Martin v. Leading Edge Recovery Solutions, LLC
Filing
84
Opinion and Order Signed by the Honorable Joan H. Lefkow on 8/10/2012:Mailed notice(mad, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NICHOLAS MARTIN and DAVID MACK,
on behalf of themselves and others similarly
situated,
)
)
)
)
Plaintiffs,
)
)
v.
)
)
LEADING EDGE RECOVERY SOLUTIONS, )
LLC and CAPITAL ONE BANK (USA), N.A., )
)
Defendants.
)
No. 11 C 5886
Judge Joan H. Lefkow
OPINION AND ORDER
Nicholas Martin and David Mack filed this putative class action against Leading Edge
Recovery Solutions, LLC and Capital One Bank (USA), N.A., alleging violations of the
Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, et seq.1 Before the court are
Leading Edge’s and Capital One’s motions to dismiss pursuant to Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(6). For the following reasons, the motions [#38, 57] will be
denied.
1
Martin also asserted a claim in his individual capacity against Leading Edge for violations of the
Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq. Martin and Leading Edge
agreed to settle the FDCPA claim and therefore the court need not consider Leading Edge’s argument that
the FDCPA claim must be dismissed pursuant to Rule 12(b)(6).
FACTS2
Leading Edge is a debt collection company; Capital One is a national bank that issues
credit cards. In 2010, both companies used equipment that allowed them to dial and call
telephone numbers that had been pre-loaded by their employees into an automatic dialing
system. They also used automatic dialing software manufactured by Aspect Software. (See
Compl. Ex. A.)
Leading Edge used automatic dialing equipment, along with Aspect Software, to call
Martin’s and Mack’s cell phones in 2010. Leading Edge called Mack’s cell phone ten times
during September 2010 and left one or more prerecorded voice messages.3 Leading Edge called
Martin at least once using automatic dialing equipment. Leading Edge had received Martin’s
and Mack’s cell phone numbers from Capital One, which requested Leading Edge to collect on
an account for Julie Mack, who is Mack’s mother and Martin’s aunt.4
2
Unless otherwise noted, the following facts are taken from plaintiffs’ second amended
complaint and are presumed true for the purpose of resolving the pending motions. Defendants argue that
certain allegations in the complaint must be disregarded because they are alleged upon information and
belief. Even after Iqbal and Twombly, however, there is no prohibition on alleging claims based on
information and belief, particularly where the facts that support the allegations are within the defendant’s
knowledge or control. See Trs. of the Auto Mechs.’ Indus. Welfare & Pension Funds Local 701 v.
Elmhurst Lincoln Mercury, 677 F. Supp. 2d 1053, 1054–55 (N.D. Ill. 2010); 2–8 James Wm. Moore et
al., Moore’s Federal Practice – Civil § 8.04 (3d ed.). The court has considered these allegations together
with the other facts alleged in the complaint.
3
Plaintiffs alleged the specific number of times Leading Edge called Mack’s phone, and that
Mack received unwanted voice messages, for the first time in their in responses to defendants’ motions to
dismiss. The court may consider these facts because they are consistent with the allegations in plaintiffs’
complaint and do not have the effect of amending the complaint to assert a new claim. See, e.g., Geinosky
v. City of Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012); Hentosh v. Herman M. Finch Univ. of Health
Sciences/The Chicago Med. Sch., 167 F.3d 1170, 1173 (7th Cir. 1999); Jones v. Sabis Educ. Sys., Inc.,
No. 98-4252, 1999 WL 1206955, at *3 (N.D. Ill. Dec. 13, 1999).
4
Plaintiffs first alleged that Julie Mack was the original account holder in response to defendants’
motions to dismiss. The court considers this fact for the reasons stated in footnote 3.
2
Capital One or its affiliate also called Martin’s and Mack’s cell phones sometime
between 2007 and 2011 in connection with a debt collection. Some or all of these calls were
made using predictive dialing equipment and used a prerecorded or artificial voice message.
Neither Martin nor Mack gave their cell phone numbers to Leading Edge or Capital One.
Martin and Mack were annoyed by the calls, which used air time from their cell phone plans and
forced them to attend to unwanted calls.
LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges the
court’s subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). The burden of proof is on the party
asserting jurisdiction. United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir.
2003). In determining whether subject matter jurisdiction exists, the court must accept all wellpleaded facts alleged in the complaint and draw all reasonable inferences from those facts in the
plaintiff’s favor. Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999). “Where evidence
pertinent to subject matter jurisdiction has been submitted, however, ‘the district court may
properly look beyond the jurisdictional allegations of the complaint . . . to determine whether in
fact subject matter jurisdiction exists.’” Id. (quoting United Transp. Union v. Gateway W. Ry.
Co., 78 F.3d 1208, 1210 (7th Cir. 1996)).
A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state a
claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6); Gen. Elec. Capital Corp. v.
Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). In ruling on a motion to dismiss,
the court accepts as true all well-pleaded facts in the plaintiff’s complaint and draws all
reasonable inferences from those facts in the plaintiff’s favor. Dixon v. Page, 291 F.3d 485, 486
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(7th Cir. 2002). In order to survive a Rule 12(b)(6) motion, the complaint must not only provide
the defendant with fair notice of the claim’s basis, but must also establish that the requested
relief is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 622, 687, 129 S. Ct. 1937, 173 L. Ed.
2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L.
Ed. 2d 929 (2007). The allegations in the complaint must be “enough to raise a right of relief
above the speculative level.” Twombly, 550 U.S. at 555. At the same time, the plaintiff need not
plead legal theories. Hatmaker v. Mem’l Med. Ctr., 619 F.3d 741, 743 (7th Cir. 2010). Rather,
it is the facts that count.
ANALYSIS
Leading Edge and Capital One argue that the complaint must be dismissed for lack of
subject matter jurisdiction because plaintiffs have not established “injury in fact,” a requirement
for standing under Article III. Leading Edge argues that, in the alternative, plaintiffs’ complaint
must be dismissed under Rule 12(b)(6) for failure to state a claim.
I.
Article III Standing
To have Article III standing, plaintiffs must allege (1) an injury in fact, (2) a causal
connection between the injury and the conduct complained of, and (3) a likelihood that the injury
will be redressed by a favorable decision. See, e.g., Lujan v. Defenders of Wildlife, 504 U.S.
555, 560, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992). An injury in fact is “an invasion of a
legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not
conjectural or hypothetical.” Id. (citations and quotations omitted). Such an injury may exist by
virtue of a violation of statutorily-created legal rights, so long as the plaintiff is within the class
of persons who are given a statutory right to relief and alleges a “distinct and palpable injury to
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himself.” Warth v. Seldin, 422 U.S. 490, 501, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975); see also
Summers v. Earth Island Inst., 555 U.S. 488, 497, 129 S. Ct. 1142, 173 L. Ed. 2d 1 (2009)
(although Congress can create procedural rights, Article III still requires the party bringing suit
to show that the action “injures him in a concrete and personal way” (citation omitted)). A
plaintiff need not suffer a substantial injury in order to establish Article III standing, however.
See, e.g., Am. Bottom Conservancy v. U.S. Army Corps of Eng’rs, 650 F.3d 652, 656 (7th Cir.
2011) (“The magnitude, as distinct from the directness, of the injury is not critical to the
concerns that underlie the requirement of standing.”); Doe v. Cnty. of Montgomery, Ill., 41 F.3d
1156, 1159 (7th Cir. 1994) (“[A]n identifiable trifle is enough for standing to fight out a question
of principle; the trifle is the basis for standing and the principle supplies the motivation.”
(quoting United States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412
U.S. 669, 689 n.14, 93 S. Ct. 2405, 37 L. Ed. 2d 254 (1973)). Even a diminution in a legallyprotected interest, such as being denied the opportunity to watch wildlife, is sufficient injury.
Am. Bottom Conservancy, 650 F.3d at 656. A plaintiff likewise has standing to bring suit for a
violation of a consumer protection statute that caused “little measurable injury” so long as the
suit would clearly redress “an injury of some sort.” Crabill v. Trans Union, LLC, 259 F.3d 662,
665 (7th Cir. 2001) (discussing the Fair Credit Reporting Act).
