Haught v. Motorola Mobility, Inc.

Filing 27

MEMORANDUM Opinion and Order Signed by the Honorable Virginia M. Kendall on 8/23/2012.(tsa, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JACK HAUGHT, individually and on
behalf of all others similarly situated,
Plaintiffs,
v.

MOTOROLA MOBILITY, INC., a Delaware
corporation,
Defendant.

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12 C 2515
Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER
Plaintiff Jack Haught brings this class action suit on behalf of himself and all
others similarly situated against Motorola Mobility, Inc. alleging three counts stemming
from his purchase of a Motorola CLIQ XT mobile telephone: (1) false and misleading
representations in violation of the Illinois Consumer Fraud and Deceptive Business
Practices Act, 815 ILSC 505/1 et seq. (Count I); (2) common law fraud by omission
(Count II); and (3) unjust enrichment (Count III). Motorola moves to dismiss Haught’s
complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on the grounds that
Haught has failed to state a claim upon which relief may be granted. For the foregoing
reasons, Motorola’s Motion to Dismiss is granted in part and denied in part.

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I. Background
In deciding the instant Motion, the Court assumes the veracity of the wellpleaded facts in the Complaint and construes all reasonable inferences in Haught’s
favor. See Killingsworth v. HSBC Bank, 507 F.3d 614, 619 (7th Cir. 2007) (citing Savory v.
Lyons, 469 F.3d 667, 670 (7th Cir. 2006)); accord Murphy v. Walker, 51 F.3d 714, 717 (7th
Cir. 1995).
Motorola is an international manufacturer of cellular telephones with its
corporate headquarters and principal place of business in Libertyville, Illinois. On
March 17, 2010, Motorola released the CLIQ XT, a mobile phone designed to utilize the
Google Android operating system. A mobile phone’s operating system allows the user
to access and use the phone’s primary features and functions. With this in mind, mobile
phone manufacturers customarily upgrade operating systems installed on previously
sold phones to provide additional features and enhanced functionality. Because thirdparty mobile application developers frequently update their products to function
correctly with the most recent version of a particular operating system, mobile phones
using an outdated operating system are often incompatible with popular third-party
mobile applications.
Upon its release the CLIQ XT utilized Android version 1.5, a version of the
Android operating system released in May 2009. At the time of the CLIQ XT’s release

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the most current version of the Android operating system was Android version 2.1.
That month Motorola included the CLIQ XT on an online upgrade status chart.
Motorola indicated on the chart that for the CLIQ XT, “[u]pgrade to Android 2.1
planned for Q2.” On the same chart, Motorola listed the upgrade status of other devices
as “[u]pgrade under evaluation.” On March 30, 2010, in response to customer inquiries
regarding the operating system of the CLIQ XT, a Forum Manager of Motorola’s online
customer support forum highlighted the phone’s inclusion on the upgrade status chart.
Thereafter, until at least June 17, 2010, Motorola represented that an upgrade of the
CLIQ XT to Android version 2.1 was planned for the second quarter of 2010.
On or around June 30, 2010, Jack Haught—a resident of the State of
Ohio—purchased a CLIQ XT for approximately $100. Prior to purchasing the phone,
Haught viewed Motorola’s representations regarding the CLIQ XT’s ability to run and
store most commonly used mobile applications through its Android operating system.
At the time of his purchase Haught was aware that his purchase was subject to a 30-day
return and exchange policy. Thereafter, before the end of the 30-day return period,
Haught viewed Motorola’s online representations of the planned upgrade of the CLIQ
XT operating system to Android version 2.1. Relying on these representations, Haught
chose not to return his phone prior to the close of the return period.

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On June 30, 2010, Motorola stated through its official Twitter account:
“Continuing work on an upgrade for CLIQ/CLIQ XT to deliver even better experience
and will update on timing when we can.” Thereafter, between July 31, 2010, and
December 22, 2010, Motorola continued to indicate on both its online customer service
forum and its official Twitter account that an upgrade of the CLIQ XT’s operating
system was forthcoming. Finally, on February 3, 2011, Motorola announced through its
online customer service forum that the CLIQ XT would remain on Android version 1.5.
As a result, Haught alleges that his phone became outdated and incompatible with
many popular mobile applications, thereby allegedly failing to provide most features
beyond its basic functionality.
II. The Standard of Review
When considering a motion to dismiss under Rule 12(b)(6) the Court accepts as
true all of the well-plead facts alleged in the complaint and construes all reasonable
inferences in favor of the nonmoving party. See Killingsworth, 469 F.3d at 619 (citing
Savory, 469 F.3d at 670); accord Murphy, 51 F.3d at 717. To state a claim upon which
relief can be granted a complaint must contain a “short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “Detailed factual
allegations” are not required, but the plaintiff must allege facts that, when “accepted as
true . . . state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,

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678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (internal
quotations omitted).

