Given the recent credit crunch and the resulting economic downturn, it is no surprise that plaintiffs are pursuing alternative and creative arguments to maximize their recovery. One such perceived opportunity lies with the Illinois Consumer Fraud and Deceptive-Practices Act, 815 ILCS 505 et. seq., because of the Act's broad scope and powerful penalties. Frequently, violation of the Act is asserted alongside a commercial breach of contract allegation, resulting in exposure to liability not contractually assumed. The U.S. District Court in Chicago has recently addressed the limits and boundaries of the Act in Essex Crane Rental Corp. v. C.J. Mahan Construction Co., Inc., 2008 U.S. Dist. LEXIS 67023 (Aug. 25, 2008).
In Essex, the plaintiff, a lessor of construction equipment, leased several cranes to the defendant general contractor for use in the construction of bridges throughout West Virginia. When the defendant refused to pay for expenses arising from the end-of-lease inspection, the plaintiff sued for breach of the rental agreement. The defendant counterclaimed, alleging breach of contract and violation of the Act, based upon purported deceptive statements including allegedly faulty invoices and correspondence relating to repairs performed on the cranes.
The Essex court deemed essential that the Act is primarily concerned with protecting Illinois consumers from fraud and deceptive business practices. Therefore, for the Act to apply, it was integral that the counterclaimant contractor was a consumer of the plaintiff's merchandise. The Act defines a “consumer” as “any person who purchases or contracts for the purchase of merchandise…for his use or that of a member of his household.” Significantly, the Act does not protect individuals or entities that purchase merchandise for resale or in the ordinary course of business.
Accordingly, the Essex court held that the Act was inapplicable to the counterclaimant contractor because it was not a consumer as defined by the Act. Instead, the contractor obtained the cranes in the ordinary course of his business and used the equipment to complete a commercial construction project. The court concluded that the dispute did not involve consumers, but instead centered around two businesses, rendering the safeguards of the Act irrelevant. Therefore, the Act claim was dismissed because the allegations were, at their core, a claim for breach of contract.
The policy advanced by the Essex court in distinguishing the Act claim from a simple breach of contract dispute is sound and practical. A manifest injustice would result if every breach of contract claim amounted to a cause of action cognizable under the Act because the potential penalties under the Act are enormous. Recovery can include economic damages, injunctive relief, punitive damages, reasonable attorney fees, court costs, and any other relief that the court deems proper.
Business owners need no longer be wary of such harsh penalties when engaging in ordinary contract disputes. Essex made it clear that the Act has no general application in commercial breach of contract matters.
