United States District Court, N.D. Illinois, Eastern Division
MARIO ALIANO and DUE FRATELLI, INC., individually and on behalf of all others similarly situated, Plaintiffs,
WHISTLEPIG, LLC, and GOAMERICAGO BEVERAGES, LLC, Defendants.
MEMORANDUM OPINION AND ORDER
SHEILA FINNEGAN, Magistrate Judge.
Plaintiffs Mario Aliano and Due Fratelli, Inc. (a restaurant operated by Aliano) have filed suit on behalf of themselves and other similarly situated consumers and businesses, charging Defendants WhistlePig, LLC and Goamericago Beverages, LLC, with engaging in fraudulent and deceptive trade practices in connection with the marketing and advertising of WhistlePig Straight Rye Whiskey. Count I, asserted on behalf of Aliano and a subclass of Illinois consumers who purchased WhistlePig (Subclass A), alleges violation of the Vermont Consumer Fraud Act, 9 V.S.A. § 2451 et seq. Count II, also asserted on behalf of Aliano and Subclass A, alleges violation of the Illinois Consumer Fraud and Deceptive Trade Practices Act ("ICFA"), 815 ILCS § 505/1 et seq. Count III, asserted on behalf of Due Fratelli and a subclass of Illinois businesses that purchased WhistlePig (Subclass B), seeks damages and injunctive relief stemming from violation of the Illinois Uniform Deceptive Trade Practices Act ("IDTPA"), 815 ILCS § 510/1 et seq. Count IV states a claim for restitution and unjust enrichment on behalf of Plaintiffs and both Subclasses.
The parties consented to the jurisdiction of the United States Magistrate Judge pursuant to 28 U.S.C. § 636(c), and Defendants now seek to dismiss the Complaint in its entirety for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). In their opposition brief, Plaintiffs concede that Count I must be dismissed for lack of standing since they are Illinois residents who purchased WhistlePig in Illinois. (Doc. 21, at 3 n.2). See Sherman v. Ben & Jerry's Franchising, Inc., No. 1:08-cv-207, 2009 WL 2462539, at *9 (D. Vt. Aug. 10, 2009) (citizens of Virginia who owned and operated a Virginia franchise were not Vermont consumers capable of bringing a suit under the Vermont Consumer Fraud Act). Count I is therefore dismissed. As for the ICFA and IDTPA claims in Counts II and III, Defendants argue that they must be dismissed because Plaintiffs do not allege that they have suffered actual or future damage, and fail to plead fraud with the requisite particularity. Defendants also argue that allegations of fraud based on deceptive statements appearing on the WhistlePig label affixed to the bottles are barred because federal regulators pre-approved the label. For the reasons set forth here, the motion is granted in part and denied in part.
In reviewing this motion, the Court accepts the Complaint's factual allegations as true and draws all reasonable inferences in Plaintiffs' favor. Gessert v. United States, 703 F.3d 1028, 1033 (7th Cir. 2013). Defendants WhistlePig and Goamericago Beverages are Delaware corporations with principal places of business in Shoreham, Vermont. In 2010, they launched the WhistlePig brand of rye whiskey, which they market as an artisanal, craft whiskey produced on a small farm in Vermont from certified organic rye grown on site. (Cmplt. ¶¶ 2, 3, 16, 17, 20, 21). In order to "give th[is] illusion of a small farm-based operation, " the WhistlePig website describes the production process as including farm fields growing rye, the "bottling room where the bottles are labeled and filled by hand" in an old cow milking parlor, and "barns, which once housed over 200 cows, " that "now serve as warehouse space for aging the whiskey." (Id. ¶ 24). The website also characterizes WhistlePig as "the nation's first farm-to-bottle' single-estate distillery, " ( id. ¶¶ 6, 26), and credits Dave Pickerell as its "Master Distiller" whose only goal is to "create the finest rye whiskey." (Id. ¶¶ 5, 26). The whiskey bottles themselves display labels prominently representing that WhistlePig is "HAND BOTTLED AT WHISTLEPIG FARM, SHOREHAM, VERMONT." (Id. ¶¶ 4, 25).
In reality, "neither WhistlePig, nor the ingredients used in making WhistlePig, are from the Vermont farm." Instead, WhistlePig is distilled and aged by Alberta Distillers, Ltd. ("ADL"), a "massive" factory in Alberta, Canada that "produces and distills industrial-sized quantities of beverage-grade alcohol, including whiskey from numerous other brands." (Id. ¶ 9). The purpose behind the small farm marketing strategy is to make "businesses and consumers... believe that they are buying unique, premium whiskey, not sourced whiskey from a bulk producer, " so that Defendants can charge premium prices. (Id. ¶¶ 7, 27).
Plaintiff Aliano is a citizen of the State of Illinois and the owner and President of Plaintiff Due Fratelli, an Illinois restaurant. (Id. ¶¶ 14, 15, 34). On an unspecified date in October 2014, Aliano purchased two bottles of WhistlePig, one to serve at the restaurant and one for his personal use. (Id. ¶ 36). His purchase decision was based on research he conducted into the details of various brands of whiskey, including WhistlePig, along with a comparison of the representations that each brand made in their "marketing and advertising materials." (Id. ¶ 35). Aliano did not know prior to the purchase that WhistlePig is made from mass produced whiskey distilled and aged in Canada. Had he known this fact, he would not have bought the product. (Id. ¶¶ 37, 38).
