NOTICE: Under Supreme Court Rule 367 a party has 21 days after the
filing of the opinion to request a rehearing. Also, opinions are
subject to modification, correction or withdrawal at anytime prior
to issuance of the mandate by the Clerk of the Court. Therefore,
because the following slip opinion is being made available prior to
the Court's final action in this matter, it cannot be considered
the final decision of the Court. The official copy of the following
opinion will be published by the Supreme Court's Reporter of
Decisions in the Official Reports advance sheets following final
action by the Court.
Docket No. 79589--Agenda 11--March 1996.
KAREN CONNICK et al., Appellees, v. SUZUKI MOTOR COMPANY, LTD.,
et al., Appellants.
Opinion filed October 18, 1996.
JUSTICE HEIPLE delivered the opinion of the court:
Plaintiffs, each of whom had purchased a new Suzuki Samurai
sport utility vehicle, filed a class action lawsuit in the circuit
court of Cook County against defendants Suzuki Motor Company and
American Suzuki Motor Corporation (hereinafter referred to
collectively as Suzuki). Plaintiffs alleged that the Samurai was
unsafe due to its excessive roll-over risk and sought damages from
Suzuki for breach of warranty, common law fraud, and violation of
the Illinois and Pennsylvania consumer fraud statutes. The circuit
court dismissed the entire complaint for failure to state a claim
for which relief could be granted. The appellate court affirmed in
part and reversed in part (No. 1--94--1275 (unpublished order under
Supreme Court Rule 23)), reinstating the counts alleging breach of
express and implied warranty under the Uniform Commercial Code
(UCC) (810 ILCS 5/1--101 (West 1994)) and the count alleging
violation of the Illinois Consumer Fraud and Deceptive Business
Practices Act (Illinois Consumer Fraud Act) (815 ILCS 505/1 et seq.
(West 1994)). The appellate court affirmed the dismissal of the
remaining counts. We allowed Suzuki's petition for leave to appeal
(155 Ill. 2d R. 315) and, for the reasons that follow, we reverse
the appellate court's decision to reinstate the UCC warranty
counts, affirm the dismissal of the common law fraud count, and
affirm the reinstatement of the Illinois consumer fraud count.
FACTS
The named plaintiffs of this class action, residents of
Illinois, Pennsylvania and New Jersey, each purchased a new Suzuki
Samurai from an authorized Suzuki dealer. Some time after their
purchases, Consumers Union, a consumer watchdog organization, gave
the Samurai a "not acceptable" rating. According to Consumers
Union, the Samurai was unsafe because it had an excessive risk of
rolling over during sharp turns and accident avoidance maneuvers.
Subsequently, plaintiffs filed the instant complaint against
Suzuki. The class action, filed on behalf of all persons in the
United States who purchased or leased a Samurai from Suzuki or an
authorized Suzuki dealer, alleged that the Samurai's risk of roll
over was due to a defect in either design or production.
Significantly, plaintiffs did not allege that they had ever
suffered a roll-over accident in a Samurai. Rather, they sought
compensation for the diminution in the vehicles' resale value due
to the perceived safety risk.
Plaintiffs filed an original complaint and three amended
complaints in the circuit court of Cook County. The circuit court,
upon Suzuki's successive section 2--615 motions (735 ILCS 5/2--615
(West 1994)), dismissed each of the complaints for failure to state
a claim upon which relief may be granted. This appeal arises from
the dismissal of the third amended complaint, which contained
counts alleging breach of express and implied warranties, violation
of consumer fraud statutes, and common law fraud.
On appeal, the appellate court first applied conflict of law
principles to determine which law applied to the plaintiffs from
Illinois, Pennsylvania and New Jersey. Using the most significant
relationship test, the court found that Pennsylvania law applied to
the claims of the Pennsylvania plaintiffs, and that Illinois law
applied to the plaintiffs from Illinois and New Jersey.
The appellate court reinstated the express warranty count,
finding that various statements of Suzuki could have been a "basis
of the bargain." The court then affirmed the dismissal of the
implied warranty count under Illinois law because the complaint
failed to sufficiently allege facts constituting privity between
plaintiffs and Suzuki. Observing that Pennsylvania law does not
require privity for an action for breach of implied warranty, the
court nevertheless held that the count based on breach of the
implied warranty of fitness for a particular purpose was properly
dismissed under Pennsylvania law because the complaint did not
allege how the plaintiffs relied on Suzuki's skill or expertise in
choosing to purchase a Samurai. In respect to the count alleging
breach of the implied warranty of merchantability under
Pennsylvania law, the appellate court found that the excessive
safety risk made the vehicle unfit for its ordinary use and
reinstated this count.
The appellate court next addressed plaintiffs' allegations of
fraud. The court reinstated the Illinois consumer fraud counts,
though it did rule that the consumer fraud count could not be based
on certain statements by Suzuki that it deemed mere "puffery." In
addition, the appellate court found that the complaint failed to
state a claim under the Pennsylvania consumer fraud statute because
it did not allege that the plaintiffs purchased or leased the
Samurai "primarily for personal, family or household" use, as
required by statute. 73 Pa. Cons. Stat. §201--9.2(a) (1993).
The appellate court affirmed the dismissal of all common law
fraud counts, under both Pennsylvania and Illinois law, finding
that most of the allegedly fraudulent statements were not pled with
sufficient specificity and particularity. The court additionally
ruled that while the statements made by local Suzuki dealers were
alleged with sufficient specificity and particularity, the
complaint failed to adequately plead an agency relationship between
Suzuki and the local dealers and thus the statements could not be
attributed to Suzuki.
