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Tile Unlimited, Inc., Both Individually and As A Representative of All Other Persons Similarly Situated v. Blanke Corporation

April 20, 2011


The opinion of the court was delivered by: Judge Feinerman


Plaintiff Tile Unlimited, Inc. brought this putative class action in the Circuit Court of Cook County, Illinois, against Defendants Blanke Corp., Virginia Tile Corp., and David J. Deutsch. Blanke manufactures Uni-Mat Pro, a tile underlayment product; Virginia Tile is the Uni-Mat Pro distributor that sold the product to Tile Unlimited; and Deutsch is the Virginia Tile employee who, working from its Wood Dale, Illinois, location, was responsible for the sale. The complaint purports to state claims against all three Defendants under the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), 815 ILCS 505/1 et seq.; against Blanke for fraud, breach of express warranty, and unjust enrichment; and against Virginia Tile for breach of implied warranty. Doc. 1-4. Defendants removed the action to this court, and Tile Unlimited has moved to remand the case back to state court.

This is Tile Unlimited's second suit arising from the same underlying facts. In the first suit, also originally filed in the Circuit Court of Cook County, Tile Unlimited sued only Blanke and Virginia Tile. Doc. 1-1. The case was removed to this court; Blanke and Virginia Tile invoked diversity jurisdiction, maintaining that the parties were diverse-Tile Unlimited is an Illinois citizen, while Virginia Tile is a Michigan citizen and Blanke is a citizen of Delaware and Georgia-and that the amount in controversy exceeded $75,000. Doc. 1-2; see Tile Unlimited, Inc. v. Va. Tile Co., No. 10 C 5903 (N.D. Ill.). Three days after removal, Tile Unlimited voluntarily dismissed the case without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i). Doc. 1-3.

Two months later, Tile Unlimited filed the instant action, which adds Deutsch as a defendant under the ICFA. Like Tile Unlimited, Deutsch is an Illinois citizen, so it is fairly clear that the first case was voluntarily dismissed and the instant case brought for the purpose of defeating diversity jurisdiction and remaining in state court. Undeterred, Defendants again removed, maintaining that Deutsch's citizenship should be ignored because he was fraudulently joined. Doc. 1.

"A plaintiff typically may choose its own forum, but it may not join a nondiverse defendant simply to destroy diversity jurisdiction." Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 763 (7th Cir. 2009). As a means of ensuring that diversity jurisdiction is not evaded in this manner, the fraudulent joinder doctrine "permits a district court considering removal to disregard, for jurisdictional purposes, the citizenship of certain nondiverse defendants, assume jurisdiction over a case, dismiss the nondiverse defendants, and thereby retain jurisdiction." Ibid. (internal quotation marks omitted); see Wecker v. Nat'l Enameling & Stamping Co., 204 U.S 176, 186 (1907) ("Federal courts should not sanction devices intended to prevent the removal to a Federal court where one has that right."). A defendant maintaining that a non-diverse defendant was fraudulently joined bears the "heavy burden" of demonstrating that, "after resolving all issues of fact and law in favor of the plaintiff," there is no "reasonable possibility that the plaintiff could prevail against the non-diverse defendant." Schur, 577 F.3d at 764 (internal quotation marks omitted). To find that the plaintiff has no "reasonable possibility" of prevailing against a non-diverse defendant, the court need not hold "that there is no possibility that a state court would someday hold that individuals can be liable for the [claim] at issue," only that "it is not a reasonable possibility based on current [state] law and the facts before [the court]." Schwartz v. State Farm Mut. Auto. Ins. Co., 174 F.3d 875, 878 (7th Cir. 1999) (emphasis added).

