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May 28, 2002


The opinion of the court was delivered by: Bucklo, U.S. District Judge


Wafra Leasing Corporation ("Wafra") invested in a securitization of financial contracts by Prime Capital Corporation and Prime Leasing Corporation (collectively "Prime"), and its investment went bad. Wafra sued Prime and several of its officers and Jirectors, as well as KPMG L.L.P., Prime's auditor, and Bischoff & Swabowski ("B&S"), its attorneys. I have already decided the defendants' motions to dismiss on the federal securities claims and some of the state law claims. See Wafra Leasing Corp. 1999-A-1 v. Prime Capital Corp., No 01 C 4314, 2002 WL 460826, *1 (N.D. Ill. Mar. 26, 2002) While those motions were pending, Wafra filed an amended complaint, adding Count X, a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. ("the Act"), against all of the defendants. Ehmann and Landeck move to dismiss, and Smithburg, Walter and Friedman adopt and supplement their motion. KPMG also moves to dismiss, raising several of the same arguments as the individual defendants. Bischoff and B&S address their objections to Count X in a supplemental memorandum in support of their earlier motion to dismiss. I grant the motions in part and deny them in part.


The facts of this case were set out in detail in my previous opinion, see Waffra, 2002 WL 460826, at *12, and I repeat them here only where necessary to decide issues presented by the motions to dismiss. For the purposes of these motions, I take the allegations of the complaint as true, draw all reasonable inferences in favor of Wafra, and dismiss only where it is clear that Wafra could prove no set of facts consistent with its complaint that would entitle it to relief under the Act. First Ins. Funding Corp. v. Federal Ins. Co., 284 F.3d 799, 804 (7th Cir. 2002).


The individual defendants and KPNG argue that Wafra lacks standing under the Act because it is not an Illinois resident and because it has failed adequately to plead a "nexus" between its claims and consumer protection concerns. The Act provides a cause of action for "[a]ny person who suffers actual damages as a result of a violation of this Act committed by any other person." 815 ILCS 505/10a(a). The Act is violated when a defendant uses or employs any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material "fact in the conduct of trade or commerce with the intent that others rely on the fraud, though no person need actually have relied on the fraud. § 2. "Person" is defined to include corporations (foreign and domestic). § 1(c). "Consumer" means any person who purchases or contracts for the purchase of merchandise not for resale in the ordinary course of his business." § 1(e). "Merchandise" includes both intangibles and services. § 1(b)

The purpose of the Act is to "protect Illinois consumers, borrcwers, and businessmen against fraud, unfair methods of competition, and other unfair and deceptive business practices." Scott v. Association for Childbirth at Home, Int'l, 430 N.E.2d 1012, 1017 (Ill. 1981). The Illinois Supreme Court has never expressly considered whether non—Illinois citizens have standing to sue for violations of the Act, although it implicitly approved of their standing where there was a significant connection to Illinois and many of the acts making up the claim occurred in Illinois. See Martin v. Heinold Commodities, Inc., 510 N.E.2d 840, 847 (Ill. 1987) (certifying multi-state class under the Act). An Illinois appellate court recently declined to certify a nationwide class that included consumers who lived outside of Illinois and purchased the defendant's product in another state because there was "no contact with Illinois." See eOliveira v. Amoco Oil Co., 726 N.E.2d 51, 61 (Ill.App. Ct. 2000), appeal allowed by 734 N.E.2d 895 (III. 2000)

The defendants ask me to read Oliveira to preclude any non— resident from suing under the Act, regardless of where the trade or commerce occurred. I have cited Oliveira for the proposition that the Act "does not apply to consumers outside Illinois or business conducted outside Illinois," The Alcar Group, Inc. v. Corporate Performance Sys., Ltd., 109 F. Supp.2d 948, 952 (N.D. Ill. 2000), but that case involved "`alleged trademark violations that occurred entirely abroad," id. at 949. See also General Elec. Capital Auto Fin. Servs., Inc. v. Phil Smith Chrysler Plymouth Jeep Eagle, No. 00 C 762, 2001 WL 1223537, at *2 (N.D. Ill. Oct. 11, 2001) (Grady, J.) :holding that plaintiff lacked standing where it did "`not allege that the purported fraudulent trade practices affecting consumers were conducted in Illinois or that such practices affected Illinois consumers"). Here, however, Wafra purchased the Owner's Certificate in Illinois, in reliance on misrepresentations made by the defendants in Illinois, and alleges that it was injured by the cover-up of a fraudulent "'diversion, misappropriation and kiting scheme" that occurred entirely in Illinois. Although Wafra is not an Illinois citizen, it is a consumer of Illinois products and services, and thus has standing to sue under the Act. See Man Roland Inc. v. Quantum Color Corp., 57 F. Supp.2d 568, 575 (N.D. Ill. 1999); Garner v. Healy, 184 F.R.D. 598, 604 (N.D. Ill. 1999).

