A Custom Heating & Air Conditioning, Inc. v. Kabbage, Inc. et al
Filing
89
MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 6/16/2017:Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
A CUSTOM HEATING & AIR
CONDITIONING, INC.,
Individually and on Behalf
of All Others Similarly
Situated,
Case No. 16 C 2513
Plaintiff,
Judge Harry D. Leinenweber
v.
KABBAGE, INC.; GULFCO
LEASING, LLC; MICHAEL HENRY,
And JOHN DOES 1-12,
Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court are myriad Motions to Dismiss filed by
Defendant Michael Henry [ECF Nos. 54, 60, 68, 74, 75, 76, and
81].
For the reasons to follow, Defendant Henry’s Motions are
granted in part. Counts II and III are dismissed for failure to
state a claim.
I.
A.
BACKGROUND
Factual Background
Even in this day and age, some businesses cry their wares
via fax.
(“Custom”)
Kabbage,
Plaintiff A Custom Heating & Air Conditioning, Inc.
alleges
Inc.
that,
on
(“Kabbage”),
February
Gulfco
17,
Leasing
2016,
LLC
Defendants
(“Gulfco”),
Michael Henry (“Henry”), and persons unknown caused to be sent
to Custom an unsolicited fax advertising money lending services.
(ECF No. 52 (“Am. Compl.”) ¶¶ 1-2, 17, 22.)
Custom asserts that
it had no prior relationship with any Defendant and never gave
anyone permission to send the fax.
(Id. ¶ 24.)
The one-page
fax advertised loan products and services “offered, originated,
and/or funded by all of the Defendants.” (Id. ¶¶ 18-19.)
bottom of the faxed page states:
The
“To Opt Out of future Faxes –
Call 8446355155.” (Id. at Ex. A.)
Custom alleges that this fax
contains neither a clear and conspicuous opt-out notice nor a
ready
and
costless
means
for
opting
out,
U.S.C. § 227(b)(2) and 47 C.F.R. § 64.1200.
In
bringing
this
action
on
behalf
as
required
by
47
(Id. ¶ 23.)
of
a
class,
Custom
alleges that Defendants “sent the same facsimile to Plaintiff
and
more
receiving
than
the
(Id. ¶ 24.)
thirty-nine
recipients’
other
express
recipients
permission
without
or
first
invitation.”
Custom bases this allegation in part on its belief
that the fax it received was transmitted by “WestFax,” a company
whose
services
many
high-volume
fax
Custom defines the class as follows:
senders
employ.
(Ibid.)
“All persons who were sent
one or more telephone facsimile messages on or after four years
prior
to
the
filing
of
this
action,
that
advertised
the
commercial availability of property, goods, or services offered
by
Defendants
that
did
not
contain
- 2 -
an
opt-out
notice
that
complied with federal law.” (Id. ¶ 26.)
The current proposed
class thus defines putative members without regard to whether
they consented to receiving a fax from Defendants.
Custom filed its original Complaint on February 23, 2016
and
later
Consumer
amended
it,
Protection
claiming
Act
(the
violations
“TCPA”),
of
the
the
Telephone
Illinois
Consumer
Fraud and Deceptive Business Practices Act (the “ICFA”), and
state
conversion
Defendants’
. . . prior
law.
Custom’s
transmitting
express
TCPA
faxes
invitation
count
“without
or
is
first
permission,”
based
on
obtaining
which
faxes
failed to comply with the TCPA’s opt-out notice requirements.
(Am. Compl. ¶¶ 45-47.)
Its state-law counts identify this same
alleged conduct as the basis for recovery.
62-67.)
(See, id. ¶¶ 54-61,
Actual damages under all three counts, according to
Custom, are its and putative class members’ loss of the paper
and toner consumed in printing out the faxes, wear and tear on
their fax machines, expenses in employee time from reviewing and
routing the faxes, and (ostensibly) anguish caused by the faxes’
invasion of privacy. (Id. ¶ 52.)
statutory
damages,
Defendants
acted
declaratory relief.
to
be
Under the TCPA, Custom seeks
trebled
willfully,
if
along
the
with
facts
show
that
injunctive
and
For its conversion count, Custom asks for
an award of “appropriate damages” along with punitive damages,
- 3 -
attorneys’ fees, and costs.
and
injunctive
relief,
Finally, Custom seeks declaratory
actual
damages,
attorneys’
fees,
and
costs under the ICFA.
B.
Procedural Background
A few months after Custom filed suit, Gulfco petitioned for
Chapter 7 bankruptcy.
Henry, who is Gulfco’s President, sole
shareholder, and Chief Operating Officer, agreed during meetings
with
creditors
would
be
that
allowed
to
Custom’s
continue
cause
of
after
action
the
close
against
of
Gulfco
bankruptcy
proceedings:
Trustee:
[O]nce the bankruptcy is closed there’s no
discharge for the corporation.
Mr. Henry, I don’t
know if you’re aware that whatever causes of action
are against the corporation will be allowed to be
continued. . . . You do understand that?
Henry:
Yes.
(ECF No. 84 (“Pl.’s Br.”) at 8.)
The Court stayed this case
pending Gulfco’s bankruptcy proceeding.
(ECF No. 58.)
By March 23, 2017, the Gulfco bankruptcy had closed.
On
April 14, 2017, Custom filed a motion to re-open discovery prior
to May 3, 2017, which was the date set for the next status
conference in the case. (See, ECF No. 71.)
The Court was not
able to hear it until May 3, 2017, and on that date lifted the
discovery stay and set briefing schedules on Henry’s Motions to
Dismiss.
(See, ECF Nos. 79, 80.)
- 4 -
But about a week before the
Court
lifted
the
stay,
on
April
27,
2017,
Custom
subpoena on WestFax for production of documents.
served
a
Henry filed a
misconduct complaint with the Illinois Attorney Registration and
Disciplinary Commission against Custom’s counsel, the law firm
of Bock and Hatch, concerning issuance of this subpoena during
the stay.
(See, ECF No. 85 at Ex. III.)
Henry alleges that he offered to settle Custom’s claim for
all that it is worth by sending to Custom a settlement proposal
accompanied
by
a
check
for
$1,500.00.
