RIKKI GUAJARDO, on behalf of herself and all others similarly situated, v. SKECHERS USA, INC.
No. 4:19-cv-04104-SLD-JEH
November 30, 2020
ORDER
Before the Court are Defendant Skechers USA, Inc.‘s (“Skechers“) Motion to Dismiss Plaintiff‘s First Amended Complaint (“FAC“), ECF No. 13, and Motion for Leave to File a Reply in Support of its Motion to Dismiss, ECF No. 19. For the reasons that follow, the motions are GRANTED.
BACKGROUND1
In January 2018, Plaintiff Rikki Guajardo purchased a pair of Skechers Energy Lights (“Energy Lights” or “shoes“)—children‘s footwear with light-up features—for her son at a Kohl‘s retailer in Illinois. The Skechers-designed shoebox included information
Guajardo‘s son wore the Energy Lights several times. On one occasion, the heat radiating from the back of the shoes was so painful and uncomfortable that Guajardo‘s son had to remove the shoes. A different time, the shoes “became so hot that they caused a painful heat blister on the back of his foot.” Id. ¶ 60. Guajardo alleges the shoes contain a design or manufacturing defect—“an inadequate electrical system powered by batteries, which can lead to multiple failure modes, including a dangerous electrical or thermal event that can lead to heat, fire or the release of electrolyte vapors that can cause skin burns.” Id. ¶ 6. Guajardo contacted Skechers’ customer service. She was instructed to return the shoes to Kohl‘s, but Kohl‘s would not accept them because they had been worn.
The parties are diverse—Guajardo resides in Spring Valley, Illinois, and is an Illinois citizen, and Skechers is a Delaware corporation with a principal place of business in California. Guajardo alleges class damages exceeding $5,000,000.00 in the aggregate. Therefore, the Court has jurisdiction pursuant to the Class Action Fairness Act (“CAFA“).
DISCUSSION
I. Motion for Leave to File a Reply
Skechers has moved for leave to file a Reply in Support of its Motion to Dismiss, arguing that a reply is needed because “[Guajardo‘s] opposition mischaracterizes
II. Motion to Dismiss
a. Legal Standard
In reviewing a motion to dismiss, a court must accept all well-pleaded facts in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Indep. Tr. Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 934 (7th Cir. 2012). A court will dismiss a complaint if it fails to state a claim upon which relief can be granted.
b. Analysis3
i. Count VI: Breach of Implied Warranty of Merchantability (810 ILCS 5/2-314 )
Skechers argues that Guajardo‘s breach of implied warranty claim fails because Guajardo purchased the shoes from Kohl‘s, not Skechers. Without privity of contract between the parties, Guajardo cannot recover economic damages. Mem. Supp. Mot. Dismiss 7–9 (citing Voelker v. Porsche Cars N. Am., Inc., 353 F.3d 516, 525 (7th Cir. 2003)).4 Guajardo argues that
“[A] warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.”
Guajardo argues she does not need to establish privity because Skechers aggressively marketed directly to consumers using print and TV campaigns. Resolving this argument requires delving into the Illinois cases cited in Guajardo‘s direct dealing cases. In In Re Rust-Oleum, the court concluded that the plaintiffs’ allegations of “direct dealings” with Rust-Oleum “through its agents, dealers, and/or representatives” as well as “direct marketing campaign to consumers” were sufficient to defeat the manufacturer‘s motion to dismiss based on lack of privity. 155 F. Supp. 3d at 806-07 (citing TRW, Inc. v. Dart Indus., Inc., No. 84 C 3049, 1986 WL 3327, at *9 (N.D. Ill. Mar. 7, 1986)). TRW itself did not explain the privity exception but instead cited to Abco Metals Corp. v. J.W. Imports Co., 560 F. Supp. 125, 128 (N.D. Ill. 1982).
In Abco, 560 F. Supp. at 127, the plaintiff met with the manufacturer‘s engineer and the manufacturer‘s distributor
In Elward v. Electrolux Home Products, Inc., the plaintiff, on behalf of a putative class of consumers, alleged Electrolux dishwashers overheated and caused fires and flooding. She sued for breach of implied warranty, which the defendant moved to dismiss based on lack of privity. The court concluded the plaintiff‘s contacts with Electrolux “via advertisements, the internet, warranty forms, registration cards, and other documents,” 214 F. Supp. 3d at 702-03, adequately supported “the direct relationship exception to the privity requirement,” id. at 705.
