YU v. International Business Machines Corp.

Case Date: 06/30/2000
Court: 1st District Appellate
Docket No: 1-99-2268

FIFTH DIVISION

June 30, 2000

No. 1-99-2268


MARIO C. YU, Indiv. and on Behalf of All
Others Similarly Situated,

Plaintiff-Appellant,

v.

INTERNATIONAL BUSINESS MACHINES
CORPORATION and MEDIC COMPUTER SYSTEMS,
INC.,

Defendants-Appellees.

Appeal from the
Circuit Court of
Cook County







Honorable
Thomas Hett,
Judge Presiding.


JUSTICE QUINN delivered the opinion of the court:



Plaintiff, Dr. Mario Yu, filed a class action complaintagainst defendants, International Business Machines Corporation andMedic Computer Systems, Incorporated, seeking to recover damagesarising out of the sale of computer software that allegedly was notyear 2000 (Y2K) compliant. The trial court granted defendants'motion to dismiss plaintiff's complaint pursuant to sections 2-615and 2-619 of the Code of Civil Procedure (735 ILCS 5/2-615, 2-619 (West 1998)) and found the suit was rendered moot. On appeal,plaintiff contends that the trial court erred in dismissing hiscomplaint where he accepted defendant's upgrade of the computersystem in order to mitigate damages. For the following reasons, weaffirm.

The following facts are pertinent to this appeal. Plaintiffis a physician specializing in obstetrics and gynecology. On December 10, 1996, plaintiff purchased a bundled computer solutionsystem (Medic system) from Medic Computer Systems, Inc. (Medic),and International Business Machines Corporation (IBM), which was tobe used to schedule patients' appointments and to track theirvisits and treatments. The record indicates that the Medic systemsoftware is to be used in conjunction with the IBM AIX operatingsystem. Plaintiff received the Medic system in 1997 at a totalcost of $19,336.

On November 24, 1998, plaintiff received a letter datedNovember 13, 1998, from Medic regarding the Medic system. Theletter stated the following: "This letter serves as notificationthat after March 1999, Medic will no longer be able to support the4.1 AIX operating system revision and we encourage you not to delayyour upgrade." The letter offered an upgrade from any AIX version4.1 to version 4.3.1, which was allegedly Y2K ready, at a discountof 50% and added that the order had to be placed before December31, 1998.

On December 4, 1998, plaintiff received an order form fromMedic for an upgrade of the AIX operating system. The form listedthe upgrade price as $2,410. Vivien Yu, plaintiff's wife andoffice manager, averred that on December 16, 1998, she spoke witha technical and sales representative from Medic who informed herthat the Medic system would not process dates after the twenty-first century and would not allow twenty-first century dates to beentered into the computer. She also averred that she was notinformed that a "free fix" of the Y2K defect was available.

On December 22, 1998, plaintiff filed a complaint in theUnited States District Court for the Northern District of Illinois. On February 23, 1999, the federal district court dismissedplaintiff's complaint for failure to establish a sufficient amountin controversy for diversity jurisdiction.

On February 24, 1999, plaintiff filed a complaint in thecircuit court of Cook County and alleged violations of the IllinoisConsumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1et seq. (West 1998)) and The Illinois Uniform Deceptive TradePractices Act (815 ILCS 510/1 et seq. (West 1998)). Plaintiff'scomplaint also sought compensatory damages for breach of expresswarranty and breach of implied warranty and fitness for a specificpurpose. Plaintiff stated in a footnote of the complaint that hewas informed that an "alleged free fix" of the Y2K defect wasavailable by downloading it from the internet or by receiving a CDROM. Robert Hanson, IBM program director of year 2000 customerservices, averred that the Y2K free fix of the AIX operating systemhas been available for downloading on IBM's website since October1997 and that the CD ROM containing the Y2K free fix could beobtained by contacting the customer's marketing representative,calling the IBM 1-800 number, or by mail and facsimile. Plaintiffclaimed that he did not have access to the internet and had notreceived the CD ROM.

