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

Filing 693

MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 8/10/2011:Mailed notice(kef, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LG ELECTRONICS U.S.A., INC.,
a subsidiary of LG Electronics, Inc.,
a Korean company,

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Plaintiff,
v.
WHIRLPOOL CORPORATION,
Defendant.

No. 08 C 242
Hon. Amy J. St. Eve

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Court 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., 835 N.E.2d 801, 853-54 (Ill. 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
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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. 10CV-1896, 2011 WL 3205487, at *2 (N.D. Ill. July 28, 2011); Tile Unlimited, Inc. v. Blanke
Corp., -- F. Supp. 2d --, 2011 WL 1527011, at *3 (N.D. Ill. Apr. 20, 2011); Classic Bus. Corp. v.
Equilon Enters., LLC, No. 09-CV- 7735, 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, 835 N.E.2d at 853; see also Morrison v. YTB Int’l, Inc., -- F.3d --, 2011
WL 3132398 (7th Cir. July 27, 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., 875 N.E.2d 682, 685 (Ill. App. Ct. 2007);
Van Tassell v. United Mktg. Grp., LLC, -- F. Supp. 2d --, 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
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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., 840 N.E.2d
269, 274 (Ill. 2005) (citing Avery, 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, 835 N.E.2d at 853 (citation omitted).
Having read the “express provisions of the statute,” the Court discerns no “clear intent” that the

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IUDTPA have extraterritorial effect. See also Schwartz 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[ed] primarily and substantially
in Illinois.” Avery, 835 N.E.2d at 854; see also Morrison, 2011 WL 3132398, at *2 (“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, 2011 WL 3132398
(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

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clear that claims under the IUDTPA “must meet the consumer nexus test by alleging that the
conduct involves trade practices directed to the market generally or otherwise implicates
consumer protection concerns.” Athey, 89 F.3d at 436-37. Nothing in that court’s decision
suggests that the consumer-nexus test goes beyond the discrete question whether the challenged
practice has a sufficiently close impact on consumers to grant a non-consumer plaintiff a right to
bring an action under a consumer-protection statute. Id. at passim. The Illinois Supreme Court
was equally clear in its holding that “a plaintiff may pursue a private cause of action under the
Consumer Fraud Act if the circumstances that relate to the disputed transaction occur primarily
and substantially in Illinois.” Avery, 835 N.E.2d at 853-54. Furthermore, the Supreme Court of
Illinois referenced neither Athey nor the consumer-nexus standard that Athey recognized. Id. at
passim. Reading these two opinions together, IUDTPA plaintiffs, like CFA plaintiffs, must
satisfy the primarily and substantially test.1
Further, LG’s argument that the “primarily and substantially” test does not apply to
actions under the IUDTPA that involve one competitor’s suing another fails. LG offers no
authority in support of its proposed distinction between competitor- and consumer-initiated
lawsuits under the IUDTPA. Although LG argues that the Illinois Supreme Court in Avery
fashioned its enunciated test “to deal with consumer claims for deceptive trade practices when
the consequences of those practices are felt by consumers outside Illinois[,] (R. 689 at 8
(emphasis in original),) nothing in the court’s opinion in Avery suggests that it sought to
distinguish lawsuits brought by consumers and competitors under the IUDTPA. Avery, 835
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LG argues that the consumer-nexus and “primarily and substantially tests” do not apply
to false-advertising cases involving competitor claims. (R. 689 at 10-12.) LG does not articulate
a convincing rationale for, or cite any case law in support of, this view, which the Court declines
to adopt.
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N.E.2d at 801, passim.
2.

