Opinion
Case No. 18-cv-1366-SMY
2020-01-30
Amy JETT, Individually and on Behalf of all Others Similarly Situated, Plaintiff, v. WARRANTECH CORPORATION and AMT Warranty Corporation, Defendants.
William M. Sweetnam, Natasha Singh, Sweetnam LLC, Chicago, IL, for Plaintiff. Michael B. Galibois, Robert A. Roth, Reed Smith, LLP, Chicago, IL, for Defendants.
William M. Sweetnam, Natasha Singh, Sweetnam LLC, Chicago, IL, for Plaintiff.
Michael B. Galibois, Robert A. Roth, Reed Smith, LLP, Chicago, IL, for Defendants.
MEMORANDUM AND ORDER
STACI M. YANDLE, United States District Judge
Plaintiff Amy Jett filed this action against Defendants Warrantech Corporation and AMT Warranty Corporation, claiming Defendants engaged in unfair and/or deceptive acts and practices related to warranty plans known as extended service plans. The case is now before the Court for consideration of Defendants' Motion to Dismiss (Doc. 16). Plaintiff filed a Response (Doc. 19). For the following reasons, the Motion is GRANTED in PART and DENIED in PART .
Background
Jett makes the following relevant allegations in the Complaint: Defendants provide extended service plans ("ESPs") for manufacturers, retailers, dealers and distributors of consumer products. Jett purchased a refrigerator manufactured by LG Electronics, Inc. ("LG") at the H.H. Gregg store in Glen Carbon, Illinois on June 4, 2016. She also purchased a five-year ESP for $350 to cover the refrigerator. The ESP was underwritten and issued by Defendants. Pursuant to the ESP, Defendants agreed to repair or replace the covered product in the event it was rendered inoperable during the term of the service agreement. The expressed purpose of the ESP is to provide coverage in case of a product failure.
The refrigerator became inoperable due to an apparent manufacturing defect in one of its component parts and Jett contacted Defendants' customer service to request service or replacement under her plan. Defendants refused to assist with or pay for the repair or replacement of the refrigerator despite the malfunction falling within the five-year window covered by the ESP. Eventually, LG processed a buyback for Jett and refunded the money for the refrigerator. Jett requested the cancellation of her ESP and a full refund, but only received a partial refund in the amount of $256.16.
Jett seeks relief on behalf of herself and a putative nationwide class of purchasers of Defendants' ESPs whose requests for service of a product during the term of the manufacturer's warranty were denied. Her Complaint asserts the forth the following causes of action on behalf of herself and all others similarly situated: Count I – violation of Illinois Consumer Fraud and Deceptive Practices Act; Count II – breach of contract; Count III – unconscionability; and Count IV – unjust enrichment.
Defendants move to dismiss Jett's Complaint, employing the proverbial "kitchen sink" approach – contending the Complaint is fatally flawed under Federal Rules of Civil Procedure ("FRCP ") 12(b)(1), 12(b)(2), 12(b)(6), 9(b) or, in the alternative, 12(f) and 23(d)(1)(D). Specifically, Defendants move to dismiss or strike Jett's class action claims, asserting that this Court lacks personal jurisdiction over the out-of-state class claims; move to dismiss Jett's individual claims on the basis she lacks constitutional standing; and move to dismiss all counts of the Complaint for failure to state a claim.
Legal Standards
To survive a motion seeking dismissal under FRCP 12(b)(1), a plaintiff must "clearly allege facts demonstrating each element" required to establish she has standing. See Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016). The "irreducible constitutional minimum" of standing requires a showing that a plaintiff has "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo , 136 S.Ct. at 1547. "That a suit may be a class action ... adds nothing to the question of standing, for even named plaintiffs who represent a class ‘must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent." Simon v. Eastern Ky. Welfare Rights Org. , 426 U.S. 26, 40 n. 20, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976) (quoting Warth v. Seldin , 422 U.S. 490, 502, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) ).
The Court considers the Complaint's well-pleaded allegations and the evidentiary materials submitted by both sides in resolving a FRCP 12(b)(2) motion. Here, as no party has requested an evidentiary hearing, the Court must accept Plaintiff's factual averments and resolve all factual disputes in her favor. See Felland v. Clifton , 682 F.3d 665, 672 (7th Cir. 2012) ("[W]here, as here, the issue of [personal jurisdiction] is raised on a motion to dismiss, the plaintiff need only make a prima facie showing of jurisdictional facts. We therefore accept as true all well-pleaded facts alleged in the complaint and resolve any factual disputes ... in favor of the plaintiff.") (citation omitted).
