The opinion of the court was delivered by: Justice Thomas
Docket No. 89371-Agenda 18-January 2001.
The plaintiff, Vanessa Jackson, brought this class action lawsuit against South Holland Dodge, Inc. (hereinafter, South Holland Dodge or dealership), and Chrysler Financial Corporation (Chrysler), alleging violations of the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 1994)), and the Sales Finance Agency Act (205 ILCS 660/1 et seq. (West 1994)), stemming from the listing on the parties' financing statement of a charge for the purchase of an extended service warranty. Chrysler filed a motion to dismiss, contending that its conduct complied with the requirements of the federal Truth in Lending Act (TILA) (15 U.S.C. §1601 et seq. (1994)) and, therefore, under Lanier v. Associates Finance, Inc., 114 Ill. 2d 1 (1986), it could not be held liable for the state-law claims. The circuit court of Cook County dismissed the claims against Chrysler and made its order final and appealable pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)). The appellate court affirmed the dismissal of the claims against Chrysler. 312 Ill. App. 3d 158. We allowed the plaintiff's petition for leave to appeal (177 Ill. 2d R. 315), and, for the reasons that follow, we affirm the appellate court's decision.
The plaintiff's amended complaint and the exhibits attached thereto establish that on May 17, 1995, the plaintiff purchased a 1995 Dodge Stratus from South Holland Dodge. As part of the transaction, the plaintiff purchased an extended service warranty contract for the sum of $1,099. She also entered into a motor vehicle retail installment contract with the dealership. The retail installment contract completed by the dealership states that $1,099 was paid to Chrysler for the extended service contract. However, South Holland Dodge did not actually pay all of the sum listed in the financing statement to Chrysler. Rather, South Holland Dodge paid only a small portion of the $1,099 to Chrysler and retained the balance of the charge. The plaintiff alleged in her amended complaint that the manner in which the price for the extended warranty is disclosed is deceptive and misleading because (1) the dealership represents that the entire amount is being disbursed to the company named, and (2) the charge is listed in the same section of the form as nonnegotiable items such as licensing and filing fees, leading the consumer to erroneously conclude that the cost of the extended warranty is a nonnegotiable fee.
South Holland Dodge subsequently assigned the retail installment contract to Chrysler. The plaintiff alleged that Chrysler is liable in the present case because the retail installment contract contains the following provision, which the Federal Trade Commission (FTC) has required sellers to include in consumer credit contracts since 1975:
"Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof. Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder." (Hereinafter, FTC Holder Notice.) 16 C.F.R. §433.2(a) (1997).
The plaintiff further alleged that based on Chrysler's "extensive experience in financing used car transactions," Chrysler had actual knowledge of the amounts which car dealers disbursed to the issuers of extended warranties, and knew that the amount represented on the retail installment contract as having been disbursed to the issuer of the extended warranty was in fact not disbursed. The amended complaint cited a 1990 report of the Attorney General for the State of New York, which concluded that in 54% of the cases, new car buyers paid in excess of the manufacturers' suggested retail price for service contracts, providing the dealerships with an average markup of 76%.
The amended complaint further alleged that before May 1995, Chrysler knew that courts had held that allegations that car dealers misrepresented the entire amount charged for an extended warranty while retaining a portion of the amount charged stated a claim under TILA (15 U.S.C. §1601 et seq. (1994)), and Regulation Z (12 C.F.R. §226 (1995)), a comprehensive set of rules enacted by the Federal Reserve Board to implement TILA. Additionally, the plaintiff alleged that Chrysler "acquiesced and approved of the representations" made by dealerships because it benefitted from them-the inflated price of the service contract meant that a greater amount was financed by the borrower. Finally, the plaintiff alleged that Chrysler facilitated the misrepresentations of South Holland Dodge and other dealerships by producing and distributing the retail installment contract forms that dealers ultimately used to make the misrepresentations.
