G&G Closed-Circuit Events, LLC. v. Castillo et al
Filing
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MEMORANDUM Opinion and Order Signed by the Honorable Joan B. Gottschall on 3/5/2015. Mailed notice(mjc, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
G&G CLOSED CIRCUIT EVENTS, LLC,
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Plaintiff,
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v.
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JAIME F. CASTILLO and MARIA A.
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CASTILLO, individually and d/b/a
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EL BAJIO ENTERPRISES, INC. d/b/a
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LA PENA RESTAURANTE and EL BAJIO )
ENTERPRISES, INC. d/b/a LA PENA
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RESTAURANTE,
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Defendants.
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Judge Joan B. Gottschall
No. 14 CV 2073
MEMORANDUM OPINION & ORDER
G&G Closed Circuit Events, LLC (“G&G”) filed a complaint on March 25, 2014 against
Jaime Castillo (“Jaime”), Maria Castillo (“Maria”) and El Bajio Enterprises, Inc. (“El Bajio”)
doing business as La Pena Restaurante (“La Pena”) (collectively, the “Defendants”). G&G
alleges violations of 47 U.S.C. §§ 553 (the “Cable Act”) and 605 (the “Communications Act”),
contending that Defendants unlawfully televised a boxing match in their establishment despite
G&G’s exclusive television distribution rights for the match. Defendants answered the complaint
and filed counterclaims against G&G for common law fraud and statutory fraud under Illinois
law. G&G now seeks to dismiss these counterclaims pursuant to Federal Rule of Civil Procedure
12(b)(6). For the reasons below, the motion is granted in part and denied in part.
I. FACTS1
G&G is a corporation that obtained the exclusive nationwide television distribution rights
for the “Austin Trout v. Saul Alvarez Fight Program,” (the “Program”) which took place on
April 20, 2013. G&G then entered into sublicensing agreements with commercial entities
throughout North America, which allowed establishments to broadcast the fight in exchange for
a fee paid to G&G. Defendants never entered into an agreement with G&G. According to G&G,
Defendants unlawfully exhibited the program at their establishment, La Pena Restaurante.
On May 29, 2013, Defendants received a letter from the Law Offices of Thomas P. Riley
(“Riley”), which represented G&G. The letter alleged that Defendants had violated the
Communications Act “and or” the Cable Act. Defendants claim that Jaime then phoned Riley’s
office and “someone took his information” and told Jaime that, “someone would get back to
him.” (Defs.’ Answer at 9, ECF No. 15.) However, no one from Riley’s office contacted
Defendants until Defendants received “another threatening letter” from Riley’s office in July
2013. Jaime called again and was given an appointment to speak with “an attorney.” (Id.)
Jaime subsequently spoke with “the attorney,” who told Jaime that “she knew he [Jaime]
was guilty and that he should settle.” (Id.) Defendants allege that “the attorney never explained
the basis for their [sic] demand or the legal standing for their [sic] claims and . . . tried to
convince [Jaime] that his only option was to settle, and demanded a minimum of $20,000.” (Id.)
Jaime informed the attorney that “he did not have that kind of money” and that “they would have
to take him to court.” (Id.)
Defendants allege they received “at least two more threatening letters from Riley between
The court draws the following facts from Defendants’ “Facts Common to All Counterclaims”
portion of their answer to G&G’s complaint and the allegations Defendants admit in their
answer. (ECF No. 15.) The court accepts them as true for purposes of the motion to dismiss. See
Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 946 (7th Cir. 2013).
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August 2013 and January 2014” before G&G’s counsel filed suit against Defendants. In their
answer to G&G’s complaint, Defendants filed a two-count counterclaim alleging common law
fraud (Count I) and violation of the Illinois Consumer Fraud and Deceptive Practices Act, 815
ILCS 505/1 et. seq. (“ICFA”) (Count II).
II. LEGAL STANDARD
“A motion under 12(b)(6) tests whether the complaint states a claim on which relief may
be granted.” Richards v. Mitcheff, 696 F.3d 635, 635 (7th Cir. 2012). A complaint must include
“a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R.
