Opinion
No. 97 C 0720
June 23, 2000
MEMORANDUM OPINION AND ORDER
Pending are Defendants Bob O'Connor Ford, Inc., ("O'Connor Ford"), Lifeguard, Inc. ("Lifeguard"), and Robert E. O'Connor's motion to dismiss Counts III, IV, and VI of Plaintiffs' third amended complaint, and Pullman Bank Trust Company's ("Pullman") motion to dismiss Count VI of Plaintiffs third amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth below defendants O'Connor Ford and Lifeguards' motions to dismiss Count III are denied. O'Connor Ford and Lifeguard's motions to dismiss Count IV are granted. Lifeguard's motion to dismiss Count VI is granted. O'Connor Ford and Pullmans' motions to dismiss Count VI are denied.
BACKGROUND FACTS
On April 23, 1999 Verdell and Bessie Taylor ("the Taylors") filed a six count third amended class action complaint on behalf of themselves and all others similarly situated against Defendants O'Connor Ford, Robert E. O'Connor, Lifeguard, Ford Motor Credit Company ("FMCC"), Pullman, and John Does 1-10. In December 1995 the Taylors bought two 95 Ford Escorts from O'Connor Ford.
First, the Taylors claim that O'Connor Ford increased the cash price of both cars in violation of the Illinois Consumer Fraud Act, ("ICFA"), 815 ILCS 505/1 by failing to include the credit for rebates agreed upon and listing a purchase price for the cars that was higher than the list price. The Taylors also complain that O'Connor Ford failed to comply with § 5 of the Motor Vehicle Retail Installment Sales Act, 815 ILCS 375/5, by failing to disclose any additional charges. Third, the Taylors allege that O'Connor Ford and Lifeguard engaged in unfair and deceptive practices by preprinting O'Connor Ford's purchase orders with a charge of $995 referred to as the Lifeguard Package. The Lifeguard Package is a rust proofing package issued by Lifeguard a company owned by Robert B. O'Connor. The Taylors allege that the package is essentially of no value because it has little utility in blocking rust from cars, and is never actually applied to the cars. Additionally, the Taylors complain that O'Connor Ford charges an additional $150 for the Environmental Protection Plan, an additional three year warranty against paint deterioration and surface rust beyond the manufacturer warranty also provided by Lifeguard. The Taylors allege that this plan is also of essentially no value because the plan exclusions are too vague and broad to confer any legally enforceable rights to the purchaser. Fourth, The Taylors allege that each contract for the sale of an automobile that included the Lifeguard Package and/or the Environmental Protection Plan was unconscionable.
Finally, The Taylors allege that O'Connor Ford and Pullman participated in a kickback scheme in which O'Connor Ford would represent a higher annual percentage finance rate ("APR") to customers on their retail installment contract than the APR actually given by Pullman. When presented with the contract by O'Connor Ford, with the higher rate paid by the consumer, Pullman would then kick back a portion of the excess charge to O'Connor Ford. The Taylors complain that they relied on O'Connor Ford as their agent in obtaining financing for them. In relying they believed that the APR on their retail installment contract was the rate given by the financing source (Pullman), not the dealer, when they agreed to purchase their vehicles.
DISCUSSION
Defendants move to dismiss Counts III, IV, and VI in accordance with Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The purpose of a motion to dismiss is to test the sufficiency of a complaint, not to decide the merits of the case. On a motion to dismiss, the court assumes the allegations of the complaint are true and construes them in the light most favorable to the plaintiff. Doherty v. City of Chicago, 75 F.3d 318, 322 (7th Cir., 1996). A complaint should not be dismissed "unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.s. 41, 45-46, 78 S. Ct. 99, 102, 2 L.Ed.2d 80 (1957).
