Santiago v. Tesla, Inc.

Filing 44

MEMORANDUM Opinion and Order Signed by the Honorable Georgia N Alexakis on 11/22/24.(ca, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JOSHUA SANTIAGO, individually and on
behalf of others similarly situated,
Plaintiff,

Case No. 23 CV 2891

v.

Hon. Georgia N. Alexakis

TESLA, INC., a Delaware Corporation
Defendant.
MEMORANDUM OPINION AND ORDER
Plaintiff Joshua Santiago brings this putative class action complaint against
defendant Tesla, Inc. based on an alleged defect in his 2020 Tesla Model 3. Santiago
claims that his Tesla’s forward collision monitoring system gives false warnings and
suddenly brakes on its own, even when no forward collision risk is present. Tesla has
moved to dismiss Santiago’s first amended complaint [14] for lack of standing to
pursue a nationwide class and for failure to state a claim. [22].
For the reasons discussed below, the Court grants Tesla’s motion to dismiss in
part and denies it in part.
LEGAL STANDARD
To survive a Rule 12(b)(6) motion to dismiss, 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). A complaint need only contain factual allegations that, accepted as
true, are sufficient to “state a claim to relief that is plausible on its face.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
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(2007)). A claim is plausible “when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Id. (citing Twombly, 550 U.S. at 556). The allegations “must be enough to
raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555.
At the pleading stage, the Court must “accept all well-pleaded factual
allegations as true and view them in the light most favorable to the plaintiff.”
Lavalais v. Vill. of Melrose Park, 734 F.3d 629, 632 (7th Cir. 2013). But “allegations
in the form of legal conclusions are insufficient.” McReynolds v. Merrill Lynch & Co.,
694 F.3d 873, 885 (7th Cir. 2012). “Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at
678.
BACKGROUND
In February 2021, Santiago purchased a 2020 Tesla Model 3 from a third-party
seller of Tesla vehicles in Illinois. [14] ¶ 26. Tesla cars are equipped with a forward
collision monitoring system that uses sensors to warn drivers of upcoming objects in
the car’s path. Id. ¶ 11. Santiago alleges that this system—both in his car and other
Tesla cars—is defective. Id. ¶ 1. According to Santiago, due to defects, Tesla owners
“encounter an unexpected, loud and obtrusive forward collision warning that
suddenly activates when there is no actual danger or collision risk, or in fact, any
other car or object is present.” Id. ¶ 13. Santiago alleges that this warning “is often
accompanied by the vehicle automatically stopping or slowing down to prevent an
accident with the nonexistent obstacle the vehicle[] thinks is in front of it,” a

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phenomenon called “phantom braking.” Id. Santiago maintains that he has
experienced such false warnings while driving his Tesla and that they have “create[d]
unnecessary panic” and “an unnecessary safety risk because of the … loud and
obtrusive false collision warning alarm.” Id. ¶ 28. On at least two occasions, Santiago
continues, the false alarm “creat[ed] a danger of [him] being hit from behind by the
cars following him.” Id. ¶ 29.
Santiago stresses that Tesla is “well aware” of the defect. Id. ¶ 14. To support
this assertion, he points to a whistleblower’s report that Tesla had recorded “139
cases of unintentional emergency braking” and “383 reported phantom stops
resulting from false collision warnings.” Id. In addition, Santiago alleges that
“hundreds of complaints regarding the False Collision Warning Defect … have been
made to the National Highway Traffic Safety Administration (“NHTSA”) and to
Defendant by owners of many Tesla models nationwide.” Id. ¶ 15. Santiago’s
complaint includes 10 of these NHTSA complaints, which consumers filed between
February 3, 2021, and February 27, 2023. Id. ¶ 13.
Tesla regularly updates its older models with over-the-air software updates,
but Santiago alleges that Tesla has failed to remedy the defect at issue via these
updates. Id. ¶¶ 12, 21, 59, 68, 81. Further, Santiago maintains that he “would not
have purchased his vehicle … had he been aware that it would suffer from the False
Collision Defect and that Defendant would fail to ensure that his vehicles’ software
was safe” and that he “has suffered monetary damages as a result.” Id. ¶ 35.

