Burdette-Miller v. Williams & Fudge, Inc.

CRYSTAL BURDETTE-MILLER,individually and on behalf of similarly situated individuals, Plaintiffs, v. WILLIAMS & FUDGE, INC., Defendant.

No. 18 C 2187

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

January 15, 2019

Chief Judge Rubén Castillo

MEMORANDUM OPINION AND ORDER

Plaintiff Crystal Burdette-Miller ("Burdette-Miller") filed this putative class action against Williams & Fudge, Inc. ("WFI"), a debt collector and debt servicing company. (R. 20, First Am. Compl.) Before the Court is WFI's Motion to Dismiss. (R. 21, Def.'s Mot.) For the reasons that follow, the motion is granted in part and denied in part.

BACKGROUND

Burdette-Miller is an Illinois resident who previously attended Lewis University. (R. 20, First Am. Compl. ¶¶ 11, 37.) WFI is a South-Carolina based corporation that contracts with colleges and universities nationwide to collect education-related loans and other receivables from current and former students. (Id. ¶ 12, 17.) Burdette-Miller alleges that WFI enters into form contracts with educational institutions governing the collection of students' debts, and then pursues student debtors and threatens them with exorbitant penalty fees in an unlawful attempt to collect maximum payments regardless of the terms of the students' tuition contracts with the educational institutions. (Id. ¶¶ 18-29.) Burdette-Miller alleges that because ordinary consumers are generally unaware that the collections WFI seeks are unlawful and unenforceable, many unwittingly acquiesce to WFI's collection efforts. (Id. ¶ 33.) Even if the consumer realizes the demand is unlawful, she adds, the consumer is likely to pay some portion to settle the debt because fighting it requires time, energy, and resources and subjects the consumer to the expense of going to court and defending against the claim. (Id. ¶¶ 34-37.)

According to Burdette-Miller, WFI entered into such a contract with Lewis University and engaged in such tactics in an attempt to collect a tuition payment and 33% penalty from her. (Id. ¶¶ 37-44.) Specifically, she alleges that WFI called her on August 29, 2014, attempting to collect on a $7,345.33 debt it said she owed to Lewis University, and that it continued making calls and sending correspondence to her thereafter. (Id. ¶¶ 39-40.) She refused to pay. (Id. ¶¶ 39, 43.) On January 21, 2016, WFI's attorneys filed a collection against her, alleging that she owed Lewis University the same amount. (Id. ¶ 49.) Attached to the complaint was an account statement prepared by WFI breaking down that figure as $5,509 in tuition, and $1,836.33 (33% of the purported balance) as a collection fee, for a total of $7,345.33. (Id. ¶ 50.) Burdette-Miller retained an attorney who timely filed an appearance, but WFI nevertheless obtained a default judgment and began wage garnishment proceedings. (Id. ¶¶ 52-58.) The default was subsequently vacated, and the garnishment proceedings dismissed. (Id. ¶ 56.) Although Burdette-Miller's motion to dismiss the collection complaint was denied, the court struck WFI's request for a 33% fee as an "unenforceable penalty." (Id. ¶ 58.) After Burdette-Miller filed counterclaims against Lewis University in that action, it subsequently retained its own counsel although WFI's attorneys did not withdraw. (Id. ¶¶ 59-60.)

After two years of litigating the collection action, Burdette-Miller alleges, Lewis University disclosed for the first time on April 12, 2018, that the contract attached to the collection complaint was not the one to which Burdette-Miller agreed, despite the fact that the copy filed with the complaint contained her electronic signature. (Id. ¶¶ 64-68.) Unlike the one WFI attached to the complaint, Burdette-Miller's actual tuition agreement with Lewis University did not purport to authorize a 33% collection fee, but rather a substantially lower one. (Id.) As a result, Burdette-Miller complains that she and Lewis University spent "more than two years and countless hours of attorney time litigating over collection fees that are not only unenforceable—they were not even applicable to begin with." (Id. ¶ 72.)

