Beaton v. SpeedyPC Software

Filing 42

MEMORANDUM Opinion and Order Signed by the Honorable Andrea R. Wood on 9/2/2014. Mailed notice (ac, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ARCHIE BEATON, individually and on
behalf of all others similarly situated,
Plaintiff,
v.
SPEEDYPC SOFTWARE, a British
Columbia company,
Defendant.

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No. 13-cv-08389
Judge Andrea R. Wood

MEMORANDUM OPINION AND ORDER
Plaintiff Archie Beaton has sued Defendant SpeedyPC Software (“SpeedyPC”), a
Canadian computer software producer, alleging that it has engaged in fraudulent and deceptive
marketing of SpeedyPC Pro (the “Software”), a software product that SpeedyPC claims
diagnoses and repairs various computer errors. SpeedyPC has filed a motion to dismiss the
complaint under Federal Rule of Civil Procedure 12(b)(6) (the “Motion”) (Dkt. No. 16). For the
reasons discussed below, the Motion is denied.
BACKGROUND
This putative class action arises out of Beaton’s purchase of a license to use the
Software. 1 SpeedyPC promotes the Software through online advertisements and on websites as
being capable of increasing computer speed and performance, removing harmful computer
errors, and protecting users’ privacy and security. (Compl. ¶ 15, Dkt. No. 1.) Beaton alleges that
these representations do not reflect the Software’s true capabilities. (Id. ¶ 22.) Instead, the

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The following facts are drawn from Beaton’s class action complaint and accepted as true for the
purposes of the Motion. See Killingsworth v. HSBC Bank Nev., N.A., 507 F.3d 614, 618 (7th Cir. 2007).

Software has two main functions: first, it is a registry cleaner; 2 and second, it removes
superfluous “temporary” files from a user’s hard drive. (Id.) According to Beaton, these
functions “do not come close to squaring with SpeedyPC’s representations about the
functionality of SpeedyPC Pro.” (Id.)
As alleged in his complaint, Beaton claims that SpeedyPC engages in a deceptive
marketing scheme to induce consumers to purchase the Software. Online ads for the Software
promise that the Software can, among other things, “[b]oost your PC’s speed and performance,”
“[f]ind your PC’s performance potential,” and “improve[] your PC’s health.” (Id. ¶ 16.)
Consumers who click on one of SpeedyPC’s advertisements are directed to one of SpeedyPC’s
websites, which warns consumers about various risks to their computers. (Id. ¶ 17.) The websites
recommend that consumers download the trial version of the Software to detect issues that the
product is supposedly designed to identify and fix. (Id. ¶ 24.) Once a consumer downloads and
runs the trial version of the Software, it displays hundreds or thousands of serious problems that
it claims are affecting the computer and “require attention.” (Id. ¶ 28.) After presenting the
results of the diagnostic scan, the Software displays to the user a half-page warning with bold red
letters stating: “SpeedyPC Pro has determined that your computer requires immediate attention!”
and is in “Serious” or “Critical” condition. (Id. ¶ 29.) The user is then given the option to
purchase the full version of the Software to fix and repair the supposedly harmful errors that
have been detected. (Id.)
In August 2012, while browsing the Internet for software to repair and optimize his
computer, Beaton encountered one of SpeedyPC’s ads. (Id. ¶ 42.) Based on various
representations made in the ad, Beaton went to one of SpeedyPC’s websites, which presented
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Registry cleaner software is a type of utility program designed to remove unwanted or redundant items
from the Microsoft Windows operating system registry. The “registry” is a database of configuration
settings that help facilitate the operation of computer applications in the operating system. (Id. ¶ 21 n.1.)

