District Court (Ill.) Says Debt Collector Principal Not Shielded by Corporate Fiction for Individual Acts

In Byrge v. R. Elliott Halsey & Halsey, No. 18 C 3267, 2019 U.S. Dist. LEXIS 98478 (N.D. Ill. June 12, 2019), Judge Korcoran declined to dismiss an FDCPA claim filed against the principal of a debt collection agency.

The Defendants next argue that Halsey should be dismissed as a defendant because “he at all times operated as a professional corporation,” and the Plaintiffs have not pled sufficient facts to pierce the corporate veil. However, this proposition confuses the issue. The relevant inquiry is not whether the Court should pierce the corporate veil, but whether Halsey was personally involved in the relevant actions so as to be considered a “debt collector” under the FDCPA. See Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1059 (7th Cir. 2000) (noting that individuals who meet the statutory definition of “debt collector” can be held personally liable under the FDCPA). The Seventh Circuit has held that “[i]t is a common misunderstanding that the principle of limited liability protects the shareholders and officers of a corporation for liability for their own wrongful acts. It does not. It protects them from derivative liability, that is, from being called to account for the wrongs of the corporation.” Hoagland ex rel. Midwest Transit, Inc. v. Sandberg, Phoenix & von Gontard, P.C., 385 F.3d 737, 742 (7th Cir. 2004) (quoting Spartech Corp. v. Opper, 890 F.2d 949, 953 (7th Cir.1989)) (emphasis in original). Indeed, “[y]ou don’t buy immunity from suits for your torts by being a member of a business corporation or a member of a professional corporation.” Id. at 743. Rather, if an individual personally committed the FDCPA violation, he may be sued for his actions. The Defendants contend that the FDCPA does not contemplate this theory of personal liability, pointing to Pettit and White to bolster their argument. See Pettit, 211 F.3d at 1059 (“Because…individuals do not become ‘debt collectors’ simply by working for or owning stock in debt collection companies, we held that the Act does not contemplate personal liability for shareholders or employees…who act on behalf of those companies, except perhaps in limited instances where the corporate veil is pierced.”); See also White v. Goodman, 200 F.3d 1016, 1019 (7th Cir. 2000) (“The [FDCPA] is not aimed at the shareholders of debt collectors operating in the corporate form unless some basis is shown for piercing the corporate veil, …or at companies that perform ministerial duties for debt collectors, such as stuffing and printing the debt collector’s letters.”) (internal citations omitted). However, those cases do not undermine the general principle that an individual working for a debt collection company can be held liable for their personal FDCPA violations. They merely condemn extreme applications of the FDCPA. See White, 200 F.3d at 1019 (criticizing the suit of a shareholder and envelope-stuffer with no personal wrongdoing under the FDCPA); See also Pettit, 211 F.3d at 1059 (rejecting the argument that a debt collection company’s largest shareholder could be sued absent personal involvement as a “debt collector”). Given that the amended complaint alleges that Halsey is a “debt collector” under the FDCPA, personally drafted the letters that allegedly violated the FDCPA, and personally signed and sent those letters, the Court finds that the Plaintiffs have sufficiently alleged Halsey’s individual liability under the FDCPA. Accordingly, the Court denies the Defendants’ motion to dismiss Halsey as a defendant.