Plaintiff's individual claim alleged that "[t]he failure orpotential failure of the BUNDLED SOLUTION after December 31, 1999creates a risk to all of his patients who are monitored asdescribed in the preceding paragraphs."

Plaintiff's complaint also requested injunctive relief. Plaintiff sought a mandatory order to require defendants to notifyall members of the class of the Y2K defect and to correct thedefect free of charge to class members and a provision thatdefendants be prohibited from failing to support or refusing tosupport plaintiff and the class members' existing software.

In plaintiff's consumer fraud allegations, plaintiff allegedthat defendants failed to disclose that the Medic system was notY2K compliant and that "[d]efendant's [sic] failure to disclose,and their misrepresentations and/or concealment of the foregoingmaterial facts may cause potential health care problems to patientsof class members as well as result in financial harm to Plaintiffand other members of the Class." Furthermore, plaintiff claimedthat "[t]he unlawful, unfair or deceptive acts or practices ofDefendants may directly and foreseeably cause damages and injuriesto Plaintiff and the class members' practices and may cause yetuntold damages to Plaintiff's and the putative class members'patients."

Plaintiff filed a motion for preliminary injunction on March5, 1999, and requested that defendants be required to notify allusers of the software that there was a free upgrade available tocure Y2K compliancy problems. Plaintiff also filed his motion forclass certification on March 5, 1999.

In a letter dated March 19, 1999, defendants sent a letter toplaintiff notifying him that they intended to send a letter to allMedic system owners that the upgrade was available at no charge tocurrent customers and would be installed in the third quarter of1999. Plaintiff then filed an emergency motion for a protectiveorder to stop defendants from sending this letter. During thehearing on the protective order, plaintiff stated that he did notwant to wait until the third quarter for the upgrade and demandedthat Medic install the upgrade on his Medic system immediately. The trial court denied plaintiff's motion and Medic mailed theletter to its customers between March 26, 1999, and March 31, 1999. On March 30, 1999, with the knowledge and consent of hiscounsel, plaintiff received the free upgrade. Plaintiff's counseladvised the court that plaintiff's experts had performed "varioustests, forwarding the time clock in the computer to assure it wouldwork after December 31, 1999," and had verified that the freeupgrade worked properly.

On May 11, 1999, defendants moved to dismiss plaintiff's classaction complaint pursuant to section 2-615 of the Code of CivilProcedure. Defendants argued that plaintiff's claims were mootbecause he received the free upgrade to his Medic system andtherefore suffered no injury. Defendants further argued that: (1)plaintiff's negligence claim was barred by the economic lossdoctrine; (2) defendants' alleged misrepresentation was merepuffery; and (3) plaintiff failed to state any allegations againstIBM. Defendants also filed a motion to dismiss pursuant to section2-619(a)(9) on the ground that there was no justiciable controversybecause plaintiff knew that the free upgrade was available beforehe filed his complaint and that the free upgrade had been installedon plaintiff's computer.

At the hearing on defendants' motion to dismiss, the courtfound that plaintiff failed to allege injury or damage and that hisclaims were only speculative. The trial court denied plaintiff'smotion for class certification and the motion for preliminaryinjunction. The court then granted defendants' motion to dismiss. Plaintiff's timely appealed followed.

Plaintiff contends that the trial court erred in finding thathis acceptance of the free upgrade rendered the class action suitmoot. Plaintiff argues that, due to the unique nature of the classaction suit, unnamed class members continue to have an interest inthe suit even after tender to the named plaintiffs of theirindividual claims. Defendants maintain that the complaint wasproperly dismissed because, after plaintiff requested and acceptedthe free upgrade, his claims became moot. Plaintiff responds thathis acceptance of the free upgrade is irrelevant because he had aduty to mitigate damages.