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Santiago is also enrolled in Tesla’s insurance program, which “determines the
policyholder’s premium based on certain driving metrics, including the frequency of
safety alerts.” Id. ¶ 33. Santiago claims that his monthly insurance premiums (and
the putative class members’ premiums) have increased because Tesla classifies the
false collision warnings as unsafe driving events. Id. ¶¶ 24, 35.
On March 14, 2023, Santiago filed a class action complaint in the Circuit Court
of Cook County, Illinois. [1-1]. His original complaint alleged (1) breach of implied
warranty under the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301, et seq.
(“MMWA”) (Count I), (2) breach of implied warranty of merchantability (Count II),
and a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act
(“ICFA”) (Count III). Id. The original complaint sought both damages and injunctive
relief. Id. ¶ 80.
On May 8, 2023, Tesla removed the case to federal court pursuant to 28 U.S.C.
§§ 1332, 1441, 1446, and 1453 based on diversity of citizenship. [1]. One week later,
Tesla moved to dismiss the complaint for failure to state a claim. [10]. In lieu of
responding, the next month, Santiago filed his first amended complaint, this time
naming an additional plaintiff, James Arnold, and adding an additional subclass of
Ohio Tesla purchasers. [14] ¶ 44. Although Counts I and II remained unchanged,
Count III of the amended complaint sought relief not just under the ICFA, but also
under the Ohio Consumer Sales Practices Act and “other materially identical
consumer fraud statutes enacted by states throughout the country.” Id. ¶ 84.

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DISCUSSION
Tesla has moved to dismiss the first amended complaint. [22]. When Santiago
and Arnold filed their response to Tesla’s motion, they simultaneously voluntarily
dismissed without prejudice Arnold’s claims. [30, 31]. Then, in his response, Santiago
stated that he “will not be proceeding” with his Count I claim under the MMWA, nor
will he be seeking any form of injunctive relief. [29] at 2, n.2. The Court therefore
dismisses Santiago’s MMWA claim and his claim for injunctive relief.
That leaves Santiago’s claim for breach of implied warranty of merchantability
(Count II) and his ICFA claim (Count III). Tesla moves to dismiss these claims
because, it argues, Santiago lacks standing to pursue a nationwide class and because
he has failed to state a claim. The Court considers each argument in turn.
A. Article III Standing
Article III of the U.S. Constitution limits federal courts to adjudication of
“Cases” and “Controversies.” U.S. Const. art. III, § 2. “Standing to bring and maintain
a suit is an essential component of this case-or-controversy requirement.” Scherr v.
Marriott Int’l, Inc., 703 F.3d 1069, 1073 (7th Cir. 2013). To establish he has standing,
Santiago must allege (1) he has suffered an “injury in fact,” (2) there is a “causal
connection between the injury and the conduct complained of,” and (3) “it must be
likely, as opposed to merely speculative, that the injury will be redressed by a
favorable decision.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992) (cleaned
up). In determining whether standing exists, the Court takes all well-pleaded
allegations of the complaint as true unless they are refuted in a defendant’s affidavit.

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See Tamburo v. Dworkin, 601 F.3d 693, 700 (7th Cir. 2010). To establish standing as
a class representative, a plaintiff must “possess the same interest and suffer the same
injury shared by all members of the class he represents.” Keele v. Wexler, 149 F.3d
589, 592–93 (7th Cir. 1998); see also Payton v. County of Kane, 308 F.3d 673, 682 (7th
Cir. 2002) (“[A] person cannot predicate standing on injury which he does not share.
Standing cannot be acquired through the back door of a class action.”).
Tesla contends that Santiago lacks standing to bring claims under consumer
protection laws in states besides Illinois. Specifically, the company urges that
Santiago has “no connection to those states and [has] suffered no injury under those
states’ laws.” [22] at 6. Santiago responds that this question is premature and should
be delayed until the class certification stage. [29] at 5.
Courts in this district take differing approaches to a plaintiff’s capacity to
represent a nationwide class. See Slowinski v. BlueTriton Brands, Inc., No. 24-CV513, 2024 WL 3757097, at *7 (N.D. Ill. Aug. 9, 2024). Some courts (including those
upon which Tesla relies) see the issue as a threshold jurisdictional question. See, e.g.,
Brown v. Auto-Owners Ins. Co., No. 1:21-CV-02597, 2022 WL 2442548, at *2 (N.D. Ill.
June 1, 2022); In re Dairy Farmers of Am., Inc. Cheese Antitrust Litig., No. 09 CV
3690, 2013 WL 4506000, at *8 (N.D. Ill. Aug. 23, 2013). They reason that “[p]laintiffs
do not possess the same interest and have not suffered the same injury as any
proposed out-of-state class members where those out-of-state injuries are governed
by different laws.” Brown, 2022 WL 2442548, at *2.

