United States District Court, N.D. Illinois, Eastern Division
MICHAEL B. JOHNSON, on behalf of himself and on behalf of those similarly situated plaintiffs, Plaintiffs,
PUSHPIN HOLDINGS, LLC, JAY COHEN, LEONARD MEZEI, ARI MADOFF, ALISHA ROSS, LOUISA TATBAK, SHAUN REDWOOD, GCN HOLDINGS, LLC, and CIT FINANCIAL USA, INC., Defendants.
CHARLES P. KOCORAS, District Judge.
Now before the Court is Defendant Pushpin Holdings, LLC ("Pushpin"), Jay Cohen ("Cohen"), Leonard Mezei ("Mezei"), Ari Madoff, Alisha Ross, Louisa Tatbak, Shaun Redwood, GCN Holdings, LLC ("GCN Holdings"), and CIT Financial USA, Inc.'s ("CIT Financial") (collectively the "Defendants") motion to dismiss brought pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). For the following reasons, the Defendants' motion to dismiss is granted in its entirety.
For the purposes of the instant motion, the following well-pleaded allegations derived from Plaintiff Michael Johnson ("Johnson"), Colleen Kitchens, Alicia Holton ("Holton"), Stephen Garcia -Agosto, Robert Rotella, Sr., Robert Marsh, Krystyn Wein ("Wein"), Robin Krier, Steven McAnally ("McAnally"), Eric Rinkoff, and Joseph Garcia's (collectively the "Plaintiffs") second amended complaint ("SAC") are accepted as true for the purposes of this motion. The Court draws all reasonable inferences in favor of the Plaintiffs. Purdue Research Found v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782-83 (7th Cir. 2003).
Pushpin is a Delaware limited liability company which engages in debt collection activity. Although not registered in the State of Illinois as a foreign company doing business in Illinois, Pushpin was responsible for filing over 3, 000 small claims collection cases in small claims court in Illinois. Pushpin is owned and controlled by Cohen and Mezei. GCN Holdings is a limited liability company registered to conduct business in Illinois, and is also owned and controlled by Cohen and Mezei. GCN Holdings acquired outstanding debt from financial institutions and would transfer the collections responsibilities to Pushpin or some other entity owned by Cohen and Mezei.
In approximately 2003, CIT Financial worked in conjunction with another financial institution to market and sell credit card processing machines to consumers and businesses. The credit card processing machines were leased to individuals and the contracts were memorialized in equipment finance lease agreements ("Lease Agreements"). CIT Financial was listed as the lessor and the customers were identified as the lessees. These Lease Agreements permitted the customers to purchase the credit card processing machines at the end of the lease period, which typically lasted forty-five months. In conjunction with the Leases for the equipment, the lessees were required to sign personal guarantees ("Guaranty Agreements").
It is alleged that the credit card processing machines had a fair market value of $250. However, the total amount of the lease payments was over $3, 000 per machine. The machines were defective and frequently failed to work satisfactorily. The sales representatives who engaged in selling the machines were agents of CIT Financial and marketed the credit card processing machines aggressively. When the sales representatives finalized the transaction, the Lease Agreements for Johnson, Wein and McAnally were forged and executed by unauthorized individuals.
The Lease/Guaranty Agreements contained a venue and forum provision which required litigation to be conducted in Cook County, Illinois. Furthermore, the Lease/Guaranty Agreements contained a choice of law provision which selected the application of Illinois law. When the Lease Agreements were made CIT Financial knew that it would assign its claims under the Lease Agreements to Cohen, Mezei, GCN Holdings and Pushpin acting as a collection agency.
Between March 2010 and November 2014, Pushpin filed more than 3, 000 small claims lawsuits in Cook County, Illinois against the Guarantors of the Lease Agreements for the credit card processing machines. The small claims lawsuits filed by Pushpin (with the exception of the small claims complaint filed against Garcia, in which the acquiring entity of the debt from CIT Financial was GlobalTech Leasing, Inc.) alleged that CIT Financial assigned the Lease/Guaranty Agreements to GCN Holdings on November 30, 2005 under the terms of an Asset Purchase Agreement dated November 9, 2005.
Each of the small claims suits were for less than $5, 000, therefore the cost incurred by the small claims court defendants in defending the cases were substantially greater than the amount sought in the suit. Prior to filing the small claims complaints, Pushpin sent demand letters to the small claims defendants threatening litigation if the outstanding balances were not satisfied.
On September 11, 2013, Johnson, a North Carolina resident, filed this action individually and on behalf of a putative class of similarly situated plaintiffs in the Circuit Court of Cook County, Illinois against the Defendants. Johnson alleges that on August 21, 2013, a default judgment was entered against him for $3, 660.29 in favor of Pushpin in Cook County, Illinois. According to the Cook County Small Claims Court complaint, Pushpin originally acquired the claims against Johnson based on the Lease Agreement between Johnson and CIT Financial. CIT Financial later assigned its rights to GCN Holdings, which were subsequently re-assigned to Pushpin.
The Defendants removed the case pursuant to 28 U.S.C. §§ 1446 and 1453 to this Court, premising jurisdiction on the Class Action Fairness Act. On November 21, 2014 the Plaintiffs filed their Second Amended Complaint ("SAC") naming additional individual plaintiffs. The Plaintiffs' allege: (1) a violation of the Illinois Consumer Fraud and Deceptive Business Act ("ICFA") for a "disguised unlawful penalty for breach of contract" in the Lease/Guaranty Agreements; (2) violation of the ICFA because the lawsuits were filed "almost ten years after the debts occurred;" (3) violation of the ICFA for Pushpin's failure to register as a debt collection agency under the ICAA; (4) a violation of the ICFA based on the expiration of the Lease/Guaranty Agreements; (5) the Defendants abuse of process; (6) the Defendants unlawfully engaged in malicious prosecution of the Plaintiffs. After a prolonged series of litigation concerning the propriety of the case before this Court, the Defendants filed the instant motion to dismiss on January 13, 2015.
A Rule 12(b)(6) motion to dismiss is used to test the legal sufficiency of a complaint. Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). Pursuant to Rule 8(a)(2), a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief, ' sufficient to provide the defendant with fair notice' of the claim and its basis." Tamayo v. Blagojevich, 526 F.3d 1074, 1084 (7th Cir. 2008) (quoting Fed.R.Civ.P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Additionally, the allegations in the complaint must "actually suggest that the plaintiff has a right to relief, by providing allegations that raise a right to relief above a speculative level." Tamayo, 526 F.3d at 1084 (emphasis in original).
The Plaintiffs' SAC levies a variety of claims against the Defendants based on their efforts to collect money on the Lease/Guaranty Agreements for the contracted credit card processing machines. The Defendants have moved to dismiss all counts of the Plaintiffs' SAC for various reasons.
I. ICFA Claims (Counts I, II, ...