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In re Ventra Card Litigation

United States District Court, N.D. Illinois, Eastern Division

April 21, 2015

IN RE VENTRA CARD LITIGATION

MEMORANDUM OPINION AND ORDER

JORGE L. ALONSO, District Judge.

Before the Court are two motions. For the reasons explained below, defendants' motion to dismiss Counts II, III and IV of the consolidated class action complaint is granted in part and denied in part, and plaintiffs' motion to strike portions of defendants' amended answer and affirmative defenses is granted.

BACKGROUND

This is a putative class action in which plaintiffs, James D. Kenger, Min Ro, Stacy Allen, and Anish Patel, allege that defendants, Cubic Corp., Cubic Transportation Systems, Inc., Cubic Transportation Systems Chicago, Inc. (collectively, "Cubic" or "the Cubic entities"), and the Chicago Transit Authority ("CTA"), "assess[ed] unauthorized fees and charges on unsuspecting CTA passengers" in connection with Cubic's implementation of the CTA's Ventra fare system, which was launched in September 2013. (Consol. Class Action Compl. ("Compl.") ¶¶ 1-3.) Plaintiffs Allen and Kenger complain that they were charged twice for certain single fares; Kenger also complains that his account was improperly debited. (Id. ¶¶ 72, 83-84.) Plaintiffs Ro and Patel complain that their Ventra accounts were not properly credited. (Id. ¶¶ 87, 90.)

Plaintiffs' complaint contains claims for breach of contract (Count I); unjust enrichment (Count II, brought in the alternative to Count I); violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (Count III); and violation of the Electronic Funds Transfer Act (Count IV, asserted by Kenger and Ro only). Plaintiffs seek to bring these claims on behalf of five classes: "[a]ll persons with a Ventra Card[1] or Ventra account who have been deprived of funds that they attempted to transfer to their Ventra accounts" (Class One); "[a]ll persons with a Ventra Card or Ventra account who have been charged both a transfer and second fare when they paid for a fare plus a transfer" (Class Two); "[a]ll persons with a Ventra Card or Ventra account who have been charged more than once for one full fare" (Class Three); "[a]ll persons with a Ventra Card or Ventra account who have been charged when purchasing or loading transit value onto a Ventra Card or Ventra account and who did not receive credit for the charge" (Class Four); and "[a]ll persons who have a Ventra Card that is linked to an asset account as defined in 15 U.S.C. § 1693 et seq. and have been charged: (a) both a transfer and second fare when they paid for a fare plus a transfer; (b) more than once for one full fare; (c) any other charge not authorized by the CTA Fare Schedule and/or Ventra's Terms and Conditions." (Id. ¶ 91.)

Defendants move to dismiss Counts II, III, and IV pursuant to Federal Rule of Civil Procedure 12(b)(6) and to strike plaintiffs' prayer for punitive damages.[2] Plaintiffs move to strike defendants' amended answer and affirmative defenses pursuant to Federal Rule of Civil Procedure 12(f).

DISCUSSION

A. Defendants' Motion to Dismiss Counts II, III, and IV and to Strike Plaintiffs' Prayer for Punitive Damages

1. Legal Standards

"A motion under Rule 12(b)(6) tests whether the complaint states a claim on which relief may be granted." Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir. 2012). Under Rule 8(a)(2), a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (ellipsis omitted). Under federal notice-pleading standards, a plaintiff's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. Stated differently, "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 Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). "In reviewing the sufficiency of a complaint under the plausibility standard, [courts must] accept the well-pleaded facts in the complaint as true, but [they] need[ ] not accept as true legal conclusions, or threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.'" Alam v. Miller Brewing Co., 709 F.3d 662, 665-66 (7th Cir. 2013) (quoting Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009)).

2. Count II (Unjust Enrichment)

In Count II, plaintiffs allege that defendants have been unjustly enriched by receiving the benefits of overcharging them and that defendants' retention of these benefits is inequitable. (Compl. ¶¶ 106-09.) Count II is pleaded in the alternative to the breach of contract claim.

Quoting Howard v. Chicago Transit Authority, 931 N.E.2d 292, 298 (Ill.App.Ct. 2010), defendants first contend that "implied contracts are not recognized where one of the parties is a municipal corporation." (Defs.' Mem. Supp. Mot. 7.) The court in Howard upheld the dismissal of an unjust enrichment claim against the CTA for its allegedly wrongful retention of the balance on transit cards once they expired, relying on McMahon v. City of Chicago, 789 N.E.2d 347, 352 (Ill.App.Ct. 2003), where the court reasoned that "a contract cannot be implied if the statutory method of executing a municipal contract has not been followed." Plaintiffs respond that while Illinois may not recognize claims against municipal entities that are based on contracts implied in fact, it does recognize claims against them that are based on contracts implied in law. (Pls.' Resp. 7-8.) Plaintiffs cite Woodfield Lanes, Inc. v. Village of Schaumburg, 523 N.E.2d 36 (Ill.App.Ct. 1988), in which the court explained:

The Village maintains that it is immune under the common law and under the Local Governmental and Governmental Employees Tort Immunity Act. The Village cites Wacker-Wabash Corp. v. City of Chicago (1953), 350 Ill.App. 343, 354, 112 N.E.2d 903, for the proposition that a municipality may not be held liable on an implied contract. However, that case involved a contract implied in fact: plaintiff therein alleged that the city's agents promised to complete certain improvements in return for plaintiff's agreement to develop its property in accord with the city's plans. The court held that the city could not be bound by its officers' promises when the officers did not follow the forms prescribing the manner in which the city can make contracts. A contract implied in law, on the other hand, does not arise from an intent to contract or a promise. The failure to follow proper contractual forms is therefore immaterial. Illinois courts have held municipalities and other governmental units liable on contracts implied in law despite the absence of proper contractual forms. ( Great Lakes Dredge and Dock Co. v. City of Chicago (1933), 353 Ill. 614, 627, 188 N.E. 196; Town of Montebello v. Lehr (1974), 17 Ill.App.3d 1017, 1021-22, 309 N.E.2d 231; Welsbach Traffic Signal Co. v. City of Chicago ...

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