Todd v. Franklin Collection Service, Inc. , 694 F.3d 849 ( 2012 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 11-3818
M ICHAEL T ODD , as assignee of V ICKI F LETCHER,
Plaintiff-Appellant,
v.
F RANKLIN C OLLECTION S ERVICE, INCORPORATED ,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:11-cv-06128—Samuel Der-Yeghiayan, Judge.
A RGUED A UGUST 8, 2012—D ECIDED S EPTEMBER 5, 2012
Before B AUER, W OOD and S YKES, Circuit Judges.
P ER C URIAM. The issue in this appeal is whether the
district court properly dismissed the claims purportedly
assigned to Michael Todd after determining that he
was engaged in the unauthorized practice of law.
Todd attempted to purchase claims against Franklin Col-
lection Service, a collection agency, from Vicki Fletcher—
who had no relationship to Todd before she assigned
2 No. 11-3818
her claims to him. He then sued Franklin for violations
of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692,
and for common law negligence. The district court dis-
missed the complaint after ruling that the assignment
was void because Todd was using it merely to attempt
to practice law without a license. The court also ruled
that Todd failed to state a claim for relief. On appeal
Todd argues only that the assignment was valid and
that he should have been allowed to amend his com-
plaint. Because the district court correctly ruled that the
assignment was void and that Todd did not state
valid claims for relief, we affirm the judgment.
In this suit Todd alleges that Franklin failed to
inform credit bureaus that it no longer owned a debt
from Fletcher and that Fletcher assigned legal claims
against Franklin arising from this neglect to Todd. Ac-
cording to the complaint, Fletcher owed a debt of $414
to AT&T that AT&T asked Franklin to collect. Franklin
reported the debt to the credit reporting agencies
TransUnion and Equifax in September 2010. A few
months later, AT&T recalled the debt from Franklin, but
Franklin failed to report this to the credit bureaus. Todd
alleged that Franklin violated state law by negligently
failing to comply with the reporting requirements of
the Fair Credit Reporting Act, 15 U.S.C. § 1681s-2(a)(1)(a),
(a)(2). (He did not allege a federal-law claim directly
under this Act.) He also alleged that Franklin had
violated the Fair Debt Collection Practices Act, 15 U.S.C.
§ 1692e, which requires a debt collector to refrain
from using “any false, deceptive, or misleading repre-
sentation or means in connection with the collection of
any debt.”
No. 11-3818 3
Franklin moved to dismiss the complaint on the
grounds that the assignment of claims from Fletcher to
Todd contravened public policy and was void because
Todd appeared to be using the assignment to engage in
the unauthorized practice of law. In support of its argu-
ment that Todd was purchasing claims so that he could
practice law without a license, Franklin attached a
contract in which Fletcher, described as Todd’s “client,”
assigned all her rights, title, and interest in her claims
against Franklin in exchange for some form of consider-
ation (the description of the consideration was redacted).
Franklin also argued that Todd had failed to allege a
violation of the Fair Debt Collection Practices Act
and that the Fair Credit Reporting Act preempts Todd’s
state-law negligence claims. Todd responded that the
assignment was valid and that he was not engaged in
the unauthorized practice of law because he was repre-
senting only himself and pursuing claims that he
now owned. He also argued that his complaint stated
claims for relief and, if the district court disagreed, that
he should be given leave to amend it.
The district court granted Franklin’s motion to dis-
miss. (Although the court relied upon materials submit-
ted outside the pleadings in ruling on the motion, Todd
does not object to this aspect of the case or question
the validity of the documents, so the court’s deviation
from proper practice is not an issue. See Loeb Indus. v.
Sumitomo Corp., 306 F.3d 469, 479-80 (7th Cir. 2002).)
The court first ruled that the assignment of Fletcher’s
claims to Todd violated Illinois public policy because
Todd had been buying claims for the purpose of litigating
4 No. 11-3818
them and using the assignments to practice law without
a license. The court noted that the assignment contract
identified Fletcher as Todd’s “client,” and that there
was no suggestion that Todd had any connection to
Fletcher before paying to litigate her claims. The court
also took judicial notice of “the many other lawsuits
Todd has filed in this district as an assignee of legal
claims.”
The court ruled in the alternative that Todd had failed
to state a claim for relief because his negligence
claims were preempted by the Fair Credit Reporting
Act. Todd also had not stated a claim under the FDCPA,
the court continued, because he had not alleged that
Franklin tried to collect the debt after AT&T recalled
it. Without that assertion, Todd had not alleged that
Franklin used “any false, deceptive or misleading repre-
sentation or means in connection with the collection
of any debt,” 15 U.S.C. § 1692e. The court did not specifi-
cally address Todd’s request to amend his complaint
other than to dismiss all other motions as moot when
it dismissed his complaint.