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more representations regarding the utility of the Software. (Id. ¶ 43.) Beaton includes in his
complaint screenshots of several of these representations. One such screenshot makes the claim
that the Software can “clean and optimize your computer for peak performance.” (Id. ¶ 43 fig.
10.) Based on SpeedyPC’s representations, Beaton downloaded and installed the Software. (Id. ¶
44.) The Software scanned Beaton’s computer and reported that it detected hundreds of serious
errors, some of which were causing damage to the computer. (Id. ¶ 45.) The Software warned
Beaton that these problems were decreasing his computer’s performance and compromising his
security, and urged him to purchase the Software to “fix” the problems. (Id.) Beaton clicked on a
button labeled “Fix All,” which forwarded him to a SpeedyPC website that urged him to register
the Software to fix the problems identified. (Id. ¶ 46.) After reaching the registration webpage,
SpeedyPC again represented to Beaton that it “detected some problems that needed to be fixed”
and instructed him to “Register SpeedyPC Pro now!” (Id. (citing ¶ 43 fig. 10).) Relying on these
representations about the Software’s capabilities and his computer’s condition, Beaton paid
approximately $39.94 to activate the Software and repair the purported errors. (Id. ¶ 47.) After he
downloaded the Software, every time Beaton ran it, the Software reported harmful errors that
were adversely affecting his computer and that he needed to fix. The Software continued to
report harmful errors even though Beaton repeatedly ran the program and “fixed” any errors that
were found. (Id. ¶ 49.) Beaton’s computer performance did not improve despite his repeatedly
running the Software’s scan. (Id.)
In addition to his personal experience with the Software, Beaton, through his attorneys,
also engaged a computer forensics expert to examine it. (Id. ¶ 31.) The expert concluded that the
free and registered versions of the Software are designed always to report that a user’s computer
is severely damaged, regardless of the condition or type of computer on which the Software is

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installed. (Id.) Beaton’s expert further concluded that errors identified by the Software as
“Serious” or “Critical” were not in fact credible threats to a computer’s functionality. (Id.) The
expert also used the Software to perform a diagnostic scan of a brand-new, never-used computer.
(Id. ¶¶ 32-33.) After being run on the new computer, the Software reported the computer’s
overall performance as “poor,” stated that 125 “problems require attention,” and represented that
at least some of those errors were causing “Serious” or “Critical” damage to the computer
system. (Id. ¶¶ 32 fig. 7, 33.) Finally, Beaton’s expert planted fake, innocuous errors on a
computer. The Software registered these harmless errors as causing “Serious” or “Critical”
damage to the computer. (Id. ¶ 34.)
Based on these allegations, Beaton filed the instant lawsuit on behalf of himself and a
class of similarly-situated individuals, defined (with certain exceptions) to include “[a]ll
individuals and entities in the United States who have purchased SpeedyPC Pro.” (Id. ¶ 50.) The
complaint asserts several causes of action on behalf of Beaton and the putative class: (1) an
Illinois common law claim for fraudulent inducement; (2) a claim under the Illinois Consumer
Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1, et seq.; (3) a claim for
breach of contract; and (4) in the alternative to Beaton’s breach of contract claim, a claim for
unjust enrichment. The Court addresses the sufficiency of each claim in turn below.
DISCUSSION
To survive a Rule 12(b)(6) motion, a complaint must “contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007)). The basic
pleading requirement is set forth in Federal Rule of Civil Procedure 8(a)(2), which requires a
complaint to provide “a short and plain statement of the claim showing that the pleader is entitled

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to relief.” Fed. R. Civ. P. 8(a)(2). “In evaluating the sufficiency of the complaint, [courts] view it
in the light most favorable to the plaintiff, taking as true all well-pleaded factual allegations and
making all possible inferences from the allegations in the plaintiff’s favor.” AnchorBank, FSB v.
Hofer, 649 F.3d 610, 614 (7th Cir. 2011).
In addition, Federal Rule of Civil Procedure 9(b) requires a plaintiff alleging fraud to
state the circumstances constituting the fraud “with particularity.” Fed. R. Civ. P. 9(b). “This
ordinarily requires describing the ‘who, what, when, where, and how’ of the fraud.”
AnchorBank, 649 F.3d at 615 (citing Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v.
Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011)). In other words, Rule 9(b) requires a
plaintiff pleading fraud “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, 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)).
I.

Plaintiff’s Claim for Fraudulent Inducement
Under Illinois state law, fraudulent inducement is a form of common law fraud. Lagen v.

Balcor Co., 653 N.E.2d 968, 972 (2d Dist. 1995). The elements of common law fraud in Illinois
are: (1) a false statement of material fact; (2) knowledge or belief by the maker that the statement
was false; (3) an intent to induce reliance on the statement; (4) reasonable reliance upon the truth
of the statement; and (5) damages resulting from that reliance. Id. Because fraudulent
inducement is a claim that sounds in fraud, it is subject to Rule 9(b)’s heightened pleading
requirements. Hoffman v. Nationwide Mut. Ins. Co., No. 10-cv-3841, 2011 WL 3158708, at *5
(N.D. Ill. July 26, 2011).