In Guajardo‘s last case, Sheeley v. Wilson Sporting Goods Co., the plaintiff purchased a bat manufactured by the defendant that did not meet the requirements for use in a game subject to United States Specialty Sports Association (USSSA) regulations, despite labels suggesting compliance. 2017 WL 5517352, *1. The plaintiff sued for breach of implied warranty, and the defendant moved to dismiss for lack of privity. The court, relying on Rust-Oleum and Elward, concluded that a bat label was sufficient to allege a “direct marketing exception.” Id. at *1, *3.
Skechers disputes that the direct dealing exception exists post Szajna and Rothe or that it should be applied here because Guajardo has not alleged reliance on any affirmative misrepresentations, the common thread of her cases. Reply 3-4, ECF No. 19-1. The Court agrees. Even if a direct relationship privity exception survived Szajna and Rothe, the recent line of federal cases exceeds the bounds of the exception created by the Illinois courts. In Abco, the only Illinois direct relationship case supporting Guajardo‘s federal cases, the buyer had repeated contacts with the manufacturer. That is not the case here. Guajardo states only that Skechers marketed its footwear directly to consumers and that if she had been aware of the defect, she would not have purchased the shoes. Mem. Opp‘n Mot. Dismiss 3. Plaintiff has not alleged she relied on any particular statement. For these reasons, her allegations are insufficient to satisfy the direct relationship privity exception. Accordingly, Guajardo‘s implied warranty of merchantability claim is dismissed. See In re VTech Data Breach Litigation, No. 15 CV 10889, 2018 WL 1863953, at *5 (N.D. Ill. Apr. 18, 2018) (acknowledging that Illinois has recognized the direct relationship privity exception, Frank‘s Maint., 408 N.E.2d at 412, and that “recent federal cases . . . have interpreted [it] as applying to circumstances in which manufacturers advertise[d] directly to consumers” but concluding that it was not clear that “the Illinois Supreme Court would . . . [agree] (and no such binding authority [was] cited), especially where, as here, there [wa]s no allegation that a plaintiff viewed a particular representation in an ad and relied on the representation in making the purchase“).
815 ILCS 505/2 )
Guajardo next alleges that Skechers concealed, suppressed, and intentionally omitted material facts about the shoes while attempting to persuade potential customers to purchase them in violation of the ICFA. FAC ¶ 109. Skechers argues that because an ICFA claim sounds in fraud, it must meet Rule 9(b)‘s heightened pleading requirements and that Guajardo “fails to plead (1) with particularity any statements or omissions related to the alleged defect; and (2) any facts giving rise to an inference that Skechers knew of the alleged defect at the time of sale.” Mem. Supp. Mot. Dismiss 9. Guajardo contends Skechers knew or should have known about its dangerous products “yet failed to provide any warning to consumers.” Mem. Opp‘n Mot. Dismiss 4.
The ICFA prohibits “unfair or deceptive acts or practices, including . . . deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment . . . in the conduct of any trade or commerce.”
Guajardo alleges Skechers failed to disclose information about the manufacturing defect in its “advertising, on [its] shoeboxes and hangtags, and on their product,” FAC ¶¶ 20, 21, 37–38, 54–59, 113(c), which only provided succinct information about the shoes’ light-up features and charging instructions, id. at ¶¶ 20, 56-57. Mem. Opp‘n Mot. Dismiss 7. Guajardo has not alleged any direct statements that contain material omissions. Rather, Guajardo alleges opportunities or locations where Skechers could have disclosed the alleged defect.
Guajardo‘s allegation that Skechers failed to disclose the defect is insufficient to state an ICFA claim because she has not pointed to a direct statement with a material omission. The Court need not reach the second half of Skechers’ argument—that Guajardo has not adequately alleged it knew of the defect when Guajardo purchased the shoes.7
iii. Count III: Negligence
Skechers argues Guajardo‘s product liability negligence claim fails because “(1) the Moorman doctrine precludes tort claims for economic losses arising from a product liability claim; and (2) [Guajardo] fails to plead facts establishing that Skechers knew about the alleged design defect.”