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But the “prevailing view” in this district is that “the issue is best framed
through the class-certification lens, not standing.” Clark v. Blue Diamond Growers,
No. 22-CV-1591, 2023 WL 4351464, at *6 (N.D. Ill. July 5, 2023) (collecting cases).
Under this view, whether a plaintiff has the representative capacity to assert a legal
theory on behalf of class members in other states is really a question about a
plaintiff’s ability to satisfy Rule 23’s class certification requirements. See id.; see also
Freeman v. MAM USA Corp., 528 F. Supp. 3d 849, 859 (N.D. Ill. 2021); Woodman’s
Food Mkt., Inc. v. Clorox Co., 833 F.3d 743, 750 (7th Cir. 2016) (“[T]he question of
who is authorized to bring an action under a statute is one of statutory interpretation;
it does not implicate Article III standing or jurisdiction.”) (citing Lexmark Int’l, Inc.
v. Static Control Components, Inc., 572 U.S. 118 (2014)); cf. Morrison v. YTB Intern,
Inc., 649 F.3d 533, 536 (7th Cir. 2011) (“[A]pplication of choice-of-law principles has
nothing to do with standing, though it may affect whether a class should be
certified.”).
This Court adopts the prevailing view: Tesla’s challenge bears on Santiago’s
representative capacity under Rule 23, which is an issue to be decided at a later date.
Here, Santiago undoubtedly meets Article III’s standing requirements. He alleges a
concrete injury in the form of economic loss; that injury is fairly traceable to Tesla’s
conduct; and the Court can redress the injury with money damages. See Freeman,
528 F. Supp. 3d at 859; Halperin v. Int’l Web Servs., LLC, 123 F. Supp. 3d 999, 1009
(N.D. Ill. 2015); 1 McLaughlin on Class Actions § 4:28 & n.25 (11th ed. 2014).
Santiago does not need to show he can recover under other states’ laws to state claims

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on behalf of a nationwide class. That is because “[f]or everyone else in the proposed
class, [Santiago] is proposing to serve as a class representative, not seeking to redress
an injury specific to [him].” Freeman, 528 F. Supp. 3d at 859. Moreover, if Tesla’s
theory about how Article III standing applies to class complaints were true, that
would mean that “no multi-state or nationwide class can ever be certified without a
representative from each and every State in the proposed class.” Id.
The Court therefore declines to dismiss Santiago’s claims involving state laws
outside Illinois based on a lack of Article III standing.
B. Implied Warranty of Merchantability (Count II)
Tesla challenges Santiago’s implied warranty of merchantability claim on,
among other grounds, Santiago’s failure to provide pre-suit notice of the alleged
defect. The Court finds Tesla’s position in this regard to have merit. It therefore does
not address Tesla’s two other attacks on Santiago’s Count II claim (involving issues
of merchantability and privity).
With respect to pre-suit notice, Section 2–607 of the Uniform Commercial Code
(“UCC”)—codified in Illinois at 810 ILCS 5/2–607(3)(a)—provides that a “buyer must
within a reasonable time after he discovers or should have discovered any breach
notify the seller of breach or be barred from any remedy.” This means that, under
Illinois law, buyers “must directly notify the seller of the troublesome nature of the
transaction or be barred from recovering for a breach of warranty.” Connick v. Suzuki
Motor Co., 174 Ill.2d 482, 492 (1996). The notice requirement is excused if (1) the
seller already has actual knowledge of the product’s defect, or (2) the consumer suffers

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a personal injury (in which case the notice requirement may be satisfied by filing
suit). Id. at 492, 494–95. “The purpose of the notice requirement is to encourage
parties to resolve the dispute short of litigation.” Ibarrola v. Kind, LLC, 83 F. Supp.
3d 751, 760 (N.D. Ill. 2015); see also 810 ILCS Ann. 5/2–607, cmt. 4 (notice
requirement “opens the way for normal settlement through negotiation”).
Santiago does not argue that he personally provided Tesla notice of the alleged
defect. Instead, he insists that the notice requirement is excused because Tesla “knew
of the issue that affected its Model 3 vehicles both through media publications,
internal reporting, as well as through the numerous NHTSA complaints.” [29] at 9.
But the actual knowledge exception “is satisfied only where the manufacturer is
somehow apprised of the trouble with the particular product purchased by a
particular buyer.” Connick, 174 Ill. 2d at 494 (emphasis added). And Santiago’s
complaint does not allege that Tesla knew about his particular issue when he filed
suit—it alleges only that Tesla was generally aware of the defect. Tesla’s “generalized
knowledge about the safety concerns of third parties” is not enough to meet the UCC’s
notice requirement. Id. at 493.
Accordingly, Santiago’s Count II claim for breach of implied warranty of
merchantability is dismissed with prejudice.
C. ICFA (Count III)
Tesla next asks the Court to dismiss Santiago’s ICFA claim. The ICFA provides
a remedy for “unfair or deceptive acts or practices” in certain commercial
transactions. 815 ILCS 505/2. “[U]nfair or deceptive acts or practices” include the use