Applying these principles, plaintiffs have alleged a particularized injury that is sufficient
to establish standing. Plaintiffs allege that defendants violated interests that are protected by the
TCPA. The TCPA prohibits the use of automatic telephone dialing systems or an artificial or
prerecorded voice to make “any” non-emergency call to a telephone number assigned to a mobile
phone without the called party’s consent. 47 U.S.C. § 227(b)(1)(A)(iii). The TCPA prevents
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nuisance telephone calls to cell phones precisely in situations such as the one described by
plaintiffs, i.e. where a bill collector has been hired by a creditor and then repeatedly calls a
number that previously belonged to the creditor’s customer. See Soppet v. Enhanced Recovery
Co., 679 F.3d 637, 638–39 (7th Cir. 2012). Congress referred to the interest protected by the
TCPA as a “privacy” interest, noting that “[e]vidence . . . indicates that residential telephone
subscribers consider automated or prerecorded telephone calls, regardless of the content or the
initiator of the message, to be a nuisance and an invasion of privacy.” TCPA, 105 Stat. 2394,
note following 47 U.S.C. § 227 (Congressional statement of findings); see also Mims v. Arrow
Fin. Servs., LLC, --- U.S. ----, 132 S. Ct. 740, 745, 181 L. Ed. 881 (2012) (quoting and discussing
Congressional findings). The TCPA also protects a limited property interest, even where a
consumer has prepaid for a certain number of minutes on his cell phone plan. See Soppet, 679
F.3d at 638–39 (“[A]n automated call to a cell phone adds expense to annoyance. . . . Bystander is
out of pocket the cost of airtime minutes and has had to listen to a lot of useless voicemail.”); In
the Matter of Rules & Regulations Implementing the Telephone Consumer Protection Act of
1991, 18 F.C.C.R. 14014, 14115 (Jul. 3, 2003) (reaffirming that it is unlawful to make “any call”
to a cell phone using an automatic dialing system and noting that even where wireless subscribers
purchase a large “bucket” of minutes at a fixed rate, the “bucket” could be exceeded more quickly
if consumers receive numerous unwanted calls). Plaintiffs’ allegations that they were forced to
tend to unwanted calls and that the calls used airtime from their cell phone plans establishes a
violation of both the privacy and property interests that are protected by the TCPA.
In addition, plaintiffs’ alleged injuries “reasonably can be said to have resulted, in a[]
concretely demonstrable way, from [defendants’] alleged . . . statutory infractions.” Warth, 422
6
U.S. at 504. Plaintiffs’ injuries are not conjectural or hypothetical, unlike some of the cases cited
by Leading Edge where plaintiffs asserted a “procedural injury” that did not result in the
deprivation of any concrete interest. Cf. Summers, 555 U.S. at 496–97 (plaintiffs did not have
standing to enjoin United States Forest Service from enforcing regulations that related to salvagetimber sales where they had failed to allege that any particular timber sale or other project would
impede a specific plan to enjoy the National Forests); Lujan, 504 U.S. at 563–64 (plaintiffs had
not established injury in fact by asserting that they intended to visit areas affected by rule
interpreting the Endangered Species Act, where they did not describe any concrete plans for the
visits). Plaintiffs, by contrast, were directly injured by defendants’ violations of the TCPA
because they had to spend time tending to unwanted calls and their cell phone minutes were
depleted. This is enough to establish “injury in fact” under Article III. See Kane v. Nat’l Action
Fin. Servs., Inc., No. 11-11505, 2011 WL 6018403, at *5 (E.D. Mich. Nov. 7, 2011) (plaintiff’s
allegation that he received several hundred phone calls on his cell phone was sufficient to
establish standing to bring claim under TCPA); Anderson v. AFNI, Inc., No. 10-4064, 2011 WL
1808779, at *6 (E.D. Pa. May 11, 2011) (plaintiff had demonstrated injury in fact by alleging that
she had received nearly fifty calls to her residential number from an automated dialer);
Mitchem v. Ill. Collection Serv., Inc., No. 09-7274, 2010 WL 3003990, at *1–2 (N.D. Ill. Jul. 29,
2010) (plaintiff demonstrated injury in fact by alleging that defendant used an automated dialer to
call his cell phone without his consent); cf. Crabill, 259 F.3d at 664 (plaintiff did not have
standing to bring suit under the of the Fair Credit Reporting Act where he had failed to show that
defendant’s violation of the Act resulted in loss of credit or any other harm).