On appeal, Todd argues that the district court wrongly
found that his agreement to pursue Fletcher’s legal
claims violated Illinois public policy. Todd notes that
the Illinois Survival Act, 755 ILCS 5/27-6, provides
that damage claims survive the death of the victim
and argues that Illinois public policy thus favors assign-
ment of damage claims such as Fletcher’s. Todd main-
tains that he is serving the public interest by pursuing
claims to protect consumers from a debt collector’s
illegal practices. He also maintains that his conduct
No. 11-3818 5
does not amount to the unauthorized practice of law
because the claims were validly assigned to him and he
is thus pursuing only claims that he owns.
The district court correctly ruled that the assignment
was void as against public policy because Todd was
using it to attempt to engage in the unauthorized
practice of law. Illinois public policy forbids the assign-
ment of legal claims to non-attorneys in order to litigate
without a license. See King v. First Capital Fin. Servs. Corp.,
828 N.E.2d 1155, 1166 (Ill. 2005) (discussing People ex rel.
Chicago Bar Ass’n v. Tinkoff, 77 N.E.2d 693 (Ill. 1948), in
which Illinois Supreme Court found that disbarred at-
torney who litigated assigned claims pro se was
engaged in subterfuge” to deceive court about real parties
in interest and practice law without license); Chicago Bar
Ass’n v. Quinlan and Tyson, Inc., 214 N.E.2d 771, 775
(Ill. 1966) (protection of the public requires that only
licensed attorneys provide legal advice for considera-
tion); Lazy ‘L’ Family Pres. Trust v. First State Bank of Prince-
ton, 521 N.E.2d 198, 200-01 (Ill. App. Ct. 1988) (holding
that plaintiff pursuing assigned claims pro se was
engaged in unauthorized practice of law); Biggs v.
Schwalge, 93 N.E.2d 87, 88 (Ill. App. Ct. 1950) (“An assign-
ment cannot be used as a subterfuge to enable plaintiff
to indulge his overwhelming desire to practice law,
without complying with the requirements for admission
to the bar.”). As the district court noted, the evidence
submitted (the validity of which, again, Todd does not
dispute) shows that Todd created a business providing
legal advice and repeatedly agreed to purchase claims
in order to litigate them in state and federal court. It does
6 No. 11-3818
not matter whether these claims would be assignable
under the Illinois Survival Act because “a cause of action
cannot be assigned if such assignment violates public
policy, even if such an action would otherwise survive
the death of the owner.” Kleinwort Benson N. Am., Inc. v.
Quantum Fin. Servs., Inc., 692 N.E.2d 269, 274 (Ill. 1998).
By attempting to litigate Fletcher’s claims through the
guise of an assignment, Todd sought to practice law
without a license, and therefore the assignment vio-
lated public policy.
Todd argues that the district court erred by denying
him leave to amend his complaint to remedy any insuf-
ficiency in his allegations under the FDCPA. He notes
that he asked the court for leave to amend in his
response to Franklin’s motion to dismiss. But the
district court did not abuse its discretion by dismissing
the complaint without allowing Todd to amend it, espe-
cially given that, as Franklin points out, amendment
would be futile after the court found that the assign-
ment of the claims was void. See Indep. Trust Corp. v.
Stewart Info. Servs. Corp., 665 F.3d 930, 943-44 (7th Cir.
2012); Owens v. Hinsley, 635 F.3d 950, 956 (7th Cir. 2011);
Crestview, 383 F.3d at 558.
We note for completeness that the district court also
properly found that even if the assignment was not
void, Todd fails to state a claim for relief. FCRA
explicitly preempts state-law claims alleging violations
of the federal act. 15 U.S.C. § 1681t(b)(1)(F); Purcell v.
Bank of Am., 659 F.3d 622, 623-25 (7th Cir. 2011). Todd
does not attempt to bring a claim directly under the
FCRA, nor could he, because the section of the Act
No. 11-3818 7
Franklin allegedly violated, 15 U.S.C. § 1681s-2, does not
create a private right of action. See Purcell, 659 F.3d at
623. And because Todd never alleged that Franklin at-
tempted to collect the debt after it was recalled, he has
not made out a claim that Franklin made a false, decep-
tive, or misleading representation “in connection with
the collection of a debt” under the FDCPA. 15 U.S.C.
§ 1692e; Wilhelm v. Credico, Inc., 519 F.3d 416, 418 (8th
Cir. 2008); Mattson v. U.S. West Commc’ns, Inc., 967 F.2d
259, 261 (8th Cir. 1992).
Accordingly, we A FFIRM the judgment of the district
court.
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