United States District Court, N.D. Illinois, Eastern Division
DENNIS M. ANDERSON, Plaintiff,
ELMHURST CHEVROLET, INC. and WESTERN DIVERSIFIED SERVICES, INC., Defendants.
The opinion of the court was delivered by: JOHN GRADY, Senior District Judge
Before the court are the motions of the defendants to dismiss
the amended complaint. For the following reasons, the motion of
Elmhurst Chevrolet, Inc. is granted in part and denied in part,
and the motion of Western Diversified Services, Inc. is denied.
This is an action arising from plaintiff Dennis M. Anderson's
purchase of a Dodge Ram truck from defendant Elmhurst Chevrolet,
Inc. ("Elmhurst") and a related service contract from defendant
Western Diversified Services, Inc. ("Western").
We have already entertained various motions in this case and
issued two memorandum opinions. The first opinion dealt with
Western's motion to compel arbitration. The service contract that
plaintiff alleged (in Count I of the complaint) was breached
clearly requires that all disputes arising under the contract be submitted to arbitration. Plaintiff responded to Western's motion
by denying under oath that he signed the service contract.
Explaining that we do not understand how plaintiff can sue on a
contract he denies executing, we dismissed Count I as against
Western and indicated that should Elmhurst file a motion for
dismissal of Count I as against it, that motion would likely be
Our second memorandum opinion addressed Western's motion to
dismiss other counts of the complaint. We dismissed, with
prejudice, plaintiff's breach of implied warranty of
merchantability claim (Count II) as against Western because it
was Elmhurst, not Western, that sold plaintiff the automobile. We
also dismissed plaintiff's statutory and common-law fraud claims
(Counts IV and V) for failure to comply with Federal Rule of
Civil Procedure 9(b) and gave plaintiff leave to file an amended
Plaintiff filed an amended complaint that contains the
following claims: breach of the service contract (Count I);
breach of the implied warranty of merchantability (Count II);
revocation of acceptance (Count III); violation of the Illinois
Consumer Fraud and Deceptive Business Practices Act (the
"Consumer Fraud Act") (Count IV); and common-law fraud (Count V).
All five counts are asserted against Elmhurst, but only Counts I,
IV, and V are asserted against Western. Defendants now move to dismiss the amended complaint.*fn1
The purpose of a 12(b)(6) motion to dismiss is to test the
sufficiency of the complaint, not to resolve the case on the
merits. 5B Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 1356, at 354 (3d ed. 2004). When
evaluating such a motion, the court must accept as true all
factual allegations in the complaint and draw all reasonable
inferences in the plaintiff's favor. Hentosh v. Herman M. Finch
Univ. of Health Sciences, 167 F.3d 1170, 1173 (7th Cir. 1999);
Jang v. A.M. Miller & Assocs., 122 F.3d 480, 483 (7th Cir.
1997). Dismissal is appropriate only if "`it is clear that no
relief could be granted under any set of facts that could be
proved consistent with the allegations.'" Ledford v. Sullivan,
105 F.3d 354, 356 (7th Cir. 1997) (quoting Hishon v. King &
Spalding, 467 U.S. 69, 73 (1984)).
A. Count I (Breach of Written Service Contract)
Elmhurst moves to dismiss Count I for the reason advanced in
our first memorandum opinion: plaintiff cannot sue for breach of
a contract he denies executing. Plaintiff notes that he has
repleaded Count I in the amended complaint "merely to preserve
[his] rights on appeal." (Response to Elmhurst's Motion at 3.) A repleading of previously-dismissed claims, however, is
unnecessary to preserve those claims for appeal. See Bastian
v. Petren Res. Corp., 892 F.2d 680, 682 (7th Cir. 1990). Count I
is dismissed with prejudice as against both defendants.
B. Counts II & III (Breach of Implied Warranty of
Merchantability & Revocation of Acceptance)
Elmhurst contends that Counts II and III must be dismissed
because they are "based on the same service contract Plaintiff
denies he signed." (Elmhurst's Memorandum at 3-4.) This is simply
incorrect. Counts II and III do not relate to the service
contract at all. Count II is a claim that the truck plaintiff
purchased was not fit for its ordinary purpose. In Count III,
plaintiff seeks to revoke the vehicle purchase agreement for the
truck, not the service contract. Accordingly, Elmhurst's motion
is denied as to Counts II and III.
C. Counts IV & V (Statutory and Common-Law Fraud)
Both of the defendants contend that Counts IV and V should be
dismissed for failure to allege fraud with the particularity
required by Federal Rule of Civil Procedure 9(b). This was the
ground for our dismissal of Counts IV and V as they were alleged
in the original complaint. In the amended complaint, though,
plaintiff clearly sets forth the who, what, where, and when of
the purported fraud. Defendants' contention is that plaintiff now
has failed to allege agency with specificity. The amended complaint contains the following agency
[Western] is in the business of marketing and
selling service contracts to the public at large,
through a system of authorized dealerships, including
The service contract was sold to Plaintiff by
[Elmhurst] on behalf of, and for the benefit of,
On or about July 8, 2002, at [Elmhurst's] place of
business, [Elmhurst], by its Finance Manager, . . .
name presently unknown, acting on behalf of
[Elmhurst] and as an agent of [Western], . . . made
the following oral representations and/or omissions
to the Plaintiff:
(a) Plaintiff was told by the above described Finance
Manager that he was purchasing a 48 month/50,000 mile
extended service contract, which would cover the
vehicle, and that the vehicle would be repaired for
the term of the service contract. [Elmhurst], by one
of its employees or agents, name unknown, then forged
Plaintiff's signature on the application for service
contract and charged Plaintiff $1,495.00. At the same
time, [Elmhurst], and more specifically through the
above described Finance Manager, knew that the
vehicle was ineligible for coverage, because of its
prior commercial use. These misrepresentations were
made by the Finance Manager of [Elmhurst].
