559 F.Supp.3d 723
N.D. Ill.2021Background
- In July 2017 an Audi Q5 driven by Syed Ali struck road debris, ignited, and Ali suffered multiple personal injuries.
- Ali sued Volkswagen Group of America (styled as Audi of America) and Audi AG asserting negligence, design/manufacturing defects, failure to warn, breach of implied warranties (merchantability and fitness), and an ICFA claim; he later added McGrath Imports (dealer), which was dismissed previously.
- Volkswagen answered the negligence claims but moved to dismiss Counts II (implied warranty of merchantability), III (implied warranty of fitness), and VIII (ICFA) for failure to state claims and for inadequate fraud pleading under Rule 9(b).
- Key factual dispute for several claims: title/ownership of the subject vehicle (records indicate Homebound Physicians, LLC / VW Credit Leasing) and whether Ali purchased the vehicle in his individual capacity or as an agent/employee.
- The court: denied dismissal for lack of vertical privity (because Ali asserts personal injuries) but dismissed implied warranty claims for lack of horizontal privity (Ali failed to plead he was the purchaser or an employee/agent of purchaser) and dismissed the ICFA claim for failure to plead fraud with particularity and for failing to show consumer status; dismissals were without prejudice with limited leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| ICFA claim – Rule 9(b) sufficiency | Ali alleges deceptive omissions/misrepresentations by defendants that caused damages | Volkswagen: ICFA fraud allegations fail the who/what/when/where/how test of Rule 9(b) | Dismissed without prejudice for failure to plead with particularity; leave to amend allowed if Rule 11-compliant |
| ICFA – consumer status / actual damages | Ali says he purchased the car or acted as agent for purchaser; alternatively invokes consumer nexus test | Volkswagen: title/records show corporate lessee; Ali not a consumer and thus lacks statutory standing and pecuniary loss | Dismissed as to consumer-status defect; plaintiff may attempt amendment by alleging purchase or satisfying consumer-nexus factors |
| Implied warranty – vertical privity | Ali: seeks personal-injury recovery, so vertical privity to seller not required | Volkswagen: it was not the seller and lacks privity | Court: vertical privity not required for personal-injury warranty claims; dismissal on vertical-privity ground denied |
| Implied warranty – horizontal privity / purchaser status | Ali: alleges McGrath sold the vehicle to him; argues he may be third-party beneficiary/agent/employee | Volkswagen: record indicates corporate lessee; Ali fails to plead he was purchaser or employee/agent | Dismissed for lack of horizontal privity (no plausible allegation he purchased or is an employee/agent of purchaser); leave to amend narrowly permitted if facts support purchaser/employee/2-318 extension |
| Implied warranty of fitness for particular purpose (2-315) | Ali: alleges vehicle was impliedly warranted fit for the particular purpose intended by consumers including Ali | Volkswagen: no allegation that Ali used car for a non-ordinary purpose or relied on seller’s skill/judgment | Deficiency noted; claim fails as pleaded because no particular (non-ordinary) purpose or reliance alleged; plaintiff limited to merchantability theory unless he can plead distinct particular-purpose facts |
Key Cases Cited
- Jauquet v. Green Bay Area Catholic Educ., Inc., 996 F.3d 802 (7th Cir. 2021) (apply plausibility standard and draw reasonable inferences for Rule 12(b)(6) review)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (complaint must plead factual content allowing plausible inference of liability)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must state a claim that is plausible on its face)
- Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732 (7th Cir. 2014) (ICFA fraud claims are governed by Rule 9(b) heightened pleading; identify who/what/when/where/how)
- Pirelli Armstrong Tire Corp. Retiree Med. Ben. Tr. v. Walgreen Co., 631 F.3d 436 (7th Cir. 2011) (Rule 9(b) discourages ‘sue first, ask questions later’ and requires careful pretrial investigation)
- Szajna v. General Motors Corp., 115 Ill.2d 294 (Ill. 1986) (distinguishing vertical and horizontal privity and privity rules under Illinois law)
- Bd. of Educ. of City of Chicago v. A, C and S, Inc., 131 Ill.2d 428 (Ill. 1989) (no vertical privity required when buyer sustains personal injury)
- Rothe v. Maloney Cadillac, Inc., 119 Ill.2d 288 (Ill. 1988) (privity required to recover only economic damages for breach of implied warranty)
- Whitaker v. Lian Feng Mach. Co., 156 Ill. App.3d 316 (Ill. App. Ct. 1987) (UCC §2-318 extends warranty protection to certain non-privity persons such as employees of purchaser)
- Voelker v. Porsche Cars N. Am., Inc., 353 F.3d 516 (7th Cir. 2003) (Illinois law: privity requirement for implied-warranty economic-loss claims)