Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Ill.: “Scare tactics” was an unfair practice under Illinois deceptive practices law, (Mar 6, 2015)

By Dan Selcke, J.D.

A pair of restaurant owners adequately alleged an unfair practice under the Illinois Consumer Fraud and Deceptive Practices Act (ICFA) on the part of a company whose attorney sent them threatening letters and indicated that they had no option but to settle a pending case against them, the federal district court in Chicago, Illinois held (G&G Closed Circuit Events, LLC v. Castillo, March 5, 2015, Gottschall, J.).

Boxing match broadcast. G&G Closed Circuit Events, LLC provided televised boxing matches to commercial establishments. It obtained the exclusive nationwide television distribution rights for the “Austin Trout v. Saul Alvarez Fight Program,” and entered into sublicensing agreements with commercial entities which allowed establishments to broadcast the fight in exchange for a fee. G&G never entered into an agreement with defendants Jaime and Maria Castillo, and alleged that they unlawfully exhibited the program in their establishment, La Pena Restaurante.

Threatening letters. The Castillos received a number of letters from a lawyer representing G&G indicating that they had violated the Communications Act “and or” the Cable Act. After the second letter arrived, Jaime Castillo spoke to an attorney who told him that his “only option was to settle,” and demanded a minimum of $20,000.00. Jaime informed the attorney that “he did not have that kind of money” and that “they would have to take him to court.”

Causes of action. G&G filed suit, alleging violations of 47 U.S.C. Sections 553 (the Cable Act) and 605 (the Communications Act). In their answer, the Castillos filed counterclaims for common law fraud and a violation of the ICFA, 815 ILCS 505/1 et. seq. G&G filed a motion to dismiss the counterclaims.

Common law fraud. First, the court addressed the Castillos’ common law fraud counterclaim, the elements of which were: (1) a false statement of material fact; (2) knowledge or belief by the maker that the statement was false; (3) an intent to induce reliance on the statement; (4) reasonable reliance upon the truth of the statement; and (5) damages resulting from that reliance. Coexist Foundation, Inc. v. Fehrenbacker, No. 11-CV-6279, 2014 WL 1287880 (N.D. Ill. Mar. 28, 2014).

The Castillos could not state a claim for common law fraud because there had been no reliance. When G&G’s lawyer told Jaime that he had no option but to settle and demanded $20,000.00, Jaime did not pay and told the lawyer that she would have to take him to court, which was exactly what happened. The Castillos argued that “when threatened with a lawsuit a potential defendant has no say in the matter, and therefore no means of avoiding reliance.” This argument made no sense, especially considering that the Castillos did have a say in the matter and exercised it by refusing to pay G&G. Accordingly, the court dismissed the counterclaim for common law fraud.

ICFA counterclaim. Next, the court considered the Castillo’s counterclaim that G&G’s “tactics and actions constitute a deceptive act or practice under the [ICFA],” which was based on the allegation that G&G used scare tactics, misrepresented its legal rights, and exaggerated the potential legal damages when attempting to negotiate a settlement with the Castillos. The elements of a claim under the ICFA were: (1) a deceptive act or unfair 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. Siegel v. Shell Oil Co., 612 F.3d 932, 935 (7th Cir. 2010).

The court held that the Castillos adequately alleged a claim under the ICFA, which involved less stringent pleading standards than their fraud claim. The Castillos’ allegations that G&G sent them multiple threatening letters and admonished them that they had no option but to settle constituted an “unfair practice” under the ICFA, particularly because the ICFA was to be “construed liberally.” The fact that the Castillos did not actually rely on G&G’s settlement demand did not matter, as actual reliance was not a necessary element to state a claim under the ICFA. Accordingly, the court denied G&G’s motion to dismiss the Castillos’ ICFA counterclaim.

The case number is: 14 CV 2073.

Attorneys: Andre Ordeanu (Zane D. Smith & Associates, Ltd.) for G&G Closed-Circuit Events, LLC. Lisa L. Clay (Lisa L. Clay Attorney at Law) for Jaime F. Castillo and El Bajio Enterprises, Inc.

Companies: El Bajio Enterprises, Inc.

Cases: StateUnfairTradePractices IllinoisNews