Illinois Credit Repair Law
IL ST Ch. 815,
ACT 605, Refs
Act 605. Credit Services Organizations Act
Chapter 815. Business Transactions
Contracts
Act 605. Credit Services Organizations Act
605/1. Short title
§ 1. This Act shall be
known and may be cited as the "Credit Services Organizations Act".
605/2. Legislative
findings and declaration
§ 2. The General Assembly finds and declares that:
(a) The ability to
obtain and use credit has become of great importance to consumers who have a
vital interest in establishing and maintaining their credit worthiness and
credit standing. As a result, consumers who have experienced credit problems
may seek assistance from credit service businesses which offer to improve the
credit standing of such consumers. Certain advertising and business practices
of some companies engaged in the business of credit services have worked a
financial hardship upon the people of this State, often on those who are of
limited economic means and inexperienced in credit matters.
(b) The purpose of this
Act is to provide prospective consumers of credit services companies with the
information necessary to make an informed decision regarding the purchase of
those services and to protect the public from unfair or deceptive advertising
and business practices.
605/3. Definitions
§ 3. As used in this
Act:
(a) "Buyer"
means an individual who is solicited to purchase or who purchases the services
of a credit services organization.
(b) "Consumer
reporting agency" has the meaning assigned by Section 603(f), Fair Credit
Reporting Act (15 U.S.C. Section 1681a(f)).
(c) "Extension of
Credit" means the right to defer payment of a debt or to incur a debt and
defer its payment offered or granted primarily for personal, family, or
household purposes.
(d) "Credit
Services Organization" means a person who, with respect to the extension
of credit by others and in return for the payment of money or other valuable
consideration, provides, or represents that the person can or will provide, any
of the following services:
(i) improving a buyer's credit record, history, or rating:
(ii) obtaining an extension of
credit for a buyer; or
(iii) providing advice or
assistance to a buyer with regard to either subsection (i) or (ii).
"Credit Services Organization" does not include any of
the following:
(i) a person authorized to make loans or extensions of credit under the laws of this State or the United States who is subject to regulation and supervision by this State or the United States, or a lender approved by the United States Secretary of Housing and Urban Development for participation in a mortgage insurance program under the National Housing Act (12 U.S.C. Section 1701 et seq.);
(ii) a bank or savings and loan
association whose deposits or accounts are eligible for insurance by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation, or a subsidiary of such a bank or savings and loan association;
(iii) a credit union doing
business in this State;
(iv) a nonprofit organization
exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, [FN1]
provided that such organization does not charge or receive any money or other
valuable consideration prior to or upon the execution of a contract or other
agreement between the buyer and the nonprofit organization;
(v) a person licensed as a real
estate broker by this state if the person is acting within the course and scope
of that license;
(vi) a person licensed to
practice law in this State acting within the course and scope of the person's
practice as an attorney;
(vii) a broker-dealer
registered with the Securities and Exchange Commission or the Commodity Futures
Trading Commission acting within the course and scope of that regulation;
(viii) a consumer reporting
agency; and
(ix) a residential mortgage
loan broker or banker who is duly licensed under the Illinois Residential
Mortgage License Act of 1987. [FN2]
(e) "Person"
means an individual, corporation, partnership, joint venture or any business
entity.
[FN1] 26 U.S.C.A. § 501.
[FN2] 205 ILCS 635/1-1 et seq.
605/4. Interpretations
of Fair Credit Reporting Act
§ 4. In construing this
Act consideration shall be given to the interpretations of the Fair Credit
Reporting Act (15 U.S.C. Section 1681 et seq.).
605/5. Prohibited acts
§ 5. No credit services
organization, its salespersons, agents or representatives, or any independent
contractor who sells or attempts to sell the services of a credit services
organization shall:
(1) Charge or receive
any money or other valuable consideration prior to full and complete
performance of the services the credit services organization has agreed to
perform for or on behalf of the buyer, unless the credit services organization
has, in conformity with Section 10 of this Act, obtained a surety bond issued
by a surety company licensed to do business in this State. If a credit services
organization is in compliance with this subsection the salespersons, agents,
and representatives who sell the services of such organization shall not be
required to obtain the surety bond provided for by this Act.
(2) Charge or receive
any money or other valuable consideration solely for the referral of a buyer to
a retail seller who will or may extend credit to the buyer if such extension of
credit is in substantially the same terms as those available to the general
public.
(3) Make, or advise any
buyer to make, any statement that is untrue or misleading, or that should be
known by the exercise of reasonable care to be untrue or misleading, with
respect to a buyer's credit reporting agency or to any person who has extended
credit to a buyer or to whom a buyer has made application for an extension of
credit.
(4) Make or use any
untrue or misleading representations in the offer or sale of the services of a
credit services organization or engage, directly or indirectly, in any act,
practice or course of business intended to defraud or deceive a buyer in
connection with the office or sale of such services; including but not limited
to: the amount or type of credit a consumer can expect to receive as a result
of the performance of the services offered; the qualifications, training or
experience of its personnel; or the amount of credit improvement the consumer
can expect to receive as a result of the services.
605/6. Consumer
statement
§ 6. Before the
execution of a contract or other form of agreement between a buyer and a credit
services organization or before the receipt by any such organization of money
or other valuable consideration, whichever occurs first, such organization
shall provide the buyer with a statement, in writing, containing the following:
(1) a complete and accurate statement of the buyer's right to review any file on the buyer maintained by a consumer reporting agency, as provided under the Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.);
(2) a statement that the buyer
may review his consumer reporting agency file at no charge if a request therefor
therefore is made to such agency within 30 thirty days after receipt by the
buyer of notice that credit has been denied and if such request is not made
within the allotted time, the approximate charge to the buyer for such review;
(3) a complete and accurate
statement of the buyer's right to dispute the completeness or accuracy of any
item contained in any file on the buyer maintained by a
consumer reporting agency;
(4) a complete and detailed
description of the services to be performed by the credit services organization
and the total cost to the buyer for such services;
(5) a statement notifying the
buyer that: (i) credit reporting agencies have no obligation to remove
information from credit reports unless the information is erroneous, cannot be
verified or is more than 7 years old; and (ii) credit reporting agencies have
no obligation to remove information concerning bankruptcies unless such
information is more than 10 years old;
(6) a statement asserting the
buyer's right to proceed against the surety bond required under Section 10; and
(7) the name and business
address of any such surety company together with the name and the number of the
account.