ANALYSIS
When the legal sufficiency of a complaint is challenged by a
section 2--615 motion to dismiss, all well-pleaded facts in the
complaint are taken as true and a reviewing court must determine
whether the allegations of the complaint, when interpreted in the
light most favorable to the plaintiff, are sufficient to establish
a cause of action upon which relief may be granted. DiBenedetto v.
Flora Township, 153 Ill. 2d 66, 69-70 (1992). Since plaintiffs
chose to amend each previously dismissed complaint, any error
regarding their dismissal is waived and we consider only the
sufficiency of the third and final amended complaint. Foxcroft
Townhome Owners Ass'n v. Hoffman Rosner Corp., 96 Ill. 2d 150, 155
(1983). In this appeal we thus address whether plaintiffs' third
amended complaint adequately stated: (1) a claim for UCC breach of
express or implied warranty under Illinois or Pennsylvania law; (2)
a claim of common law fraud under Illinois or Pennsylvania law; and
(3) a claim under the Illinois Consumer Fraud Act. Neither party
has appealed the appellate court's determination of the applicable
law or the appellate court's decision to affirm the dismissal of
the Pennsylvania consumer fraud count. Therefore those issues are
waived. 155 Ill. 2d R. 341(e)(7); Meyers v. Kissner, 149 Ill. 2d 1,
8 (1992).
In applying Pennsylvania law to the UCC breach of warranty
count, we will cite to Pennsylvania's interpretation of the UCC
wherever possible. However, Pennsylvania courts have not ruled on
some of the UCC section 2--607 issues raised in this appeal.
Section 1--102 of the UCC states that one of the underlying
purposes and policies of the Act is "to make uniform the law among
the various jurisdictions." 810 ILCS 5/1--102(2)(c) (West 1994); 13
Pa. Cons. Stat. §1102(2)(c) (1984). In keeping with this policy,
both Illinois and Pennsylvania have primarily followed the majority
interpretation of the UCC. See, e.g., Collins Co. v. Carboline Co.,
125 Ill. 2d 498, 508 (1988); Cucchi v. Rollins Protective Services
Co., 377 Pa. Super. 9, 546 A.2d 1131 (1988). We will accordingly
rely on Illinois decisions consistent with majority UCC
interpretations where Pennsylvania courts have remained silent
respecting section 2--607.
I. Breach of Warranty
Suzuki argues that plaintiffs cannot recover for a breach of
warranty under the UCC because the complaint did not adequately
allege that plaintiffs notified Suzuki of the breach as required by
article II, section 2--607, of the Uniform Commercial Code. 810
ILCS 5/2--607(3)(a) (West 1994); 13 Pa. Cons. Stat. §2607 (1984).
Plaintiffs counter that they were excused from giving direct notice
of breach of warranty because Suzuki had actual knowledge of the
breach and because notice was given by the filing of plaintiffs'
breach of warranty complaint.
Section 2--607 of the UCC mandates that a "buyer must within
a reasonable time after he discovers or should have discovered any
breach notify the seller of breach or be barred from any remedy."
810 ILCS 5/2--607(3)(a) (West 1994); 13 Pa. Cons. Stat. §2607
(1984). A notification of breach of warranty is sufficient if it
lets the seller know that the particular "transaction is still
troublesome and must be watched." 810 ILCS Ann. 5/2--607, Uniform
Commercial Code Comment 4 (Smith-Hurd 1993); 13 Pa. Cons. Stat.
§2607, Uniform Commercial Code Comment 4 (1984).
In general, buyers such as the instant plaintiffs must
directly notify the seller of the troublesome nature of the
transaction or be barred from recovering for a breach of warranty.
See 810 ILCS 5/1--201(26) (West 1994); 13 Pa. Cons. Stat. §1201(26)
(1984). There are instances, however, when a buyer can fulfill the
notice requirement without giving direct notice to the seller.
Direct notice is not required when (1) the seller has actual
knowledge of the defect of the particular product (Malawy v.
Richards Manufacturing Co., 150 Ill. App. 3d 549 (1986)); or (2)
the seller is deemed to have been reasonably notified by the filing
of the buyer's complaint alleging breach of UCC warranty (Perona v.
Volkswagen of America, Inc., 276 Ill. App. 3d 609 (1995)).
Plaintiffs argue that they properly alleged notice under either of
these two exceptions. In their complaint, plaintiffs alleged:
"Any notice of breach of warranty that may have been
required was provided to defendants or excused by each of
the following separately and cumulatively:
a. The June 2, 1988 Consumers Union report of
the Samurai's `not acceptable' rating;
b. The June, 1988 investigation by seven
states' attorneys general resulting in defendants'
agreement as set forth in paragraphs 34-36 above;
c. The commencement of the Pennsylvania
action; and
d. The commencement of this action."
We first consider plaintiffs' contention that they were
excused from giving direct notice of the breach of warranty because
Suzuki had actual knowledge of the Samurai's alleged safety risks.
It is uncontroverted that Suzuki was aware of the safety concerns
regarding the Samurai. Suzuki knew of the unfavorable report about
the Samurai issued by Consumers Union, as evidenced by its attempts
to counter that report with its own publicity. Moreover, Suzuki
entered settlement agreements with several states following
attorney general investigations of the Samurai's safety risks.
However, Suzuki's generalized knowledge about the safety
concerns of third parties is insufficient to fulfill plaintiffs'
UCC notice requirement. While it is unnecessary to list specific
claims of breach of warranty in giving notice under section 2--607
(810 ILCS Ann. 5/2--607, Uniform Commercial Code Comment 4 (Smith-
Hurd 1993); 13 Pa. Cons. Stat. §2607, Uniform Commercial Code
Comment 4 (1984)), it is essential that the seller be notified that
this particular transaction is "troublesome and must be watched."
