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Mednick v. Precor, Inc.

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

September 27, 2016

GARY MEDNICK and STEVEN BAYER, Individually and on Behalf of All Others Similarly Situated, Plaintiffs,
v.
PRECOR, INC., a Delaware Corporation, Defendant.

          MEMORANDUM OPINION AND ORDER

          Harry D. Leinenweber, Judge.

         Before the Court is the parties' dispute over whether Plaintiffs should have the Court's permission to file an Amended Complaint [ECF Nos. 130, 141]. For the reasons stated herein, Plaintiffs are given leave to amend their Complaint subject to some limitations.

         I. LEGAL STANDARD

         A grant or denial of a motion to amend a pleading is within the discretion of the district court judge. Foman v. Davis, 371 U.S. 178, 182 (U.S. 1962). Nonetheless, Rule 15(a) of the Federal Rules of Civil Procedures instructs judges to “freely give leave when justice so requires.” Thus, in the absence of “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment, ” leave to amend should and will be given. Foman, 371 U.S. at 182.

         There is still the question of what evidence the Court may consider when reviewing a motion for leave to amend a complaint. Plaintiffs urged that the Court look solely to the pleadings and determine if their claim is “plausible on its face.” (Pls.' Reply Mem. Supp. Mot. Am. Compl., ECF No. 141, p.5.) Plaintiffs say that this is because “a proposed amendment is futile only if it could not withstand a Rule 12(b)(6) motion to dismiss.” Id., p.6 (internal quotation marks omitted). But the very case that Plaintiffs cite for this proposition, Peoples v. Sebring Capital Corp., acknowledged that the above statement is only “generally” true. Peoples v. Sebring Capital Corp., 209 F.R.D. 428, 430 n.1 (N.D. Ill. 2002). Peoples explicitly noted that the statement is not true when courts have pending before them a motion for summary judgment. See, id. In such circumstances, courts may consider extrinsic materials, indeed the same materials considered in summary judgment, in ruling on the motion for leave to amend. Id. While there is no summary judgment motion before this Court, the Court has already decided a Motion on Class Certification. As such, the Court will consider the same materials in deciding this Motion as it did for class certification.

         II. BACKGROUND

         The factual background of this case was discussed at length in the Court's Memorandum Opinion denying class certification on June 10, 2016. See, ECF No. 125, p. 1-8. Below is an account of the facts as they have unfolded since that last ruling. Other facts will be discussed in the analysis as they become relevant.

         A. Proceedings since Denial of Class Certification

         Shortly after the denial of class certification, the parties appeared again before the Court. During this appearance on June 30, Plaintiffs' counsel said that Plaintiffs would “seek leave to file an amended complaint, your Honor, that is much narrower than the original complaint the class sought in the class cert motion.” (Transcript, ECF No. 134, p. 2.) Defendant Precor's counsel replied, “We would need to see the motion, your Honor.” Id. at 3. The Court then set the briefing schedule for the initial filing, response, and reply. Id. The exchange between the parties and the Court makes clear that the Court was setting the schedule for a Motion for Leave to Amend the Complaint and not for the filing of an Amended Complaint itself. The minute order issued on the same day, however, stated, “Plaintiff to file amended complaint by 7/14/2016.” (ECF No. 126.)

         B. Amended Complaint

         Plaintiff filed its First Amended Complaint (the “FAC”) by the deadline. (ECF No. 127.) Plaintiffs' Complaint now alleges a single cause of action: violation of the Illinois Fraud and Deceptive Business Practices Act and nine other consumer protection statutes “which are materially similar” to Illinois law. Id. ¶¶ 97-102. The ten states whose laws are implicated are California, Florida, Illinois, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, and Washington. Id. ¶ 99.

         Plaintiffs sought to represent four different classes in their Amended Complaint. The first new class, called the “Multi-State Damages Class, ” was made up of all persons, not otherwise excluded, who are residents of the ten states and “who purchased a Precor treadmill equipped with a touch sensor heart rate monitor from either Precor or a third-party retailer.” FAC ¶ 86 (emphasis added). In the alternative, Plaintiffs bring the action on behalf of an “Illinois Resident Damages Class, ” which is defined in the same way as the Multi-State Damages Class but is confined to residents of Illinois. Id. ¶ 87.

         In addition to the damages classes, Plaintiffs sought to represent a Multi-State Injunctive Relief Class and an Illinois Resident Injunctive Relief Class. These injunctive relief classes are defined in the same way as the damages classes, although presumably their members are entitled only to a remedy in equity. (FAC ¶¶ 88-89.) Plaintiffs also expanded on the injunctive relief they seek, naming five specific ways in which they would have Precor enjoined. Id. at 27. All five are forms of prospective injunctive relief having to do with how Precor advertises its treadmills in the future. For instance, Plaintiffs asked for an order “enjoining Precor from making representations regarding the validity, reliability or accuracy of the Touch Sensor Monitoring feature on its treadmills.” Id.

         As for money damages, Plaintiffs requested the same types of damages as in their original Complaint. These included “compensatory damages . . . and treble, multiple, disgorgement, punitive or other damages” as well as “pre-judgment and post-judgment interest” and awards of “attorney fees, expenses, and costs.” (FAC at 27.)

         Because Plaintiffs' sole claim for relief is now predicated on the allegation that Precor engaged in unfair and misleading representations in marketing its heart rate monitors, Plaintiffs also refined and expanded on their allegations of Precor's allegedly deceptive advertising. See, FAC ¶¶ 5-14, 42-54. For example, Plaintiffs emphasized that, “In every product accompanying a Precor treadmill, Precor made the exact same statement, that, “whether you walk or run, ” the [touch sensor heart rate monitoring] feature allows the consumer to ‘maximize' their workout, ” all the while knowing that such a statement was false. Id. at ¶¶ 15, 16, 45 (emphasis in original).

         Plaintiffs' factual allegations may be distilled thusly: (1) “Precor's Touch Sensor Monitoring in treadmills does not work as advertised” (FAC ¶¶ 15, 26); (2) Precor knew that its Touch Sensor technology “cannot perform as advertised” (FAC ¶¶ 22, 26); and (3) by “inducing [consumers] to pay a premium price for a feature that simply could not work as advertised, ” Precor had violated the consumer protection laws of the ten named states (FAC ¶¶ 22, 99).

         IV. ANALYSIS

         Precor raised four issues with Plaintiffs' Amended Complaint. The first is a procedural issue arising from the fact that Plaintiffs had not filed a Motion for Leave to Amend a Complaint prior to filing the Amended Complaint itself. The remaining are substantive arguments related to standing, futility, and undue prejudice. The Court will address each in turn.

         A. Procedural Error

         While it is true that Plaintiffs had not filed a Motion for Leave to Amend, the Court recognized that its minute order issued on June 30 had in error allowed Plaintiffs to file an Amended Complaint directly. See, Min. Order, ECF No. 137 (correcting the June 30 minute order). The Court will thus treat the parties' briefs on the issue as a Motion for Leave to Amend the Complaint. In so doing, the Court exercises its discretion and rejects Precor's attempt to have this Court deny leave solely on the procedural ground that Plaintiffs did not file a motion.

         B. ...


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