United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
J. Tharp, Jr. Judge
plaintiff Robert Romero brings suit against Continental
Service Group, Inc. (“ConServ”), alleging that
ConServ breached an implied warranty of authority when it
purported to act on behalf of the United States and entered
into an agreement with Romero for the repayment of his
federally-backed student loans. Romero also alleges that
ConServ is liable to him under the theory of promissory
estoppel because of this agreement. ConServ moved to dismiss
the third party complaint, and Magistrate Judge Martin
recommended that this Court grant the motion on the basis of
non-compliance with the statute of limitations. This Court
disagrees with the recommendation, concluding that it is not
clear on the face of the Third Party Complaint that Romero
knew of his injury within the five-year statute of
limitations. The Court further concludes that, on the merits,
the third party complaint states a plausible claim for
United States filed suit against Romero on September 30, 2014
for the collection of unpaid, federally-funded student loans.
First Am. Compl. ECF No. 16. In response, Romero alleged that
the debt had been settled through ConServ in January 2006.
Answer to Am. Compl. 4, ¶ 1, ECF No. 20. Romero alleged
that in January 2006 ConServ called him, represented that it
was acting on behalf of the United States Government, and
offered to settle the remaining balance of the student loans
(which was at that time $103, 841.64). Countercl.
¶¶ 3-5, ECF No. 20. Romero alleged that he agreed
with ConServ to pay a total of approximately $10, 000 to
settle the debt: approximately $4, 808.70 by credit card to
ConServ over the phone that day, and $5, 191.30 by mailing a
check to the U.S. Department of Education. Id.
¶ 6. After making the required payment by credit card,
id., Romero received a written offer from ConServ to
settle his remaining debt for $5, 191.30, Third Party Compl.
Ex. A, ECF No. 50-1, Romero mailed a check for $5, 191.30 to
the U.S. Department of Education on January 26, 2006. TPC Ex.
B-C, ECF Nos. 50-2, 50-3. In his Counterclaim against the
United States, Romero alleged: “On February 1, 2006,
United States of America retracted the settlement agreement
it entered into with Robert M. Romero, ” and, “On
February 2, 2006, United States of America returned the $5,
191.30 check received from Robert M. Romero.”
Countercl. ¶¶ 10-11.
the United States initiated this suit to collect the
outstanding balance of Romero's loans, a consent judgment
was entered on June 29, 2015, in favor of the United States
for $109, 104.73 plus costs (of which Romero was required to
pay $100, 000 by a date certain, after which the judgment was
satisfied). J. Order, ECF No. 54.
22, 2015, just before this consent judgment, Romero had filed
a Third Party Complaint (“TPC”) against ConServ,
in essence seeking to hold Conserv liable for his debt to the
United States, asserting theories of implied warranty of
authority and promissory estoppel. TPC ¶¶ 14-34,
ECF No. 50. Romero alleges that ConServ warranted to Romero
through both the phone conversation and the written offer
that ConServ had the authority to settle the unpaid student
loan balance on behalf of the United States Government.
Id. ¶¶ 16-17. Romero asserts that because
he relied upon ConServ's warranty and did not make any
further payments on the notes, he came to owe the Government
over $104, 000. Id. ¶ 21. Romero's
promissory estoppel claim against ConServ is based on the
same reliance theory. Id. ¶¶ 25-34.
filed a Motion to Dismiss the TPC alleging, among other
things, that both of Romero's claims are time-barred.
Mem. in Supp. of Mot. to Dismiss, 4-5, 8-9, ECF No. 68.
ConServ contends that both the promissory estoppel and the
breach of implied warranty of authority claims have five-year
statutes of limitations, Id. 4, 9, and that Romero
should reasonably have been aware of his alleged injury when
the Government returned the check on February 2, 2006.
Id. 5. Romero counters that he first knew about his
alleged injury on September 20, 2014, when the United States
filed its lawsuit against Romero, and that the statute of
limitations should have begun to run on that date. Resp. in
Opp'n to Mot. to Dismiss, 7, ECF No. 80. He denies
knowledge that the United States returned the check in
February 2006. Id. 8. Additionally, Romero argues
that his claim for breach of implied warranty of authority is
a contract claim with a ten-year statute of limitations, and
therefore is not time-barred even if he was aware of his
alleged injury in 2006. Id. 12.
Report and Recommendation,  Magistrate Judge Martin
recommended that ConServ's Motion to Dismiss be granted
on the grounds that both claims are time-barred. Report &
Recommendation 9, ECF No. 83. Judge Martin concluded that a
five-year statute of limitations applies to Romero's
breach of implied warranty of authority because ConServ's
alleged liability does not derive from a contractual
obligation, but from common law tort concepts. Id.
4. Judge Martin also found that Romero's statements in
his Counterclaim were judicial admissions that are binding on
Romero as to ConServ. Id. 6, 7. Based on those
admissions-specifically, that the United States repudiated
the agreement and returned the check-Judge Martin determined
that Romero was aware of his injury on February 1, 2006, and
his claims against ConServ are barred by the statute of
limitations. Id. 9.
filed timely objections to the Report and Recommendation, and
Conserv responded. Objections, ECF No. 85; Resp, ECF No. 86.
Conserv brought a dispositive pretrial motion, this Court
reviews de novo the parts of the magistrate
judge's recommended disposition as to which Romero made a
timely objection. Fed.R.Civ.P. 72(b)(3). Romero objected to
two aspects of Judge Martin's Report and Recommendation.
First, he argues that Judge Martin erred when he determined
that the breach of implied warranty of authority claim is
subject to a five-year statute of limitations because the
claim sounds in contract and such claims have a ten-year
statute of limitations. Objection ¶¶ 1-2, ECF No.
85. Second, Romero contends that Judge Martin erred in
binding Romero to the pleadings in his Counterclaim against
the United States and finding that the statute of limitations
began to run on February 1, 2006. Id. ¶ 3.
Romero argues that his pleadings against ConServ assert no
knowledge of his alleged injury until 2014, and that this
creates an issue of fact that cannot be decided on a motion
to dismiss. Id.
a defendant charges noncompliance with the statute of
limitations, dismissal under Rule 12(b)(6) is irregular, for
the statute of limitations is an affirmative defense.”
Chicago Bldg. Design, P.C. v. Mongolian House, Inc.,
770 F.3d 610, 613 (7th Cir. 2014) (citing United States
v. N. Trust Co., 372 F.3d 886, 888 (7th Cir.2004)).
“[A] motion to dismiss based on failure to comply with
the statute of limitations should be granted only where the
allegations of the complaint itself set forth everything
necessary to satisfy the affirmative defense.”
Id. at 614 (citing United States v. Lewis,
411 F.3d 838, 842 (7th Cir.2005)). In reviewing a motion to
dismiss, a court must draw all favorable inferences for the
non-moving party. Killingsworth v. HSBC Bank Nevada,
N.A., 507 F.3d 614, 618 (7th Cir. 2007).
reasons stated below, this Court agrees with Magistrate Judge
Martin's conclusion that the applicable statute of
limitations for both of Romero's theories of relief is
five years, but nevertheless concludes that it cannot be
determined on the pleadings alone when Romero knew
or should have known that ConServ had injured him.