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WILLIAMS v. FORD MOTOR CO.

July 29, 1997

JOSEPH WILLIAMS, on behalf of himself and others similarly situated, Plaintiff,
v.
FORD MOTOR COMPANY and HIGHLAND PARK FORD, INC., Defendants.



The opinion of the court was delivered by: MORAN

 Plaintiff Joseph Williams (Williams), on behalf of a putative class of individuals similarly situated, brought this action against defendants Ford Motor Company (Ford) and Highland Park Ford, Inc. (Highland) claiming violations of the Racketeer Influenced and Corrupt Organization Act (RICO), 18 U.S.C. § 1962(c), the Illinois Consumer Fraud Act, 815 ILCS 505/1 et seq., and the Magnuson Moss Consumer Warranty Act, 15 U.S.C. § 2310. Specifically, plaintiff claims that (1) defendants fraudulently sold plaintiff an extended service plan in connection with the purchase of a used car without disclosing the existence of an inspection fee, and (2) after plaintiff paid the inspection fee, defendant Ford breached the plan by failing to make the required payment. Jurisdiction is invoked pursuant to 18 U.S.C. § 1964, 28 U.S.C. § 1337, and 28 U.S.C. § 1367. Ford and Highland have filed separate motions to dismiss plaintiff's amended complaint pursuant to Fed.R.Civ.P. 9(b) and 12(b)(6). For the reasons stated below, Ford's motion to dismiss is granted in part and denied in part. Highland's motion to dismiss is granted.

 BACKGROUND

 In considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim, we accept all well pled factual allegations in the complaint as true and draw all reasonable inferences from these facts in favor of the plaintiff. Travel All Over the World, Inc. v. The Kingdom of Saudi Arabia, 73 F.3d 1423, 1429 (7th Cir. 1996). Read in this light, the facts are as follows.

 Ford is a Delaware corporation that sells automobiles in Illinois. Highland is a corporation that operates a car dealership in Highland Park, Illinois. Ford, through formal agreements with automobile dealerships like Highland, also sells vehicle service plans to car purchasers. Pursuant to these agreements the dealers provide necessary repairs to consumers under the service plans and Ford reimburses the dealers' costs.

 On June 17, 1994, plaintiff purchased a used 1990 Ford Festiva from Highland for a cash price of $ 4,800. Along with that vehicle, plaintiff paid an additional $ 1,195 for an extended service plan (ESP) that provided coverage for repairs incurred after the expiration of the manufacturer's basic limited warranty (in this case, after June 17, 1997, or 91,876 miles, whichever occurred first). The ESP covered the repair or replacement of 84 vehicle components at all participating Ford dealers in the United States and Canada. The only mention of costs beyond the initial purchase price of the ESP was the requirement of a $ 50 deductible per repair visit. The ESP stated that "All you pay is the deductible." It also stipulated that "repairs will be paid up to the then current N.A.D.A. wholesale value of the vehicle per repair visit" (Cplt. Exh. B.).

 On approximately July 24, 1996, plaintiff's Festiva lost power and he took it to Highland for service. Highland informed him that Ford required the payment of an inspection fee of $ 612.95 before it would decide whether the problems causing the mechanical breakdown were covered by the ESP. Neither Highland nor Ford had disclosed the existence of an inspection fee prior to this date and no reference to an inspection fee was contained in the ESP. On July 31, 1996, plaintiff paid the inspection fee and Highland inspected the vehicle.

 Highland found that the engine was defective and estimated the cost of repairs to be $ 6,000, which was in excess of the N.A.D.A. value of the vehicle ($ 1,575). Ford opted not to repair the vehicle and instead to pay plaintiff the N.A.D.A. value. Plaintiff repeatedly requested payment from both Highland and Ford, but has not yet received the amount owed to him under the ESP.

 Plaintiff originally filed a class action complaint against Highland and Ford on January 9, 1997, that included five separate counts: (I) a RICO claim against Highland; (II) an Illinois Consumer Fraud Act claim against Highland and Ford; (III) a breach of service contract claim against Ford for the inspection fee; (IV) a separate breach of service contract against Ford for its failure to pay plaintiff the value of the car; and (V) a separate Consumer Fraud Act claim against Highland. On April 16, 1997, after both defendants filed separate motions to dismiss, plaintiff filed an amended complaint pursuant to Fed.R.Civ.P. 15 withdrawing the two Consumer Fraud Act claims against Highland (Counts II and V).

 DISCUSSION

 I. Standard of Review

 A motion to dismiss tests the sufficiency of a complaint, not its merits. Triad Ass'n Inc. v. Chicago Housing Authority, 892 F.2d 583, 586 (7th Cir. 1989), cert. denied, 498 U.S. 845, 112 L. Ed. 2d 97, 111 S. Ct. 129 (1990). The allegations of a complaint should not be dismissed for failure to state a claim "unless it appears beyond a reasonable 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, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). In order to withstand a motion to dismiss a complaint must allege facts sufficiently setting forth the essential elements of the cause of action. Gray v. County of Dane, 854 F.2d 179, 182 (7th Cir. 1988). A complaint need not set out any legal theory; an incorrect legal theory is not fatal. Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992).

 II. RICO Claim Against Highland

 Normally, when an owner takes in his automobile for repairs, the shop finds out what is wrong, repairs the vehicle, and bills the owner for the entire job. Perhaps the shop will first provide an estimate, for a price, then the owner decides whether or not he wants the repairs made, and, if the repairs are made, the estimate price becomes part of the total cost of repairs. After all, the shop has to find out what is wrong before it can proceed. With insurance coverage, that initial look is for an added reason. Perhaps the repairs are not covered and then the owner must foot the bill. Perhaps the inspection fee becomes part of the repair bill if the repairs are covered and the work is done, with the insurance reimbursing the owner. Perhaps the insurer also reimburses the owner if (1) the repairs are covered, (2) they would cost more than the value of the vehicle, and (3) the insurer elects to pay the value of the vehicle. And perhaps not. The allegations of the complaint indicate that plaintiff paid a substantial sum for a plan that promised that he would pay only the deductible for covered repairs, and that Ford would pay the rest of the cost of the repairs or the value ...


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