Kurth v. The Hertz Corporation

Filing 35

OPINION AND ORDER. For the reasons stated in the accompanying Opinion and Order, the Court grants Hertz's motion to compel arbitration 27 and grants Hertz's motion to dismiss 24 with prejudice regarding claims stemming from Kurth's fifth transaction with Hertz. The Court stays this case pending arbitration. Status hearing set for 11/1/2018 is stricken and reset for 4/25/2019 at 1:30 PM to report on the arbitration. Signed by the Honorable Sara L. Ellis on 10/24/2018. Mailed notice(rj, )

Case: 1:18-cv-02785 Document #: 35 Filed: 10/24/18 Page 1 of 8 PageID #:494

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
KATHRYNE ANNE KURTH, on behalf of
herself and others similarly situated,
Plaintiff,
v.
THE HERTZ CORPORATION,
Defendant.

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No. 18 C 2785
Judge Sara L. Ellis

OPINION AND ORDER
After Plaintiff Kathryne Kurth discovered that Hertz allegedly charged her a “concession
fee recovery” at a location where it incurred no concession fee on five separate occasions when
she rented a car from Hertz, she filed this putative class action against Defendant Hertz
Corporation (“Hertz”) for violation of the Illinois Consumer Fraud and Deceptive Business
Practices Act (“ICFA”), 815 Ill. Comp. Stat. 505/1 et seq., and other state consumer fraud
statutes. She also brings an unjust enrichment claim. In response, Hertz now brings a motion to
compel arbitration and a partial motion to dismiss. Because Kurth’s claims stemming from the
first four transactions are governed by an arbitration agreement, the Court grants Hertz’s motion
to compel arbitration. Additionally, Kurth fails to state a claim for violation of ICFA or unjust
enrichment regarding the fifth transaction because she was aware of the alleged deception when
she entered into the fifth transaction, and so the Court partially grants Hertz’s motion to dismiss.

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BACKGROUND 1
Between December 2017 and March 2018, Kurth rented cars on five separate occasions
from Hertz at its location at 401 North State Street in Chicago, Illinois (the “State Street
Location”). Each time, Hertz charged her a “concession fee recovery.” Hertz defines
“concession fee recovery” as a “fee to reimburse Hertz for concession/commission fees paid to
the airport (hotel, train station, base, or agent) for each rental.” Doc. 22 ¶ 15. However, the
State Street Location is not located at a facility where Hertz would incur a concession fee.
Hertz operates a loyalty program called the Hertz Gold Plus Rewards Program (the “Gold
Program”). Kurth enrolled in this program and signed an agreement regarding the Gold Program
(the “Gold Agreement”) that provides that the agreement “may be revised or supplemented from
time to time by Hertz sending [Kurth] notice of such changes,” and that “making a Program
rental after the effective date of such changes will constitute [Kurth’s] acceptance of such
changes.” Doc. 28-1 ¶ 4. Hertz updated the Gold Agreement in 2016, including an arbitration
provision that provides that the parties agree to arbitrate any disputes between the parties, other
than “claims for property damage, personal injury or death.” Doc. 28 at 5. Hertz provided Kurth
with notice of this change. Doc. 28-4 ¶ 4. The provision further states that “all issues are for the
arbitrator to decide, including his or her own jurisdiction, and any objections with respect to the
existence, scope or validity of this Arbitration Provision.” Doc. 28 at 5. Although it allows
customers to opt out of the provision, Kurth did not choose to do so for the first four transactions

The facts in the background section are taken from Kurth’s amended complaint and exhibits attached
thereto and are presumed true for the purpose of resolving Hertz’s motion to dismiss. See Virnich v.
Vorwald, 664 F.3d 206, 212 (7th Cir. 2011); Local 15, Int’l Bhd. of Elec. Workers, AFL-CIO v. Exelon
Corp., 495 F.3d 779, 782 (7th Cir. 2007). For the purpose of resolving the motion to compel arbitration,
the Court also considers exhibits and affidavits regarding the arbitration agreement in question. Brown v.
Worldpac, Inc., No. 17 CV 6396, 2018 WL 656082, at *2 (N.D. Ill. 2018).

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at issue in this case. She did, however, opt out of the arbitration provision with regard to the fifth
transaction, which occurred on March 15, 2018.
LEGAL STANDARD
I.