We first note that the standard of review on appeal from asection 2-615 motion to dismiss is whether the allegations in thecomplaint, when viewed in the light most favorable to theplaintiff, sufficiently set forth a cause of action upon whichrelief may be granted. Saunders v. Michigan Avenue National Bank,278 Ill. App. 3d 307, 310, 662 N.E.2d 602 (1996). A ruling on amotion to dismiss does not require a court to weigh facts ordetermine credibility and therefore we review the complaint denovo. Vernon v. Schuster, 179 Ill. 2d 338, 344, 688 N.E.2d 1172(1997). A complaint should not be dismissed under section 2-615unless it clearly appears that no set of facts could be provedunder the pleadings that would entitle the plaintiff to relief. Illinois Graphics Co. v. Nickum, 159 Ill. 2d 469, 488, 639 N.E.2d1282 (1994). A motion to dismiss for failure to state a cause ofaction may be acted upon in a class action before determination ofcertification issues. Arriola v. Time Insurance Co., 296 Ill. App.3d 303, 307, 694 N.E.2d 649 (1998).

We next examine whether plaintiff's complaint containedsufficient allegations to maintain a cause of action againstdefendants. We hold that nothing in plaintiff's complaint allegesactual injury or damages. We also agree with defendants thatplaintiffs' complaint fails to specifically allege a cause ofaction against defendant IBM. Plaintiff's complaint alleges onlythat the Y2K defect in the Medic system may cause potential harm tohis patients and to the patients of putative class members. Failure to state sufficient facts to constitute a legallycognizable present injury or damage mandates dismissal of theaction. Verb v. Motorola, Inc., 284 Ill. App. 3d 460, 471, 672N.E.2d 1287 (1996). As plaintiff's claims of consumer fraud,deceptive trade practices and negligence require actual injury ordamage, we hold that plaintiff's claims constitute conjecture andspeculation. Indeed, as defendants note, similar claims in otherjurisdictions alleging computer failure in the year 2000 have beendismissed for failure to allege a present injury or damages. See,e.g., Faegenburg v. Intuit, Inc., Nos. 602587/98, 603134/98,402582/98 (N.Y. Sup. Ct. December 1, 1998) (complaint dismissedbecause plaintiffs had "not yet incurred any economic damages, andthe anticipated defect had not yet manifested itself"); AgainstGravity Apparel, Inc. v. Quarterback Corp., No. 603752/98 (N.Y.Sup. Ct. Apr. 4, 1999) (complaint dismissed because computer hadnot malfunctioned and plaintiff could not prove damages from alatent Y2K defect). As plaintiff failed to allege that the Medicsystem actually malfunctioned and caused damages due to the Y2Kdefect, we hold that the trial court properly dismissed plaintiff'scomplaint under section 2-615. In light of our disposition, wefind it unnecessary to reach defendant's additional argument thatplaintiff's complaint failed to comply with the Y2K Act (15U.S.C.A. 6601 et. seq. (West Supp. 2000)).

We now address whether the trial court erred in finding thatunder section 2-619(a)(9) of the Code of Civil Procedure,plaintiff's case was rendered moot due to accepting the freeupgrade defendants offered. A motion to dismiss under section2-619 of the Illinois Code of Civil Procedure admits allwell-pleaded facts, but does not admit either conclusions of law orconclusions of fact that are not supported by allegations ofspecific fact. Szczurek v. City of Park Ridge, 97 Ill. App. 3d649, 422 N.E.2d 907 (1981). A defendant can defeat a plaintiff'scause of action by asserting, pursuant to section 2-619(a)(9), an"affirmative matter" that negates completely the plaintiff's causeof action or refutes crucial conclusions of law or conclusions ofmaterial fact that are not supported in the complaint byallegations of specific fact. Illinois Housing DevelopmentAuthority v. Sjostrom & Sons, Inc., 105 Ill. App. 3d 247, 433N.E.2d 1350 (1982).