On November 18, 2014, Plaintiffs filed a class action suit against Defendants in the Circuit Court of Cook County, Illinois, alleging that they and other consumers and businesses have purchased "hundreds of thousands of bottles of WhistlePig at a premium price" without knowing that it "is not made on a humble farm from locally grown rye" but is "made with the same 100% rye recipe that other ADL rye whiskeys are made with." (Id. ¶¶ 8, 10). Those other ADL-manufactured whiskeys, moreover, are sold under different brand names by different companies for much lower prices than WhistlePig. (Id. ¶ 30). Plaintiffs claim that Defendants have deliberately engaged in deceptive marketing and advertising strategies because they "know that consumers and businesses are willing to pay more for a craft, Vermont rye whiskey because the quality would be higher, and Defendants know that Plaintiffs and other consumers and businesses believe they are paying costs associated with higher-quality ingredients and for small-scale production." (Id. ¶¶ 32, 33).
Defendants removed the case to federal court based on diversity jurisdiction, and now seek to dismiss the entire complaint for failure to state a claim.
A. Standard of Review
In evaluating the sufficiency of a complaint under Rule 12(b)(6), the Court must "construe it in the light most favorable to the nonmoving party, accept well-pleaded facts as true, and draw all inferences in [the nonmoving party's] favor." Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146 (7th Cir. 2010). "To survive a motion to dismiss, the plaintiff must do more in the complaint than simply recite elements of a claim; the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Zellner v. Herrick, 639 F.3d 371, 378 (7th Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. See also Bausch v. Stryker Corp., 630 F.3d 546, 558 (7th Cir. 2010). Although a "formulaic recitation of the elements of a cause of action will not do, " id. at 678, a plaintiff need provide "only enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests, and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief." Reger Development, LLC v. National City Bank, 592 F.3d 759, 764 (7th Cir. 2010) (quoting Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir. 2008)).
1. Damages Under the ICFA (Count II)
The ICFA is "a regulatory and remedial statute intended to protect consumers, borrowers, and business persons against fraud, unfair methods of competition, and other unfair and deceptive business practices." Robinson v. Toyota Motor Credit Corp., 201 Ill.2d 403, 416-17, 775 N.E.2d 951, 960 (2002). To state a claim under the Act, a plaintiff must allege (1) a deceptive act or practice by the defendant, (2) the defendant's intent that the plaintiff rely on the deception, (3) the occurrence of the deception in a course of conduct involving trade or commerce, and (4) actual damage to the plaintiff that is (5) a result of the deception. DeBouse v. Bayer, 235 Ill.2d 544, 550, 922 N.E.2d 309, 313 (2009). The fifth element requires the plaintiff to allege and prove that the deceptive act proximately caused any damages, meaning he was "in some manner, deceived' by the misrepresentation." Id.; Avery v. State Farm Mut. Auto. Ins. Co., 216 Ill.2d 100, 200, 835 N.E.2d 801, 861 (2005) (quoting Oliveira v. Amoco Oil Co., 201 Ill.2d 134, 155, 776 N.E.2d 151, 164 (2002)).
Defendants insist that Plaintiffs "do not plausibly allege that they were actually deceived by WhistlePig's statements and omissions, as required to state a claim for damages based on deceptive marketing" under the ICFA. (Doc. 16, at 6). This argument is premised on the fact that Plaintiffs have filed similar lawsuits against other distilleries challenging the exact same marketing practices. For example, on September 26, 2014 (before Aliano bought any WhistlePig on an unidentified date in October 2014), he filed suit against the makers of Templeton Rye whiskey alleging that the company deceptively marketed its product as an Iowa rye whiskey when in fact it "is distilled and aged by MGP Ingredients, Inc.'s factory in Lawrenceburg, Indiana." (Doc. 16, at 7; Doc. 16-2, Aliano v. Templeton Rye Spirits, LLC, No. 2014 CH 15667). Aliano subsequently filed three additional lawsuits with similar allegations against other manufacturers, one on October 7, 2014 and two on October 28, 2014. (Doc. 16-3, Aliano v. Fifth Dimension, Inc., No. 2014 CH 16201 (Oct. 7, 2014) (Tito's Handmade Vodka); Doc. 16-4, Aliano v. Louisville Distilling Co., No. 2014 CH 17428 (Oct. 28, 2014) (Angel's Envy Rye whiskey); Doc. 16-5, Aliano v. Proximo Spirits, Inc., No. 2014 CH 17429 (Oct. 28, 2014) (Tincup American Whiskey)).
Defendants contend that in light of these lawsuits, it is not plausible that Aliano purchased WhistlePig in October 2014 "based on the research he conducted and the false and misleading representations' allegedly made by Defendants." (Doc. 16, at 7). Rather, Defendants find it "evident that this was a strategic purchase so [Aliano] could gin up a lawsuit." (Id. ). As a result, Defendants argue that the allegations regarding damage are not well-pleaded and Count II must be dismissed. (Id. ) (citing Pirelli Armstrong Tire Corp. Retiree Med. ...