Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Ill.: Consumer claims that manufacturer, telemarketer, and promoter partnered on deceptive sales practices can proceed, (May 29, 2014)

By Linda O’Brien, J.D., LL.M.

In a putative class action against a promotional products manufacturer, telemarketing firm, and marketing services company, a consumer sufficiently pleaded facts to support claims that the companies partnered to defraud consumers into enrolling in valueless membership programs by using deceptive marketing and sales practices, the federal district court in Chicago has decided (Daniell v. Sempris, LLC, May 27, 2014, Gettleman, R.).

E. Mishan & Sons, Inc. d/b/a Emson, Inc. is an importer and manufacturer of promotional products. Bonnie Daniell purchased a product on Emson’s website and entered her billing and contact information on the website purchase page. Subsequently, Daniell was contacted by an operator from telemarketer Quality Resources to review her purchase and attempt to market various membership programs offered by Sempris, LLC. The operator represented that the programs had low-cost introductory offers, included incentive gifts, and written information with offer details would be mailed prior to the commencement of the program monthly membership charges. Daniell agreed to a trial membership in a “Budget Savers” program but did not receive any written materials or incentive gift. Sempris denied her request for a refund after Daniell cancelled her membership.

Daniell filed suit against Emson, Quality Resources, and Sempris, alleging that the companies worked in concert and used deceptive marketing and sales practices to defraud customers by enrolling them in valueless membership programs, in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA). Sempris moved for dismissal.

The court determined that the consumer sufficiently pleaded that Sempris knowingly participated in the fraud by developing the misrepresentations and partnering with the other defendants to market its deceptively described membership programs. To state a claim under the ICFA, a plaintiff must show (1) a deceptive act or practice by the defendant, (2) the defendant’s intent that the plaintiff rely on the deception, (3) the occurrence of the deception in course of trade or commerce, and (4) damage to the plaintiff proximately caused by the deception.

In rejecting Sempris’ argument that all the representations in the complaint were made to Daniell by Quality Resources, the court noted the plaintiff alleged that the defendants worked in concert to use the deceptive sales practices and had a contractual relationship to share profits. She also alleged that Sempris actively participated in drafting the script used by Quality Resources operators that contained the misrepresentations and Sempris reviewed telephone calls made by operators to consumers. In this case, Sempris may be liable for violations of the ICFA by reviewing, revising, and approving another defendant’s deceptive solicitations, the court concluded.

The case is No. 13 C 6938.

Attorneys: Steven Lezell Woodrow (Edelson PC) for Bonnie Daniell. Jeffrey Backman (Greenspoon Marder, PA) and Timothy A. Hudson (Tabet DiVito Rothstein) for Quality Resources, Inc. Craig Christopher Martin (Jenner & Block LLP) for Sempris, LLC. Adam Thomas Peterson (Leahy, Eisenberg & Fraenkel, Ltd.) for E. Mishan & Sons, Inc.

Companies: Sempris, LLC; E. Mishan & Sons, Inc.; Quality Resources, Inc.

Cases: StateUnfairTradePractices IllinoisNews