Civ. P. 8(a)(2). The short and plain statement must “give the defendant fair notice of what the
claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007) (citation omitted). To survive a 12(b)(6) motion to dismiss, “a counterclaim must ‘state a
claim to relief that is plausible on its face.” Sarkis’ Café, Inc. v. Sarks in the Park, LLC, No. 12C-9686, 2014 WL 3018002 (N.D. Ill. 2014) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007).) In addition, on a motion to dismiss, a court must “accept as true all of the factual
allegations contained in the complaint.” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citations
omitted). In ruling on a motion to dismiss “for failure to state a claim, the court must . . . draw all
reasonable inferences in favor of the pleader.” Villareal v. El Chile, Inc., 601 F.Supp.2d 1011,
1014 (N.D. Ill. 2009).
III. ANALYSIS
A. The Common Law Fraud Counterclaim
In Count I of Defendants’ counterclaims, Defendants allege that G&G committed common
law fraud. G&G makes two arguments in support of its motion to dismiss Count I. It argues that
(1) Defendants fail to meet the heightened pleading standard that applies to fraud claims under
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Fed. R. Civ. P. 9(b), and (2) even assuming arguendo that the counterclaims were pled with the
requisite particularity, Counter-Plaintiffs fail properly to allege several elements of a common
law fraud claim.
1. Common Law Fraud
The elements of common-law fraud 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.” Coexist Foundation, Inc. v. Fehrenbacher, No. 11-CV-6279, 2014 WL
1287880 (N.D. Ill. Mar. 28, 2014).2
At a minimum, Defendants cannot state a claim to fraud because their own statement of
facts indicates that no reliance actually occurred. When G&G’s agent allegedly told Jaime that
his “only option was to settle” and demanded $20,000, Jaime did not make any payments and
instead insisted that G&G would have to “take him to court,” which is in fact what happened.
Defendants’ theory of reliance is that, “when threatened with a lawsuit a potential defendant has
no say in the matter, and therefore no means of avoiding reliance.” (Defs.’ Response at 6-7, ECF
No. 21.) But this position makes no sense and does not explain how Defendants relied on any
statement G&G made. Additionally, Defendants did have a say in the matter: by refusing to pay
the settlement demand, Defendants left G&G with the option of filing suit or abandoning an
attempt to collect the damages it alleges it is owed.
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An alternative recitation of the elements of common law fraud exists: “(1) a statement by
defendant; (2) of a material nature as opposed to opinion; (3) that was untrue; (4) that was known
or believed by the speaker to be untrue or made in culpable ignorance of its truth or falsity; (5)
that was relied on by the plaintiff to his detriment; (6) made for the purpose of inducing reliance;
and (7) such reliance led to the plaintiff’s injury.” Chow v. Aegis Mortg. Corp., 185 F.Supp.2d
914, 917 (N.D. Ill. 2002). The court’s analysis of the common law fraud claim is the same under
either recitation of elements.
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Because Defendants have not adequately alleged reliance — and indeed demonstrated nonreliance — their common law fraud counterclaim (Count I) is insufficiently pled and the motion
to dismiss Count I is granted.3
B. The Illinois Consumer Fraud and Deceptive Practices Act (“ICFA”) Counterclaim
Count II of the counterclaims states that G&G’s “tactics and actions constitute a deceptive
act or practice under the [ICFA].” This claim is based on Defendants’ allegation that G&G is
using scare tactics, misrepresenting its legal rights, and exaggerating its potential legal damages
when attempting to negotiate settlements with Defendants and others like them.
The ICFA “is construed liberally to effectuate its purpose.” Wigod v. Wells Fargo Bank,
N.A., 673 F.3d 547, 574. The elements of a claim under the ICFA are: “(1) a deceptive act or
unfair practice by the defendant; (2) the defendant’s intent that the plaintiff rely on the deceptive
or unfair practice; and (3) the unfair or deceptive practice occurred during a course of conduct
involving trade or commerce.” Siegel v. Shell Oil Co., 612 F.3d 932, 935 (7th Cir. 2010).
