the nature of the plaintiffs' breach of contract claim, and the hypothesis that the plaintiffs fulfilled their contractual obligations is certainly consistent with the allegations in the complaint. A line-by-line review of the relevant contracts, accompanied by "specific facts" demonstrating the plaintiffs' compliance with each and every provision of those contracts, is simply not necessary at this stage of the proceedings.
The defendants' second argument -- that the plaintiffs' claim that Santanna breached Petri's Gas Sales Contract is contradicted by the language of the agreements
-- is more persuasive. Focusing on § 3.1 of that contract, which provides that "the price per Therm shall be based on the monthly market price then in effect for natural gas delivered to the various natural gas Sales Point(s) into the interstate pipelines," the plaintiffs assert that Santanna breached the agreement by "charging prices other than the lowest monthly market price for natural gas." Amended Complaint P 61. But as the passage quoted above clearly reveals, § 3.1 of the contract did not obligate Santanna to charge the lowest monthly market price. The verb "base" means "to use as a base or basis for," see Webster's Third New International Dictionary 180 (1971); see also id. 181 ("BASE now usu. applies to what underlies a belief, a system of thought, a judgment, a hope, and so on . . . based on prospective earnings>"); The Random House Dictionary of the English Language 172 (2d ed. 1987) (stating that the verb "base" means "to place or establish on a base or basis; ground; found (usually fol. by on or upon)"), and the noun "base" is typically defined as a "foundation," or "that on which something rests or stands." Webster's Third New International Dictionary 180 (1971); see also The Random House Dictionary of the English Language 172 (2d ed. 1987); Black's Law Dictionary 151 (6th ed. 1990) (both containing a similar definitions). By requiring Santanna to charge rates which were based on the monthly market price, § 3.1 of the Gas Sales Contract obliged Santanna only to charge rates which bore some relation to the monthly market price, not to charge rates that were identical to the lowest monthly market price. Of course, Santanna may have breached the contract by charging rates that were altogether divorced from the monthly market price; to date, however, the plaintiffs have not made such a claim. Accordingly, insofar as it is premised on an alleged breach of Petri's Gas Sales Contract, Count I is dismissed.
II. Counts II (Illinois Consumer Fraud and Deceptive Business Practices Act) and III (Texas Deceptive Trade Practices-Consumer Protection Act)
A. Rule 12(b)(6)
1. Count II
The Illinois Consumer Fraud and Deceptive Business Practices Act prohibits "unfair methods of competition and unfair or deceptive acts or practices." 815 ILCS 505/2 (West 1993).
The Act is designed "to eradicate 'all forms of deceptive and unfair business practices and to grant appropriate remedies to defrauded consumers,'" Lee v. Nationwide Cassel, L.P., 277 Ill. App. 3d 511, 660 N.E.2d 94, 100, 213 Ill. Dec. 837 (Ill. App. Ct. 1995) (quoting Warren v. LeMay, 142 Ill. App. 3d 550, 491 N.E.2d 464, 471, 96 Ill. Dec. 418 (Ill. App. Ct. 1986)), rev'd in part, 174 Ill. 2d 540, 675 N.E.2d 599, 221 Ill. Dec. 404 (Ill. 1996); see also Lyne v. Arthur Andersen & Co., 772 F. Supp. 1064, 1067-68 (N.D. Ill. 1991); Law Offices of William J. Stogsdill v. Cragin Fed. Bank for Sav., 268 Ill. App. 3d 433, 645 N.E.2d 564, 565, 206 Ill. Dec. 559 (Ill. App. Ct. 1995) (both explaining that the aim of the Act is to protect "consumers, borrowers and businessmen" against fraud, acts of deception, and unfair competitive practices), and thus "provides broader consumer protection than an action for common law fraud." Moore v. Fidelity Fin. Services, Inc., 949 F. Supp. 673, 679 (N.D. Ill. 1997); accord Barille, 682 N.E.2d at 124; Perona v. Volkswagen of Am., Inc., 292 Ill. App. 3d 59, 225 Ill. Dec. 868, 684 N.E.2d 859, 864 (Ill. App. Ct. 1997). To establish a violation of the ICFA, a plaintiff must show that (1) the defendant committed a deceptive act, such as the misrepresentation or concealment of a material fact; (2) the defendant intended to induce the plaintiff's reliance on the deception; and (3) the deception occurred in a course of conduct involving trade or commerce. Thacker v. Menard, Inc., 105 F.3d 382, 386 (7th Cir. 1997); Tibor Mach. Products v. Freudenberg-NOK Gen. Partnership, 942 F. Supp. 1165, 1172 (N.D. Ill. 1996) (Grady, J.); Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 675 N.E.2d 584, 593, 221 Ill. Dec. 389 (Ill. 1996); Smith v. Prime Cable Co. of Chicago, 276 Ill. App. 3d 843, 658 N.E.2d 1325, 1335, 213 Ill. Dec. 304 (Ill. App. Ct. 1995).
