Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—NDIll: Illinois Consumer Fraud Claims Fail Against Wal-Mart and Crib Manufacturer over Crib Recall, (May 23, 2013)

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

A purchaser of a crib, which was later subject to a recall that allegedly reduced its value and prevented resale, could not state putative class action Illinois Consumer Fraud Act (ICFA) claims against the manufacturer of the crib and Wal-Mart Stores, Inc. over alleged misrepresentations and omissions made by the manufacturer and Wal-Mart, the federal district court in Chicago has ruled (Wiegel v. Stork Craft Manufacturing, Inc., May 21, 2013, Bucklo, E.).

Celina Wiegel owns a drop-side crib manufactured by Stork Craft Manufacturing, Inc. that was purchased through Wal-Mart Stores’ website in February 2008. On November 23, 2009, Stork Craft voluntarily recalled 2.1 million drop-side cribs, including the model belonging to Wiegel. Stork Craft offered a repair kit that would convert the drop-side crib into a fixed-side crib, which Wiegel installed. The Consumer Product Safety Commission (CPSC) had previously recalled drop-side cribs manufactured by Simplicity, Inc. in 2007.

Although Wiegel’s child did not suffer the injuries that prompted the recall, Wiegel filed a class action lawsuit against Stork Craft and Wal-Mart, asserting that their “misleading and deceptive statements and omissions regarding the safety of her crib on Wal-Mart’s website” violated the ICFA. The defendants filed a motion to dismiss.

Wiegel challenged statements on Wal-Mart’s website characterizing her crib as a “drop-side crib,” and claiming that the crib “meets or exceeds all U.S. and Canadian standards.” The court first rejected Wiegel’s argument that, although the characterization of her crib as a “drop-side crib” at the time of purchase may have been accurate, the characterization later “became untrue” when the crib was recalled. “Illinois law does not contemplate ICFA liability for statements that, while true when made, ‘became’ untrue in light of intervening events,” according to the court.

As to the statement that the crib met or exceeded all U.S. and Canadian standards, Wiegel did not dispute that Wal-Mart, Stork Craft, and third party entities had tested the cribs and found they complied with relevant regulations. Instead, Wiegel claimed that the statement was still misleading because (1) the crib did not actually comply with a CPSC crib regulation and (2) the statement implied that the cribs were safe when they were not.

The court rejected the first argument, observing that Wiegel’s only evidence that the cribs did not comply with the CPSC regulation was the recall notice and an e-mail from the CPSC to Stork Craft referring to the “weakness of the plastic hardware” in the cribs, neither of which “suggest[ed] that the recalled cribs did not comply with” the CPSC regulation. Moreover, the regulations appeared to be “directed to different issues” than those identified by Wiegel.

With respect to the second argument, Wiegel relied on a 2002 Illinois Appellate Court decision in Kleczek v. Jorgensen, 767 N.E.2d 913, for the proposition that “a statement which is technically true as far as it goes may nevertheless be fraudulent, where it is misleading because it does not state matters which materially qualify the statement as made.”

However, the court observed that, unlike the “binary” statement at issue in Kleczek, “whether a product is ‘safe’ is virtually impossible to quantify in any reliable or uniform fashion, other than by reference to objective criteria such as those set forth in the regulations and industry standards,” and Wiegel had not identified any such alternative standard. It was not “a misrepresentation to state that the crib complied” with applicable standards, “when that it is what the undisputed evidence shows,” because, “[u]nlike in Kleczek, defendants’ statement was accurate in substance.”

Nor were the defendants’ statement misleading because they did not disclose (1) “that infants and young children were reported to have been injured or killed while using the cribs;” (2) “that the [crib] would be recalled and require conversion to a fixed-side crib to be used safely;” and (3) “that the cribs could not be resold.”

With respect to the first alleged omission, Wiegel did not show that the defendants knew of consumer complaints before October 2009, when the CPSC sent a chart of them to Stork Craft’s president. Moreover, the recall notice did not state when Stork Craft became aware of the incidents, and in any case “under Illinois law, a recall announcement is not evidence of concealment.” Further, the inference that the defendants omitted the reported injuries to induce Wiegel and others to purchase the crib was “implausible” given that Wiegel admitted she was unaware of any other crib manufacturer that provided that information.

With respect to the second alleged omission, the prior recall of cribs made by Simplicity did not provide evidence that the defendants knew Wiegel’s crib would be recalled, because Wiegel did not demonstrate that her crib “was so similar to the recalled Simplicity crib that defendants had to have known that her crib, too, would be recalled.”

Nor could Wiegel sufficiently support her claim with a March 2009 e-mail from Stork Craft’s president stating, in relation to a Chicago Tribune article, that “[a]ll I can say is it is a darn good thing we started on this over one year ago. Now we have to move quickly to change everything over and sell through inventory. The public is now on notice that drop-sides are bad.” The statements “we started on this over a year ago” and “drop-sides are bad” were “simply too vague to support [Wiegel’s] claim” that Stork Craft knew in February 2008 that Wiegel’s crib would have to be recalled, that the defendants knew that she would be unable to resell it, or that they knew that drop-side cribs would become subject to a regulation barring their sale.

Finally, the court rejected Weigel’s argument that the defendants violated the ICFA’s prohibition on “unfair trade practices “by selling a crib that was later recalled.” The court’s analysis under this provision required determining ““(1) whether the practice offends public policy; (2) whether it is immoral, unethical, oppressive, or unscrupulous; [and] (3) whether it causes substantial injury to consumers.”

The court observed that Wiegel had not provided evidence that would support the conclusion that the defendants knew that her crib “presented unreasonably high safety risks” or would later be recalled. The Illinois Attorney General’s September 2010 criticism of a third party that tested Stork Craft’s cribs did not provide evidence that the defendants knew in February 2008 that the cribs were “dangerously defective,” or that they knew that their statements about the crib’s characteristics were misleading. Therefore, the court found that “the evidence in this case is not such as could reasonably support the conclusion that defendants engaged in conduct of the kind proscribed by the ‘unfair practices’ section of the” ICFA.

The case is No. 09 C 7417.

Attorneys: Ben Barnow (Barnow and Associates, P.C.) for Celina Wiegel. Brian Patrick Kavanaugh (Kirkland & Ellis LLP) for Stork Craft Manufacturing, Inc. Gretchen N. Miller (Greenberg Traurig, LLP) for Wal-Mart Stores, Inc.

Companies: Stork Craft Manufacturing, Inc.; Wal-Mart Stores, Inc.

Cases: StateUnfairTradePractices IllinoisNews