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MARK OLIVEIRA, Appellee and Cross-Appellant, v. AMOCO

JUSTICE McMORROW delivered the opinion of the court:

The plaintiff, Mark Oliveira, filed a one count, amended classaction complaint against the defendant, Amoco Oil Company, inthe circuit court of Champaign County. The complaint alleged thatdefendant violated the Consumer Fraud and Deceptive BusinessPractices Act (Act) (815 ILCS 505/1 et seq. (West 1996)) byfalsely representing in a series of advertisements that the use of itspremium gasolines would improve engine performance and benefitthe environment. The complaint further alleged that defendant'sadvertisements increased consumer demand for the premiumgasolines. This, in turn, allegedly permitted defendant to"command an inflated and otherwise unsustainable price for itspremium gasolines," thereby proximately causing actual damageto all purchasers of the gasolines, regardless of whether they wereaware of the ads at the time of purchase. The complaint soughtcertification of a nationwide class of consumers who hadpurchased defendant's premium gasolines.

Defendant filed a motion to dismiss plaintiff's complaintpursuant to section 2-615 of the Code of Civil Procedure (735ILCS 5/2-615 (West 1996)). The circuit court granted defendant'smotion on the basis that plaintiff's "proximate causation pleading[was] inadequate to state a cause of action under the IllinoisConsumer Fraud Act." At the same time, the circuit court alsodenied plaintiff's request for class certification, finding that therewere no predominating common issues of fact or law with respectto plaintiff's proposed class. On appeal, the appellate courtreversed the circuit court's dismissal of plaintiff's cause of actionand affirmed the circuit court's denial of class certification. 311Ill. App. 3d 886. Plaintiff and defendant filed petitions for leave toappeal from the appellate court's decision. 177 Ill. 2d R. 315. Wegranted both petitions and consolidated the appeals for review.

Plaintiff filed his amended class action complaint in thecircuit court of Champaign County on May 5, 1997. The singlecount contained in the complaint alleged that defendant violatedsection 2 of the Act (815 ILCS 505/2 (West 1996)) by conductinga deceptive advertising campaign over a period of several years.Section 2 of the Act provides, in pertinent part, that "deceptiveacts or practices *** or the concealment, suppression or omissionof any material fact, with intent that others rely upon theconcealment, suppression or omission of such material fact *** inthe conduct of any trade or commerce are hereby declaredunlawful ***." 815 ILCS 505/2 (West 1996).

According to plaintiff's complaint, defendant ran a series oftelevision, radio and print advertisements for its premiumgasolines, including "Amoco Ultimate and/or Amoco Silver,"which touted the gasolines' environmental benefits and highperformance qualities. The advertisements allegedly representedthat:

"(A) Amoco Ultimate gasoline is superior to all otherbrands of premium gasoline with respect to engineperformance or environmental benefits because it isrefined more than all other such brands;

(B) The clear color of Amoco Ultimate gasolinedemonstrates the superior engine performance andenvironmental benefits Amoco Ultimate providescompared to other premium brands of gasolines that arenot clear in color;

(C) A single tankful of Amoco Silver or Ultimategasoline will make dirty or clogged fuel injectors clean;

(D) Amoco Silver or Ultimate gasoline providessuperior fuel injector cleaning compared to other brandsof gasoline; and

(E) Automobiles driven more than 15,000 miles withregular gasoline generally suffer from lost engine poweror acceleration which will be restored by the higher octaneof Amoco Silver gasoline."

Plaintiff's complaint alleged that defendant's advertisementsomitted material facts and were "false and misleading." Accordingto plaintiff's complaint, the representations in defendant's adswere "made without any competent and/or scientificsubstantiation" and defendant's premium gasolines were in fact"no better for the performance of [consumers'] motor vehiclesthan [nonpremium] gasolines." The complaint also alleged thatdefendant's advertisements were made in the course of trade orcommerce and that defendant intended "that consumers would relyon these advertisements in making their purchase decisions."Therefore, according to plaintiff's complaint, defendant'sadvertisements violated section 2 of the Act.

Plaintiff also alleged in his amended complaint thatdefendant's advertisements proximately caused him actualdamage. Proximate causation was a necessary element ofplaintiff's complaint because his claim for consumer fraud wasbrought under section 10a(a) of the Act (815 ILCS 505/10a(a)(West 1996)), the provision of the Act which establishes the rightto pursue a private cause of action for consumer fraud. Section10a(a) states, in part, that "[a]ny person who suffers actual damageas a result of a violation of [the] Act" may bring a cause of actionagainst that person for consumer fraud. 815 ILCS 505/10a(a)(West 1996). The "as a result of" language in section 10a(a)imposes an obligation upon a private individual seeking actualdamages under the Act to "demonstrate that the fraud complainedof proximately caused" those damages in order to recover for hisinjury. Zekman v. Direct American Marketers, Inc., 182 Ill. 2d359, 373 (1998).