In the alternative, arguing the Court lacks personal jurisdiction, Defendants move to strike Plaintiff's nationwide class allegations under FRCP 12(f) and/or 23(d)(1)(D). Under Rule 12(f), "[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Under Rule 23(d)(1)(D), the Court may "require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly." Fed.R.Civ.P. 23(d)(1)(D).
To survive a Rule 12(b)(6) motion, a plaintiff need only "nudge[ ] [her] claims across the line from conceivable to plausible." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929, (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The Court draws all reasonable inferences and facts in favor of the nonmovant. See Vesely v. Armslist LLC , 762 F.3d 661, 664 (7th Cir. 2014).
Under FRCP 8(a)(2), a Complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The "short and plain statement" must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (citation omitted).
Finally, pursuant to FRCP 9(b), a party pleading fraud must "state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b). This "ordinarily requires describing the ‘who, what, when, where, and how’ of the fraud, although the exact level of particularity that is required will necessarily differ based on the facts of the case." AnchorBank, FSB v. Hofer , 649 F.3d 610, 614 (7th Cir. 2011).
Discussion
Motion to Dismiss Under FRCP 12(b)(1)
Defendants argue that Jett (1) has no injury in fact, (2) has failed to allege a contractual agreement with Defendant AMT, (3) cannot pursue class claims outside of Illinois, and (4) lacks standing to seek injunctive relief. Arguments (1) and (2) are easily discarded. The Complaint specifically alleges that Jett paid $350 for the ESP but only received a partial refund. Jett also alleges she would not have purchased the warranty had she known it would not provide her recourse when her refrigerator malfunctioned. These allegations are directed to both defendants and the ESP states the agreement is administered by Warrantech and that the service agreement provider is AMT Warranty Corp.
Next, Defendants' argument that Jett lacks standing to pursue class claims outside of Illinois is premature. Jett clearly has standing to pursue her personal claims against Defendants. Any standing issues arising from her attempt to represent the proposed multi-state class are class certification issues that will be addressed during the class certification stage of this litigation. See Ortiz v. Fibreboard Corp. , 527 U.S. 815, 831, 119 S.Ct. 2295, 144 L.Ed.2d 715 (1999) (holding that because "class certification issues are ... ‘logically antecedent’ to" the question of the putative class representative's standing, "the issue about Rule 23 certification should be treated first"); Payton v. Cnty. of Kane , 308 F.3d 673, 680 (7th Cir. 2002) ("We have begun our analysis with the question of class certification, mindful of the Supreme Court's directive to consider issues of class certification prior to issues of standing.").
Defendants also move to dismiss Jett's demand for injunctive relief on the basis she is not likely to purchase Defendants' ESP in the future. The Court agrees. When seeking prospective injunctive relief, a plaintiff must allege a "real and immediate" threat of future violations of her rights. See City of Los Angeles v. Lyons , 461 U.S. 95, 102, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983) ("Past exposure to illegal conduct does not in itself show a present case for injunctive relief..."). Because Jett does not set forth any facts showing she faces a real and immediate threat of future harm, she does not have Article III standing to obtain an injunction against Defendants. Scherr v. Marriott Int'l, Inc. , 703 F.3d 1069, 1074 (7th Cir. 2013) (stating that "to establish injury in fact when seeking prospective injunctive relief, a plaintiff must allege a ‘real and immediate’ threat of future violations of their rights"). Jett cannot rely on the idea that other consumers may be deceived by Defendants' ESPs in order to establish that she has standing to pursue injunctive relief. See, Campbell v. Miller , 373 F.3d 834, 836 (7th Cir. 2004). Accordingly, her claim for injunctive relief will be DISMISSED for lack of standing.
Motion to Dismiss Under FRCP 12(b)(2) and/or Strike Under FRCP 12(f) and 23(d)(1)(D)
Defendants move to dismiss or strike the Complaint's nationwide class allegations on the ground that the Supreme Court's decision in Bristol-Myers Squibb Co. v. Sup. Ct. of California , ––– U.S. ––––, 137 S.Ct. 1773, 198 L.Ed.2d 395 (2017) forecloses this Court from exercising personal jurisdiction over them with respect to class action claims of non-Illinois residents. Plaintiff maintains that Bristol-Myers does not apply to the claims of absent class members who are not parties to the litigation as a named mass tort plaintiff would be.
