Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Ill.: Claims against bail and bond service provider narrowed, (Jun 1, 2015)

By Michael Menzhuber, J.D., LL.M.

A motion to dismiss claims made against a payment services company, which provided bail and bond services to certain county agencies, was granted in part and dismissed in part by the federal district court in Chicago, Illinois. The court granted the motion to dismiss count II of the complaint (violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), count III (common law claim of unjust enrichment); and count V (conversion). The court denied the motion to dismiss count I (violation of the ICFA) and count IV (fraud) (Miner v. Government Payment Service, Inc., May 29, 2015, Dow, R.).

Government Payment Service, Inc. (GPS), d/b/a Gov Pay Net, provided payment processing services when individuals made bail-related payments, using credit or debit cards, to the Cook County circuit court. It also charged these individuals a fee for these payments which was characterized as a merchant fee.

Michael Miner (Miner) used his credit card to pay a bail deposit for two traffic citations. When the government voluntarily dismissed the citations, the court directed that Miner receive a full refund of the amount of bail that he paid. However, GPS did not refund or reimburse Miner for the 8 percent additional charge that it made for bail and bond services.

Miner alleged that GPS’s charge for bail and bond services was an unfair business practice and deceptive business practice under ICFA, 815 ILCS 505/1 et seq. (count I and II). He also alleged common low claims of unjust enrichment (count III), fraud (count IV), and conversion (V). Miner brought these claims on behalf of himself and a class of similarly situated Illinois citizens.

GPS filed a motion to dismiss all claims for lack of Article III standing; the ICFA and common law fraud claims under Federal Rules of Civil Procedure 12(b)(6) and 9(b), and Miner’s unjust enrichment claim.

Article III Standing. Article III standing requires that: (1) the plaintiff must have suffered an "injury-in-fact"; (2) the “injury-in-fact” must be traceable to the defendant’s conduct; and (3) the “injury-in-fact” could likely be redressed by a favorable court decision. GPS argued that there was no “injury-in-fact” traceable to its conduct. The court disagreed. By alleging that GPS charged his a fee, Miner pled a sufficiently concrete and actual monetary injury. GPS presented arguments in response but, rather than addressing Miner’s pleading, they addressed issues requiring a merit analysis or whether GPS was a proper defendant.

The court determined that the “injury-in-fact” was traceable to GPS because GPS charged Miner the fee. Whether the fees were charged pursuant to GPS’ contract with the Cook County court was, according the court, immaterial to whether the fee was fairly traceable to GPS.

Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) and Fraud Claims. GPS argued that Miner’s ICFA and fraud claims (counts I, II, and IV) under Rule 12(b)(6) should be dismissed because: (1) GPS provides payment processing services, not bail and bond services; and (2) even if it did provide bail and bond services, these services were not prohibited under 725 ILCS 5/110-7, 110-8 and 110-15. The court determined that GPS’s first argument was premature because, on a motion to dismiss under Rule 12(b)(6), it takes as true Miner’s factual allegations, including the allegation that GPS provided bail and bond services.

The court addressed GPS’ second argument by first considering Miner’s claims of deceptive business practice in violation of the ICFA (count I) and fraud (count IV). After finding that the services provided by GPS were not prescribed by statute, the court determined that Miner failed to plausibly allege that GPS charged him for illegal services. Consequently, the court dismissed these counts under Rule 12(b)(6).

The court next addressed Miner’s two theories in support of his claim of unfair business practice under the ICFA. The court dismissed Miner’s first theory, that GPS deceived Minor by charging him for an illegal service, because the service provided by GPS was not prescribed by statute.

The court then considered Miner’s second theory, that GPS’ charging Miner for services offended Illinois’ public policy against commercial bail and bond-related services, in the context of interpretations of the Federal Trade Commission (FTC) and the federal courts relating to Sec. 5(a) of the Federal Trade Commission Act, which similarly prohibits unfair or deceptive acts of practices in or affect commerce. In doing so, it noted a FTC unfairness test which stated that unjustified consumer injury would be the most important fact. To be “unfair”, an “injury” would have to be: (1) substantial; (2) must not be outweighed by any countervailing benefits to consumers or competition that the practice produces; and (3) an injury that consumers themselves count not reasonable have avoided. The court further noted that, under Illinois Law, all three criteria do not need to be satisfied to support a finding of unfairness.

Miner plausibly alleged that GPS’s conduct could offend the public policy of 725 ILCS 5/110-7, 110-8, and 110-15 because these statutes have two main public policy objectives: (1) to reduce the cost of liberty to arrested persons awaiting trial; and (2) regain from professional bondsmen the control of bail releases and restore such control to the courts. Miner’s charge implicated the first policy because the court’s retention charge was only 1 percent while GPS charged 8 percent for its fee.

The court also determined that the fee GPS charged could be so oppressive as to leave the consumer with little alternative except to submit to it because the only options an individual, such as Miner, had was to either pay the fee or stay in jail. Finally, the court determined that the fee charged by GPS had the potential to cause substantial injury, particularly in the case of large bails.

The court next addressed GPS’ motion to dismiss count II under Rule (9b) but denied doing so because Rule ((b) did not apply. The court noted that, because neither fraud nor mistake is an element of unfair conduct under Illinois’ Consumer Fraud Act, a cause of action for unfair practices was not required to meet the particularity requirement of Rule 8(a).

GPS argued that liability under counts I, II, or IV would be unconstitutional because there was no statutory definition of “bail bondsman” or “bail and bond-related service.” As such, GPS did not have a reasonable opportunity to know specifically what conduct was prohibited. Therefore, according to GPS, the protections of the Due Process Clause prevented the court from finding in Miner’s favor. The court considered GPS’s “void-for-vagueness” challenge as it applied to whether the IFCA, applied in count I (the only remaining count of the three counts). The court determined that it did not need to decide the issue at this time because whether a statute is void-for-vagueness requires application to the particular facts at issue.

Unjust Enrichment. Lastly, GPS argued that the unjust enrichment claim (count III) should be dismissed under Rule 12(b)(6) because, under Illinois law, unjust enrichment is not an independent cause of action. The court disagreed because it found that Miner’s did not bring a free-standing claim of unjust enrichment but also stated an IFCA claim.

The case is No. 1:14-cv-07474

Attorneys: Larry D. Drury (Larry D. Drury, Ltd.) for Michael J. Miner. Denean K. Sturino (O'Hagan LLC) for Government Payment Service, Inc.

Companies: Government Payment Service, Inc.

Cases: StateUnfairTradePractices IllinoisNews