Cunningham v. Health Plan Intermediaries Holdings, LLC et al

Filing 148

MEMORANDUM Opinion and Order Signed by the Honorable John Robert Blakey on 2/13/2018. Mailed notice(gel, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CRAIG CUNNINGHAM,
Plaintiff,

Case No. 17-cv-1216

v.
HEALTH PLAN INTERMEDIARIES
HOLDINGS, LLC d/b/a HEALTH
INSURANCE INNOVATIONS, et al.,

Judge John Robert Blakey

Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiff Craig Cunningham sued 20 Defendants under the Telephone
Consumer Protection Act (TCPA), 47 U.S.C. § 227 et seq. In his second amended
complaint [73], Plaintiff asserts four putative class claims based upon unwanted
telemarketing calls he allegedly received on his cell phone. Numerous Defendants
have moved to dismiss all claims for various reasons, including lack of personal
jurisdiction and failure to state a claim.
Because Plaintiff served different Defendants at different times, responsive
pleadings in this case do not all follow the same timeline.

Thus, this opinion

addresses only five of the pending motions to dismiss, brought by the following
Defendants: Health Plan Intermediaries Holdings, LLC (HPI) [60]; National Health
Hub, LLC (NHH), Alliance for Consumers USA, Inc. (AFC), and Amalgamated Life
Insurance Company (ALI) [62]; Cigna Health and Life Insurance Company (Cigna)
[64]; Loyal American Life Insurance Company (LALI) [82]; and GIP Technology,
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Paul Maduno, and Ada Maduno (together, GIP) [86]. For the reasons explained
below, this Court grants all five motions.
I.

The Complaint’s Allegations
In October 2016, Defendants’ third-party agents started calling Plaintiff’s cell

phone to try to sell him health insurance. [73] ¶ 35. These calls—over one hundred
total—continued through February 2017. Id. ¶ 36. Plaintiff received each call in
Nashville, Tennessee, where he lives. Id. ¶ 4; [1] ¶ 25. 1
Defendants’ agents called through an automatic telephone dialing system
(ATDS). [73] ¶ 37. Plaintiff knew that the calls came through an ATDS because,
after answering the calls, he always heard a long pause before a prerecorded
message began.

Id. ¶ 38.

The prerecorded message came from the “National

Health Insurance Enrollment Center”; that name does not connect to any
Defendant, and the calls never revealed “the real name of the person or entity
calling.” Id. ¶¶ 39–40. But the calls mentioned each Defendant’s products, and
Plaintiff got written offers in the mail featuring all Defendants’ names. Id. ¶ 41.
Plaintiff never consented to receive calls made using an ATDS. Id. ¶ 48. In
fact, he says that he contacted HPI after the calls started to express that
Defendants did not have permission to contact him. Id. ¶ 50. Plaintiff alleges that
HPI then emailed “the other Defendants as its agents” to tell them to add Plaintiff’s
phone number to their internal Do Not Call lists. Id. Despite that communication,
Plaintiff continued receiving soliciting phone calls from Defendants. Id. ¶ 51.
This Court takes judicial notice of Plaintiff’s original complaint, which he first filed in the Middle
District of Tennessee and later refiled in this district. [1]. In that complaint, Plaintiff states: “the
acts and transactions occurred here,” in the Middle District of Tennessee. Id. ¶ 24.
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Plaintiff alleges that GIP, a technology company, facilitated the unwanted
phone calls by providing phone numbers and caller ID services to the other
Defendants.

Id. ¶ 55.

Defendants used a GIP service that prevents a call’s

recipient from learning the caller’s telecom service provider, thus preventing the
recipient from complaining to the service provider about unwanted calls. Id. ¶ 58.
Plaintiff alleges that “all Defendants do business” within Illinois. Id. ¶ 3.
Plaintiff also alleges that “each and every Defendant” acted as “an agent and/or
employee of each of the other Defendants,” id. ¶ 25, and that Defendants relied
upon third-party “Insurance Sales Agents” to carry out their core business
functions, including marketing “the products and services of each and every other
Defendant,” id. ¶¶ 26, 30. Plaintiff claims that Defendants control their agents’
actions, including by marketing each other’s products to potential customers. Id. ¶
27.

