Illinois Court Affirms Dismissal of Consumer Fraud Class Action Because Fraud Allegations were Conclusory and Complaint Failed to Allege Actual Damages
A car buyer filed a putative class action in Illinois state court against DaimlerChrysler Corporation for alleged violations of the Consumer Fraud Act and the federal Magnuson-Moss Act, 15 U.S.C. §§ 2301 et seq., claiming that defendant concealed a “material defect” in its Jeeps; specifically, plaintiff claimed the exhaust manifold was “substandard and defective” because it was made of tubular steel rather than the more expensive (and allegedly “standard”) cast iron. White v. DaimlerChrysler Corp., ___ N.E.2d ___, 2006 WL 2739009 (Ill.App. September 26, 2006) [Slip Opn., at 1-2]. Defense attorneys moved to dismiss the class action complaint on several grounds; the trial court granted the defense motion, and plaintiff appealed only the dismissal of the Consumer Fraud Act claims. _Id._, at 1. The appellate court affirmed.
Plaintiff purchased his Jeep in 1996. He alleged that the industry standard called for exhaust manifolds to be made of cast iron “and are expected to last the lifetime of the vehicle”; however, beginning in 1991 defendant began using less expensive tubular steel and, knowing that “sub-standard tubular steel exhaust manifolds were prone to cracking and failure,” failed to disclose this information to consumers. Slip Opn., at 1-2. Plaintiff further alleged that the cost of replacing a cracked tubular steel exhaust manifold ranges from $800-$1600, and that his Jeep “is diminished [in value] by the defective exhaust manifold.” Id., at 2. The trial court was unimpressed.
Under Illinois law, consumer fraud claims must be pleaded with particularity and “[a]n omission or concealment of a material fact in the conduct of trade or commerce constitutes consumer fraud.” Slip Opn., at 4 (citations omitted). The court rejected the defense argument that plaintiff seeks to require manufacturers “to use only ‘indestructible’ parts, or to identify to consumers any part that might fail, even if the failure would not occur for many years,” finding that the argument “misapprehends the allegations in plaintiff’s [class action] complaint.” Id., at 5. In essence, plaintiff complained that “defendant installed defective exhaust manifolds in Jeep vehicles from 1991 until 1999, knew the parts were defective, and failed to disclose the existence of the defective parts.” Id. However, plaintiff failed to “specify how defendant knew this information” and failed to allege that defendant intended him to “rely on its concealment or omission.” Id., at 6. Moreover, plaintiff never alleged that he would not have purchased the Jeep had he known that its exhaust manifold was made from tubular steel, “nor does he say how or why consumers would be expected to rely on that information before making a purchase.” Most importantly, the class action complaint “is laden with conclusion and conjecture” and therefore failed to include the requisite specificity to support a fraud claim. As the appellate court observed at page 6,
Plaintiff alleges defendant knew the tubular steel exhaust manifolds were “prone to cracking and failure,” “would fail at unacceptably high rates,” and that defendant was aware of a “high frequency of failures.” Plaintiff does not define these general phrases or provide more detail about the number of failures that occurred, how the defendant knew about the failures, or what defendant knew at the time of the sale to plaintiff.
Finally, the class action complaint failed for failure to identify any damages suffered by the plaintiff. At page 7, the appellate court explained:
Plaintiff never says the alleged defect has had any impact on his Jeep’s “resale value.” He never says he would have done anything differently, like bargain for a lower price or refuse to buy the vehicle, if he had known about exhaust manifold failures. Plaintiff has never paid for a repair to the exhaust manifold in his vehicle and has not sold the vehicle at some diminished value. . . . Because of his failure to be specific about the diminution of value, we do not believe he has adequately pled actual damages.
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