The defendants maintain that the complaint fails to state a cognizable claim under the ICFA for three reasons. First, the defendants argue that the plaintiffs' claim is at best one for breach of contract rather than for fraud, and that Count II is insufficient because it fails to "allege conduct implicating consumer protection concerns." Santanna Memorandum at 7-8; Santanna Reply at 5. Second, the defendants argue that the passage in their brochures indicating that "a customer can save 15% to 35% on annual gas bills" is neither false nor a statement of fact. Id. at 8-9; Santanna Reply at 6. Third, the individual defendants argue that officers generally cannot be held responsible for their corporation's ICFA violations, and that the complaint fails to allege that Gatlin, Smith, or Pajares committed any specific acts of deception. Memorandum of Law In Support Of The Motion To Dismiss Of Defendants T. Wayne Gatlin, Jesse D. Smith And Jerry Pajares ("Individual Defendants Memorandum") at 13-14; Reply Memorandum In Further Support Of The Motion To Dismiss Of Defendants T. Wayne Gatlin, Jesse D. Smith And Jerry Pajares ("Individual Defendants Reply") at 9.
The defendants' first argument -- that the plaintiffs have alleged no more than a simple breach of contract claim and have not established a nexus between the defendants' conduct and consumer protection concerns -- is unavailing. True, the ICFA "was not intended to provide a remedy for ordinary common law breach of contract actions." Stern v. Great W. Bank, 959 F. Supp. 478, 486 (N.D. Ill. 1997); see also Stogsdill, 645 N.E.2d at 567 ("Every individual breach of a contract between two parties does not amount to a cause of action under the Act."); Bankier v. First Fed. Sav. & Loan Ass'n of Champaign, 225 Ill. App. 3d 864, 588 N.E.2d 391, 398, 167 Ill. Dec. 750 (Ill. App. Ct. 1992) (citing additional Illinois cases). We may also assume arguendo that "where a dispute involves two businesses that are not consumers," the test for sufficiency under the ICFA is "'whether the alleged conduct involves trade practices addressed to the market generally or otherwise implicates consumer protection concerns.'" Lake County Grading Co. of Libertyville, Inc. v. Advance Mechanical Contractors, Inc., 275 Ill. App. 3d 452, 654 N.E.2d 1109, 1115, 211 Ill. Dec. 299 (Ill. App. Ct. 1995) (quoting Downers Grove Volkswagen, Inc. v. Wigglesworth Imports, Inc., 190 Ill. App. 3d 524, 546 N.E.2d 33, 41, 137 Ill. Dec. 409 (Ill. App. Ct. 1989)); see also Athey Products Corp. v. Harris Bank Roselle, 89 F.3d 430, 436-37 (7th Cir. 1996); Scarsdale Builders, Inc. v. Ryland Group, Inc., 911 F. Supp. 337, 340-41 (N.D. Ill. 1996); (both adopting the "consumer nexus" test as articulated in Lake County).
