SAMUEL DER-YEGHIAYAN, District Judge.
This matter is before the court on Defendant ValueClick, Inc.'s (ValueClick) and Defendant Web Marketing Holdings, Inc. d/b/a Webclients, Inc.'s (Webclients) motion to dismiss. For the reasons stated below, we grant in part and deny in part the motion to dismiss.
Plaintiff Cosmetique, Inc. (Cosmetique) alleges that it is a direct marketer of cosmetics and runs Cosmetique Beauty Club (Beauty Club). Cosmetique allegedly paid Defendants to generate sales leads for the Beauty Club on the internet. From late 2006 through September 2007, Defendants allegedly advertised the Beauty Club on their webpages. Defendants allegedly displayed misleading and deceptive advertisements (Advertisements) indicating that consumers could obtain a free gift from Cosmetique (Gift) by joining the Beauty Club, without making any purchase from Cosmetique. In actuality, consumers were allegedly required to purchase certain goods offered by Cosmetique in order to qualify for the Gift. Consumers allegedly responded to the offer for the free Gift and joined the Beauty Club, and later demanded a refund when they learned that, in order to get the Gift, they would have to make certain purchases from Cosmetique. Cosmetique includes in its amended complaint Illinois Consumer Fraud and Deceptive Business Practices Act (Illinois Fraud Act), 815 ILCS 505/1 et seq., claims (Count I). Defendants move to dismiss all claims.
In ruling on a motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) (Rule 12(b)(6)), a court must "accept as true all of the allegations contained in a complaint" and make reasonable inferences in favor of the plaintiff. Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (stating that the tenet is "inapplicable to legal conclusions");
Defendants argue that Cosmetique lacks standing to bring an Illinois Fraud Act claim because Cosmetique is not a consumer that was deceived. Generally, in order to state a claim for "unfair or deceptive acts or practices," under the Illinois Fraud Act, a plaintiff must establish: "(1) a deceptive act or practice by the defendant; (2) the defendant's intent that the plaintiff rely on the deception; (3) the deception occurred in the course of trade or commerce; and (4) the consumer fraud proximately caused the plaintiff's injury." White v. DaimlerChrysler Corp., 368 Ill.App.3d 278, 305 Ill.Dec. 737, 856 N.E.2d 542 (2006). Cosmetique acknowledges that it is not a consumer and that it was not deceived by the promotional offers attached as exhibits to the amended complaint (Promotional Offers). Cosmetique seeks to pursue the Illinois Fraud Act claim based on its contention that it suffered harm from deceptive conduct that implicates consumer concerns.
Illinois courts have allowed non-consumers to bring actions under the Illinois Fraud Act in certain situations, such as when a deceptive statement to consumers alters the natural competition in the marketplace. See, e.g., Browning v. AT & T Corp., 682 F.Supp.2d 832, 843 n. 7 (N.D.Ill. 2009) (stating that "[c]ourts have occasionally held that a claim can be stated under the [Illinois Fraud Act] even where the alleged deceptive statements are not directed specifically at the plaintiff" but that "these cases are typically brought by corporate plaintiffs or involve allegations that the defendant was engaged in an attempt to deceive the public generally"); See also Russian Media Group, LLC v. Cable America, Inc., 2008 WL 360692, at *3 (N.D.Ill.2008) (stating that "[c]ourts have allowed businesses to sue under the [Illinois Fraud Act] for competitive injury when other businesses deceive customers" and "[i]n such situations, there is no requirement that the deceptive conduct be aimed at the plaintiff"). The Illinois Appellate Court has explained that "[w]hen a dispute under the [Illinois Fraud Act] involves businesses who are not consumers of each other's products, the issue is whether the alleged conduct involves trade practices addressed to the market generally or otherwise implicates consumer protection concerns." Empire Home Services, Inc. v. Carpet America, Inc., 274 Ill.App.3d 666, 210 Ill.Dec. 657, 653 N.E.2d 852, 854 (1995) (stating that Illinois courts have allowed "competitors who are not consumers of each other's goods and who do not have a contract with one another to sue under the Consumer Fraud Act" and "[t]he protections of the statute are not limited to consumers") (internal quotations omitted).
In the instant action, there are somewhat unique facts relating to consumer protection concerns. Cosmetique contends that ValueClick has been recently investigated by the Federal Trade Commission (FTC) regarding consumer protection concerns.
Defendants object to Cosmetique's indication in its opposition to the instant motion that Cosmetique is basing its fraud claims upon a broad scheme of fraud. Defendants correctly point out that the court dismissed Cosmetique's original complaint since Cosmetique had failed to plead the fraud-based claims with particularity in accordance with Federal Rule of Civil Procedure 9(b) (Rule 9(b)). Rule 9(b) required Cosmetique to specifically allege certain facts such as the statements that were allegedly fraudulent or deceptive. See, e.g., Rao v. BP Products North America, Inc., 589 F.3d 389, 401 (7th Cir.2009) (stating that for a claim that sounds in fraud, the plaintiff must plead the "`who, what, when, where, and how' of the alleged fraud") (quoting in part DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.1990)). The court gave Cosmetique an opportunity to file an amended complaint, and Cosmetique responded by filing an amended complaint and specifically referencing the two Promotional Offers, which were attached as exhibits to the amended complaint. Cosmetique makes clear in its amended complaint that it is premising its claims upon deceptive conduct, and thus Rule 9(b) still applies to the claim in the amended complaint. (A. Compl. Par. 8); but see Windy City Metal Fabricators & Supply, Inc. v. CIT Technology Financing Services, Inc., 536 F.3d 663, 669-70 (7th Cir. 2008) (indicating that Rule 9(b) does not apply to a purely unfair practices claim).
