Johnson v. Pushpin Holdings, LLC
821 F.3d 871
7th Cir.2016Background
- Putative class of ~3,000 guarantors sued in Cook County small-claims courts by Pushpin Holdings (sub-assignee of CIT) to collect on guaranties of leases for credit-card processing machines.
- Leases were labeled business contracts and contained forum-selection clauses requiring disputes be litigated in Cook County under Illinois law; each lease required a personal guaranty.
- Pushpin removed the case under the Class Action Fairness Act; the district court originally remanded for lack of requisite amount in controversy, this court remanded for further fact-finding; on remand the district court found the $5M threshold satisfied but later dismissed the complaint on the merits under Rule 12(b)(6).
- Plaintiffs allege violations of the Illinois Consumer Fraud and Deceptive Business Practices Act and other torts based on (inter alia) forum-shopping to induce default judgments, failure to register as a collection agency, suing for amounts exceeding machine value, statute-of-limitations/laches, forgery, malicious prosecution, and abuse of process.
- Court rejected plaintiffs’ major legal theories: Pushpin was not required to register as a consumer collection agency under the relevant statute at the time; sub-assignee status meant Pushpin did not set lease terms; guaranty actions were within the 10-year limitations period; laches and forgery claims were inadequately pleaded or unsupported.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction under CAFA (amount in controversy) | Class contends amount in controversy is below $5M so removal improper | Pushpin argued CAFA threshold met given judgments and possible punitive damages | Court previously remanded for fact-finding; jurisdiction exists here (insufficient class members are Illinois citizens to defeat CAFA jurisdiction) |
| Enforceability/use of forum-selection clauses | Clauses are unfairly enforced against nonresident, unsophisticated guarantors to induce defaults | Clauses were valid business-to-business terms and enforceable under Carnival precedent | Forum-selection clauses not invalidated; inconvenience alone insufficient to void them |
| Failure to register as a collection agency | Pushpin failed to register and thus violated consumer fraud statute | Statutory registration requirement then applied only to consumer debt collectors; Pushpin handled commercial leases | Registration claim fails; even if required, failure would not invalidate final judgments (citing LVNV) |
| Claims that lease amounts exceeded machine value / deceptive practices | Suits sought amounts much greater than machine value, constituting consumer fraud | Pushpin was a sub-assignee/enforcer and did not set lease price or lease machines | No liability: Pushpin merely enforced assigned contracts, not responsible for initial pricing |
| Statute of limitations / laches | Many suits were stale; laches and shorter limitations for underlying debt bar recovery | Written guaranties have a 10-year limitations period; Pushpin sued within that period; laches not shown | Claims barred by limitations/laches rejected; adjudications timely |
| Forgery and fraud allegations | Several guaranties and leases contained forged signatures | Fraud/forgery allegations were not pleaded with particularity under Rule 9(b); signatures might be authentic | Fraud-based claims dismissed for failure to plead with requisite particularity |
| Abuse of process / malicious prosecution | Suits were improper tactics to induce defaults and punish guarantors | Pushpin followed procedural process in small-claims suits | Court found these tort claims meritless per district court reasoning |
Key Cases Cited
- Johnson v. Pushpin Holdings, LLC, 748 F.3d 769 (7th Cir. 2014) (prior appellate decision remanding for further consideration of amount in controversy)
- LVNV Funding, LLC v. Trice, 32 N.E.3d 553 (Ill. 2015) (failure to register as a collection agency does not invalidate final judgments)
- Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991) (forum-selection clauses in form contracts may be enforceable)
- Armbrister v. Pushpin Holdings, LLC, 896 F.Supp.2d 746 (N.D. Ill. 2012) (discussion of applicable limitations periods)
- Nature Conservancy v. Wilder Corp. of Delaware, 656 F.3d 646 (7th Cir. 2011) (discussion of laches under Illinois law)
- Riley Acquisitions, Inc. v. Drexler, 946 N.E.2d 957 (Ill. App. 2011) (treatment of guarantor obligations after corporate dissolution)