Although
counsel
for
Custom avers that neither his law firm nor Custom received a
$1,500.00 check from Gulfco, Henry strenuously states otherwise,
providing to the Court a letter dated March 1, 2016 addressed to
Custom’s registered agent:
Based on this lawsuit and your claim of $1,500 owed
and to spare the expense of Litigation enclosed is
Check Number 1151 in the Amount of $1,500.00 drawn on
Chase Bank.
Your company authorized us to send you
this information if you do not accept this check and
terminate the Litigation we will list you [as] a
creditor in the bankruptcy filing for the company.
Gulfco Leasing, LLC is a Florida corporation and was
dissolved on February 25, 2016 and in accordance with
Florida Law this check is to settle debts of the
corporation as we liquidate its assets.
(ECF No. 85 at Ex. I.)
C.
Additional Background on the Parties
Defendant Henry has a well-documented history of abusing
the litigation process as a plaintiff.
- 5 -
As the Seventh Circuit
recounted in Henry v. United States, 360 Fed.Appx. 654 (7th Cir.
2010), Henry filed six pro se cases in the Northern District of
Illinois from December 2006 to October 2007 concerning his 1999
tax liability.
those
cases,
After receiving an unfavorable ruling in one of
Henry
presiding
judge
officials
sent
involved
Northern
as
District
threatening
well
in
of
as
his
a
emails
number
lawsuit.
Illinois
addressed
of
In
other
the
government
December
Executive
to
2007,
Committee
the
issued
an
order that barred Henry from filing any new civil cases in this
district but permitted him to seek modification or rescission of
the order after nine months.
Likewise, counsel for Custom has few claims to litigation
piety.
In a prior TCPA class action, the Seventh Circuit noted
that the law firm of Bock and Hatch engaged in two forms of
misconduct.
Gear
LLC,
See, Creative Montessori Learning Ctr. v. Ashford
662
F.3d
913
(7th
Cir.
2011).
First,
“the
firm
“obtain[ed] material from [a third party] on the basis of a
promise
of
confidentiality
that
concealed
the
purpose
of
obtaining the material, a purpose inconsistent with maintaining
confidentiality
business.”
and
likely
Id. at 917.
to
destroy
[the
third
party’s]
Second, it “impl[ied] in the letter to
[a putative class member] that there already was a certified
class
to
which
[it]
belonged.”
Ibid.
- 6 -
Ultimately,
the
court
reversed
class
certification
based
on
counsel’s
“demonstrated
lack of integrity” and inability to instill “confidence that
they would prosecute the case in the interests of the class.”
Ibid.
II.
LEGAL STANDARDS
When considering a Rule 12(b)(1) motion to dismiss for lack
of subject-matter jurisdiction, a district court accepts as true
all
well-pleaded
inferences
from
factual
the
allegations
allegations
in
and
favor
draws
of
reasonable
the
plaintiff.
Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191 (7th Cir. 1993).
The court may also look beyond the allegations of the complaint
and
consider
determine
Mootness
affidavits
whether
is
constitutional
and
other
subject-matter
evaluated
limitations
under
on
documentary
jurisdiction
Rule
Article
12(b)(1);
III
evidence
exists.
it
to
Ibid.
involves
jurisdiction,
which
requires a live case or controversy and demands that the parties
maintain a personal stake in the case “through all stages of
federal juridical proceedings, trial and appellate.”
Spencer v.
Kemna, 523 U.S. 1, 7 (1998) (citations and quotations omitted).
A case is moot when the plaintiff no longer “suffer[s], or [is
no longer] threatened with, an actual injury traceable to the
defendant and likely to be redressed by a favorable judicial
decision.”
Id. (citation and quotations omitted).
- 7 -
When nothing
remains
to
litigate,
dismissal
is
appropriate
under
Rule 12(b)(1) because the plaintiff “has no remaining stake” in
the case.
Holstein v. City of Chicago, 29 F.3d 1145, 1147 (7th
Cir. 1994) (citation and quotations omitted).
To survive a Rule 12(b)(6) motion to dismiss, a complaint
“must state a claim that is plausible on its face.”
Adams, 742
F.3d at 728 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570
(2007)).
plaintiff
A
pleads
claim
enjoys
sufficient
“facial
factual
plausibility
content
the
allows
that
when
the
court to draw the reasonable inference that the defendant is
liable for the alleged misconduct.”
(quoting
Ashcroft
plaintiff
must
v.
Adams, 742 F.3d at 728
Iqbal,
556
U.S.
that
all
elements
allege
662,
678
of
(2009)).
his
claim
A
are
satisfied, but cannot survive a Rule 12(b)(6) motion to dismiss
by alleging only legal conclusions.
Reynolds v. CB Sports Bar,
Inc., 623 F.3d 1143, 1147 (7th Cir. 2010).
of
the
elements
of
a
cause
of
action,
conclusory statements, do not suffice.”
III.
Henry
moves
to
dismiss
“Threadbare recitals
supported
become
apparent,
the
mere
Iqbal, 556 U.S. at 678.
DISCUSSION
all
counts
of
Complaint based on a mélange of arguments.
will
by
Court
examines
Custom’s
Amended
For reasons that
Count
I
last,
ultimately denying Henry’s Motions as to that count. It first
- 8 -
dismisses Counts II and III for failure to state a claim on
which relief can be granted.
A.
Count II:
Conversion
To state a conversion claim under Illinois law, a plaintiff
must
allege
“(1)
an
unauthorized
and
wrongful
assumption
of
control, dominion, or ownership by defendant over plaintiff’s
personalty;
(2)
plaintiff’s
right
in
the
property;
(3)
plaintiff’s right to the immediate possession of the property,
absolutely and unconditionally; and (4) a demand for possession
of the property.”
General Motors Corp. v. Douglass, 565 N.E.2d
93, 96-97 (Ill. App. 1990).
For its conversion claim, Custom alleges that Defendants
“improperly and unlawfully converted [its] fax machines, toner
and paper to Defendants’ own use” along with “employees’ time.”
(Am. Compl. ¶ 56.)
Custom allegedly “owned an unqualified and
immediate
possession
right
to
of
their
fax
machines,
paper,
toner, and employee time” prior to Defendants’ transmission of
the
unsolicited
fax.
(Id.
¶
57.)
