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Larroza v. Resurgence Capital, LLC

United States District Court, N.D. Illinois, Eastern Division

May 8, 2018

BRIAN J. LARROZA, Plaintiff,


          Charles P. Kocoras United States District Judge

         Now before the Court is Defendants Stern Process & Investigation, LLC (“SPI”) and Robert A. Clarke's (“Clarke”) Motion to Dismiss (“Motion”) Count I of Plaintiff Brian J. Larroza's (“Larroza”) Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth below, the Motion is granted.


         The following facts are taken from Larroza's Complaint and assumed to be true for purposes of this Motion. Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995). The Court draws all reasonable inferences in Larroza's favor. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).

         On or about May 4, 2012, Defendant Resurgence Legal Group, P.C. (“RLG”) filed a complaint (“Resurgence Complaint”) against Larroza to collect an alleged debt in the Circuit Court of Cook County. At some point thereafter, RLG hired SPI to support efforts to collect the alleged debt from Larroza. Larroza alleges that SPI is “a licensed private detective and process service company.” He further alleges that “SPI acts as a debt collector…by providing debt collection support services to collection attorneys, third-party debt collectors and debt buyers via ‘investigations and surveillance' services and by servicing documents as stated on its website.” Clarke is alleged to have been an SPI agent or employee working as a debt collector “at the time of the actions complained of….”

         On or around July 10, 2017, over five years after the Resurgence Complaint was filed, SPI, by and through Clarke, executed an affidavit of service (“Affidavit”) in which Clarke stated that he had effectuated substitute service on Larroza. The Affidavit states that Larroza's brother was served with the Alias Summons and Resurgence Complaint at Larroza's “usual place of abode, ” 4249 N Lawndale Ave, Apt. 3, Chicago, IL 60816. The Affidavit also states that Clarke “spoke to [Larroza's] brother who confirmed that [Larroza] does reside at this address” and that Clarke “mailed a copy of the Summons or process in a sealed envelope with postage prepaid to [Larroza], at his/her usual place of above [sic] within two business days of service.”

         Larroza alleges that he did not reside at 4249 N Lawndale on July 10, 2017, that no defendant served him or any member of his residence on July 10, 2017, and that no defendant served Larroza's brother with the Alias Summons and Resurgence Complaint, as asserted and sworn to by Clarke in his Affidavit. Larroza also alleges that “Clarke and SPI, on behalf of [Defendant Resurgence Capital, LLC] and RLG, made false statements in an attempt to enforce collection of a consumer debt.” He goes on to assert that Clarke and SPI made no actual attempt to serve legal process. Instead, Larroza alleges that they “were engaged in the act of assisting with the drafting, preparation and filing of a false affidavit of service by providing false testimony to aid in collection of the consumer debt…and to have [Larroza] believe that collection could in fact legally proceed against him, when it could not so proceed.”

         Larroza filed his three-count Complaint on November 11, 2017, asserting the following causes of action. Count I: a violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq., against all defendants; Count II: a violation of the Illinois Consumer Fraud Act, 815 ILCA 501/1, et seq., against Resurgence Capital, LLC (“Resurgence”) and SPI; and Count III: a due process action against Resurgence, RLG, and SPI, pursuant to 42 U.S.C. § 1983. SPI and Clarke filed the instant Motion seeking to be dismissed from Count I, the FDCPA claim.

         A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) “tests the sufficiency of the complaint, not the merits of the case.” McReynolds v. Merrill Lynch & Co., 694 F.3d 873, 878 (7th Cir. 2012). Larroza need not provide detailed factual allegations, but he must provide enough factual support to raise his right to relief above a speculative level. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Larroza's claims must be facially plausible, meaning that the pleadings must “allow…the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “In conducting our review, we must consider not only the complaint itself, but also…documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice.” Phillips v. Prudential Ins. Co. of America, 714 F.3d 1017, 1019-20 (7th Cir. 2013) (internal citations and quotation marks omitted). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, ” are insufficient to withstand a 12(b)(6) motion to dismiss. Iqbal, 556 U.S. at 678.

         Here, SPI and Clarke's only argument for dismissal of Count I is that Larroza failed to alleged facts sufficient to suggest that either party is a “debt collector” as covered by the FDCPA. If correct, Count I would fail as a matter of law as against SPI and Clarke because the FDCPA “applies only to debt collectors….” Neff v. Capital Acquisitions & Mgmt. Co., 352 F.3d 1118, 1121 (7th Cir. 2003). Under the statute, “[t]he term ‘debt collector' means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). Our inquiry, therefore, is a simple one. The Complaint must allege sufficient facts to allow the Court to infer that either (i) the principal purpose of SPI and Clarke's business was debt collection; or (ii) SPI and Clarke regularly collected debt, directly or indirectly. Failure to so allege would amount to a failure to state an FDCPA claim.

         Larroza makes no attempt to allege that SPI and Clarke engage in debt collection as their principal business aim, instead conceding that SPI is primarily a private detective and process service company, for which Clarke works. We proceed to the second possibility.

         The Complaint also makes no showing of direct debt collection. The only suggestion that SPI and Clarke regularly engage in debt collection is of the indirect sort, where Larroza alleges that (i) SPI provides “debt collection support services to collection attorneys, third-party debt collectors and debt buyers via ‘investigations and surveillance' services and by servicing documents as stated on its website, ” and (ii) Clarke works as a “debt collector” for SPI.

         As the parties' memoranda portend (between the substantive arguments of their three briefs, they cite to only four Northern District cases and one Seventh Circuit decision) there is a relative paucity of persuasive caselaw on the indirect debt collection topic. This is particularly so as regards the intersection of FDCPA-contemplated debt collectors and the debt collection support role filled by investigative service companies. The closest thing to binding precedent that the Court can find comes from the Seventh Circuit's White v. Goodman decision, which noted that the FDCPA “is not aimed at…companies that perform ministerial duties for debt collectors, such as stuffing and printing the debt collector's letters.” 200 F.3d 1016, 1019 (7th Cir. 2000). While White itself does not track neatly enough with the instant allegations to be dispositive, the cases to which it cites for support are quite instructive.

         To ground its “ministerial duties” language, White cites to two summary judgment opinions issued five days apart from one another in 1997, Laubach v. Arrow Service Bureau, Inc., 987 F.Supp. 625 (N.D. Ill. 1997) and Trull v. Lason Systems, Inc., 982 F.Supp. 600 (N.D. Ill. 1997). Both cases had the opportunity to analyze the debt collection role of the same defendant, Lason Systems, Inc. (“Lason”), “an integrated outsourcing services provider that help[ed] companies manage records, control documents, and disseminate business communications.” Trull, 982 F.Supp. at 602. See Laubach, 987 F.Supp. at 627 (“Lason's activities included, among other things, storing [debt collection agency Arrow's] debt collection letters on computers, merging the letters with Arrow's mailing lists, printing the letters, and mailing them to the debtors”). Both opinions agree that Lason “encourage[d] debt collection, ” Laubach ...

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