Plaintiff maintained in his complaint that he suffered actualdamage as a result of the allegedly deceptive advertisements whenhe purchased defendant's premium gasoline. Plaintiff did notallege, however, that defendant's advertisements induced him tobuy the gasoline or that he was deceived by the ads. Nor didplaintiff claim that he saw, heard or read any of the allegedlydeceptive advertisements. Instead, plaintiff alleged that he wasdamaged by defendant's advertisements because the ads created an"artificially inflated" price for the gasoline he purchased. Insupport of this allegation, plaintiff advanced a "market theory" ofcausation.⁽¹⁾ According to plaintiff's complaint, defendant'sallegedly deceptive advertising scheme increased demand fordefendant's premium gasolines. Because of this increase indemand, defendant "was able to command an inflated andotherwise unsustainable price for its premium gasolines."Therefore, "all purchasers of Amoco's premium gasolines wereinjured irrespective of whether they did or did not see or hear thespecific advertisements and marketing materials in question." Inother words, according to plaintiff's complaint, all consumers whopurchased defendant's premium gasolines during the time theadvertisements were running were damaged when they made thepurchase because they paid a higher price for the gasoline thenthey would have paid in the absence of the ads.

In the prayer for relief, plaintiff's complaint requested anorder from the circuit court certifying his action as a class action.See 735 ILCS 5/2-801 et seq. (West 1996). Plaintiff's proposedclass was defined as "[a]ll retail purchasers in the United Stateswho purchased Amoco Ultimate and/or Amoco Silver gasoline"during the time the various advertisements ran, fromapproximately November 6, 1991, through January 2, 1996.⁽²⁾ Insupport of his request for class certification, plaintiff submitted theaffidavit of Dr. William R. Latham III, a professor of economicsat the University of Delaware. Taking as a given that defendant'sadvertisements were misleading and that they had an effect onconsumers, Latham opined that "there exists a strong economiclikelihood that a substantial part of the price differential betweenUltimate and/or Silver and the other grades of Amoco gasolinewas the result of the greater demand for Ultimate and/or Silvergasoline caused by the misleading advertisements for the premiumgasolines. A necessary result of the fact that the misleadingadvertising led some consumers to demand Amoco premiumgasolines was an increase in demand that permitted Amoco tomaintain a higher price for its premium gasolines." According toLatham, all individuals who purchased defendant's premiumgasolines paid an increased price because of the allegedlydeceptive ads, regardless of whether they saw or relied upon theadvertisements at issue. Latham also stated that the extent of the"inflated" price-the difference between the price of the gasolinewith the ads and the price of the gasoline without the ads-could bedetermined by "using the basic techniques of econometricanalysis."

Defendant filed a motion to dismiss plaintiff's complaintpursuant to section 2-615 of the Code of Civil Procedure (735ILCS 5/2-615 (West 1996)). Defendant also contested plaintiff'srequest for class certification. On February 24, 1998, in a rulingissued from the bench, the circuit court concluded that plaintiff's"marketing theory" of causation was "not a correct statement ofproximate cause under the Illinois Consumer Fraud Act."Accordingly, the circuit court granted defendant's motion todismiss "on the basis that the proximate causation pleading isinadequate to state a cause of action under the Illinois ConsumerFraud Act."

Although the circuit court dismissed plaintiff's complaint, thecourt nevertheless went on to consider plaintiff's request for anorder certifying a nationwide class of consumers who hadpurchased defendant's premium gasolines. On this issue, thecircuit court concluded that there were "so many variables" thatmight influence a consumer's decision to buy a particular gasoline,including, for example, the location of the gas station or otherservices available at the station, that the court could not "find thatquestions of fact would be common to the class or that thecommon questions would predominate over any questionsaffecting only individual members." The circuit court also foundthat no common questions of law existed because the Act "wouldnot extend to persons who were not Illinois consumers."Consequently, because there was "a lack of commonality ofquestions of law or fact" with respect to plaintiff's proposed class,the circuit court denied plaintiff's request for class certification.

On appeal, the appellate court first considered the propriety ofthe circuit court's dismissal of plaintiff's complaint and, inparticular, the circuit court's conclusion that plaintiff had failed toadequately plead proximate causation as required under section10a(a) of the Act. As set forth by the appellate court, the parties'arguments on this issue focused primarily on this court's holdingin Martin v. Heinold Commodities, Inc., 163 Ill. 2d 33 (1994).