COUNT III
Count III is brought against O'Connor Ford, Robert E. O'Connor, and Lifeguard. Count III alleges that O'Connor Ford engaged in unfair and deceptive acts and practices in violation of § 2 of the Illinois Consumer Fraud and Deceptive Practices Act, 815 ILCS 505/2 ("ICFA"). To state a claim under the ICFA, the plaintiff must show 1) that the defendant engaged in a deceptive act or practice; 2) that the defendant intended the plaintiff to rely on the deception; and 3) that the deception occurred in the course of conduct involving trade or commerce. Martin v. Heinold Commodities, Inc., 163 Ill.2d 33, 75, 643 N.E.2d 734, 754, 205 Ill. Dec. 443 (Ill., 1994) citing ( Siegel v. Levy Organization Development Co., 153 Ill.2d 534, 542, 607 N.E.2d 194, 198, 180 Ill. Dec. 300 (Ill., 1992).
Defendants move to dismiss Count III in accordance with Federal Rule of Civil Procedure 12(b)(6) arguing that the allegations of fraud against Lifeguard are not stated with sufficient particularity to meet the standards of Federal Rule of Civil Procedure 9(b) and are insufficient against O'Connor Ford because O'Connor Ford did not apply the rust proofing package.
Rule 9(b) requires that "[i]n all averments of fraud . . . the circumstances constituting the fraud or mistake shall be stated with particularity." Fed.R.Civ.P. 9(b). The Seventh Circuit has repeatedly instructed that Rule 9(b) requires the plaintiff to state "with particularity" any circumstances constituting fraud. [A]lthough the states of mind may be pleaded generally the "circumstances" must be pleaded in detail. This means the who, what, when, where, and how the first paragraph of any newspaper story. DiLeo v. Ernst Young, 901 F.2d 624, 627 (7th Cir., 1990). In other words the plaintiff must plead the time, place and content of the allegedly fraudulent misrepresentation, as well as the parties to that communication. Corley v. Rosewood Care Center, Inc. of Peoria, 142 F.3d 1041, 1050 (7th Cir. 1998).
A review of the Taylors' third amended complaint reveals that the Taylors' compliant sufficiently sets forth a claim for violation of the ICFA in alleging that Lifeguard engaged in the deceptive act of selling a rust proofing package to consumers that was unnecessary, essentially worthless, and not applied to the cars after the package was sold. We know the time and the place to be December of 1995 at O'Connor Ford. The Taylors also state that Lifeguard intended them to rely on their omission that the additional rust proofing was not necessary. We conclude the above allegations satisfy the particularity requirement under Fed.R.Civ.Proc. 9(b). The deceptive act or practices that defendants are alleged to have engaged in relates to the sale of a worthless rust proofing and environmental packages and it is alleged that both defendants intended that the Taylors would rely on the deception that they were effective methods of protecting their cars. In addition, it is undisputed that the alleged deception occurred in the course of trade — the sale of motor vehicles. Therefore, the Taylors have met the three requirements necessary to sufficiently state a claim under the ICFA and these claims have been set forth with sufficient particularity for purposes of Fed.R.Civ.Proc. 9(b).
O'Connor Ford argues that the Taylors have failed to plead that O'Connor Ford's involvement was in the act of "applying the rust proofing package." On the contrary, the Taylors complaint states that one of the fraudulent acts committed by O'Connor Ford, was in not applying the rust proofing package. (Plaintiff's Third Amended complaint #35, p. 10). The fact that technically O'Connor Ford does not apply the rust proofing rather Lifeguard does is insufficient to warrant O'Connor Ford's dismissal. Moreover, the Taylors allege several other acts of fraudulent conduct on the part of O'Connor Ford with regard to the sale of the cars. The Taylors complain that they were charged too much for the car and their purchase contracts were preprinted with the price of these packages included without the customer's request, which the customer then believed to be a set price not subject to negotiation. They also allege that both of the above packages are of essentially no value to the customer. Lifeguard was owned by O'Connor Ford and O'Connor Ford used its position as a Ford car dealer to sell the Lifeguard package. Further, while technically Lifeguard is not involved in the sale of the rust proofing package it is involved in the alleged fraudulent scheme of which the sale is a part. Therefore, Defendants' motions to dismiss Count III are denied.