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Defendants argue that “injury in fact” should be equated with “actual damages,” and that
plaintiffs’ failure to allege actual damages indicates that they lack standing. Leading Edge asserts
that plaintiffs must allege that they were charged in excess of their usual monthly plan or that they
suffered some emotional distress. Capital One asserts that plaintiffs must allege that they suffered
a concrete monetary loss, answered the unwanted cell phone calls, were called a certain
(unspecified) number of times, or actually listened to the prerecorded voice messages. The issue
of standing, however, is distinguishable from the merits of plaintiffs’ claims. See, e.g., Steel Co.
v. Citizens for a Better Environment, 523 U.S. 83, 89, 118 S. Ct. 1003, 140 L. Ed. 2d 210 (1998)
(“Jurisdiction . . . is not defeated . . . by the possibility that the averments might fail to state a
cause of action in which petitioners could actually recover.” (citation omitted)). To determine
whether plaintiffs have standing under Article III, the relevant question is “whether the
constitutional or statutory provision on which the claim rests properly can be understood as
granting persons in the plaintiff’s position a right to judicial relief.” See Discovery House, Inc. v.
Consolidated City of Indianapolis, 319 F.3d 277, 279 (7th Cir. 2003) (quoting Warth, 522 U.S. at
500). As discussed above, plaintiffs plainly suffered injuries to interests that are protected by the
TCPA. Defendants have cited no case holding that monetary loss or emotional distress is a
prerequisite for Article III standing. Cf., e.g., Lujan, 504 U.S. at 562–63 (“the desire to use or
observe an animal species, even for purely esthetic purposes, is undeniably a cognizable interest
for purposes of standing”); Havens Realty Corp. v. Coleman, 455 U.S. 363, 374, 102 S. Ct. 1114,
71 L. Ed. 2d 214 (1982) (black “tester” plaintiff had standing to bring for violations of the Fair
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Housing Act where she “alleged injury to her statutorily created right to truthful housing
information”).5
Moreover, neither the text nor legislative history of the TCPA supports defendants’
position. Plaintiffs need not allege monetary loss in order to bring suit for violations of the
TCPA. See discussion infra at p. 10–11; see also 47 U.S.C. § 227(b)(3) (stating that a person
may recover “actual monetary loss” from the violation or $500 per violation, whichever is
greater). Moreover, Congress concluded that “any” automated or prerecorded call would be an
invasion of the called party’s right to privacy, and its findings indicate that even a de minimis
number of automated calls or voicemails would not be condoned. See note following 47 U.S.C. §
227 (“Banning such automated or prerecorded telephone calls to the home . . . is the only effective
means of protecting telephone consumers from this nuisance and privacy invasion.” (emphasis
added)). Nothing in the statute indicates that Congress sought to protect only those consumers
who listened to the prerecorded voicemails, answered the unwanted calls, or received a specified
number of calls. Finally, Congress stated that one of the purposes of the TCPA was to protect
telephone subscribers from the “nuisance” of unwanted calls, see id., further undermining
Leading Edge’s position that plaintiffs are required to allege emotional distress.
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In their motions to dismiss, defendants repeatedly assert that the court’s analysis must be
governed by the Supreme Court’s anticipated decision in Edwards v. First American Corporation, 610
F.3d 514 (9th Cir. 2010), cert. granted 131 S. Ct. 3022 (2011). After briefing was complete, the Supreme
Court dismissed the writ of certiorari in Edwards as improvidently granted. See 131 S. Ct. 2536 (2012).
Therefore the Ninth Circuit’s opinion, which holds that a plaintiff has standing to file suit under the antikickback provision of the Real Estate Settlement Procedures Act even if she is not overcharged as a result
of the violation, is still good law. Edwards is not binding on this court, but it provides significant
persuasive authority in support of the conclusion that plaintiffs need not allege actual damages in order to
establish injury in fact.
