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Eclipse Manufacturing Co. v. M and M Rental Center

May 18, 2007

ECLIPSE MANUFACTURING CO., AN ILLINOIS CORPORATION, INDIVIDUALLY AND AS THE REPRESENTATIVE OF A CLASS OF SIMILARLY-SITUATED PERSONS, PLAINTIFF,
v.
M AND M RENTAL CENTER, INC., DEFENDANT.



The opinion of the court was delivered by: Elaine E. Bucklo United States District Judge

MEMORANDUM OPINION AND ORDER

Before me is a motion by Robert Hinman ("Hinman") and Italia Foods, Inc. ("Italia Foods") for leave to file a second amended class action complaint naming them as plaintiffs. Defendant M and M Rental Center, Inc. ("M and M") previously filed a Rule 37 motion to dismiss Eclipse Manufacturing Co.'s ("Eclipse") complaint or to strike plaintiff's answers to discovery. In its motion M and M contended that Hinman and not Eclipse was actually prosecuting the present claims under the Telephone Consumer Protection Act of 1991, 47 U.S.C. § 227 (2005) ("TCPA"),*fn1 and that Hinman did not have standing to pursue these claims. In response to M and M's motion Hinman acknowledged that he was the real party in interest and asserted that he did have standing to prosecute these claims.

Although I denied M and M's motion to strike, I ordered Hinman to file a motion to amend the complaint to name himself as the real party in interest, and I further ordered the parties to brief the issue of Hinman's standing. The parties have now done so. For the following reasons, I conclude that Hinman does have standing to pursue his claims, and so I grant the motion for leave to file a second amended class action complaint.

I.

A brief review of the allegations and circumstances of Hinman's involvement in this litigation is relevant to determine whether Hinman has standing. Plaintiff's first amended class action complaint alleged that on June 23, 2005, M and M transmitted an unsolicited advertisement to Eclipse's telephone facsimile machine. Plaintiff alleged that the advertisement was addressed to "Robert T. Hinman." Defendant purportedly sent similar unsolicited advertisements to at least 39 other recipients, each in violation of 47 U.S.C. § 227.

At the time that M and M purportedly sent these unsolicited advertisements, Hinman was the sole owner, shareholder and president of Eclipse. He also held these positions at the time Eclipse initially filed its TCPA claims against M and M in an Illinois state court; M and M subsequently removed that suit to this court. After M and M had removed the case, on November 30, 2005, Hinman entered into an agreement with Mark Wiener ("Wiener") and Dennis Crounse ("Crounse") to sell them all his shares of stock and ownership interest in Eclipse. As part of this agreement, the parties agreed that Hinman would "retain the right to proceed with all litigation concerning unsolicited faxes received through the date of closing in the name of Eclipse Manufacturing Co." and would be "entitled to retain the settlement proceeds of any suit so prosecuted."

Based on this agreement Hinman continued to prosecute his suit in the name of Eclipse and to identify himself as the president of Eclipse, until his deposition in which he acknowledged the existence of his agreement with Wiener and Crounse. After Hinman's deposition, M and M filed a Rule 37 motion to dismiss the plaintiff's complaint or to strike plaintiff's answers to discovery. I denied M and M's motion, but I agreed that Eclipse was not the real party at interest in this litigation since it had assigned its claim to Hinman. See Eclipse, 2007 WL 487007, at *2-3. I therefore allowed plaintiff to file an amended complaint naming the real party in interest, and ordered the parties to brief the question of whether Hinman had standing to pursue the TCPA claim. Id. at *3. Hinman and Italia Foods responded by filing a motion for leave to file a second amended complaint naming themselves as plaintiffs. The proposed second amended complaint alleges that M and M sent unsolicited advertisements to Italia Foods as well as to Eclipse.

II.

Failure to establish standing is a jurisdictional defect. See Lewis v. Casey, 518 U.S. 343, 349 n.1 (1996). Because standing is a jurisdictional requirement, a district court may dismiss a case sua sponte if it determines that a plaintiff lacks standing. See Metallgesellschaft AG v. Sumitomo Corp. of Am., 325 F.3d 836, 842 (7th Cir. 2003) (internal citations omitted). Setting aside the fact that Hinman was not bringing this suit on his own behalf until the time that he sold his interest in Eclipse to Wiener and Crounse, his argument that it is sufficient that he had standing at the time Eclipse originally brought suit is irrelevant because a plaintiff's standing must be "continuous from the beginning of the suit to the end." Walters v. Edgar, 163 F.3d 430, 432 (7th Cir. 1998) (internal citations omitted). Hinman contends that he has standing both as the former president of Eclipse and as the individual to whom the advertisement at issue was addressed, and as the assignee of Eclipse's cause of action. I consider both arguments below.

III.

The version of the TCPA applicable to the claims in this action prohibits the use of "any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine." 47 U.S.C. § 227(b)(1)(C). The TCPA does not indicate whether claims under the statute may be assigned.