By
sending
the
fax,
Defendants “permanently misappropriated the Class members’ fax
machines, toner, paper, and employee time to their own use.”
(Id. ¶ 58.)
The problem with Custom’s allegations lies in the bedrock
legal principle of de minimis non curat lex (“the law cares not
- 9 -
for
trifles”).
Even
if
a
conversion
claim
is
otherwise
adequately pled, it must fail if the complained-of conversion
resulted in damages that are miniscule, amounting only to mere
inconveniences.
See,
e.g.,
G.M.
Sign,
Inc.
v.
Elm
Street
Chiropractic, Ltd., 871 F.Supp.2d 763, 767-68 (N.D. Ill. 2012)
(collecting
cases).
“presupposes
a
While
violation
a
of
nominal
damages
sufficient
award
gravity
to
-
which
merit
a
judgment, even if significant damages cannot be proved,” Brandt
v. Bd. of Educ. of City of Chicago, 480 F.3d 460, 465 (7th Cir.
2007) – may be properly awarded where interference with property
rights
damages
“caused
are
“miniscule
a
significant
“negligible
to
the
point
from
of
injury,”
the
de
onset
minimis
of
nonexistent.”
the
conversion
lawsuit”
Savanna
and
Group
v.
Truan, No. 10 C 7995, 2011 WL 703622, at *3 (N.D. Ill. Feb. 22,
2011); Brandt, 480 F.3d at 465.
If damages are de minimis,
“there are never significant damages available, either at the
time
of
trial.”
the
conversion,
the
time
of
the
lawsuit,
or
during
Paldo Sign and Display Co. v. Topsail Sportswear, Inc.,
No. 08 C 5959, 2010 WL 276701, at *3 (N.D. Ill. Jan. 15, 2010).
In rejecting the plaintiff’s claim for conversion based on
unsolicited
receipt
of
a
one-page
fax,
the
court
in
Stonecrafters, Inc. v. Foxfire Printing & Packaging, Inc., 633
F.Supp.2d 610 (N.D. Ill. 2009), drew the following distinction
- 10 -
between nominal damages for which recovery may be had and de
minimis damages that preclude a conversion claim. On the one
hand, nominal damages “might be appropriate in a case in which
the
defendant
converts
plaintiff’s
valuable
antique
coin
collection but then, during the pendency of the lawsuit, returns
the coins to plaintiff unharmed”; even though such a plaintiff
cannot
prove
significant
damages
resulting
from
temporary
deprivation of his right to possess the coin collection, at the
time the complaint was filed, the conversion caused an injury
sufficient
to
sustain
a
judgment.
Id.
at
614-15.
On
the
contrary, “if the defendant takes the plaintiff’s inexpensive
ball point pen and a notebook without his permission, uses the
pen and one sheet of paper from the notebook to write a short
letter,
and
then
immediately
returns
the
remainder
of
the
plaintiff’s supplies to him, the de minimis doctrine would be
implicated”
because
the
plaintiff
negligible losses from the beginning.
suffered
no
Id. at 615.
more
than
It should be
clear which of these situations applies to Custom’s claim that
Defendants’ one-page unsolicited fax converted its fax machine,
toner, ink, paper, and employees’ time.
The most Custom can
hope to gain from a favorable judgment on Count II is a few
pennies – a fact equally true at the time it printed the junk
- 11 -
fax, filed its original Complaint, and opposed Henry’s Motions
to Dismiss.
See, Paldo Sign, 2010 WL 276701, at *3.
Courts hearing junk fax cases like the one at bar typically
dismiss conversion claims based on the de minimis rationale.
See, e.g., Able Home Health, LLC v. Onsite Healthcare, Inc.,
S.C., No. 16 C 8219, 2017 WL 2152429, at *6 (N.D. Ill. May 17,
2017) (“Any damages from the ink, toner, and paper in connection
with this two-page fax are clearly de minimis. . . . Plaintiff’s
mere assertion that at least nominal damages should be awarded
for the invasion of its property rights does not alter the fact
that this invasion was not severe enough to justify the payment
of nominal damages.”) (internal citations and quotation marks
omitted); Sturdy v. Medtrak Educ. Servs. LLC, No. 13 C 3350,
2014 WL 2727200, at *5 (C.D. Ill. June 16, 2014) (“This court
agrees with the reasoning in those decisions that have applied
the de minimis doctrine to bar conversion claims in junk fax
cases.”) (citations omitted); Paldo Sign, 2010 WL 276701, at *23 (same); Garrett v. Rangle Dental Lab., No. 10 C 1315, 2010 WL
3034709,
at
alleged
loss
*1
(N.D.
is
de
Ill.
Aug.
minimis
3,
and
2010)
can
be
(finding
remedied
that
“the
by
[the
plaintiff’s] TCPA claim”); Stonecrafters, 633 F.Supp.2d at 615
(“Because plaintiff’s claim for conversion of paper and toner
was insufficient at its inception to merit a judgment, the de
- 12 -
minimis doctrine applies in this case, and no amount of damages,
nominal or otherwise, would be appropriate.”); G.M. Sign, 871
F.Supp.2d
Centerline
at
767-68
Equip.
(same).
Corp.
v.
(Although
Banner
one
Pers.
older
Serv.,
case,
Inc.,
545
F.Supp.2d 768 (N.D. Ill. 2008) permitted a conversion claim to
proceed based on receipt of a single junk fax, “cases decided
over
the
last
decade
[]
have
expressly
declined
to
follow
Centerline,” and “[d]ismissing such claims under the de minimis
maxim has been the trend in authority in this circuit.”
Home
Health,
cumulative
2017
WL
allegations
2152429
“of
a
at
*6
putative
n.6.)
What
class
in
a
is
Able
more,
complaint
cannot be used to prop up an otherwise trivial claim that is
unable to stand on its own.”
Stonecrafters, 633 F.Supp.2d at
614.
The only distinction here, Custom might protest, is that
Henry does not argue in these precise terms for dismissal of the
conversion claim.
The Court finds that Henry – who, it should
be remembered, is proceeding pro se and is entitled to have his
filings more “liberally construed,” Erickson v. Pardus, 551 U.S.