PROCEDURAL HISTORY

On March 26, 2018, Burdette-Miller filed this putative class action against WFI complaining of its imposition of exorbitant collection fees and other purportedly unlawful collection activities. (R. 1, Compl.) WFI moved to dismiss the complaint in its entirety (R. 12, Def.'s Mot.), but the motion was denied without prejudice so that Burdette-Miller could amend her complaint to include the additional facts she said had developed since her initial filing. (R. 19, Min. Order.) On July 27, 2018, Burdette-Miller filed her first amended complaint, asserting claims of breach of contract (Count I), violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. (Count II), violation of the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), 815 ILL. COMP. STAT. § 505/1 et seq. (Counts III and IV), wrongful garnishment (Count VI), and for a declaratory judgment (Count V). (R. 20, First Am. Compl.) WFI again moved to dismiss the complaint (R. 22, Def.'s Mot.), and Burdette-Miller responded in opposition (R. 26, Pl.'s Resp.). WFI filed a reply (R. 27, Def.'s Reply), and Burdette-Miller filed a surreply (R. 29, Pl.'s Surreply). The motion is now ripe for resolution.

LEGAL STANDARD

On a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded factual allegations of the complaint, drawing all possible inferences in the plaintiff's favor. Vesely v. Armslist LLC, 762 F.3d 661, 664 (7th Cir. 2014). "[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations," but it must contain "enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows 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) (citing Twombly, 550 U.S. at 556). "In reviewing the sufficiency of a complaint under the plausibility standard, [courts must] accept the well-pleaded facts in the complaint as true, but . . . need not accept as true legal conclusions, or threadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Alam v. Miller Brewing Co., 709 F.3d 662, 665-66 (7th Cir. 2013) (internal quotation omitted).

When considering a Rule 12(b)(6) motion to dismiss, the court may take judicial notice of matters of public record such as court records without converting the motion into one for summary judgment. Henson v. CSC Credit Servs., 29 F.3d 280, 284 (7th Cir. 1994); Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080-81 (7th Cir. 1997). This includes state court orders and filings made in this and other courts. See Cancer Found. v. Cerberus Capital Mgmt., LP, 559 F.3d 671, 676 n.2 (7th Cir. 2009); 520 S. Mich. Ave. Assocs., Ltd. v. Shannon, 549 F.3d 1119, 1137 n.14 (7th Cir. 2008).

ANALYSIS

I. Breach of Contract

WFI moves to dismiss Burdette-Miller's breach of contract claim on the basis that she is neither a party to nor a third-party beneficiary of the contract she complains was breached, WFI's collection contract with Lewis University. (R. 22, Def.'s Mot. at 4-7.) In addition, it argues, she fails to allege that WFI breached any particular one of the contract's terms. (Id.) According to WFI, the claim fails under either Illinois law, where Lewis University is located, or South Carolina law where WFI is domiciled. (Id. at 4.) Burdette-Miller admits she is not a party to the contract but argues that she nevertheless has standing to bring the claim under either Illinois or South Carolina law because she and the class she purports to represent are third-party beneficiaries. (R. 26, Pl.'s Resp. at 7.) According to Burdette-Miller, she adequately pleads breach by alleging that WFI attempted to collect debts under incorrect tuition agreements and assessed and collected unauthorized fees in violation of applicable law. (Id. at 9.)

Illinois law recognizes two types of third-party beneficiaries, intended and incidental. Carlson v. Rehab. Inst. of Chi., 50 N.E.3d 1250, 1256 (Ill. App. Ct. 2016). Unlike an incidental beneficiary, who has no rights under a contract, "[a]n intended beneficiary is intended by the parties to the contract to directly benefit for the performance of the agreement; under the contract an intended beneficiary has rights and may sue." Id. Express language in the contract identifying the third-party beneficiary is the best evidence of intent to benefit that party, but an implied showing may be made where the implication that the contract applies to third parties is so strong as to be practically an express declaration. Quinn v. McGraw-Hill Cos., 168 F.3d 331, 334 (7th Cir. 1999) (construing Illinois law). South Carolina law similarly provides that "if a contract is made for the benefit of a third person, that person may enforce the contract if the contracting parties intended to create a direct, rather than an incidental or consequential, benefit to such third person." Bob Hammond Constr. Co. v. Banks Constr. Co., 440 S.E.2d 890, 891 (S.C. App. Ct. 1994). Because there is no material difference between South Carolina and Illinois law on this issue, therefore, the Court need not undertake a choice-of-law analysis.

According to Burdette-Miller, the intent to benefit her and other student debtors is demonstrated by the provision of the contract requiring WFI to abide by federal and state laws including the FDCPA. (R. 26, Pl.'s Resp. at 7-8.) Because consumer protection laws are designed to protect consumers, she reasons, they are the "only plausible beneficiaries" of this provision of the contract. (Id. at 8.) As WFI correctly points out, however, "[t]he intent of the parties...