(2) by leaving a copy at the defendant’s usual place of abode, with some

person of the family or a person residing there, of the age of 13 years or

upwards, and informing that person of the contents of the summons,

provided the officer or other person making service shall also send a copy

of the summons in a sealed envelope with postage fully prepaid, addressed

to the defendant at his or her usual place of abode.
735 ILCS 5/2-203(a). In this case, plaintiff served defendants by having a process server
leave a copy of the summons and complaint with a receptionist at LLF. (Def’s. Mem.
Supp. Mot. Dismiss at 1.) Defendant Victor Lawrence was never served personally, a
copy of the summons was never left at his home; a copy of the summons was never sent
to his home. Therefore, in the event plaintiff was attempting to serve Lawrence as an
individual, this attempt failed.

There is however, a question as to whether LLF was properly served. Magistrate
Judge Mason came to the conclusion that service was not proper and it is thal aspect of
the R & R to which plaintiff objects. While the complaint alleges that LLF is a
corporation, defendants contend that it is a sole proprietorship and this contention is
uncontested by the plaintiff. Under Utah law, a sole proprietorship is served in the same
way as a corporation, U.C.A. 1953 § 42-2-11. According to Utah R. Civ, P. 4, service
on a corporation may be effected

by delivering a copy of the summons and the complaint to an officer, a

managing or general agent, or other agent authorized by appointment or

by law to receive service of process and, if the agent is one authorized by

statute to receive service and the statute so requires, by also mailing a

copy of the summons and the complaint to the defendant. Ifno such

officer or agent can be found within the state, and the defendant has, or

advertises or holds itself out as having, an office or place of business

within the state or elsewhere, or does business within the state or

elsewhere, then upon the person in charge of such office or place of

business.

Utah R. Civ. P. 4(d)(1)(E). In Illinois, a corporation may be served by (1) leaving a copy

4



believe that an “interaction” can be unilateral. Plaintiffs declaration states that he filled
out a form and entered into a contract with LLF online through defendants’ website and
that communication went back and forth between plaintiff and LLF over email and the
telephone. (PI's. Decl. 4 2-6.)

Whilc the issue of what type of Internet activity is sufficient (o establish personal
jurisdiction has not been addressed by the Seventh Circuit, there is an emerging standard.
See, e.g., Berthold, 102 F, Supp. 2d at 932; Euromarket, 96 F. Supp. 2d at 837; Int'l Star
Registry of Ill. v. Bowman-Haight Ventures, Inc., No. 98 C 6823, 1999 WL 300285, at *4
(N.D. TIl. May 6, 1999). Courts in this district have adopted a three-part sliding scale
approach to determine what level of website interaction subjects a defendant to personal
jurisdiction. /d. The three categories of Internet activity are (1) those in which the
defendant clearly transacts business in foreign jurisdictions over the Internet; (2) those in
which the defendant has simply posted information on the Internet with a passive site, but
has no further communication with potential customers via the Internet; and (3) those in
which the defendant operates an interactive website that allows the defendant and
potential customers in foreign jurisdictions lo communicate regarding the defendant’s
goods or services. Jd, Using this approach, the likelihood that personal jurisdiction can
be constitutionally exercised is proportionate to the nature and quality of activity that a
defendant conducts over the Internet. /d. This framework allows courts to appropriately
exercise personal jurisdiction over those defendants who fall into the first category by
actively conducting business over the Internet. Jd. However, courts may not exercise
jurisdiction over defendants who fall into the second category of passively providing

information to potential customers. See, e.g., Berthold, 102 F. Supp. 2d at 933;

9



N.E.2d 195, 208 (Ill, 2d 2002). Plaintiff also argues that the service was valid because
the defendant had timely notice of the action, but “a defendant’s actual notice of the
litigation ... is insufficient to satisfy Rule 4’s requirements.” Mid-Continent Wood
Prods., Inc. v. Harris, 936 F.2d 297, 301 (7th Cir. 1991). This Court finds that Mr.
Lawrence’s uncontested declaration fulfills his burden to establish that the receptionist
was not a proper person to receive service. The Seventh Circuit has made it clear that “a
liberal construction of the rules of service of process ‘cannot be utilized as a substitute
for the plain legal requirement as to the manner in which service of process may be
had.’” Mid-Continent, 936 F.2d at 300 (quoting United States v. Mollenhauer Labs.,
Ine., 267 F.2d 260, 262 (7th Cir. 1959)). It is clear that plaintiff has not met the strict
standards for service of process in this instance. Therefore, this Court accepts Magistrate
Judge Mason’s R & R on this issuc.
B. Personal Jurisdiction’