Chrysler filed a motion to dismiss pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1998)). Citing Lanier, Chrysler argued that because it complied with its obligations under TILA as an assignee, it could not be held liable under Illinois law for the plaintiff's state-law claims. Under TILA, an assignee can be held liable only if the misrepresentation is "apparent on the face" of the assigned document. See 15 U.S.C. §1641(a) (1994); Taylor v. Quality Hyundai, Inc., 150 F.3d 689, 694 (7th Cir. 1998). Because any misrepresentation of the dealer in this case was not apparent on the face of the document assigned to Chrysler, it cannot be held liable in this case. Chrysler also argued that the plaintiff's allegations of "actual knowledge" were irrelevant to Chrysler's compliance with TILA, and that the plaintiff's allegations lacked the required specificity to state a cause of action.
The trial court granted the motion and dismissed the plaintiff's complaint against Chrysler with prejudice. On appeal, the appellate court affirmed, finding that Lanier applied to bar the plaintiff's state-law claims against Chrysler and that its conclusion was supported by the " `overwhelming consensus' " among federal courts that compliance with TILA was an absolute bar to liability under the Consumer Fraud Act. 312 Ill. App. 3d at 164, citing Franks v. Rockenbach Chevrolet Sales, Inc., No. 95-C-6266 (N.D. Ill. December 30, 1999). The appellate court then noted that a contrary conclusion had recently been reached in Pawlikowski v. Toyota Motor Credit Corp., 309 Ill. App. 3d 550 (1999), which held that an assignee's exemption from TILA liability was not a defense to Consumer Fraud Act liability. The appellate court in the present case, however, determined that the state and federal cases relied upon by Pawlikowski did not support that court's decision. 312 Ill. App. 3d at 167.
The appellate court further concluded that the FTC Holder Notice could not be used to "trump" the exemption from liability granted by the operation of TILA. 312 Ill. App. 3d at 169. The court stated that its decision should not be interpreted as a "blanket immunization of assignees, no matter their conduct." 312 Ill. App. 3d at 168. Rather, an assignee would still be liable for its preassignment fraud that was active and direct. 312 Ill. App. 3d at 168. Finally, the court stated that its decision did not conflict with Pawlikowski in the long run because the court in that case had found similar conclusory allegations in the plaintiff's complaint to be insufficient. The appellate court in the present case declined to remand for more pleadings, however, finding it would not serve any useful purpose given the barrage of similar lawsuits around the country which indicated that the plaintiff would not be likely to form any better factual allegations of fraud. 312 Ill. App. 3d at 169-70.
A motion to dismiss under section 2-615 challenges only the legal sufficiency of the complaint and all well-pleaded facts in the complaint are taken as true. Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 490 (1996); Anderson v. Vanden Dorpel, 172 Ill. 2d 399, 407 (1996). The question a reviewing court must determine when considering the propriety of a section 2-615 motion to dismiss is 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. Connick, 174 Ill. 2d at 490.
I. Applicability of Lanier
The plaintiff argues that the appellate court erred in finding that Lanier barred the state-law claims in this case. She contends that Lanier limits exemptions from liability to actions that are "specifically authorized" by TILA, and that the disclosures in this case, rather than being authorized by TILA, violate TILA. She claims that the appellate court incorrectly expanded Lanier when it found, in essence, that if there is no liability under TILA, then the conduct is authorized by TILA. The plaintiff relies upon Pawlikowski, 309 Ill. App. 3d 550, Bernhauser v. Glen Ellyn Dodge, Inc., 288 Ill. App. 3d 984 (1997), and Grimaldi v. Webb, 282 Ill. App. 3d 174 (1996), to support her position.
In Lanier, this court considered whether compliance with TILA is a defense to liability under the Consumer Fraud Act. There, the plaintiff instituted a class action suit against a financing company whose loan documents provided that interest would be computed using the Rule of 78's if the borrower prepaid the outstanding loan balance. The plaintiff contended that the use of the Rule of 78's to compute interest in loans made to unsophisticated borrowers, absent an explanation to the borrower about the effects of the rule upon early repayment, constituted common law fraud and violated the Consumer Fraud Act.
This court in Lanier noted that section 10b(1) of the Consumer Fraud Act provides that the Consumer Fraud Act does not apply to " `[a]ctions or transactions specifically authorized by laws administered by any regulatory body or officer acting under statutory authority of this State or the United States.' " Lanier, 114 Ill. 2d at 17, quoting Ill. Rev. Stat. 1981, ch. 121½, par. 270b(1) (now 815 ILCS 505/10b(1) (West 2000)). Under this provision, conduct which is authorized by federal statutes ...