See, e.g., Malawy, 150 Ill. App. 3d 549. As Judge Learned Hand
stated regarding section 2--607's predecessor:
"The notice `of the breach' required is not of the facts,
which the seller presumably knows quite as well as, if
not better than, the buyer, but of BUYER'S CLAIM that
they constitute a breach." (Emphasis added.) American
Manufacturing Co. v. United States Shipping Board
Emergency Fleet Corp., 7 F.2d 565, 566 (2d Cir. 1925).
Thus, even if a manufacturer is aware of problems with a particular
product line, the notice requirement of section 2--607 is satisfied
only where the manufacturer is somehow apprised of the trouble with
the particular product purchased by a particular buyer. See Malawy,
150 Ill. App. 3d 549 (actual knowledge satisfied notice requirement
where seller hospital removed defective medical device from
plaintiff); Crest Container Corp. v. R.H. Bishop Co., 111 Ill. App.
3d 1068 (1982) (actual knowledge satisfied notice requirement where
seller's employee visited plaintiff to "get to the bottom of why"
the product was malfunctioning); Overland Bond & Investment Corp.
v. Howard, 9 Ill. App. 3d 348 (1972) (actual knowledge satisfied
notice requirement where the car was towed to the seller's auto
dealership and seller's employees were told that the car needed
major repairs).
Plaintiffs' complaint alleged that Suzuki received notice of
the Samurai's safety problems through information received from
newspapers, magazines, and various third parties, all of which was
generalized information concerning the Samurai product line. The
complaint does not allege that Suzuki had actual knowledge of the
alleged breach of the particular products purchased by the named
plaintiffs in this lawsuit. Thus, plaintiff's allegation of actual
knowledge was insufficient to allege notice.
We next address plaintiffs' contention that Suzuki was deemed
to be notified of the breach of warranty upon the filing of
plaintiffs' complaint. Initially, we note that, in determining
whether notice of breach of warranty is adequate under the UCC,
courts divide plaintiffs into three categories: (1) merchant buyers
(see Board of Education v. A, C, & S, Inc., 131 Ill. 2d 428
(1989)); (2) consumer buyers who did not suffer personal injuries
(see Perona, 276 Ill. App. 3d 609); and (3) consumer buyers who did
suffer personal injuries (see Goldstein v. G.D. Searle & Co., 62
Ill. App. 3d 344 (1978); Bednarski v. Hideout Homes & Realty, Inc.,
709 F. Supp. 90 (M.D. Pa. 1988)). Only a consumer plaintiff who
suffers a personal injury may satisfy the section 2--607 notice
requirement by filing a complaint stating a breach of warranty
action against the seller. Accord Goldstein, 62 Ill. App. 3d 344;
Bednarski, 709 F. Supp. 90. The reason for this distinction is that
where the breach has not resulted in personal injury, the UCC
indicates a preference that the breach be cured without a lawsuit.
Since the instant plaintiffs did not allege that they suffered any
personal injuries as a result of the Samurai's alleged roll-over
risk, the section 2--607 notice requirement was not fulfilled by
filing a breach of warranty complaint. Perona, 276 Ill. App. 3d
609.
Since plaintiffs failed to allege direct notice to Suzuki and
since plaintiffs may not rely upon either exception to the direct
notice requirement, plaintiffs' complaint did not satisfy the
section 2--607 notice requirement. That failure to allege
sufficient notice is fatal to plaintiffs' breach of warranty
claims. 810 ILCS 5/2--607(3) (West 1994); 13 Pa. Cons. Stat. §2607
(1984); Board of Education, 131 Ill. 2d at 462-63; Williams v. West
Penn Power Co., 313 Pa. Super. 461, 460 A.2d 278 (1983). Thus, we
reverse the appellate court's finding that plaintiffs adequately
pled notice and hold that the breach of warranty counts in
plaintiffs' complaint were properly dismissed by the circuit court.
II. Fraud
We next consider the appellate court's rulings regarding the
fraud counts in plaintiffs' complaint. In the complaint, plaintiffs
contend that Suzuki committed common law fraud and statutory
consumer fraud by: (1) selling the Samurai to consumers; (2)
placing advertisements in magazines and sales brochures; (3)
providing driving guidelines in manuals accompanying each Samurai;
(4) issuing press releases responding to reports that the Samurai
was unsafe; (5) making statements through local Suzuki dealers; and
(6) concealing material facts regarding the Samurai's safety risks.
The circuit court dismissed the common law fraud counts and the
appellate court affirmed, finding that the complaint lacked
sufficient specificity and particularity. The appellate court
likewise affirmed the dismissal of the Pennsylvania consumer fraud
count because the complaint failed to allege that the Samurai was
purchased "primarily for personal, family or household purposes,"
as required by the Pennsylvania statute. 73 Pa. Cons. Stat. §201--
9.2(a) (1993). However, the appellate court found that plaintiffs'
complaint stated a cause of action under the Illinois Consumer
Fraud Act.
A. Common Law Fraud
1. Fraudulent Misrepresentation
Suzuki argues that the plaintiffs' common law fraud counts
based on specific representations were properly dismissed because
the complaint lacked both particularity and specificity. We agree.
The elements of common law fraud are: (1) a false statement of
material fact; (2) defendant's knowledge that the statement was
false; (3) defendant's intent that the statement induce the
plaintiff to act; (4) plaintiff's reliance upon the truth of the
statement; and (5) plaintiff's damages resulting from reliance on
the statement. Board of Education, 131 Ill. 2d at 452; Gibbs v.