But neither of those canons of statutory construction necessitates the dismissal of the plaintiffs' ICFA claim. First, Count II simply cannot be classified as a garden variety breach of contract claim. If the plaintiffs were merely alleging that Santanna regularly entered into contracts it had no intention of fulfilling, their ICFA claim would be suspect. However, the plaintiffs allege not just that the defendants regularly breached their natural gas contracts, but also that the defendants lured consumers into signing those contracts by disseminating promotional brochures containing misrepresentations of material facts. See also 997 F. Supp. 956, 1997 U.S. Dist. LEXIS 20862, *40-45 (discussing the defendants' "breach of contract" rationale in relation to Count III). If proved, these allegations would entitle the plaintiffs to relief under the Act. Cf. Rohlfing v. Manor Care, Inc., 172 F.R.D. 330, 350 (N.D. Ill. 1997) (refusing to dismiss an ICFA claim because the complaint alleged that the defendants "misrepresented the prices [the plaintiff] would be charged by falsely claiming that their prices were lower than those of alternative suppliers"); Mitchell v. Norman James Constr. Co., 291 Ill. App. 3d 927, 684 N.E.2d 872, 883, 225 Ill. Dec. 881 (Ill. App. Ct. 1997) (refusing to dismiss an ICFA claim which alleged that the defendant made false representations, concealed defective work, and failed to schedule required inspections "all to induce the plaintiff to enter into the contract in the first instance"); Rumford v. Countrywide Funding Group, 287 Ill. App. 3d 330, 678 N.E.2d 369, 373, 222 Ill. Dec. 757 (Ill. App. Ct. 1997) (finding that the plaintiff's claim "was not based on a simple breach of contract but on an allegation that defendant was engaged in a pattern of misrepresenting to customers that additional charges would not be assessed"); Borcherding v. Anderson Remodeling Co., 253 Ill. App. 3d 655, 624 N.E.2d 887, 892, 191 Ill. Dec. 699 (Ill. App. Ct. 1993) (refusing to dismiss an ICFA claim because the plaintiffs adequately alleged that the defendant "made several false material statements which induced them to enter into a remodeling contract"); see generally Stern, 959 F. Supp. at 486 ("The Consumer Fraud Act has been properly applied in cases where a defendant made affirmative misrepresentations to the plaintiffs."). Second, the consumer nexus test is inapplicable because the dispute at hand does not involve "two businesses that are not consumers." See Lefebvre Intergraphics, Inc. v. Sanden Mach. Ltd., 946 F. Supp. 1358, 1368 (N.D. Ill. 1996) (emphasizing that the test "applies only to a Consumer Fraud Act action by a business that is not a consumer of the other business's products"). Section 505/1(e) of the Act broadly defines "consumer" as "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," see also Stogsdill, 645 N.E.2d at 566 (highlighting the Act's "broad statutory definition of consumer"),
and Illinois courts frequently emphasize that the terms of the Act should be "liberally construed." Connick, 675 N.E.2d at 594; Johnston v. Anchor Org. for Health Maintenance, 250 Ill. App. 3d 393, 621 N.E.2d 137, 140, 190 Ill. Dec. 268 (Ill. App. Ct. 1993); see also Uniroyal Goodrich Tire Co. v. Mutual Trading Corp., 749 F. Supp. 869, 877-78 (N.D. Ill. 1990) (honoring "the Act's broad definitional sweep and explicit mandate of liberal construction" while interpreting the statutory definition of "consumer"). Since Petri and Todd purchased natural gas for use in the buildings they own, and
since Petri and Todd only lease apartments and do not resell the gas, they appear to qualify as "consumers" and are thus protected by the ICFA. Furthermore, even if we were to require a consumer nexus, the complaint would
still pass the test. According to the plaintiffs, the defendants for several years have (1) distributed "hundreds or thousands of copies" of the brochures containing the alleged misrepresentations to prospective customers, see Amended Complaint P 18; (2) used a limited number of standard-form agency agreements and gas sales contracts, see id. P 28; and (3) observed a "policy and practice" of misrepresenting the savings customers can achieve by purchasing natural gas from Santanna. See id. PP 49-50. This alleged conduct surely implicates consumer protection concerns.