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SpeedyPC challenges the sufficiency of Beaton’s fraudulent inducement claim under the
heightened pleading standard of Rule 9(b). This argument fails because the complaint more than
adequately pleads the “who, what, when, where, and how” of the alleged fraud. For example, the
complaint alleges that, in August 2012, Beaton encountered a series of advertisements containing
claims made by SpeedyPC. (Compl. ¶ 42, Dkt. No. 1.) Beaton asserts that these advertisements
claimed that SpeedyPC Pro could, among other things, “remov[e] malware and privacy files,”
“clean[] away . . . private and confidential information,” and “improve[] PC startup times.” (Id.
¶¶ 21, 42.) Beaton further alleges that, as a result of these representations, he visited the
SpeedyPC Pro website, which made similar claims. (Id. ¶ 43 Figs. 10-16.) He includes in the
complaint screenshots that are the same as, or substantially similar to, the alleged
misrepresentations he viewed. (Id.) Beaton also specifies the manner in which he believes these
representations to be false, both through his expert’s analysis and his own experience, alleging
that “every time Beaton ran SpeedyPC Pro, the Software reported that harmful errors were
adversely affecting his computer and that he needed to ‘fix’ the errors using SpeedyPC Pro,” but
that “despite repeatedly running SpeedyPC Pro’s scan, and purportedly ‘fixing’ the reported
errors, his computer’s performance did not improve.” (Id. ¶ 49.) These allegations state the
circumstances constituting SpeedyPC’s alleged fraud with sufficient particularity as required
under Rule 9(b). 3

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In support of the Motion, Beaton identifies several lawsuits similar to this one but naming other
defendants, filed in this jurisdiction and elsewhere. Courts in these other cases have found that allegations
virtually identical to those here stated a claim under Rule 9(b). See e.g., Hall v. TuneUp Corp., No. 13 C
1804, 2013 WL 4012642 (N.D. Ill. Aug. 6, 2013); Robichaud v. Speedy PC Software, No. C 12 04730
LB, 2013 WL 818503, at *10-12 (N.D. Cal. Mar. 05, 2013); Worley v. Avanquest N. Am., Inc., No. C 12–
04391 SI, 2013 WL 1820002, at *2-3 (N.D. Cal. Apr. 30, 2013). Despite the fact that Beaton relies
heavily upon these decisions in his response brief, SpeedyPC does not address the substance of these
decisions in its briefs.

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SpeedyPC also argues that Beaton has failed to state a claim for fraudulent inducement
because there is no link between the allegations regarding the computer forensic expert’s
examination of the Software and those based on Beaton’s personal experience. (Memo in Supp.
of Def’s Mot. to Dismiss (“Memo”) at 8, Dkt. No. 17.) According to SpeedyPC, the complaint is
fatally flawed because it “does not allege that any expert ever examined Beaton’s computer to
determine whether the reported errors were in fact false.” (Id.) But even without reference to the
portion of the complaint describing the expert’s analysis, Beaton adequately alleges that the
Software falsely identified errors. For example, Beaton alleges that SpeedyPC represented that
the Software could “fix” the purported “problems” the Software detected. (Compl. ¶ 29 Fig. 6,
Dkt. No. 1.) Beaton further claims that despite this representation, he repeatedly ran the Software
and saw no improvement in his computer’s performance. (Id. ¶ 49.) Moreover, the Software
continued to indicate that harmful errors existed on his computer . (Id.) These factual allegations
are sufficient to plead that the Software falsely reported errors, and thus any failure by Beaton to
connect his computer expert’s tests of the Software to his personal experience is immaterial at
the pleading stage.
SpeedyPC further faults Beaton for failing to allege what computer problems Beaton had
experienced before using the Software, or “the specific problems the [S]oftware identified as
needing to be fixed, what solutions it recommended and whether the [S]oftware fixed the
problems it identified.” (Memo. at 9, Dkt. No. 17.) However, at the pleading stage, Beaton need
not allege facts regarding particular computer problems he experienced, nor must he allege the
nature of the problems identified by the Software. See Worley, 2013 WL 1820002, at *3 (the
“actual state of plaintiffs’ own computers prior to and after defendant’s software was used” is a
matter subject to discovery and need not be pleaded in the complaint).