It is the plaintiff’s burden to make a prima facie showing of personal jurisdiction.
See, e.g., Central States v. Reimer Express World Corp., 230 F.3d 934, 939 (7th Cir.
2000); Kohler Co. v. Kohler Int'l, Ltd., 196 F. Supp. 2d 690, 695 (ND. Ill. 2002);
Quantum Color Graphies, LLC y. Fan Ass'n Event Photo GMBH, 185 F. Supp. 2d 897,
902 (N.D. Tll. 2002). In analyzing personal jurisdiction, the Court considers all facts in
the complaint as true unicss refuted by the defendant in an affidavit. Kohler Co. v.

Kohler Int'l, 196 F. Supp. 2d at 695; Jones v. Sabis Educ. Sys., Inc., 52 F. Supp. 2d 868,

‘Although dismissal of the complaint for improper service is a threshold issue, this Court
feels compelled to analyze defendants’ remaining arguments, because they will be at issue if
plaintiff is able to effect proper service in the future, especially in light of the fact that the Court
grants plaintiff an extension of time in which to do so.

6



of the complaint and summons with the corporation’s registered agent or any officer or
agent found anywhere within the state; or (2) in any other manner permitted by law. 735
JLCS 5/2-204, Plaintiff suggests that a receptionist who is in charge of receiving papers
for a corporation is a proper agent for service of process. “Generally, the sheriff's return
is prima facie evidence of service which can be set aside only by clear and satisfactory
evidence.” Island Terrace Apartments v. Keystone Serv. Co., Division of Cole Coin
Operated Laundry Equip., Inc., 341 N.E.2d 41, 43-4 (Ill, App. 1975). However, when a
corporation is the defendant, the sheriff's return is not conclusive as to the fact of agency.
Id. Most likely agency is not within the personal knowledge of the officer and therefore,
it may be disputed by a denial. Id. “Where the agency of the person named on the return
is disputed, the defendant has the burden of proving that the individual served was not a
proper person to receive service.” Jd.

Defendants have explained that Victor Lawrence is the registered agent of LLF.
(Def’s. Mem. Supp. Mot. Dismiss at 1.) Defendants also contend that the receptionist
was not a general or managing agent and was not authorized by law or by appointment to
receive service on behalf of Mr. Lawrence or LLF. (Def"s. Decl. 4.) Plaintiff argues
that case law demonstrates a receptionist is a proper person to receive service. In 4-7
Equipment Co. v. Moody, the Court held that service was proper when the summons was
left with the secretary on duty. 410 N.E.2d 438, 441 (Ill. App. Ct. 1980). However, in
that case, the defendant’s office was also his residence, Id. at 440-1. Additionally, in
Sarkissian v. Chicago Board of Education, the Court held a receptionist was a proper
person to receive service, but in that casc, the evidence established that the Board had
delegated authority to her to accept service through a regular custom or practice. 776

$



Amenability to service of process can be established by showing that the
defendant is subject to this court’s jurisdiction under the Illinois long-arm statute, 735
ILCS 5/2-209. Euromarket, 96 F. Supp. 2d at 834. The long-arm statute provides, inter
alia, that jurisdiction is authorized “on any other basis now or hereafter permitted by the
Illinois Constitution and the Constitution of the United States.” 735 ILCS 5/2-209(c).
Therefore, the inquiry collapses into a due process inquiry - whether bringing defendants
into this court’s jurisdiction would comport with duc process requirements of the fedcral
and Illinois constitutions, Berthold, 102 F. Supp. 2d at 930; Evromarket, 96 F. Supp. 2d
at 834. Both constitutions explain that the court must assess the nature and number of
contacts that defendant has had with the forum state (Illinois). See., e.g., Rollins v.
Ellwood, 565 N.E.2d 1302, 1316 (II. 1990). The court must evaluate whether defendant
has purposefully established minimum contacts with Illinois and whether those contacts
would make personal jurisdiction reasonable and fair under the circumstances. See, ¢.g.,
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476-77 (1985); RAR, Inc, v, Turner
Diesel, Ltd., 107 F.3d 1272, 1277 (7th Cir. 1997); Berthold, 102 F. Supp. 2d at 931.
Specific jurisdiction also requires that the action arise out of the defendants minimum
contacts with the forum state. Berthold, 102 F. Supp. 2d at 931; Euromarket, 96 F. Supp.
2d at 834.