The question here, then, is whether Virginia Tile has a "reasonable possibility" of prevailing against Deutsch under the ICFA. ICFA liability may lie against an individual employee like Deutsch. See Garcia v. Overland Bond & Inv. Co., 668 N.E.2d 199, 207 (Ill. App. 1996) ("Section 10(a) of the Consumer Fraud Act states that those damaged by violations of the Act may sue 'any person' who violates the Act. Section 1(c) of the Act includes corporations and the salesmen and employees who work for these corporations within the definition of the term 'person.'"). To bring an ICFA claim, however, a plaintiff must either: (1) be a "consumer," or, (2) if a non-consumer, satisfy the "consumer nexus" test, which requires the plaintiff to "have suffered damages resulting from conduct that is either directed toward the market or otherwise implicates consumer protection concerns." MacNeil Auto. Prods., Ltd. v. Cannon Auto. Ltd., 715 F. Supp. 2d 786, 792 (N.D. Ill. 2010) (citing Athey Prods. Corp. v. Harris Bank Roselle, 89 F.3d 430, 436-37 (7th Cir. 1996)); see also First Comics, Inc. v. World Color Press, Inc., 884 F.2d 1033, 1039-40 (7th Cir. 1989); Stepan Co. v. Winter Panel Corp., 948 F. Supp. 802, 805-06 (N.D. Ill. 1996). Defendants contend that because Tile Unlimited meets neither requirement, it has no reasonable possibility of prevailing on its ICFA claim in state court.

Tile Unlimited responds by asserting that it is a "consumer" under the ICFA. The ICFA defines "consumer" as "any person who purchases . merchandise not for resale in the ordinary course of his trade or business but for his use or that of a member of his household." 815 ILCS 505/1(e). A corporation may be a "consumer" under the ICFA. A good example is Lefebvre Intergraphics, Inc. v. Sanden Mach. Ltd., 946 F. Supp. 1358 (N.D. Ill. 1996), where the plaintiff, a commercial printer, was held to be a "consumer" because it had purchased a printing press from the defendant for its own use-it used the press, which at all times remained in its possession, to produce a wholly separate product-and not, as the statute says, "for resale in the ordinary course of his trade or business." Id. at 1368-69; see also Skyline Int'l Dev. v. Citibank, F.S.B., 706 N.E.2d 942, 946 (Ill. App. 1998) ("Plaintiff, though a corporation, was a consumer of defendant's banking services when it requested the wire transfer."); LaBella Winnetka, Inc. v. Gen. Cas. Ins. Co., 259 F.R.D. 143, 150 (N.D. Ill. 2009) (plaintiff business that purchased insurance from defendant qualifies as "consumer" under ICFA).

Tile Unlimited attempts to liken itself to the commercial printer in Lefebvre, contending that it "is not reselling . Uni-Mat Pro but is using it for its own use." Doc. 15 at 9. This description of how Tile Unlimited used Uni-Mat Pro is inaccurate and flatly at odds with the complaint. The complaint alleges that Tile Unlimited "is in the business of installing ceramic and other tile in both residential and commercial buildings within Illinois." Doc. 1-4 at ¶ 2. The complaint explains that "[t]o prevent the tiles from cracking after installation," "an underlayment is usually placed on top of the floor to make it rigid and the tiles [are] then placed on the underlayment." Id. at ¶¶ 6-7. Uni-Mat Pro is a "new underlayment system" that "allegedly works by maintaining a rigid surface between the tile and the Uni-Mat Pro such that if there is any deflection or movement in the floor below, the top part of the Uni-Mat Pro will stay affixed to the tile and provide a rigid surface, while the bottom part of the Uni-Mat Pro will reportedly breakaway and move with the floor." Id. at ¶¶ 15, 19.

