Saenz v. Buckeye Check Cashing of Illinois, LLC et al

Filing 20

MEMORANDUM Opinion and Order. Signed by the Honorable Manish S. Shah on 9/20/2016: Defendants' motion to dismiss 11 is granted in part, and denied in part. Saenz alleged a sufficiently concrete harm to confer Article III standing, but he did not-and cannot-allege facts to support a claim that Buckeye met the statutory definition of a debt collector under the FDCPA. The complaint is dismissed with prejudice, and plaintiff's motion for class certification 18 is denied as moot. Enter judgment and terminate civil case. [For further detail see attached order.] Notices mailed by Judicial Staff. (psm, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JUAN SAENZ,
Plaintiff,

No. 16 CV 6052

v.
BUCKEYE CHECK CASHING OF ILLINOIS,
CHECKSMART FINANCIAL, LLC, and
COMMUNITY CHOICE FINANCIAL, INC.,

Judge Manish S. Shah

Defendants.
MEMORANDUM OPINION AND ORDER
Juan Saenz defaulted on his personal loan. Buckeye Check Cashing of Illinois
mailed Saenz a letter informing Saenz of his missed payment and attempting to
collect his debt. Saenz alleges that by sending this letter Buckeye violated the Fair
Debt Collections Practices Act in two respects. First, Buckeye failed to include in
the letter notices of Saenz’s rights under the FDCPA. Second, Buckeye made false,
deceptive, and misleading representations in the letter in order to collect the alleged
debt. Saenz named Buckeye and affiliated companies, Checksmart Financial, LLC,
and Community Choice Financial, Inc., as defendants. The defendants move to
dismiss Saenz’s complaint for lack of subject-matter jurisdiction under Rule 12(b)(1)
and for failure to state a claim under Rule 12(b)(6).
I.

Legal Standards
A court must dismiss an action if it determines, at any time, it lacks subject-

matter jurisdiction, Fed. R. Civ. P. 12(h)(3), and a defendant may move to dismiss

an action for lack of subject-matter jurisdiction. Fed. R. Civ. P. 12(b)(1). The
plaintiff bears the burden of proving that jurisdiction is proper. Transit Express,
Inc. v. Ettinger, 246 F.3d 1018, 1022 (7th Cir. 2001) (citation omitted). To prevail, “a
plaintiff need only show the existence of facts that could, consistent with the
complaint’s allegations, establish standing.” Apex Digital, Inc. v. Sears, Roebuck &
Co., 572 F.3d 440, 443 (7th Cir. 2009) (citations omitted).
To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain
factual allegations that plausibly suggest a right to relief. Virnich v. Vorwald, 664
F.3d 206, 212 (7th Cir. 2011) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554, 558
(2009)). “The purpose of a motion to dismiss is to test the sufficiency of the
complaint, not to decide the merits.” Triad Assocs., Inc. v. Chicago Hous. Authority,
892 F.2d 583, 586 (7th Cir. 1989). With a 12(b)(6) motion, a court may only consider
allegations in the complaint, documents attached to the complaint, and documents
that are both referred to in the complaint and central to its claim(s). Levenstein v.
Salafsky, 164 F.3d 345, 347 (7th Cir. 1998). The court must construe all factual
allegations as true and draw all reasonable inferences in the plaintiff’s favor, but
the court need not accept legal conclusions or conclusory allegations. Virnich, 664
F.3d at 212 (citing Ashcroft v. Iqbal, 556 U.S. 662, 680–82 (2009)).
II.

Background
Saenz took out a consumer payday loan for personal purposes. [1] at ¶ 12. He

was unable to pay it and he defaulted on the loan. [1] at ¶ 13. Buckeye sent a letter
to Saenz on Buckeye’s letterhead, which said, “Your loan is in default.” [1-1] at 8. It

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also stated: “Your debt has now been transferred to our office for collection,” and
referred to a contract with Buckeye. [1-1] at 8. The collection letter was Buckeye’s
first and last communication with Saenz; it did not provide notices about Saenz’s
rights to dispute or verify the debt, or to obtain additional information about the
creditor. [1] at ¶¶ 15–19. The complaint alleges that Buckeye’s letter was false,
deceptive, and misleading because Buckeye represented itself as a debt collector to
instill fear in Saenz and to induce Saenz to pay the debt. [1] at ¶¶ 31.
III.