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of any “deception, fraud, false pretense, false promise, [or] misrepresentation.” Id. To
state a claim under the ICFA, a plaintiff must allege: “(1) a deceptive or unfair act or
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.” Wigod v. Wells Fargo Bank, N.A.,
673 F.3d 547, 574 (7th Cir. 2012); see also Weatherman v. Gary-Wheaton Bank of Fox
Valley, N.A., 186 Ill. 2d 472, 492 (1999) (citing Connick, 174 Ill.2d at 501). The statute
permits claims based on “either deceptive conduct or unfair conduct (or both).” Benson
v. Fannie May Confections Brands, Inc., 944 F.3d 639, 646 (7th Cir. 2019).
As with other varieties of fraud, ICFA claims based on deceptive conduct are
subject to Rule 9(b)’s heightened pleading standard. See Greenberger v. GEICO Gen.
Ins. Co., 631 F.3d 392, 399 (7th Cir. 2011). A plaintiff must allege “the who, what,
when, where, and how: the first paragraph of any newspaper story.” DiLeo v. Ernst
& Young, 901 F.2d 624, 627 (7th Cir. 1990).
Tesla challenges Santiago’s Count III ICFA claim on three grounds, each of
which the Court addresses next.
1. Deceptive Conduct – Material Misrepresentation
Tesla contends that Santiago has not sufficiently alleged any specific
misrepresentation the company made in advertising its vehicles to support a claim
based on deceptive conduct. The Court agrees with Tesla.
Santiago relies on two alleged misrepresentations. First, he points to a Tesla
website that contains the following statements about the Tesla Model 3: “Rear, side

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and forward-facing cameras provide maximum visibility;” “Forward-facing radar
provides a long-range view of distant objects;” “12 Ultrasonic Sensors”; and “Detects
nearby cars, prevents potential collisions and assists with parking.” [14] ¶ 11.
According to Santiago, the statement that the Tesla Model 3 “prevents potential
collisions” is false because its defective forward collision monitoring system actually
creates potential collisions. [29] at 10.
Under the ICFA, “a statement is deceptive if it creates a likelihood of deception
or has the capacity to deceive.” Bober v. Glaxo Wellcome PLC, 246 F.3d 934, 938 (7th
Cir. 2001). The “allegedly deceptive act must be looked upon in light of the totality of
the information made available to the plaintiff.” Davis v. G.N. Mortg. Corp., 396 F.3d
869, 884 (7th Cir. 2005). Assessed under this standard, the Court is not convinced
that the cited statements from Tesla’s website were deceptive for purposes of the
ICFA. Although Tesla’s forward collision monitoring system might sometimes cause
phantom braking, and although an occurrence of phantom braking might sometimes
result in a collision, it does not follow that Tesla’s system does not also “prevent
potential collisions” when it is reacting to an actual forward threat. Santiago’s
complaint certainly does not allege that to be the case. In other words, that the
forward collision monitoring system might sometimes cause collisions does not make
Tesla’s statement that it prevents collisions untrue. Nor did Tesla represent that its
forward collision monitoring system prevents all collisions.
Santiago also points to statements on Tesla’s website touting its vehicles as
“some of the safest cars on the road” and “built for safety.” [14] ¶ 10; [29] at 10. Tesla

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argues these representations are “puffery” and cannot support a consumer fraud
claim. [22] at 14; Avery v. State Farm Mut. Auto Ins. Co., 835 N.E.2d 801, 846 (2005);
Pickens v. Mercedes-Benz USA, LLC, No. 20 C 3470, 2021 WL 5050289, at *2, 4 (N.D.
Ill. Nov. 1, 2021). The Court agrees with Tesla.
“[G]eneral statements about big-picture concepts such as trust, security,
reputation, and safety are non-actionable puffery.” Costa v. FCA US LLC, 542 F.
Supp. 3d 83, 101 (D. Mass. 2021); Beck v. FCA US LLC, 273 F. Supp. 3d 735, 750
(E.D. Mich. 2017) (“[T]o the extent Beck is claiming that he relied on any FCA’s
representations regarding their vehicles’ general safety, quality, reliability, or
performance, those assertions undoubtedly constitute non-actionable puffery.”).
Tesla’s general statements regarding safety are so vague that their “truth or falsity
… cannot be precisely determined.” Barbara’s Sales, Inc. v. Intel Corp., 227 Ill. 2d 45,
73 (2007). Moreover, because the statements are so vague, “no reasonable consumer
would rely on … [them] as the sole basis for making a purchase.” Id. at 74.
Santiago argues otherwise, writing that Tesla’s safety-oriented language
cannot constitute puffery where it “is based on ‘objectively verifiable terms.’” [29] at
10 (citing Bietsch v. Sergeant’s Pet Care Prod., Inc., No. 15 C 5432, 2016 WL 1011512,
at *4 (N.D. Ill. Mar. 15, 2016)). In Bietsch, however, the consumer-product packaging
at issue specifically referenced the relevant, objective metrics; it communicated to
consumers that the pet food inside contained “essential nutrients … in accordance
with the ‘AAFCO Dog Food Nutrient Profiles.’” Id. As Bietsch explained: “The
reference to these recognized standards suggests that Sergeant’s nutrition claims are

