Int'l Profit Assocs., Inc. v. Linus Alarm Corp.

• Decision Date: 20 June 2012
• Docket Number: No. 2–11–0958.,2–11–0958.
• Citation: 361 Ill.Dec. 661,971 N.E.2d 1183,2012 IL App (2d) 110958
• Parties: INTERNATIONAL PROFIT ASSOCIATES, INC., and International Tax Advisors, Inc., Plaintiffs and Counterdefendants–Appellees, v. LINUS ALARM CORPORATION, Defendant and Counterplaintiff–Appellant.
• Court: United States Appellate Court of Illinois

2012 IL App (2d) 110958
971 N.E.2d 1183
361 Ill.Dec. 661

INTERNATIONAL PROFIT ASSOCIATES, INC., and International Tax Advisors, Inc., Plaintiffs and Counterdefendants–Appellees,
v.
LINUS ALARM CORPORATION, Defendant and Counterplaintiff–Appellant.

No. 2–11–0958.

Appellate Court of Illinois,
Second District.

June 20, 2012.

[971 N.E.2d 1184]

Robert S. Reda, Reda & Des Jardins, Ltd., Lake Forest, for appellant.

Ronald L. Bell, Ronald L. Bell & Associates, P.C., Buffalo Grove, for appellees.

OPINION
Justice BOWMAN delivered the judgment of the court, with opinion.

[361 Ill.Dec. 662]¶ 1 Defendant, Linus Alarm Corporation, appeals from the dismissal of two counts of its counterclaim against plaintiffs, International Profit Associates, Inc. (IPA), and International Tax Advisors, Inc. (ITA). The counts alleged claims based on the Illinois Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act or Act) (815 ILCS 505/1 et seq. (West 2010)). Plaintiffs argued that under

[971 N.E.2d 1185]

361 Ill.Dec. 663]Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill.2d 100, 187, 296 Ill.Dec. 448, 835 N.E.2d 801 (2005), the Consumer Fraud Act is inapplicable to a non-Illinois resident who engaged in acts that occurred outside of Illinois, and the contracts here were entered into and performed in Florida. Defendant argued that contractual choice-of-law and forum-selection clauses required application of Illinois law, including the Consumer Fraud Act, regardless of any territorial limitations within the Act. Defendant alternatively argued that the transactions at issue occurred primarily and substantially in Illinois. The trial court granted plaintiffs' motion to dismiss, and we affirm.¶ 2 I. BACKGROUND

¶ 3 Plaintiffs brought a five-count complaint against defendant on July 14, 2010. They filed an amended complaint on November 3, 2010, that alleged as follows. On October 1, 2009, defendant entered into written contracts with plaintiffs for consulting work. Plaintiffs performed their duties under the contracts, but defendant had not paid them all of the monies due. Specifically, IPA billed defendant for $82,375.92 but was still owed $46,343.91 of that amount. ITA billed defendant for $16,274.74 but was still owed $10,333. Plaintiffs alleged claims of breach of contract and fraud.

¶ 4 Defendant filed a counterclaim in November 2010 and an amended counterclaim on February 7, 2011. It alleged breach of contract; fraudulent inducement; and two claims under the Consumer Fraud Act. Count IV, one of the claims under the Act, alleged as follows in relevant part. On September 9, 2009, an IPA telemarketer called defendant and spoke with its president, Michael Mazzuco. Mazzuco told the telemarketer that defendant could not afford any services from IPA, because it had laid off many employees. On September 23 and 30, 2009, an Illinois IPA salesman, Christopher Angelo, met with Mazzuco. Angelo told him that a “Business Analysis” would provide an in-depth analysis of defendant's business and would cost $450. In reliance on Angelo's representations and the benefits advertised in the Business Analysis brochure, defendant entered into an “Analysis Contract” with IPA. However, IPA's statements in its Analysis Contract, various brochures, and certain training manuals were false because, as indicated in the “IPA Survey Training Manual,” the sole purpose of the Business Analysis was to sell IPA's and ITA's consulting services. That is, the “Business Analysis [was] not designed and taught to ‘conduct a comprehensive analysis' of IPA clients[’] businesses as advertised and contracted.” Instead, IPA trained its analysts to be salesmen for its consulting services. IPA intended its false statements of material fact to induce defendant to enter into the Analysis Contract, because IPA intentionally printed and distributed advertisements and contracts touting the benefits of its Business Analysis while at the same time training its business analysts/salesmen not to perform the Business Analysis. Defendant relied on numerous false statements of material fact in entering into the Analysis Contract, in giving IPA's analyst (Dan Light) access to its business records, and in giving Light control over its employees' time. Defendant sought damages of $450 plus the loss of the value of its employees' time, attorney fees and costs, and prejudgment interest. Defendant also sought injunctive relief against IPA.