The defendants' second argument fares no better. The defendants contend that their statement in the promotional brochures that a customer can save 15% to 35% on annual gas bills "is clearly an expression of opinion of what can (not will) happen in the future, and . . . such expressions of opinion are not actionable in fraud." Santanna Memorandum at 8-9 (emphasis in original).
The defendants also contend that the statement is not false, since the plaintiffs have admitted that consumers can, in fact, expect to save up to 15%. Id. at 9 (citing paragraphs 20 and 21 of the Amended Complaint); Santanna Reply at 6. Again, as a matter of hornbook law it is true that mere expressions of opinion, or "puffing," are not actionable under the ICFA. In re Estate of Albergo, 275 Ill. App. 3d 439, 656 N.E.2d 97, 107, 211 Ill. Dec. 905 (Ill. App. Ct. 1995) (citing Sohaey v. Van Cura, 240 Ill. App. 3d 266, 607 N.E.2d 253, 272, 180 Ill. Dec. 359 (Ill. App. Ct. 1992)); Evanston Hosp. v. Crane, 254 Ill. App. 3d 435, 627 N.E.2d 29, 36, 193 Ill. Dec. 870 (Ill. App. Ct. 1993). But "[a] statement that would otherwise be an opinion can constitute a statement of fact if it is made in such a way that the consumer could reasonably treat it as a statement of fact." Borcherding, 624 N.E.2d at 892; see also Thacker, 105 F.3d at 386 (quoting Totz v. Continental Du Page Acura, 236 Ill. App. 3d 891, 602 N.E.2d 1374, 1382, 177 Ill. Dec. 202 (Ill. App. Ct. 1992)). Consequently, we need not consider any fine grammatical distinctions between the verbs "can," "may," or "will," since the plaintiffs reasonably could have treated the defendants' statement that customers could save between 15% and 35% on annual bills as one of fact. Moreover, the plaintiffs allege only that the brochures gave the impression that the potential (not necessarily actual) savings could be between 15% and 35%, when in fact there was never any possibility of achieving these savings for the vast majority of Santanna customers. The defendants' other point (that the statement is not actionable because the plaintiffs have conceded that customers can save up to 15%) is wholly unconvincing. The plaintiffs allege that the defendants' literature informs readers that they can save a minimum of 15%, when in reality 15% is the maximum amount they can expect to save by selecting Santanna as their supplier. That a customer could fall within the defendants' inflated range of 15% to 35% in the event he achieved the maximum possible savings of 15% does not mean that the brochures could not have been misleading.
The individual defendants' third argument -- that the plaintiffs' allegations are insufficient under Rule 12(b)(6) to render Gatlin, Smith, or Pajares liable for any ICFA violations committed by Santanna -- also misses the mark. As the defendants note in their brief, the general rule in Illinois is that "while a corporation can be held liable for the acts of its agents, the directors or officers cannot be held individually liable unless they participated in the conduct giving rise to that liability." Prince v. Zazove, 959 F.2d 1395, 1401 (7th Cir. 1992); see also Washington Courte Condominium Ass'n-Four v. Washington-Golf Corp., 267 Ill. App. 3d 790, 643 N.E.2d 199, 217, 205 Ill. Dec. 248 (Ill. App. Ct. 1994) (stating that a corporate officer is liable "for the torts of the corporation in which he actively participates"); see generally Itofca, Inc. v. Hellhake, 8 F.3d 1202, 1204 & n.6 (7th Cir. 1993) (remarking that "this has been the rule of law in Illinois for over sixty years"). But there are two problems with the defendants' position. First, most of the authorities upon which the defendants rely are inapposite, because Count II involves a statutory claim, not a tort claim. Garcia v. Overland Bond & Inv. Co., 282 Ill. App. 3d 486, 668 N.E.2d 199, 218 Ill. Dec. 36 (Ill. App. Ct. 1996) expressly recognizes the distinction. See 668 N.E.2d at 199-200 (noting that "corporate employees are not vicariously liable for tortious acts of the corporation in which they do not participate" and emphasizing that the ICFA "confers a statutory right of action created by the legislature") (emphasis in original). Second, even if the traditional rules of tort liability do apply to statutory fraud claims, the complaint still passes muster. While the absence of specific facts linking the individual defendants to the alleged ICFA violations might be fatal to the plaintiffs' claim in an Illinois tribunal, that is not the case under the Federal Rules. To reiterate, in a notice pleading system a suit should not be dismissed so long as it is possible to hypothesize facts, consistent with the complaint, that would make out a claim for relief. See 997 F. Supp. 956, 1997 U.S. Dist. LEXIS 20862, *10-11, *15-18. The plaintiffs have at least generally alleged that the individual defendants were responsible for disseminating the brochures, see Amended Complaint P 10; that they approved the representations in the brochures, see id. P 19; and that they knew those representations were false. See id. PP 22, 25; see also 997 F. Supp. 956, 1997 U.S. Dist. LEXIS 20862, *51-53 (explaining that, for purposes of Rule 9(b), the plaintiffs are entitled to assume during the pleading stage that the individual defendants were responsible for the brochures). No more is required under Rule 12(b)(6).