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tested and verifiable, essentially placing a seal of approval on Sergeant’s claims.” Id.
Here, even accepting that NHTSA safety ratings and mandatory government tests
provided definitive, objective criteria by which vehicle safety can be measured, see
[29] at 10–11, the statements on Tesla’s website to which Santiago points did not
reference them. For this reason as well, Tesla’s statements fall on the puffery side of
the line, not actionable deceptive representations.
2. Deceptive Conduct – Material Omissions
Tesla argues Santiago cannot bring an omission-based deceptive conduct claim
because he has not adequately pled Tesla had pre-purchase knowledge of the alleged
defect and because Santiago has not pled with particularity that Tesla omitted
material information from a specific communication. Here, Santiago has met his
burden.
When bringing a claim based on an omission of a material fact, a plaintiff must
allege “that the fact omitted or concealed was known to the defendant at the time of
the concealment.” Ibarolla v. Nutrex Rsch., Inc., No. 12 C 4848, 2013 WL 672508, at
*3 (N.D. Ill. Feb. 25, 2013) (quoting Addison v. Distinctive Homes, Ltd., 359 Ill.App.3d
997, 1001 (1st Dist. 2005)); see also Schwebe v. AGC Flat Glass N. Am., Inc., No. 12 C
9873, 2013 WL 2151551, at *5 (N.D. Ill. May 16, 2013) (“One cannot engage in a
deceptive practice when one lacks knowledge regarding the issue in question.”).
Knowledge “may be alleged generally” under Rule 9(b). Fed. R. Civ. P. 9(b); see also
Coss v. Playtex Prod., No. 08 C 50222, 2009 WL 2245657, at *5 (N.D. Ill. July 10,
2009). However, that knowledge “may be alleged generally” does not give a plaintiff

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“license to evade the less rigid—though still operative—strictures of Rule 8.” Iqbal,
556 U.S. at 686–87. Given this backdrop, the Court will accept “general allegations
of knowledge insofar as they are consistent with reasonable inferences we can draw
from the facts in the complaint.” Ibarolla, 2013 WL 672508, at *3.
The Court is satisfied that Santiago has sufficiently alleged Tesla’s knowledge
of the pertinent defect. At least twice in his complaint, Santiago contends that Tesla
generally knew about the alleged defects in February 2021, when Santiago purchased
his vehicle. See [14] ¶ 18 (“Defendant has been consistently notified of the False
Collision Warning Defect since the release of its Tesla vehicles with auto-driving and
cruise control features.”); id. ¶¶ 67, 80 (“Defendant has had extensive knowledge and
awareness that its Tesla Vehicles have the False Collision Warning Defect.”). And
Santiago supports these allegations with two sources: (1) a May 2023 whistleblower
article suggesting that Tesla had received hundreds of reports of phantom braking,
id. ¶ 14; and (2) 10 consumer reports made to the NHTSA between February 2021
and February 2023, id. ¶ 15. In each report, the Tesla user complains they
experienced sudden phantom braking when there was no hazard on the road. Id.
The Court sets aside the 10 NHTSA complaints. As Tesla points out, nine of
the 10 complaints were made after Santiago purchased his car. [22] at 14. The tenth
complaint was made on February 3, 2021, which may have been before Santiago’s
purchase. (The complaint does not pinpoint the exact purchase date, stating only that
Santiago bought his car sometime in February 2021. Id. ¶ 26.) Even if the Court
assumed that the tenth complaint was made before Santiago bought his Tesla,

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Santiago cannot plausibly allege that Tesla knew about the defect based on a single
complaint made, at most, only days or a handful of weeks before his purchase.
But that still leaves the whistleblower article, which states that Tesla began
receiving complaints about the defect starting as early as 2015 and which is
consistent with Santiago’s allegation that Tesla has been notified of the defect since
the original release of the features at issue.1 When viewed in the light most favorable
to Santiago, the complaint’s general allegations of knowledge combined with the
whistleblower report permit the reasonable inference that Tesla knew about the
alleged defects when Santiago purchased his car in February 2021. See Reid v.
Unilever U.S., Inc., 964 F. Supp. 2d 893, 916 (N.D. Ill. 2013) (plaintiffs sufficiently
alleged knowledge based on complaints posted on the internet); cf. Herman &
MacLean v. Huddleston, 459 U.S. 375, 391 (1983) (“[P]roof of scienter required in
fraud cases is often a matter of inference from circumstantial evidence.”).2