Bristol-Myers is a mass tort action in which the U.S. Supreme Court held that due process does not permit courts to exercise specific personal jurisdiction over claims that are unconnected to the forum state and brought by nonresident plaintiffs against a nonresident defendant, even when the nonresident plaintiffs join in a lawsuit initiated by plaintiffs who suffered injury in the forum state. Although Bristol-Myers is not a class action lawsuit, Defendants seek to apply its holding to this case. The Seventh Circuit Court of Appeals has not addressed the issue of whether Bristol-Myers applies in the class action context and there is a split among Illinois district courts regarding this issue. Compare, e.g. , Chavez v. Church & Dwight Co. , 2018 WL 2238191, at *11 (N.D. Ill. May 16, 2018) ("The Court therefore concludes that Bristol-Myers extends to class actions, and that Chavez is therefore foreclosed from representing either a nationwide and multistate class comprising non-Illinois residents in this suit."); Practice Mgmt. Support Servs., Inc. v. Cirque du Soleil, Inc. , 301 F.Supp.3d 840, 860-62 (N.D. Ill. Mar. 12, 2018) (same); with Al Haj v. Pfizer Inc. , 338 F. Supp. 3d 815, 820 (N.D. Ill. 2018) (declining to extend the logic of Bristol-Myers to prohibit a court from exercising specific jurisdiction over a defendant to resolve the class action claims of non-Illinois residents and examining current precedent); Curran v. Bayer Healthcare LLC , 2019 WL 398685, at *3 (N.D. Ill. Jan. 31, 2019) (same).
In Al Haj , the court explained that to apply Bristol-Myers to class actions would be to hold that "[a]lthough absent class members are not parties for purposes of diversity of citizenship, amount in controversy, Article III standing, and venue, they are parties for purposes of personal jurisdiction over the defendant. That cannot be right." Al Haj , 338 F. Supp. 3d at 820 (emphasis in original). Numerous other courts have also declined to extend Bristol-Myers to the unnamed class members. See Knotts v. Nissan N. Am., Inc. , 346 F.Supp. 3d 1310, 1313 (D. Minn. 2018) (citing cases from courts in California, Louisiana, Florida, Georgia, Virginia, Texas, the District of Columbia, and Illinois which have concluded that there are valid reasons for limiting Bristol-Myers to named parties – particularly due to the material distinctions between mass tort actions and class actions).
This Court finds the reasoning of courts declining to apply Bristol-Myers to unnamed class members persuasive and is unconvinced that Bristol-Myers is applicable in the class action context. Defendants do not contest the fact that this Court has personal jurisdiction over them with respect to Jett's individual claims. Unlike a mass tort action in which each plaintiff is a real party in interest to the claims in the Complaint, in a class action, it is the named plaintiff's claim that must arise out of or result from the defendant's forum-related activities – not the claims of the unnamed members of the putative class who are not party to the litigation absent class certification. Prior to class certification, determining whether this Court has specific jurisdiction over Defendants with respect to the claims of the unnamed class members would be premature. Accordingly, Defendants' Motion to Dismiss and/or Strike on this point will be DENIED without prejudice .
Motion to Dismiss Under FRCP 12(b)(6)
Defendants contend that Jett's allegations fail to state a claim and must be dismissed on numerous grounds, including: (1) Plaintiff cannot bring an Illinois Consumer Fraud Act ("ICFA") claim based on the assertion that Defendants' breached their contractual duties and the claim is not pled with sufficient particularity; (2) Plaintiff's breach of contract claim fails to identify a breach; (3) Plaintiff's unconscionability claim is improperly pled as a cause of action; and (4) Plaintiff has not sufficiently pled unjust enrichment.
Illinois Consumer Fraud Act (Count I)
To plead a violation of Section 2 of the ICFA "a plaintiff must allege: (1) a deceptive act or practice by the defendant, (2) the defendant's intent that the plaintiff rely on the deception, (3) the occurrence of the deception in the course of conduct involving trade or commerce, and (4) actual damage to the plaintiff (5) proximately caused by the deception." Oliveira v. Amoco Oil Co. , 201 Ill.2d 134, 267 Ill.Dec. 14, 776 N.E.2d 151, 160 (2002). Defendants argue that Count I of Jett's Complaint alleges no more than a breach of contract claim, that the claim is not pled with sufficient particularity, and that Jett fails to identify any false representations.