To plead negligence, a plaintiff must allege duty, breach, causation, and damages. Suarez v. W.M. Barr & Co., Inc., 842 F.3d 513, 523 (7th Cir. 2016) (citing Calles v. Scripto–Tokai Corp., 864 N.E.2d 249, 263 (Ill. 2007)). In Moorman Manufacturing Co. v. National Tank Co., 435 N.E.2d 443, 452 (Ill. 1982), the plaintiff sued under a negligence theory for damages resulting from a crack in a grain-storage tank. The court held that the plaintiff could not pursue a negligence claim because the UCC provided the proper framework for economic losses. Id. at 452. Economic loss damages include “damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits—without any claim of personal injury or damage to other property.” Id. at 449 (quotation marks omitted). In her negligence count, Guajardo seeks damages for “an unsafe product that could not be used for its intended purpose.” FAC ¶¶ 102–03. Skechers argues suing for “a product . . . unfit for its intended use” demonstrates she is seeking economic losses due to disappointed expectations, a claim precluded by the Moorman doctrine. Mem. Supp. Mot. Dismiss 13 (quoting Moorman Mfg. Co., 435 N.E.2d at 449). Guajardo disputes her negligence claim is “simply about disappointed expectations,” points to her allegations that her son was injured, and asserts the sudden or dangerous occurrence exception to the Moorman doctrine. Mem. Opp‘n Mot. Dismiss 12-13.
Moorman identified three exceptions to the economic loss rule including when “the plaintiff sustained damage, i.e., personal injury or property damage, resulting from a sudden or dangerous occurrence.” In re Chicago Flood Litig., 680 N.E.2d at 275 (citing Moorman Mfg. Co., 435 N.E.2d at 450). “[T]he event, by itself, does not constitute an exception to the economic loss rule. Rather, the exception is composed of a sudden, dangerous, or calamitous event coupled with personal injury or property damage.” Id. Recovery in tort was limited to property damage; economic loss was not recoverable even if accompanied by property damage. Id. at 276 (holding that plaintiffs could recover in tort for lost inventory because it was property damage caused by the Chicago flood but could not recover the loss of continuous electrical service because that was a disappointed commercial expectation that fell within the economic loss doctrine).
Although Guajardo alleges in the FAC that she sues for the difference between the shoes she expected to buy and the defective shoes, FAC ¶ 102, she argues in response to the motion to dismiss that she has properly alleged an exception to the economic loss rule, which means she is attempting to allege a product liability negligence claim for personal injuries. Mem. Opp‘n Mot. Dismiss 13. The Court may “consider both [the] complaint and the additional allegations, consistent with the complaint, that [a plaintiff raises] in response to [a] motion to dismiss.” Denwiddie v. Mueller, 775 F. App‘x 817, 819-20 (7th Cir. 2019). But a plaintiff may not amend her complaint in response to a motion to dismiss. Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 448 (7th Cir. 2011) (holding that plaintiff may not amend his theory of recovery in his response brief). Guajardo‘s original negligence claim for expectation damages is barred by the Moorman doctrine. The Court grants Guajardo leave to amend her complaint if she intends to pursue a negligence claim for personal injury damages related to a sudden or dangerous event.
iv. Count II: Unjust Enrichment8
Skechers argues Guajardo‘s unjust enrichment claim should be dismissed because it is based on the same allegations as her inadequate ICFA and UDTPA claims. Mem. Supp. Mot. Dismiss 12 (citing Wiegel v. Stock Craft Mfg., Inc., 946 F. Supp. 2d 804, 817 (N.D. Ill. 2013)). Guajardo argues the “claim is brought in the alternative ‘to the extent there is any determination that any contracts between Class Members and Skechers do[es] not govern . . . the dispute[].‘” Mem. Opp‘n Mot. Dismiss 11 (alterations in original) (quoting FAC ¶ 85).
To state a claim for “unjust enrichment, a plaintiff must allege that the defendant has [(a)] unjustly retained a benefit,” (b) “to the plaintiff‘s detriment,” and (c) “defendant‘s retention of the benefit violates the fundamental principles of justice, equity, and good conscience.” HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 545 N.E.2d 672, 679 (Ill. 1989). “[A] plaintiff need not show loss or damages, [but] he must show a detriment—and, significantly, a connection between the detriment and the defendant‘s retention of the benefit.” Cleary v. Philip Morris Inc., 656 F.3d 511, 518–19 (7th Cir. 2011).