1 See Erin Marquis, Whistleblower Drops 100 Gigabytes of Tesla Secrets To German News

Site: Report, JALOPNIK (May 25, 2023), https://jalopnik.com/whistleblower-drops-100gigabytes-of-tesla-secrets-to-g-1850476542. The Court takes judicial notice of the report as a
document Santiago incorporated into his complaint by reference. See Tellabs, Inc. v. Makor
Issues & Rts., Ltd., 551 U.S. 308, 322 (2007) (“[C]ourts must consider the complaint in its
entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6)
motions to dismiss, in particular, documents incorporated into the complaint by reference.”);
see also 5B Wright & Miller § 1357 (4th ed.) (2024).
2 Tesla cites to Sherwin v. Samsung Electronics America, Inc., No. 16 C 7535, 2018 WL
11216896 (N.D. Ill. Mar. 2, 2018), to support its contention that Santiago has not sufficiently
pled Tesla’s knowledge of the defect. The plaintiff in Sherwin referenced a “handful” of
consumer complaints, and, like here, only one predated plaintiff’s initial purchase. Id. at *5.
But in Sherwin, the one complaint that predated plaintiff’s purchase was anonymously
posted to a chat room and addressed a completely different defect than the one plaintiff
alleged in her complaint. See id. Here, the one complaint that likely predated Santiago’s
purchase was posted to the NHTSA’s website and related to the exact same defect upon which
his claims are based. And, more importantly, Santiago supplements that NHTSA complaint
with a whistleblower article which says that Tesla began receiving complaints about the
defect as early as 2015. In contrast to the complaint in Sherwin, Santiago’s allegations much

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Tesla argues, in the alternative, that even if Santiago adequately pled
knowledge, his omission-based claim should still fail because he has not pled with
particularity that Tesla omitted material information from a specific communication.
[22] at 15. “An omission or concealment of a material fact in the conduct of trade or
commerce constitutes consumer fraud.” Connick, 174 Ill.2d at 504 (citing 815 ILCS
505/2). “A material fact exists where a buyer would have acted differently knowing
the information, or if it concerned the type of information upon which a buyer would
be expected to rely in making a decision whether to purchase.” Id. at 505. A “consumer
cannot maintain an action under the [ICFA] when the plaintiff does not receive,
directly or indirectly, communication or advertising from the defendant.” De Bouse v.
Bayer, 235 Ill. 2d 544, 555 (2009). For this reason, some courts have dismissed ICFA
claims of omission when a plaintiff has not “connected the dots between the purported
omission and a particular communication” upon which the plaintiff relied. Fleury v.
Gen. Motors LLC, 654 F. Supp. 3d 724, 732 (N.D. Ill. 2023); see also O’Connor v. Ford
Motor Co., 477 F. Supp. 3d 705, 720 (N.D. Ill. 2020) (dismissing omission-based ICFA
claim because plaintiff did “not identify any particular direct statements from
Defendant that contain material omissions”).
Here, Santiago successfully connects the dots. He points to the same Tesla
webpage, already discussed, in which Tesla represented that its sensor system
“[d]etects nearby cars, prevents potential collisions and assists with parking.” [14]
¶ 11; [29] at 13. The Court sees no reason why it cannot treat the language on Tesla’s

more plausibly suggest that Tesla was aware of the defect by the time Santiago purchased
his car.

16

webpage as a specific communication, and Tesla does not offer one. See [22] at 15
(arguing only that “[w]hile Santiago may claim that Tesla failed to disclose the defect
in its online advertisements, that assertion fails because Santiago cannot ‘connect[]
the dots between the purported omission and a particular communication by [Tesla]
which he relied on’”) (second alteration in original). Critically from Santiago’s
perspective, the webpage contains no warning that the car sometimes alerts
unnecessarily or automatically brakes when there is no real risk of forward collision.
In addition, Santiago squarely alleges that he relied on this webpage when
deciding to purchase his Tesla. He maintains that he “reviewed Defendant’s website
page for its Model 3 at the time that he purchased it, including the section explaining
that the vehicle came with forward facing cameras and sensors to detect objects in its
path.” Id. ¶ 30. Moreover, Santiago alleges that the “safety features that Defendant
had advertised as to its Model 3, including specifically its collision avoidance
technology, were major factors in [his] decision to purchase his Model 3.” Id. Finally,
Santiago contends that he would not have purchased the Tesla Model 3 (or else would
have paid significantly less for it) had he known about the defect. Id.; see also
Connick, 174 Ill.2d at 505 (finding plaintiffs adequately pled an ICFA violation based
on a material omission where plaintiffs “alleged that Suzuki was aware of the
Samurai’s safety problems,” that “Suzuki failed to disclose these defects,” and that
“they would not have purchased the vehicles if Suzuki had disclosed the Samurai’s
safety risk”).

