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SCARSDALE BUILDERS, INC. v. RYLAND GROUP

January 16, 1996

SCARSDALE BUILDERS, INC., Plaintiff,
v.
RYLAND GROUP, INC., Defendant.



The opinion of the court was delivered by: SHADUR

 Ryland Group, Inc. ("Ryland") has filed its Answer Affirmative Defenses to Count I (a breach of contract claim) of the Complaint brought against it by Scarsdale Builders, Inc. ("Scarsdale"), simultaneously filing a motion to dismiss Complaint Count II (which is grounded on the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 to 505/12). *fn1" Because Scarsdale's counsel has contemporaneously filed a responsive memorandum, the motion is ripe for decision.

 Both of Scarsdale's claims share the common gravamen that Ryland agreed to sell Scarsdale some unimproved Illinois real estate (an 80-lot subdivision in Cook County). *fn2" Each company is a real estate developer engaged in the construction of residences on such lots, and Complaint Ex. B is the type of lengthy Real Estate Agreement (the "Agreement," which occupies fully 35 typewritten pages) that is typical of the acquisition of a tract development, with staged drawdowns of the lots for purposes of the residential construction. Complaint Count I alleges that Ryland breached its representation under Agreement P10.1(f) when it refused to pay the fees for sanitary connections and water tap-ons to the lot. Count II claims that the selfsame refusal violated the Act because Ryland's promise to bear those fees (either an express or an implied promise) was false.

  For a number of reasons, including the possibility that if broadly construed the Act could effectively swallow up both the Illinois common law of fraud (unlike that tort, the Act does not require detrimental reliance *fn3" ) and the Illinois common law of contracts (by characterizing any broken promise as a "false promise" within the meaning of the Act), the statute has been an extremely prolific source of litigation. When those factors are coupled with the checkered history of the Act, under which some amendments aimed at certain perceived problems have made its coverage extraordinarily opaque, motions of the present type frequently prove more complex than they ought to be.

 For example, the Act still bears its original short title of "Consumer Fraud and Deceptive Business Practices Act" (Act § 12), but that has tended in common usage to be shortened to "Consumer Fraud Act" alone (see, e.g., the recent opinion by this Court's colleague Honorable Marvin Aspen in Industrial Specialty Chems., Inc. v. Cummins Engine Co., 902 F. Supp. 805, 811 (N.D. Ill. 1995)--a usage that follows the lead of many state court decisions, and indeed has been employed by this Court in the course of opinions dealing with situations that are consumer-fraud-based). And although the actual statutory title is framed in a way that does not indicate that the second half of its conjunctive elements--"Deceptive Business Practices"--is also modified by a limiting reference to "consumers," the use of the shorthand version has led to such statements as (Industrial Specialty, id.):

 
As its name indicates, the Consumer Fraud Act is primarily concerned with protecting consumers.

 Yet Act § 2, which identifies the "unfair methods of competition and unfair or deceptive acts or practices" that the Act declares unlawful, says nothing at all about limiting those matters to consumers as victims, and Act § 10a(a)--which is the statutory source for actions such as this one--confers a private cause of action not on "consumers" alone but on "any person who suffers damage as a result of a violation of this Act committed by any other person." And of course Act § 1(c) gives the term "person" the usual all-encompassing definition (including for example partnerships, corporations, business entities and associations as well as individuals). Moreover, the frequent bobtailing of the Act's title to "Consumer Fraud Act" has tended to obscure the fact that its full title (with emphasis added) says that it is "an Act to protect consumers and borrowers and businessmen against fraud, unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce..." (see Historical and Statutory Notes to Act § 1, West's Smith-Hurd Illinois Compiled Statutes Annotated at 562 (1993)).

 Whatever may be the source of the apparent misapprehension in some quarters that the Act is solely focused on consumer protection (despite the just-discussed compelling evidence to the contrary), a good deal of case law had developed over the years tending to suggest that conduct would not be Act-violative unless it were of the type that would injure consumers in general. To scotch that misunderstanding, effective January 1, 1990 the General Assembly amended Act § 10a(a) so that the existing statutory provision, which conferred a private cause of action upon any injured "person," was followed with this statement:

 
Proof of a public injury, a pattern, or an effect on consumers generally shall not be required.

 Indeed, in a somewhat different respect that is potentially relevant here, the Act itself has created a major possibility of confusion by the manner in which it is drafted. Thus Act § 1(e) and (b) set out these definitions (emphasis added):

 
(e) The term "consumer" means any person who purchases or contracts for the purchase of merchandise not for resale in the ordinary course of his trade or business but for his use or that of a member of his household;
 
* * *

 Those provisions certainly make it plain that the buyer of real estate in Illinois is not a "consumer" in statutory terms. If then the Act's coverage were really limited to the protection of "consumers" as defined, Scarsdale's Count II would be knocked out of the box without further ...


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