The credit services organization shall maintain on file, for a
period of 2 years after the date the statement is provided, an exact copy of
the statement, signed by the buyer, acknowledging receipt of the statement.
605/7. Contracts
§ 7. (a) Each contract
between the buyer and a credit services organization for the purchase of the
services of the credit services organization shall be in writing, dated, signed
by the buyer, and shall include:
(1) a conspicuous
statement in boldfaced type, in immediate proximity to the space reserved for
the signature of the buyer, as follows:
"You, the buyer, may cancel this contract at any time before
midnight of the third day after the date of the transaction. See the attached
notice of cancellation form for an explanation of this right";
(2) the terms and
conditions of payment, including the total of all payments to be made by the
buyer, whether to the credit services organization or to another person;
(3) a full and detailed
description of the services to be performed by the credit services organization
for the buyer, including all guarantees and all promises of full or partial
refunds, and the estimated date by which the services are to be performed or
the estimated length of time for performing the services; and
(4) the address of the
credit services organization's principal place of business and the name and
address of its agent in the State authorized to receive service of process.
(b) The contract must
have two easily detachable copies of a notice of cancellation. The notice must
be in boldfaced type and in the following form:
"Notice of Cancellation"
"You may cancel this contract, without any penalty or
obligation, within three days after the date the contract is signed.
If you cancel, any payment made by you under this contract will be
returned within 10 days after the date of receipt by the seller of your
cancellation notice.
To cancel this contract, mail or deliver a signed, dated copy of
this cancellation notice, or other written notice to:
(name of seller) at (address of seller) (place of business) not
later than midnight (date)
I hereby cancel this transaction."
.............................. ........................................
(date) (purchaser's signature)
(c) The credit services
organization shall give to the buyer a copy of the completed contract and all
other documents the credit services organization requires the buyer to sign at
the time they are signed.
605/8. Noncompliance;
waiver
§ 8. Any contract for
services which does not comply with applicable provisions of this article shall
be void and unenforceable as contrary to public policy. Any waiver by a buyer
of the provisions of this Act shall be deemed void and unenforceable by a
credit services organization as contrary to public policy. Any attempt by a
credit services organization to have a buyer waive rights granted by this Act
shall constitute a violation of this Act.
605/9. Registration
statement
§ 9. (a) A credit
services organization shall file a registration statement with the Secretary of
State before conducting business in this State. The registration statement
shall contain:
(1) the name and address
of the credit services organization;
(2) the name and address
of the registered agent authorized to accept service of process on behalf of
the credit services organization;
(3) the name and address
of any person who directly or indirectly owns or controls 10 percent or more of
the outstanding shares of stock in the credit services organization; and
(4) the name, numbers,
and location of the surety company issuing a surety bond maintained as required
by Section 10 of this Act.
(b) The registration
statement must also contain either:
(1) a full and complete
disclosure of any litigation or unresolved complaint filed with a governmental
authority of this State, any other state or the United States relating to the
operation of the credit services organization; or
(2) a notarized
statement that states that there has been no litigation or unresolved complaint
filed with a governmental authority of this State, any other state or the
United States relating to the operation of the credit services organization.
(c) The credit services organization shall update such statement
not later than the 90th day after the date on which a change in the information
required in the statement occurs.
(d) Each credit services
organization registering under this Section shall maintain a copy of the
registration statement in their files. The credit services organization shall
allow a buyer to inspect the registration statement on request.
(e) The Secretary of
State may charge each credit services organization that files a registration
statement a reasonable fee not to exceed $100 to cover the cost of filing.
605/10. Surety bond
§ 10. If a credit
services organization is required to obtain a surety bond pursuant to paragraph
(1) of Section 5 of this Act, the following procedures shall be applicable:
(a) If a bond is
obtained, a copy of it shall be filed with the Office of the Secretary of
State.
(b) The required bond
shall be in favor of the State of
(c) The bond shall be in
the amount of $100,000 and shall be maintained for a period of 2 years after
the date that the credit services organization ceases operations.
605/11. Damages
§ 11. Any person injured
by a violation of this Act or by the credit services organization's breach of a
contract entered into pursuant to Section 7 of this Act, may bring any action
for recovery of actual damages. Such person may also be awarded punitive
damages, reasonable attorney's fees and court costs.
605/12. Injunction
§ 12. A. The Attorney
General, the State's Attorney of any county, or a buyer may bring an action in
a circuit court to enjoin a violation of this Act. In addition to any
injunction, the Attorney General or any State's Attorney or any county, in the
name of the People of the State of
605/13. Misdemeanor;
felony
§ 13. Any person, as
defined under this Act, violating any provision of this Act except breach of
contract, upon conviction for the first offense, is guilty of a Class A
misdemeanor. Upon conviction of a second or subsequent offense the violator is
guilty of a Class 4 felony.
605/14. Burden of proof
§ 14. In an action under
this Act the burden of proving an exemption under paragraph (d) of Section 3 is
on the person claiming the exemption.
605/15. Nature of
remedies; violation of Consumer Fraud and Deceptive Business Practices Act
§ 15. The remedies
provided by this Act are in addition to other remedies provided by law. A
violation of this Act shall also constitute a violation of the Consumer Fraud
and Deceptive Business Practices Act. [FN1]
[FN1] 815 ILCS 505/1 et seq.
605/16. Liberal
construction
§ 16. This Act shall be liberally construed to effect the purposes
thereof.
Current through P.A. 95-5 of the 2007 Reg. Sess.
