share an interdependence that renders them a "single economic enterprise." Harrison v. NBD, Inc., 968 F. Supp. 837, 845 (E.D.N.Y. 1997); see also Moore v. National Account Sys., Inc., 1991 U.S. Dist. LEXIS 18137, 1991 WL 313896, at *2 (D. Conn. Nov. 13, 1991); United States v. ACB Sales & Serv., Inc., 590 F. Supp. 561, 574 (D. Ariz. 1984).
In ACB Sales, the court held that a corporate parent and its sixteen subsidiary collection agencies constituted a single economic enterprise based on the companies' "appearance to the public and the actual interdependent relationship between them." 590 F. Supp. at 575. The court noted that the parent's name was on each subsidiary's letterhead. Id. Furthermore, the parent entered into contracts with creditors for the debt collection services provided by the subsidiaries. Id. It provided management, accounting, purchasing and administrative services for the local offices. Id. Finally, all the companies were managed by "an interlocking directorate" of three individuals. Id. "Consequently, [defendants], albeit indirectly, are debt collectors under the FDCPA and, therefore, are liable for all violations of the FDCPA committed by the local [subsidiaries]." Id. at 576.
In contrast, Union plays no role in either the actual debt collection process or in procuring creditor-clients. The Union name does not appear on any Transworld correspondence. The two corporations do not share any facilities, employees or a computer system. One Transworld officer sits on Union's board and one Union director is a Transworld officer. Both corporations maintain their own accounting departments and keep separate corporate minutes. Although the bulk of Union's profits come from Transworld dividends, this amount is set after Transworld determines its immediate and long-range cash requirements. Other courts have found allegations of more extensive interdependence within a parent-subsidiary relationship insufficient to state a FDCPA claim against a collector's corporate parent. See Stepney v. Outsourcing Solutions, Inc., 1997 U.S. Dist. LEXIS 18264, 1997 WL 722972 at *2-*3 (N.D. Ill. Nov. 13, 1997) (allegations that defendant parent purchased portfolios of old consumer debts, implemented the policies and practices of its subsidiary collection company, and financed the collection activities at issue failed to support a finding of a single economic enterprise.); Harrison v. NBD, Inc., 968 F. Supp. 837, 845 (E.D.N.Y. 1997) (parent corporation's approval of both the collection demand form and the deceptive practices of its subsidiary were inadequate to render defendants a single economic enterprise.) Plaintiffs fall far short of establishing the facts necessary to find that Union and Transworld are engaged in a single economic enterprise, a finding required to make Union an indirect debt collector under the FDCPA.
Absent such a showing, Union can be liable for Transworld's FDCPA violations only by presenting evidence that (1) Transworld is a "mere instrumentality" of Union, and (2) recognizing Transworld's corporate existence would work a fraud or injustice on the plaintiffs, so as to warrant piercing the corporate veil.
Van Dorn Co. v. Future Chem. & Oil Corp., 753 F.2d 565, 570 (7th Cir. 1985) ("Generally, before the separate corporate identity of one corporation will be disregarded and treated as the alter ego of another, it must be shown that it is so controlled and its affairs so conducted that it is a mere instrumentality of another, and it must further appear that observance of the fiction of separate existence would, under the circumstances, sanction a fraud or promote injustice.") (citing Main Bank of Chicago v. Baker, 86 Ill. 2d 188, 205, 427 N.E.2d 94, 101, 56 Ill. Dec. 14 (1981)). On the instrumentality/control factor, "the Illinois courts have considered some of the following: (1) the failure to maintain adequate corporate records or to comply with corporate formalities, (2) the commingling of funds or assets, (3) undercapitalization, and (4) one corporation treating the assets of another corporation as its own." 753 F.2d at 570.
Plaintiffs argue that because this case involves a federal consumer protection statute, the court should apply a more lenient standard, such as the one employed in cases involving section 5 of the Federal Trade Commission Act, where liability has been imposed on parent corporations without rigidly adhering to common law veil-piercing analysis. See, e.g., P.F. Collier & Son Corp. v. FTC, 427 F.2d 261, 267 (6th Cir. 1970) ("Where the public interest is involved, as it is in the enforcement of Section 5 of the Federal Trade Commission Act, a strict adherence to common law principles is not required in the determination of whether a parent should be held for the acts of its subsidiary, where strict adherence would enable the corporate device to be used to circumvent the policy of the statute."). But plaintiffs fail to show how employing traditional veil-piercing analysis here would circumvent the FDCPA's policies. Indeed, the Seventh Circuit recently applied the traditional veil piercing test to determine whether a corporate parent should be liable for the acts of its subsidiary under the FDCPA. See Aubert v. American General Finance, Inc., 137 F.3d 976, 1998 U.S. App. LEXIS 3266, 1998 WL 86685, at *3 (7th Cir. 1998). In rejecting the plaintiff's attempt to hold three corporations jointly liable for FDCPA violations, the court observed that the plaintiff failed to present any evidence, "such as inadequate capitalization or a failure to observe the legal requirement of separate corporate existences, to justify the unusual remedy of piercing the corporate veil." Id.
In the instant case, plaintiffs have failed to present any evidence that Transworld is a mere instrumentality subject to Union's total control, or that observing Transworld's corporate existence would work an unjustice or fraud on them. First, the same facts that demonstrate Union and Transworld are not a single economic enterprise compel the conclusion that Transworld is not a mere instrumentality of Union. In addition, there is no evidence that the two companies have failed to observe corporate formalities, that Transworld is a sham corporation, is inadequately capitalized, or that it would be unable to afford the plaintiffs' damages. Union and Transworld each have their own officers and board of directors -- with only two overlapping members -- and keep separate minute books and accounting records. It is undisputed that Transworld existed prior to its involvement with Union and that Transworld has a net worth of $ 11 million. In light of these facts, we find no justification for piercing the corporate veil or for finding Union liable for Transworld's debt collection activities. Accordingly, we grant Union's motion for summary judgment in its entirety.
To summarize, the Court finds as follows:
(1) Transworld's typeface did not visually overshadow the validation notice in violation of § 1692g in the November 1, 1995 letter to Jenkins or the August 22, 1995 letter to Terrafino.
(2) Transworld violated the requirements of § 1692g by using language that overshadowed the validation notices in the November 1, 1995 and August 22, 1995 collection letters sent to Jenkins and Terrafino, respectively.
(3) Transworld did not violate § 1692g or any other provision of the FDCPA in the second common letter sent to both Jenkins and Terrafino.
(4) Transworld did not violate § 1692g with overshadowing language in Jenkins' third letter, dated November 24, 1995.
(5) Fact issues prevent the Court from determining, as a matter of law, whether Transworld's third letter to Jenkins misrepresented the amount of time remaining in the validation period in violation of § 1692e.
(6) Transworld did not request that Jenkins or Terrafino contact the creditor by telephone in violation of § 1692g.
(7) Transworld did not threaten legal action against Terrafino in violation of § 1692e(5).
(8) Transworld's presentation of the "Colorado" information on the reverse side of all six letters is false, deceptive and misleading in violation of § 1692e.
(9) Transworld did not intentionally seek to collect an unauthorized fee from Jenkins in violation of §§ 1692f(1) or 1692e(2)(a), and it has a bona fide defense to these claims.
(10) Union Corp. is not a debt collector as defined in the Act and is not liable for any of the above FDCPA violations committed by Transworld.
Accordingly, as set forth above and for the reasons stated, the parties' motions for summary judgment are hereby GRANTED in part and DENIED in part.
United States District Court Judge
March 30, 1998