In analyzing whether a complaint meets this standard the

“reviewing court [must] draw on its judicial experience and common sense.” Iqbal, 556
U.S. at 678.

When the factual allegations are well-plead the Court assumes their

veracity and then determines if they plausibly give rise to an entitlement to relief. See
Id. at 679.

A claim has facial plausibility when the factual content plead in the

complaint allows the Court to draw a reasonable inference that the defendant is liable
for the misconduct alleged. See Id. at 678.
Claims alleging fraud must satisfy the heightened pleading requirement of Rule
9(b), which requires that “[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.”

Fed. R. Civ. P. 9(b)

(emphasis supplied). Rule 9(b) applies both to common law fraud claims and to claims
brought under the Illinois Consumer Fraud and Deceptive Business Practices Act. See
Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 441
(7th Cir. 2011). “While [Rule 9(b)] does not require a plaintiff to plead facts that if true
would show that the defendant’s alleged misrepresentations were indeed false, it does
require the plaintiff to state the identity of the person making the misrepresentation, the
time, place, and content of the misrepresentation, and the method by which the
misrepresentation was communicated to the plaintiff.” Uni*Quality, Inc. v. Infotronx,

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Inc., 974 F.2d 918, 923 (7th Cir. 1992) (quoting Bankers Trust Co. v. Old Republic Ins. Co.,
959 F.2d 677, 683 (7th Cir. 1992)) (internal quotations omitted).
The heightened pleading requirement of Federal Rule of Civil Procedure 9(b)
therefore mandates that a complaint alleging fraud contain more substance in order to
survive a motion to dismiss than a complaint based on another cause of action governed
only by the minimal pleading standards of Rule 8(a)(2). See Ackerman v. Nw. Mut. Life
Ins. Co., 172 F.3d 467, 469 (7th Cir. 1999) (Rule 9(b) forces “the plaintiff to do more than
the usual investigation before filing his complaint”); Vicom, Inc. v. Harbridge Merch.
Servs., Inc., 20 F.3d 771, 777 (7th Cir. 1994) (the rule serves three main purposes: (1)
protecting a defendant’s reputation from harm; (2) minimizing “strike suits” and
“fishing expeditions;” and (3) providing notice of the claim of fraud to the defendants);
accord Iqbal, 556 U.S. at 678 (a complaint must only state a plausible claim to relief to
survive a motion to dismiss under Rule 8).
III. Discussion
A. Count I: The Illinois Consumer Fraud and Deceptive Business Practices Act
Motorola argues first that Haught may not bring a claim under the Illinois
Consumer Fraud and Deceptive Business Practices Act, 815 ILSC 505/1 et seq. (hereafter
“ICFA”). Although Motorola argues that Haught lacks standing to bring his ICFA
claim, Motorola’s argument is actually premised on choice-of-law principles articulated

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in Avery v. State Farm Mut. Auto. Ins. Co., 835 N.E.2d 801 (Ill. 2005). In Avery, the Illinois
Supreme Court held that the ICFA does not have extraterritorial effect, and applies to
nonresident claimants only when the circumstances of the disputed transaction
occurred “primarily and substantially” in Illinois. Id. at 854.
Whether a putative nonresident plaintiff may bring an ICFA claim is not
governed by a bright-line rule but rather requires a highly fact-bound inquiry in which
no single factor is dispositive. See Crichton v. Golden Rule Ins. Co., 576 F.3d 392, 396 (7th
Cir. 2009). In particular, the Illinois Supreme Court has considered: (1) the claimant’s
residence; (2) the defendant’s place of business; (3) the location of the relevant item that
is the subject of the disputed transaction; (4) the location of the claimant’s contacts with
the defendant; (5) where the contracts at issue were executed; (6) the contract’s choice of
law provisions, if there are any; (7) where the allegedly deceptive statements were
made; (8) where payments for services were to be sent; and (9) where complaints about
the goods or services were to be directed. See The Clearing Corp. v. Fin. and Energy Exch.
Ltd., No. 09 C 5383, 2010 WL 2836717, *6 (N.D. Ill. July 16, 2010) (citing Avery, 835
N.E.2d at 854-855).
In applying this test, it is instructive to look both to Avery as well as the Seventh
Circuit’s decision in Crichton, 576 F.3d 392.