Analysis
A.

Saenz Has Standing to Bring This Lawsuit

Saenz alleges he suffered “a concrete informational injury” due to Buckeye’s
“failure to provide truthful information” in its collection letter to Saenz—an injury
which can be redressed by a favorable decision by this court. [1] ¶¶ 3–4. Buckeye
argues that “[n]one of the asserted violations worked an actual harm,” [12] at 4, nor
did they pose a “risk of real harm,” [12] at 6–7, and thus, there is no injury-in-fact.
Without an injury-in-fact, Buckeye notes, Saenz has no standing to bring this
FDCPA lawsuit.
A federal court does not have subject-matter jurisdiction over a dispute
unless the plaintiff has “(1) suffered an injury in fact, (2) that is fairly traceable to
the challenged conduct of the defendant, and (3) that is likely to be redressed by a
favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547, as revised
(May 24, 2016). An injury-in-fact is a concrete and particularized invasion of a
legally protected interest. Id. at 1548. In Spokeo, the Supreme Court held that even

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lawsuits based on statutory violations require proof of a concrete injury, which is
not met automatically by citing a statute that grants a right and authorizes a suit
to vindicate that right. Id. at 1549. “This does not mean, however, that the risk of
real harm cannot satisfy the requirement of concreteness.” Id. (citation omitted). In
some circumstances, violation of a statutory procedural right will be enough to
confer standing. Id. For some plaintiffs, alleging the harm identified by Congress in
the statute is sufficient. Id.
The Seventh Circuit has not had occasion to consider Article III standing for
FDCPA violations after Spokeo. But nothing in Spokeo overruled the Seventh
Circuit’s decisions that emphasized and affirmed the power of Congress to pass
legislation creating new rights, which if violated, would confer standing under
Article III. See, e.g., Sterk v. Redbox Automated Retail, LLC, 770 F.3d 618, 623 (7th
Cir. 2014) (citing Kyles v. J.K. Guardian Sec. Servs., Inc., 222 F.3d 289, 294 (7th
Cir. 2000)). Indeed, the Supreme Court endorsed the view that “Congress has the
power to define injuries and articulate chains of causation that will give rise to a
case or controversy where none existed before.” Spokeo, 136 S. Ct. at 1549 (quoting
Lujan v. Defs. of Wildlife, 504 U.S. 555, 580 (1992) (Kennedy, J., concurring)).
Congress gave consumers a legally protected interest in certain information
about debts, and made the deprivation of information about one’s debt (in a
communication directed to the plaintiff consumer) a cognizable injury. The
violations alleged here are distinguishable from the “bare procedural violation”
imagined in Spokeo. 136 S. Ct. at 1550. Saenz was harmed by receiving a deficient

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and allegedly misleading communication from Buckeye—a harm defined and made
cognizable by the statute, but a concrete harm nonetheless. The alleged violations of
the FDCPA in this case are concrete and particularized to Saenz, and he has Article
III standing to bring suit. Buckeye’s motion to dismiss for lack of subject-matter
jurisdiction is denied.
B.

The Complaint Fails to State a Claim Under the FDCPA

The act targets debt collectors, not creditors. A “creditor” extends credit
thereby creating a debt. 15 U.S.C. § 1692a(5). A “debt collector” collects, or attempts
to collect, debts of another. Id. at (6). “Because creditors are generally presumed to
restrain their abusive collection practices out of a desire to protect their corporate
goodwill, their debt collection activities are not subject to the Act.” Aubert v. Am.
Gen. Fin., Inc., 137 F.3d 976, 978 (7th Cir. 1998) (citation omitted). When creditors
do not practice self-restraint, though, the FDCPA can sometimes apply. Specifically,
the term “debt collector” “includes any creditor who, in the process of collecting his
own debts, uses any name other than his own which would indicate that a third
person is collecting or attempting to collect such debts.” § 1692a(6) (emphasis
added). This is known as the false names exception. It is the only circumstance
under which the FDCPA creates liability for unfair debt collection practices by
creditors.
Saenz’s complaint invokes the false names exception by alleging that the
collection letter fails to clearly identify the sender or the creditor. He attaches the
letter to his complaint, and admits the letter is on Buckeye’s letterhead. [1] at ¶¶ 23