Evidence of a Nationwide Course of Conduct, Which Does Not
Include Evidence of Conduct Specific to Illinois, Does Not
Trigger Application of the IUDTPA

LG contends that granting Whirlpool’s motion would amount to the “extreme and
unprecedented step of declaring Illinois law off-limits to a competitor seeking relief from a
nationwide false advertising campaign.” (R. 689 at 7.) This contention misconceives the limited
reach of the IUDTPA, as defined by the Illinois Supreme Court, and ignores the larger comityand potentially Constitution-based limitations on extraterritorial application of state law, which
do not always allow a court to issue a nationwide injunction based on a violation of state law.2
Contrary to LG’s suggestion, Illinois does not necessarily bar a company harmed by a
nationwide practice of false advertising from seeking relief under its laws. To avail itself of
Illinois’s IUDTPA statute, however, such a plaintiff would have to establish that the challenged
advertising occurred primarily and substantially within the state. Avery, 835 N.E.2d at 854; see
also IFC Credit Corp. v. Aliano Bros. Gen. Contractors, Inc., No. 04-CV-6504, 2007 WL
164603, at *3 (N.D. Ill. Jan. 12, 2007) (observing that “[t]he Avery court set the following test
for determining when a transaction occurs ‘primarily and substantially’ in Illinois; it pointed to

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Indeed, even if the Supreme Court of Illinois had not limited the reach of the CFA (and,
by extension, the IUDTPA) in this manner, concerns of comity can limit courts’ ability to issue
nationwide injunctions based on a violation of state law. See, e.g., Herman Miller, Inc. v.
Palazzetti Imports & Exports, Inc., 270 F.3d 298, 327 (6th Cir. 2001); see also United States v.
AMC Entm’t, Inc., 549 F.3d 760, 770 (9th Cir. 2008) (“Once a court has obtained personal
jurisdiction over a defendant, the court has the power to enforce the terms of the injunctions
outside the territorial jurisdiction of the courts, including issuing a nationwide injunction.
However, when exercising its equitable powers to issue an injunction, a court must be mindful of
any effect its decision might have outside its jurisdiction. Courts ordinarily should not award
injunctive relief that would cause substantial interference with another court’s sovereignty.”)
(internal citations omitted).
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the following factors to guide the analysis: (i) plaintiff’s residence, (ii) where the deception
occurred, (iii) where the damage to plaintiff occurred, and (iv) whether plaintiff communicated
with defendants or its agents in Illinois”). If a plaintiff cannot make this showing because
“events were centered outside Illinois,” then it “must rely on some other state’s law.” Morrison,
2011 WL 3132398, at *2.
In this case, LG introduced no evidence concerning Whirlpool’s advertisements of its
dryers in Illinois. Nor did it produce evidence of the parties’ contacts with, or relevant activities
in, the State that would satisfy the factors highlighted in Avery. The most LG can say is what it
previously argued to the Court: it “conducted business in Illinois through (i) its extensive
relationship with Kenmore (headquartered in Hoffman Estate, Illinois) during the time in which
Whirlpool manufactured Kenmore’s steam dryer for Sears . . . and (ii) its sales of dryers in
Illinois.” (R. 649 at 22.) This evidence does not demonstrate that Whirlpool’s challenged
advertising occurred primarily and substantially in Illinois. See, e.g., Morrison, 2011 WL
3132398, at *3 (observing that, in Avery, “[t]he only fact favoring application of Illinois law was
that State Farm’s headquarters, where the replacement-parts policy was adopted, is in Illinois”
and so “[t]he Supreme Court of Illinois held that Louisiana rather than Illinois law should govern
[Avery’s] situation”). LG did not introduce any evidence of advertising in Illinois regarding
Kenmore’s steam dryers, or any evidence of damages in Illinois stemming from such advertising.
Finally, LG points to a number of decisions in this district that have upheld actions taken
by competitors under the IUDTPA against nationwide conduct. (R. 689 at 12-13 (citing
Dynamic Fluid Control (PTY) Ltd. v. Int’l Valve Mfg., LLC, -- F. Supp. 2d --, 2011 WL 1838872,
at *6-7 (N.D. Ill. May 11, 2011); Morningware, Inc. v. Hearthware Home Prods., Inc., 673 F.