COUNT IV
Count IV is brought against O'Connor Ford, Robert E. O'Connor, and Lifeguard under a common law unconscionability theory. The equitable concept of `unconscionability' becomes meaningful always in the context of otherwise defined factors of inequality, deception and oppression. A standard statement of the concept reads, "[w]hen the accompanying incidents are inequitable and show bad faith, such as concealments, misrepresentations, undue influence, oppression on the part of the one who obtains the benefit, or ignorance, weakness of mind, sickness, old age, incapacity, pecuniary necessities, and the like, on the part of the other, these circumstances, combined with inadequacy of price, may easily induce a court to grant relief, defensive or affirmative." Contract Buyers League v. F F Investment, 300 F. Supp. 210, 227 (N.D.Ill. 1969), aff'd, Baker v. F F Investment, 420 F.2d 1191 (7th Cir., 1970), cert. denied, 400 U.S. 821, 91 S.Ct. 42, 27 L.Ed.2d 49 (1970), citing 3 Pomeroy, Equity Jurisprudence, § 928, pp. 640-641 (1941).
Illinois' cases present a great variety of situations where a concurrence of any of the above elements will be sufficient for invocation of the principle of unconscionability. But one point is clear upon review of the cases ( Mitchem v. American Loan Comp., 2000 WL 290276*3 (N.D. Ill., Judge Coar), Original Great American Chocolate Chip Cookie v. River Valley, 970 F.2d 273, 281 (7th Cir. 1992), Reuben H. Donnelley v. Krasny Supply Co., 227 Ill. App.3d 414, 592 N.E.2d 8, 12, 169 Ill. Dec. 521 (1st Dist. 1991), Cobb v. Monarch Fin. Corp., 913 F. Supp. 1164, 1179 (N.D. Ill. 1995) and Larned v. First Chicago Corp., 264 Ill. App.3d 697, 636 N.E.2d 1004, 1006, 201 Ill. Dec. 572 (1st Dist., 1994)), application of the doctrine requires extreme circumstances beyond what can be understood or implied from any of the allegations in this complaint. The Taylors' claim to be the weaker party without a choice but to execute the contract, however, the Taylors have submitted no facts which indicate that the Taylors lacked a reasonable opportunity to decline the purchase or understand the purchase agreements they were entering into. Even if we accept their claim as true, that they were the weaker party, the fact that one party enjoys little bargaining power is not itself sufficient reason to declare a contract provision unconscionable. T. A. Moynahan Properties, Inc. v. Lancaster Village Co-Op., Inc. 496 F.2d 1114, 1119 (7th Cir., 1994) and supra at 226. Plaintiffs' lack of education and lack of experience relative to Defendants can obviously not in and of itself independently constitute a significant factor of unconscionability. Accordingly, Defendants' motion to dismiss Count V is granted.
COUNT VI
Count VI of the Taylors' third amended complaint is brought against all Defendants. Count VI alleges that the Defendants engaged in unfair and deceptive acts and practices in violation of ICFA by kicking back a part of the difference between the "buy rate" the bank's specified APR, and the APR charged to the Taylors on their retail installment contracts. Because each Defendant argues different grounds for dismissal, each argument will be taken separately.
A. O'Connor Ford
The Taylors complain that O'Connor Ford initiated an agency relationship with the Taylors to obtain financing for them and acted as their agent in obtaining the financing. The Taylors allege that O'Connor Ford violated the ICFA by engaging in unfair and deceptive acts and practices by accepting "kickbacks" from Pullman for the difference between the finance rate charged to the Taylors and Pullman's buy rate for the contracts.
In our order of March 25, 1999 we denied Defendants' motion to dismiss the ICFA claim. The order granted leave to Plaintiffs to re-plead their claim to "include the necessary agency allegation," and allege some basis for holding O'Connor liable. (p. 4) The Taylors have alleged that O'Connor Ford was the Taylor's agent. The Taylors also allege that consumers are led to believe that the dealer is acting in. their best interest in obtaining financing for them and that O'Connor Ford's practice of misrepresenting the finance rate to the Taylors breached its duty as an agent of the Taylors.