When presented with a motion to dismiss on the basis that a statement is not deceptive under the ICFA, "[the Court must] ask whether the allegedly false and misleading statements on which [Plaintiff] based his ICFA claim can be read to create a likelihood of deception or to have the capacity to deceive." Bober v. Glaxo Wellcome PLC , 246 F.3d 934, 938 (7th Cir. 2001). Jett's Complaint alleges numerous deceptive practices by Defendants, including:
23. The ESPs purport to provide coverage beginning on the date of product purchase. Specifically, inter alia , the ESP brochure accompanying the product states, "Coverage begins on the date of purchase ." Premium Service Plan (emphasis added).
24. The contract itself states, "Coverage under this Service Agreement begins on the date of product purchase or date of installation by the selling retailer ... and continues for the period of time defined on Your sales receipt. This Service Agreement is inclusive of the manufacturer's warranty; it does not replace the manufacturer's warranty, but provides certain benefits during the term of the manufacturer's warranty ." Extended Service Protection Agreement (emphasis added).
25. Notwithstanding the above representations, the actual policy and practice of Defendants is to not provide any benefits or service for products that fail during the original manufacturer's warranty, despite their representations and misleading statements to the contrary.
57. Defendants have misled Plaintiff and the Class into purchasing extended service plans, in part or in whole, due to an erroneous belief that the ESPs provided coverage from the date of the product's purchase. Instead, Plaintiff and the Class paid for a deceptive, worthless, and illusory plan that effectively imposed no obligations on Defendants.
58. As a direct and proximate result of the foregoing, Plaintiff and the Class purchased extended service plans from Defendants that they would not have purchased had the true characteristics been known to them. Alternatively, Plaintiff and the Class lacked the information necessary to make an informed choice regarding their decision to purchase such ESPs, causing them to pay for a service plan that possessed negligible or de minimis value because they never come into effect.
These allegations satisfy the basic components of an ICFA claim; that Defendants engaged in a deceptive act or practice, with the intent the consumer would rely on the deception in the course of trade, and that the deception proximately caused harm to Jett.
Defendants also argue the Complaint does not meet the heightened pleading standard for allegations of fraud under F.R.C.P. 9(b) and is "fatally vague and unspecific as to what fraudulent or unfair and deceptive practices were allegedly committed." FRCP 9(b) requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). In the context of consumer fraud statutory claims, a plaintiff must generally state the identity of the person making the representation, the time, the place, and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff. See Camasta v. Jos. A. Bank Clothiers, Inc. , 761 F.3d 732, 737 (7th Cir. 2014).
Again, Plaintiff adequately pled who (the Defendants) and specified the allegedly deceptive practices (misrepresentations that the ESP provided coverage from the date of the product's purchase and that Plaintiff would have adequate coverage for her product under the warranty). She also specifies the date and place and asserts that she relied on Defendants' representation by purchasing the ESP for $350.00. Therefore, Defendants' argument on this point is fails.
Next, Defendants maintain that the ICFA does not have extraterritorial application to the non-Illinois class members. Illinois statutes usually have limited territorial reach. The ICFA is no exception, and it does not "apply to fraudulent transactions which take place outside Illinois." Avery v. State Farm Mut. Auto. Ins. Co. , 216 Ill.2d 100, 296 Ill.Dec. 448, 835 N.E.2d 801, 853 (2005). "There is no single formula or bright-line test for determining whether a transaction occurs within this state." Id. , 296 Ill.Dec. 448, 835 N.E.2d at 854. Instead, a court must analyze whether "the circumstances relating to the transaction occur primarily and substantially" within Illinois. Id. , 296 Ill.Dec. 448, 835 N.E.2d at 853. Circumstances will vary in every case, but the factors considered in Avery are instructive; the residency of the plaintiff, the location of harm, communications between parties (where sent and where received), and where a company policy is carried out. Id. , 296 Ill.Dec. 448, 835 N.E.2d at 854.