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For all of these reasons, plaintiffs have sufficiently alleged that they suffered “injury in
fact” required for Article III standing. Defendants do not contest that plaintiffs have satisfied the
other requirements for standing, namely causation and redressability. Defendants’ motions to
dismiss for lack of subject matter jurisdiction will be denied.
II.
Failure to State a Claim
Leading Edge argues that, even if plaintiffs have standing, the complaint must be
dismissed for failure to state a claim because plaintiffs have failed to allege that the calls were
made by an automatic dialing system or that they resulted in additional charges to plaintiffs.
Neither contention has merit.
A.
Automatic Dialing System
The TCPA defines the term “automatic telephone dialing system” as “equipment that has
the capacity to store or produce telephone numbers to be called, using a random or sequential
number generator; and to dial such numbers.” Id. § 227(a)(1). Plaintiffs allege that Leading Edge
called their cell phones using equipment that automatically dialed numbers that were pre-loaded
in batches by employees. They have attached, as an exhibit to their complaint, Leading Edge’s
2009 application for registration of an Automatic Dial Announcing Device (“ADAD”) with the
Public Utility Commission of Texas. (Compl. Ex. A.) Plaintiffs’ allegations and exhibits are
more than sufficient to give rise to the inference that Leading Edge called them using an
“automatic telephone dialing system” as that term is defined in the TCPA.
B.
Charges for Calls
Plaintiffs claim that defendants violated 47 U.S.C. § 227(b)(1)(A)(iii), which provides that
it shall be unlawful to use an automatic telephone dialing system to make non-emergency calls
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“to any telephone number assigned to a paging service, cellular telephone service, specialized
mobile radio service, or other radio common carrier service, or any service for which the called
party is charged for the call.” (emphasis added). Another court in this district concluded that the
phrase “for which the called party is charged for the call” only modifies the phrase “any service”
and that therefore the TCPA is violated even if the called party does not incur a charge that is
specifically linked to the automated call. Lozano v. Twentieth Century Fox Film Corp., 702 F.
Supp. 2d 999, 1009–10 (N.D. Ill. 2010). The statute, read as a whole, supports this conclusion.
See Abbas v. Selling Source, LLC, No. 09-3413, 2009 WL 4884471, at *3 (N.D. Ill. Dec. 14,
2009). Congress amended the TCPA in 1992 to provide that the Federal Communications
Commission (“FCC”) may issue rules or orders that “exempt . . . calls to a telephone number
assigned to a cellular telephone service that are not charged to the called party.” See 47 U.S.C. §
227(b)(2)(C). If the TCPA only prohibited calls to cell phones that result in a charge to the called
party, then it would be unnecessary to create exemptions for uncharged calls. Abbas, 2009 WL
4884471, at *3. “Courts avoid such ineffective statutory construction.” Id. (citing In re
Merchants Grain, Inc., 93 F.3d 1347, 1353–54 (7th Cir. 1996)).
Leading Edge does not cite to any section of the TCPA or its legislative history to support
its position that a plaintiff must allege that he was charged for a call in order to state a claim
under the Act. The only case cited by Leading Edge, Knutson v. Reply!, Inc., No. 10-1267, 2011
WL 291076, at *1 (S.D. Cal. Jan. 27, 2011), simply asserts without citation to authority that a
plaintiff must plead that it was charged for the call in order to state a claim under the TCPA. In
that case, the plaintiff specifically alleged that he was charged for incoming calls and the court
did not analyze the issue in detail. Knutson is not persuasive.
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The plain language of the statute supports plaintiffs’ position that an automated call is
prohibited by the TCPA even if the called party does not incur a charge that is specifically linked
to that call. Taking all of the allegations in the complaint as true, plaintiffs have successfully
alleged that Leading Edge violated the TCPA by using automated dialing equipment to call their
cell phones. Leading Edge’s motion to dismiss for failure to state a claim will be denied.
CONCLUSION AND ORDER
For the foregoing reasons, Leading Edge’s and Capital One’s motions to dismiss [#38, 57]
are denied. Defendants are directed to answer the second amended complaint by August 24,
2012.
Dated: Aug. 10, 2012
Enter:___________________________________
JOAN HUMPHREY LEFKOW
United States District Judge
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