In Avery, 835 NE.2d at 810-811, the

nonresident claimants alleged that their Illinois-based automobile insurer fraudulently

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supplied substitute parts on insured repairs performed outside of the state. Similarly,
in Crichton, 576 F.3d at 394, 397, the nonresident claimant brought an ICFA claim
against an Illinois-based insurance company despite the fact that he received
promotional insurance materials, entered into and renewed his insurance, submitted
claims, and was allegedly deceived outside of Illinois. In each of these cases, the courts
emphasized the plaintiff’s place of residence and the tenuous connection between the
respective transactions and the State of Illinois to conclude that the putative plaintiffs
were unable to bring ICFA claims. See Avery, 835 N.E.2d at 855; Crichton, 576 F.3d at
397.
Haught seeks to distinguish the instant case by emphasizing that the alleged
misrepresentations were designed in Illinois and disseminated on a website registered
and hosted in Illinois. Further, Haught notes that the terms of an agreement relating to
his use of online Motorola services provides for the resolution of disputes under Illinois
law. Taken together, however, the factors articulated in Avery advise against extending
ICFA protection to Haught’s transaction with Motorola.
Haught is a resident of the State of Ohio who purchased his phone from a thirdparty vendor outside of the State of Illinois. Although Motorola is headquartered in
Illinois, this alone does not confer nonresident standing under the ICFA. See Crichton,
576 F.3d at 396 (the location of the defendant’s business in Illinois is not dispositive of a

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nonresident claimant’s standing to sue under the ICFA). Nor does Haught’s allegation
that Motorola designed its allegedly deceptive scheme in Illinois confer standing under
the Act. See Avery, 835 N.E.2d at 855 (that a scheme to defraud “disseminated” from the
defendant’s headquarters in Illinois is insufficient to confer nonresident standing to sue
under the ICFA) (citing Rohlfing v. Manor Care, Inc., 172 F.R.D. 330, 340 & n.10 (N.D. Ill.
1997) (where the only connection with Illinois is the headquarters of the defendant or
the fact that the scheme “emanated” from Illinois, the ICFA does not apply to
nonresident

claimants)).

Further,

though

Haught

alleges

that

Motorola’s

misrepresentations emanated from servers located in Illinois, he has made no
allegations that he viewed these representations within the State.
Although there is an Illinois choice-of-law provision included in the terms of
service agreement between Motorola and Haught regarding Haught’s mobile services
account, this is not dispositive of the effect of the ICFA on nonresident claimants. As
noted above, the Court may consider a choice-of-law provision included in a contract
between the putative plaintiff and defendant in determining whether a nonresident
claimant may bring a cause of action under the ICFA in Illinois. However, because an
ICFA claim cannot rely solely on a breach of contract claim, a choice-of-law provision is
not dispositive of a claimant’s right to sue under the ICFA.

See Morrison v. YTB

International, Inc., 649 F.3d 533, 537 (7th Cir. 2011) (“Avery holds that a choice-of-law

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clause is not dispositive, because a claim under the Consumer Fraud Act is independent
of the contract”); see also Shaw v. Hyatt International Corp., No. 05 C 022, 2005 WL
3088438, at *3 (N.D. Ill. Nov.15, 2005) (where choice-of-law provision on defendant’s
website specified Illinois law, the existence of such a clause has no impact on whether
the ICFA applies in the first instance because the extraterritorial application of the ICFA
is limited to deceptive trade practices occurring “primarily and substantially within
Illinois” and the fact that “Illinois law was selected to govern disputes arising out of the
defendant’s website does nothing to further the contention that the allegedly deceptive
practices occurred in Illinois.”); Int'l Profit Associates, Inc. v. Linus Alarm Corp., 2012 IL
App (2d) 110958, 2012 WL 2366404, at *7 (Ill. App. Ct. June 20, 2012) (“Particularly in a
situation such as this one, where an action under the Act must be based outside of
contract, it does not make sense to have a contractual choice-of-law provision
automatically prevail over a statutory territorial limitation.”) (emphasis in original).
Here, although Haught alleges that he accessed Motorola’s status upgrade chart by
means of his MOTOBLUR account, the terms of service agreement relate only indirectly
to the transaction at issue in his ICFA claim—that is, his purchase of a mobile phone in
Ohio.
In sum, the nature of the transaction at issue here is substantially similar to the
transaction addressed in Crichton. There, as here, the nonresident claimant sought

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recovery under the ICFA on the basis of allegedly fraudulent representations that were
devised in Illinois and received outside of the State. See Crichton, 576 F.3d at 394, 397.
Likewise, in this case and in Crichton, both the transactions at issue and the alleged
injury therefrom occurred outside of Illinois.