“Unlike a claim for common law fraud . . . to state a claim under the ICFA, [a party] need not
allege that [it] actually relied on [the] deceptive statements.” Ibarrola v. Kind, LLC, No. 13-C50377, 2014 WL 3509790 at *4 (N.D. Ill. July 14, 2014) (internal citations omitted).
The Seventh Circuit has held that when an ICFA claim is made on the basis of “unfair
conduct” rather than “fraud,” the heightened pleading requirement of Fed. R. Civ. P. 9(b) does
not apply. See Windy City Metal Fabricators & Supply, Inc. v. CIT Technology Financing
Services, Inc., 536 F.3d 663, 670 (7th Cir. 2008). The Seventh Circuit has applied a three-prong
test to determine whether the “unfairness” prong is satisfied: “a defendant’s conduct must
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Because Defendants have not pled reliance, the court need not resolve whether they have
adequately alleged the other elements of their claim for common law fraud. The court also does
not need to address the particularity requirements of Rule 9(b).
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(1) violate public policy; (2) be so oppressive that the consumer has little choice but to submit;
and (3) cause consumers substantial injury.” Siegel, 612 F.3d at 935. Further, a “court may find
unfairness even if the claim does not satisfy all three criteria.” Id.
The court finds that Defendants have adequately alleged a claim under the ICFA because,
under Defendants’ theory, G&G’s actions violate public policy and are intended to be
oppressive.4 The ICFA “provides redress not only for deceptive business practices, but also for
business practices that, while not deceptive, are unfair.” Wigod, 673 F.3d at 575. In Defendants’
counterclaims, they allege that G&G is using “scare tactics . . . and exaggerating their [sic]
potential legal damages when attempting to negotiate ‘settlements’ with Defendants and others
like them.” (Answer at 11, ¶ 14, ECF No. 15.) Defendants also allege that they received multiple
“threatening” letters and that an attorney representing G&G “tried to convince [Jaime] Castillo
that his only option was to settle and demanded a minimum of $20,000.” (Id. at 9, ¶ 4.) The fact
that Defendants did not in fact rely on this settlement demand is immaterial — a party does not
need to plead reliance to adequately plead a claim under the ICFA. See Ibarrola at *4. The court
believes that the repeated letters and admonition that Defendants had little option but to settle
sufficiently alleges an “unfair practice” under the ICFA, particularly because the ICFA is
“construed liberally.” Wigod, 673 F.3d at 574. Whether the Defendants will eventually prevail on
the merits of this counterclaim is a separate question not properly addressed in a ruling on a
motion to dismiss.
Defendants also argue that G&G misrepresents its legal rights because it cannot prevail under
both statutes. The fact that G&G may not prevail under both statutes is axiomatic. See Joe Hand
Promotions, Inc. v. Lynch, 822 F.Supp.2d 803, 805-806 (N.D. Ill. 2011). In fact, courts in this
district have held that “any complaint asserting that a single action violates both statutes can only
be interpreted as stating alternative claims.” Id. Given that alternative pleading is permissible, the
court will not construe G&G’s assertions that it may be entitled to relief under either act as an
actionable misrepresentation under the ICFA.
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Because Defendants have adequately alleged a violation of the ICFA, G&G’s motion to
dismiss Count II is denied.
C. Leave to Amend
Defendants indicate in their response that they seek leave to amend their counterclaims.
(Defs.’ Resp. at 5, n. 10.) Defendants have not properly requested leave to amend under Fed. R.
Civ. P. 15(a)(2). If Defendants wish to amend their pleadings, they must file a motion for leave
to amend with the court.
IV. Conclusion
For the reasons set forth in this Order, the court grants in part and denies in part G&G’s
motion to dismiss [16]. The motion to dismiss Count I is granted; the motion to dismiss Count II
is denied.
ENTER:
/s/
JOAN B. GOTTSCHALL
United States District Judge
DATED: March 5, 2015
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