END OF DOCUMENT
815 ILCS 505/2Z
Formerly cited as IL ST CH 121 1/2 P 262Z
815 ILCS 505/2Z
Formerly cited as IL ST CH 121 1/2 ¶ 262Z
Chapter 815. Business Transactions
Deceptive Practices
Act 505. Consumer Fraud and Deceptive Business Practices Act
505/2Z. Violations of other Acts
§ 2Z. Violations of
other Acts. Any person who knowingly violates the Automotive Repair Act, [FN1] the Automotive Collision
Repair Act, [FN2] the Home Repair and
Remodeling Act, [FN3] the Dance Studio Act, [FN4] the Physical Fitness Services
Act, [FN5] the Hearing Instrument
Consumer Protection Act, [FN6] the Illinois Union Label Act, [FN7] the Job Referral and Job
Listing Services Consumer Protection Act, [FN8] the Travel Promotion Consumer
Protection Act, [FN9] the Credit Services Organizations Act, [FN10] the Automatic Telephone
Dialers Act, [FN11] the Pay-Per-Call Services
Consumer Protection Act, [FN12] the Telephone Solicitations
Act, [FN13] the Illinois Funeral or
Burial Funds Act, [FN14] the Cemetery Care Act, [FN15] the Safe and Hygienic Bed
Act, [FN16] the Pre-Need Cemetery Sales
Act, [FN17] the High Risk Home Loan Act, [FN18] the Payday Loan Reform Act, [FN19] the Mortgage Rescue Fraud
Act, subsection (a) or (b) of Section 3-10 of the Cigarette Tax Act, [FN20] the Payday Loan Reform Act,
subsection (a) or (b) of Section 3-10 of the Cigarette Use Tax Act, [FN21] the Electronic Mail Act, [FN22] paragraph (6) of subsection
(k) of Section 6-305 of the Illinois Vehicle Code, [FN23] Article 3 of the Residential
Real Property Disclosure Act, [FN24] the Automatic Contract
Renewal Act, [FN25] or the Personal Information
Protection Act [FN26] commits an unlawful practice within the meaning of
this Act.
Case Law
I identified several cases construing the act. In Arnold v.
Goldstar Financial Systems, Inc., 2002 WL 1941546 (N.D.
Not Reported in F.Supp.2d, 2002 WL 1941546
N.D.Ill.,2002.
August 22, 2002
Jon ARNOLD, et al., Plaintiff,
v.
GOLDSTAR FINANCIAL SYSTEMS, INC., et al., Defendants.
Customers
sued company providing credit repair services, and its law firm, claiming
breach of contract to manage debt. Company and attorney moved to dismiss or
compel arbitration. The District Court, Gottschall, J.,
held that: (1) personal jurisdiction was lacking over attorney; (2) court did
not have jurisdiction over claim of nonresident customer; (3) court had
jurisdiction over claims made by Illinois residents; (4) motion to compel
arbitration would be treated as motion to stay proceedings; and (5) proceedings
would not be stayed, due to likelihood that costs of arbitration would be
prohibitive.
Motion granted in part, denied in part.
[1] KeyCite Notes
170B Federal
Courts
170BII Venue
170BII(A) In
General
170Bk76 Actions
Against Non-Residents; “Long-Arm” Jurisdiction in General
170Bk76.20 k.
Persons Acting in Representative Capacity, Venue For; Fiduciary Shield. Most Cited Cases
Under Illinois law, court lacked personal jurisdiction over
attorney employed by company in credit repair business, in suit by customers
alleging federal and state violations arising out of failure to live up to
promises; attorney acted only in her capacity as employee of company, and was
protected by fiduciary shield doctrine. S.H.A. 735 ILCS 5/2-209(c).
[2] KeyCite Notes
170B Federal
Courts
170BII Venue
170BII(A) In
General
170Bk77 Corporations, Actions by or Against
170Bk81 k.
Sales, Solicitation and Advertising. Most Cited Cases
Under Illinois law, court had personal jurisdiction over
nonresident company providing credit repair services, sued by Illinois
customers for failing to honor promises; representatives of company had made
phone calls to customers in state, urging them to enter into contract. S.H.A. 735 ILCS 5/2-209(c).
[3] KeyCite Notes
92 Constitutional Law
92XXVII Due
Process
92XXVII(E) Civil Actions and Proceedings
92k3961 Jurisdiction and Venue
92k3965 Particular Parties or Circumstances
92k3965(5) k.
Services and Service Providers. Most Cited Cases
170B Federal
Courts KeyCite Notes
170BII Venue
170BII(A) In
General
170Bk77 Corporations, Actions by or Against
170Bk84 k.
Miscellaneous Particular Activities. Most Cited Cases
Court sitting in
Court sitting in
[4] KeyCite Notes
92 Constitutional Law
92XXVII Due
Process
92XXVII(E) Civil Actions and Proceedings
92k3961 Jurisdiction and Venue
92k3965 Particular Parties or Circumstances
92k3965(5) k.
Services and Service Providers. Most Cited Cases
170B Federal
Courts KeyCite Notes
170BII Venue
170BII(A) In
General
170Bk77 Corporations, Actions by or Against
170Bk81 k.
Sales, Solicitation and Advertising. Most Cited Cases
Court sitting in
Court sitting in
[5] KeyCite Notes
170B Federal
Courts
170BII Venue
170BII(A) In
General
170Bk77 Corporations, Actions by or Against
170Bk79 k.
Corporate Activities and Contacts Within District; Doing Business in General. Most Cited Cases
170B Federal
Courts KeyCite Notes
170BII Venue
170BII(A) In
General
170Bk77 Corporations, Actions by or Against
170Bk81 k.
Sales, Solicitation and Advertising. Most Cited Cases
Court sitting in
[6] KeyCite Notes
29T Antitrust
and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(C) Particular Subjects and Regulations
29Tk218 k.
Credit Repair and Counseling. Most Cited Cases
Court had subject matter jurisdiction, under Credit Repair
Organizations Act (CROA), over claim that for-profit repair organization did
not honor promises made to customers, even though company's
successor-in-interest was non-profit corporation not covered by CROA. 15 U.S.C.A. § 1679 et seq.
[7] KeyCite Notes
25T Alternative
Dispute Resolution
25TII Arbitration
25TII(D) Performance, Breach, Enforcement, and Contest
25Tk185 Stay of
Arbitration
25Tk188 k.