See Id.

Although the choice-of-law

provisions included in Haught’s mobile services agreement are a “mark in [his] favor,”
Morrison, 649 F.3d at 537 (citing Martin v. Heinold Commodities, Inc., 510 N.E.2d 840, 847
(Ill. 1987)), the principal transaction upon which his complaint rests is his purchase of a
mobile phone in Ohio. As Haught has failed to allege that the conduct at issue here
occurred “primarily and substantially” in Illinois, he has failed to state a claim under
the ICFA upon which relief may be granted. See Avery, 835 NE.2d at 854. Therefore
Count I of Haught’s Complaint, alleging a cause of action under the Illinois Consumer
Fraud and Deceptive Business Practices Act, is dismissed.
B. Count II: Common Law Fraud
Motorola further argues that Haught has failed to state a colorable claim of
common law fraud in Count II of his Complaint. In order to prevail on such a claim in
Illinois a plaintiff must prove: (1) a false statement or omission of a material fact; (2) the
defendant’s knowledge or belief that the statement was false; (3) the defendant’s intent
to induce the plaintiff to act; (4) the plaintiff’s reliance upon the truth of the statement;

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and (5) damages to the plaintiff resulting from his reliance on the statement. See Connick
v. Suzuki Motor Co., Ltd., 675 N.E.2d 584, 591 (Ill. 1996).
Although Haught describes his claim as fraud by omission, his Complaint relies
primarily on Motorola’s alleged misrepresentations regarding its ability and intention
to upgrade the CLIQ XT. In short, Haught alleges that Motorola’s official statements
created the false impression that an upgrade for the CLIQ XT was imminent, while in
fact the company was either unable or unwilling to upgrade the phone. Haught alleges
that he justifiably relied on these affirmative representations in choosing not to return
his phone prior to the close of the 30-day return period, which expired on July 31, 2010.
While Haught described his claim against Motorola as fraud by omission, his real cause
of action that he has plead against Motorola, taking all of the allegations in the
Complaint as true and construing all reasonable inferences in Haught’s favor, is for
actionable common law promissory fraud that is part of a larger scheme or device to
defraud.
Haught argues that Motorola’s alleged representations that induced him to retain
his phone constituted statements of then-existing material facts.

However, the

company’s statements prior to July 31, 2010, the date on which the 30-day return period
closed, are better understood as statements of future intentions. In Illinois, statements
of future intention cannot generally form the basis for an action for fraud because

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alleged misrepresentations must be statements of present or preexisting facts and not
statements of future intent or conduct. See, e.g., LeDonne v. Axa Equitable Life Ins. Co., 411
F. Supp. 2d 957, 960 (N.D. Ill. 2006) (citing AAR Int'l Inc. v. Vacances Heliades S.A., 202 F.
Supp. 2d 788, 798-799 (N.D. Ill. 2002) (in Illinois, misrepresentations of intent to perform
future conduct is not actionable absent a showing that the fraud is part of a scheme to
defraud); Sommer v. United Savings Life Ins. Co., 471 N.E.2d 606, 611 (Ill. App. Ct. 1984)
(“Illinois law is clear that a misrepresentation as to a future promise or intent will not
sustain an action for fraud.”)). Thus, under Illinois law there is a general prohibition
against claims for promissory fraud, lest every claim for breach of contract also sounds
in tort. See Bower v. Jones, 978 F.2d 1004, 1012 (“If the rule were otherwise, anyone with
a breach of contract claim could open the door to tort damages by alleging that the
promises broken were never intended to be performed. Presumably, it is this result that
the Illinois rule [against claims of promissory fraud] seeks to avoid.”); see, e.g., Bensdorf
& Johnson, Inc. v. Northern Telecom Ltd., 58 F. Supp. 2d 874, 881 (N.D. Ill. 1999) (“The
Illinois cases make it clear that the bar against claims for promissory fraud is at least in
part aimed at preventing every contract case from becoming a claim for fraud as well.”).