89, 94 (2007) (internal quotation marks omitted) – did raise
variants of the de minimis argument in his Rule 12(b)(6) filings
by
arguing,
inter
alia,
that
Custom’s
class
allegations
impermissibly seek to transform a non-actionable injury into an
- 13 -
actionable one.
at 2, 4.)
(See, e.g., ECF No. 76 at 6, 9-11; ECF No. 74
And even if Henry did not sufficiently raise these
arguments, at worst the Court considers its action a sua sponte
dismissal predicated on clear evidence from Custom’s pleading.
“Sua sponte 12(b)(6) dismissals are permitted, provided that a
sufficient
basis
for
the
court’s
action
is
evident
from
the
plaintiff’s pleading.” Ledford v. Sullivan, 105 F.3d 354, 356
(7th Cir. 1997); accord, Hoskins v. Poelstra, 320 F.3d 761, 763
(7th Cir. 2003) (Easterbrook, J.) (noting that, irrespective of
a complaint’s compliance with Rule 8(a), district judges have
ample
authority
to
dismiss
transparently
defective
suits
sua
sponte, thereby saving everyone time and legal expense) (citing
Rowe v. Shake, 196 F.3d 778, 783 (7th Cir. 1999)).
As such, Count II for conversion is dismissed for failure
to state a claim.
B.
Count III: Violation of the Illinois Consumer
Fraud and Deceptive Business Practices Act
The ICFA “is a regulatory and remedial statute intended to
protect
fraud,
consumers,
unfair
borrowers,
methods
of
and
business
competition,
deceptive business practices.”
and
persons
other
against
unfair
and
Siegel v. Shell Oil Co., 612
F.3d 932, 934 (7th Cir. 2010) (citation and internal quotation
marks omitted).
To state an ICFA claim, a plaintiff must allege
five elements:
(1) a deceptive act or unfair practice; (2) the
- 14 -
defendant’s intent that the plaintiff rely on the deception; (3)
the deception’s occurrence in the course of conduct involving
trade or commerce; (4) the plaintiff’s actual damages; and (5)
proximate causation of the damages by the defendant’s deception.
See, e.g., Blankenship v. Pushpin Holdings, LLC, No. 14 C 6636,
2015 WL 5895416, at *6 (N.D. Ill. Oct. 6, 2015); accord, Siegel,
612 F.3d at 934-35.
A plaintiff may allege either deceptive or unfair conduct
(or both) under the ICFA.
Wells
Fargo
Bank,
N.A.,
Siegel, 612 F.3d at 935; Wigod v.
673
F.3d
547,
575
(7th
Cir.
2012).
Three inquiries bear on whether a business practice is unfair:
“(1) whether the practice offends public policy; (2) whether it
is immoral, unethical, oppressive, or unscrupulous; [and] (3)
whether it causes substantial injury to consumers.”
Toyota
Motor
Credit
(citation omitted).
Corp.,
775
alleges
951,
961
(Ill.
2002)
Courts are tasked with making a case-by-
case analysis of these factors.
Custom
N.E.2d
Robinson v.
for
its
Siegel, 612 F.3d at 935.
ICFA
count
that
Defendants’
transmission of “unsolicited fax[es]” is “an unfair practice”
that effectively forced “Plaintiff and the other class members
to
pay
¶ 64.)
for
Defendants’
advertising
campaign.”
(Am.
Compl.
According to Custom, “Defendants violated the unfairness
predicate of the Act by engaging in an unscrupulous business
- 15 -
practice
and
by
violating
Illinois
statutory
public
policy,”
damaging Plaintiff and other potential class members in the form
of “loss of paper, toner, ink, use of their facsimile machines,
and
use
of
their
employees’
time.”
(Id.
¶¶
65-66.)
Courts
applying the ICFA largely agree that “sending unsolicited fax
advertisement[s]
offends
public
policy.”
Stonecrafters,
633
F.Supp.2d at 616; Mussat v. Power Liens, LLC, No. 13 C 7853,
2014 WL 3610991, at *3 (N.D. Ill. July 21, 2014) (collecting
cases).
However,
the
second
and
against an ICFA claim here.
third
factors
of
Robinson
cut
Although a few pre-2011 cases (such
as Centerline, mentioned supra) reach the contrary conclusion, a
burgeoning majority of courts – and all the recent decisions –
hold that receiving one- or two-page unsolicited faxes does not
trigger
Robinson’s
other
two
factors.
See,
e.g.,
Able
Home
Health, 2017 WL 2152429, at *4-5 (“[T]he receipt of a single
unsolicited two-page fax – costing a couple of pennies worth of
toner and paper – [is] neither ‘oppressive’ nor the cause of
‘substantial
injury’
in
violation
of
ICFA.”);
Helping
Hand
Caregivers, Ltd. v. Darden Restaurants, Inc., No. 14 C 10127,
2015
WL
2330197,
unsolicited
fax
at
does
*5
not
(N.D.
Ill.
rise
to
May
the
14,
level
2015)
of
(“[O]ne
immoral,
unethical, oppressive, or unscrupulous behavior as required by
- 16 -
the Act.”) (internal quotation marks omitted); Mussat, 2014 WL
3610991, at *3 (holding that the defendant’s “single, one-page
fax cannot be said to burden [the plaintiff] to an oppressive
level”
and
that
toner,
and
the
“[o]ne
few
or
seconds
two
of
sheets
a
of
paper,
person’s
time
the
minimal
expended
in
response to the unsolicited fax do not amount to a substantial
injury”); Sturdy, 2014 WL 2727200, at *3 (agreeing “with courts
that have found the burden imposed by the transmission of a one
page
fax
[]
not
unreasonable”
and
finding
that
the
“costs
associated with the transmission and printing of a single fax
advertisement cannot be said to cause significant harm”); Old
Town Pizza of Lombard, Inc. v. Corfu-Tasty Gyro’s Inc., No. 11 C
6959,
2012
WL
638765,
at
*5-6
(N.D.
Ill.
Feb.
23,
2012)
(dismissing allegation that junk faxes violated the ICFA); G.M.