Finally, Plaintiff says that Defendants ratified each other’s actions by

knowingly accepting “applications and customers from each other.” Id. ¶ 32.
II.

Legal Standard
To survive a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6), a complaint must provide a “short and plain statement of the claim”
showing that the pleader merits relief, Fed. R. Civ. P. 8(a)(2), so the defendant has
“fair notice” of the claim “and the grounds upon which it rests.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47
(1957)). A complaint must also contain “sufficient factual matter” to state a facially
plausible claim to relief—one that “allows the court to draw the reasonable

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inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). This plausibility
standard “asks for more than a sheer possibility” that a defendant acted unlawfully.
Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013). Thus, “threadbare recitals
of the elements of a cause of action” and mere conclusory statements “do not
suffice.” Limestone Dev. Corp. v. Vill. of Lemont, 520 F.3d 797, 803 (7th Cir. 2008).
In evaluating a complaint under Rule 12(b)(6), this Court accepts all wellpleaded allegations as true and draws all reasonable inferences in the plaintiff’s
favor. Iqbal, 556 U.S. at 678. This Court does not, however, accept a complaint’s
legal conclusions as true. Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009).
When a defendant moves to dismiss for lack of personal jurisdiction under
Rule 12(b)(2), the plaintiff must make a prima facie jurisdictional showing. See N.
Grain Mktg., LLC v. Greving, 743 F.3d 487, 491 (7th Cir. 2014). In evaluating
whether a plaintiff makes a prima facie showing, this Court resolves factual
disputes in the plaintiff’s favor.

Purdue Research Found. v. Sanofi-Synthelabo,

S.A., 338 F.3d 773, 782 (7th Cir. 2003).

But if a defendant submits evidence

opposing jurisdiction, “the plaintiff must go beyond the pleadings and submit
affirmative evidence supporting the exercise of jurisdiction.” Id. at 783.
III.

Analysis
A.

Personal Jurisdiction

HPI, NHH, AFC, ALI, and GIP argue that this Court lacks personal
jurisdiction over them because they are incorporated and have their principal places

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of business in other states, operate almost entirely in other states, and largely lack
the ability to initiate phone calls from within Illinois. [60] at 3–9; [62] at 2–8; [87]
at 2–6. This Court agrees, except as to GIP.
This Court’s exercise of personal jurisdiction over a non-consenting out-ofstate defendant must satisfy both the Illinois long-arm statute and the federal
Constitution. See Destiny Health, Inc. v. Conn. Gen. Life Ins. Co., 741 F. Supp. 2d
901, 910 (N.D. Ill. 2010); see also Citadel Grp. Ltd. v. Wash. Reg’l Med. Ctr., 536
F.3d 757, 761 (7th Cir. 2008) (explaining that federal courts may forgo analyzing
jurisdiction under the Illinois Constitution because the federal and Illinois
constitutional standards remain the same). The Illinois long-arm statute allows
jurisdiction on any basis “permitted by the Illinois Constitution and the
Constitution of the United States.” 735 ILCS 5/2-209(c). Thus, the statutory and
constitutional inquiries merge: if this Court may constitutionally exercise personal
jurisdiction over an out-of-state defendant, then that exercise comports with the
Illinois long-arm statute. See Greving, 743 F.3d at 492.
The Fourteenth Amendment’s Due Process Clause provides the touchstone
for assessing personal jurisdiction.

See Citadel, 536 F.3d at 761.

Due process

requires that a defendant have “certain minimum contacts” with the forum state,
such that maintaining a suit there “does not offend traditional notions of fair play
and substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
Cases following International Shoe distinguish between general (or all-purpose)
jurisdiction and specific (or case-linked) jurisdiction. See BNSF Ry. Co. v. Tyrrell,

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137 S. Ct. 1549, 1558 (2017) (collecting cases).
1.