Ernst, 538 Pa. 193, 210, 647 A.2d 882, 889 (1994). A successful
common law fraud complaint must allege, with specificity and
particularity, facts from which fraud is the necessary or probable
inference, including what misrepresentations were made, when they
were made, who made the misrepresentations and to whom they were
made. Board of Education, 131 Ill. 2d at 457; Pa. R. Civ. P.
1019(b); Martin v. Lancaster Battery Co., 530 Pa. 11, 18, 606 A.2d
444, 448 (1992).
We first address plaintiffs' allegations that Suzuki made
fraudulent misrepresentations in magazine advertisements, sales
brochures, new car manuals, and publicity issued in response to
reports that the Samurai was unsafe. These allegations are
inadequate to plead fraud because the complaint fails to state
which, if any, of the plaintiffs heard these representations and
relied on them. These allegations were not pled with specificity
and particularity. Board of Education, 131 Ill. 2d at 457; Pa. R.
Civ. P. 1019(b); Martin v. Lancaster Battery Co., 530 Pa. 11, 18,
606 A.2d 444, 448 (1992). Thus, the appellate court did not err in
affirming the circuit court's dismissal of the counts in fraudulent
misrepresentation based on magazine advertisements, sales
brochures, new car manuals, and publicity released by Suzuki.
We next address plaintiffs' allegations that statements made
by salesmen at local Suzuki dealers constituted fraud by Suzuki.
These statements were alleged with sufficient specificity in that
the complaint set forth what the statement was, when it was made,
who made it, and to whom it was made. Board of Education, 131 Ill.
2d at 457; Pa. R. Civ. P. 1019(b); Martin, 530 Pa. at 18-19, 606
A.2d at 448. Plaintiffs' complaint would therefore adequately state
a claim for common law fraud if these statements were sufficiently
alleged to have been made by Suzuki. However, the statements were
not made by Suzuki but by Suzuki dealers and therefore cannot be
the basis of a common law fraud count against Suzuki unless
plaintiffs have adequately alleged that the dealers were the agents
of Suzuki. A complaint relying on agency must plead facts which, if
proved, could establish the existence of an agency relationship. It
is insufficient to merely plead the legal conclusion of agency.
Knapp v. Hill, 276 Ill. App. 3d 376, 382 (1995); Clayton v.
McCullough, ___ Pa. ___, ___, 670 A.2d 710, 713 (1996).
Plaintiffs, in their complaint, alleged that they "purchased
their vehicles from authorized Suzuki dealers, who were agents of
defendants," and further alleged that certain named plaintiffs
"understood" the local Suzuki dealers to be agents of Suzuki. Such
allegations alone are mere legal conclusions and thus insufficient
to plead agency because they contain no facts to support a finding
that the local Suzuki dealers had actual or apparent authority to
act on Suzuki's behalf. See Washington v. Courtesy Motor Sales,
Inc., 48 Ill. App. 2d 380, 383 (1964) ("the term `Authorized ***
Dealer' is in the nature of a trade-mark sign, which is used by
independent dealers [citation] and means nothing more than a dealer
who sells [those] products").
First, we note that the complaint is devoid of any facts to
support actual agency authority, either express or implied (see
Progress Printing Corp. v. Jane Byrne Political Committee, 235 Ill.
App. 3d 292, 308 (1992); Reifsnyder v. Dougherty, 301 Pa. 328, 152
A.2d 98 (1930)), or apparent authority (see Gilbert v. Sycamore
Municipal Hospital, 156 Ill. 2d 511, 523 (1993); Reifsnyder, 301
Pa. 328, 152 A. 98). Specifically, plaintiffs have not alleged in
their complaint that Suzuki expressly gave authority to the
individual dealers to bind them to statements made regarding the
Samurai's safety. Nor did plaintiffs allege that the position of
the dealers inherently gave them implied authority to act on behalf
of Suzuki. Rather, the complaint merely stated that the dealers
were "authorized Suzuki dealers." This, without more, is merely an
allegation that the dealers were given permission to sell Suzuki
vehicles. It does nothing to support a claim that the dealers had
implied authority from Suzuki sufficient to impose liability on
Suzuki for fraudulent statements made by the dealers. See Spiegel
v. Sharp Electronics Corp., 125 Ill. App. 3d 897, 900 (1984) ("No
[agency] relationship exists between a supplier and a retailer
which simply and only sells merchandise bearing the supplier's
brand name").
In addition, plaintiffs did not adequately allege apparent
agency. Other than alleging that the dealers were "authorized,"
plaintiffs made no allegations about how Suzuki held out the
dealers as their agents. For instance, plaintiffs did not allege
that the dealers were required or requested by Suzuki to display
the Suzuki logos upon "signs, literature, products, brochures, and
plaques" within the dealerships. Malmberg v. American Honda Motor
Co., 644 So. 2d 888, 891 (Ala. 1994). Nor did plaintiffs allege
that Suzuki held out the dealers as their agents by requiring
dealer employees to wear a uniform with a Suzuki logo or by
requiring dealership employees to be trained by Suzuki. See
O'Banner v. McDonald's, No. 79547, slip op. at 5 (1996) (Bilandic,
C.J., dissenting) (discussing facts relevant to apparent agency
issue regarding a franchisee). In short, plaintiffs have alleged no
facts to support a claim that Suzuki held out the local dealers as
Suzuki's agents, thus giving them apparent authority.