Sign, 871 F.Supp.2d at 770 (“Improperly interfering with one
piece of [Plaintiff’s] paper, a tiny amount of its toner, and a
trivial
amount
of
its
employees’
time
is
not
oppressive
conduct.”); Stonecrafters, 633 F.Supp.2d at 616-17; Rossario’s
Fine Jewelry, Inc. v. Paddock Pubs., Inc., 443 F.Supp.2d 976,
979 (N.D. Ill. 2006) (“Of the three Robinson-identified factors,
only the ‘public policy’ consideration is met, and the patent
inapplicability of the other two factors to [the defendant’s]
one-page fax advertisement heavily outweighs that one element in
- 17 -
the
evaluation
called
for
by
Robinson.”).
As
another
court
aptly put it, “[t]he only burden placed on [the plaintiff] was
to
throw
the
fax
in
the
trash.
classified as ‘unreasonable.’”
*4.
This
deed
can
hardly
be
Paldo Sign, 2010 WL 276701, at
As such, Custom fails to state an actionable ICFA claim.
That Custom brings this case on behalf of a class “of more
than thirty-nine people” does not change the substantial injury
analysis.
(Am. Compl. ¶ 29.)
Even if this Court assumes that
the harm to the class as a whole could be aggregated under the
third Robinson factor, the Complaint would still not plausibly
allege
substantial
injury.
On
the
assumption
that
each
unauthorized one-page fax would yield a loss of 1 cent, accord,
e.g., Able Home Health, 2017 WL 2152429 at *5; G.M. Sign, 871
F.Supp.2d at 770-71, the class would have to consist of 100
persons before the harm even reached $1.00.
From involvement in
other similar cases, Custom’s counsel knows that this does not
amount to “substantial injury.”
See, Urban Elevator Service,
LLC v. Stryker Lubricant Distribs. Inc., No. 15 C 2128, 2015 WL
6736676, at *3 (N.D. Ill. Nov. 4, 2015) (“Forty people receiving
a one-page fax does not amount to a ‘substantial injury.’
Nor
is plaintiff entitled to a reading of its allegations so liberal
so as to presume a class size large enough to transform an
insubstantial
injury
into
a
substantial
- 18 -
one.”)
(citation
omitted);
accord,
Helping
Hand,
2015
WL
2330197
at
*5.
At
bottom, a one-page junk fax engenders only minimal harm even in
the
aggregate,
such
that
additional
plaintiffs
do
not
transmogrify the insignificant injury into grist for the ICFA
mill.
See, e.g., Stonecrafters, 633 F.Supp.2d at 770-71.
Therefore, because two of the three Robinson factors cut
strongly in Defendants’ favor, their alleged conduct was not
“unfair”
under
the
ICFA.
The
Court
reiterates
its
earlier
analysis (see, Section III.A, supra) that Henry, as a pro se
litigant, sufficiently raises these ICFA arguments by contending
that Custom’s injury is inadequate on its own to be actionable
under Illinois law and that its assertion of a 40-person class
does not create a cognizable injury.
In the alternative, the
Court finds sua sponte dismissal appropriate anyway.
As such,
the Court dismisses Count III for failure to state a claim.
C.
Count I: Violation of the Telephone
Consumer Protection Act
The TCPA prohibits the use of “any telephone, any facsimile
machine,
facsimile
computer,
or
machine,
U.S.C. § 227(b)(1)(C).
as
“any
material
other
an
device
to
unsolicited
send,
to
a
telephone
advertisement.”
47
It defines “unsolicited advertisement”
advertising
the
commercial
availability
or
quality of any property, goods, or services which is transmitted
- 19 -
to any person without the person’s prior express invitation or
permission, in writing or otherwise.”
Id. § 227(a)(5).
The statute provides several exemptions from the general
prohibition on unsolicited faxes, two of which bear potential
relevance to Custom’s allegations in this lawsuit.
First, there
is no TCPA violation if “the unsolicited advertisement is from a
sender
with
recipient.”
an
Id.
established
§
business
227(b)(1)(C)(i).
relationship
Second,
an
with
the
unsolicited
advertisement does not offend if it “contains a notice meeting
the requirements under paragraph 2(D).” Id. § 227(b)(1)(C)(iii).
Paragraph 2(D), in turn, provides that the notice must be “clear
and conspicuous” and state “on the first page of the unsolicited
advertisement”
that
the
recipient
may
opt
out
unsolicited advertisements.” Id. § 227(b)(2)(D).
from
“future
To come within
the ambit of paragraph 2(D), the fax must also include a “costfree mechanism” to send an opt-out request “to the sender of the
unsolicited advertisement.” Ibid.
The TCPA permits private enforcement, such that a person
may bring an action based on a violation of Section 227 “to
recover for actual monetary loss from such a violation, or to
receive $500 in damages for each such violation, whichever is
greater.” 47 U.S.C. § 227(b)(3); see also, Mims v. Arrow Fin.
Servs., LLC, 565 U.S. 368, 370 (2012); Ira Holtzman, C.P.A. v.
- 20 -
Turza, 728 F.3d 682, 688 (7th Cir. 2013).
A district court has
discretion
to
award
willful
violations
of
the
treble
TCPA,
damages
for
increasing
a
recovery to $1,500 for each violation.
In
moving
to
dismiss
Custom’s
or
plaintiff’s
knowing
potential
47 U.S.C. § 227(b)(3)(C)
First
Amended
Complaint,
Henry does not challenge basic TCPA pleading requirements but
instead makes several arguments at a higher level of generality.
First,
he
argues
that
the
Court
lacks
subject-matter
jurisdiction over the TCPA claim. Second, Henry contends that
Gulfco’s
bankruptcy
discharge
precludes
including its TCPA claim, against Henry.
Custom’s
claims,
Third, Henry urges
dismissal based on a recent TCPA opinion issued by the Court of
Appeals for the District of Columbia Circuit.
Fourth, Henry
argues that Custom has failed to plead his personal involvement
in sending the faxes, such that there is no plausible claim
against
him
individually.
Finally,
Henry
maintains
that
Custom’s claims are moot because of a disputed past offer of
settlement
payment.
and
his
willingness
to
make
a
future
“certified”
The Court takes these in turn.
1.
First,
jurisdiction
Henry
to
argues
hear
diversity are not met.
Jurisdiction
that
this
the
case
Court
because
lacks
the
subject-matter
requirements
of
(See, e.g., ECF No. 74 at 4; ECF No. 75
- 21 -
at 2-3; ECF No. 76 at 7-10.)