Generally promissory fraud, based on future acts, is not actionable in Illinois
unless the fraud falls into the exception to the rule whereby it is part of a scheme or

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device to defraud. See, e.g., LeDonne, 411 F. Supp. 2d at 960-961 (citing Wachovia Secs.
LLC v. Neuhauser, No. 04 C 3082, 2004 WL 2526390, at *9-*10 (N.D. Ill. Nov. 5, 2004)
(making false statements in SEC filings, promising to engage in only legal transactions
while intending to violate securities laws, and misusing margin accounts sufficiently
fell within the exception to the rule); Pulphus v. Sullivan, No. 02 C 5794, 2003 WL
1964333, at *1-*5, *19 (N.D. Ill. April 28, 2003) (inducing elderly plaintiff to take out two
mortgages to remodel her home, forging her signature on documents, and doing
minimal work while pocketing $75,000 is sufficient to fall within the exception to the
rule); AAR Int’l Inc. v. Vacances Heliades S.A., 202 F. Supp. 2d 788, 798-799 (N.D. Ill. 2002)
(a series of misrepresentations designed to induce a party to enter into a contract is
sufficient to fall within the exception to the rule); Asad v. Hartford Life Insurance
Company, 116 F. Supp. 2d 960, 964 (N.D. Ill. 2000) (insurance company’s nationwide
scheme to maintain or increase insurance premium income by encouraging its agents to
engage in fraudulent sales practices falls within the exception); HPI Health Care Services,
Inc. v. Mt. Vernon Hospital, Inc., 545 N.E.2d 672, 683 (Ill. 1989) (numerous knowingly
false promises regarding the defendant’s ability and intent to pay debts is sufficient to
fall within the exception)); Sommer, 471 N.E.2d at 611 (insurance company’s
misrepresentations regarding material facts about coverage and policy were sufficient
to fall within the exception) (citing Steinberg v. Chicago Medical School, 371 N.E.2d 634

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(Ill. 1977)); Johnson v. George J. Ball, Inc., 617 N.E.2d 1355, 1362 (Ill. App. Ct. 1993)
(representation that plaintiff would supervise presentation of training program through
a certain time was part of a scheme to induce him to leave his prior position, accept the
defendant’s job, develop the programs, and then replace him with a less expensive
employee where statement was made with the present intention of not carrying it out
and thus sufficient to fall within the exception); Pepper v. Marks, 522 N.E.2d 688, 691 (Ill.
App. Ct. 1988) (scheme to defraud exception existed when real estate developer told
prospective purchaser of unit that it had no plans to auction any of its unsold lots
despite the fact that the defendant had entered into a contract with a real estate
auctioneer to auction unsold units).
It is true that Motorola provided less definite declarations regarding proposed
upgrades to other phones (e.g., “Upgrade under evaluation”). Nonetheless, Motorola’s
statements prior to June 17, 2010, indicate that the company “planned” to provide an
upgrade of the phone’s operating system prior to the conclusion of the second quarter
of 2010. Similarly, Motorola’s June 30, 2010, suggestion that it would provide further
updates regarding its efforts to provide an upgrade is a statement of future intentions.
Although Motorola’s June 30, 2010, statement that the company was “[c]ontinuing work
on an upgrade for CLIQ/CLIQ XT” more closely resembles a statement of present fact,
Haught does not allege that Motorola was not working to provide an upgrade as of that

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date. Because each of the allegedly fraudulent statements attributed to Motorola that
Haught alleges induced him to retain his phone concerned Motorola’s future intentions,
Haught’s claim must rely on a theory of promissory fraud. See, e.g., LeDonne, 411 F.
Supp. 2d at 960; Bradley Real Estate Trust, 640 N.E.2d at 13.
Under Illinois law, a promise to perform an act in the future—even if made by a
party who does not intend to perform—is not actionable fraud, unless the false promise
is part of a larger scheme or device to defraud another of their property—in which case
the plaintiff can rely on a theory of promissory fraud. See Chatham Surgicore, Ltd. v.
Health Care Serv. Corp., 826 N.E.2d 970, 977 (Ill. App. Ct. 2005); see also Cont'l Bank, N.A.
v. Meyer, 10 F.3d 1293, 1298 (7th Cir. 1993) (a “statement which . . . relates to future or
contingent events, expectations or probabilities . . . ordinarily does not constitute an
actionable misrepresentation.”) (internal citations omitted). To survive a motion to
dismiss, a claimant relying on a theory of promissory fraud must therefore aver specific,
objective manifestations of fraudulent intent—of a scheme or device to defraud. See,
e.g., RMB Fasteners, Ltd. v. Heads & Threads Int'l, LLC, No. 11 C 02071, 2012 WL 401490,
*11 (N.D. Ill. Feb. 7, 2012) (quoting Bower, 978 F.2d at 1011). If the plaintiff cannot meet
this burden, it is presumed that he cannot prove facts at trial entitling him to relief. See
Id.