KPMG and the individual defendants also argue that Wafra has failed to allege that the conduct that led to its injuries "involves trade practices directed to the market generally or otherwise implicates consumer protection concerns." Athey Prods. Corp. v. Harris Bank Roselle, 89 F.3d 430, 437 (7th Cir. 1996). The Seventh Circuit held that Illinois courts and the courts in this district "have uniformly held that claims under the Act must meet the consumer nexus test," but it did not distinguish between consumer and non-consumer plaintiffs. Id. In Athey, the plaintiff was not a "consumer" as defined by the Act, see id. at 432, and all of the cases that it cited involved non-consumer plaintiffs. See Lake County Grading Co. v. Advance Mech. Contractors, Inc., 654 N.E.2d 1109, 1115-16 (Ill.App. Ct. 1995); Scarsdale Builders, Inc. v. Ryland Group, Inc., 911 F. Supp. 337, 340 (N.D. Ill. 1996); Web Communications Group, Inc. v. Gateway 2000, Inc., 889 F. Supp. 316, 322 (N.D. Ill. 1995).

Athey was decided on summary judgment, which involves a stricter standard than I apply on a motion to dismiss, where a plaintiff is not required to plead evidence or match facts to every element of its claim. Bennett v. Schmidt, 153 F.3d 516, 518 (7th Cir. 1998). Moreover, Athey did not involve a consumer plaintiff, which Wafra claims to be. The Act applies to securities transactions, see Lyne v. Arthur Andersen & Co., 772 F. Supp. 1064, 1068 (N.D. Ill. 1991, and Wafra alleges that it purchased the Owner's Certificate (an "intangible") and contracted for the servicing of the financial contract ("services"), Compl. ¶¶ 39, 41, so it. contracted for the sale of "merchandise" under § 1(b) of the Acts and is therefore a "consumer." § 1(e). Whether I consider Wafra, as a "consumer," to be excused from the "more stringent standing requirements" for two non-consumer businesses, see ASI Acquisition, LLC v. Rayman, No. 01 C 165, 2002 WL 335311, at *2 (N.D. Ill. Feb. 28, 2002), or whether I consider its allegations that it is a "consumer" sufficient to satisfy the consumer nexus test, see Commonwealth Ins. Co. v. Stone Container Corp., No. 99 C 8471, 2001 WL 477151, at *4-5 (N.D. Ill. May 3, 2001), this case is distinguishable from Athey. Cf. DRL Enters., Inc. v. Partners, Inc., 173 F. Supp.2d 818, 820 (N.D. Ill. 2001) (reading Athey broadly to require consumer nexus allegation even when parties are not two non-consumers, but not describing the circumstances in which Athey applied). Wafra has standing to sue under the Act.


Wafra acknowledges that it was not a first-hand consumer of the services of KPMG and B&S, but it argues that the Act applies to their services. Legal services, including the "actual practice of law" as well as billing practices, are exempt from the Act, Cripe v. Leiter, 703 N.S.2d 100, 105 (Ill. 1998), 50 B&S cannot be liable for consumer fraud for its opinion letter. Accountants, however, may be liable even where plaintiffs do not directly purchase their services, but receive them from the accountant's client in the course of a securities offering. See Lyne, 772 F. Supp. at 1068. Nothing in the Act requires that the plaintiff have purchased goods or services directly from the defendant. Id.

Nonetheless, Wafra must be able to satisfy the elements of a claim under the Act. Id. KPMG argues that Wafra could not prove any set of facts that would show that KPMG intended for Wafra to rely on its May 4, 1999 valuation letter. As I noted in my previous opinion in this case, the valuation letter was addressed only to Prime Leasing, Prime Financial, and Merrill Lynch, and stated that: "[t]his report is intended solely for the use of the addressees and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes." KPMG Ex. A at 1, 6.*fn1 I held that "no reasonable reading of the letter shows that Wafra was intended to rely on it," Wafra, 2002 WL 460826, at *17, 50 Wafra cannot state a claim under the Act. See Martin v. Heinold Commodities, Inc., 643 N.E.2d 734, 754 Ill. 1994) ("Martin II") (holding that, although plaintiff need not show that it actually relied on the defendant's statements, it must show "intent on the defendant's part that plaintiff rely on the deception")

KPMG argues that Wafra's claim based on KPMG's 1997 audit is barred by the statute of limitations. Actions against accountants in Illinois, whether "based upon tort, contract or otherwise," must be "commenced within 2 years from the time the person bringing an action knew or should reasonably have known of such act or omission." 735 ILCS 5/13-214.2(a). KPMG argues that Wafra should have discovered the alleged fraudulent omissions as early as May 1999, more than two years before it filed the complaint, on June 8, 2001. I rejected a similar argument with regard to the one — year statute of limitations for federal securities fraud, finding that there were questions of fact that barred a determination, as a matter of law, that Wafra ...

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