By contrast to how the Lefebvre plaintiff used the printing press, Tile Unlimited does not retain possession of Uni-Mat Pro and does not use it to produce wholly separate products for the market. Rather, Uni-Mat Pro is an inseparable component of the final tile product that Tile Unlimited installs at homes and businesses-as the complaint admits, "[a]fter the tile has been set in a thin-set mortar and the spaces between the tiles have been grouted, the only way to replace Uni-Mat Pro is to cut out or rip up the flooring itself." Id. at ¶ 48. Accordingly, Tile Unlimited is not a "consumer" under the ICFA, at least with respect to its purchase of Uni-Mat Pro. See Ivanhoe Fin., Inc. v. Mortg. Essentials, Inc., 2004 WL 856591, at *2 (N.D. Ill. Apr. 21, 2004) ("Merely purchasing component parts for incorporation into a final product does not make a party a consumer."); Pressalite Corp. v. Matsushita Elec. Corp. of Am., 2003 WL 1811530, at *10 (N.D. Ill. Apr. 4, 2003) ("The fact that [plaintiff] purchased component parts from [defendant] does not render it a consumer under the Act."); Stepan, 948 F. Supp. at 806-07 (plaintiff not a "consumer" where it "indisputably purchased the [product] for incorporation into insulating panels that were later resold for commercial and residential construction").

Because Tile Unlimited is not a "consumer," it must satisfy the "consumer nexus" test, which, as noted above, requires that Defendants have engaged in "conduct that is either directed toward the market or otherwise implicates consumer protection concerns." MacNeil Auto.

Prods., 715 F. Supp. 2d at 792.*fn1 Tile Unlimited contends Defendants' conduct was "directed toward the market" because "Uni-Mat Pro was advertised to an entire market and represented to all of the prospective users as a superior product." Doc. 15 at 11. In support, Tile Unlimited cites Downers Grove Volkswagen, Inc. v. Wigglesworth Imports, Inc., 546 N.E.2d 33 (Ill. App. 1989), which held the consumer nexus test met "where plaintiff has alleged defendant published false information about [plaintiff's] prices for services." Id. at 41. The pricing information in Wigglesworth Imports was directed to the market generally; here, by contrast, the complaint alleges only that Defendants' false representations about Uni-Mat Pro were directed to Tile Unlimited "and other tile installers," not to consumers. Doc. 1-4 at ¶ 23; see also id. at ¶¶ 26, 30-32. Tile Unlimited thus has not alleged that Defendants' conduct was directed toward the market. See Harris v. JAT Trucking of Ill., Inc., 2009 WL 2222740, at *9 (C.D. Ill. July 24, 2009) (consumer nexus test not satisfied where the "allegedly false statements were made to Plaintiff and other employees, not to the general public"); Conditioned Ocular Enhancement, Inc. v. Bonaventura, 458 F. Supp. 2d 704, 711-12 (N.D. Ill. 2006).

Tile Unlimited alternatively contends that Defendants' conduct implicates consumer protection concerns because "the defective Uni-Mat Pro will reach households who have the product installed on their floors . affect[ing] not just the businesses at bar, but innocent homeowners as well." Doc. 15 at 11. This argument has been soundly, repeatedly, and correctly rejected:

The Defendant's argument that the misrepresentation affected consumers because consumers ultimately used the product . . . fails. Almost every product sold by one commercial party to another will ultimately be sold to or otherwise effect [sic] a consumer. Consequently, if allegations [that the product ultimately will reach consumers] are sufficient to bring the claim within the ambit of the Act, the Act would apply to nearly all commercial transactions, a result contrary to the intent of the legislature as presently interpreted.

Stepan, 948 F. Supp. at 807; see also Kingsford Fastener, Inc. v. Koki, 2002 WL 992610, at *3 (N.D. Ill. May 15, 2002) ("[Plaintiff] fails to articulate [a consumer] nexus, . except to state that defendant's conduct not only affected plaintiff, but plaintiff's customers and any other unfortunate purchasers of the defective fastening system from Hitachi's full-line distributors, not to mention the scores of home buyers who may have been affected by the cost and delay in remedying the problems with the faulty fastening system. This amounts to the oft-given and just as often rejected argument that because consumers are ultimately affected, the claim has a consumer nexus. A consumer nexus is not established, however, simply because ...

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