2001 U.S. Dist. LEXIS 13918, *


MOHAMMED HAMID, on behalf of himself and all others similarly situated, Plaintiff, v. BLATT, HASENMILLER, LEIBSKER, MOORE & PELLETTIERI, and UNIFUND CCR PARTNERS, and UNIFUND CORP., Defendants.


No. 00 C 4511


UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION


2001 U.S. Dist. LEXIS 13918



August 31, 2001, Decided
September 4, 2001, Docketed

DISPOSITION: [*1] The 12(b)(6) Motion to Dismiss brought by defendant Blatt, Hasenmiller, Leibsker, Moore & Pellettieri denied.


CASE SUMMARY

PROCEDURAL POSTURE: Defendant law firm filed a collection action on behalf of defendant client against plaintiff debtor for a default on a credit card account. Prior to suit, the law firm sent collection letters to the debtor which he tried to answer. At trial, the court granted the firm's motion to voluntarily dismiss but awarded costs to debtor, who later sued for violations of the Fair Debt Collection Practices Act (FDCPA). The law firm moved to dismiss.


OVERVIEW: The debtor alleged that the law firm violated the FDCPA by filing a suit that was barred by the statute of limitations, by seeking more interest than it was entitled to collect, and by attempting to collect attorneys fees. The law firm argued that the suit was not outside the limitations period and that in any event, the argument was made in good faith. The debtor argued that the four-year statute of limitations should apply because the predominant aspect of the interaction was a sale of goods, while the law firm argued that a ten-year statute applied because the financing was provided by a third party. The court held that disputed facts made the question close, thus the allegations were sufficient to survive dismissal. The law firm also argued that even if the four-year statute applied, it had not knowingly violated the FDCPA because the question was so close. The argument did not carry the day because as a law firm in the collection business, there was a possibility that it knew about the statutory distinctions, and the court could not decide that the law firm had not acted knowingly in the alleged violation of the FDCPA.


OUTCOME: The court denied the law firm's motion to dismiss.


CORE TERMS: statute of limitations, credit card, motion to dismiss, lawsuit, financing, question of law, third party, law firm, knowingly, written contract, collection, vendor


CORE CONCEPTS - Hide Concepts

Civil Procedure : Pleading & Practice : Defenses, Objections & Demurrers : Failure to State a Cause of Action
A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) does not test whether the plaintiff will prevail on the merits, but instead whether the plaintiff has properly stated a claim. In deciding a motion to dismiss, the court must assume all facts in the complaint to be true, construe the allegations liberally, and view the allegations in a light most favorable to the plaintiff. The court may dismiss a complaint for failure to state a claim under Rule 12(b)(6) only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.


Governments : Legislation : Limitation of Actions : Time Limitations
In Illinois, the statute of limitations on a debt which arises from a sale of goods is four years. 810 Ill. Comp. Stat. § 5/2-725. However, the statute of limitations for breach of a written contract is ten years. 735 Ill. Comp. Stat. § 5/13-206.


Banking Law : Bank Activities : Consumer Protection : Credit Card Agreements
Governments : Legislation : Limitation of Actions : Time Limitations
What statute of limitations should apply to a credit card debt is not entirely clear. In situations in which the financing is provided by the merchant, then the four year statute of limitations should apply because the transaction is one for the sale of goods and the financing aspect is merely a portion of that arrangement. However, if the financing is provided by a third party, then the suit is one based on the written contract to provide credit and the appropriate statute of limitations is ten years.


Banking Law : Bank Activities : Consumer Protection : Fair Debt Collection Practices
A violation of 15 U.S.C.S. § 1692e must be knowing and intentional.



COUNSEL: For MOHAMMED HAMID, plaintiff: James S. Shedden, Michael S. Hilicki, Beeler, Schad & Diamond, P.C., Chicago, IL. Christopher V. Langone, Joel D. Dabisch, Langone Law Firm, Chicago, IL. Lance A. Raphael, Chicago, IL.

For BLATT, HASENMILLER, LEIBSKER, MOORE & PELLETTIERI, defendant: Alan I. Ehrenberg, Scott C. Frost, Ehrenberg & Frost, P.C., Chicago, IL. Kathleen Elizabeth Weeks, Ehrenberg & Frost, P.C., Chicago, IL.

For UNIFUND CCR PARTNERS, UNIFUND CORPORATION, defendants: Scott C. Frost, Ehrenberg & Frost, P.C., Chicago, IL. William B Fecher, Statman, Harris & Bardach, LLC, Cincinnati, OH.

JUDGES: Wayne R. Andersen, United States District Judge.

OPINIONBY: Wayne R. Andersen

OPINION: MEMORANDUM, OPINION AND ORDER

This case is before the Court on the Fed.R.Civ.P. 12(b)(6) Motion to Dismiss brought by defendant Blatt, Hasenmiller, Leibsker, Moore & Pellettieri ("Blatt"). For the following reasons, the motion is denied.

BACKGROUND

This case stems from a case filed by Blatt in the Circuit Court of Cook County. Blatt was representing Unifund CCR Partners, also [*2] a defendant in the instant suit. In that case, Blatt filed a Complaint claiming that Hamid defaulted on $ 834.99 on a "Montgomery Wards account, account number 400707391." The Complaint stated that interest had been accruing at a rate of 1.80% per month and that $ 2,386.93 in interest was due plus a reasonable attorney's fee of $ 350. Therefore, the Complaint demanded $ 3,571.92 plus costs.