Proceedings. Most Cited Cases
Court would treat motion to compel arbitration, under Federal
Arbitration Act (FAA), as motion for stay of arbitration, when forum selection
clause of contract specified another jurisdiction, precluding orders to compel
by courts in other than specified jurisdiction. 9 U.S.C.A. §§ 3, 4.
[8] KeyCite Notes
170B Federal
Courts
170BVI State
Laws as Rules of Decision
170BVI(C) Application
to Particular Matters
170Bk403 k.
Arbitration. Most Cited Cases
Federal law, rather than state law specified in contractual choice
of law provision, governed question whether arbitration clause in contract
could be avoided on grounds that contract was illegal.
[9] KeyCite Notes
25T Alternative
Dispute Resolution
25TII Arbitration
25TII(B) Agreements to Arbitrate
25Tk131 Requisites and Validity
25Tk134 Validity
25Tk134(1) k.
In General. Most Cited Cases
Under governing federal law, contractual obligation to arbitrate
disputes was not affected by claim that underlying contract was illegal.
[10] KeyCite Notes
25T Alternative
Dispute Resolution
25TII Arbitration
25TII(B) Agreements to Arbitrate
25Tk131 Requisites and Validity
25Tk134 Validity
25Tk134(1) k.
In General. Most Cited Cases
Provision of agreement between credit repair company and customer,
under which customer agreed not to participate in class action, as part of
arbitration clause, was not unenforceable as impermissible waiver of protection
provided by or consumer right under Credit Repair Organizations Act (CROA).
Consumer Credit Protection Act, § 402 et seq., as amended, 15 U.S.C.A. § 1679 et seq.
[11] KeyCite Notes
25T Alternative
Dispute Resolution
25TII Arbitration
25TII(D) Performance, Breach, Enforcement, and Contest
25Tk190 Stay of
Proceedings Pending Arbitration
25Tk196 k.
Particular Cases. Most Cited Cases
Prohibitive expense of arbitration, in Florida, precluded stay of
lawsuit by Illinois residents against nonresident company providing credit
repair services, claiming nonfulfillment of contractual promises, in order that
arbitration could proceed; it was estimated that arbitration would cost each
claimant, who was already hard pressed financially, $2,550, as opposed to court
filing fee of $150.
MEMORANDUM OPINION & ORDER
GOTTSCHALL, J.
*1 In this putative class
action, plaintiffs allege that defendants violated various state and federal
laws in the course of offering and providing them with credit repair services. Defendants
have moved for dismissal on jurisdictional grounds and for an order compelling
arbitration. As explained below, the request for dismissal is granted in part
and denied in part, and the request for an order compelling arbitration is
denied.
I. Background
In their first amended
complaint, plaintiffs Jon Arnold, Cary Sorbo, and Julian Dorsey, on behalf of
themselves and similarly situated individuals, allege that Goldstar Financial
Systems, Inc. (“Goldstar”), doing business as Gibson Trust, Inc. (“Gibson”),
and The Law Office of Dashia Trowers, along with a putative defendant class of
similarly situated attorneys, engaged in fraudulent, unfair, and deceptive
practices in promising to manage consumer debt, improve plaintiffs' credit, and
prevent creditor harassment. In either late 1999 or early 2000, each plaintiff
entered into a credit repair services contract with Goldstar, which was
estimated to last between four and five years. The basic notion was that
Goldstar would work with each plaintiffs' creditors to consolidate and reduce
payments, would make the payments each month, and would generally serve as a
buffer between plaintiffs and their creditors. According to plaintiffs,
Goldstar violated both state and federal laws and generally failed to live up
to its promises and representations. Plaintiffs' complaint consists of three
counts: (1) violations of the Credit Repair Organizations Act (“CROA”), 15
U.S.C. § 1679 et seq.; (2)
illegality of contract; and (3) violations of the Illinois Consumer Fraud and
Deceptive Business Practices Act, 815
ILCS 505/1 et seq. The
first two counts are brought by all plaintiffs against all defendants; the
third is brought by Arnold and Sorbo, individually, against Goldstar alone.
Defendants move to dismiss the complaint for lack of personal and subject
matter jurisdiction. In the alternative, defendants seek an order compelling
arbitration.
II. Analysis
A. Personal Jurisdiction
Once personal
jurisdiction is contested, a plaintiff has the burden of providing sufficient
evidence to establish a prima facie case of personal jurisdiction. “The
allegations in the complaint are to be taken as true unless controverted by the
defendants' affidavits; and any conflicts in the affidavits are to be resolved
in his favor.” Turnock
v. Cope, 816 F.2d 332, 333 (7th Cir.1987). A motion to dismiss for lack of personal jurisdiction should be
denied if the plaintiff alleges sufficient facts to support a reasonable
inference that the defendant can be subjected to jurisdiction of the court. Jackam
v. Hosp. Corp. of Am. Mideast, Ltd., 800 F.2d 1577, 1579
(11th Cir.1986).
1.
In cases involving a
federal question, a plaintiff must show that the defendant is amenable to
service in the forum state and that exercising jurisdiction over the person of
the defendant would not offend constitutional standards of due process. Cent.
States, S.E. & S.W. Areas Pension Fund
v. Reimer Express World Corp., 230 F.3d 934, 939 (7th Cir.2000). Because no special rule or statute
applies here, service is effective to establish jurisdiction over a defendant
only if that defendant would be subject to the jurisdiction of an
*2 [1]
Defendant Trowers swears
that Goldstar management made all decisions for transactions with its clients,
that prior to this lawsuit she was not aware that any of the named plaintiffs
were clients of Goldstar, that she had no agreement to provide any services to
them, that she does not remember performing any services for them, and that she
signed contracts on Goldstar's behalf only as an employee of Goldstar and not
in any other capacity. (Defs.' Mem. Supp. Mot. Dismiss Ex. B.) Plaintiffs argue
in response that the evidence contradicts Trowers's averments that she had no
communications with the plaintiffs and performed no services on their behalf.