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Viewing these facts in the light most favorable to Santiago, the Court concludes
that the complaint plausibly states an omission-based ICFA claim.
3. Unfair Conduct
Finally, Tesla argues that Santiago cannot proceed with his ICFA unfairconduct claim because it is duplicative of his ICFA deceptive-conduct claim.
“An unfair practice claim hinges upon a defendant’s allegedly ‘unfair or
unscrupulous’ behavior rather than deceptive behavior.” Quitno v. Gen. Motors, LLC,
No. 1:18-CV-07598, 2020 WL 777273, at *4 (N.D. Ill. Feb. 18, 2020) (quoting
Stavropoulos v. Hewlett-Packard Co., No. 13 C 5084, 2014 WL 7190809, at *3 (N.D.
Ill. Dec. 17, 2014)). Illinois follows the so-called Sperry test to determine whether
particular conduct is unfair. See Batson v. Live Nation Ent., Inc., 746 F.3d 827, 830
(7th Cir. 2014) (citing F.T.C. v. Sperry & Hutchinson Co., 405 U.S. 233, 244 n.5
(1972)); see also Robinson v. Toyota Motor Credit Corp., 201 Ill. 2d 403, 417 (2002).
The Sperry factors consider whether the practice “(1) offends public policy; (2) is
immoral, unethical, oppressive, or unscrupulous; or (3) causes substantial injury to
consumers.” Batson, 746 F.3d at 830. “All three criteria do not need to be satisfied to
support a finding of unfairness,” and a “practice may be unfair because of the degree
to which it meets one of the criteria or because to a lesser extent it meets all three.”
Robinson, 201 Ill. 2d at 418 (quoting Cheshire Mortg. Serv., Inc. v. Montes, 223 Conn.
80, 106 (1992)).
Unlike a deceptive-practices claim, an unfair practices claim is not subject to
Rule 9(b)’s heightened pleading requirements. See Pirelli Armstrong Tire Corp.

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Retiree Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 446 (7th Cir. 2011). However,
a plaintiff cannot “use the ‘unfair practices’ prong of the ICFA to avoid meeting Rule
9(b)’s particularity requirements if the claim remains ‘entirely grounded’ in a fraud
claim.” Quitno, 2020 WL 777273, at *4 (quoting Camasta v. Jos. A. Bank Clothiers,
Inc., 761 F.3d 732, 737 (7th Cir. 2014)); see also Pirelli, 631 F.3d at 446.
Santiago argues that his false advertising allegations support his unfair
practices claim, but the Court disagrees. As other courts in this district have
explained, an “unfair practice claim hinges upon a defendant’s allegedly ‘unfair or
unscrupulous’ behavior rather than deceptive behavior.” Quitno, 2020 WL 777273, at
*4 (citing Stavropoulos, 2014 WL 7190809, at *3). Santiago sometimes describes
Tesla’s false representations and omissions as “deceptive and unfair.” [14] ¶¶ 88, 90
(emphasis added). But his choice of adjectives notwithstanding, at their core,
Santiago’s false advertising allegations remain “entirely grounded” in his claim that
Tesla engaged in deceptive practices. Santiago cannot convert his fraud claim by
“[s]imply adding language of ‘unfairness.’” See Camasta, 761 F.3d at 737. The Court
therefore declines to analyze Santiago’s allegations of false advertising by Tesla
under the lower pleading threshold for an unfair act. See Schwebe v. AGC Flat Glass
N. Am., Inc., No. 12 C 9873, 2013 WL 2151551, at *2 (N.D. Ill. May 16, 2013) (“[U]nder
Illinois law, concealment cases … are evaluated under the deception prong of the
ICFA.”).3

Santiago cites one district court case which concluded—based on the Seventh Circuit’s
decision in Benson—that “[f]alse advertising alone is an unfair practice under the ICFA.”
Bonahoom v. Staples, Inc., No. 20-CV-1942, 2021 WL 1020986, at *5 (N.D. Ill. Mar. 17, 2021)
(citing Benson, 944 F.3d at 647). In Benson, the Seventh Circuit held that plaintiff plausibly
3

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Santiago offers a second basis for his unfair practices claim: that Tesla is
overcharging him for his car insurance premiums. According to Santiago, this is
because Tesla records the false collision warnings as unsafe driving events, then it
calculates his “Safety Score”—a measure of his driving habits that factors into his
insurance premiums—with these unsafe driving events baked in. [14] ¶ 34. The
problem for Santiago is that, as currently plead, his allegations regarding Tesla’s
insurance premiums fail to satisfy the Sperry test.
As to the first Sperry factor, Santiago argues that “charging inflated insurance
premiums based on a vehicle defect of [Tesla’s] own creation plainly meets the
requirements for pleading an unfair act that ‘offends public policy.’” [29] at 12.
Although Santiago makes this argument in a conclusory fashion, the Court is hardpressed to come up with a countervailing position. Assuming the truth of Santiago’s
allegations, it is difficult, if not impossible, to conceive of a sound public policy for
permitting insurers to overcharge consumers for unfounded reasons.
With respect to the second Sperry factor, Santiago makes no effort—either in
his complaint or in his response to Tesla’s motion—to articulate how Tesla’s practice
“may be considered immoral, unethical, oppressive, or unscrupulous” or whether “it
imposes a lack of meaningful choice or an unreasonable burden on the consumer.” See