In so ruling, we are not stating that an authorized dealer can
never be an agent of the manufacturer. Rather, we find that in
Illinois, where fact pleading is required, this complaint is
insufficient. Knox College v. Celotex Corp., 88 Ill. 2d 407, 424
(1981). Therefore, we affirm the dismissal of plaintiffs' common
law fraud count based on statements made by local Suzuki dealers.
2. Fraudulent Concealment
In their complaint, plaintiffs further alleged that Suzuki
committed fraud by failing to disclose its knowledge of the
Samurai's safety risks. In order to state a claim for fraudulent
concealment, a plaintiff must allege that the defendant concealed
a material fact when he was under a duty to disclose that fact to
plaintiff. Lidecker v. Kendall College, 194 Ill. App. 3d 309, 314
(1990); Wilson v. Donegal Mutual Insurance Co., 410 Pa. Super. 31,
40-41, 598 A.2d 1310, 1315-16 (1991). A duty to disclose a material
fact may arise out of several situations. First, if plaintiff and
defendant are in a fiduciary or confidential relationship, then
defendant is under a duty to disclose all material facts. Kurti v.
Fox Valley Radiologists, Ltd., 124 Ill. App. 3d 933, 938 (1984);
City of Harrisburg v. Bradford Trust Co., 621 F. Supp. 463, 473
(M.D. Pa. 1985). Second, a duty to disclose material facts may
arise out of a situation where plaintiff places trust and
confidence in defendant, thereby placing defendant in a position of
influence and superiority over plaintiff. Kurti, 124 Ill. App. 3d
at 938; City of Harrisburg, 621 F. Supp. at 473. This position of
superiority may arise by reason of friendship, agency, or
experience. Kurti, 124 Ill. App. 3d at 938; City of Harrisburg, 621
F. Supp. at 473.
Plaintiffs, in their complaint, failed to state a claim for
common law fraudulent concealment because they failed to adequately
allege that Suzuki had a duty to disclose its knowledge of the
Samurai's safety risks. Lidecker, 194 Ill. App. 3d at 314; Wilson,
410 Pa. Super. at 41, 598 A.2d at 1316. Regarding the relationship
between plaintiffs and Suzuki, the complaint merely alleged that
plaintiffs had purchased a Samurai from an authorized Suzuki
dealer, and that Suzuki manufactured and distributed the Samurai.
Nowhere in the complaint did plaintiffs sufficiently allege that
they were in a confidential or fiduciary relationship with Suzuki
or that Suzuki was in a position of superiority over them. Without
such allegations, plaintiffs' complaint did not allege a duty to
disclose material facts which could give rise to a claim for common
law fraudulent concealment. Knox College, 88 Ill. 2d at 424.
Accordingly, the count of common law fraudulent concealment was
properly dismissed by the trial court.
B. Illinois Consumer Fraud Act
We now address whether plaintiffs' complaint stated a valid
claim under the Illinois Consumer Fraud Act. The elements of a
claim under the Illinois Consumer Fraud Act (815 ILCS 505/2 (West
1994)) are: (1) a deceptive act or practice by defendant; (2)
defendant's intent that plaintiff rely on the deception; and (3)
that the deception occurred in the course of conduct involving
trade and commerce. Siegel v. Levy Organization Development Co.,
153 Ill. 2d 534, 542 (1992). Plaintiff's reliance is not an element
of statutory consumer fraud (see Harkala v. Wildwood Realty, Inc.,
200 Ill. App. 3d 447, 453 (1990)), but a valid claim must show that
the consumer fraud proximately caused plaintiff's injury (see
Wheeler v. Sunbelt Tool Co., 181 Ill. App. 3d 1088, 1109 (1989)).
Furthermore, a complaint alleging a violation of consumer fraud
must be pled with the same particularity and specificity as that
required under common law fraud. People ex rel. Hartigan v. E&E
Hauling, Inc., 153 Ill. 2d 473, 492 (1992).
First, we address whether plaintiffs adequately pled statutory
consumer fraud based upon statements by local Suzuki dealers. As
with common law fraud discussed above, the complaint was
insufficient to state a claim of statutory consumer fraud based on
statements of local Suzuki dealers because the complaint did not
adequately plead agency between Suzuki and the local dealers.
Accordingly, we reverse the appellate court insofar as it
reinstated any of the Suzuki consumer fraud counts based on
statements by local dealers.
Second, we address whether the complaint adequately pled a
consumer fraud violation based on statements made directly by
Suzuki. Plaintiffs can recover damages under the Consumer Fraud Act
only for injuries that were proximately caused by the alleged
consumer fraud. See Stehl v. Brown's Sporting Goods, Inc., 236 Ill.
App. 3d 976, 981 (1992). Accordingly, plaintiffs can state a valid
claim of consumer fraud only where premised upon statements made
prior to their dates of purchase. In that the counts of consumer
fraud were based upon statements made after the dates of purchase
alleged in the complaint, they were properly dismissed.
Third, we turn to the remaining counts of statutory consumer
fraud, i.e., those based on statements made prior to the dates of
purchase. Plaintiffs contended that the owner's manual accompanying
each new Samurai contained a representation violative of the
Illinois Consumer Fraud Act. Plaintiffs' complaint alleged that the
owner's manual provided " `guidelines' for safe `on-pavement
driving' " and that "[t]hese guidelines were provided because
[Suzuki] knew that plaintiffs and members of the Class would `often
use [the] vehicle on paved roads.' " In other paragraphs of the
complaint, plaintiffs alleged that Suzuki falsely represented to
plaintiffs that the Samurai was "safe for on and off road use."