In support of this argument, plaintiffs cite three documents: (1) a letter sent
to plaintiff Dorsey printed on letterhead listing both Goldstar and “The Law
Office of Dashia N. Trowers”; (2) a statement in the client information sheet
advising that late payments would render “ATTORNEY'S agent or subcontractor”
unable to make timely disbursements to creditors; and (3) a reference on
Goldstar's website boasting of its “full legal staff.” (Pls.' Resp. at 5.) The
second and third documents make no reference to Trowers. While the joint
letterhead does tend to refute Trowers's claim that her law offices had no
connection to Goldstar, the letterhead sheds no light on the capacity in which
Trowers and her law offices acted. Her averments that Goldstar's management
made all the decisions concerning client transactions and that she acted only
in her capacity as an employee of Goldstar stand unrebutted and bring her
within the fiduciary shield doctrine endorsed by the Illinois Supreme Court.
Because her only contacts with Illinois apparently derived from, and were
motivated by, her employment status, the Illinois constitution prohibits the
exercise of personal jurisdiction over her and her law firm.FN1 All claims against
Trowers's law offices are therefore dismissed.
FN1. For similar reasons, exercising personal jurisdiction over Trowers might also violate federal due process. See Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958) (“The unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State.”); cf. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 479 n. 22, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (“[W]hen commercial activities are ‘carried on in behalf of’ an out-of-state party those activities may sometimes be ascribed to the party, at least where he is a ‘primary [participant]’ in the enterprise and has acted purposefully in directing those activities.”) (citations omitted).
[2]
With respect to Goldstar, the case law applying the
Illinois constitution provides less clear guidance, but tends to point in the
other direction, at least with respect to plaintiffs Arnold and Sorbo.FN2 Neither of the two cases cited by defendants on the personal jurisdiction
question applies the
FN2. Dorsey, who has
2. Federal Due Process Clause
*3 The existence of
personal jurisdiction over Goldstar therefore turns on the strictures imposed
by the federal due process clause. Due process requires that a nonresident
defendant have “minimum contacts with [the forum state] such that the maintenance
of the suit does not offend traditional notions of fair play and substantial
justice.” Int'l
Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (internal quotation marks omitted). The touchstone is
foreseeablility, whether “the defendant's conduct and connection with the
Jurisdiction is proper,
however, where the contacts proximately result from actions by the defendant
himself that create a “substantial connection” with the
Personal jurisdiction
may be either “general” or “specific.” Since plaintiffs here do not claim that
Goldstar had “continuous and systematic general business contacts” with
Illinois,FN3 each plaintiff must show that his or her claim arises out of or is related to
Goldstar's contacts with Illinois, Helicopteros Nacionales
de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984), and
that those contacts were not “random,” “fortuitous,” or “attenuated.” Burger King, 471 U.S. at 475. Each plaintiff
has his or her own claims against Goldstar. The personal jurisdiction analysis
therefore must be plaintiff-specific. Cf. Phillips Exeter Academy
v. Howard Phillips Fund, Inc., 196 F.3d 284, 289 (1st Cir.1999) (“Questions of specific
jurisdiction are always tied to the particular claims asserted.”). But since
the three claims asserted by any particular plaintiff rest on a common set of
operative facts, there is no need to examine the three claims separately.
FN3. Although plaintiffs point to Goldstar's maintenance of an interactive website, they do not assert that Goldstar actually did business through the website with anyone other than plaintiffs.
a. Dorsey
*4 [3]
Plaintiffs fail to
establish sufficient contacts between Goldstar and Illinois with respect to
plaintiff Dorsey. The complaint alleges that Dorsey is a resident of
b. Sorbo
[4]
The plaintiff with the
next strongest case for personal jurisdiction is Sorbo. Sorbo alleges that she
is an
On the other hand,
O'Toole avers that the company has no offices in
*5 O'Toole does not dispute
the existence or the content of the alleged pre-agreement conversation between
Sorbo and Dudley and does not suggest that Sorbo has ever left
Goldstar could
reasonably anticipate being haled into an
c.
[5]
Plaintiff Jon Arnold's factual allegations are more detailed
than those of the other plaintiffs. He is an
*6 Goldstar's alleged contacts
with
FN4. Although Goldstar objects to the printed web pages attached by plaintiffs to their
response brief, Goldstar does not dispute
Goldstar does not
expressly argue, let alone put forward a compelling case, that subjecting it to
the personal jurisdiction of a court in
B. Subject Matter Jurisdiction
[6]
Defendants argue that this court lacks subject matter
jurisdiction. Plaintiffs' only federal cause of action arises under the CROA,
which does not apply to non-profit organizations. 15 U.S.C. § 1679a(3)(B)(i).
O'Toole avers that Gibson Trust, Inc., Goldstar's successor-in-interest, is a
non-profit corporation. As plaintiffs observe in response, however, their
contracts were with Goldstar, which was not a non-profit organization.
Plaintiffs also assert that they were not informed about the transfer of their
accounts to Gibson Trust until well after the alleged wrongdoing took place. In
their reply brief, defendants do not dispute any of these assertions. Obtaining
non-profit status after the fact cannot protect an entity from liability for
its previous misdeeds. This court therefore has subject matter jurisdiction.FN5
FN5. After quoting a choice-of-law provision in the contracts, defendants assert in
a single sentence that “[t]he pendant state law claims fail because
C. Arbitration Clause
*7 Defendants, citing § 4 of the Federal Arbitration Act (“FAA”), 9
U.S.C. § 1 et seq., ask
this court for an order compelling “binding arbitration in accordance with the
terms of the agreements at issue” (Mem. at 4.) Defendants assert that each of
plaintiffs' contracts included the following provision:
Any dispute between us
that cannot be amicably resolved; [sic] as to all claims or controversies
arising out of this Agreement, shall be settled solely and exclusively by
binding arbitration in
(
1. Order or Stay?
[7]
Having established the
existence of arbitration agreements providing for arbitration in Florida, a
threshold question (mysteriously ignored by the parties) becomes whether this
court has the power to grant defendants' request by entering an order
compelling arbitration “in accordance with the terms of the agreements at
issue.” (Mem. at 4.) It does not. Where an arbitration agreement contains a
forum selection clause and the parties have not waived reliance on that clause,
only a court in the selected forum can issue a § 4 order compelling arbitration. Snyder
v. Smith, 736 F.2d 409, 418-20 & n. 8 (7th Cir.1984). Defendants quote the forum selection clause and seek an order
compelling arbitration in accordance with the agreement, so there is no waiver.