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Objective manifestations of a fraudulent scheme or device are evident where the
defendant’s conduct is “particularly egregious” or an element of a “larger pattern of
deceptions or enticements that reasonably induces reliance.” Desnick v. Am. Broad.
Companies, Inc., 44 F.3d 1345, 1354 (7th Cir. 1995). Thus, to make out an actionable
promissory fraud claim, Haught must allege that Motorola’s statements before July 31,
2010—the date on which the return period expired—were particularly egregious or a
part of a larger pattern of deceptions propagated by Motorola that reasonably induced
Haught to purchase and retain his phone.
To meet this burden, Haught points to statements made by Motorola prior to
July 31, 2010, as well as statements made after that date, allegedly evidencing an
ongoing effort to mislead consumers regarding the company’s intention or ability to
upgrade the CLIQ XT. “A series of unfulfilled promises is better (though of course not
conclusive) evidence of fraud than a single unfulfilled promise.” Speakers of Sport, Inc. v.
ProServ, Inc., 178 F.3d 862, 866 (7th Cir. 1999). Here, Haught alleges a specific series of
representations made by Motorola that could plausibly be seen to entice consumers to
purchase a CLIQ XT and that the company subsequently failed to fulfill.

Thus,

although it is far from certain that Haught will be able to prove the existence of an
ongoing scheme or device to defraud CLIQ XT customers on summary judgment or at
trial, Haught has properly alleged such a scheme or device at this stage of the

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proceedings, when the duty of this Court is merely to test the sufficiency of the
pleadings and construe all reasonable inferences in favor of the nonmoving party. See
Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990) (quoting Triad Assocs., Inc. v.
Chicago Hous. Authority, 892 F.2d 583, 586 (7th Cir. 1989)) (internal quotations omitted).
Likewise, Haught has sufficiently alleged that he reasonably relied on Motorola’s
statements prior to July 31, 2010, in choosing to retain his phone. The question of a
plaintiff’s reliance is generally a question of fact, and becomes a question for the Court
only where it is apparent from the undisputed facts that only one conclusion can be
drawn. See Kopley Group V., L.P. v. Sheridan Edgewater Properties, Ltd., 876 N.E.2d 218,
229 (Ill. App. Ct. 2007). Here, as of July 1, 2012, Motorola’s stated intention to upgrade
the CLIQ XT by June 30, 2010 had clearly failed to come to fruition. However, Haught
alleges that on the day that he purchased his phone, Motorola indicated that it was
“[c]ontinuing work on an upgrade for CLIQ/CLIQ XT to deliver even better
experience.” Based on these representations, and Haught’s allegation that a reasonable
consumer would expect such an upgrade, Haught alleges that he reasonably believed
his phone would, without question, be upgraded, and that the only remaining issue was
when exactly that upgrade would occur. Although the fact that Motorola had already
failed to meet its expected upgrade schedule perhaps should have counseled against
Haught relying on the company’s assurances, Motorola’s statement that it was

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continuing work on an upgrade could plausibly be understood to constitute an
affirmative assurance that such an upgrade would inevitably follow. Thus, accepting
all of Haught’s allegations as true and construing all reasonable inference in his favor,
the Court can plausibly draw the reasonable inference that Haught relied on Motorola’s
statements and the Court cannot say that he has failed to present a plausible claim of
promissory fraud based on a scheme or device to defraud that gives rise to an
entitlement to relief.
Nonetheless, Motorola argues that Haught’s fraud claim must be dismissed
because he has failed to allege an injury resulting from Motorola’s assurances regarding
the CLIQ XT. Under Illinois Law, claims of fraudulent misrepresentation are governed
by the benefit-of-the-bargain rule, with damages determined by assessing the difference
between the actual value of the product sold and the value that the product would have
had at the time of the sale if the representations had been true. See Smith, Allen,
Mendenhall, Emons & Selby v. Thomson Corp., 862 N.E.2d 1006, 1009 (Ill. App. Ct. 2006)
(citing Gerill Corp. v. Jack L. Hargrove Builders, Inc., 538 N.E.2d 530, 537-38 (Ill. 1989)). At
the pleading stage, the plaintiff must allege actual damages, and may only recover outof pocket losses where the parties lack privity, as Haught and Motorola do in
connection with the sale of Haught’s phone. See Swanson v. Citibank, N.A., 614 F.3d 400,

