Chicago Business Litigation Lawyer Blog

Direct Deception Not Necessary in Consumer Fraud By Omission, Rules Appeals Court

January 22, 2009 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

In a consumer fraud class action, the Fifth District Court of Appeal has ruled that consumers may sue over a manufacturer’s intentional suppression of important facts, even when when disclosure of the hidden information would have alerted the consumer to the product’s dangers and caused the consumer not to purchase the product. In De Bouse v. Bayer, 5-06-0077 (Oct. 9, 2008), plaintiff Teresa De Bouse filed a proposed class action against pharmaceutical companies Bayer and GlaxoSmithKline, as well as several individuals, alleging that they violated the Illinois Consumer Fraud and Deceptive Business Practices Act by intentionally concealing information casting doubt on the safety and efficacy of the statin drug Baycor.

This is actually the second appellate decision in De Bouse; the Illinois Supreme Court had returned it to the appeals court with instructions to reconsider it in light of a contemporary decision on the Consumer Fraud Act called Barbara’s Sales v. Intel Corp., 227 Ill. 2d 45, 879 N.E.2d 910 (2007). In that case, the state Supreme Court held that claims that a product was “the best” was “puffing” (routine exaggeration by advertisers) and did not amount to deception. Thus, a deceptive advertising campaign was not enough to violate the Consumer Fraud Act in this case, the Supreme Court ruled. The Fifth District, on remand, pointed out that while the drug makers were accused of a deceptive advertising campaign, their campaign was not “puffing” and involved alleged suppression of material facts so Barbara’s Sales did not apply.

The original appeal to the appeals court came with three certified questions:

Appeals Court Rules Contract Not Valid After ‘Material Modifications’

January 15, 2009 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

Changes to a contract invalidated a business owner’s agreement to sell his auto dealership, the Illinois Third District Court of Appeal has ruled. In Finnin et al v. Bob Lindsay Honda-Toyota, 3-05-0428 (June 29, 2006), the court ruled that a trial court properly granted summary judgment to the defendant, because the plaintiffs made material changes to the contract that was allegedly breached.

The dispute dates to March of 2002, when the three plaintiffs, including Michael Finnin, approached defendant Robert Lindsay about selling his Toyota-Honda dealership in Knox County. The parties, and their lawyers, worked out the details of the sale over several months and eventually signed an agreement incorporating those details. In August, an assistant to Lindsay’s attorney sent a copy of the agreement, with all of the agreed-on conditions that were then current, and with Lindsay’s signature. On receipt, the plaintiffs’ attorney noticed two mistakes, including a substantially lower purchase price than the parties had agreed on. The attorneys discussed the problem at the time, and Lindsay’s attorney suggested that the draft be returned so that he could send out a corrected version. The plaintiffs’ attorney took no action.

Eight or nine days later, Lindsay himself phoned Finnin to tell him that he was selling the dealership to another buyer. Finnin and his fellow plaintiffs decided they still wanted to buy the dealership, and their attorney made the necessary changes to the draft that day. Lindsay still sold the dealership to the third party, and the plaintiffs sued for breach of contract. The trial court granted Lindsay summary judgment, saying that even though the changes plaintiffs made to the contract were consistent with the parties’ intent, they consisted of a counteroffer to his offer, and thus there was no contract to breach.

Appeals Court Rules Small Business Cannot Sue Bank Over Embezzlement

January 8, 2009 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

A small business may not sue a bank for allowing a minority shareholder to embezzle, the Illinois Second District Court of Appeal has ruled. In Time Savers, Inc. v. LaSalle Bank, N.A., 02-06-0198 (Feb. 28, 2007), the company had sued its bank for breach of contract, common-law fraud, conspiracy to defraud, aiding and abetting and violating the Illinois Fiduciary Obligations Act.