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Finally, SpeedyPC cites a number of cases in which courts have dismissed complaints
that alleged facts similar to those pleaded in the instant case. Each of these cases is
distinguishable, however. For example, SpeedyPC first cites Bilodeau et al. v. McAfee, 12-cv04589-lhk, 2013 WL 3200658 (N.D. Cal. Jun. 24, 2013), in which the district court dismissed a
similar complaint for failing to satisfy the heightened pleading requirements of Rule 9(b). Id. at
*7. However, the Bilodeau court primarily based its decision on the rationale that the complaint
paraphrased the allegedly false representations by the defendants, rather than including direct
quotations. Id. at *9. That is not the situation here, as Beaton’s complaint includes direct
quotations of the allegedly false representations as well as screenshots of representations taken
directly from the SpeedyPC Pro website. SpeedyPC also cites Kulesa v. PC Cleaner Inc., 12-cv725, 2012 U.S. Dist. LEXIS 188542, at *20-21 (C.D. Cal. Oct. 12, 2012). However, the Kulesa
court based its decision on the fact that the plaintiff there did not allege the timing of the fraud
with sufficient particularity and also merely summarized the alleged misrepresentations by the
defendant rather than providing direct quotations. Id. The complaint currently before this Court
does not suffer from these defects.
II.

Plaintiff’s Claim under the ICFA
SpeedyPC also seeks dismissal of Beaton’s ICFA claim. To state a claim under the ICFA,

a plaintiff must allege that (1) the defendant engaged in a deceptive or unfair practice, (2) the
defendant intended for the plaintiff to rely on the deception, (3) the deception occurred in the
course of conduct involving trade or commerce, (4) the plaintiff sustained actual damages, and
(5) such damages were proximately caused by the defendant’s deception. Martis v. Pekin Mem’l
Hosp. Inc., 917 N.E.2d 598, 603 (3d Dist. 2009). A claim for deceptive conduct under the ICFA

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sounds in fraud and must be pleaded with particularity to satisfy Rule 9(b). O’Brien v. Landers,
10-cv-2765, 2011 WL 221865, at *4 (N.D. Ill. Jan. 24, 2011).
SpeedyPC argues that “Beaton fails to plead how Speedy’s alleged misrepresentations
regarding the [S]oftware’s functionality caused him harm,” and that this purported failure is fatal
to Beaton’s case because “[w]here a plaintiff cannot show how he was deceived by the
misrepresentation, he cannot establish proximate causation” under the ICFA. (Memo. at 10-11,
Dkt. No. 17 (citing Avery v. State Farm Mut. Auto Ins. Co., 835 N.E. 2d 801, 861 (Ill. 2005)).
However, contrary to SpeedyPC’s assertions, Beaton does allege facts that trace the connection
between SpeedyPC’s alleged misrepresentations and his injury.
Specifically, Beaton alleges that SpeedyPC’s advertising represented that the Software
would “clean[], optimize[] and protect [Beaton’s] computer for improved speed, performance
and operations.” (Compl. ¶ 44, Dkt. No. 1.) Beaton relied upon these representations when he
decided to download and install the free trial version of the Software. (Id. ¶¶ 44-45.) After
running the free scan, the Software informed Beaton that his PC’s “Performance” and “Security”
levels were in “Serious” or “Critical” condition and “required immediate attention.” (Id. ¶ 45.)
Relying on these representations, Beaton paid SpeedyPC $39.94 to purchase the Software. (Id. ¶
47.) Moreover, Beaton alleges that the Software did not “fix” the errors it reported and the
performance of his computer did not improve. (Id. ¶ 49.) In light of these factual allegations, the
Court finds that Beaton has adequately pleaded that SpeedyPC’s alleged misrepresentations
caused him harm in the form of money he paid for software that failed to function as advertised.
See Hall, 2013 WL 4012642, at *4 (finding that a plaintiff who viewed and relied upon alleged
misrepresentations in purchasing and continuing to use utility software stated a claim for a
defendant’s violation of ICFA).