This argument ignores the fact
that the Court has original jurisdiction (concurrent with state
courts) to hear Custom’s private TCPA claim, which arises under
federal law. 28 U.S.C. § 1331; Mims, 565 U.S. at 372 (“We find
no convincing reason to read into the TCPA’s permissive grant of
jurisdiction to state courts any barrier to the U.S. district
courts’
exercise
of
the
general
federal-question
jurisdiction
they have possessed since 1875.”) (citation omitted).
Custom
claim.
asserts
federal
question
(Am. Compl. ¶ 15.)
jurisdiction
over
Indeed,
its
TCPA
And Custom grounds its conversion
and ICFA claims in exactly the same facts comprising its TCPA
claim, such that they form part of the same case or controversy
and
endow
the
Court
U.S.C. § 1367(a).
with
supplemental
jurisdiction
under
28
As a result, subject-matter jurisdiction in
this case does not turn on diversity or an amount-in-controversy
exceeding $75,000.
Henry’s other jurisdictional argument faults Custom for not
disclosing the list of at least thirty-nine other putative class
members.
(See, e.g., ECF No. 54 at 12-13.)
Yet class discovery
has not commenced, and so Custom is under no obligation (and
likely has no ability) to furnish Henry with this information.
Custom never purported to possess this information.
Am. Compl. ¶ 29.)
(See, e.g.,
And fact discovery only commenced recently
- 22 -
after the nearly year-long stay of the case pending Gulfco’s
bankruptcy.
The Court can conceive of no universe in which
disagreement
over
the
timing
of
discovery
disclosures
would
destroy subject-matter jurisdiction.
As
such,
Henry’s
Rule
12(b)(1)
Motions
to
Dismiss
are
denied in relevant part.
2.
Henry
next
bankruptcy
Gulfco’s Bankruptcy Discharge
proposes
resolved
that
Chapter
pending
Custom’s
Gulfco’s
claims
individually. (See, generally, ECF No. 68.)
said
of
this
argument,
other
than
to
7
corporate
against
Little needs to be
reject
it
outright.
Corporate debtors do not receive discharges in Chapter 7.
11
U.S.C.
§
discharge,
727(a)(1)
unless
the
(“The
debtor
court
is
shall
not
him
grant
an
the
See,
debtor
individual.”).
a
A
plaintiff in an action pending against a Chapter 7 debtor holds
an unsecured claim and is entitled to prosecute it in district
court after closure of the bankruptcy.
See, e.g., DeLeon v.
Beneficial Const. Co., 55 F.Supp.2d 819, 824 (N.D. Ill. 1999)
(“The DeLeons were listed as unsecured general creditors in that
[Chapter
debtor,
7]
action,
but
because
the
closure
did
not
Beneficial
discharge
their
is
a
corporate
claim.
Thus,
plaintiffs are entitled to prosecute their claim here, despite
- 23 -
the fact that Beneficial is insolvent and certainly judgmentproof.”).
This
Gulfco’s
was
indeed
bankruptcy
the
understanding
proceeding;
the
of
the
trustee
parties
to
unequivocally
informed Henry that the claims in this litigation against Gulfco
would not be discharged.
Gulfco’s
bankruptcy
What is more, Henry was involved in
proceedings
not
as
a
debtor
but
as
the
company’s Chief Operating Officer, President, and shareholder.
Thus, even if Custom’s claims against Gulfco were extinguished
in
bankruptcy,
Henry’s
attempt
to
invoke
that
discharge
to
shroud him personally would still be a non-sequitur.
The
Court
thus
denies
Henry’s
Rule
12(b)(1)
Motions
in
relevant part.
3.
Bais Yaakov and Unsolicited versus Solicited Faxes
Next, Henry points to the D.C. Circuit’s opinion in Bais
Yaakov of Spring Valley v. FCC, 852 F.3d 1078 (D.C. Cir. 2017),
arguing that Custom fails to state a claim on which relief can
be granted. (See, generally, ECF No. 81.)
That recent opinion
held that the TCPA does not grant the FCC authority to require
opt-out notices on solicited faxes.
at 1083.
See, Bais Yaakov, 852 F.3d
It did not invalidate the clear statutory language
requiring opt-out notices to be placed on unsolicited faxes.
- 24 -
The Court acknowledges that Custom’s class definition does
not distinguish between class members that gave prior permission
to Defendants and those that did not.
Instead, the class is
defined solely with respect to whether a person received a fax
from Defendants that “did not contain an opt-out notice that
complied with federal law.” (Am. Compl. ¶ 26.)
As such, Bais
Yaakov might spell Rule 23 doom for the proposed class should
Custom seek to certify it.
Custom’s
receipt
individual
of
an
TCPA
claim,
unsolicited
sufficient opt-out notice.
But Bais Yaakov does not bear on
fax
which
traces
allegedly
solely
lacking
a
to
its
legally
(See, e.g., Am. Compl. ¶ 17 (“On or
about February 17, 2016 Plaintiff received an unsolicited fax
advertisement.”); id. ¶ 22 (“Plaintiff did not invite or give
permission to anyone to send [the subject fax] to it.”).)
Thus, the Court denies Henry’s Rule 12(b)(6) Motion based
on Bais Yaakov.
4.
Personal Liability of Henry
Henry also asserts that Custom fails to “name one instance
or offer any proof that Defendant Henry did anything improper.”
(ECF No. 54 at 14.)
Part and parcel of Henry’s argument is that
Custom only alleges his liability as an employee of Gulfco. (Id.
at 13.)
The Court finds that Custom adequately pleads Henry’s
personal involvement in sending the unsolicited fax.
- 25 -
It is true that officers or employees are generally not
liable for statutory violations based solely on their employment
status.
See,
e.g.,
Savanna
Group,
2013
WL
4734004,
at
*8
(finding the head of defendant’s marketing division not liable
under the TCPA because the allegations were based solely on his
status).
However, the TCPA applies to “any person,” including
individuals.
47
U.S.C.
§
227(b)(1);
see
also,
Chapman
v.
Wagener Equities, Inc., No. 09 C 7299, 2014 WL 540250, at *16-18
(N.D. Ill. Feb. 11, 2014) (denying individual employee’s motion
to dismiss because the plaintiff alleged that he “personally
approved,
authorized,
and
participated
in
the
scheme
to
broadcast unsolicited advertisements via facsimile”) (internal
quotation marks omitted).