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406 (7th Cir. 2010) (citing Roboserve, Inc. v. Kato Kagaku Co., Ltd., 78 F.3d 266, 274 (7th
Cir. 1996) (applying Illinois law)).
Here, Haught alleges that he would have returned his CLIQ XT had he known
that it would become outdated and incompatible with many popular mobile
applications. Further, he alleges that he and similarly situated consumers would have
refused to purchase a CLIQ XT, or demanded to pay less for the phone, if not for
Motorola’s alleged misrepresentations. As such, Haught alleges damages equivalent to
the purchase price of the CLIQ XT, as well diminution in value of the CLIQ XT utilizing
Android 2.1 as opposed to Android 1.5. Although it is unclear whether Haught will be
able to prove the diminution in value between the phone that he received and a CLIQ
XT utilizing Android 2.1, he has properly plead damages resulting from Motorola’s
alleged misrepresentations. For this reason, Haught has stated a claim of common law
promissory fraud based on a scheme or device to defraud upon which relief may be
granted. At this stage of the proceedings, Haught has sufficiently alleged a plausible
entitlement to relief and the Court can draw a reasonable inference that Motorola is
liable for the misconduct alleged. See Iqbal, 556 U.S. at 678.
C. Count III: Unjust Enrichment Claim
Under Illinois law unjust enrichment is not a separate cause of action. See Pirelli,
631 F.3d at 477 (quoting Alliance Acceptance Co. v. Yale Ins. Agency, Inc., 648 N.E.2d 971,

20

977 (Ill. App. Ct. 1995)). Unjust enrichment is a condition that may arise from unlawful
or improper conduct as defined by positive law, such as fraud, undue influence, or
duress, and may be redressed by a cause of action based upon that improper conduct.
See Id. “Where the plaintiff’s claim of unjust enrichment is predicated on the same
allegations of fraudulent conduct that support an independent claim of fraud, resolution
of the fraud claim against the plaintiff is dispositive of the unjust enrichment claim as
well.” Association Ben. Services, Inc. v. Caremark RX, Inc., 493 F.3d 841, 855 (7th Cir. 2007)
(emphasis in original) (citing Athey Products Corp. v. Harris Bank Roselle, 89 F.3d 430, 436
(7th Cir. 1996)). Because the Court concludes that Haught has sifficiently alleged a claim
of promissory fraud that is plausible on its face, Motorola’s Motion to Dismiss is also
denied with respect to Haught’s claim of unjust enrichment. See Cleary v. Philip Morris
Inc., 656 F.3d 511, 517 (7th Cir. 2011) (“[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.”). Here the unjust enrichment claim relies on Haught’s common law
fraud claim, so it is therefore tied to that claim and Haught will be able to recover for
unjust enrichment depending on whether he is able to successfully recover on his claim
for common law fraud. See Cleary, 656 F.3d at 517; Association Ben. Services, 493 F.3d at
855.

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IV. Conclusion
Because Haught has failed to demonstrate that his purchase of a Motorola CLIQ
XT mobile phone and the subsequent conduct by Motorola occurred “primarily or
substantially” in Illinois, he is unable to bring a claim as a nonresident claimant under
the ICFA. However, because Haught alleges that he reasonably relied on Motorola’s
misrepresentations of future conduct regarding the proposed upgrade of his mobile
phone’s operating system in deciding not to return his phone, he has properly stated
claims of promissory fraud and unjust enrichment based on a scheme or device to
defraud that are plausible on their face.

For these reasons, Motorola’s Motion to

Dismiss Haught’s Complaint is granted with respect to Count I and denied with respect
to Counts II and III.

____________________________________
Virginia M. Kendall
United States District Court Judge
Northern District of Illinois
Date: August 23, 2012

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