O'Connor Ford argues that the Taylors' complaint insufficiently establishes the existence of an agency relationship. O'Connor Ford argues that the Taylors' belief that the car dealer was acting in their best interests is insufficient to establish the agency relationship. O'Connor Ford as well as Pullman further points to Balderos v. City Chevrolet, ___ F.3d ___, 2000 WL 681010 (7th Cir. 5/26/00) arguing that plaintiffs' allegations as to the agency relationship are insufficient because the our Court of Appeals concluded in Balderos that an automobile dealer does not become the purchaser's agent merely because the car dealer agreed to arrange financing for the purchase. Id. at *3 This may be so, but for purposes of this motion to dismiss we must accept as true the allegation that O'Connor did act as the Taylors' agent in obtaining financing for them. Agency relationships are established when one undertakes to act for another. See Doner v. Phoenix Joint Stock Land Bank of Kansas City, 381 Ill. 106 113, 45 N.E.2d 20, 24 (1942) and Fairman v. Schaumburg Toyota, 1996 WL 392224 at # 6 (N.D. Ill. July 10, 1996). For purpose of this motion plaintiffs' allegation, that O'Connor Ford obtained the financing on their behalf, is sufficient. Our Court of Appeals also stated in Balderos that "it is a questions of fact whether the contract expressed or implied between a particular dealer and a particular customer constitutes the former an agent for the later in procuring financing. Id. The remainder of O'Connor Ford's arguments challenging the existence of an agency relationship raise questions of fact which will be addressed at a later stage of this litigation. Accordingly, O'Connor Ford's motion to dismiss Count VI is denied.
B. Pullman
As stated in Judge Gottschall's April 10th, 1998 order, whether Pullman knew of the existence of an agency relationship between the Taylors and O'Connor Ford is a question "more properly resolved after discovery in a motion for summary judgment or at trial." (p. 16). To survive a motion to dismiss under the ICFA, however, case law requires the plaintiff allege that direct actions were taken by the defendant. The Taylors must allege that Pullman was directly engaged in the fraudulent actions complained of. In Vance v. National Benefit Ass'n, 1999 WL 731764 at *5 (N.D. Ill., Aug. 30, 1999) the court held that the absence of a finance company's direct dealing with the plaintiff may constitute insufficient direct involvement in a fraudulent or deceptive practice under the ICFA to survive a motion to dismiss. In Vance the plaintiff was charged almost $1400 for a credit card with an available limit of $36. The account was assigned to defendant Green Country Acceptance Corporation after the plaintiff signed the retail installment contract. The court dismissed GCAC as a defendant in the ICFA Count because GCAC's only involvement was that the retail installment contract was assigned to it.
Here, the Taylors allege in their complaint that Pullman had more involvement than that of a mere passive assignee of a retail contract for financing. Plaintiffs allege that Pullman agreed to "kick back" a portion of the higher finance rates charged by O'Connor Ford to the dealer and "allowed the dealers to understate the finance charge and APR." Under the ICFA the plaintiff is required to plead violations with specificity pursuant to Rule 9(b). Because the deceptive and fraudulent acts arise out of the alleged agency relationship between the Taylors and O'Connor Ford, the Taylors must allege Pullman's knowledge of the agency relationship in the complaint. They have done so. Therefore, defendants O'Connor Ford and Pullman's motion to dismiss Count VI is denied.
C. Lifeguard
The Taylors state in their response to Lifeguard's motion to dismiss Count VI of the complaint that Lifeguard is not a defendant as to Count VI. (Plaintiff's Consolidated Response p. 8). Therefore, Lifeguard's motion to dismiss is granted as to Count VI.
MOTION TO SUBSTITUTE DEFENDANT ROBERT E. O'CONNOR
Also pending is plaintiffs' motion for substitution of the Estate of Robert E. O'Connor pursuant to Fed.R.Civ.Proc. 25(a). Rule 25(a)(1) of the Federal Rules of Civil Procedure allows substitution of proper parties in federal court once it is determined that applicable substantive law allows the action to survive party's death; but it does not resolve the question of what law of survival of actions should be applied in the case. Robertson v. Wegmann, 436 U.S. 584, 587, 593, 98 S.Ct. 1991, 1996 (1978).