Plaintiff suggests that this Court has personal jurisdiction over defendants
because Lawrence and LLF established minimum contacts with Illinois when they
interacted with plaintiff regarding credit repair services. Defendant argues that the
interaction was actually unilateral activity conducted by plaintiff, and therefore, there
was no “purposeful availment.” (Def’s. Objections R & R at 5.) However, it is hard to

8



Minute Order Form (06/97)

United States District Court, Northern District of Illinois

"Name of Assigned Judge Ronald A. Guzman Sitting Judge ff Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 03 C 987 DATE 8/7/2003
CASE CHRISTOPHER IOSELLO vs. LEXINGTON LAW FIRM, et al
TITLE

{Ln the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.)

MOTION;

DOCKET ENTRY:

rap) Oo Filed motion of [ use listing in “Motion” box above.]

(2) ia} Bricfin support of motion due

(3) oOo Answer brief to motion duc___. Reply to answer briefduc___

(4) oO Ruling/earingon_ set for_— at.

(5) O Status hearing[held/continued to] (set for/re-set for]on__—_sset ffor___ at

(6) o Pretrial conference[held/continued to] [set for/re-set for]on__—_sset fort.
(7) oO Trial[set for/re-set for]on at

(8) ia} [Bench/Jury trial] [Hearing] held/continucd to __at

(9) im} This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) CLocal Rule 41.1 OOFRCP41(a)(1)  FRCP41(a)(2).

do [Other docket entry] This Court adopts Magistrate Judge Mason's R & R. The Court grants defendants’
Rule 12(b)(5) motion to dismiss for improper service [11-2], denies Rule 12(b)(2) motion to dismiss for lack of
personal jurisdiction [11-1], and denics Rule 12(b)(6) motion to dismiss for failure to state a claim {11-3}.
Plaintiff's motion to extend deadline for service is granted and the Court denics without prejudice motion for
leave to make service by alternative means. Plaintiffs motion for certification of class [3-1] is stricken without
prejudice until service of process has been effected. LNTER MEMORANDUM OPINION AND ORDER.

(11) [For further detail see order attached to the original minute order.]

WY | No notices required, advised in open court.

No nolices required.

‘ number of notices
Notices muiled by judge’s staff. AUG 1 2 2003
Notified counsel by telephone, diate docket

Doeketing ta mail notives.
Mail AO 430 form. Lynod Law1sid ‘sn
Yu)

Copy to judge/inagistrate judge,

¢
Uocket

neg WY 21 AY 60

pep es Yd
Dute/lime epcadved in 7
central Clerk's Office crating depwty initia

date mailed notice
courtroom

ca deputy’s
initials 4



performing credit repair services and that Congress did not intend to regulate lawyers
with the CROA. For the reasons set forth below, this Court rejects defendants’
objections and adopts the R & R as to this issue,

15 U.S.C. § 1679 is the CROA. Section a(3)(B) of that Act provides explicit
exceptions to the definition of a “credit repair organization.” Lawyers are not listed in
the list of exemptions and there is no other statutory clause exempting lawyers from the
CROA. Furthermore, 15 U.S.C. § 1679a(3)(A) provides that for the purposes of this
statute, a credit repair organization is

any person who uses any instrumentality of interstate commerce or the

mails to sell, provide, or perform (or represent that such person can or will

sell, provide, or perform) any service, in return for the payment of money

or other valuable consideration, for the express or implied purpose of (i)

improving any consumer’s credit record, credit history, or credit rating; or

(ii) providing advice or assistance to any consumer with regard to any

activity or service described in clause (i).

The fact that the statule names “any person” and does not include lawyers in its list of
exceptions, suggests that there was no intention to protect lawyers from this regulation.
Magistrate Judge Mason’s R & R is accepted as to this issue as well.

Tn sum, the Court adopts Magistrate Judge Mason’s R & R in its entirety. The
Court holds that: (1) the service of process on Victor Lawrence and LLF was improper;
(2) the Court has personal jurisdiction over both defendants; and (3) the CROA applies to
lawyers.

Jn addition, plaintiff has moved for an extension of time in which to effect service
of process which this Court, in its discretion, grants. Plaintiff has also moved for leave to
make service by alternative means, which the Court denies without prejudice, because

plaintiff has failed to make a sufficient showing that defendants have attempted to evade

il



Euromarket, 96 F. Supp. 2d at 838; Int'l Star Registry of Ill, vy, Bowman-Haight Ventures,
Inc., No. 98 C 6823, 1999 WL 300285, at *5. Lastly, courts may exercise jurisdiction
over defendants who fall into the third category by providing an intcractive website
where a user can exchange information with the host computer. Jd.