stated an unfair act by misrepresenting the amount of chocolate in a chocolate box, a practice
the plaintiff had referred to as “false advertising.” 944 F.3d at 647. Although the Court
recognizes some ambiguity between Camasta and Benson, it finds Camasta’s reasoning to be
directly on point here, where Santiago bases his deceptive practice and unfair practice claims
on identical conduct. In addition, as Tesla points out, see [32] at 11, the complaint in
Bonahoom involved “numerous detailed factual allegations of false advertising,” which is not
the case here. 2021 WL 1020986, at *5.

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Stonecrafters, Inc. v. Foxfire Printing & Packaging, Inc., 633 F. Supp. 2d 610, 616
(N.D. Ill. 2009) (quoting W. Ry. Devices Corp. v. Lusida Rubber Prods., Inc., No. 06 C
0052, 2006 WL 1697119, at *5 (N.D. Ill. June 13, 2006)). In his response to Tesla’s
motion, Santiago does not even mention the second Sperry factor when arguing that
Tesla’s allegedly inflated insurance premiums establish a valid unfair-practices
claim. See [29] at 13. His complaint is similarly hollow. Although he refers to Tesla’s
insurance-premium practice as “malicious,” see [14] ¶ 23, he does not flesh out that
characterization with any detail. Did Tesla’s practice deprive Santiago of a
meaningful choice or impose an unreasonable burden on him by, for example, locking
him into a contractual arrangement he could not exit even after learning of Tesla’s
charging practices? Santiago does not say. When considering a Rule 12(b)(6) motion
to dismiss, the Court “must draw all reasonable inferences in the plaintiff's favor.”
Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011). The Court, however, “need not
accept as true statements of law or unsupported conclusory factual allegations.” Bilek
v. Fed. Ins. Co., 8 F.4th 581, 586 (7th Cir. 2021). See also Twombly, 550 U.S. at 555
(courts “are not bound to accept as true a legal conclusion couched as a factual
allegation”) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). Instead, “the factual
allegations must be enough to raise a right to relief above the speculative level.” Id.
On this point, Santiago has provided only conclusory allegations to date.
For similar reasons, the Court is reluctant to weigh the third Sperry factor in
Santiago’s favor. “A practice causes substantial injury to consumers if it causes
significant harm to the plaintiff and has the potential to cause injury to a large

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number of consumers.” Stonecrafters, 633 F. Supp. 2d at 617 (quoting Wilson v. Harris
N.A., No. 06 C 5840, 2007 WL 2608521, at *8 (N.D. Ill. Sept. 4, 2007)). Although
Santiago has clearly alleged an injury, he has alleged no facts regarding its
significance, despite that information being in his possession. For instance, his
complaint includes no allegations about just how much his insurance premiums
increased. Nor does Santiago shed any light on when those increases occurred relative
to the “phantom braking” incidents he experienced. On this barebones complaint, the
Court is reluctant to conclude that Santiago has experienced a “significant” enough
injury to plausibly state an unfair act.
CONCLUSION
For the foregoing reasons, the Court grants in part and denies in part Tesla’s
motion to dismiss. [22]. Count I and Santiago’s claim for injunctive relief are
dismissed without prejudice based on Santiago’s representation in his response brief
that he no longer wishes to pursue these claims. [29] at 2 n.2. Count II is dismissed
with prejudice for lack of notice. Count III may proceed in its current iteration, but
only to the extent Santiago alleges an omission-based deceptive practice.
The Court grants Santiago leave to file a second amended complaint on or
before 12/13/24 if he can cure the deficiencies with his unfair-practice ICFA claim, as
it relates to the insurance premiums, while still complying with his obligations under
Federal Rule of Civil Procedure 11. See Runnion ex rel. Runnion v. Girl Scouts of
Greater Chi. & Nw. Ind., 786 F.3d 510, 519–20 (7th Cir. 2015) (“Unless it is certain
from the face of the complaint that any amendment would be futile or otherwise

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unwarranted, the district court should grant leave to amend after granting a motion
to dismiss.”). The parties are directed to appear for a status hearing on 1/7/25 at 9:30
a.m. to discuss next steps in the case.

___________________________
Georgia N. Alexakis
United States District Judge
Date: 11/22/24

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