These allegations, however, were insufficient to state a claim
under the Illinois Consumer Fraud Act. Plaintiffs' complaint fails
because it did not allege with specificity how the manual's
guidelines were false or deceptive. Specifically, the complaint
failed to allege how the Samurai was unsafe where a driver followed
the manual's guidelines. Without such specificity and
particularity, the complaint fails to state a violation of consumer
fraud. E&E Hauling, 153 Ill. 2d at 492. Accordingly, we reverse the
appellate court's reinstatement of this count, which had been
dismissed by the circuit court.
In their complaint, plaintiffs also alleged that Suzuki
committed consumer fraud by providing misinformation to Car &
Driver magazine. In January 1986, Car & Driver published a review
of the Samurai, allegedly based on information provided by Suzuki.
In the article, the reviewer stated: "Mindful of the rollover
problems associated with other vehicles of this type, the Suzuki
engineers built extensive passenger protection into the convertible
version of the Samurai." Plaintiffs contend in their complaint that
this information was false, alleging that, "in the event of a
rollover, the Samurai provides little, if any, protection for the
occupants of the vehicle in that it has improper side-door strength
and roof-crush resistance."
In light of the fact that the Illinois Consumer Fraud Act
should be liberally construed (Law Offices of William J. Stogsdill
v. Cragin Federal Bank for Savings, 268 Ill. App. 3d 433, 436
(1995)) and that, in reviewing the legal adequacy of a complaint,
we must interpret the allegations of the complaint in the light
most favorable to the plaintiff (DiBenedetto, 153 Ill. 2d at 69-
70), we find that plaintiffs' allegations regarding Suzuki's
representation to Car & Driver magazine adequately stated a cause
of action for consumer fraud.
First, plaintiffs' complaint adequately pled a deceptive act
or practice by Suzuki. Specifically, plaintiff alleged that Suzuki
represented to Car & Driver that the Samurai had special safety
features to protect passengers involved in a roll-over accident and
that this information was false since the Samurai had improper
side-door strength and roof-crush resistance.
Second, plaintiffs alleged that Suzuki intended purchasers to
rely on this statement, which they claim is evident from the very
nature of the representations themselves. Suzuki made statements to
a magazine planning to publish a review of the Samurai. Suzuki
undoubtedly knew that many prospective purchasers would read the
review and that information furnished to the magazine by Suzuki
would be one basis of the published review.
Third, plaintiffs alleged that the statements were made in
trade or commerce. Fourth, plaintiffs have alleged proximate cause,
as required. They allege that their purchases occurred after the
allegedly fraudulent statements, and the complaint contains no
facts showing an intervening cause that would break the chain of
proximate causation. Furthermore, the required allegation of
proximate cause is minimal since that determination is best left to
the trier of fact. Petrauskas v. Wexenthaller Realty Management,
Inc., 186 Ill. App. 3d 820, 832 (1989). We thus affirm the
appellate court's decision to reinstate the consumer fraud count
based on Suzuki's misinformation to Car & Driver magazine.
Lastly, we consider the counts alleging that Suzuki
fraudulently concealed material facts from plaintiffs. First,
plaintiffs alleged that Suzuki failed to inform consumers of the
Samurai's roll-over tendency, which was "an improper concealment,
suppression, or omission of a material fact, in violation of the
Consumer Fraud Acts." Plaintiffs further alleged that Suzuki
committed consumer fraud based on the mere sale of the Samurai
without disclosure of the safety risks, in that "[t]he offering for
sale *** of a consumer product *** constitutes a representation ***
that the product is reasonably safe for its intended use."
An omission or concealment of a material fact in the conduct
of trade or commerce constitutes consumer fraud. 815 ILCS 505/2
(West 1994); Mackinac v. Arcadia National Life Insurance Co., 271
Ill. App. 3d 138, 141 (1995). A material fact exists where a buyer
would have acted differently knowing the information, or if it
concerned the type of information upon which a buyer would be
expected to rely in making a decision whether to purchase.
Mackinac, 271 Ill. App. 3d at 141. Furthermore, it is unnecessary
to plead a common law duty to disclose in order to state a valid
claim of consumer fraud based on an omission or concealment. Celex
Group, Inc. v. Executive Gallery, Inc., 877 F. Supp. 1114, 1129
(N.D. Ill. 1995).
We find that plaintiffs adequately pled a consumer fraud
violation based on a material omission by Suzuki. Plaintiffs
alleged that Suzuki was aware of the Samurai's safety problems,
including its tendency to roll over and its inadequate protection
for passengers. Plaintiffs further alleged that Suzuki failed to
disclose these defects. Finally, plaintiffs alleged that the safety
problems of the Samurai were a material fact in that they would not
have purchased the vehicles if Suzuki had disclosed the Samurai's
safety risk. Accordingly, we affirm the appellate court insofar as
it reinstated the count alleging that Suzuki committed consumer
fraud by concealing material facts about the Samurai's safety
risks.
CONCLUSION
To summarize, we find that the counts based in UCC breach of
warranty and common law fraud were properly dismissed. We reinstate
the Illinois consumer fraud count, but only insofar as it was based
on the 1986 Car & Driver article or on Suzuki's concealment of
material facts regarding the Samurai's safety risk. For these
reasons, we affirm in part and reverse in part the judgments of the
appellate and circuit courts, and remand this cause to the circuit
court.
Appellate court judgment affirmed in part
and reversed in part;
circuit court judgment affirmed in part
and reversed in part;
cause remanded.