General Jurisdiction

General jurisdiction exists when a defendant has “continuous and
systematic” connections to a state that render the defendant “essentially at home in
the forum.” Id. (quoting Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014)). A
corporation’s place of incorporation and principal place of business provide
“paradigm” forums for general jurisdiction.

Daimler, 134 S. Ct. at 760.

In an

exceptional case, a corporate defendant might have operations “so substantial and
of such a nature” as to render that defendant “at home” in another forum. BNSF,
137 S. Ct. at 1558 (internal quotation marks omitted).
This is not that exceptional case. The facts here clearly do not give rise to
general jurisdiction over any of the moving Defendants, and Plaintiff does not
suggest otherwise in his briefs. See [92] at 10–11 (arguing for specific jurisdiction);
[93] at 6–8 (same); [94] at 8–10 (same).
2.

Specific Jurisdiction

For an exercise of specific jurisdiction to pass constitutional muster, the
defendant’s contacts “must directly relate to the challenged conduct or transaction.”
Tamburo v. Dworkin, 601 F.3d 693, 702 (7th Cir. 2010). The defendant must have
“purposefully directed” its activities at the forum state, and the alleged injury must
arise out of those forum-related activities.

Id. (citing Burger King Corp. v.

Rudzewicz, 471 U.S. 462, 472 (1985)). Thus, for specific jurisdiction to exist here,
Defendants must have had purposeful contacts with Illinois that directly relate to

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the phone calls that Plaintiff complains about.
In support of its motion to dismiss, HPI submitted a declaration from its
corporate parent’s Vice President of Compliance. [60-2]. The declaration states
that HPI is a Delaware limited liability company (LLC) with its principal place of
business in Tampa, Florida, and that HPI has no corporate offices, real property, or
bank accounts in Illinois. Id. ¶ 2. None of HPI’s 127 employees work in Illinois. Id.
¶¶ 7–8. Most importantly, HPI has “no physical infrastructure or ability to initiate
any telephone calls from within the State of Illinois.” Id. ¶ 9.
Likewise, NHH’s President declares that NHH is a Florida LLC with its
principal place of business in Fort Lauderdale, Florida, and that NHH has no
corporate offices, real property, or bank accounts in Illinois. [62-2] ¶¶ 2, 4–5. NHH
has no employees in Illinois, and “no physical infrastructure or ability to initiate
any telephone calls from within the State of Illinois.” Id. ¶¶ 6, 8.
Continuing the pattern, AFC’s President declares that AFC is a Nebraska
corporation with its principal place of business in Plano, Texas. [62-3] ¶ 2. Like
HPI and NHH, AFC has no corporate offices, real property, bank accounts, or
employees in Illinois. Id. ¶¶ 4–6. And AFC has “no physical infrastructure or
ability to initiate any telephone calls from within the State of Illinois.” Id. ¶ 9.
Finally, ALI’s Executive Vice President declares that ALI is a New York
company with its principal place of business in New York. [62-4] ¶ 2. ALI has no
corporate offices, real property, or bank accounts in Illinois, although two of its 482
employees work in Illinois. Id. ¶¶ 4–6. Like the other moving Defendants, ALI “has