In Martin, this court considered a private cause of actionbrought under the Act in which it was alleged that a brokeragefirm misrepresented the nature of a certain securities fee. Thiscourt addressed, among other issues, what type of causation theplaintiff had to prove to recover damages for the defendant'smisrepresentation. Relying on federal case law, this court adopteda causation analysis found in federal decisions interpreting Rule10(b)-5 of the Securities and Exchange Act of 1934. Weexplained:

"In order for a plaintiff to recover for a violation ofRule 10(b)-5, the great majority of Federal courts requireplaintiffs to show two types of causation: (1) transactioncausation; and (2) loss causation. [Citation.] Transactioncausation has been defined as meaning that 'the investorwould not have engaged in the transaction had the otherparty made truthful statements at the time required.'[Citation.] Loss causation, on the other hand, has beendefined as meaning 'that the investor would not havesuffered a loss if the facts were what he believed them tobe.' ***

We find Illinois law to be similar to the analysis usedby these Federal courts which require both transactioncausation and loss causation in order to recover formisrepresentation in securities cases." Martin, 163 Ill. 2dat 60.

See also Adler v. William Blair & Co., 271 Ill. App. 3d 117, 128-29 (1995); Bastian v. Petren Resources Corp., 271 Ill. App. 3d232, 235 (1995) (in securities fraud, transaction causation occurswhen the defendant's conduct causes the plaintiff to enter into atransaction; loss causation refers to the reasons for theinvestment's decline in value).

Before the appellate court in the case at bar, defendant arguedthat, under Martin, any plaintiff seeking recovery under the Actmust allege "transaction causation." That is, a plaintiff must allegethat he would not have engaged in the transaction that resulted indamage if the defendant had made truthful statements rather thanmisleading ones. Defendant argued that plaintiff in the instant casehad not made any such allegation and, indeed, could not, since hedid not allege that he was even aware of defendant'sadvertisements. Therefore, according to defendant, plaintiff'scomplaint was properly dismissed.

The appellate court rejected this argument. The appellatecourt concluded that the term "transaction causation," as used inMartin, was simply another name for reliance. See 311 Ill. App. 3dat 893. The appellate court noted, however, that this court hasstated in several decisions that reliance is not a separate elementof a plaintiff's cause of action under the Act. 311 Ill. App. 3d at893 (citing Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 501(1996), Martin, 163 Ill. 2d at 76, and Siegel v. Levy OrganizationDevelopment Co., 153 Ill. 2d 534, 542 (1992)). Attempting toreconcile Martin's holding requiring proof of transaction causationwith these latter statements, the appellate court concluded thattransaction causation, or reliance, was an element of a plaintiff'scause of action only in cases involving securities fraud broughtunder the Act. 311 Ill. App. 3d at 893. Because plaintiff's cause ofaction in the case at bar did not concern securities fraud, theappellate court concluded that transaction causation was not arelevant concern.

Having rejected defendant's argument regarding transactioncausation, the appellate court concluded that plaintiff's marketingtheory of causation satisfied the proximate causation requirementof the Act. The appellate court noted plaintiff's allegation that, butfor defendant's allegedly deceptive advertisements, defendant'spremium gasolines would have cost less than they actually did.The appellate court further noted that plaintiff had alleged that hepurchased defendant's gasoline during the time the advertisementswould have had their effect, i.e., after they were published orbroadcast. These allegations, the appellate court determined, setforth a legally sufficient statement of proximate causation underthe Act. 311 Ill. App. 3d at 896.

The appellate court rejected defendant's additional argumentsthat plaintiff's complaint was properly dismissed because it wasnot pled with the level of particularity required under the Act andbecause it failed to plead a material misrepresentation. 311 Ill.App. 3d at 894-95. Accordingly, the appellate court reversed thecircuit court's dismissal of plaintiff's complaint.

With respect to the question of class certification, however,the appellate court affirmed the circuit court. The appellate courtnoted that a suit may not be certified as a class action unless"[t]here are questions of fact or law common to the class, whichcommon questions predominate over any questions affecting onlyindividual members" (735 ILCS 5/2-801(2) (West 1996)).Addressing this requirement, the appellate court first held, as amatter of statutory construction, that the Act did not apply to out-of-state consumers. 311 Ill. App. 3d at 897-98. In addition, theappellate court determined that the members of plaintiff'sproposed class from outside Illinois lacked sufficient contacts withIllinois to permit application of the Act. The court stated:

"As the purchase of gasoline in his or her respectivestate and the determinants of the price paid for it werewhat triggered each potential plaintiff's cause of action,something that does not affect Illinois commerce orconsumers, no significant connection to Illinois justifiesthe use of Illinois law." 311 Ill. App. 3d at 899.