At all times relevant, [Elmhurst] was acting on
behalf of [Western] and was authorized to transaction
[sic] business on behalf of [Western]. Therefore, at
all times relevant, [Elmhurst], through its employee,
Finance Manager as herein described, was acting as
either the agent or apparent agent of [Western].
(Amended Complaint, ¶¶ I.2, I.9, IV.9(a), IV.17.)
As an initial matter, defendants' citation of Illinois case law
in support of their argument is misplaced. Illinois' fact
pleading requirements are not applicable here. It is well
established that the liberal federal notice pleading requirements are applicable in a federal case even when the claim pleaded
arises under state law. See Muick v. Glenayre Elecs.,
280 F.3d 741, 743 (7th Cir. 2002).
Federal Rule of Civil Procedure 9(b) provides that "[i]n all
averments of fraud . . ., the circumstances constituting fraud
. . . shall be stated with particularity." In Lachmund v. ADM
Investor Services, 191 F.3d 777, 783 (7th Cir. 1999), the
Seventh Circuit explained the purpose of Rule 9(b): "to ensure
that the party accused of fraud, a matter implying some degree of
moral turpitude and often involving a `wide variety of potential
conduct,' is given adequate notice of the specific activity that
the plaintiff claims constituted the fraud so that the accused
party may file an effective responsive pleading." In light of
Rule 9(b)'s purpose, the Seventh Circuit held in Lachmund that
an agency relationship establishing vicarious liability for fraud
generally does not have to be pleaded with particularity. Id.
Agency must be pled with particularity only where a plaintiff
relies upon the same circumstances to establish both fraud and
the agency relationship of a defendant. See id.
Here, the purported agency relationship between Elmhurst and
Western is alleged generally and independently from the
allegations of the fraudulent activity itself. Therefore, it need
not be pleaded with the particularity required by Rule 9(b).
See Guaranty Residential Lending, Inc. v. International
Mortgage Ctr., Inc., 305 F. Supp.2d 846, 860-61 (N.D. Ill. 2004). The amended complaint
gives defendants adequate notice of the purportedly fraudulent
Defendants also assert that plaintiff's fraud claim must fail
because of plaintiff's denial that he signed the service
contract. We reject defendants' argument because the fraud claims
do not depend on the existence of a contract. Plaintiff states
fraud claims by alleging that his signature was forged on the
service contract and that he was charged for vehicle service on
an ineligible vehicle and refused service when he requested it.
We decline to address Western's argument regarding reliance
because it is raised for the first time in Western's reply to
plaintiff's supplemental response.
D. Elmhurst's Refund Argument
Elmhurst argues that the entire amended complaint should be
dismissed because Elmhurst offered plaintiff a refund of the
purchase price of the truck prior to the filing of this action.
Attached to Elmhurst's brief is a January 21, 2003 letter to
plaintiff from a Elmhurst employee stating: "We would like to
inform you that Mr. Anthony Castle [presumably another Elmhurst
employee] did call Mr. Norman Lehrer [plaintiff's counsel] on
Monday the 20th of January, and offered to reverse the deal on
the 1999 Dodge Pickup, and provide a full refund on the vehicle." (Elmhurst's Memorandum, Ex. B.)*fn2 Generally, on a 12(b)(6)
motion, a court may only consider materials outside the pleadings
if it converts the motion to dismiss into a motion for summary
judgment and offers the other party an opportunity to respond.
See Fed.R. Civ. P. 12(b); Edward Gray Corp. v. National Union
Fire Ins. Co., 94 F.3d 363, 366 (7th Cir. 1996). But even if we
considered the letter, Elmhurst's argument would not succeed.
In support of its argument, Elmhurst cites two Illinois cases:
Hayman v. Autohaus on Edens, Inc., 734 N.E.2d 1012 (Ill.App.
Ct. 2000), and Huss v. Sessler Ford, Inc., 799 N.E.2d 444 (Ill.
App. Ct. 2003). The court in Hayman held that when a defendant
in an action for common-law fraud has unconditionally tendered
the full amount owed to a plaintiff prior to suit being filed,
there is no actual controversy, and the suit is rendered moot.
734 N.E.2d at 1014-15. In Huss, the court cited the Hayman
rule and affirmed dismissal of a Consumer Fraud Act suit where
defendant offered to cancel the contract, refund all amounts paid
by plaintiff on the vehicle, pay all reasonable attorney's fees,
and pay all losses, costs, and expenses incurred by plaintiff.
799 N.E.2d at 450-51.
The court in Huss noted that reasonable attorney's fees are
recoverable under the Consumer Fraud Act, and in relation to such an action, an offer to refund the purchase of a vehicle does not
constitute an offer for the "full amount" owed to a plaintiff
when it does not include the payment of attorney's fees as well.
799 N.E.2d at 450. The facts of the instant case are
distinguishable from those of Hayman and Huss because
Elmhurst, aware of a possible Consumer Fraud Act claim, did not
refund or make any offer to compensate plaintiff for reasonable
attorney's fees (which Elmhurst knew plaintiff was incurring).
Nor did Elmhurst offer to pay other losses, costs, and expenses
incurred by plaintiff, as in Huff. Therefore, Elmhurst did not
make an offer to pay the full amount owed to plaintiff, and
dismissal would not be warranted.
For the foregoing reasons, Elmhurst's motion to dismiss the
amended complaint is granted as to Count I and denied as to
Counts II-V. Western's motion to dismiss Counts IV and V is
denied. Count I of the amended complaint is dismissed with
prejudice as to both defendants.