If anyone has waived the issue, it is plaintiffs; they have not requested, even
in the alternative, that arbitration should take place in the Northern District
of Illinois.
The question then is how
to respond to defendants' request for relief that is outside of the power of
this court to grant. At first blush, it is tempting simply to deny defendants'
motion for this reason.FN6 If plaintiffs had raised the objection instead of briefing the question of
arbitrability, then denying the motion may have been the appropriate course of
action. But plaintiffs argued the merits of the arbitration issue instead and
now the question is fully briefed. Both parties are apparently content to have
this court decide whether arbitration in
FN6. If defendants had initiated this lawsuit seeking an order compelling
arbitration in
2. Illegality
*8 [8]
[9]
Plaintiffs seek to avoid
arbitration on the ground that the underlying contract is illegal. As a matter
of federal law, this argument is a non-starter: the illegality of a contract
containing an arbitration clause does not infect the clause itself. See Prima
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395,
403-04, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967); Sweet
Dreams Unlimited, Inc. v. Dial-A-Mattress Int'l, Ltd., 1 F.3d 639, 642
(7th Cir.1993). This explains why the
only case law plaintiffs muster in support of their contrary position comes
from state courts. Ala.
Catalog Sales v. Harris, 794 So.2d 312, 314 (Ala.2000); FastFunding
The Co., Inc. v. Betts, 758 So.2d 1143, 1144 (Fla.Dist.Ct.App.2000). This court is bound by the Seventh Circuit's interpretation of
federal law and nothing connects the case at bar to
Although the parties
apparently fail to realize it, plaintiffs' reliance on FastFunding is
more intriguing. According to defendants, the contracts provide that all
questions concerning them are to be governed by
The only case this court
has found considering the question under
3. Class Action Prohibition
*9 [10]
Plaintiffs' next
argument is based on the contractual provision prohibiting plaintiffs'
participation in any class action. This prohibition renders the arbitration
clause unenforceable because, according to plaintiffs, it constitutes an
impermissible waiver of a “protection provided by” or a “right of the consumer
under” the CROA. 15
U.S.C. § 1679f(a). Plaintiffs cite no
case law in support of this theory. This court's own research has failed to
reveal any judicial decision directly addressing the question of whether the
CROA renders void an arbitration clause that prohibits class actions.
Nonetheless, it is clear that plaintiffs' argument fails. The burden of showing
that Congress intended to preclude arbitration for a statutory claim rests with
the party who seeks to avoid arbitration. Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26,
111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). “If such an intention exists, it will be discoverable in the
text of the [statute], its legislative history, or an ‘inherent conflict’
between arbitration and the [statute]'s underlying purposes.”
Plaintiffs here rely
solely on the statutory text. As a general matter, the right to bring a class
action in federal court is a procedural right created by Rule 23
of the Federal Rules of Civil Procedure. The only references to class actions in the CROA concern the
calculation of punitive damages. 15
U.S.C. §§ 1679g(a)(2)(B), (b)(4). These provisions do not create a substantive right to bring a
class action, so agreeing in an arbitration clause to forego the class action
mechanism does not amount to a waiver of a protection provided by or statutory
right under the CROA. Cf. Johnson
v. W. Suburban Bank, 225 F.3d 366, 371 (3d Cir.2000) (reaching the same result with respect to a Truth-in-Lending Act
(“TILA”) claim); Lopez v. Plaza Fin. Co., 1996 U.S. Dist. LEXIS 5566,
No. 95-C-7567, 1996 U.S. Dist. LEXIS 5566, at *7 (N.D.Ill. Apr. 25, 1996)
(“Congress has not created a statutory right to bring class actions under [the]
TILA”).
4. Prohibitive Expenses
[11]
Plaintiffs' final argument against arbitration is their
strongest. The United States Supreme Court has recognized that “the existence
of large arbitration costs could preclude a litigant ... from effectively
vindicating her federal statutory rights in the arbitral forum.” Green Tree Fin. Corp.-Ala.
v. Randolph, 531 U.S. 79, 90,
121 S.Ct. 513, 148 L.Ed.2d 373 (2000). “[W]here ... a party seeks to
invalidate an arbitration agreement on the ground that arbitration would be
prohibitively expensive, that party bears the burden of showing the likelihood
of incurring such costs.” Id. at 92. Plaintiffs attempt to meet
this burden. Arbitration, plaintiffs' claim, would proceed under the American
Arbitration Association's Commercial Dispute Resolution Procedures and would
cost in excess of $4000 per plaintiff, not including the costs of renting a
room, traveling to
*10 Defendants make only two points in reply.
First, citing Green Tree, they argue that because the agreements are
silent as to who will bear the costs of arbitration, plaintiffs have failed to
show that they will be required to do so. Second, defendants assert that
plaintiffs will not need to travel to
The starting point, as
both sides recognize, is Green Tree. There, the Court found that “[t]he
record reveals only the arbitration agreement's silence on the subject [of
whether claimaint would bear the costs], and that fact alone is plainly
insufficient to render it enforceable.”
Even at this relatively
early stage of litigation, plaintiffs here have done much more than merely
point to the absence of contractual language concerning arbitration costs.
Although plaintiffs do not state exactly what portion of the $4000 estimate
(unchallenged by defendants) they are likely to bear, the figure is easily
calculable. Plaintiffs state that the filing fee will be $750 each, as compared
with the single $150 fee for filing in federal court. This initial fee
apparently will be born entirely by plaintiffs. Defendants do not object to
plaintiffs' reliance on either a two-days-per-plaintiff hearing duration or a
$1800-per-day arbitrator's fee, so the court accepts as an accurate estimate
$3600 per plaintiff in arbitrator's fees. According to a recent case cited by
plaintiffs, “[t]he AAA's Commercial Rules provide that the arbitrator's fees ...,
travel expenses, rental of a hearing room, and other costs are borne equally by
the parties, absent some agreement between the parties ... or a different
division made at the discretion of the arbitrator.” Phillips v. Assocs.