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SpeedyPC also contends that Beaton “does not allege the specific problems the
[S]oftware identified as needing to be fixed, what it recommended and whether the [S]oftware
fixed these problems.” (Memo. at 11, Dkt. No. 17.) However, Beaton does not need to include in
the complaint the detailed information that SpeedyPC claims is missing. See Worley, 2013 WL
1820002, at *3. As with his fraudulent inducement claim, Beaton has pleaded sufficient factual
allegations to state a claim under the ICFA and survive a motion to dismiss. Whether Beaton
ultimately will be able to adduce sufficient evidence to prove his claim is another matter that
need not be determined at this early stage in the litigation.
In a final challenge to Beaton’s ICFA claim, SpeedyPC argues that Beaton improperly
seeks to certify a class of individuals that includes non-Illinois residents because the ICFA has
no application to transactions that take place outside of the State of Illinois. (Memo. at 11-12,
Dkt. No. 17 (citing Avery, 835 N.E. 2d at 853; Landau v. CNA Fin. Corp., 886 N.E. 2d 405, 406
(1st Dist. 2008))). While there may be some merit to the argument that Beaton’s proposed class
definition is overbroad, that matter is immaterial to the Motion. The Court declines to resolve
class certification issues until the parties have had time to conduct appropriate class discovery
and brief a motion for class certification. See, e.g., De Falco v. Vibram USA, Inc., No. 12-cv7238, 2013 WL 1122825, at *9 (N.D. Ill. Mar. 18, 2013) (collecting cases).
III.

Plaintiff’s Claim for Breach of Contract
To state a claim for breach of contract, Beaton must plead the following elements: (1)

offer and acceptance, (2) consideration, (3) definite and certain terms, (4) performance by the
plaintiff of all required conditions, (5) breach, and (6) damages. Wigod v. Wells Fargo Bank,
N.A., 673 F.3d 547, 560 (7th Cir. 2012); Assoc. Benefit Servs., Inc. v. Caremark RX, Inc., 493

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F.3d 841, 849 (7th Cir. 2007). Of these elements, SpeedyPC challenges only whether Beaton has
sufficiently alleged that SpeedyPC breached the agreement between the two parties.
In support of the Motion, SpeedyPC argues that “there are insufficient factual allegations
to establish that Speedy falsely reported errors on Beaton’s own computer or even whether the
[S]oftware fixed the reported errors on Beaton’s own computer.” (Memo. at 12, Dkt. No. 17.)
However, as noted above, Beaton specifically alleges that he repeatedly ran the Software and
saw no improvement in his computer’s performance, and that despite SpeedyPC’s representation
that the Software could “fix” computer errors, it failed to do so with respect to his computer.
(Compl. ¶¶ 29, 49 & fig. 6, Dkt. No. 1.) At the pleadings stage, these allegations are sufficient
for Beaton to plead breach of a contract.
IV.

Plaintiff’s Claim for Unjust Enrichment
To state a claim based on a theory of unjust enrichment under Illinois law, a plaintiff

must allege “that the defendant has unjustly retained a benefit to the plaintiff’s detriment and that
defendant’s retention of the benefit violates the fundamental principles of justice, equity, and
good conscience.” Siegel v. Shell Oil Co., 612 F.3d 932, 937 (7th Cir. 2010) (citing HPI Health
Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 545 N.E. 2d 672 (Ill. 1989)). Where a claim of unjust
enrichment is premised on the same improper conduct as alleged in another claim, then the
unjust enrichment cause of action will “stand or fall” based on the disposition of the related
claim. Cleary v. Philip Morris, Inc., 656 F.3d 511, 516-517 (7th Cir. 2011) (citing Assoc. Benefit
Servs., Inc., 493 F.3d at 855).
SpeedyPC argues that Beaton’s unjust enrichment claim is predicated on the same
conduct as his ICFA and fraudulent inducement claims, and thus the unjust enrichment claim
must fail for the same reasons that those associated claims fail. (Memo. at 13-14, Dkt. No. 17.)

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However, as explained above, the Court finds that Beaton’s claims for fraudulent inducement
and violation of the ICFA survive. Accordingly, Beaton’s unjust enrichment claim may proceed
as well.
CONCLUSION
For the reasons stated above, Beaton has satisfactorily pleaded each of his claims.
Accordingly, SpeedyPC’s motion to dismiss the complaint is denied. SpeedyPC shall file an
answer to Beaton’s complaint by September 17, 2014.

ENTERED:

Dated: September 2, 2014

__________________________
Andrea R. Wood
United States District Judge

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