JUSTICE HARRISON, concurring in part and dissenting in part:
Although most of the majority's analysis is correct, I
disagree its conclusion that plaintiffs did not adequately plead
that the various Suzuki dealers were Suzuki's agents. The complaint
specifically alleged that the vehicles were purchased from
"authorized Suzuki dealers" who were "the actual and apparent
agents of [Suzuki]." At this point I do not know what else needed
to be said. Under the Code of Civil Procedure, "[n]o pleading is
bad in substance which contains such information as reasonably
informs the opposite party of the nature of the claim or defense
which he or she is called upon to meet." 735 ILCS 5/2--612(b) (West
1992). The allegations here accomplished that purpose. Additional
details, even if plaintiffs had them, would have contributed
little. The complaint, as it stood, supplied ample information for
defendants to prepare their answer.
I fail to see, moreover, how the court could reasonably expect
plaintiffs to be any more specific at this stage of the
proceedings. The situation here is analogous to the one present in
Gilbert v. Frank, 233 Ill. App. 3d 372 (1992), a medical
malpractice action against a hospital and one of its emergency room
physicians. Rejecting the hospital's argument that the complaint
did not adequately allege that the physician was its apparent
agent, the appellate court held that
"precision pleading should not be required if knowledge
of the pertinent facts is within the control of the
defendant rather than the plaintiff. (Holton v.
Resurrection Hospital (1980), 88 Ill. App. 3d 655, 658.)
In the case at bar, the hospital would have had knowledge
about the nature of its relationship with [the
physician], but it is highly unlikely that plaintiff
would have had access to this information when she filed
her complaint. Therefore we do not believe it is unfair
to the hospital to construe the allegation that [the
physician] was its agent to be an allegation that he was
either an actual or apparent agent. We conclude that
plaintiff adequately alleged in count II that [the
physician] was an apparent agent of the hospital and
reject the hospital's contrary contention." Gilbert v.
Frank, 233 Ill. App. 3d at 377.
Our court subsequently granted a petition for leave to appeal
in the case and expressly agreed with the appellate court's
reasoning and result on this issue. Gilbert v. Sycamore Municipal
Hospital, 156 Ill. 2d 511, 527 (1993). This result is consistent
with the principal that the existence of an agency relationship is
a question of fact for the trier of fact and that "[t]o require
plaintiffs, without benefit of discovery, to include in their
complaint sufficient factual detail to permit a determination of
these questions from the face of the complaint is both unrealistic
and unnecessary." Sherman v. Field Clinic, 74 Ill. App. 3d 21, 25
(1979).
Even if I could put these considerations aside and accept that
the allegations in the body of the complaint were too conclusory,
by themselves, to comply with our pleading requirements, the
majority's analysis would still be unpersuasive. In declaring the
agency allegations deficient, the majority overlooks the exhibits
that were attached to the plaintiffs' complaint. Where, as here,
exhibits are incorporated into a pleading, the facts set forth in
those exhibits have the same effect as if they had been alleged in
the body of the pleading itself. See E.A. Cox Co. v. Road Savers
International Corp., 271 Ill. App. 3d 144, 149 (1995). Accordingly,
the facts contained in the exhibits must be considered alongside
the allegations of the complaint in determining whether the
pleading adequately states a cause of action. See Payne v. Mill
Race Inn, 152 Ill. App. 3d 269, 275 (1987).
The exhibits to plaintiffs' third-amended complaint indicate
that Suzuki dealerships are not simply independent merchants who
buy a product from a manufacturer and resell it to third parties.
The dealerships sell the vehicles on Suzuki's behalf, and the
corporation receives no payment for its vehicles until the
dealerships have managed to sell them. Suzuki has also made the
dealerships responsible for handling the warranties extended by the
corporation to its customers. The owner's manual furnished to
consumers by Suzuki for the vehicle at issue here provides that any
questions are to be referred to the dealer, not Suzuki, and that if
warranty service is required, the vehicle should be taken to the
dealer. These facts clearly suggest that the dealers do act, in
every meaningful sense, as the agents of Suzuki for the purpose of
selling and servicing Suzuki vehicles.
If, despite all this, the court still believes that
plaintiffs' complaint is deficient, it is time for it to reassess
its pleading requirements. The General Assembly has declared that
pleadings must be construed liberally with the ultimate goal of
doing substantial justice between the parties (735 ILCS 5/2--603(c)
(West 1992)), and we are bound to adhere to this principle.
Instead, the majority persists in refusing to even acknowledge that
the principle exists. See Anderson v. Vanden Dorpel, 172 Ill. 2d
399, 417-20 (1996) (Harrison, J., dissenting). Although my
colleagues purport to rely on the old doctrine of "fact pleading"
to justify their position, I am afraid that what is really at work
here is a fundamental opposition to plaintiffs' claims. This is
unfair and contrary to the law. The court should not subvert
procedural requirements in order to effectuate its own private
version of tort reform.
I would reinstate the Illinois consumer fraud count based on
representations by local Suzuki dealers as well as on the
concealment of material facts by Suzuki itself. I would likewise
reinstate plaintiffs' common law fraud count to the extent it is
based on representations by local Suzuki dealers.
JUSTICE McMORROW, also concurring in part and dissenting in
part:
I agree with the majority that the circuit court correctly
dismissed the common law fraud counts for failure to state a cause
of action. I also believe that the majority properly reinstates
that part of the Illinois consumer fraud count relating to Suzuki's
concealment of the Samurai's safety risks. However, I find that the
complaint adequately alleges that Suzuki knew its vehicles were
"troublesome and must be watched." Accordingly, I would affirm the
appellate court's reinstatement of the breach of warranty claims.
As the majority observes, both the Illinois and Pennsylvania
Commercial Codes provide that "[a]ny affirmation of fact or promise
made by the seller to the buyer which relates to the goods and
becomes part of the basis of the bargain creates an express
warranty that the goods shall conform to the affirmation or
promise." 810 ILCS 5/2--313(1)(a) (West 1994); 13 Pa. Cons. Stat.