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Supp. 2d 630, 639 (N.D. Ill. 2009); WMH Tool Grp., Inc. v. Woodstock Int’l, Inc., No. 07-CV3885, 2009 WL 971425 (N.D. Ill. Apr. 8, 2009); Hyundai Const. Equip. USA, Inc. v. Chris
Johnson Equip., Inc., No. 06-CV-3238, 2008 WL 4210785 (N.D. Ill. Sept. 10, 2008); Medallion
Prods., Inc. v. H.C.T.V., Inc., No. 06-CV-2597, 2006 WL 3065344, at *6-7 (N.D. Ill. Oct. 24,
2006).)
None of these opinions reference Avery. Id. Nor do any of them address the question
whether an IUDTPA claim can stand where a plaintiff exclusively offers evidence of nationwide,
as opposed to Illinois-specific, conduct. Id. Further, all but two of the cited cases involved
motions to dismiss under Rule 12(b)(6), which the courts denied without having occasion to
analyze the issue whether the allegedly deceptive behavior occurred “substantially and
primarily” in Illinois. Cf. Morrison, 2011 WL 3132398, at *3-5. The other two cases, WMH
Tool and Hyundai, involved motions for summary judgment, but neither court engaged in any
analysis specific to the IUDTPA.
Ultimately, the precedent relied upon by LG does not help its current argument, for none
of those cases addressed the legal question presently before the Court. In light of Avery and the
preceding discussion, LG failed to establish through the extensive evidence presented at trial that
Whirlpool’s nationwide advertising of its dryers, or that the parties’ other activities relevant to
the dispute, occurred primarily and substantially in Illinois. See generally Morrison, 2011 WL
3132398, at *4 (“Avery’s standard is not exactly self-defining, and the Supreme Court of Illinois
said that ‘each case must be decided on its own facts,’ a formula that gives the trier of fact
substantial latitude and implies deferential appellate review.”). For that reason, LG’s IUDTPA
claim fails, and Whirlpool is entitled to judgment as a matter of law.

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3.

Whirlpool Preserved its Argument that the IUDTPA Does Not
Apply

Finally, LG argues that Whirlpool has waived its “standing” argument by failing to raise
it at the pleading stage.3 (R. 689 at 7-9.) This claim is unavailing. Whirlpool argued at the
outset of the case that “LG cannot succeed on its claims under Illinois state law” on the ground
that “a plaintiff may pursue claims under . . . the Illinois Deceptive Trade Practices Act . . . only
‘if the circumstances that relate to the disputed transaction occur primarily and substantially in
Illinois.’” (R. 50 at 20) (emphasis in original) (quoting Avery, 835 N.E.2d at 854).) Whirlpool
raised this argument just weeks after LG initiated this lawsuit. Nor was this an undeveloped
argument of the kind that the Court could deem waived. See, e.g., Radha Geismann, M.D., P.C.
v. Allscripts Healthcare Solutions, Inc., 764 F. Supp. 2d 957, 961 (N.D. Ill. 2011). The Court
therefore finds that Whirlpool has not waived its argument that LG’s IUDTPA claim fails on
account of the fact that the challenged advertising did not occur primarily and substantially in
Illinois.
II.

The Court Need Not Address Whirlpool’s Argument that the IUDTPA Claim Fails
on Account of the Fact that Whirlpool’s Dryers Use Steam
In light of its finding that LG failed to introduce evidence sufficient to trigger application

of the IUDTPA, the Court need not address Whirlpool’s alternative argument that the IUDTPA
claim fails both because Whirlpool’s dryers in fact use steam and because LG failed to prove
injury. (R. 684 at 10-17.)

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The Seventh Circuit recently explained that the question whether a state’s law applies in
light of the fact that the relevant events took place out of the state is not a matter of standing.
Morrison, 2011 WL 3132398, at *2.
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CONCLUSION
For the preceding reasons, the Court grants Whirlpool’s motion for judgment as a matter
on LG’s IUDTPA claim.

Dated: August 10, 2011

ENTERED

_________________
AMY J. ST. EVE
United States District Court Judge

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