Home Equity Servs., 179
F.Supp.2d 840, 846 (N.D.Ill.2001). Hence, even excluding one half of
travel expenses (or video conferencing costs) and rental fees, it is
uncontested that arbitration presumptively will cost each plaintiff $2550 (the
$750 filing fee plus half of the $3600 arbitrator's fee). This is seventeen
times the cost of proceeding in district court. Although one might have
preferred affidavits from plaintiffs stating that this amount was prohibitive,
defendants do not take issue with the view that individuals, like plaintiffs,
with debt problems are unable to afford such costs. Cf. Giordano v. Pep
Boys-Manny, Moe & Jack, Inc., No. 99-1281, 2001 U.S. Dist. LEXIS 5433,
at *24 (E.D.Pa. Mar. 29, 2001) (“[N]othing in Green Tree requires courts
to undertake detailed analyses of the household budgets of low-level employees
to conclude that arbitration costs in the thousands of dollars deter the
vindication of employees' claims in arbitral fora.”). Unlike Green Tree, this case squarely presents the question of whether a party resisting
arbitration has made an adequate showing of prohibitive expenses. Although
plaintiffs' showing on this point is less than overwhelming, this court
believes that it suffices to shift the burden to defendants, who offer in reply
only Green Tree and a vague promise of cost-saving technology.
III. Conclusion
*11 This court has subject matter jurisdiction.
Because personal jurisdiction over the Law Offices of Dashia Trowers is
lacking, however, the claims against that entity (and the putative defendant
class represented thereby) are dismissed. So too Dorsey's claims against
Goldstar are dismissed for lack of personal jurisdiction. On the other hand,
this court finds that Arnold and Sorbo have made out prima facie cases of
personal jurisdiction with respect to Goldstar, so the court denies defendants'
motion to dismiss the claims of those two plaintiffs against Goldstar. Finally,
the court construes defendants' motion to compel arbitration as a motion to
stay proceedings pending arbitration and denies the motion because plaintiffs
have shown a genuine likelihood that they would incur prohibitive costs in
arbitration.
N.D.Ill.,2002.
Not Reported in F.Supp.2d, 2002 WL 1941546 (N.D.Ill.)
Cannon v. William
Chevrolet/Geo, Inc.
341 Ill.App.3d
674, 794 N.E.2d 843
Ill.App. 1
Dist.,2003.
June 26, 2003
(Approx. 14 pages)
341 Ill.App.3d 674, 794 N.E.2d 843, 276 Ill.Dec. 593, 2003-2 Trade
Cases P 74,085
Appellate
Court of
First
District, Fourth Division.
Kattrina CANNON,
Plaintiff-Appellee and Cross-Appellant,
v.
WILLIAM CHEVROLET/GEO, INC., and Firstar Bank
Used
car purchaser filed lawsuit against car dealership and bank which financed her
car purchase for, among other causes, violations of Magnuson-Moss Warranty
Federal Trade Commission Improvement Act (Magnuson-Moss Act) and Credit
Services Organizations Act, alleging dealership failed to inform her that the
vehicle had been in an accident, and raising disclosure issues related to
retail installment contract assigned to bank. The Circuit Court,
Affirmed in part, reversed in part and remanded with directions.
[1] KeyCite Notes
30 Appeal and
Error
30VII Transfer
of Cause
30VII(D) Writ
of Error, Citation, or Notice
30k428 Filing
Notice and Proof of Service
30k428(2) k.
Time for Filing. Most Cited Cases
Vehicle purchaser's petition, as prevailing party in lawsuit
against dealership and bank, for attorney fees pursuant to Magnuson-Moss
Warranty Federal Trade Commission Improvement Act, was not collateral to
underlying action and, thus, notice of appeal filed by dealership and bank
within 30 days of resolution of attorney fees claim was timely, although
purchaser argued that petition for attorney fees was not posttrial motion such
as to prevent order disposing of main claims from being appealable; trial court
retained jurisdiction to hear claim for fees as part of the judgment under said
act. Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, §
110(d)(2), 15 U.S.C.A. § 2310(d)(2); Sup.Ct.Rules, Rule 304(a).
[2] KeyCite Notes
30 Appeal and
Error
30X Record
30X(J) Defects,
Objections, Amendments, and Corrections
30k641 k.
Defects in Authentication or Certificate. Most Cited Cases
Appellate court cannot consider an unofficial copy of a portion of
the record. Sup.Ct.Rules, Rule 324.
[3] KeyCite Notes
30 Appeal and
Error
30X Record
30X(A) Matters
to Be Shown
30k497 Grounds
of Review
30k497(1) k. In
General. Most Cited Cases
The appellant has the burden of presenting a sufficiently complete
record of the proceedings at trial to support a claim of error.
[4] KeyCite Notes
30 Appeal and
Error
30XVI Review
30XVI(G) Presumptions
30k906 Facts or
Evidence Not Shown by Record
30k907 In
General
30k907(1) k. In
General. Most Cited Cases
In the absence of sufficiently complete record of the proceedings
at trial, the reviewing court will presume that the order entered by the trial
court was in conformity with the law and had a sufficient factual basis.
[5] KeyCite Notes
307A Pretrial
Procedure
307AI In
General
307Ak3 k.
Motions in Limine; Preclusion of Evidence, Argument, or Reference. Most Cited Cases
Car dealer's and bank's motions in limine seeking to dismiss car
purchaser's Magnuson-Moss Warranty Federal Trade Commission Improvement Act
claims of breach of implied warranty of merchantability and revocation of
acceptance and recision were not proper vehicle for the relief sought, where,
with regard to motion in limine on issue of recision, dealer and bank sought
ruling on election of remedies, rather than a ruling on evidentiary matter, and
another motion sought to bar purchaser from mentioning that she was refused any
repairs, also a dispositive, rather than evidentiary, matter.
[6] KeyCite Notes
307A Pretrial
Procedure
307AI In
General
307Ak3 k.
Motions in Limine; Preclusion of Evidence, Argument, or Reference. Most Cited Cases
Motions in limine are not designed to obtain rulings on
dispositive matters but, rather, are designed to obtain rulings on evidentiary
matters outside the presence of the jury.