§2313(a)(1) (1984). If the goods fail to conform to the affirmation
or promise, the seller may be held accountable for breach of
warranty. In order to maintain such an action, a "buyer must within
a reasonable time after he discovers or should have discovered any
breach notify the seller of breach or be barred from any remedy."
810 ILCS 5/2--607(3)(a) (West 1994). There are, however, two
recognized exceptions to giving notice. "Direct notice is not
required when (1) the seller has actual knowledge of the defect of
the particular product (Malawy v. Richards Manufacturing Co., 150
Ill. App. 3d 549 (1986)); or (2) the seller is deemed to have been
reasonably notified by the filing of the buyer's complaint alleging
breach of UCC warranty (Perona v. Volkswagen of America, Inc., 276
Ill. App. 3d 609 (1995))." Slip op. at 5.
In this case, the complaint clearly alleges that Suzuki had
actual knowledge of a defect in its vehicles. The majority itself
notes: "It is uncontroverted that Suzuki was aware of the safety
concerns regarding the Samurai. Suzuki knew of the unfavorable
report about the Samurai issued by Consumers Union, as evidenced by
its attempts to counter that report with its own publicity.
Moreover, Suzuki entered [into] settlement agreements with several
states following attorney general investigations of the Samurai's
safety risks." Slip op. at 5-6.
Nonetheless, the majority holds that "it is essential that the
seller be notified that THIS PARTICULAR TRANSACTION is `troublesome
and must be watched.' " (Emphasis in original.) Slip op. at 6,
quoting 810 ILCS Ann. 5/2--607, Uniform Commercial Code Comment 4
(Smith-Hurd 1993). Thus, because the plaintiffs here did not allege
that Suzuki was aware that there was trouble with each and every
one of plaintiffs' vehicles, the majority finds that Suzuki did not
have actual knowledge of the defect. Surprisingly, the court
reaches this conclusion even though plaintiffs alleged that Suzuki
had knowledge that all of its vehicles suffered the same design
defect.
As support for its holding, the majority relies almost
exclusively on the appellate court decision in Malawy v. Richards
Manufacturing Co., 150 Ill. App. 3d 549 (1986). That case, however,
is not only inapposite to the case at bar, it also does not stand
for the proposition for which it is cited; namely, that a seller
must be notified of trouble with every particular transaction.
In Malawy, a single plaintiff suffered a fracture to his right
hip. As part of his surgery, doctors installed a metal plate into
the femur shaft fracture. The plate later broke, resulting in at
least five more surgeries. Plaintiff sued the hospital (as the
seller) as well as the manufacturer of the plate under a breach of
warranty theory. The manufacturer argued, however, that it did not
receive notice of the plaintiff's warranty claim. The appellate
court disagreed.
First, the court held that the seller, St. Elizabeth's
Hospital, had actual notice of the defect because its doctors
removed the broken plate. Second, the court noted that the
manufacturer was in fact "notified of the break of the plate
immediately after plaintiff [who originally sued the wrong
manufacturer] obtained knowledge that it was the manufacturer of
the plate." Malawy, 150 Ill. App. 3d at 561. Importantly, nowhere
in Malawy did the court ever hold that knowledge of a particular
transaction is a prerequisite to satisfying the notice
requirements. It just so happened that in Malawy there was a single
buyer and a single product. As a result, once the seller learned of
the broken plate, the seller necessarily became aware that there
was trouble with that particular transaction. That circumstance,
however, is far different from the factual situation presented
here.
In contrast to Malawy, this case involves a nationwide class
action against the manufacturer of a product claimed to have been
defectively designed. Specifically, plaintiffs allege that a defect
in the Samurai's design caused all of the vehicles to roll over
during turns or evasive maneuvers. Unlike a manufacturing defect,
which occurs when one or more products are defectively made, a
design defect renders all of the products defective all of the
time. Consequently, if a manufacturer has actual knowledge that
one of its products suffers a design defect, as opposed to a
manufacturing defect, it necessarily follows that the manufacturer
has knowledge that all of its products suffer that defect. In this
case, Suzuki had actual knowledge that the Samurai suffered a
design defect rather than a manufacturing defect. The majority
concedes as much, citing to the negative report issued by Consumers
Union as well as the attorney general investigations of the
Samurai's safety risks. Because Suzuki knew that its Samurai
suffered a design defect, it knew a fortiori that each and every
Samurai was defective. Contrary to the majority, I simply cannot
fathom how Suzuki can claim that it did not have knowledge of a
defect in each of its Samurais when in fact it had actual knowledge
of a defect in all of its Samurais.
Finally, as noted above, plaintiffs seek to represent a class
consisting of all persons in the United States who have purchased
or leased a Samurai during the relevant time period. Putting Suzuki
on notice to the same defect in every Samurai would not only be
redundant, it would also likely prove impractical. What purpose
would be served in requiring such notice where it appears that
large quantities of the same defective product are at issue? What
purpose would be served in requiring such notice where there has
been a considerable number of complaints over a substantial period
of time, so much so that the attorney generals of several states
have intervened on consumers' behalf?
Because I believe that plaintiffs' complaint adequately
alleges that Suzuki had actual knowledge of the defect, and because
I find Suzuki's other arguments regarding plaintiffs' claims for
breach of warranty lacking in merit, I would affirm the appellate
court's reinstatement of the breach of warranty count.
For the foregoing reasons, I respectfully dissent in part.
JUSTICE FREEMAN joins in this partial concurrence and partial
dissent.