According to the instant First Amended Complaint Hamid received collection letters from Blatt demanding payment of an alleged debt. He called to inquire into the matter and never received a response. Months later he received another collection letter and was served with the Circuit Court Complaint. On the trial date, Blatt attempted to dismiss the case pursuant to agreement, but Hamid's counsel denied the existence of an agreement and the case was placed on the trial call. Blatt then moved to voluntarily dismiss the case without prejudice. The Circuit Court granted the motion, but awarded costs to Hamid.

Hamid filed the instant class action First Amended Complaint alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692e, 1692e(2), 1692f [*3] and 1692f(1). In the First Amended Complaint, Hamid alleges that Blatt violated the FDCPA by filing a lawsuit asking for amounts that it should have known were not legally enforceable because the statute of limitations barred the lawsuit. Furthermore, Hamid alleges that Blatt violated the FDCPA by attempting to request more interest than it was entitled to collect, attempting to collect interest barred by the statute of limitations, and attempting to collect attorneys fees.

DISCUSSION

A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) does not test whether the plaintiff will prevail on the merits, but instead whether the plaintiff has properly stated a claim. Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974). In deciding a motion to dismiss, the court must assume all facts in the complaint to be true, construe the allegations liberally, and view the allegations in a light most favorable to the plaintiff. Caremark, Inc. v. Coram Healthcare Corp., 113 F.3d 645, 648 (7th Cir. 1997). The court may dismiss a complaint for failure to state a claim under Rule 12(b)(6) only if "it is clear that no relief could be granted [*4] under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984).

In the instant motion, Blatt seeks to dismiss Counts I and II against it because it argues that the filing of the lawsuit was not outside the statute of limitations or, alternatively, a good faith argument exists that the filing of the lawsuit was not outside the statute of limitations. In Illinois, the statute of limitations on a debt which arises from a sale of goods is four years. 810 ILCS 5/2-725. However, the statute of limitations for breach of a written contract is ten years. 735 ILCS 5/13-206.

There is little law on this subject and it is not entirely clear which statute of limitations should apply to a credit card debt. In situations in which the financing is provided by the merchant, then the four year statute of limitations should apply because the transaction is one for the sale of goods and the financing aspect is merely a portion of that arrangement. Citizen's Nat'l Bank of Decatur v. Farmer, 395 N.E.2d 1121, 1123, 77 Ill. App. 3d 56, 32 Ill. Dec. 740 (4th Dist. 1979). However, [*5] if the financing is provided by a third party, then the suit is one based on the written contract to provide credit and the appropriate statute of limitations is ten years. Harris Trust & Savings Bank v. McCray, 316 N.E.2d 209, 210-11, 21 Ill. App. 3d 605 (1st Dist. 1974).

In the instant case, plaintiff alleges that he obtained the credit card from Montgomery Ward and used it to finance purchases made from Montgomery Ward. Therefore, according to the pleadings, the four year statute of limitations should apply because the predominant aspect of the interaction is a sale of goods. Blatt asks us to take judicial notice of the fact that the credit card was issued by Montgomery Ward Credit Corporation, a separate and distinct corporation from the vendor Montgomery Ward. However, in the Complaint filed before the Circuit Court Blatt alleged that it was a "Montgomery Wards account." Furthermore, plaintiff alleges that the credit card was issued by Montgomery Ward. At the motion to dismiss stage, those allegations are sufficient because we can imagine a set of facts under which, even if the two corporations are distinct, the closeness of the two corporations means that the [*6] four year statute of limitations should apply.

Blatt further argues that, even if the statute of limitations is four years, it did not and could not have knowingly violated the FDCPA because the question of law is so close. A violation of 15 U.S.C. § 1692e must be knowing and intentional. Transamerica Financial Services v. Sykes, 171 F.3d 553, 555 note 2 (7th Cir. 1999)(citing Ducrest v. Alco Collections, Inc., 931 F. Supp. 459, 462 (M.D.La. 1996)). Defendant's argument is compelling, but does not carry the day. Defendant is a law firm. The precedent which forms the basis of this, admittedly close, distinction is over twenty years old. Furthermore, defendant is in the business of representing debt collectors. The possibility that defendant knew the difference between a credit card provided by a vendor and a credit card provided by a third party is not an impossible assumption given that defendant is a law firm. As a matter of law, we cannot decide that defendant could not have acted knowingly in the alleged violation of plaintiff's rights under the FDCPA because the question of law was close. Therefore, defendant's motion [*7] is denied.

CONCLUSION

The 12(b)(6) Motion to Dismiss brought by defendant Blatt, Hasenmiller, Leibsker, Moore & Pellettieri is denied.

It is so ordered.

Wayne R. Andersen

United States District Judge

Dated: August 31, 2001

[Other docket entry] Enter MEMORANDUM, OPINION AND ORDER: The 12(b)(6) motion to dismiss [19-1], [12-1] brought by defendant Blatt, Hasenmiller, Leibsker, Moore & Pellettieri is denied. It is so ordered.

[For further detail see order attached to the original minute order.]

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