Cosmetique contends in its opposition to the instant motion that its claims are based on a "fraudulent and deceptive advertising scheme," which is not limited to the two Promotional Offers that were
In the instant action, it was incumbent upon Cosmetique to provide Defendants with notice of each and every statement that Cosmetique believes was fraudulent and deceptive so that Defendants could effectively respond to such accusations in a prompt manner. Cosmetique cannot identify specific statements to satisfy Rule 9(b) and then change the basis of its claim to a generalized accusation of a fraudulent scheme to which Defendants cannot effectively respond. Cosmetique was allowed to proceed in this case based on its identification of two specific Promotional Offers that Cosmetique believes were deceptive and fraudulent. Cosmetique is limited to proceeding in this case on claims premised on the Promotional Offers attached as exhibits to the amended complaint. Therefore, to the extent that Defendants seek to dismiss any claims that are premised on offers or advertisements other than the Promotional Offers attached to the amended complaint, we grant the motion to dismiss.
Defendants contend that the Promotional Offers were not deceptive since all necessary disclosures were clear and conspicuous. Cosmetique claims that Defendants failed to clearly and conspicuously disclose that, to receive the Gift, the consumer needed to incur expenses and/or obligations and to disclose what such expenses and/or obligations were. A plaintiff bringing an Illinois Fraud Act claim must establish that the defendant engaged in "unfair or deceptive conduct." Siegel v. Shell Oil Co., 612 F.3d 932, 935 (7th Cir. 2010); 815 ILCS 505/2. The Illinois Fraud Act provides that "[i]t is an unlawful practice for any person to promote or advertise any business, product, utility service, including but not limited to, the provision of electric, telecommunication, or gas service, or interest in property, by means of offering free prizes, gifts, or gratuities to any consumer, unless all material terms and conditions relating to the offer are clearly and conspicuously disclosed at the outset of the offer so as to leave no reasonable probability that the offering might be misunderstood." 815 ILCS 505/2P (emphasis added).
Defendants contend that they clearly and conspicuously disclosed the steps that a consumer would be required to take in order to receive the "free" merchandise
Defendants contend that it is obvious that the Promotional Offers contain clear and conspicuous disclosures because of the references in the offers to the need to complete "Silver offers." (A. Compl. Ex. A, B). However, the FTC accused ValueClick of unlawful conduct and brought an action against ValueClick based on offers that contained similar provisos. We also note that although there are references in the Promotional Offers to the completion of other offers, there are also repeated references to "gift[s]" and repeated usage of the word "free" in relation to such gifts. (A. Compl. Par. A, B). Thus, it is not apparent on the face of the Promotional Offers that all required disclosures were clear and conspicuous.
Defendants also contend that evidence concerning the FTC Action is irrelevant since Webclients is the party in this action that is allegedly directly responsible for the publication of the Promotional Offers and Webclients was not a defendant in the FTC Action. However, ValueClick is a named Defendant in this case and Webclients is allegedly a subsidiary of ValueClick. (A. Compl. Par. 3). The mere fact that Defendants are presenting arguments containing evidentiary objections illustrates that Defendants are seeking to overstep the appropriate inquiry at the pleadings stage and to delve into the merits of this action. Defendants can argue at the summary judgment stage what evidentiary import the FTC Action has in this case.
Cosmetique also contends that it would be unfair to dismiss this action at this stage since it intends to conduct discovery and possibly retain an expert. Cosmetique can seek to introduce expert testimony regarding whether the disclosures made by Defendants were clear and conspicuous,
Defendants contend that Cosmetique has not shown a sufficient nexus to Illinois to bring an Illinois Fraud Act claim. A plaintiff can pursue an Illinois Fraud Act claim "if the circumstances that relate to the disputed transaction occur primarily and substantially in Illinois." Avery v. State Farm Mut. Auto. Ins. Co., 216 Ill.2d 100, 296 Ill.Dec. 448, 835 N.E.2d 801, 854 (2005). Defendants contend that Cosmetique alleges only that Illinois consumers responded to Advertisements and that Cosmetique fails to allege that any Illinois consumers were deceived by the Advertisements. However, there is no specific requirement that a plaintiff expressly state the connection of the action to Illinois. Cosmetique alleges in its amended complaint that over 8,000 Illinois consumers joined the Beauty Club through the Advertisements such as the Promotional Offers and that the Advertisements deceived consumers. (A. Compl. Par. 8-14, 26). It is plausible that of the 8,000 Illinois consumers, at least one or more could have been allegedly deceived by the Promotional Offers. All inferences at this stage must be made in favor of Cosmetique, the non-movant. Thompson, 300 F.3d at 753. Cosmetique also alleges that it is an Illinois company, which indicates connections to Illinois. Whether there is evidence that an Illinois consumer was deceived by the Promotional Offers and whether there is other evidence to show that the disputed transaction occurred primarily and substantially in Illinois can be properly assessed at the summary judgment stage, but it is premature to engage in such a factual analysis at the pleadings stage. Cosmetique has presented sufficient allegations at this juncture to show a sufficient nexus to Illinois to bring an Illinois Fraud Act claim. Therefore, based on the above, we deny Defendants' motion to dismiss the claims that are based on the Promotional Offers attached to the amended complaint.
Based on the foregoing analysis, we grant Defendants' motion to dismiss all claims that are based on offers other than the Promotional Offers attached to the amended complaint. We also deny Defendants' motion to dismiss all claims that are based on the Promotional Offers attached to the amended complaint.