The case stems from bad loans taken out by the minority shareholder in construction and maintenance equipment supplier Time Savers (TSI), Stephen Harrison. He owned 20% of the company and shareholder Lawrence Kozlicki owned the remaining 80%. Harrison also owned another business, RDSJH Equipment Venture, that does the same kind of equipment supply business. Kozlicki has no ownership interest in RDSJH, but the two companies did business together. Between 1997 and 2001, Harrison, through TSI, refinanced existing loans and took out new ones with LaSalle Bank seven times. With these loans, Harrison financed new equipment purchases for RDSJH; the equipment was then rented to TSI, allowing RDSJH to enrich itself at TSI’s expense.

Kozlicki and TSI contended that LaSalle suspected or knew that the loans were for Harrison’s personal benefit, but failed to alert Kozlicki or investigate further. TSI pointed to various documents and communications, as well as the fact that some funds were deposited into an RDSJH account. The complaint at issue in this appeal is the third amended complaint by TSI; the company voluntarily dismissed the original complaint and the DuPage County trial court dismissed the first, second and third amended complaints at LaSalle’s request. (The bank also moved for sanctions after the third amended complaint was dismissed.) The final dismissal is the subject of this appeal.

Best Websites to Learn About Consumer Law Issues — Our Chicago Consumer Attorneys Can Assist You in Your Internet Fraud, Lemon Law, Auto and RV Fraud, Unfair Debt Collection, Unfair Wage Practices Claims and Other Consumer Rights Lawsuits

January 5, 2009 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

The National Consumers League’s Fraud Center is one of the best informational websites on the internet to learn about consumer rights and protection issues. Informed consumers are best armed to protect themselves from consumer scams and consumer frauds. The website contains sections for Telemarketing Fraud, Internet Fraud, Scams Against Businesses, Scams Against Elderly, Counterfeit Drugs, and a Fraud News section.

Lubin Austermuehle DiTommaso is a private consumer rights law firm who associates with other law firms around the country that can help you recover funds lost due to fraud against brick and mortar companies in the United States with assets. All too often with many internet and telemarketing frauds this may not be possible as the scam artists may be overseas, hard to locate or without assets.

Class action lawsuits our firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. Lubin Austermuehle DiTommaso is proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from corporate misdeeds.

FTC Website Provides Useful Tips for Recognizing Telephone and Telemarketing Fraud — Our Chicago Area Consumer Lawyers and Telemarketing Fraud Attorneys Can File Private Lawsuits if You are the Victim of Telephone or Telemarketing Fraud

January 4, 2009 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

The Federal Trade Commission (“FTC”) website provides useful information regarding recognizing telephone and telemarketing frauds.

The website states:

Who’s Calling? Recognize & Report Phone Fraud

Best Websites to Learn About Consumer Law Issues — Our Chicago Consumer Attorneys Can Assist You in Your Lemon Law, Predatory Lending, Auto and RV Fraud, Unfair Debt Collection, Unfair Wage Practices Claims and Other Consumer Rights Lawsuits

January 4, 2009 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

One of the best websites to obtain information about consumer law topics and purchase consumer and lawyer oriented publications and books about consumer rights issues is the website of the National Consumer Law Center.

A particularly well done book offered by the National Consumer Law Center is called Surviving Debt. It is a “how to” book that consumers can use to learn about their rights regarding matters such as unfair debt collection practices. The National Consumer Law Center provides a detailed description of the book.

The National Consumer Law Center describes Surviving Debt as follows:

Dealer Implied Warranty Applies to Manufacturer When They Have an Agency Relationship, U.S. District Court Rules

January 1, 2009 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

As Illinois and Chicago area consumer rights attorneys with a substantial auto dealer fraud and lemon law practice, we were pleased that a federal district court ruled in October that a manufacturer can be sued for a dealer’s alleged implied warranty under the Magnuson-Moss Warranty Act. Semitekol v. Monaco Coach Corporation, No. 06 C 6424 (Oct. 21, 2008), is an RV warranty case pending in the Northern District of Illinois. The plaintiffs, a married couple, purchased a Monaco motor home from an RV dealer. The motor home turned out to have the following alleged problems: electrical problems, a malfunctioning air-conditioner and heating problems. Numerous attempts to fix it were allegedly unsuccessful, and the motor home allegedly spent 180 of the 341 days the couple owned it in repair shops before the couple allegedly revoked acceptance of the motor home.