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& 25. The uncertainty for Saenz comes from this statement: “Your debt has now
been transferred to our office for our collection.” [1] at ¶¶ 22–23. From Saenz’s
perspective, the reference to “our office,” without further explanation, suggests the
office belongs to a third party and not to Buckeye. [1] at ¶ 22. Even assuming that
Buckeye is the original creditor, Saenz contends, the FDCPA applies because
Buckeye proclaimed itself to be a debt collector by sending a letter that suggests it
is from “an office that collects debts.” [1] at ¶ 25, (citing Catencamp v. Cendant
Timeshare Resort Grp.-Consumer Fin., Inc., 471 F.3d 780, 781 (7th Cir. 2006)).
Buckeye insists it is the original creditor. [12] at 8. Since Saenz recognizes
the use of Buckeye’s letterhead and does not allege that Buckeye used a false name
in the collection letter, Buckeye argues that the FDCPA false name exception
cannot apply here. [12] at 8. If the FDCPA does not apply to Buckeye’s
communication to Saenz, the complaint must be dismissed (and no theory of
vicarious liability would support a claim against the affiliated defendants).
The notion that a creditor can make a proclamation that subjects itself to
treatment as a “debt collector” under the FDCPA is limited to proclamations about
the creditor’s identity and does not include representations about the creditor’s
intent. See Catencamp, 471 F.3d at 782 (applying the false names exception where
creditor communicated to debtor using two names the debtor had never encountered
before). In Catencamp, the creditor sent a collection letter to collect on its debt, but
masked its identity by using a trade name. The court concluded that the
unsophisticated consumer would understand this letter to be from a debt collector;

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thus the false name exception applied. Id. (citing Gammon v. GC Services Limited
Partnership, 27 F.3d 1254 (7th Cir. 1994) (discussing the “unsophisticated
consumer” standard). But if it had been on the creditor’s letterhead, the
communication would be “from the creditor in its own name” and the FDCPA would
not apply even though there was a confusing statement in the body of the letter. Id.
Catencamp instructs, therefore, that unless the creditor communicates under
a different name, triggering the false name exception, courts will not examine the
effect of the substantive contents of a communication on the unsophisticated
consumer because “the Act’s anti-confusion rule applies only to debt collectors.” Id.;
see also Nwoke v. Countrywide Home Loans, Inc., 251 Fed. App’x 363, 364–365 (7th
Cir. 2007) (unpublished) (“[Creditor’s] statement in a single letter that it is a debt
collector does not raise a genuine issue of material fact as to whether it is subject to
the FDCPA for attempting to collect a debt it believed [debtor] owed.”); Gaddy v.
Wulf, No. 09 CV 5338, 2010 WL 1882015, at *4 (N.D. Ill. May 11, 2010). Here,
Saenz alleges that only one name appeared in the letter: Buckeye’s. Consequently,
Buckeye’s letter was “from the creditor in its own name.” Catencamp, 471 F.3d at
782. The letter said the debt had been “transferred to our office,” and referred to
Buckeye in the third person (claiming that “we are required by contract with
Buckeye” to resolve the debt), so it certainly could have been more direct and clear
about its source. But it did not use any name other than Buckeye’s, the creditor, and
the unsophisticated consumer would see that no other name was used. Creditors are
not subject to the FDCPA unless they use a name other than their own, and here,

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the false name exception does not apply. Although the contents of Buckeye’s letter
may have confused Saenz and failed to contain FDCPA-required notices, the letter
is not actionable under the FDCPA.
Ordinarily, a plaintiff should be given leave to amend the complaint after a
first dismissal, but here, there can be no allegation that cures the defect in
plaintiff’s theory. The creditor did not use any name other than its own, and so was
not a debt collector subject to the FDCPA. The complaint against Buckeye, and
against Community Choice and Checksmart by extension, is dismissed with
prejudice for failure to state a claim upon which relief may be granted.
IV.

Conclusion
Defendants’ motion to dismiss [11] is granted in part, and denied in part.

Saenz alleged a sufficiently concrete harm to confer Article III standing, but he did
not—and cannot—allege facts to support a claim that Buckeye met the statutory
definition of a debt collector under the FDCPA. The complaint is dismissed with
prejudice, and plaintiff’s motion for class certification [18] is denied as moot. Enter
judgment and terminate civil case.

ENTER:
___________________________
Manish S. Shah
United States District Judge
Date: 9/20/2016

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