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Munch v. Sears

September 30, 2008

SUSAN MUNCH, LARRY BUTLER, JOSEPH LEONARD, KEVIN BARNES, AND VICTOR MATOS, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, AND BRYAN SERATT, ALAN JARASHOW, DR. STEPHEN PAPALEO, LAUREN CRANE, AND LAWRENCE L'HOMMEDIEU, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
SEARS, ROEBUCK AND CO., DEFENDANT.



The opinion of the court was delivered by: Judge Joan H. Lefkow

MEMORANDUM OPINION AND ORDER

Plaintiffs,*fn1 owners of Kenmore Elite-brand HE3t and HE4t washing machines, have filed a Consolidated First Amended Class Action Complaint (hereinafter, "Amended Complaint") individually and on behalf of purchasers of Kenmore Elite HE3, HE3t, HE4, and HE4t model washing machines (collectively, "HE washers"). Plaintiffs allege violations of their respective home states' consumer protection statutes (Counts I--IX), common law fraud (Count X), breach of implied warranty of merchantability (Count XI), unjust enrichment (Count XII), and a declaration of the rights of the parties (Count XIII). Before the court is Sears's motion to dismiss Counts I--X, XII, and XIII of the Amended Complaint. Also before the court is Sears's refiled motion to strike plaintiffs' class allegations. For the reasons stated below, Sears's motion to dismiss [#78] is granted in part and denied in part, and Sears's motion to strike [#74] is moot.

ALLEGATIONS OF THE FIRST AMENDED COMPLAINT*fn2

In their Amended Complaint, plaintiffs allege that their Sears washers suffer from two major defects: electronic control board failure and water drainage failure. Electronic control board failure, plaintiffs allege, manifests itself in a variety of ways, including "premature and repeated mechanical failure; stopping or not starting; the door remaining locked; and display of a variety of error codes such as F11 and FdL." Pls.' Am. Compl. ¶ 20. Plaintiffs allege that these electronic and mechanical failures result from "the use of defective, inappropriate, and/or inferior electronic control panels, a.k.a. Central Control Units or CCU's, and defective, inappropriate, and/or inferior relays, an integral component part of the CCU's." Id. ¶ 21. Water drainage failure, plaintiffs contend, manifests itself in various ways, including "clothes not being cleaned properly (including clothes being stained); foul odors; [and] mold and mildew growing in the machines." Id. ¶ 20. Plaintiffs suggest that the water drainage failure is often related to a defective door seal. Id. Plaintiffs allege that despite the electronic control board failure and water drainage failure defects, Sears misrepresents the HE washers to consumers as "being dependable and providing outstanding cleaning." Id. ¶ 33.

Plaintiffs further allege that Sears knew or should have known about the defects because the high number of complaints Sears received was "far in excess of the number deemed acceptable by reasonable quality control" standards. Id. ¶ 25. Plaintiffs contend, for example, that at least 22,987-or 1.5% of-HE washer owners have had electronic control board repairs, but that the "acceptable relay failure rate" is "1 failure in a million operations (0.0001%)." Id. ¶¶ 28--29. According to plaintiffs, this standard was established by the United States government and is generally accepted by the electronics industry. Plaintiffs further allege that at least 15,538-or 1.0% of-HE washer owners have had mold issues, whereas, typically, "industrial and commercial front loading washing machines operate relatively free of front load door seal drainage issues." Id. ¶ 30. Plaintiffs contend that because Sears knew about their defective machines but failed to disclose this information to consumers, Sears committed fraud.*fn3

The HE washers came with a two-year express warranty on the electronic control board. The warranty covers free replacement parts for two years with labor charges covered only during the first year.*fn4 HE washer owners were allegedly forced to pay a significant amount of money-some times more than 30% of the purchase price-to repair their machines because the defects tend not to manifest themselves until after the warranty period has elapsed. Plaintiffs contend that Sears has further benefitted from their defective machines by marketing extended warranties on its HE washers. Plaintiffs thus allege that they have suffered actual damages in that (1) their HE washing machines "have not operated as represented by Sears," (2) they "have had to pay too high a price for a washing machine that is defective and not fit for use," and (3) they have "ha[d] to pay for costs associated with service calls, replacement parts, and extended warranties." Id. ¶ 37.