In this case Robert E. O'Connor has been sued in Count III for breach of the Illinois Consumer Fraud Act; Count IV for unconscionability, and in Count VI for violation of Illinois' Deceptive Acts and Practices statute. The plaintiffs have not stated expressly which of these claims are alleged to survive the death of Robert E. O'Connor and why. No applicable substantive law is cited in support of the motion to establish that the claims survive. Nor do Plaintiffs even indicate whether state law or federal law, governs the survival of the claims, some of which are premised upon state statutes. Illinois Courts have held that the test of survivability is whether the claim is assignable. Roberson v. Wood, 500 F. Supp. 854, 859 (S.D. Ill., 1980) citing Hogan v. Braudon, 40 Ill. App.3d 352, 352, N.E.2d 303 (2d Dist., 1966). In federal question cases, federal law and federal decisions, rather than state law, determine whether the action survives the death of a party, Schreiber v. Sharpless, 110 U.S. 76, 3 S.Ct. 423 (1884); but some cases have held that if federal law is silent it may be appropriate to look to state law. Roberson v. Wood, 500 F. Supp. at 858.
Plaintiffs also ask that James J. Roche be appointed administrator of the Estate of Robert E. O'Connor, but there is no contention or proof that an estate has been opened, and James J. Roche has objected to such appointment. The record contains no facts which we are aware of that would lead us to find that James J. Roche is the legal representative of Robert O'Connor's estate. As a general rule, where "[t]here is no other legal relationship between [the party to be substituted] and the deceased [defendant] other than kinship", a Rule 25(a) motion must be denied. Roberson v. Wood, 500 F. Supp. 854, 859 (S.D. Ill., 1980). Some courts have applied a narrow exception to this general rule. "A distributee of an estate is a `proper party' under Rule 25(a) if the estate of the deceased has been distributed at the time the motion for substitution has been made." Gronowicz v. Leonard, 109 F.R.D. 624, 626 (S.D.N.Y., 1986), citing McSurely v. McClellan, 753 F.2d 88, 99, 243 U.S. App. D.C. 270, cert. denied 474 U.S. 1005, 106 S.Ct. 525, 88 L.Ed.2d 457 (1985). This court has not been apprized of any facts which would lead it to find that the estate of Robert O'Connor has been distributed and that James J. Roche is a distributee of the estate. Equally important, as the court stated in Rende v. Kay, 415 F.2d 983, 985 (D.C. Cir., 1969), "[a]lthough the attorney for the defendant was retained to `represent' the deceased as his counsel; he is not a person who could be made a party and is not a `representative' of the deceased party' in the sense contemplated by Rule 25(a)(1)." Likewise, in Boggs v. Dravo Corp., 532 F.2d 897, 900 (3d Cir., 1976), the Court stated, "even the most liberal construction of the Rule (25) would not permit substitution of a party's attorney who did not have legal status as a legal representative of the deceased party's estate".
Plaintiffs' request in this ease for the appointment of James J. Roche is not warranted by the existing law. It appears to have been made without a reasonable inquiry into the existing law or facts, or both. Accordingly, plaintiffs' motion for substitution of parties is denied with prejudice.
CONCLUSION
For the reasons set forth above Defendants O'Connor Ford and Lifeguard's motions to dismiss Count III are denied. O'Connor Ford, Robert E. O'Connor and Lifeguard's motions to dismiss Count IV are granted. O'Connor Ford Inc.'s motion to dismiss Count VI is denied. Pullman's motion to dismiss Count VI is denied. Lifeguard's motion to dismiss Count VI is granted. (#80-1) (#82-1) Plaintiffs' motion to substitute the estate of Robert B. O'Connor is denied and Robert E. O'Connor is dismissed from the complaint (Counts III, IV and VI). (#87-1).