2. Count III
Not surprisingly, the Texas Deceptive Trade Practices-Consumer Protection Act in many ways parallels the Illinois Consumer Fraud and Deceptive Business Practices Act. The underlying purposes of the DTPA are "to protect consumers against false, misleading and deceptive business practices, and to provide efficient and economical procedures to secure such protection." State Farm Fire and Cas. Co. v. Price, 845 S.W.2d 427, 439 (Tex. App. 1992); accord Pope v. Rollins Protective Services Co., 703 F.2d 197, 201 (5th Cir. 1983); McClung v. Wal-Mart, 866 F. Supp. 306, 310 (N.D. Tex. 1994). The Act is to be "liberally construed" to achieve these goals. Brandon v. American Sterilizer Co., 880 S.W.2d 488, 490 (Tex. App. 1994); Star Houston, Inc. v. Kundak, 843 S.W.2d 294, 297 (Tex. App. 1992) (citing McKinley v. Drozd, 685 S.W.2d 7, 11 (Tex. 1985)). To establish a violation of the Act, a plaintiff must show that (1) he fits the statutory definition of "consumer;" (2) the defendant engaged in false, misleading, or deceptive acts; and (3) these acts constituted a "producing cause" of the plaintiff's damages. Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 478 (Tex. 1995); LaBella v. Charlie Thomas, Inc., 942 S.W.2d 127, 134 (Tex. App. 1997); Cianfichi v. White House Motor Hotel, 921 S.W.2d 440, 443 (Tex. App. 1996). Misrepresentations of material facts are actionable under the DTPA so long as they are not merely "puffing" or expressions of opinion. Sergeant Oil & Gas Co. v. National Maintenance & Repair, Inc., 861 F. Supp. 1351, 1362 (S.D. Tex. 1994) (Crone, Mag. J.); Pennington v. Singleton, 606 S.W.2d 682, 687 (Tex. 1980); Humble Nat'l Bank v. DCV, Inc., 933 S.W.2d 224, 229 (Tex. App. 1996). Finally, Texas courts adhere to the rule that "an allegation of a mere breach of contract, without more, does not constitute a 'false misleading or deceptive act' in violation of the DTPA." Ashford Dev., Inc. v. USLife Real Estate Services Corp., 661 S.W.2d 933, 935 (Tex. 1983); accord Dura-Wood Treating Co. v. Century Forest Indus., Inc., 675 F.2d 745, 756 (5th Cir. 1982); Bass v. Hendrix, 931 F. Supp. 523, 534-35 (S.D. Tex. 1996); La Sara Grain Co. v. First Nat'l Bank of Mercedes, Tex., 673 S.W.2d 558, 565 (Tex. 1984); Chilton Ins. Co. v. Pate & Pate Enterprises, Inc., 930 S.W.2d 877, 889-90 (Tex. App. 1996).
