United States District Court, N.D. Illinois, Eastern Division
ARCHIE BEATON, individually and on behalf of all others similarly situated, Plaintiff,
SPEEDYPC SOFTWARE, a British Columbia company, Defendant.
MEMORANDUM OPINION AND ORDER
ANDREA R. WOOD, District Judge.
Plaintiff Archie Beaton has sued Defendant SpeedyPC Software ("SpeedyPC"), a Canadian computer software producer, alleging that it has engaged in fraudulent and deceptive marketing of SpeedyPC Pro (the "Software"), a software product that SpeedyPC claims diagnoses and repairs various computer errors. SpeedyPC has filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) (the "Motion") (Dkt. No. 16). For the reasons discussed below, the Motion is denied.
This putative class action arises out of Beaton's purchase of a license to use the Software. SpeedyPC promotes the Software through online advertisements and on websites as being capable of increasing computer speed and performance, removing harmful computer errors, and protecting users' privacy and security. (Compl. ¶ 15, Dkt. No. 1.) Beaton alleges that these representations do not reflect the Software's true capabilities. ( Id. ¶ 22.) Instead, the Software has two main functions: first, it is a registry cleaner; and second, it removes superfluous "temporary" files from a user's hard drive. ( Id. ) According to Beaton, these functions "do not come close to squaring with SpeedyPC's representations about the functionality of SpeedyPC Pro." ( Id. )
As alleged in his complaint, Beaton claims that SpeedyPC engages in a deceptive marketing scheme to induce consumers to purchase the Software. Online ads for the Software promise that the Software can, among other things, "[b]oost your PC's speed and performance, " "[f]ind your PC's performance potential, " and "improve your PC's health." ( Id. ¶ 16.) Consumers who click on one of SpeedyPC's advertisements are directed to one of SpeedyPC's websites, which warns consumers about various risks to their computers. ( Id. ¶ 17.) The websites recommend that consumers download the trial version of the Software to detect issues that the product is supposedly designed to identify and fix. ( Id. ¶ 24.) Once a consumer downloads and runs the trial version of the Software, it displays hundreds or thousands of serious problems that it claims are affecting the computer and "require attention." ( Id. ¶ 28.) After presenting the results of the diagnostic scan, the Software displays to the user a half-page warning with bold red letters stating: "SpeedyPC Pro has determined that your computer requires immediate attention!" and is in "Serious" or "Critical" condition. ( Id. ¶ 29.) The user is then given the option to purchase the full version of the Software to fix and repair the supposedly harmful errors that have been detected. ( Id. )
In August 2012, while browsing the Internet for software to repair and optimize his computer, Beaton encountered one of SpeedyPC's ads. ( Id. ¶ 42.) Based on various representations made in the ad, Beaton went to one of SpeedyPC's websites, which presented more representations regarding the utility of the Software. ( Id. ¶ 43.) Beaton includes in his complaint screenshots of several of these representations. One such screenshot makes the claim that the Software can "clean and optimize your computer for peak performance." ( Id. ¶ 43 fig. 10.) Based on SpeedyPC's representations, Beaton downloaded and installed the Software. ( Id. ¶ 44.) The Software scanned Beaton's computer and reported that it detected hundreds of serious errors, some of which were causing damage to the computer. ( Id. ¶ 45.) The Software warned Beaton that these problems were decreasing his computer's performance and compromising his security, and urged him to purchase the Software to "fix" the problems. ( Id. ) Beaton clicked on a button labeled "Fix All, " which forwarded him to a SpeedyPC website that urged him to register the Software to fix the problems identified. ( Id. ¶ 46.) After reaching the registration webpage, SpeedyPC again represented to Beaton that it "detected some problems that needed to be fixed" and instructed him to "Register SpeedyPC Pro now!" ( Id. (citing ¶ 43 fig. 10).) Relying on these representations about the Software's capabilities and his computer's condition, Beaton paid approximately $39.94 to activate the Software and repair the purported errors. ( Id. ¶ 47.) After he downloaded the Software, every time Beaton ran it, the Software reported harmful errors that were adversely affecting his computer and that he needed to fix. The Software continued to report harmful errors even though Beaton repeatedly ran the program and "fixed" any errors that were found. ( Id. ¶ 49.) Beaton's computer performance did not improve despite his repeatedly running the Software's scan. ( Id. )
In addition to his personal experience with the Software, Beaton, through his attorneys, also engaged a computer forensics expert to examine it. ( Id. ¶ 31.) The expert concluded that the free and registered versions of the Software are designed always to report that a user's computer is severely damaged, regardless of the condition or type of computer on which the Software is installed. ( Id. ) Beaton's expert further concluded that errors identified by the Software as "Serious" or "Critical" were not in fact credible threats to a computer's functionality. ( Id. ) The expert also used the Software to perform a diagnostic scan of a brand-new, never-used computer. ( Id. ¶¶ 32-33.) After being run on the new computer, the Software reported the computer's overall performance as "poor, " stated that 125 "problems require attention, " and represented that at least some of those errors were causing "Serious" or "Critical" damage to the computer system. ( Id. ¶¶ 32 fig. 7, 33.) Finally, Beaton's expert planted fake, innocuous errors on a computer. The Software registered these harmless errors as causing "Serious" or "Critical" damage to the computer. ( Id. ¶ 34.)