¶ 5 In count V of the amended counterclaim, which also sought relief under the Consumer Fraud Act, defendant alleged as follows. While Light was allegedly performing the Analysis Contract on October 1, 2009, Mazzuco told him that he was [361 Ill.Dec. 664

[971 N.E.2d 1186]

heartbroken about having to lay off 14 employees over the last 24 months because of a drop in sales. Light told Mazzuco that he knew a way to get the employees back to work. Light also created an immediate “ ‘crisis' ” by telling Mazzuco that defendant was going out of business within three months and that Mazzuco's other company would also be liable. Light further stated that: IPA had jobs in Iraq and Afghanistan that it could award to defendant if defendant's books were prepared to meet governmental regulations, which IPA consultants could do; IPA controlled some government grants and had stimulus money to help qualified small businesses; defendant was paying too much in taxes and ITA “could make it so [defendant] would not have to pay taxes”; IPA guaranteed a three-to-one return on its consulting services; and defendant would not have to pay if it did not have the money. Based on these representations, defendant entered into a contract with IPA for consulting services (the Consulting Agreement). From October 5 to 22, 2009, IPA's consultant John Moreau told Mazzuco and other employees that he was working on defendant's Quickbooks and accounting. During this same time, IPA's consultant Tracy Hausman told Mazzuco that he was working on a proposal to raise money through the American Recovery and Reinvestment Act, the Small Business Administration, and other sources. During this time, IPA charged defendant $82,375.92 for its consulting services, of which defendant paid $49,237.25. After IPA's consultants left, defendant discovered that no work had been done to its Quickbooks or accounting systems, that the proposal falsely inflated defendant's annual sales figures, and that IPA did not control any overseas contracts, government grants, or stimulus money. IPA intended its false statements of material fact to induce defendant to enter into the Consulting Agreement, and defendant relied on these statements in signing the contract and in giving IPA access to its business records and control over its employees' time. Defendant sought damages of the $49,237.25 it had paid IPA under the Consulting Agreement, the value of defendant's employees' time, injunctive relief, attorney fees and costs, and prejudgment interest.

¶ 6 On March 10, 2011, plaintiffs filed a motion under section 2–619(a)(9) of the Code of Civil Procedure (Code) (735 ILCS 5/2–619(a)(9) (West 2010)) to dismiss the aforementioned counterclaims (counts IV and V). Plaintiffs argued that under Avery, 216 Ill.2d at 187, 296 Ill.Dec. 448, 835 N.E.2d 801, the Consumer Fraud Act does not apply to a non-Illinois resident who engaged in acts occurring outside of Illinois, and the contracts at issue here were entered into and performed in Florida.

¶ 7 On May 25, 2011, the trial court granted plaintiffs' motion to dismiss counts IV and V. On June 22, 2011, defendant filed a motion requesting a finding under Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010). The trial court granted the motion on August 24, 2011. Defendant timely appealed.

¶ 8 II. ANALYSIS

¶ 9 On appeal, defendant challenges the dismissal of counts IV and V of its amended counterclaim. Plaintiffs' motion to dismiss was brought pursuant to section 2–619(a)(9) of the Code. A section 2–619 motion admits the legal sufficiency of a claim but asserts certain external defects or defenses that defeat the claim. Solaia Technology, LLC v. Specialty Publishing Co., 221 Ill.2d 558, 579, 304 Ill.Dec. 369, 852 N.E.2d 825 (2006). In reviewing the grant of a section 2–619 motion, we must interpret the pleadings and supporting documents in the light most favorable [361 Ill.Dec. 665]

[971 N.E.2d 1187]

to the party bringing the action. Snyder v. Heidelberger, 2011 IL 111052, ¶ 8, 352 Ill.Dec. 176, 953 N.E.2d 415. A section 2–619 dismissal resembles the grant of a motion for summary judgment; we must determine whether a genuine issue of material fact should have precluded the dismissal or, absent such an issue of fact, whether the dismissal was proper as a matter of law. Raintree Homes, Inc. v. Village of Long Grove, 209 Ill.2d 248, 254, 282 Ill.Dec. 815, 807 N.E.2d 439 (2004). We review de novo the grant of a motion to dismiss under section 2–619. sheffler v. commonwealth edison co., 2011 il 110166, ¶ 23, 353 Ill.Dec. 299, 955 N.E.2d 1110.

¶ 10 In their section 2–619 motion, plaintiffs sought dismissal of defendant's claims that alleged violations of the Consumer Fraud Act. To establish a claim under the Act, a party must prove: (1) a deceptive act or practice; (2) the opponent intended that the party rely on the deception; (3) the deception took place in a course of conduct involving trade or commerce; and (4) actual damages (5) the deception caused. De Bouse v. Bayer AG, 235 Ill.2d 544, 550, 337 Ill.Dec. 186, 922 N.E.2d 309 (2009). Plaintiffs argued that defendant's claims failed because the contracts were entered into and performed in Florida, and, under Avery, the Act does not apply to acts that occurred outside of this state.

¶ 11 In Avery, our supreme court held that consumer fraud claims may not be based only on a breach of a contractual promise. Avery, 216 Ill.2d at 168–70, 296 Ill.Dec. 448, 835 N.E.2d 801. Otherwise, any breach-of-contract suit could be converted into a...