The couple sued Monaco, among others, alleging that it breached its own written warranty, the federal Magnuson-Moss Warranty Act and the implied warranty of merchantability created by Illinois law. Monaco moved to dismiss the implied warranty allegation, arguing that Illinois law requires direct contact between a buyer and seller to create an implied warranty. In this case, the manufacturer pointed out, the dealer was the actual seller of the Monaco motor home. The plaintiffs responded by arguing that direct contact in this case was established by BMS’s advertising and actual status as an “authorized Beaver Monaco dealership”; the fact that Monaco allegedly referred customers to the dealer to deal with problems and customer service concerns; consumers’ ability to find and contact the dealer through Monaco’s Web site; BMS’s authorization to distribute Monaco publications; and the fact that plaintiffs had the option of picking up their new motor home at either company.

In its analysis, the district court agreed for purposes of a motion to dismiss that the dealer was acting as Monaco’s agent. It dismissed arguments that past caselaw does not support such a finding, pointing out that unlike the current plaintiffs, none of the plaintiffs in the cases the defense cited showed any evidence for an agency relationship. The court did not agree that there actually was an agency relationship, or even that an agency relationship is enough to establish the direct contact necessary to prove an implied warranty under Illinois law. Rather, it pointed out that these are questions of fact that are improper to resolve with a motion to dismiss. Thus, the motion was denied. Dismissal motions by the dealer and two parts manufacturers also failed.

Federal District Court Certifies Class in Overtime Class Action Lawsuit

December 25, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

Our Chicago class action attorneys recently noted that the U.S. District Court for the Northern District of Illinois has conditionally certified a wage and hour class action alleging that Illinois Bell Telephone failed to pay overtime to its hourly employees. In Russell v. Illinois Bell Telephone Co., 08 C 1871 (filed April 1, 2008), Constemecka Russell alleges that Illinois Bell regularly required her and other hourly employees to work off the clock, and sought to conditionally certify these employees as a class and notify them of the action. Several of her colleagues have joined and submitted affidavits supporting her allegations. The case is pending, but the judge granted those motions Sept. 15 over most of Illinois Bell’s objections.

U.S. District Judge Matthew Kennelly’s opinion granting certification and notice repeats many of Russell’s allegations about the unpaid overtime. Russell worked in sales for the company at a call center, and she alleges that she was paid only for time she spent logged into the call center’s computer system. However, there were certain work tasks that she had to perform without being logged in, during lunch and rest breaks, including tasks like filling orders as well as time spent logging onto the computers and opening software programs. She estimated that she spent between 15 minutes and an hour per day doing this unpaid work, which sometimes would have entitled her to overtime.

In response to Russell’s request for class certification and notice, Illinois Bell argued that class certification is inappropriate because it doesn’t use the phone system to keep time, and thus there is no common policy or practice linking the proposed plaintiffs. The court was unimpressed by this argument. It pointed to multiple assertions by Russell that company practice was to require unpaid work before and after time on the phone, as well as affidavits by joining plaintiffs stating that managers explicitly instructed them to work off the clock. It also dismissed arguments that written policies were evidence that Illinois Bell complied with the law.

First District Rules Auto Dealer Committed Fraud By Misrepresenting Car’s History

December 18, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

A statement that a car has not been involved in an accident and “it’s fine” can constitute common-law fraud and a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, the First District Court of Appeal has ruled. In Hanson-Suminski v. Rohrman Midwest Motors, Inc., 1-07-0755 (Nov. 7, 2008), a customer successfully sued after she discovered that her used car had been in an accident, even though the dealer who sold it to her had told her it was not. The appeals court rejected the dealership’s arguments that both the decision and the financial award were erroneous.