[7] KeyCite Notes
307A Pretrial
Procedure
307AI In
General
307Ak3 k.
Motions in Limine; Preclusion of Evidence, Argument, or Reference. Most Cited Cases
It is improper to file a dispositive motion seeking the dismissal
of a claim as a motion in limine where it forecloses the opportunity of the
opposing party to adequately respond to the motion.
[8] KeyCite Notes
30 Appeal and
Error
30V Presentation and Reservation in Lower Court of Grounds of Review
30V(B) Objections and Motions, and Rulings Thereon
30k214 Instructions
30k215 Objections in General
30k215(1) k.
Necessity of Objection in General. Most Cited Cases
30 Appeal and
Error KeyCite Notes
30V Presentation and Reservation in Lower Court of Grounds of Review
30V(B) Objections and Motions, and Rulings Thereon
30k242 Necessity of Ruling on Objection or Motion
30k242(5) k.
Reservation of Rulings. Most Cited Cases
30 Appeal and
Error KeyCite Notes
30V Presentation and Reservation in Lower Court of Grounds of Review
30V(D) Motions
for New Trial
30k286 k.
Review of Rulings or Orders Before Trial or Hearing. Most Cited Cases
Car dealership and bank, as defendants in lawsuit brought by used
car purchaser, waived on appeal claim that trial court erred in denying their
motions in limine seeking to dismiss purchaser's Magnuson-Moss Warranty Federal
Trade Commission Improvement Act claims on basis of alleged failure by
purchaser to give notice and opportunity to cure, where, after court reserved
ruling on motions, defendants never sought a ruling, court denied their motions
for directed verdict on issue of notice, they did not object to jury
instructions on issue of notice, and they did not file posttrial motions.
Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, § 110(e), 15 U.S.C.A. § 2310(e).
[9] KeyCite Notes
307A Pretrial
Procedure
307AI In
General
307Ak3 k.
Motions in Limine; Preclusion of Evidence, Argument, or Reference. Most Cited Cases
When a motion in limine is made, the trial judge has broad
discretion to grant or deny the motion or choose not to entertain the motion at
all.
[10] KeyCite Notes
92B Consumer
Credit
92BI In General
92Bk3 License
and Regulation in General
92Bk4 k.
Particular Businesses or Transactions. Most Cited Cases
Car dealership's failure to inform car purchaser that it had
obtained financing at lower interest rate than rate disclosed in retail
installment contract was not a violation of Credit Services Organizations Act,
where dealership did not receive valuable consideration specifically for credit
services performed in procuring financing; without evidence of such
consideration, financing transaction was not regulated under act and dealership
could not be considered a credit services organization. S.H.A. 815 ILCS 605/1 et seq.
[11] KeyCite Notes
92B Consumer
Credit
92BI In General
92Bk3 License
and Regulation in General
92Bk4 k.
Particular Businesses or Transactions. Most Cited Cases
The Credit Services Organizations Act is not intended to regulate
retailers primarily engaged in the business of selling goods and services to
their customers; goods and services provided by retailers are not generally
services aimed at improving the consumer's credit or obtaining an extension of
credit for the consumer, otherwise unattainable because of the consumer's poor
credit history or rating. S.H.A. 815 ILCS 605/1 et seq.
[12] KeyCite Notes
92B Consumer
Credit
92BI In General
92Bk3 License
and Regulation in General
92Bk4 k.
Particular Businesses or Transactions. Most Cited Cases
Financing services offered by car dealership in connection with
purchase of vehicle from dealership did not fall within the purview of Credit
Services Organizations Act; dealership was primarily in the business of selling
and leasing cars, not primarily in the business of obtaining extensions of
credit otherwise unattainable because of a consumer's poor credit history or
rating, and, accordingly, legislature did not intend to include retailers, such
as car dealerships, within the purview of act. S.H.A. 815 ILCS 605/2.
[13] KeyCite Notes
30 Appeal and
Error
30X Record
30X(J) Defects,
Objections, Amendments, and Corrections
30k635 Effect
of Omissions
30k635(1) k. In
General. Most Cited Cases
Car dealership and bank, as defendants in lawsuit brought by used
car purchaser for, among other causes, violations of Magnuson-Moss Warranty
Federal Trade Commission Improvement Act (Magnuson-Moss Act) and Credit
Services Organizations Act, waived on appeal claims regarding reasonableness of
attorney fees awarded by trial court to purchaser under Magnuson-Moss Act,
where defendants failed to make transcript of hearing on attorney fees part of
record on appeal. Magnuson-Moss Warranty-Federal Trade Commission Improvement
Act, § 110(d)(2), 15 U.S.C.A. § 2310(d)(2).
[14] KeyCite Notes
102 Costs
102VIII Attorney Fees
102k194.10 k.
In General. Most Cited Cases
115 Damages KeyCite Notes
115III Grounds
and Subjects of Compensatory Damages
115III(A) Direct or Remote, Contingent, or Prospective Consequences or Losses
115III(A)1 In
General
115k15 k.
Nature and Theory of Compensation. Most Cited Cases
Damages are designed to compensate a plaintiff for his or her loss
and injury, whereas the purpose of awarding attorney fees is to provide
potential litigants with access to legal assistance so that they might pursue a
remedy for their injuries or loss.
[15] KeyCite Notes
29T Antitrust
and Trade Regulation
29TIII Statutory Unfair Trade Practices and Consumer Protection
29TIII(E) Enforcement and Remedies
29TIII(E)7 Relief
29Tk395 Costs
29Tk397 k.
Attorney Fees. Most Cited Cases
(Formerly 92Hk42 Consumer Protection)
Award of attorney fees under Magnuson-Moss Warranty Federal Trade
Commission Improvement Act does not depend upon a plaintiff's recovery of
substantial monetary damages nor does it need to be proportionate to an award
of money damages. Magnuson-Moss Warranty-Federal Trade Commission Improvement
Act, § 110(d)(2), 15 U.S.C.A. § 2310(d)(2).
[16] KeyCite Notes
102 Costs
102VIII Attorney Fees
102k194.18 k.
Items and Amount; Hours; Rate.