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no physical infrastructure within the State of Illinois.” Id. ¶ 9.
GIP did not submit any declarations or other evidence supporting its
jurisdictional challenge. See generally [87]. GIP argues in its brief, however, that it
does not conduct business in Illinois and that it has “no connection or affiliation
with” any other Defendants. [87] at 2.
GIP aside, the moving Defendants’ evidence depicts companies with
essentially no connection to Illinois. Most importantly, these companies lack the
infrastructure necessary to operate an ATDS within Illinois, and so could not have
launched the offending calls to Plaintiff from within this state. Given that evidence,
Plaintiff “must go beyond the pleadings and submit affirmative evidence supporting
the exercise of jurisdiction” to keep HPI, NHH, AFC, and ALI in the case. Purdue
Research, 338 F.3d at 783. Plaintiff fails to do so.
Instead, Plaintiff falls back on his complaint, arguing that Defendants’
declarations fail to contradict any of his claims. See, e.g., [93] at 6. Plaintiff says
that he makes a prima facie showing of personal jurisdiction by alleging that all
Defendants act as each other’s agents and that Defendants Medsense and Axis are
incorporated in Illinois. Id. So, Plaintiff claims: “Jurisdiction for one Defendant
thus satisfies jurisdiction for all Defendants.” Id.
Plaintiff’s last assertion flies in the face of decades of precedent emphasizing
that determining whether personal jurisdiction exists requires defendant-specific
analysis.

See, e.g., BNSF, 137 S. Ct. at 1558 (collecting cases).

Without the

requisite analysis, merely respecting one defendant’s due-process rights cannot

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make up for violating a co-defendant’s rights. That said, this Court disagrees that
Defendants’ declarations fail to contradict any of Plaintiff’s claims. Indeed, they
refute Plaintiff’s bare-bones allegation that “all Defendants do business within the
State of Illinois.” [73] ¶ 3. Plaintiff correctly points out that agency relationships
may be relevant to the question of specific jurisdiction, see Daimler, 134 S. Ct. at
759 n.13, but Plaintiff’s deficient and conclusory allegations (as discussed below)
that all Defendants act as agents of all other Defendants cannot defeat the evidence
that HPI, NHH, AFC, and ALI offer. This Court dismisses HPI, NHH, AFC, and
ALI for lack of personal jurisdiction.
As for GIP, this Court cannot dismiss it for lack of personal jurisdiction
because GIP did not provide any evidence to contradict Plaintiff’s claim that it does
business in Illinois. This Court cannot rely upon arguments in a brief as if they
were sworn statements made under penalty of perjury. See Lee v. Chi. Youth Ctrs.,
69 F. Supp. 3d 885, 888 (N.D. Ill. 2014) (explaining that “statements of lawyers in
briefs are not evidence”). Without any affirmative evidence, this Court must resolve
disputes over relevant facts—including that GIP does business in Illinois—in
Plaintiff’s favor. Purdue Research, 338 F.3d at 782.
B.

Failure to State a Claim

Plaintiff claims that all Defendants have vicarious liability for the alleged
TCPA violations because “each and every Defendant” acted “as the agent of each
and every other Defendant” and relied upon a network of “Insurance Sales Agents”
to make telemarketing calls to Plaintiff. [91] at 7. Plaintiff does not allege that any

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Defendants made telemarketing calls themselves.

Instead, he alleges that his

claims survive under any one of three agency theories: actual authority, apparent
authority, and ratification. Id. at 7–8. Cigna, LALI, and GIP argue that Plaintiff’s
claims fail for various reasons, including that Plaintiff fails to allege any facts
supporting an agency relationship. See generally [64]; [82]; [86]. This Court agrees.
In a 2013 ruling, the Federal Communications Commission (FCC) explained
that sellers may face vicarious liability under the TCPA even when they do not
directly initiate telemarketing calls. In re Joint Petition filed by Dish Network,
LLC, 28 F.C.C.R. 6574, 6584 (2013). If a seller’s representative violates the TCPA,
the seller may face liability “under a broad range of agency principles, including not
only formal agency, but also principles of apparent authority and ratification.” Id.
The FCC’s ruling relied upon federal common-law principles of agency, id. at 6582,
which accord with the Restatement (Third) of Agency. See Opp v. Wheaton Van
Lines, Inc., 231 F.3d 1060, 1064 (7th Cir. 2000); see also Smith v. State Farm Mut.
Auto. Ins. Co., No. 13-cv-2018, 2013 WL 5346430, at *3 (N.D. Ill. Sept. 23, 2013).
The FCC has authority to promulgate implementing regulations for the TCPA, 47
U.S.C. § 227(b)(2), and both sides agree that the FCC’s ruling applies here.
Accordingly, this Court addresses each theory of vicarious liability in turn.
1.

