The opinion of the court was delivered by: JAMES MORAN, Senior District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff David Eromon filed a four-count complaint against
defendant Grand Auto Sales, Inc. (Grand) and U.S. Bancorp Card
Services, Inc. (U.S. Bancorp) alleging violations of the Federal
Odometer Act, 49 U.S.C. § 32701 et seq. (FOA), the Illinois
Motor Vehicle Code, 325 ILCS 5/3-112.1 (IMVC), the Illinois
Consumer Fraud and Deceptive Business Practices Act,
815 ILCS 505/1 et seq. (ICFA), and seeking a declaratory judgment.
Defendant U.S. Bancorp filed a motion to dismiss the claims
against it pursuant to Federal Rule of Civil Procedure 12(b)(6).
For the following reasons, defendant's motion is granted in part
and denied in part.
On June 24, 2002, the plaintiff entered into a contract with
Grand to purchase a 1995 Nissan Pathfinder. As required by the
FTC Holder Rule, 16 C.F.R. § 433.2, the contract contained the
Any holder of this consumer credit contract is
subject to all claims and defenses which the debtor
could assert against the seller of goods or services
obtained pursuant thereto or with the proceeds
hereof. Recovery hereunder by the debtor shall not
exceed amounts paid by the debtor hereunder.
The sales contract was subsequently assigned to U.S. Bancorp,
which has been collecting monthly payments from the plaintiff. Plaintiff alleges that Grand failed to show him title to the
vehicle at the time of purchase and never provided him with a
certificate of title or valid permanent license plates. He has
since discovered a prior lien on the vehicle, with title in the
lien holder. He claims that, because defendants conspired to sell
him a vehicle without valid title, he has frequently been
ticketed by the police and is no longer able to drive the
In deciding a Federal Rule of Civil Procedure 12(b)(6) motion
to dismiss the court assumes the truth of all well-pleaded
allegations, making all inferences in the plaintiff's favor.
Sidney S. Arst Co. v. Pipefitters Welfare Educ. Fund,
25 F.3d 417, 420 (7th Cir. 1994). The court should dismiss a claim
only if it appears "beyond doubt that the plaintiff can prove no
set of facts in support of his claim which would entitle him to
relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). While the
complaint does not need to provide the correct legal theory to
withstand a Rule 12(b)(6) motion, it must allege all of the
elements necessary to recover. Ellsworth v. City of Racine,
774 F.2d 182, 184 (7th Cir. 1985), cert. denied, 475 U.S. 1047
We deal first with counts I and II of plaintiff's complaint, in
which he seeks damages for violations of the federal and state
odometer laws. The FTC Holder Rule allows a plaintiff to state a
claim against the holder of a note in cases where the alleged
breach by the seller is so substantial that rescission and
restitution are justified. Reavley v. Toyota Motor Sales U.S.
Corp., 2001 WL 127662, *4 (N.D. Ill.). In Reavley, the
plaintiffs claimed that the defendants sold them a car with
between 60,000 and 90,000 miles, while representing the mileage
to be 14,000. Id. at *1. The court determined that plaintiffs
could bring suit against the assignee of the financing contract
pursuant to the FTC Holder Rule because the plaintiffs would have
been unlikely to enter into the contract in the absence of the
defendants' wrongdoing. Id. at *5. Plaintiff's claims here are nearly identical to those in
Reavley. He claims that defendants' breach was substantial,
rendering the car essentially worthless to him. In count IV, he
seeks rescission of the contract and argues that he would not
have entered into the deal in the absence of defendants'
wrongdoing. The FTC Holder Rule allows plaintiff to bring such a
claim against U.S. Bancorp, even in the absence of specific
allegations of wrongdoing.*fn1
In count III, the plaintiff seeks damages for violations of the
ICFA. Both the Illinois Supreme Court and the Seventh Circuit
have found that the federal Truth in Lending Act,
15 U.S.C. § 1601 et seq. (TILA), trumps the FTC Holder Rule in cases where
the plaintiff alleges fraud based on a financing contract.
Jackson v. South Holland Dodge, 755 N.E.2d 462, 471-72 (Ill.
2001); Taylor v. Quality Hyundai, Inc., 150 F.3d 689, 693
(7th Cir. 1998). In Jackson, the plaintiff brought suit
against a car dealership and the assignee of the financing
contract, alleging that the contract misrepresented the price of
the extended service warranty. 755 N.E.2d at 464. In affirming
the dismissal of the ICFA claim against the financing company,
the court held that TILA expressly limits the liability of
assignees to those defects apparent on the face of the loan
documents. Id. at 468-69. Because the financing corporation
could not have known the price of the warranty, and known that
the contract was erroneous, TILA protected it from liability.
Because there are no allegations that the alleged wrongdoing
was apparent on the face of the contract or that U.S. Bancorp
otherwise failed to fulfill its obligations under TILA, the FTC
Holder Rule is trumped and plaintiff cannot use it to recover
from U.S. Bancorp as the assignee. The plaintiff may be able to
state a claim against an assignee defendant by alleging active
and direct participation in the fraud. See Jackson,
755 N.E.2d at 470-71 ("if a plaintiff could allege specific facts showing that the assignee met with
the car dealer an concocted a scheme to put false statements on
the financing statement, an assignee would not be exempt.").
While there is one sentence in the complaint indicating that
defendants conspired to defraud the plaintiff, there are no
specific allegations of affirmative wrongdoing by U.S. Bancorp
certainly nothing that rises to the level of specification
necessary to state a claim for fraud under the ICFA.
Finally, we turn to count IV of the complaint, in which
plaintiff seeks a declaratory judgment stating that defendants'
conduct violated the law and rescinding the contract. We read
that claim to seek proper injunctive relief and recognize that,
even if a declaratory judgment is not the proper remedy in this
case, some such injunctive relief may be appropriate.
For the foregoing reasons, defendant U.S. Bancorp's motion to
dismiss is granted in ...