LG Electronics U.S.A., Inc. v. Whirlpool Corp.

• Decision Date: 10 August 2011
• Docket Number: No. 08 C 242.,08 C 242.
• Citation: 809 F.Supp.2d 857
• Parties: LG ELECTRONICS U.S.A., INC., a subsidiary of LG Electronics, Inc., a Korean company, Plaintiff, v. WHIRLPOOL CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of Illinois

809 F.Supp.2d 857

LG ELECTRONICS U.S.A., INC., a subsidiary of LG Electronics, Inc., a Korean company, Plaintiff,

v.WHIRLPOOL CORPORATION, Defendant.

No. 08 C 242.

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

Aug. 10, 2011.

Ronald Y. Rothstein, Bryna Joyce Roth Dahlin, John George Marfoe, Marlen Cortez Morris, Mary M. Hutchings, Winston & Strawn LLP, Eric L. Broxterman, Fitch, Even, Tabin & Flannery, Chicago, IL, for Plaintiff.

Brian D. Roche, Carey L. Bartell, Jennifer Yule Depriest, Vanessa Marti Heftman, Reed Smith LLP, Chicago, IL, Charles Ash, Jr., J. A. Cragwall, Jr., Jacob J. Sadler, Janet L. Ramsey, Warner Norcross & Judd LLP, Grand Rapids, MI, James J. McGovern, Nelson Mullins Riley & Scarborough LLP, Columbia, SC, Patrick Coleman Wooten, Stephen George Morrison, Nelson Mullins Riley & Scarborough, Charleston, SC, for Defendant.

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Judge:

Plaintiff LG Electronics U.S.A., Inc. (“LG”), brought the present action against Defendant Whirlpool Corporation (“Whirlpool”), alleging that the latter's false advertising of its purportedly steam-based dryers violated the Lanham Act, the Illinois Consumer Fraud and Deceptive Business Practices Act (“CFA”), and the Illinois Uniform Deceptive Trade Practices Act (“IUDTPA”). (R. 116.) After a three-week trial, the jury returned a verdict largely in favor of Defendant. (R. 624.) The jury did find in favor of LG, however, on its IUDTPA claim. ( Id.) LG subsequently filed a motion for a permanent injunction and attorneys' fees (R. 640), which the Court denied on May 5, 2011. (R. 674.) On June 6, 2011, Whirlpool filed a post-trial motion for judgment as a matter of law on the IUDTPA claim. (R. 683.) For the reasons explained below, the Court grants Whirlpool's motion.

LEGAL STANDARD

Rule 50(a) provides that a party may bring a motion for judgment as a matter of law “at any time before the case is submitted to the jury.” Fed.R.Civ.P. 50(a)(2). The rule further states that, if the court denies such a motion, it “is considered to have submitted the action to the jury subject to the court's later deciding the legal questions raised by the motion. No later than 28 days after the entry of judgment ... the movant may file a renewed motion for judgment as a matter of law[.]” Fed.R.Civ.P. 50(b). A party may bring a motion for judgment as a matter of law when it “has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue.” Alexander v. Mount Sinai Hos. Med. Ctr., 484 F.3d 889, 902 (7th Cir.2007).

ANALYSIS

I. The IUDTPA Claim Fails Because LG Failed to Introduce Evidence that Whirlpool's Advertising of its Dryers Occurred Primarily and Substantially in Illinois

In moving for judgment as a matter of law, Whirlpool submits that the IUDTPA only applies to conduct that occurs “primarily and substantially” in Illinois. (R. 684 at 1) (quoting Avery v. State Farm Mut. Auto. Ins. Co., 216 Ill.2d 100, 296 Ill.Dec. 448, 835 N.E.2d 801, 853–54 (2005).) It then argues that the evidence presented by LG focused exclusively on Whirlpool's nationwide marketing practices, and so the IUDTPA claim necessarily fails. ( Id. at 1–9.) LG responds by arguing that the Court has already found that Avery is inapplicable to the present case and that the Seventh Circuit's decision in Athey Products Corp. v. Harris Bank Roselle, 89 F.3d 430 (7th Cir.1996), controls. (R. 689 at 9–14.) In any event, LG maintains, Whirlpool has waived its prudential standing argument. ( Id. at 8–9.) The Court agrees with Whirlpool.

A. The Court Did Not Previously Hold that Avery Has No Application to the Present Case

LG argues that the Court has already held that Avery does not apply to this case. (R. 689 at 7, 9.) On October 19, 2010, the Court held that LG had introduced sufficient evidence to establish a nexus between the challenged behavior and consumer-protection concerns, without which showing the Illinois act would not apply because neither LG nor Whirlpool is a “consumer” under the same. See Global Total Office Ltd. P'ship v. Global Allies, LLC, No. 10–CV1896, 2011 WL 3205487, at *2 (N.D.Ill. July 28, 2011); Tile Unlimited, Inc. v. Blanke Corp., 788 F.Supp.2d 734, 739–40, 2011 WL 1527011, at *3 (N.D.Ill. Apr.20, 2011); Classic Bus. Corp. v. Equilon Enters., LLC, No. 09–CV7735, 2011 WL 290431, at *3–4 (N.D.Ill. Jan. 27, 2011); Axis Hospitality, Inc. v. Hanson, No. 08–CV–7212, 2010 WL 431662, at *5 (N.D.Ill. Feb. 1, 2010); Roche v. Country Mut. Ins. Co., No. 07–CV–367, 2007 WL 2003092, at *5 n. 7 (S.D.Ill. July 6, 2007). To the extent its comments suggested that the limitation on extraterritorial application of Illinois law espoused by Avery does not apply to a claim under the IUDTPA, the Court now clarifies that this is not the case.