The plaintiff, Traci Hanson-Suminski, bought a used 2002 Honda Civic from defendant Arlington Acura in Palatine, Ill. On the test drive, she asked the salesman if the car had been in an accident, to which he replied “No, it’s fine.” She did not take the car to an independent mechanic or get a Carfax sheet, nor did the salesman advise her that she could do so. She discovered that the car had indeed been in a rollover accident causing “moderate or severe” damage the following year, when she tried to trade it in. At trial, witnesses testified that the car had a “green light” at the auction where the dealership bought it, indicating no title problems, but that a car in good condition should have been more expensive. The plaintiff prevailed on her common-law fraud claim at a jury trial and on her Consumer Fraud Act claim at a bench trial. To avoid an illegal double recovery, the judge ruled that the Consumer Fraud Act claim would be satisfied with the jury’s common-law fraud verdict.

On appeal, the defendant argued that the plaintiff should not have prevailed on her Consumer Fraud Act claim, in part because she failed to show that fraud could have been avoided with reasonable prudence, and because the salesman’s statement was mere “puffery.” In its opinion, the appeals court cited Harkala v. Wildwood Reality, Inc., 200 Ill. App. 3d 447, 453 (1990), to show that the plaintiff had no obligation to double-check the salesman’s statement that the car had not been in an accident. Furthermore, it said, a car’s accident history is not a matter of public knowledge, as that case required. “Puffery” is a legal term for exaggerations used in advertising, which no reasonable person would believe. Because it was reasonable to believe the salesman was not lying, and it is not reasonable to think that car salespeople always claim cars are accident-free, the court said, it dismissed the puffery claim as without merit.

Guarantors of Commercial Lease Are Liable Even After Lease Changes Hands, First District Rules

December 11, 2008 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

As Naperville, Oak Brook, Wheaton, and Chicago business trial lawyers with substantial experience in shopping center claims, we were interested to see a recent decision by the First District Court of Appeal on the obligations of people who guarantee a lease. A change in the lease and a directed verdict at trial do not relieve a couple of their liability as guarantors of a commercial lease, the court has ruled. In Chicago Exhibitors Corporation v. Jeepers! Of Illinois and Swento, 1-06-3313 (Aug. 30, 2007), the court ruled that a guaranty agreement written to survive changes to the lease is enforceable even if the lease is assigned to a new tenant who changes it without the guarantor’s approval.

Harvey and Cherry Swento owned a business that leased space from a predecessor landlord to Chicago Exhibitors Corporation (CEC). To sweeten that lease, the Swentos in 1991 personally guaranteed their lease payments and all of their other obligations as tenants, with a clause specifying that the guaranty would survive changes to or assignment of the lease. In 1997, they sold their business to Jeepers! of Illinois, Inc. and executed an agreement in which Jeepers! indemnified them from losses stemming from their personal guaranty. Jeepers! then failed to pay its rent, causing CEC to demand an amendment to the lease that reaffirmed the Swentos’ personal guaranty. CEC declined to recognize the transfer of lease obligations from the Swentos’ company to Jeepers! until rent was paid in full and Jeepers! executed its own guaranty.

Jeepers! never did take on the guaranty, but it failed to pay its rent again several times. In an effort to avoid eviction, it agreed to several changes to the lease in January of 2001. The Swentos did not sign this amendment, even though it called for the ratification of all guarantors. When CEC eventually sued Jeepers! for unpaid rent and repairs, it included the Swentos as guarantors. In the trial, the Swentos asserted that the January 2001 amendment was a material change that discharged them from their obligations as guarantors; CEC successfully moved in limine for a ruling that it was not. The parties then agreed to move straight to the damages phase of the trial, so the judge granted a directed verdict on liability. The Swentos were eventually found liable for unpaid rent and damages as well as attorney fees. They appealed the in limine motion, the directed verdict and the award of attorney fees.