Motion to Compel Arbitration
Congress passed the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., to codify the

federal policy favoring the resolution of disputes through arbitration. Kawasaki Heavy Indus. v.
Bombardier Recreational Prods., 660 F.3d 988, 994 (7th Cir. 2011). Section 2 of the FAA states
that contractual provisions “to settle by arbitration a controversy thereafter arising out of such
contract or transaction” are “valid, irrevocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Section 3 of the FAA
requires courts to stay a proceeding and to compel arbitration of any matter covered by a valid
arbitration agreement. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344, 131 S. Ct. 1740,
179 L. Ed. 2d 742 (2011). A federal court may compel arbitration where there is (1) a written
agreement to arbitrate, (2) a dispute within the scope of the agreement, and (3) a refusal to
arbitrate by one of the parties to the agreement. Zurich Am. Ins. Co. v. Watts Indus., Inc., 417
F.3d 682, 687 (7th Cir. 2005). Contract defenses, such as fraud, duress, and unconscionability,
apply to agreements to arbitrate. Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68, 130 S. Ct.
2772, 177 L. Ed. 2d 403 (2010). The party seeking to avoid arbitration bears the burden of
establishing why the arbitration agreement should not be enforced. Green Tree Fin. Corp.-Ala.
v. Randolph, 531 U.S. 79, 91–92, 121 S. Ct. 513, 148 L. Ed. 2d 373 (2000).
II.

Motion to Dismiss
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not

its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.

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1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all wellpleaded facts in the plaintiff’s complaint and draws all reasonable inferences from those facts in
the plaintiff’s favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive
a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a
claim’s basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct.
1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 678.
ANALYSIS
I.

Motion to Compel Arbitration
Hertz argues that even the gateway questions of whether the arbitration agreement exists

and covers the matters at issue in this case should be decided by an arbitrator. The Supreme
Court has “recognized that parties can agree to arbitrate ‘gateway’ questions of ‘arbitrability,’
such as whether the parties have agreed to arbitrate or whether their agreement covers a
particular controversy.” Rent-A-Center, 561 U.S. at 68–69. The Court must enforce such
agreements. Grasty v. Colo. Tech. Univ., 599 F. App’x 596, 598 (7th Cir. 2015). However,
there must be “clear and unmistakable evidence” that the parties agreed to delegate the issue of
arbitrability to the arbitrator. Kemph v. Reddam, No. 13 CV 6785, 2015 WL 1510797, at *3
(N.D. Ill. Mar. 27, 2015).
Kurth did not submit any response to Hertz’s motion to compel, effectively waiving any
argument in opposition to its motion. See Ennin v. CNH Indus. Am., LLC, 878 F.3d 590, 595
(7th Cir. 2017) (noting that “[f]ailure to respond to an argument generally results in waiver”);

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Cincinnati Ins. Co. v. E. Atl. Ins. Co., 260 F.3d 742, 747 (7th Cir. 2001) (finding that where a
party fails to respond to a non-frivolous dispositive argument, it “acquiesces, rightly or wrongly”
to that argument). However, even had Kurth challenged the delegation provision, she would not
have prevailed. The delegation provision in the Gold Agreement clearly demonstrates the
parties’ agreement to send the threshold matter of arbitrability to the arbitrator. Another court
within this circuit, when presented with the exact delegation provision present here, decided that
the delegation provision was clear and it must send the matter to an arbitrator. See Cooks v.
Hertz Corp., No. 3:15-CV-0652-NJR-PMF, 2016 WL 3022403, at *4 (S.D. Ill. Apr. 29, 2016)
(“There is nothing vague or ambiguous about this statement or the arbitration clause as a
whole.”). In light of the valid delegation clause, the Court grants Hertz’s motion to compel
arbitration with regard to the first four transactions at issue.
II.

