Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—E.D. Ill.: Purchaser states Illinois consumer fraud claim over allegedly deceptive software advertising and error reporting, (Aug 7, 2013)

By Tobias J. Gillett, J.D., LL.M.

A purchaser of computer maintenance software sufficiently alleged a claim under the Illinois Consumer Fraud Act (CFA) that the developer of the software deceptively advertised it as being capable of repairing computer problems when it could not make those repairs, and actually decreased her computer’s performance, and that the software falsely reported that it had identified and repaired errors when it was run, the federal district court in Chicago has ruled (Hall v. TuneUp Corp., August 6, 2013, Der-Yeghiayan, S.).

According to the complaint, TuneUp Corporation developed a software program called TuneUp Utilities that it advertised as being capable of increasing computer start-up speeds, optimizing performance, and removing harmful computer errors. The purchaser alleged that she encountered a TuneUp advertisement claiming that her computer could contain hundreds of harmful errors, and that the TuneUp Utilities could “accurately identify, report, and repair a variety of computer errors and other problems.” When she downloaded and ran a free trial version of the software, it allegedly reported that he computer required repair due to hundreds of errors causing “strong system interference.”

The purchaser then bought a copy of the full version of software. However, she alleged that the software “exaggerated the errors in her PC and fraudulently indicated that such errors were causing damage when in fact they were not,” and that her computer’s speed actually declined when she began using the software. A computer forensic expert hired by the purchaser allegedly found that the software “detect[s] non-errors as harmful computer problems, and mischaracterizes the overall status of a user’s computer—all without real, credible diagnosis of the user’s system.” The software would allegedly appear to be detecting and fixing problems regardless of the actual condition of the computer.

The purchaser filed suit, asserting claim a claim for violation of the CFA, among other claims. TuneUp filed a motion to dismiss.

Legal relationship. The court rejected TuneUp’s argument that the purchaser’s claims should be dismissed because the purchaser had no legal relationship with TuneUp. TuneUp contended that the purchaser entered into a licensing agreement with TuneUp Distribution GmbH, a distributor of the software, and that the court could consider the agreement under the doctrine of incorporation by reference, under which a court may consider “documents to which the Complaint has referred, that are concededly authentic, and that are central to a plaintiff’s claim.” The court observed that Hall had disputed the authenticity of the agreement, arguing that it was not posted on TuneUp’s website or presented to her when she downloaded the software, and that she had received the software from a reseller other than TuneUp Distribution. Since Hall disputed the authenticity of the agreement, the doctrine of incorporation did not apply, the court concluded. In addition, the court noted that the agreement “would not necessarily defeat all of the claims” even if the court did consider it.

Rule 9(b). The court also concluded that the purchaser had adequately alleged her CFA claim with the particularity required by Federal Rule of Civil Procedure 9(b) for fraud allegations. Hall’s claim sufficiently alleged the “who, what, when, where, and how” of TuneUp’s alleged fraud, and therefore satisfied the pleading standards of Rule 9(b), according to the court.

Deception allegations. The purchaser sufficiently alleged that she was deceived by TuneUp’s advertising for purposes of the CFA, in the court’s view. The court found her allegations that TuneUp’s advertisements claimed the software could detect and repair problems with her computer, that the free trial version fraudulently reported errors that induced her to purchase the full version, that she relied on the advertisements and error reports in purchasing it, and that her computer’s performance declined after she began using the software were sufficient to state a claim under the CFA.

Content of the alleged misrepresentations. The court rejected TuneUp’s contention that the purchaser’s claims should be dismissed because the alleged misrepresentations constituted mere “puffery.” The court explained that “puffing in the usual sense signifies meaningless superlatives that no reasonable person would take seriously, and so it is not actionable as fraud.” In contrast, here the purchaser had alleged that TuneUp “fraudulently represented both the purpose and ability of the software,” and “that the free trial version of the software fraudulently identified harmful errors on [the purchaser’s] computer to induce [the purchaser] to purchase the full version of the software.”

The court also declined to dismiss the purchaser’s claims for fraudulent inducement, breach of contract, and unjust enrichment.

The case is No. 13 C 1804.

Attorneys: Benjamin Harris Richman (Edelson LLC) for Carole Grant Hall. James R. Carroll (Skadden, Arps, Slate, Meagher & Flom LLP) for TuneUp Corp.

Companies: TuneUp Corp.

Cases: StateUnfairTradePractices IllinoisNews