Guajardo‘s unjust enrichment claim depends on her claims for “breach of contract, implied warranty, negligence, and violations under ICFA and UDTPA,” which “demonstrate[] that Skechers retained [Guajardo‘s] and Class Members’ money in violation of the principles of ‘justice, equity, and good conscience.‘” Mem. Opp‘n Mot. Dismiss 12 (quoting Cleary, 656 F.3d at 518). “[I]f an unjust enrichment claim rests on the same improper conduct alleged in another claim, then the unjust enrichment claim will be tied to this related claim—and, of course, unjust enrichment will stand or fall with the related claim.” Cleary, 656 F.3d at 517. Since Guajardo‘s claims have been dismissed and she has not alleged an independent basis for the Court to consider, the unjust enrichment claim is dismissed.
V. Standing
Skechers argues Guajardo, who purchased Energy Lights shoes, cannot bring a claim on behalf of class members who purchased Skechers’ other light-up shoes such as Twinkle Toes, Shopkins, and S-Lights because they are not substantially similar. Mem. Supp. Mot. Dismiss 15 (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992) (requiring the plaintiff to have suffered an “injury in fact” as to each claim)).
Skechers cites Muir v. NBTY, Inc., No. 15 C 9835, 2016 WL 5234596, at *4 (N.D. Ill. Sept. 22, 2016), Padilla v. Costco Wholesale Corp., No. 11 C 7686, 2012 WL 2397012, at *3 (N.D. Ill. June 21, 2012), and Gubala v. Allmax Nutrition, Inc., No. 14 C 9299, 2015 WL 6460086, at *4 (N.D. Ill. Oct. 26, 2015), which all concluded that a named plaintiff had standing to bring claims on behalf of unnamed plaintiffs only when the defective products were substantially similar. These district court cases, which cite to Payton v. County of Kane, 308 F.3d 673, 680 (7th Cir. 2002), are not persuasive.
In Payton, the court first determined that the named plaintiffs had suffered an injury in fact and had standing to sue two of the named defendants. Then, it concluded that whether the named plaintiffs could represent a class suing other named defendants was an issue to be decided during class certification, which would be decided before class member standing. “[O]nce a class is properly certified, statutory and Article III standing requirements must be assessed with reference to the class as a whole, not simply with reference to the individual named plaintiffs.” Payton, 308 F.3d at 680; see Lewis v. Casey, 518 U.S. 343, 395–96 (1996) (Souter, J., concurring in part, dissenting in part, and concurring in the judgment) (“Unnamed plaintiffs need not make any individual showing of standing in order to obtain relief, because the standing issue focuses on whether the plaintiff is properly before the court, not whether represented parties or absent class members are properly before the court. Whether or not the named plaintiff who meets individual standing requirements may assert the rights of absent class members is neither a standing issue nor an Article III case or controversy issue but depends rather on meeting the prerequisites of Rule 23 governing class actions.” (alterations and quotation marks omitted)); Kohen v. Pac. Inv. Mgmt. Co. LLC, 571 F.3d 672, 676 (7th Cir. 2009) (“[A]s long as one member of a certified class has a plausible claim to have suffered damages, the requirement of standing is satisfied.“).
Skechers does not dispute Guajardo has standing to bring her claims. Therefore, whether she is the appropriate representative of the class must wait until class certification, that is if Guajardo decides to file an amended complaint curing the deficiencies described in this order. See Friend v. FGF Brands (USA) Inc., No. 18 CV 7644, 2019 WL 2482728, at *3 (N.D. Ill. June 12, 2019) (deferring standing analysis until class certification because Rule 23 determines whether the named plaintiff may represent a class under the standard commonality or adequacy of representation analysis (quotation marks omitted)).
CONCLUSION
Defendant Skechers USA, Inc.‘s Motion to Dismiss Plaintiff‘s First Amended Complaint, ECF No. 13, and Motion for Leave to File a Reply in Support of its Motion to Dismiss, ECF No. 19, are GRANTED. Counts I and V are DISMISSED WITH PREJUDICE. Counts II, III, IV, VI, and VII are DISMISSED with leave to amend in 14 days if the deficiencies identified in the First Amended Complaint can be cured. The Clerk is directed to file the Reply, ECF No. 19-1, on the docket.
Entered this 30th day of November, 2020.
s/ Sara Darrow
SARA DARROW
CHIEF UNITED STATES DISTRICT JUDGE