Applying this framework, defendants’ website is sufficiently interactive to bring
them within the jurisdiction of this Court. Not only do defendants exchange information
with customers over the Internet, but defendants also transact business through the
website. This activity is enough to establish minimum contacts with the forum state, and
this dispute arises out of those contacts. Although defendants assert that this sliding scale
approach is improper and invalid, this Court believes is an effective way to determine
whether Internet activity is sufficient to establish minimum contacts in a specific
jurisdiction analysis. Additionally, this Court sees no reason why its cxercise of
jurisdiction would offend the traditional notions of fair play and substantial justice. See,
eg., Burger King, 471 U.S. at 476-77; RAR, Ine., 107 F.3d at 1277; Berthold, 102 F.
Supp. 2d at 931. Therefore, this Court accepts Magistrate Judge Mason’s R & R as to
this issue.

Cc, Credit Repair Organizations Act

Defendants contend that the CROA does not pertain to lawyers and that a motion
to dismiss should be granted on that ground. Magistrate Judge Mason disagreed with
defendants and suggested that the CROA docs pertain to lawyers - and any other person -
acting in the manner of a credit repair organization, unless specifically exempted by the
text of the CROA. This is another aspect of the R & R to which Defendant objects.

Defendant asserts that controlling case law establishes an exemption for lawyers

10



883 (N.D. TH, 1999). Once a fact is challenged by an affidavit from the defendant, the
plaintiff has an obligation to provide an additional affidavit supporting his or her
contention. /d, Tn the end, all disputed facts will be resolved in the plaintiffs favor. See
id.

On this issue, Magistrate Judge Mason recommended that this Court find it docs
have jurisdiction over the defendants. One of defendants’ objections is directed at that
aspect of the R & R. Specifically, defendants suggest that Magistrate Judge Mason’s
rationale for finding personal jurisdiction was flawed with regard to “(1) identifying the
coniacts Mr. Lawrence had with Illinois; (2) analyzing whether these contacts meet
constitutional minimums, (3) analyzing whether, although minimum contacts are found,
exercising jurisdiction sufficiently comports with fairness and justice; (4) whether the
cause of action “arises out of” any of the defendant’s constitutionally sufficient contacts
with the forum.” (Def’s. Objections R & R at 4.) However, this Court agrees with
Magistrate Judge Mason, and for the reasons set forth below, accepts his R & R on this
issue.

Specific jurisdiction gives a court personal jurisdiction over a non-resident
defendant who has sustained minimum contacts with the forum. Euromarket Designs,
Ine. v. Crate & Barrel Ltd., 96 F. Supp. 2d 824, 833 (N.D. Ill. 2000). To establish
specific jurisdiction, a plaintiff must show that (1) bringing a defendant into court
comports with due process guarantees of the Constitution, and that (2) the defendant is
amenable to service of process. See, e.g., United States v. De Ortiz, 910 F.2d 376, 381
(7th Cir. 1990); Berthold Types Ltd. v. European Mikrograf Corp., 102 F. Supp. 2d 928,

930 (N.D. Ill. 2000); Euromarket, 96 F. Supp. 2d at 833-34.

7



required to conduct another hearing to review the magistrate judge’s findings and
credibility determinations. See United States v. Raddatz, 447 U.S. 667, 675 (1980);
Goffman v. Gross, 59 F.3d 668, 671 (7th Cir. 1995); United States v. Severson, 49 F.3d
268, 273 (7th Cir. 1995). Rather, the district court has discretion to “accept, reject,
modify, in whole or in part, the findings or recommendations made by the magistrate
judge.” 28 U.S.C. § 636(b)(1)(B) (2002). If the district court is satisfied with the
magistrate judge’s findings and recommendations, it may in its discretion treat those
findings and recommendations as its own. Raddatz, 447 U.S. at 675.
A. Service of Process

Once a defendant has challenged the sufficiency of service of process with a
motion to dismiss under Fed. R. Civ. P. 12(b)(5), the burden is upon the plaintiff to make
a prima facie showing that there was proper service. Trotter v. Oppenheimer & Co., No.
96 C 1238, 1997 WL 102531, at *2 (N.D. Ill. Mar. 4, 1997). According to Fed. R. Civ.
P. 4, service upon an individual within a United States judicial district may be effected:

(1) pursuant to the law of the state in which the district court is located, or

in which service is effected; or (2) by delivering a copy of the sammons

and of the complaint to the individual personally or by leaving copies

thereof at the individual’s dwelling house or usual place of abode with

some person of suitable age and discretion then residing therein or by

delivering a copy of the summons and complaint to an agent authorized by

appointment or by law to receive service or process.
Fed. R. Civ, P. 4(e). The first section of Fed. R. Civ. P. 4(e) points out that service is
proper pursuant to the law of the state in which the district court is located, (Illinois) or in
which service is effected (Utah). While the Utah service rules are the same as Fed. R.
Civ. P, 4(e)(2), in Hlinois, someone may be served:

(1) by leaving a copy of the summons with the defendant personally, [or]

3


Deadline for Service, but denies Plaintiffs Motion for Leave to Make Service by
Alternative Means.
FACTS

This matter arises out of Mr. Iosello’s transaction of business with LLF. During
2002, Mr. Iosello, a resident of Chicago, Mlinois, contracted with LLF, located in Salt
Lake City, Utah, for credit repair services. (Compl. { 10.) Plaintiff leamed about and
entered into contract with LLF through its website. (/d.) Throughout the relationship,
plaintiff interacted with LLF via Internet, mai) and telephone. (/d.) Because he was not
satisfied with the service, plaintiff requested his money back. (/d. 12.) Plaintiff alleges
in the complaint that his contract with LLF did not comply with the requirements of
CROA because (1) it failed to include in writing the total amount of all payments to be
made by the consumer to the credit repair organization or to any other person and (2) it
did not include a “Notice of Cancellation” form in duplicate. (/d. | 11.) These alleged
violations prompted plaintiff to request compensatory and punitive damages, attorney’s
fees and expenses and other appropriate relief. However, defendants contend that they
were never properly served, that this Court lacks personal jurisdiction and that attorneys
are not subject to the CROA, and therefore, they move to dismiss the action pursuant to
Fed. R. Civ. P. 12(b){5), 12(b)(2) and 12(b)(6) respectively.

DISCUSSION

When written objections are filed regarding a magistrate judge’s R & R, the
district court is required to conduct a de novo review of those portions of the R & R at
which specific objections are aimed. See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b).

Nevertheless, de novo review does not require a de novo hearing; the district court is not

2



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

pockesed

CHRISTOPHER IOSELLO, J
) AUG 12 7003
Plaintiff, )
) 03 C 987
v )
) Judge Ronald A. Guzman
)
LEXINGTON LAW FIRM, a corporation, )
and VICTOR LAWRENCE, )
)
Defendants. )

MEMORANDUM OPINION AND ORDER

Plaintiff Christopher Iosello and defendants Lexington Law Firm (“LLF”) and
Victor Lawrence, principal officer and owner have filed written objections, pursuant to
Fed, R. Civ. P. 72, to Magistrate Judge Mason’s Report and Recommendation (“R & R”)
entered on July 18, 2003, In his complaint, the plaintiff alleged a violation of the Credit
Repair Organizations Act (15 U.S.C, § 1679) (“CROA”). In his R & R Magistrate Judge
Mason considered a motion to dismiss for improper service pursuant to Fed. R. Civ. P.
12(b)(5) and a motion to dismiss for lack of personal jurisdiction pursuant to Fed. R. Civ.
P. 12(b)(2). In addition, the defendants argued that the CROA does not apply to
attomeys performing credit repair. Magistrate Judge Mason recommended that this
Court grant the motion to dismiss, based on the fact that Defendants werc never properly
scrved. He also recommended that this Court has personal jurisdiction over the
defendants, were they cver to be served properly and that the defendants are, in fact,
subject to the CROA. For the reasons set forth below, this Court adopts Magistrate Judge

Mason’s R & R in full. Additionally, the Court grants Plaintiff's Motion to Extend

a



service. Simply filing a motion to dismiss for improper service and refusing to waive
service do not constitute an evasion of service.
CONCLUSION

For the reasons set forth above, this court adopts Magistrate Judge Mason’s R &
R. The Court grants defendants’ Rule 12(b)(5) motion to dismiss for improper service
[11-2], denies defendants’ Rule 12(b)(2) motion to dismiss for lack of personal
jurisdiction [11-1], and denies defendants’ Rule 12(b)(6) motion to dismiss for failure to
state a claim [11-3]. In addition, the Court, in its discretion, grants plaintiffs motion to
extend deadline for service within 20 days of the date of this Memorandum Opinion and
Order and the Court denies without prejudice plaintiff's motion for leave to make service
by alternative means. Plaintiff’s motion for certification of the class (3-1) is stricken

without prejudice until service of process has been effected.

SO ORDERED enrereD:  4/? [03

UNITED STATES JUDGE

12