Motion to Dismiss
Hertz also moves to partially dismiss Kurth’s amended complaint. Hertz argues that the

Court should dismiss Kurth’s claims regarding the fifth transaction because Kurth was aware of
the deception when she entered the fifth transaction.
To state a claim under ICFA, Kurth must plausibly allege (1) a deceptive act or practice
by Hertz, (2) Hertz’s intent that she rely on the deception, (3) the deception occurred during a
course of conduct involving trade or commerce, and (4) actual damage as a result of the
deception. Haywood v. Massage Envy Franchising, LLC, 887 F.3d 329, 333 (7th Cir. 2018). To
establish that the deception caused the damages alleged, “a plaintiff must show that he was
actually deceived by the defendant’s deception and that the deception proximately caused his
damages.” Nava v. Sears, Roebuck and Co., 2013 IL App (1st) 122063, ¶ 21, 995 N.E.2d 303,
374 Ill. Dec. 164 (2013).

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Kurth has failed to state a claim under ICFA for the fifth transaction because she cannot
plausibly allege that her damages were caused by Hertz’s deception. The fifth transaction
occurred after Kurth filed this case, and so she cannot plausibly allege that Hertz deceived her
when it charged the concession fee recovery in that fifth transaction. This case mirrors
Haywood: there, the plaintiff brought an ICFA claim against a massage company for
misrepresenting the length of time their massages would last. 887 F.3d at 331. After receiving
only a fifty-minute massage that the defendant represented lasted an hour, the plaintiff booked a
second massage and brought the same claim regarding the second massage. Id. at 333. The
Seventh Circuit barred her claim for her second visit because, after the first visit, she could no
longer plausibly claim that the defendant deceived her on the second. Id. The facts are the same
here; if anything, there is more conclusive proof that Hertz could not have succeeded in
deceiving Kurth on the fifth transaction, because she had already brought suit regarding that
exact type of deception.
Kurth argues that her knowledge of the deceit should not be a barrier to her ICFA claim.
According to Kurth, requiring that she be deceived is effectively an application of the voluntary
payment doctrine, and Illinois courts have held that “when a plaintiff sufficiently pleads [an
IFCA] claim based on a deceptive act or that is in the nature of fraud, the voluntary payment
doctrine does not apply and is not a bar to the plaintiff’s claims.” McIntosh v. Walgreens Boots
All., Inc., 2018 IL App (1st) 170362, ¶ 17, appeal allowed, No. 123626, 2018 WL 4698918 (Ill.
Sept. 26, 2018). The voluntary payment doctrine provides that “money voluntarily paid under a
claim of right to the payment, and with knowledge of the facts by the person making the
payment, cannot be recovered back on the ground that the claim was illegal.” Id. at ¶ 13.
Kurth’s interpretation of McIntosh is incorrect. In neither McIntosh nor the opinions upon which

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McIntosh relies does an Illinois court dispense with the requirement that the plaintiff be deceived
by the alleged deceptive act to state a claim under ICFA. In McIntosh, the court specifically
found that the plaintiff alleged that he was unaware of defendant’s deceptive act when he
completed his purchases from defendant. Id. at ¶ 19. Similarly, in Nava, a case upon which
McIntosh relies heavily, the court notes that the plaintiff testified that “he was unaware he was
being overcharged” when the transaction occurred. 2013 Il App (1st) 122063 at ¶ 22. These
courts have held that the voluntary payment doctrine does not apply to ICFA claims based upon
deception, but they still require that plaintiffs properly plead the required elements of an ICFA
claim. Kurth has not done so here. Because she cannot amend her claim to fix this deficiency,
the Court dismisses her ICFA claims based on the fifth transaction with prejudice. Haywood,
887 F.3d at 335.
Finally, the failure of Kurth’s ICFA claim also bars any unjust enrichment claim
stemming from the fifth transaction. 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.”). 2

Hertz also includes argument in its motion to dismiss that the Court lacks personal jurisdiction and
subject matter jurisdiction over portions of Kurth’s class action claims. Because the Court’s opinion
sends some of Kurth’s claims to arbitration and disposes of the rest of Kurth’s claims on the merits, and
Kurth has not yet moved for class certification, Kurth’s class action claims are no longer properly before
the Court and so the Court need not address these arguments at this time.

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CONCLUSION
For the foregoing reasons, the Court grants Hertz’s motion to compel arbitration [27] and
grants Hertz’s motion to dismiss [24] with prejudice regarding claims stemming from Kurth’s
fifth transaction with Hertz. The Court stays this case pending arbitration.

Dated: October 24, 2018

______________________
SARA L. ELLIS
United States District Judge

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