A Recent Illinois Supreme Court Decision May Have Nationwide Importance For Consumer Litigation,
By ANTHONY J. SEBOK
Monday, Feb. 09, 2004
Over the last decade, plaintiffs' class action attorneys have defended their work by saying that if they do not pursue corporate wrongdoers in private lawsuits, then consumers will be left unprotected. And there is clearly something to this argument: The plaintiffs' bar has been a tremendous force in changing the way that big business treats workers and consumer. But the question has always been, how much power, exactly, should the law give the plaintiffs' bar to pursue corporate wrongdoing?
A recent decision from the Illinois Supreme Court illustrates how much power the members of the plaintiffs' bar could have, if only the courts would give it to them -- but also refuses to give them that power. In Shannon v. Boise Cascade Corp., the Illinois Supreme Court issued a decision that restricts the reach of consumer litigation and thus, in certain ways, hamstrings the plaintiffs' bar.
The decision may have important consequences for ongoing litigation in Illinois. And more broadly, it may have an effect in the many other states that also have consumer fraud statutes similar to Illinois'.
The Boise Case: A Would-Be Class Action About Wood Siding
The lawsuit at the heart of Shannon involved wood siding, a product that has been the subject of a lot of consumer class action litigation around the country. According to the lawyers who have brought these suits, Boise Cascade misrepresented the quality and durability of siding that it sold.
The ability of consumers to obtain class action status for these wood siding suits has been key. Only class action status can indicate the chance of a sizable settlement. Only a sizable settlement may persuade tort lawyers to take on these cases based on a contingency fee arrangement. And without a contingency fee arrangement, few consumers could afford the initial outlays necessary to initiate a suit.
Generally, class action status is relatively easy to obtain if plaintiffs are all claiming the same misrepresentations about the same product -- and thus the same kind of violation of the same consumer fraud statute. But the Shannon case, it turned out was a little more difficult.
The Illinois Courts Divide On the "Proximate Cause" Issue
In Shannon, the lawyers initially located eight "named plaintiffs" to be the class representatives. But seven of the eight admitted in depositions that they had never personally read any statement from Boise Cascade about the siding on their homes.
Thus, Boise Cascade moved to dismiss the case brought by these seven, on the ground that since the plaintiffs were unaware of any statements by Boise, Boise's misrepresentation could not have been the "proximate cause" of their decision to buy the homes that had the siding. And the stakes, as everyone knew, were greater than just those seven plaintiffs' claims. With only a single named plaintiff left, if the motion were granted, class action status -- and indeed, the lawsuit's survival -- would also be in jeopardy.
Proximate cause is a technical term in tort law, and it basically means "legal" cause. It stands for the proposition that even if a wrongful act is an actual cause of a harm, it may not be the legal cause of the harm if it occurred too far away in time or space, or if other acts intervened.
The trial judge thought that any alleged misrepresentations by Boise were too remote. He interpreted the plaintiffs to be saying that only because someone believed Boise's alleged lies, could it stay in business long enough to sell them their homes.
But the appellate court disagreed. It held that plaintiffs' theory was better interpreted to claim that builders and architects believed Boise's alleged lies, and that when plaintiffs bought their homes, they relied on those builders and architects -- and thus on Boise's alleged lies. The court thought this connection was close enough for proximate cause.
The Illinois Supreme Court, however, thought differently. To explain why, a bit of background is in order.
Why the Illinois Supreme Court Reached the Decision to Dismiss the Suit
In a fraud suit brought under the common law (that is, the longstanding, non-statutory tort law of each state), the plaintiff must prove "reliance." That is, the plaintiff must prove he relied on the defendant's alleged lie, in the sense that the lie induced him to act, or refrain from acting.
In contrast, many states -- Illinois included -- do not require proof of reliance in their consumer fraud statutes. The elimination of reliance was designed specifically to make it easier for consumers to bring fraud claims.
However, some defendants have tried to use "proximate cause" to, in effect, resurrect the reliance element in statutory consumer fraud cases. Their logic is: If the plaintiff didn't rely on the defendant's statements, they how can those statements have proximately caused the plaintiffs' harm?
Plaintiffs' lawyers see this kind of argument as reading a reliance requirement back into a statute that omitted it. But the Illinois Supreme Court disagreed. It held that proof of proximate cause, even without direct reliance, was possible. But it also held that there was no such proof in the Shannon case.
For instance, it noted there was no actual evidence that any "builder, architect or contractor" who sold the plaintiffs their homes had heard or read Boise's alleged misrepresentations. Had there been such evidence, the Court suggested, that would be the kind of indirect reliance that would support proximate cause -- and sustain a consumer fraud claim.
An Important Illinois Precedent Played a Major Role in the Court's Decision
A 2002 Illinois Supreme Court precedent, in Oliveira v. Amoco Oil Co., was influential in the court's decision to rule against the Shannon plaintiffs.
There, a consumer named Oliveira claimed that Amoco had violated Illinois' consumer fraud statute by lying about the cleaning abilities of premium gasoline he'd purchased. Oliveira admitted that he had never read or seen the ads containing the misrepresentations. But he argued that because other consumers were deceived by the ads, the demand for the gasoline was artificially high, and he therefore overpaid.
Oliviera's claim, however, was rejected. "Proximate cause" had not been shown
-- the misrepresentations were too remote from the harm of the allegedly overpriced gas.
Was the Illinois Supreme Court's Ruling Correct?
To some extent, the Illinois Supreme Court's holdings in Oliveira and Shannon commonsensical. It seems plain that for there to be "proximate cause," there must be some connection between the alleged lie, and the alleged harm. Otherwise, any person, living anywhere, could sue a corporation alleging that it told lies that somehow -- in some Rube Goldbergian chain of events -- caused that person harm.
But when the Court tries to explain what the connection has to be, its reasoning falls apart (as the Court's Justice Thomas pointed out in a special concurrence). The Court made clear that it's okay if the lies are believed by a builder or architect of the plaintiff's house. But why is that connection sufficient?
It must be because the plaintiff trusts the expert -- because he relied on the expert. And there's the reliance requirement again: The expert's reliance on the defendant is a proxy for the consumer's reliance. But remember, the consumer fraud statute omitted any reliance requirement.
Plainly, Boise Cascade's advertising campaign, which was designed to convince builders and architects to use its siding, was also designed to affect consumers in the end. The corporation knew that, in the end, it was the consumer who would buy the houses, and thus the siding.
And in the absence of any reliance requirement, shouldn't the intent to affect the plaintiff through the alleged misrepresentations be enough to show "proximate cause"? After all, as a practical matter, corporate lying is effective because it has such a large ripple effect.
The Illinois courts desire to limit misrepresentation suits to those who have suffered relatively direct harms makes sense. But the line it has drawn does not -- and worse, it imports back into the law some of the very same reliance concepts the Illinois legislature tried to omit.