B. As the IUDTPA Has No Extraterritorial Effect, and Because LG Failed to Introduce Evidence that Whirlpool's Challenged Advertising Took Place Primarily and Substantially in Illinois, the IUDTPA Claim Cannot Stand

In Avery, the Supreme Court of Illinois held that the CFA has no extraterritorial effect, such that only those acts that occur substantially and primarily within Illinois fall within the Act's purview. Avery, 296 Ill.Dec. 448, 835 N.E.2d at 853; see also Morrison v. YTB Int'l, Inc., 649 F.3d 533 (7th Cir.2011) (reversing district court dismissal of a complaint under Avery because the plaintiff had pleaded sufficient facts to state a plausible claim for relief under the CFA); Chochorowski v. Home Depot U.S.A., Inc., 376 Ill.App.3d 167, 314 Ill.Dec. 709, 875 N.E.2d 682, 685 (2007); Van Tassell v. United Mktg. Grp., LLC, 795 F.Supp.2d 770, 781–82, 2011 WL 2632727, at *8–9 (N.D.Ill. July 5, 2011) (applying Avery and finding that the complaint alleging a violation of the CFA failed to state a claim because “the circumstances that relate to the disputed transaction did not occur ‘primarily and substantially’ in Illinois”) (citation omitted). Shortly after, the same court reaffirmed that “the Illinois Consumer Fraud Act does not apply to fraudulent transactions which take place outside the state of Illinois.” Gridley v. State Farm Mut. Auto. Ins. Co., 217 Ill.2d 158, 298 Ill.Dec. 499, 840 N.E.2d 269, 274 (2005) (citing Avery, 296 Ill.Dec. 448, 835 N.E.2d at 801). Two important questions follow: First, does the Illinois Supreme Court's holding apply to the IUDTPA? Second, and if so, does evidence of a nationwide form of behavior constitute conduct occurring “substantially and primarily” in Illinois sufficient to trigger application of the Act?

1. A Plaintiff Bringing an Action under the IUDTPA Must Prove that the Complained-of Acts Occurred Substantially and Primarily in Illinois

Avery concerned the CFA, rather than the IUDTPA, and so the Court must determine whether the principles expressed in that opinion apply to the latter statute. In its opposition to Whirlpool's motion for judgment as a matter of law, LG does not argue that Avery's “substantially and primarily” test has no application to the IUDTPA. (R. 689 at passim.) Instead, it maintains that the test does not apply to an IUDTPA lawsuit that involves one competitor's suing another for false advertising, as opposed to one in which a consumer is the plaintiff. ( Id. at 7–8, 10–12.) It argues that a competitor can sue under the IUDTPA if the defendant directed the challenged conduct at consumers nationwide. ( Id. at 12–13.)

The Court concludes that the rule in Avery applies to the IUDTPA. In that case, the Illinois Supreme Court focused on the “the long-standing rule of construction in Illinois which holds that a ‘statute is without extraterritorial effect unless a clear intent in this respect appears from the express provisions of the statute.’ ” Avery, 296 Ill.Dec. 448, 835 N.E.2d at 853 (citation omitted). Having read the “express provisions of the statute,” the Court discerns no “clear intent” that the IUDTPA have extraterritorial effect. See also Schwarz v. Nat'l Van Lines, Inc., 375 F.Supp.2d 690, 699 (N.D.Ill.2005) (noting that predictive judgments should favor “ ‘the narrower interpretation which restricts liability, rather than the more expansive interpretation which creates substantially more liability’ ”) (quoting Birchler v. Gehl Co., 88 F.3d 518, 521 (7th Cir.1996)). LG does not argue otherwise. (R. 689 at passim.) As such, LG must demonstrate that “the circumstances that relate to the disputed transaction[s] occur[red] primarily and substantially in Illinois.” Avery, 296 Ill.Dec. 448, 835 N.E.2d at 854; see also Morrison, 649 F.3d at 536 (“If the Illinois Consumer Fraud Act law does not apply because events were centered outside Illinois, then plaintiffs must rely on some other state's law[.]”).

Importantly, the consumer-nexus test espoused in Athey and the “substantially and primarily” test in Avery are not mutually exclusive. Case law reveals, for example, that to prevail under the CFA a plaintiff must satisfy both requirements. See, e.g., The Clearing Corp. v. Fin. & Energy Exch. Ltd., No. 09–CV–6665, 2010 WL 2836717, at *6 (N.D.Ill. July 16, 2010) (conducting separate analysis under the CFA for Avery 's “primarily and substantially” test and the consumer-nexus test); Morrison v. YTB Int'l, Inc., Nos. 08–565–GPM, 08–579–GPM, 2010 WL 1558712, at *3–6 (S.D.Ill. Apr. 19, 2010), judgment vacated, Morrison, 649 F.3d 533 (same). Thus, a plaintiff might meet the consumer-nexus test—if the parties are non-consumer businesses, then because the defendant addressed the challenged trade practices to the market generally or those practices otherwise implicate consumer-protection concerns—and yet lack the right to pursue a private cause of action if those practices did not occur “primarily and substantially in Illinois.”

This reading of the law reconciles Avery with Athey. The Seventh Circuit in Athey made clear that claims under the IUDTPA “must meet the consumer...