Brown v. Swagway, LLC et al

Filing 78

OPINION AND ORDER: For the reasons set forth in the Opinion and Order, the Court DENIES Defendant Swagway's 39 motions. Signed by Judge Joseph S Van Bokkelen on 3/7/2017. (jss)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
MICHAEL BROWN,
Plaintiff,
v.

Case No. 3:15-CV-588 JVB

SWAGWAY, LLC,
Defendant.
OPINION AND ORDER
Plaintiff claims the Swagway hoverboard he bought burst into flames. He attempts to
bring a consumer class action. Defendant Swagway moves to strike the class allegations, to
dismiss the unjust enrichment claim, and to dismiss the claim for injunctive relief. (DE 39.) For
the following reasons, the Court denies these motions.

A.

Motion to strike class allegations
Motions to strike class allegations are disfavored. See Heller Fin., Inc. v. Midwhey

Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989) (involving motion to strike affirmative
defenses). Courts disfavor motions to strike class allegations in part because a motion for class
certification is a more appropriate vehicle for consideration of the relevant issues. See DuRocher
v. Nat’l Collegiate Athletic Ass’n, No. 1:13-cv-1570, 2015 WL 1505675, at *4, n.2 (S.D. Ind.
Mar. 31, 2015).1

1

See also Pruitt v. Pers. Staffing Group, LLC, No. 16-cv-5079, 2016 WL 6995566, at *6 (N.D.
Ill. Nov. 30, 2016) (“Defendants, however, have not shown that such a drastic measure [as
striking the class allegations] should be taken in this case. They present no justification for
denying Plaintiffs the opportunity to conduct some class discovery and for the court to resolve
the class certification issue on the merits in an orderly fashion.”).

This is because class action plaintiffs generally bear the burden of satisfying Rule 23, but
class action defendants often control the information plaintiffs need to carry that burden. Hence,
the need for discovery. See Murdock-Alexander v. Tempsnow Employment, No. 16-cv-5182,
2016 WL 6833961, at *3 (N.D. Ill. Nov. 21, 2016).
Since class certification “generally involves considerations that are enmeshed in the
factual and legal issues comprising the plaintiff’s cause of action,” striking class allegations at
the pleading stage is generally inappropriate. Boatwright v. Walgreen Co., No. 10-cv-3902, 2011
WL 843898, at *2 (N.D. Ill. Mar. 4, 2011). “[M]otions to strike class allegations are generally
regarded as premature because the shape and form of the class is to be given time to evolve
through discovery.” DuRocher, 2015 WL 1505675, at *4.
Indeed, a court abuses its discretion by not allowing appropriate discovery before
deciding whether to certify a class. See Damasco v. Clearwire Corp., 662 F.3d 891, 897 (7th Cir.
2011) (overruled on other grounds by Chapman v. All Am. Painting, Inc., 796 F.3d 783, 787 (7th
Cir. 2015)).
Motions to strike class allegations at the pleading stage are generally only appropriate
where it is clear from the pleadings that the class claims are defective. See Murdock-Alexander,
2016 WL 6833961, at *4; see also Kasalo v. Harris & Harris, Ltd., 656 F.3d 557, 563 (7th Cir.
2011).
On a motion to strike class allegations (as opposed to a motion for class certification) the
moving defendant bears the burden of persuasion. See Rysewyk v. Sears Holdings Corp., No. 15cv-4519, 2015 WL 9259886, at *8 (N.D. Ill. Dec. 18, 2015).

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Here, Defendant Swagway has not persuaded the Court to strike the class allegations at
this stage. The Court cannot say “it is obvious from the pleadings that no class action can be
maintained.” In re Yasmin & Yaz (Drospirenone) Mktg., 275 F.R.D. 270, 274 (S.D. Ill. 2011).
Plaintiff might have an uphill climb on a motion to certify the class, but striking at this
point would be premature. Defendant may re-raise its arguments later.
For these reasons, and for other reasons articulated in Plaintiff’s response (DE 50), the
Court denies the motion to strike (DE 39).

B.

Motions to dismiss

1.

Standard for evaluating a motion to dismiss
The purpose of a motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim

is to test the sufficiency of the pleadings, not to decide the merits of the case. See Gibson v. Chi.,
910 F.2d 1510, 1520 (7th Cir. 1990). Rule 8(a)(2) provides that a complaint must contain “a
short and plain statement of the claim showing that the pleader is entitled to relief.” However,
“recitals of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp v. Twombly, 550 U.S.
544, 555 (2007)).1

1

In Twombly, the Supreme Court “retooled federal pleading standards, retiring the oft-quoted
[Conley v. Gibson, 355 U.S. 42, 47 (1957)] formulation that a pleading ‘should not be dismissed
for failure to state a claim unless it appears beyond doubt that the [pleader] can prove no set of
facts in support of his claim which would entitle him to relief.’” Killingsworth v. HSBC Bank
Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007).
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As the Supreme Court stated, “the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions.” Id. Rather, “a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Id. at 678 (quoting Twombly, 550 U.S. at 570). A complaint is facially
plausible if a court can reasonably infer from factual content in the pleading that the defendant is
liable for the alleged wrongdoing. Id. (citing Twombly, 550 U.S. at 556).
The Seventh Circuit synthesized the standard into three requirements. See Brooks v. Ross,
578 F.3d 574, 581 (7th Cir. 2009). “First, a plaintiff must provide notice to defendants of her
claims. Second, courts must accept a plaintiff’s factual allegations as true, but some factual
allegations will be so sketchy or implausible that they fail to provide sufficient notice to
defendants of the plaintiff’s claim. Third, in considering the plaintiff’s factual allegations, courts
should not accept as adequate abstract recitations of the elements of a cause of action or
conclusory legal statements.” Id.