In fact, under the TCPA, the “sender”
is “the person or entity on whose behalf the advertisement is
sent,” not the individual or entity that actually operates the
transmitting fax machine.
Matter
of
Rules
and
21 F.C.C.R. 3787, at 3808 (In the
Regulations
Implementing
the
[TCPA])
Henry’s
alleged
(Apr. 6, 2006).
Here,
the
three
salient
facets
of
involvement that suffice to state a claim against him under the
TCPA are his alleged active participation in transmitting the
fax(es),
direct
benefits
from
transmitting
the
fax(es),
and
communications with Custom on behalf of Gulfco claiming to know
- 26 -
exactly how and to whom Gulfco sent faxes.
For example, Custom
alleges that Henry “actively participated in the transmission of
the
subject
fax
transmissions.”
advertisements,
(Am.
Compl.
or
¶
14;
benefitted
see
also,
from
id.
the
¶
18
(“Defendants sent, or caused the unsolicited fax advertisement
to
be
sent
persons.”).)
to
Plaintiff
and
a
class
of
similarly-situated
Henry, along with the other Defendants, “offered,
originated, and/or funded” the loan products and services being
advertised and “benefit[ted]” from their sale. (Id. ¶¶ 19-20.)
After filing its initial Complaint, Custom’s counsel allegedly
received
a
letter
Gulfco”
and
in
which
Henry
that,
by
filing
suit,
stated
Custom
that
he
caused
terminate its contractual relationship with Gulfco.
“represents
Kabbage
to
(Am. Compl.
¶ 21(b) (noting Henry’s claim of “tortuous” interference with
contract).)
Custom further claims that its counsel received a
fax from Henry on April 6, 2016, containing an affidavit in
which he averred based on personal knowledge that Gulfco only
faxed customers, including Custom, from whom it had procured
consent.
(Id. ¶ 21(c).)
Although it is a close question, the Court finds that these
allegations,
plausibly
taken
allege
in
the
Henry’s
light
personal
most
favorable
involvement
to
in
Custom,
Gulfco’s
transmission of the subject fax for purposes of TCPA liability.
- 27 -
See, e.g., Creative Montessori Learning Ctr. v. Ashford Gear,
LLC, No. 09 C 3963, 2010 WL 3526691, at *3 (N.D. Ill. Sept. 2,
2010)
(denying
motion
to
dismiss
as
to
individual
defendant
employee who was “involved with the day-to-day operations of
Ashford Gear in general and with the specific conduct alleged in
the instant complaint,” including creation of the unsolicited
facsimile
advertisements
and
correspondence
directly
with
the
service who blasted the faxes to recipients).
For these reasons, Henry’s Rule 12(b)(6) Motions are denied
in relevant part.
5.
Mootness
Henry spills lots of ink – or, perhaps more appropriately,
uses a good deal of his own toner – contending that he sent
Custom
a
$1,500.00
check
uncashed and unreturned.
from
a
Gulfco
account
that
went
(See, e.g., ECF No. 54 at 3-4.)
With
equal measure, Henry now offers to deposit $1,500 in “certified
funds” for Custom under Rule 68. (See, id. at 15.)
The thrust
of his argument is that his offer to settle Custom’s TCPA claim
for all it’s worth – i.e., for the maximum allowable amount of
statutory damages - moots Custom’s suit.
Custom disputes ever
receiving a $1,500.00 check and provides an affidavit from one
of its attorneys indicating that it did not receive it.
- 28 -
The
Court
particularly
parties’
is
at
past
loath
this
to
early
litigation
adjudicate
a
procedural
conduct
stage
casts
veracity of their contentions here.
swearing
and
contest,
where
aspersions
the
on
the
It suffices to note that,
even if Custom did receive Henry’s March 1, 2016 offer, its
rejection
argument.
considered
of
the
same
After
fourteen
withdrawn,”
original positions.
lends
no
support
days,
leaving
an
the
to
Henry’s
“unaccepted
parties
back
mootness
offer
in
is
their
Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663,
670 (2016) (citing FED. R. CIV. P. 68(b)).
Thus, even accepting
Henry’s version of events, his Rule 68 offer of judgment to
Custom expired on March 15, 2016 and, “once rejected, had no
continuing
efficacy.”
Ibid.
(citing
Genesis
S.Ct. at 1533 (Kagan, J., dissenting)).
Healthcare,
133
To the extent Henry is
frustrated at Custom’s rejection of his offer, there are other
mechanisms
more
appropriate
than
a
Rule
12(b)(1)
motion
police plaintiffs who reject a fully compensatory offer.
to
See,
e.g., Chapman, 796 F.3d at 787 (discussing cost-shifting and
using an offer of complete relief as an affirmative defense in
the context of Rule 68).
Rule 68
offer
has
no
So Henry’s disputed March 1, 2016
effect
on
Custom’s
interest in this case.
- 29 -
current
Article
III
The more interesting issue concerns the effect on Custom’s
interest
–
and
that
of
the
putative
class
members
-
of
statements in Henry’s briefs offering to deposit $1,500.00 with
the Court to settle Custom’s claims.
15
(offering
to
deposit
$1,500.00
(See, e.g., ECF No. 54 at
in
“certified
funds
into
whatever institution this courts [sic] chooses to settle this
litigation”).)
This implicates several questions left open by
Campbell-Ewald, which concerned only Rule 68 offers of judgment.
See, Campbell-Ewald, 136 S.Ct. at 672 (declining to extend the
holding to cases involving a direct tender or a deposit of funds
with the court).
Should the Court construe such statements as a
Rule
to
67
motion
$1,500.00?
deposit
with
the
Court
the
amount
of
If so, would a ruling granting that Rule 67 motion
or entering that deposit moot Custom’s individual claims?
If
so, would it moot the class claims too?