Because an assignment is a type of contract, whether or not claims may be assigned is normally a question of state law. See, e.g., In re Century Inv. Fund VIII Ltd. P'ship, 937 F.2d 371, 376 (7th Cir. 1991). Under Illinois law, an Illinois corporation has the power to "sell and convey, mortgage, pledge, lease as lessor, and otherwise dispose of all or any part of its property and assets." 805 ILL. COMP. STAT. ANN. 5/3.10(e) (2007). An Illinois corporation such as Eclipse therefore has the power to assign its claims subject to the common law principles governing assignment. See Grunloh v. Effingham Equity, Inc., 174 Ill. App.3d 508, 518, 124 Ill. Dec. 140, 146, 528 N.E.2d 1031, 1046 (Ill. App. Ct. 1988). In Kleinwort Benson N. Am. v. Quantum Fin. Servs., Inc., 181 Ill.2d 214, 229 Ill. Dec. 496, 692 N.E.2d 269 (1998) the Illinois Supreme Court reviewed the Illinois jurisprudence on assignment. It noted that because the law of survivability and assignability developed together, "in determining assignability, this court has considered whether the action would survive the death of the owner." Id. at 219, 229 Ill. Dec. at 499, 692 N.E.2d at 272 (citations omitted). Under the Illinois survival statute, the relevant actions that survive include actions of replevin, actions to recover damages for an injury to the person (except slander and libel), actions to recover damages for an injury to real or personal property or for the detention or conversion of personal property, actions against officers for misfeasance, malfeasance, nonfeasance of themselves or their deputies, actions for fraud or deceit, and actions provided in Section 6-21 of "An Act relating to alcoholic liquors". 755 ILL. COMP. STAT. ANN. 5/27-6. However, the Illinois Supreme Court also stated in Kleinwort that "[a] more significant consideration in determining the assignability of causes of action in general has been whether such assignments violate public policy." 181 Ill.2d at 225, 229 Ill. Dec. at 501, 692 N.E.2d at 274. Based on this limitation, "[t]he only causes of action that are not assignable are torts for personal injuries and actions for other wrongs of a personal nature, such as those that involve the reputation or feelings of the injured party." Id. (citation omitted); see also Claudy v. Commonwealth Edison Co., 169 Ill.2d 39, 47, 214 Ill. Dec. 188, 191, 660 N.E.2d 895, 898 (1995) (holding that torts to property and contract actions are generally assignable, but personal injury and some contract actions are not).

The relevant question, then, is whether claims under the TCPA are actions for a personal injury. In 2005, the Seventh Circuit tangentially addressed this issue in Am. States Ins. Co. v. Capital Assocs. of Jackson County, Inc., 392 F.3d 939 (7th Cir. 2005), a case in which the court analyzed whether the insured's violation of the TCPA was covered by its commercial and general liability insurance policy's advertising injury or property damage clause. The Seventh Circuit noted that at the time of its decision Illinois cases had not addressed this issue. Id. at 943. In the course of this evaluation, the Seventh Circuit concluded that the TCPA protected both personal injury and property rights; it protects a company's "(slight) interest in seclusion" and "keeps telephone lines from being tied up and avoids consumption of the recipients' ink and paper" which is an economic interest. Id. at 942. The Illinois Supreme Court cited this holding in Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 223 Ill.2d 352, 307 Ill. Dec. 653, 860 N.E.2d 307 (2006), another case addressing whether violations of the TCPA were covered by commercial and general liability insurance policies. See id. at 365, 307 Ill. Dec. at 661-62, 860 N.E.2d at 315-16.*fn2

Although no Illinois court has clearly stated that a privacy tort is a personal injury action, I agree with M and M that this is the case. See, e.g., RESTATEMENT (SECOND) OF TORTS § 652I cmt. a (1977) ("The right protected by the action for invasion of privacy is a personal right . . ."). However, although M and M concludes that because the TCPA is partly intended to protect privacy interests, the action is therefore not assignable, this does not end the inquiry. The comments to this section of the Restatement also state, "A corporation, partnership or unincorporated association has no personal right of privacy" and therefore has no cause of action for invasion of privacy other than intrusions upon the use of its own name or identity. Id. at § 652I cmt. c. The Seventh Circuit agrees with this assessment, noting in American States that businesses lack interests in "seclusion" because corporations are not alive. 392 F.3d at 942 ("Where does a corporation go when it just wants to be left alone?"). This is not disputed by the Illinois Supreme Court in Valley Forge, because although there the court did conclude that TCPA violations do "implicate a person's right to privacy," the original plaintiff in that suit was an individual doing business as a private investigation business, so the court did not need to address whether corporations had standing to assert privacy interests under the TCPA. 223 Ill.2d at 355, 365, 307 Ill. Dec. at 656, 661, 860 N.E.2d at 310, 315. Therefore, it only makes sense that corporations bringing claims under the TCPA may only assert the property interests the TCPA ...


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