2.

Motion to dismiss unjust enrichment claim
Defendant Swagway moves to dismiss the unjust enrichment claim. (DE 39.)
Defendant argues Brown lacks standing to bring an unjust enrichment claim under the

laws of any state other than New York, and that under New York law, an unjust enrichment
claim is only available in unusual circumstances where the defendant has not breached a contract
or committed a tort. Defendant argues that the unjust enrichment claim should be dismissed
because it is duplicative of other claims.

4

Regarding standing, two Supreme Court cases provide guidance. In Amchem, the
Supreme Court resolved “logically antecedent” class certification issues before standing issues,
and observed that without a certified class, the unnamed proposed class members’ standing was
irrelevant. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 612 (1997).
Then, in Ortiz, the Supreme Court again found class certification issues to be “logically
antecedent” to Article III issues, and addressed whether the proposed settlement class met Rule
23’s requirements before considering the putative class representative’s standing. Ortiz v.
Fibreboard Corp., 527 U.S. 815, 831 (1999).
The Seventh Circuit recognized the Supreme Court’s decision in Ortiz as a “directive to
consider issues of class certification prior to issues of standing.” Payton v. County of Kane, 308
F.3d 673, 680 (7th Cir. 2002). Furthermore, the Payton Court recognized that, after certification,
courts assess standing based on the class as a whole:
We understand Ortiz to rest on the long-standing rule that, once a class is
properly certified, statutory and Article III standing requirements must be
assessed with reference to the class as a whole, not simply with reference to
the individual named plaintiffs. The certification of a class changes the
standing aspects of a suit, because a properly certified class has a legal status
separate from and independent of the interest asserted by the named
plaintiff.
Id. (quotation marks omitted).
Moreover, Rule 8 allows Plaintiff to plead in the alternative. Fed. R. Civ. Pro. 8(d)(2).
Therefore, the Court concludes that dismissing the unjust enrichment claim at this stage would
be premature and inappropriate. Defendant has not shown that Rule 12(b)(6) compels dismissal.

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For these reasons, and for other reasons articulated in Plaintiff’s response (DE 50), the
Court denies the motion to dismiss the unjust enrichment claim (DE 39).

3.

Motion to dismiss claim for injunctive relief
Defendant Swagway also moves to dismiss the claim for injunctive relief. (DE 39.)
Defendant argues Plaintiff lacks standing to pursue injunctive relief, and is not entitled to

seek injunctive relief, because he has not alleged that he is likely to purchase a Swagway
Hoverboard again, and therefore has not alleged that Defendant’s conduct will likely cause him
future harm. Defendant also argues Plaintiff cannot show he lacks an adequate remedy at law.
Again, the class certification issues are logically antecedent to the standing issues. See
Amchem, 521 U.S. at 612.
Moreover, this Court agrees with the reasoning of a recent decision by a sister district
concluding that the fact that a named plaintiff is unlikely to purchase a defendant’s product in the
future does not undermine standing.2 The injunctive provisions of the consumer protection

2

In a 2016 decision, the Northern District of Illinois reasoned:
Indeed, courts have split on whether a plaintiff who, having unveiled the
defendant's deception, is unlikely to purchase (or affirmatively disavows the
intent to purchase) the defendant’s product in the future nevertheless
maintains standing to pursue injunctive relief under state consumer
protection statutes. The better view, however, and the one consistent with
Arreola [v. Godinez, 546 F.3d 788 (7th Cir. 2008)], is the one taken by
courts that have declined to hold that plaintiffs lacked standing based on the
fact that they abandoned the product upon their discovery that it had been
deceptively labeled or advertised. These courts acknowledged the public
policy conundrum inherent in the contrary view: the injunctive provisions
of consumer protection statutes such as ICFA could never be invoked to
enjoin deceptive practices if the complaining consumer’s standing
dissipated the moment she discovered the alleged deception and could no
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statutes applicable here could not be invoked by a consumer if his standing disappeared the
moment he discovered the deception.
For these reasons, and for other reasons articulated in Plaintiff’s response (DE 50), the
Court denies the motion to dismiss the claim for injunctive relief (DE 39).

C.

Conclusion
The Court DENIES Defendant Swagway’s motions (DE 39).

SO ORDERED on March 7, 2017.
s/ Joseph S. Van Bokkelen
JOSEPH S. VAN BOKKELEN
UNITED STATES DISTRICT COURT

longer be fooled. While it is true, as Bohn observes, that public policy
concerns do not confer Article III standing on a plaintiff who fails to allege
an individual injury in fact, I am satisfied that plaintiff has alleged a legally
cognizable injury resulting from defendant’s alleged deception, and thus has
standing to bring her claims. Whether plaintiff is an appropriate class
representative with respect to some or all of these claims is an issue properly
decided after discovery and briefing on class certification.
Leiner v. Johnson & Johnson Consumer Cos., No. 15-cv-5876, 2016 WL 128098, at *1 (N.D. Ill.
Jan. 12, 2016) (internal citations omitted).

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