At this juncture, Jett as the named plaintiff is the only plaintiff in this case. Jett, an Illinois resident, alleges that she purchased the ESP in Illinois, and that the situs of the transactions at issue occurred "primarily and substantially" in Illinois. Avery , 296 Ill.Dec. 448, 835 N.E.2d at 853. Whether she will ultimately succeed in representing a nationwide class based on the ICFA is an issue more properly examined at class certification. For now, Jett's ICFA claim survives Defendants' motion to dismiss.
Breach of Contract (Count II)
To state a viable breach of contract claim under Illinois law, a plaintiff must allege: (1) the existence of a valid contract; (2) the performance of the contract by plaintiff; (3) the breach of the contract by defendant; and (4) a resulting injury to the plaintiff. Priebe v. Autobarn Ltd. , 240 F.3d 584, 587 (7th Cir. 2001). Defendants argue that Jett's coverage under the ESP did not begin until after expiration of the manufacturer's original warranty. But the contract does not expressly state that. Rather, under the express terms of the ESP:
Coverage under this Service Agreement begins on the date of product purchase or date of installation by the selling retailer...and continues for the period of time defined on your sales receipt. This Service Agreement is inclusive of the manufacturer's warranty; it does not replace the manufacturer's warranty, but provides certain benefits during the term of the manufacturer's warranty. During the manufacturer's warranty period, any parts, labor, on-site service or shipping costs covered by that warranty are the sole responsibility of the manufacturer, upon expiration of the shortest portion of the manufacture's original parts and/or labor warranty, this Service Agreement continues to provide many of the manufacture's benefits as well as certain additional benefits...
Jett alleges she entered into a contract with Defendants by paying for the ESP. In exchange, Defendants agreed to help Plaintiff manage the cost and inconveniences of covered product failures by replacing or repairing the product. After her refrigerator malfunctioned, however, Defendants repeatedly denied coverage despite the ESP stating that coverage began on the date of product purchase.
Affording the Complaint a liberal construction, this Court does not find that no relief could be granted based on any set of facts that could be proven consistent with these allegations. Therefore, Jett's breach of contract claim survives dismissal at this juncture. Unconscionability (Count III)
Defendants sole argument for dismissal of Count III is that unconscionability is not a cognizable cause of action. It is. Under Illinois law, unconscionability may be either procedural, substantive, or both. Williams v. Jo-Carroll Energy, Inc. , 382 Ill.App.3d 781, 321 Ill.Dec. 844, 890 N.E.2d 566, 569 (2008). "Procedural unconscionability refers to a situation where a term is so difficult to find, read, or understand that the plaintiff cannot fairly be said to have been aware he was agreeing to it, and also takes into account a lack of bargaining power." Razor v. Hyundai Motor Am. , 222 Ill.2d 75, 305 Ill.Dec. 15, 854 N.E.2d 607, 622 (2006). Substantive unconscionability refers to contract terms that are so one-sided as to oppress or unfairly surprise an innocent party, an overall imbalance in the obligations and rights imposed by the bargain, and significant cost-price disparity. Id. As both have been sufficiently alleged by Jett, Defendants' Motion is denied on this point as well.
Unjust Enrichment (Count IV)
Under Illinois law, to state a claim of unjust enrichment, "a plaintiff must allege that the defendant has unjustly retained a benefit to the plaintiff's detriment, and that defendant's retention of the benefit violates the fundamental principles of justice, equity, and good conscience." Gagnon v. Schickel , 368 Ill.Dec. 240, 983 N.E.2d 1044, 1052 (Ill. App. 2012). When a claim of unjust enrichment arises out of the same conduct alleged in another claim, the unjust enrichment claim stands or falls with the other claim." Cleary v. Philip Morris Inc. , 656 F.3d 511, 517 (7th Cir. 2011) (citing Ass'n Benefit Servs. v. Caremark Rx, Inc. , 493 F.3d 841, 855 (7th Cir. 2007) ). Here, Jett's theory of unjust enrichment arises out of the same conduct as her ICFA claim in Count I. As such, the claim stands or falls with the ICFA claim. Based on this Court's determination that Plaintiff has stated a colorable ICFA claim, the related unjust enrichment claim is also sufficient to withstand Defendants' Motion.
Conclusion
For the forgoing reasons, Defendants' Motion to Dismiss Plaintiff's claims for injunctive relief is GRANTED with prejudice . The remainder of the Motion is DENIED .