Actual Authority

The Restatement (Third) of Agency defines agency as a “fiduciary
relationship that arises when one person”—a principal—“manifests assent to
another person”—an agent—“that the agent shall act on the principal’s behalf and

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subject to the principal’s control.” § 1.01. Actual authority arises when an agent
“reasonably believes,” based upon manifestations that the principal makes to the
agent, “that the principal wishes the agent” to act. Id. § 2.01.
First, Plaintiff alleges that “each and every Defendant” acted as “an agent
and/or employee of each of the other Defendants.” [73] ¶¶ 25, 43. This conclusory
allegation has several failings, including that it does not identify a principal for the
web of agents.

An agency relationship cannot exist without a principal.

See

Restatement (Third) Agency § 1.01. Drawing inferences in Plaintiff’s favor, Iqbal,
556 U.S. at 678, he alleges in one sentence that HPI was the principal, because HPI
“sent an email to the other Defendants as its agents” instructing them to put
Plaintiff’s phone number on Do Not Call lists, [73] ¶ 50. But according to Plaintiff,
the other Defendants ignored HPI’s instruction and telemarketers continued calling
him. Id. So, even as alleged, HPI did not control the other Defendants’ actions, and
was not their principal. See Paldo Sign & Display Co. v. Wagener Equities, Inc., 825
F.3d 793, 798 (7th Cir. 2016) (Because the alleged agent “expressly contradicted
defendant’s actual instructions, this is clearly not express actual agency.”).
Those issues aside, Plaintiff’s allegations of universal agency among
Defendants offer nothing more than “threadbare recitals of the elements of a cause
of action” and conclusory statements.

Limestone Dev. Corp., 520 F.3d at 803.

Although Plaintiff does not have to allege facts completely within Defendants’
knowledge at this stage, he does have to allege a factual predicate “that gives rise to
an inference of an agency relationship.” Mauer v. Am. Intercontinental Univ., Inc.,

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No. 16-cv-1473, 2016 WL 4651395, at *2 (N.D. Ill. Sept. 7, 2016).

Plaintiff’s

allegations lack that factual predicate. Cf. id. at *3 (complaint sufficiently pled an
agency relationship by describing a “detailed chain of events” connecting the
defendant to a telemarketer).
Plaintiff also alleges that Defendants rely upon third-party “Insurance Sales
Agents” to carry out their core business functions, including marketing “the
products and services of each and every other Defendant.” [73] ¶¶ 26, 30. Plaintiff
uses the term “agents” in his complaint to refer both to Defendants acting as each
other’s agents and to the third-party telemarketers acting as Defendants’ agents,
thus failing to specify what exactly he alleges that each actor did. See, e.g., id. ¶¶
30–31.

Plaintiff’s complaint further lacks factual allegations showing that the

“Insurance Sales Agents” actually acted at Defendants’ behest. Again, he offers
only conclusory allegations that Defendants had “control over their agents’ actions,”
id. ¶ 27, but such allegations do not bring his claims across the line from the merely
possible to the plausible, see Williamson, 714 F.3d at 436. In short, Plaintiff fails to
sufficiently plead that the telemarketers had Defendants’ actual authority.
2.

Apparent Authority

Apparent authority arises when a third party “reasonably believes” that an
actor “has authority to act on behalf of the principal and that belief is traceable to
the principal’s manifestations.”

