Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Ill.: Sale of taxi metering systems not a consumer transaction, (Jan 22, 2015)

By Dan Selcke, J.D.

Several Washington, D.C. cab companies could not bring a claim under the D.C. Consumer Protection Procedures Act, a federal district court in Chicago has held, because the transaction they were complaining about—the sale of electronic metering systems for use in taxi cabs—was a business transaction, rather than a consumer transaction of the kind the statute was designed to police. Gleike, the company that sold the metering systems, had brought the action against the cab companies for breach of contract, fraud, tortious interference with a prospective business expectancy, and defamation (Gleike Taxi v. DC Tops LLC, January 20, 2015, Shah, M.).

Taxi regulations. In 2013, the District of Columbia Taxicab Commission enacted regulations requiring that all taxis be equipped with a Modern Taximeter System (MTS), which would allow drivers to process payments from debit and credit cards. Three cab companies—DC Tops, Challenger, and Grand—contracted with Gleike, a preferred vendor, to provide them with MTS units and to install them in their cabs.

Problematic installation. The MTS installation process was plagued by problems. Two of the cab companies entered into their agreements with Gleike expecting the company to ask for extensions of the deadline the regulations had set for installation of the MTS units. Gleike asked for extensions for some drivers, but many others were left out and were prohibited from driving for a time after the deadline came and went. Also, drivers for one of the cab companies were misinformed as to the terms of the agreement with Gleike, which resulted in chaos during the installation process. The companies alleged that Gleike charged them fees that were not present in the original agreements, while Gleike accused the companies of not paying for the MTS units. In the end, either Gleike or the cab companies terminated their agreements with each other.

Counterclaims. After Gleike sued them, the cab companies filed counterclaims for breach of contract, fraud, and unjust enrichment. They also alleged violations of the D.C. Consumer Protection Procedures Act (CPPA) and the Illinois Consumer Fraud and Deceptive Business Practices Act. Gleike moved to dismiss the counterclaim brought under the D.C. consumer protection statute and the counterclaim for unjust enrichment.

CPPA inapplicable. The court turned first to the cab companies’ counterclaim under the CPPA. That statute applied to transactions involving goods that “[a] person does or would purchase, lease (as lessee), or receive and normally use for personal, household, or family purposes.” D.C. Code Section 28-3901(a)(2)(B)(i). Gleike argued that a contract to sell MTS units for use in commercial taxis was not such a transaction, and that the CPPA did not apply to it.

The cab companies fired back, and cited Adam A. Weschler & Son, Inc. v. Klank for the proposition that a transaction will usually fall under the CPPA if the purchaser is not engaged in the regular business of purchasing and reselling a certain type of good. 561 A.2d 1003 (D.C. 1989). The cab companies argued that they intended to use, rather than resell, the MTS units, so those transactions were covered by the CPPA. The court disagreed, noting that buying a good without intending to resell it did not automatically bring the transaction within the ambit of the statute. “Ultimately,” it said, “if the purpose for a good (even by an end-user) is a business or professional one, then the transaction is exempt from D.C.’s consumer-protection law.” Here, the MTS units were to be put to use by taxi drivers and taxi companies, a business use.

Unjust enrichment. Next, the court turned to the cab companies’ counterclaim for unjust enrichment, which they had pled in the alternative. The court allowed the claim to advance, since it did not contradict any of the factual allegations that formed the basis of their other claims.

Affirmative defenses. Geike had also filed a motion to strike several affirmative defenses raised by the cab companies, which the court considered one by one. It struck the affirmative defense of unclean hands, since that defense was not available under Illinois law in a situation where, as here, the plaintiff was seeking only legal remedies. It also struck the affirmative defense of frustration of purpose, as the cab companies did not identify any frustrating event that totally or almost totally destroyed the value of Geike’s performance.

However, the court did allow some of the affirmative defenses to advance. For example, it did not strike the affirmative defense of estoppel, since the cab companies adequately pled that they had relied on Geike’s representations that it was able to install functional MTS units before the regulatory deadline when making their decision to contract with the company. The court also allowed the cab companies’ affirmative defense that Geike failed to state a breach of contract claim to advance, since that question required more factual development and argument to answer.

Outcome. Finally, the court granted Geike’s motion to strike the cab companies’ jury demand, since they had all signed a broadly worded jury waiver before the suit started. The court granted Geike’s motion to dismiss the cab companies’ counterclaim for violation of the CPPA, but denied it as to their counterclaim for unjust enrichment. Also, it struck the cab companies’ affirmative defenses of unclean hands and frustration of purpose, but did not strike the affirmative defenses of estoppel and failure to state a claim.

The case number is: 13-cv-06715

Attorneys: Svetlana Kaplina (Elan Law Group) for Gleike Taxi Inc. Michael Paul Lewis (The Lewis Firm PLLC) for DC Tops LLC, Challenger Cab, LLC, and Grand Cab, LLC

Companies: Gleike Taxi Inc.; DC Tops LLC; Challenger Cab, LLC; Grand Cab, LLC

Cases: StateUnfairTradePractices IllinoisNews