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Tartan Construction, LLC v. NES Equipment Services Corp.

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

May 14, 2018

STATE MECHANICAL SERVICES, LLC, Plaintiff,
v.
NES EQUIPMENT SERVICES CORPORATION d/b/a NES RENTALS, NES RENTALS HOLDINGS, and UNITED RENTALS NORTH AMERICA, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          John Robert Blakey United States District Judge

         In this putative class action, Plaintiff Tartan Construction, LLC[1] alleges that Defendants NES Rentals, NES Holdings, and United Rentals charged two “illegitimate” fees as part of their standard rental agreements for heavy equipment. [39] ¶ 3. Plaintiff claims that these fees breached the rental agreements, unjustly enriched Defendants, and violated the Illinois Consumer Fraud and Deceptive Trade Practices Act (ICFA). Id. Defendants moved to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. [26]. For the reasons explained below, this Court grants Defendants' motion.

         I. The Complaint's Allegations

         Defendants rent heavy equipment to industrial construction customers through a standard rental agreement. [39] ¶ 23. Along with a rental fee, Defendants charge two other fees: (1) an “environmental fee”; and (2) a fee for a “limited damage waiver” (LDW). Id. ¶ 25. Defendants do not disclose to their customers how they calculate the two additional fees. Id. ¶ 28.

         Plaintiff says that Defendants misrepresent the environmental fee as a means of recovering the costs of handling and disposing of waste fluids, when in reality the amount of the environmental fee bears no relation to any such costs. Id.

         ¶ 34. The rental agreement describes the environmental fee as follows:

Customer acknowledges that it shall be charged a per item, per invoice environmental fee for the handling and disposal of waste oil and other fluids used in connection with the operation and/or cleaning of the Equipment.

[39-1] § 18. Defendants charge a $10 per item environmental fee on every invoice regardless of how much equipment a customer rented, which type of equipment the customer rented, and whether Defendant actually had to dispose of any waste fluids [39] ¶¶ 35-36. Plaintiff always timely paid the environmental fee. Id. ¶ 42.

         The rental agreement does not contain the LDW. Id. ¶ 43. Instead, it refers to the LDW as follows:

Customer acknowledges that the Company's [LDW] policy was explained at the time of entering into this Agreement. A copy of the policy is available at all branches of the Company and is available upon request. Customer acknowledges that it is responsible for the Equipment and that any [LDW] entered into is not insurance.

[39-1] § 17. Plaintiff alleges that, contrary to section 17's representations, Defendants do not explain anything about the LDW to customers when entering into rental agreements and do not make copies of the LDW available because “no such ‘policy' exists.” [39] ¶ 44. Defendants charge 14% of total rental costs on each invoice for the LDW. Id. ¶ 45.

         Although the LDW purportedly waives Defendants' rights to recover from renters for certain types of damage to equipment, Plaintiff says that the LDW provides little or no value to customers. Id. ¶ 46. Even if customers pay for the LDW, Defendants' rental agreement still obligates customers to maintain liability and property insurance for the equipment, and Defendants rarely or never waive costs under the LDW. Id. ¶¶ 48, 51-52. Plaintiff alleges that Defendants deceive customers into believing both that they must purchase the LDW and that the LDW confers a meaningful benefit if equipment gets damaged. Id. ¶¶ 49, 57. Plaintiff timely paid the 14% LDW fee on any applicable invoices from Defendants. Id. ¶ 61.

         II. Legal Standard

         To survive a motion to dismiss under Rule 12(b)(6), a complaint must provide a “short and plain statement of the claim” showing that the pleader merits relief, Fed.R.Civ.P. 8(a)(2), so Defendants have “fair notice” of the claim “and the grounds upon which it rests, ” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint must also contain “sufficient factual matter” to state a facially plausible claim to relief-one that “allows the court to draw the reasonable inference” that the defendant committed the alleged misconduct. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). This plausibility standard “asks for more than a sheer possibility that a defendant has acted unlawfully.” Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013). Thus, “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Limestone Dev. Corp. v. Vill. of Lemont, 520 F.3d 797, 803 (7th Cir. 2008).

         In evaluating a complaint, this Court accepts all well-pleaded allegations as true and draws all reasonable inferences in Plaintiffs' favor. Iqbal, 556 U.S. at 678. This Court does not, however, accept legal conclusions as true. Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009). On a motion to dismiss, this Court may consider the complaint itself, documents attached to the complaint, documents central to the complaint and to which the complaint refers, and information properly subject to judicial notice. Williamson, 714 F.3d at 436.

         Fraud claims under the ICFA must meet Federal Rule of Civil Procedure 9(b)'s heightened pleading requirements. Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014). Rule 9(b) demands that claimants alleging fraud “state with particularity the circumstances constituting fraud.” To satisfy Rule 9(b), a plaintiff “ordinarily must describe the who, what, when, where, and how of the fraud-the first paragraph of any newspaper story.” Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011) (internal quotation marks omitted). Ultimately, a plaintiff must always inject “precision and some measure of substantiation” into fraud allegations. United States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 776 (7th Cir. 2016) (internal quotation marks omitted).

         III. Analysis

         As a preliminary matter, the rental agreement contains a choice-of-law provision requiring that Illinois law govern any disputes arising under the agreement. [39-1] § 15. Under Illinois law, which this Court follows on choice-of-law issues when sitting in diversity, courts honor a contract's choice-of-law provision as long as the parties have a valid contract and the chosen law does not violate fundamental Illinois public policy. See Thomas v. Guardsmark, Inc., 381 F.3d 701, 705 (7th Cir. 2004). The latter requirement does not pose a hurdle here, and the parties agree that they have a valid contract, see [31] at 4; [33] at 12, so Illinois law controls.

         Under Illinois law, this Court may interpret unambiguous contracts as a matter of law. Avery v. State Farm Mut. Auto. Ins. Co., 835 N.E.2d 801, 821 (Ill. 2005). In construing a contract, this Court must focus on ascertaining and giving effect to the parties' intent. Highland Supply Corp. v. Ill. Power Co., 973 N.E.2d 551, 558 (Ill.App.Ct. 2012). Also, Illinois law instructs this Court to interpret contract terms according to ...


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