Based on these allegations, Beaton filed the instant lawsuit on behalf of himself and a class of similarly-situated individuals, defined (with certain exceptions) to include "[a]ll individuals and entities in the United States who have purchased SpeedyPC Pro." ( Id. ¶ 50.) The complaint asserts several causes of action on behalf of Beaton and the putative class: (1) an Illinois common law claim for fraudulent inducement; (2) a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), 815 ILCS 505/1, et seq.; (3) a claim for breach of contract; and (4) in the alternative to Beaton's breach of contract claim, a claim for unjust enrichment. The Court addresses the sufficiency of each claim in turn below.
To survive a Rule 12(b)(6) motion, a complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007)). The basic pleading requirement is set forth in Federal Rule of Civil Procedure 8(a)(2), which requires a complaint to provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). "In evaluating the sufficiency of the complaint, [courts] view it in the light most favorable to the plaintiff, taking as true all well-pleaded factual allegations and making all possible inferences from the allegations in the plaintiff's favor." AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011).
In addition, Federal Rule of Civil Procedure 9(b) requires a plaintiff alleging fraud to state the circumstances constituting the fraud "with particularity." Fed.R.Civ.P. 9(b). "This ordinarily requires describing the who, what, when, where, and how' of the fraud." AnchorBank, 649 F.3d at 615 (citing Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011)). In other words, Rule 9(b) requires a plaintiff pleading fraud "to state the identity of the person making the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff.'" Uni *Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 923 (7th Cir. 1992) (quoting Bankers Trust Co. v. Old Republic Ins. Co., 959 F.2d 677, 683 (7th Cir. 1992)).
I. Plaintiff's Claim for Fraudulent Inducement
Under Illinois state law, fraudulent inducement is a form of common law fraud. Lagen v. Balcor Co., 653 N.E.2d 968, 972 (2d Dist. 1995). The elements of common law fraud in Illinois are: (1) a false statement of material fact; (2) knowledge or belief by the maker that the statement was false; (3) an intent to induce reliance on the statement; (4) reasonable reliance upon the truth of the statement; and (5) damages resulting from that reliance. Id. Because fraudulent inducement is a claim that sounds in fraud, it is subject to Rule 9(b)'s heightened pleading requirements. Hoffman v. Nationwide Mut. Ins. Co., No. 10-cv-3841, 2011 WL 3158708, at *5 (N.D. Ill. July 26, 2011).
SpeedyPC challenges the sufficiency of Beaton's fraudulent inducement claim under the heightened pleading standard of Rule 9(b). This argument fails because the complaint more than adequately pleads the "who, what, when, where, and how" of the alleged fraud. For example, the complaint alleges that, in August 2012, Beaton encountered a series of advertisements containing claims made by SpeedyPC. (Compl. ¶ 42, Dkt. No. 1.) Beaton asserts that these advertisements claimed that SpeedyPC Pro could, among other things, "remov[e] malware and privacy files, " "clean away... private and confidential information, " and "improve PC startup times." ( Id. ¶¶ 21, 42.) Beaton further alleges that, as a result of these representations, he visited the SpeedyPC Pro website, which made similar claims. ( Id. ¶ 43 Figs. 10-16.) He includes in the complaint screenshots that are the same as, or substantially similar to, the alleged misrepresentations he viewed. ( Id. ) Beaton also specifies the manner in which he believes these representations to be false, both through his expert's analysis and his own experience, alleging that "every time Beaton ran SpeedyPC Pro, the Software reported that harmful errors were adversely affecting his computer and that he needed to fix' the errors ...