Two district court decisions in this Circuit have answered
such
questions
differently
post-Campbell-Ewald
–
and
context of unsolicited fax advertisements, no less.
in
the
First, in
Fulton Dental, LLC v. Bisco, Inc., No. 15 C 11038, 2016 WL
4593825 (N.D. Ill. Sept. 2, 2016), the court held that a TCPA
defendant who moved to deposit funds under Rule 67, requested
judgment
against
injunctive
relief,
it
for
and
this
did
so
monetary
before
- 30 -
relief
the
and
plaintiff
also
for
filed
a
motion
for
class
certification
successfully
mooted
both
individual plaintiff’s claims and those of the class.
the
The court
held that such a tender was an “unconditional surrender backed
by
immediate
action”
as
to
the
individual
named
plaintiff,
leaving the court with no task but to enter judgment.
*8.
of
Id. at
Looking to Seventh Circuit authority enshrining the filing
a
certification
motion
as
the
moment
when
putative
class
members develop an interest in the case, the Fulton Dental court
held that the class claims could have been preserved had the
plaintiff
merely
filed
an
earlier
motion
for
class
certification, such as a placeholder motion to accompany its
class action complaint.
Id. at *13.
A few months later, the court in Wendell H. Stone Co., Inc.
v. Metal Partners Rebar, LLC, 318 F.R.D. 343 (N.D. Ill. 2016),
also considered the mootness implications of a TCPA defendant’s
motion to deposit funds under Rule 67.
tender
appropriate,
the
court
held
Although finding such a
that
the
plaintiff’s
individual claim would not be moot even upon the actual deposit
and
entry
of
the
judgment.
To
hold
otherwise
would
impermissibly decapitate the class action device by separating
the named plaintiff’s interests from those of the putative class
and,
moreover,
accepted
full
“‘a
defendant’s
proof
compensation . . . is
- 31 -
that
an
the
plaintiff
affirmative
has
defense
rather
than
a
jurisdictional
Chapman, 796 F.3d at 787).
bar.’”
Id.
at
348
(quoting
With respect to the class claims,
the court emphasized that the named plaintiff had “made clear
its
intent
to
pursue
class
certification”
by
filing
its
complaint “as a class complaint” and then by moving for class
certification, albeit by placeholder motion, a week after the
defendant moved to deposit (but before issuance of the court’s
opinion). Id. at 348-49.
Thus, the defendant’s Rule 67 motion
to deposit did not moot the class claims either.
The court
ultimately granted the defendant’s motion to deposit the funds
but
denied
favor.
its
request
to
enter
judgment
in
the
plaintiff’s
Id. at 350.
Even if the two cases’ disparate treatment of class claims
might be squared on the basis that the plaintiff in Wendell
filed a motion for class certification whereas the plaintiff in
Fulton Dental “never” did, see, 2016 WL 4593825 at *13 (emphasis
in
original),
whether
a
the
Rule
67
cases
seem
tender
to
plaintiff’s individual claims.
irreconcilable
on
deposit
moots
funds
the
issue
the
of
named
Fortunately, however, the Court
need not choose between the two approaches here, because Henry’s
statements in his Rule 12 briefs do not clearly constitute a
Rule 67 motion that could, on Fulton Dental’s rationale, moot
Custom’s individual TCPA claim.
- 32 -
Mindful of Henry’s pro se status, the Court does not base
its finding on a superficial deficiency, such as Henry’s failure
to mention Rule 67, but instead on other absent hallmarks of a
motion to deposit funds.
There is a crucial difference between
a Rule 67 motion to deposit funds – “an unconditional offer and
an actual production of the money to be paid” – and a Rule 68
“offer to tender payment in the future.”
Telemark Dev. Grp.,
Inc. v. Mengelt, 313 F.3d 972, 978 (7th Cir. 2002); see also,
Campbell-Ewald,
136
(noting
Rule
that
a
S.Ct.
68
at
675
settlement
(Thomas,
offer
is
J.,
concurring)
unlike
a
tender
because the latter is “accompanied by actually produc[ing] the
sum at the time of tender in an unconditional manner”).
Henry’s
statements in his Rule 12(b)(1) and 12(b)(6) briefs evince a
desire to furnish a Rule 68 offer of judgment in the future
while simultaneously denying any legal culpability with respect
to
Custom’s
allegations.
Indeed,
both
parties
seem
to
understand his proposal as a mere reiteration of the exact same
disputed offer he claims to have made to Custom on March 1,
2016.
Finally, Henry has not delivered to the clerk a copy of
the order permitting deposit, as Rule 67 requires.
See, FED. R.
CIV. P. 67(a) (“The depositing party must deliver to the clerk a
copy of the order permitting deposit.”) (emphasis added).
- 33 -
Similarly, even if Henry’s statements could somehow be read
as a Rule 67 motion to deposit, Henry has not requested entry of
a
judgment
Rule 12
in
Custom’s
filings,
the
favor.
Court
After
finds
no
scouring
his
statements
numerous
tethering
to
Henry’s offer an explicit request that the Court enter judgment
against him monetarily or in the form of an injunction against
further transmission of faxes to Custom.
As such, were the
Court to grant the hypothetical, inchoate motion to deposit, no
claims in this case would be mooted; Henry would simply have
made funds available.
As such, Henry still could not avail
himself of the mootness procedure described in Fulton Dental.
In
sum,
Henry’s
statements
do
not
constitute
a
Rule
67
motion for deposit of funds because they are equivocal (both in
essence and in their Rule 12 milieu), resemble another iteration
of his purported initial Rule 68 offer, and lack the necessary
order permitting deposit that Rule 67 requires.
In any event,
Henry has not given the Court occasion to apply either of the
Rule
67
Wendell,
mootness
because
approaches
he
has
described
not
requested
in
Fulton
entry
of
Dental
an
judgment either as to monetary or injunctive relief.
and
adverse
Standing
alone, Henry’s statements offering to pay Custom $1,500.00 in
the future to settle the case moot neither Custom’s individual
TCPA claim nor the putative class’s TCPA claims.
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The Court
reserves
ruling
on
the
effect
of
a
proper
Rule
67
motion
accompanied by a request for an adverse judgment in favor of
Custom.
For these reasons, Henry’s Rule 12(b)(1) Motions to Dismiss
for mootness are denied in relevant part.
IV.
CONCLUSION
For the reasons stated herein, the Court grants in part
Defendant Henry’s Motions to Dismiss [ECF Nos. 54, 60, 68, 74,
75, 76, and 81].
Counts II and III are dismissed for failure to
state a claim.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Dated: June 16, 2017
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