The defendants' arguments as to why the plaintiffs' DTPA claim should be dismissed are familiar. First, the defendants again contend that the plaintiffs' claim is at best one for breach of contract, and that "claims based upon failure to perform under a contract are not actionable under the DTPA." Santanna Memorandum at 10. Second, the defendants renew their argument that the plaintiffs have not alleged that Gatlin, Smith, or Pajares were personally responsible for the alleged misrepresentations, and that the lack of such personal involvement precludes a finding of individual liability. Individual Defendants Memorandum at 13-14; Individual Defendants Reply at 8-9. Because the defendants have adduced additional Texas authorities in support of their arguments, these points warrant further consideration.
The defendants' second argument -- that Count III must be dismissed on a 12(b)(6) basis because Gatlin, Smith, and Pajares cannot be held responsible for any DTPA violations committed by Santanna -- cannot carry the day. Citing Light v. Wilson, 663 S.W.2d 813, 814-15 (Tex. 1983), and Leitch v. Hornsby, 885 S.W.2d 243, 249 (Tex. App. 1994),
the defendants maintain that the owner of a corporation is not individually liable under the DTPA if he did not personally violate the Act. For the most part, that is an accurate statement of Texas law. See Walker v. Federal Deposit Ins. Co., 970 F.2d 114, 122 (5th Cir. 1992) (recognizing that an individual corporate agent may be held liable under the DTPA for "oral or written misrepresentations made by him" and for "any tortious conduct that he committed in connection with his corporate duties"); Luevano v. Dow Corning Corp., 895 F. Supp. 135, 137 (W.D. Tex. 1994) (citing additional Texas cases for the proposition that "a corporate officer or employee may be personally liable for torts committed in the course of his employment"); Portlock v. Perry, 852 S.W.2d 578, 582 (Tex. App. 1993) (stating that "a corporate officer may be held individually liable for a corporation's tortious conduct if he knowingly participates in the conduct or has knowledge of the tortious conduct, either actual or constructive") (citing, among other cases, Leyendecker & Associates, Inc. v. Wechter, 683 S.W.2d 369, 375 (Tex. 1984)). As we previously noted in our discussion of the plaintiffs' ICFA claim, however, the plaintiffs have alleged that the individual defendants were responsible for and approved the misrepresentations in the brochures. See supra at 29-30. Since it is possible to hypothesize facts consistent with these allegations that would state a claim under the DTPA, we cannot dismiss Count III on the basis of the defendants' second argument.
The defendants' first argument -- that the plaintiffs' claim is merely one for breach of contract and therefore cannot be a basis for relief under the DTPA -- hinges on the Texas Supreme Court's recent decision in Crawford v. Ace Sign, Inc., 917 S.W.2d 12 (Tex. 1996). That case largely revolved around a meeting in 1989 between James R. Willett, the president of Ace Sign, and Larry Crawford, a sales representative for the Southwestern Bell Yellow Pages. During the meeting, Crawford told Willett that (1) because Ace Sign had fallen behind in its previous payments, it would be required to pay in advance for a renewal of a Yellow Pages advertisement; (2) Ace Sign's Yellow Pages ad would be published upon payment of the contract price; (3) businesses like Ace Sign tend to be heavily dependent on Yellow Pages advertising; and (4) a Yellow Pages ad would increase Ace Sign's business by 70% to 80% during the next year. Id. at 13, 14. Willett then entered into a written agreement with Crawford, and paid the full contract price in advance. When Willett's ad did not appear in the 1989-90 Yellow Pages directories, he sued Crawford and several other defendants for breach of contract, negligence, and assorted violations of the DTPA. Id. at 13. The Texas Supreme Court, after noting that "courts and commentators have struggled to clarify the boundary between contract claims and other causes of action," held that
the essence of [the plaintiff's] allegations is that: (1) the defendants represented that they would perform under the contract, and (2) nonperformance means that they misrepresented that they would perform under the contract. To accept this reasoning, however, would convert every breach of contract claim into a DTPA claim.
Crawford's statements were nothing more than representations that the defendants would fulfill their contractual duty to publish, and the breach of that duty sounds in contract. The statements themselves did not cause any harm. The failure to run the advertisement (the breach of the contract) actually caused the lost profits, and that injury is governed by contract law, not the DTPA. . . .