Commercial Banking, Collections, and Bankruptcy

Dist. Ct. erred in denying defendant-bankruptcy debtor’s request to exempt 85 percent of $24,000 in unused vacation time from his creditor’s claims, where Dist. Ct. found that unpaid wages are not exempt in bankruptcy. Illinois law permits creditors to reach 15 percent of unpaid wages, but forbids debt collection from other 85 percent of unpaid wages, and 11 USC section 522(b)(2) and (3)(A) apply state-law exemption rules to bankruptcy proceedings. Accordingly, because 85 percent of unpaid wages are exempt from creditors’ claims in Illinois, and because vacation pay is form of wages, Dist. Ct.’s decision to not exempt 85 percent of debtor’s unpaid vacation pay must be reversed.

Dist. Ct. did not err in granting defendant’s motion to dismiss plaintiff-customer’s class action, alleging that defendant violated Illinois Consumer Fraud and Deceptive Practices (ICFDPA), Act by selling plaintiff half-empty box of chocolates, where plaintiff asserted that defendant’s box of chocolates contained needless empty space that misled consumers. While plaintiff alleged that “slack-fill” or empty space in defendant’s otherwise opaque box was both deceptive and unfair, plaintiff failed to allege that she incurred any actual damages, since she failed to claim either that candy contained in defendant’s boxes was defective or that she could have acquired said candy at better price. Also, plaintiff could not pursue unlawful enrichment claim where her ICFDPA failed, since, under Illinois law, there is no stand-alone claim for unjust enrichment.

Record failed to contain sufficient evidence to support jury’s $3 million punitive damages award in claim under Ill. Consumer Fraud and Deceptive Practices Act, alleging that defendant made several attempts to collect on debt that had been discharged in plaintiff’s Chapter 13 bankruptcy petition. Record showed that: (1) defendant sent plaintiff several notices that made false claims that plaintiff owed defendant money and threatened plaintiff with foreclosure of her home; and (2) when plaintiff challenged defendant’s claims, defendant failed to explain why it believed that plaintiff owed it money. While defendant asserted that any punitive damages award was improper, since any errors were made by single employee, record showed that defendant essentially ratified actions of said employee, where it continued to defend actions of said employee through its course of litigation, and where no one at defendant took any steps to investigate how employee’s erroneous actions occurred or how they could have been prevented. However, $3 million punitive damages figure set by jury was excessive, and Ct. reduced said figure to $582,000, which constituted 1 to 1 ratio with compensatory damages award set by jury.

Dist Ct. and Bankruptcy Ct. erred in treating fines that debtors incurred in either illegally parking or running red lights after Bankruptcy Ct. had confirmed debtors’ Chapter 13 payment plans as not administrative expenses that could be paid from debtors’ bankruptcy estate, where said courts believed that paying said fines did not promote debtors’ interests. Moreover, effect of said courts’ orders meant that City of Chicago could not seize, tow or immobilize debtors’ cars in order to collect on said fines due to automatic stay of 11 USC section 362. However, Ct. of Appeals found that Bankruptcy Code could not be read to enlist judiciary’s aid in permitting debtors to violate law. As such, Ct. found that said fines should be treated as administrative costs that must be paid promptly and in full.

Dist. Ct. erred in granting defendant-debt collector’s motion to dismiss instant Fair Debt Collection Practices Act (FDCPA) action, alleging that defendant’s dunning letter that told plaintiff-debtor that debtor could satisfy debt by paying lesser amount than what was owed, and that creditor “may file 1099C form” with IRS because of the lesser payment was misleading under FDCPA. IRS requires creditor to file 1099C form if it has forgiven $600 or more in principal, and amounts stated in instant letter indicated that creditor was willing to forgive less than $600 if plaintiff paid requested amount. As such, plaintiff could plausibly allege that it was misleading to unsophisticated debtor to state that creditor may file 1099C form where creditor never would file such a form with IRS. Moreover, defendant’s reference to 1099C form might instill angst to debtor to extent that said reference pertained to threat to involve IRS with collection of instant debt, and that said threat was designed to intimidate debtor into paying debt.

Bankruptcy Ct. erred in finding under Illinois’s version of Article 9 of U.C.C. that creditor’s financing statement failed to perfect security interest since it failed to contain separate and additional description of debtor’s collateral that was subject to said security interest. Record showed that debtor obtained commercial loan from creditor, and that parties executed security agreement that listed debtor’s asserts as collateral. Creditor thereafter filed financing statement with Ill. Secretary of State that purported to cover “all collateral” described in parties’ security agreement. While trustee argued that creditor’s security interest was not properly perfected because its financing statement did not independently describe underlying collateral, Ct. of Appeals found that Illinois’s version of Article 9 of U.C.C. allows party to “indicate” collateral in financing statement by pointing to or directing attention to description of that collateral in parties’ security agreement. As such, instant financing statement was sufficient to perfect creditor’s security interest in debtor’s assets, where security agreement contained detailed list of collateral, and where creditor may incorporate by reference its security agreement in financing statement under section 9-108.

Dist. Ct. erred in granting defendant’s motion for summary judgment in plaintiff’s action alleging that defendant breached contract requiring plaintiff to supply certain goods by failing to timely pay for goods that had been delivered to defendant. Record showed that plaintiff halted delivery of goods after defendant owed approximately $185,000 to plaintiff, and Dist. Ct. found that plaintiff had breached contract first by failing to timely ship goods to defendant under circumstances where contract called for prompt shipment of goods, while contract failed to contain provision requiring prompt payment for said goods. Ct. of Appeals, though, found that defendant’s summary judgment motion should not have been granted, since there was material question as to whether defendant's delay in payment to plaintiff was reasonable. Ct. also noted that there was issue regarding when defendant informed plaintiff that it would not be retaining portion of its business that required plaintiff to supply certain goods.

Record contained sufficient evidence to support Dist. Ct.’s entry of permanent injunction against defendant in action under section 13(b) of Federal Trade Commission Act, alleging that defendant’s websites and referral system that automatically enrolled customers in unspecified $29.94 monthly membership in defendant’s credit-monitoring service without their prior knowledge violated Restore Online Shopper Confidence Act and other consumer protection statutes. Ct. rejected defendants’ argument that permanent injunction violated 8^th Amendment’s Excessive Fine Clause, since instant injunction was not “fine.” However, Dist. Ct. erred in imposing $5 million restitution award, since: (1) section 13(b) authorizes only restraining orders and injunctions; and (2) section 13(b)’s grant of authority does not implicitly authorize restitution awards. As such, Ct. overruled its prior decision in Amy Travels, 875 F.2d 564, that allowed restitution awards in section 13(b) actions. (Dissent filed from denial of rehearing en banc.)