Under the circumstances of this case, the trial court properlydismissed plaintiff's case as moot due to defendants' tender of thefree upgrade to plaintiff. An issue is moot if no actualcontroversy exists or where events occur that make it impossiblefor the court to grant effectual relief. Wheatley v. Board ofEducation of Township High School District 205, 99 Ill. 2d 481,485, 459 N.E.2d 1364 (1984). In Wheatley, the defendant dismissed26 tenured and 33 nontenured teachers. The plaintiffs filed aclass action suit requesting a writ of mandamus directing thedefendant to rescind its dismissals of the teachers. Subsequently,the named plaintiffs accepted the defendant's offer ofreemployment. The defendant then filed a motion to dismiss thecomplaint and argued that the reemployment of the named plaintiffs,rendered the issues in the complaint moot. The trial court foundthat the issues were moot and dismissed the complaint. This courtreversed, holding that the issues were not moot as to the tenuredteachers who were not offered reemployment.

Wheatley, 99 Ill. 2d at 483-84.

On appeal to the supreme court, the defendant contended thatthe action should be dismissed because the interests of the namedplaintiffs were moot. Our supreme court held that "[b]y virtue ofaccepting employment, they were granted the essential reliefdemanded. Under these circumstances, it is clear that theinterests of the named representative plaintiffs are moot becausethere is no longer a controversy between them and the Board." Wheatley, 99 Ill. 2d at 485.

Here, plaintiff clearly demanded and accepted the free upgradein March 1999. Once defendants tendered the requested relief toplaintiff and his Medic system was Y2K compliant, there was nolonger a case or controversy. As in Wheatley, once plaintiffaccepted this remedy, plaintiff was no longer an appropriaterepresentative of the interests of the class. "'If none of thenamed plaintiffs purporting to represent a class establishes therequisite of a case or controversy with the defendants, none mayseek relief on behalf of himself or any other member of theclass.'" Magnuson v. City of Hickory Hills, 933 F.2d 562, 565 (7thCir. 1991), quoting O'Shea v. Littleton, 414 U.S. 488, 494, 38 L.Ed. 2d 674, 682, 94 S. Ct. 669, 675 (1974).

Plaintiff urges us to find that defendants' tender of the free upgrade to him as the named plaintiff is irrelevant to the mootnessquestion and relies on Susman v. Lincoln American Corp., 587 F.2d866 (1978), for the proposition that a case does not become mootmerely because a defendant tenders to the named plaintiff his orher individual damages. See Susman, 587 F.2d at 870. As noted inthe recent case of Hillenbrand v. Meyer Medical Group, S.C., 308Ill. App. 3d 381, 720 N.E.2d 287 (1999), "[t]o hold otherwise wouldallow a party to avoid ever defending a class action suit by simplytendering payment to the named plaintiffs, in each class actionfiled against it, prior to the trial court's ruling on their motionfor class certification." Hillenbrand, 308 Ill. App. 3d at 392.

In the instant case, we find that plaintiff's reliance onSusman is misplaced. While it is true that, if a motion for classcertification is pending at the time tender is made, the case isnot moot, here, tender was made prior to plaintiff filing themotion for class certification. Plaintiff filed his motion forclass certification on March 5, 1999. The record shows thatplaintiff became aware of the free upgrade after filing thecomplaint, but before he filed his motion for class certification. Indeed, although plaintiff argues that he was informed that he hadto purchase the AIX operating system upgrade at a cost of $2,410,plaintiff's complaint reveals that he was aware that defendant IBMprovided a free upgrade of its AIX operating system through theinternet and CD ROM as early as December 1998. Therefore, thetender of the free upgrade was made prior to the motion for classcertification and we find that dismissal was appropriate. Furthermore, as plaintiff was the sole representative of the classand no remaining class members have sought to substitute themselvesas the named plaintiff, we hold that dismissal of the suit and thedenial of the motion for class certification was proper. Based onthe foregoing reasons, the dismissal of plaintiff's class actioncomplaint is affirmed.

Affirmed.

HARTMAN and GREIMAN, JJ., concur.