Restatement (Third) Agency § 2.03 (emphasis

added). Here, Plaintiff fails to allege that any Defendants ever manifested to him
that the telemarketers or other Defendants had authority to act on their behalf, see

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generally [73], and thus he fails to allege apparent authority.
Plaintiff’s only contact with any Defendant came when he wrote a letter to
HPI stating that “Defendants did not have Plaintiff’s consent to contact him.” Id. ¶
50. Plaintiff alleges that HPI then emailed the other Defendants to instruct them to
add Plaintiff’s phone number to internal Do Not Call Lists. Id. Emailing the other
Defendants does not qualify as making a manifestation to Plaintiff. Besides, the
fact that the other Defendants disregarded HPI’s instruction and continued calling
Plaintiff, id., makes it unreasonable for Plaintiff to believe that the other
Defendants acted as HPI’s agents, see Paldo Sign, 825 F.3d at 798.
Plaintiff argues that he reasonably believed that the telemarketers had
apparent authority simply because they mentioned Defendants’ products on their
calls and sent him paperwork featuring Defendants’ names. [91] at 9–10 (citing
Paldo Sign, 825 F.3d at 797). This argument has several problems. First, as noted
above, apparent authority requires that the principal made manifestations to the
third party (in this case, Plaintiff) that created the third party’s reasonable belief.
See Restatement (Third) Agency § 2.03; see also Dish Network, 28 F.C.C.R. at 6579
(defining apparent authority as “when the seller affirmatively, or through negligent
inaction, makes it appear to third parties that the telemarketer has authority to act
on the seller’s behalf.”). Second, contrary to Plaintiff’s characterization, the TCPA
plaintiff in Paldo Sign did not argue that the telemarketers who sent him faxes had
the defendant’s “implied or apparent authority,” 825 F.3d at 798, so that case does
not support Plaintiff’s apparent authority theory. Finally, Plaintiff’s approach to

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apparent authority would create the absurd result “of imposing liability for the
same telephone call on numerous clients” of a lead generator, “including competitors
of one another.” Smith, 2013 WL 5346430, at *5.
Because Plaintiff fails to allege any manifestations that Defendants made to
him, he fails to sufficiently plead apparent authority.
3.

Ratification

Ratification happens when a principal affirms another party’s prior act,
“whereby the act is given effect as if done by an agent acting with actual authority.”
Restatement (Third) Agency § 4.01.

Plaintiff alleges that: “Each and every

Defendant also ratified the illegal actions of every other defendant by knowingly
accepting the benefits of each Defendant’s activities by accepting applications and
customers from each other.” [73] ¶ 32. 2 Plaintiff further alleges that Defendants
“transferred valuable customer information to one another based on the results of
these telemarketing calls.” Id. ¶ 33. These conclusory allegations fail to state a
claim for vicarious liability under a ratification theory.
Here again, Plaintiff offers nothing more than “threadbare recitals of the
elements of a cause of action” and conclusory statements. Limestone Dev. Corp., 520
F.3d at 803. Plaintiff must allege some factual predicate “that gives rise to an
inference of an agency relationship.” Mauer, 2016 WL 4651395, at *2. Plaintiff’s
complaint lacks that factual predicate, and his broad and sweeping ratification
allegations fail to move the alleged misconduct across the line between “sheer
Notably, Plaintiff alleges that he had no interest in buying insurance products because he has free
lifetime coverage through another source, [73] ¶ 41, so Defendants did not benefit by signing him up
as a customer.
2

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possibility” and plausibility. Williamson, 714 F.3d at 436. As such, this Court
grants Cigna, LALI, and GIP’s motions to dismiss for failure to state a claim.
IV.

Conclusion
This Court grants the five motions to dismiss at issue here: HPI’s [60]; NHH,

AFC, and ALI’s [62]; Cigna’s [64]; LALI’s [82]; and GIP’s [86]. Plaintiff may replead
any dismissed claims.

Given Plaintiff’s delay in serving many Defendants, this

Court expects similar issues to arise in future motions to dismiss. In repleading
claims or responding to future motions, Plaintiff should be mindful both of this
Court’s opinion and his obligations under Federal Rule of Civil Procedure 11. The
motion hearing set for 3/28/2018 at 9:45 a.m. in Courtroom 1203 stands.
Dated: February 13, 2018
Entered:

____________________________________
John Robert Blakey
United States District Judge

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