Leeb v. Pendrick Capital Partners, LLC

Citations: 891 F. Supp. 2d 1002; 2012 WL 3135526; 2012 U.S. Dist. LEXIS 107291Docket: No. 12 C 913

Court: District Court, N.D. Illinois; August 1, 2012; Federal District Court

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Plaintiff Gregory Leeb, on behalf of himself and others, filed a three-count amended complaint against Pendrick Capital Partners, LLC and Nationwide Credit Corp., alleging violations of the Illinois Collection Agency Act (ICAA) and the Fair Debt Collection Practices Act (FDCPA). Count I claims Pendrick, unlicensed as a debt collector in Illinois, violated the ICAA when Nationwide attempted to collect debts on its behalf. Count II alleges Nationwide violated the FDCPA by sending a dunning letter after Leeb disputed the debt in writing. Count III also claims a FDCPA violation for a subsequent letter sent by Nationwide requiring further information for its investigation. 

The defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). The court granted Pendrick’s motion and granted in part and denied in part Nationwide’s motion. Pendrick, a Delaware corporation, purchased consumer debts from Illinois residents and hired Nationwide, which is licensed in Illinois, to collect these debts. A dunning letter was sent to Leeb on December 26, 2011, demanding payment of a debt purchased from Infinity Healthcare. Leeb disputed the debt via certified mail and fax two days later and instructed Nationwide to cease communication. On January 5, 2012, Nationwide sent another letter indicating it could not continue its investigation without additional information.

The ruling emphasizes that a Rule 12(b)(6) motion assesses whether the complaint states a valid claim for relief, assuming all well-pleaded facts are true. The complaint must contain a clear statement of the claim as required by federal pleading standards, and the court can only review the complaint and its attachments, without considering extraneous documents unless necessary.

Counts I and II of the plaintiffs' complaint against defendants Pendrick and Nationwide are dismissed. Count I asserts a violation of the Illinois Collection Agency Act (ICAA) by Pendrick for allegedly collecting debts without a license. Pendrick contends that it does not qualify as a collection agency simply by purchasing debts and assigning them to a third party for collection. The ICAA defines a collection agency as one that regularly engages in debt collection on behalf of others or collects debts it has purchased. Section 4 prohibits any unlicensed collection agency from operating in Illinois. The court finds that Pendrick does not engage in collection activities and thus is not subject to licensing requirements under the ICAA.

The plaintiffs' reliance on the case LVNV Funding, LLC v. Trice is deemed misplaced; in that case, the debt purchaser sued to collect on the debt, which is not analogous to Pendrick's actions, as Pendrick did not attempt to collect from the plaintiff nor send any communication regarding the debt. Instead, Pendrick transferred the debt to a licensed collection agency. Other cited cases do not support the plaintiffs' claims, particularly Kim v. Riscuity, where the defendant actively attempted debt collection, unlike Pendrick's conduct. Thus, the dismissal is based on the conclusion that Pendrick's actions fall outside the scope of the ICAA's licensing requirements.

In Wisniewski v. Asset Acceptance Capital Corp., the court found that the relationship between a debt purchaser and its subsidiary did not support the plaintiff's claims. Unlike in LVNV, the debt purchaser did not engage in collection activities and merely assigned the debt to its subsidiary, which filed suit. The plaintiff's failure to cite any case where a debt purchaser, lacking direct collection activity and utilizing an independent agency, was classified as a collection agency under the Illinois Collection Agency Act (ICAA) led to the dismissal of Count I of the complaint. Because Count II, the Fair Debt Collection Practices Act (FDCPA) claim, relied on the ICAA claim, it was also dismissed.

Count III, however, was upheld as Nationwide allegedly continued collection efforts despite receiving a dispute letter from the plaintiff, which could defeat its motion to dismiss. Nationwide's reliance on Marro v. Crosscheck, Inc. was deemed misplaced as the circumstances differed significantly. The plaintiff's dispute letter was not vague, and the letter sent by Nationwide included elements suggesting it was an attempt to collect the debt, such as a detachable payment section and references to payment. Thus, the plaintiff adequately alleged a violation under 15 U.S.C. § 1692g against Nationwide.

Defendant Pendrick’s motion to dismiss is granted, and defendant Nationwide’s motion to dismiss is granted in part, resulting in the dismissal of Counts I and II of the plaintiffs' complaint. However, Count III remains viable against Nationwide. The plaintiff's request to file additional authority is denied. The case of Grant-Hall v. Cavalry Portfolio Services, LLC is referenced, but the court does not address the constitutional issue raised. It clarifies that Grant-Hall only addressed Section 8b of the ICAA, which is not relevant here. The plaintiff's citations to Schutz v. Arrow Fin. Services, LLC, Pollice v. Nat'l Tax Funding, L.P., and Fox v. Citicorp Credit Services, Inc. regarding Pendrick’s status as a collection agency through vicarious liability are found insufficient, as these cases do not address the criteria for determining when a debt purchaser qualifies as a collection agency. The Third Circuit's position in Pollice is noted, emphasizing that vicarious liability applies only if the debt owner is also deemed a 'debt collector' under the FDCPA. The plaintiff's allegations of FDCPA violations due to misrepresentations and threats are acknowledged, but the plaintiff admits these actions stem from Pendrick's alleged criminal activity under the ICAA.