STANDARD

A motion to dismiss under Rule 12(b)(6) challenges the complaint for failure to state a claim upon which relief may be granted. General Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). In ruling on a motion to dismiss, the court accepts as true all well-pleaded facts alleged in the complaint and draws all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002). In order to survive a motion under Rule 12(b)(6), the complaint must provide the defendant with "fair notice of what the . . . claim is and the grounds upon which it rests." EEOC v. Concentra Health Servs., Inc.,496 F.3d 773, 776--77 (7th Cir. 2007) (citing Bell Atl. Corp. v. Twombly,- U.S. -, 127 S.Ct. 1955, 1964, 167 L, Ed. 2d 929 (2007)). The allegations in the complaint must also be "enough to raise a right to relief above a speculative level." Bell Atl., 127 S.Ct. at 1965.

DISCUSSION

I. Claims Under State Consumer Fraud Statutes

Plaintiffs allege that Sears violated the consumer fraud statutes of the individual plaintiffs' respective states, including Illinois, California, Kentucky, Minnesota, Michigan, New Jersey, New York, Washington, and Indiana.*fn5 Plaintiffs' theories of fraud liability are based on their contentions that Sears had a duty to disclose to consumers that HE washers experience control board failures and drainage failures at rates in excess of industry standards and that Sears failed to disclose such information.

The Illinois Consumer Fraud and Deceptive Business Practices Act ("Illinois Consumer Fraud Act") prohibits any "concealment, suppression or omission of any material fact, with intent that others rely upon the concealment . . . in the conduct of any trade or commerce." 815 Ill. Comp. Stat. 505/2. To successfully plead a claim under the Illinois Consumer Fraud Act, a complaint must set forth specific facts showing (1) a deceptive act or practice by the defendant; (2) the defendant's intent that the plaintiff rely on the deception; (3) the deception occurred in the course of conduct involving trade or commerce; and (4) the consumer fraud proximately caused the plaintiff's injury. Connick v. Suzuki Motor Co., 675 N.E.2d 584, 593, 174 Ill. 2d 482, 221 Ill. Dec. 389 (Ill. 1996). Additionally, a complaint alleging a violation of consumer fraud must be pled with the same particularity and specificity as that required for common law fraud. Id. (citing People ex rel. Hartigan v. E & E Hauling, Inc., 607 N.E.2d 165, 174--75, 153 Ill. 2d 473, 180 Ill. Dec. 271 (1992)); see also Fed. R. Civ. P 9(b) (mandating that "a party must state with particularity the circumstances constituting fraud or mistake").

To successfully state a cause of action for fraudulent concealment as a deceptive act or practice, the plaintiff must allege that the defendant omitted or concealed a material fact in the conduct of trade or commerce. See White v. DaimlerChrysler Corp., 856 N.E.2d 542, 547, 368 Ill. App. 3d 278, 305 Ill. Dec. 737 (Ill. App. Ct. 1st Dist. 2006). A fact "is 'material' if the plaintiff would have acted differently had he been aware of it, or if it concerned the type of information upon which he would be expected to rely when making his decision to act." Miller v. William Chevrolet/GEO, Inc., 762 N.E.2d 1, 7, 326 Ill. App. 3d 642, 260 Ill. Dec. 735 (Ill. App. Ct. 1st Dist. 2001) (citing Mackinac v. Arcadia Nat'l Life Ins. Co., 648 N.E.2d 237, 239, 271 Ill. App. 3d 138, 207 Ill. Dec. 781 (Ill. App. Ct. 1st Dist. 1995)). When such a claim is brought in federal court, the particularity requirements of Rule 9(b) of the Federal Rules of Civil Procedure are imposed to ensure that defendants are properly notified of their alleged fraud, so that they can respond adequately. Towers Fin. Corp. v. Solomon, 126 F.R.D. 531, 535 (N.D. Ill. July 10, 1989).

Although plaintiffs are not required to plead all evidentiary facts, they cannot put defendants on notice simply by asserting conclusional allegations. Id. (citing Ambling v. Blackstone Cattle Co., Inc., 658 F. Supp. 1459, 1468 (N.D. Ill. 1987); Rudolph v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 100 F.R.D. 807, 809 n.2 (N.D. Ill. 1984)) At the same time, Rule 9 is to be read in conjunction with Rule 8. Brown v. SBC Communications, Inc., 2007 WL 684133 *6 (S.D. Ill.). This means that a plaintiff is required to plead "only slightly more than is demanded under ordinary notice pleading." Id. (quoting Tomera v. Galt, 511 F.2d 504, 508 (7th Cir. 1975)) (overruled on other grounds by Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385 (7th Cir. 1990)). More specifically, "a plaintiff must plead 'the bare bones' of a fraudulent scheme, by supplying 'a brief sketch of how the fraudulent scheme operated, when and where it occurred, and ...


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