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Cosmetique, Inc. v. Valueclick

November 4, 2010

COSMETIQUE, INC., PLAINTIFF,
v.
VALUECLICK, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Defendant ValueClick, Inc.'s (ValueClick) and Defendant Web Marketing Holdings, Inc. d/b/a Webclients, Inc.'s (Webclients) motion to dismiss. For the reasons stated below, we grant in part and deny in part the motion to dismiss.

BACKGROUND

Plaintiff Cosmetique, Inc. (Cosmetique) alleges that it is a direct marketer of cosmetics and runs Cosmetique Beauty Club (Beauty Club). Cosmetique allegedly paid Defendants to generate sales leads for the Beauty Club on the internet. From late 2006 through September 2007, Defendants allegedly advertised the Beauty Club on their webpages. Defendants allegedly displayed misleading and deceptive advertisements (Advertisements) indicating that consumers could obtain a free gift from Cosmetique (Gift) by joining the Beauty Club, without making any purchase from Cosmetique. In actuality, consumers were allegedly required to purchase certain goods offered by Cosmetique in order to qualify for the Gift. Consumers allegedly responded to the offer for the free Gift and joined the Beauty Club, and later demanded a refund when they learned that, in order to get the Gift, they would have to make certain purchases from Cosmetique. Cosmetique includes in its amended complaint Illinois Consumer Fraud and Deceptive Business Practices Act (Illinois Fraud Act), 815 ILCS 505/1 et seq., claims (Count I). Defendants move to dismiss all claims.

LEGAL STANDARD

In ruling on a motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) (Rule 12(b)(6)), a court must "accept as true all of the allegations contained in a complaint" and make reasonable inferences in favor of the plaintiff. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(stating that the tenet is "inapplicable to legal conclusions"); Thompson v. Ill. Dep't of Prof'l Regulation, 300 F.3d 750, 753 (7th Cir. 2002). To defeat a Rule 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949 (internal quotations omitted)(quoting in part Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint that contains factual allegations that are "merely consistent with a defendant's liability . . . stops short of the line between possibility and plausibility of entitlement to relief." Iqbal, 129 S.Ct. at 1949 (internal quotations omitted).

DISCUSSION

I. Standing of Non-Consumer

Defendants argue that Cosmetique lacks standing to bring an Illinois Fraud Act claim because Cosmetique is not a consumer that was deceived. Generally, in order to state a claim for "unfair or deceptive acts or practices," under the Illinois Fraud Act, a plaintiff must establish: "(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 trade or commerce; and (4) the consumer fraud proximately caused the plaintiff's injury." White v. DaimlerChrysler Corp., 856 N.E.2d 542 (Ill. App. Ct. 2006). Cosmetique acknowledges that it is not a consumer and that it was not deceived by the promotional offers attached as exhibits to the amended complaint (Promotional Offers). Cosmetique seeks to pursue the Illinois Fraud Act claim based on its contention that it suffered harm from deceptive conduct that implicates consumer concerns.

Illinois courts have allowed non-consumers to bring actions under the Illinois Fraud Act in certain situations, such as when a deceptive statement to consumers alters the natural competition in the marketplace. See, e.g., Browning v. AT & T Corp., 682 F.Supp.2d 832, 843 n.7 (N.D. Ill. 2009)(stating that "[c]courts have occasionally held that a claim can be stated under the [Illinois Fraud Act] even where the alleged deceptive statements are not directed specifically at the plaintiff" but that "these cases are typically brought by corporate plaintiffs or involve allegations that the defendant was engaged in an attempt to deceive the public generally"); See also Russian Media Group, LLC v. Cable America, Inc., 2008 WL 360692, at *3 (N.D. Ill. 2008)(stating that "[c]courts have allowed businesses to sue under the [Illinois Fraud Act] for competitive injury when other businesses deceive customers" and "[i]n such situations, there is no requirement that the deceptive conduct be aimed at the plaintiff"). The Illinois Appellate Court has explained that "[w]hen a dispute under the [Illinois Fraud Act] involves businesses who are not consumers of each other's products, the issue is whether the alleged conduct involves trade practices addressed to the market generally or otherwise implicates consumer protection concerns." Empire Home Services, Inc. v. Carpet America, Inc., 653 N.E.2d 852, 854 (Ill. App. Ct. 1995)(stating that Illinois courts have allowed "competitors who are not consumers of each other's goods and who do not have a contract with one another to sue under the Consumer Fraud Act" and "[t]he protections of the statute are not limited to consumers")(internal quotations omitted).

In the instant action, there are somewhat unique facts relating to consumer protection concerns. Cosmetique contends that ValueClick has been recently investigated by the Federal Trade Commission (FTC) regarding consumer protection concerns. Cosmetique also contends that the FTC brought an action pursuant to the Federal Trade Commission Act, 15 U.S.C. 41, et seq.,against ValueClick and other parties (FTC Action). Cosmetique has filed a copy of the complaint in an action brought in 2008 by the FTC against ValueClick and other parties, which alleges violations of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, 15 U.S.C. § 7701, et seq.. The FTC alleged in the FTC Action that ValueClick presented promotional offers on its websites and purported to offer free merchandise. (FTC Compl. Par. 17). The FTC also alleged that ValueClick falsely gave the consumer the impression that he had won a gift and failed to clearly and conspicuously disclose that the consumer needed to incur expenses or other obligations to receive the promotional gift. (FTC Compl. Par. 19, 21). The FTC further alleged that ValueClick's websites "group[ed] the tiers of offers that qualify the consumer for the promised free merchandise into three categories: Silver, Gold, and Platinum," and that the website indicated that the consumer was required "to 'participate in' multiple offers from each category to obtain the promised free merchandise." (FTC Compl. Par. 23-24). Such statements are similar to the types of statements included in the Promotional Offers that are at issue in the instant action. Although, according to Defendants, the FTC action was settled, the fact that the FTC decided to bring a civil action against ValueClick based on such conduct is an indication that consumer protection concerns are raised in regard to such conduct. In the instant action, Cosmetique alleges that Illinois consumers were deceived by Defendants and that Cosmetique was harmed as a result of conduct that implicates consumer protection concerns. Thus, under the unique circumstances of this case, Cosmetique has standing to bring the instant action.

II. Promotional Offers Not Named in Amended Complaint

Defendants object to Cosmetique's indication in its opposition to the instant motion that Cosmetique is basing its fraud claims upon a broad scheme of fraud. Defendants correctly point out that the court dismissed Cosmetique's original complaint since Cosmetique had failed to plead the fraud-based claims with particularity in accordance with Federal Rule of Civil Procedure 9(b)(Rule 9(b)).

Rule 9(b) required Cosmetique to specifically allege certain facts such as the statements that were allegedly fraudulent or deceptive. See, e.g., Rao v. BP Products North America, Inc., 589 F.3d 389, 401 (7th Cir. 2009)(stating that for a claim that sounds in fraud, the plaintiff must plead the "'who, what, when, where, and how' of the alleged fraud")(quoting in part DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)). The court gave Cosmetique an opportunity to file an amended complaint, and Cosmetique responded by filing an amended complaint and specifically referencing the two Promotional Offers, which were attached as exhibits to the amended complaint. Cosmetique makes clear in its amended complaint that it is premising its claims upon deceptive conduct, and thus Rule 9(b) still applies to the claim in the amended complaint. (A. Compl. ...


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