Because the Act could not be applied to out-of-state members ofthe proposed class, the appellate court concluded that thosemembers' claims would be governed by the laws of each statewhere the gasoline was purchased. 311 Ill. App. 3d at 899. Thus,the appellate court held, there was "no common law to apply." 311Ill. App. 3d at 899. Further, because the elements of the consumerfraud laws of some other states differ from the Act's, the appellatecourt concluded that "[t]he claims of out-of-state plaintiffs wouldrequire individual fact finding and no predominance of commonfact exists." 311 Ill. App. 3d at 899. Accordingly, the appellatecourt affirmed the circuit court's denial of class certification.

Plaintiff filed a petition for leave to appeal the appellatecourt's judgment affirming the denial of class certification. 177 Ill.2d R. 315. The petition was allowed and the case was docketed inthis court as No. 89511. Defendant filed a petition for leave toappeal the appellate court's judgment reversing the dismissal ofplaintiff's cause of action. That petition was also allowed and thecase was docketed as No. 89497. The two appeals wereconsolidated for review.

We subsequently granted leave to the Illinois Trial LawyersAssociation to file an amicus curiae brief in support of plaintiff'sappeal. We also granted leave to the Product Liability Council, theNational Association of Independent Insurers, the AmericanInsurance Association and the Alliance of American Insurers, theIllinois Automobile Dealers Association and the ChicagoAutomobile Trade Association, Lawyers for Civil Justice, and theChamber of Commerce of the United States, to file amicus curiaebriefs in support of defendant.

In No. 89497, defendant contests the appellate court's holdingthat plaintiff adequately pled a private cause of action forconsumer fraud under the Act. In No. 89511, plaintiff challengesthe appellate court's holding that the circuit court properly deniedclass certification. We first consider defendant's appeal.

The circuit court granted defendant's motion to dismissplaintiff's amended class action complaint pursuant to section2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West1996)). A section 2-615 motion attacks the legal sufficiency of acomplaint by asserting that it fails to state a cause of action uponwhich relief can be granted. Weatherman v. Gary-Wheaton Bankof Fox Valley, N.A., 186 Ill. 2d 472, 491 (1999). In determiningwhether a complaint states a cause of action, the allegationscontained within the complaint are construed in the light mostfavorable to the plaintiff and all well-pleaded facts and reasonableinferences drawn from those facts are accepted as true.Weatherman, 186 Ill. 2d at 491. The standard of review on appealfrom an order granting a section 2-615 motion to dismiss is denovo. Weatherman, 186 Ill. 2d at 491.

Plaintiff's amended class action complaint alleges thatdefendant violated section 2 of the Act (815 ILCS 505/2 (West1996)). Section 2 prohibits deceptive acts or practices which arecommitted in the course of trade or commerce and with the intentthat others rely upon them. Section 2 provides, in full:

"Unfair methods of competition and unfair or deceptiveacts or practices, including but not limited to the use oremployment of any deception, fraud, false pretense, falsepromise, misrepresentation or the concealment,suppression or omission of any material fact, with intentthat others rely upon the concealment, suppression oromission of such material fact, or the use or employmentof any practice described in Section 2 of the 'UniformDeceptive Trade Practices Act', approved August 5, 1965,in the conduct of any trade or commerce are herebydeclared unlawful whether any person has in fact beenmisled, deceived or damaged thereby. In construing thissection, consideration shall be given to the interpretationsof the Federal Trade Commission and the federal courtsrelating to Section 5(a) of the Federal Trade CommissionAct." 815 ILCS 505/2 (West 1996).

When originally enacted in 1961, the Act did not expresslyprovide a private cause of action for violations of section 2. Butsee Rice v. Snarlin, Inc., 131 Ill. App. 2d 434 (1970) (holding thatthe Act impliedly permitted a private cause of action). Unlawfulbusiness practices were generally prosecuted by the AttorneyGeneral, who had the authority to pursue injunctive relief,restitution and civil penalties. See 815 ILCS 505/3 through 7(West 1996). In 1973, the General Assembly added section 10a(a)to the Act (815 ILCS 505/10a(a) (West 1996)). Section 10a(a)expressly authorizes private causes of action for deceptivebusiness practices proscribed by the Act. Section 10a(a) states, inrelevant part: "Any person who suffers actual damage as a resultof a violation of [the] Act committed by any other person maybring an action against such person." 815 ILCS 505/10a(a) (West1996).

Unlike an action brought by the Attorney General undersection 2, which does not require that "any person has in fact beenmisled, deceived or damaged" (815 ILCS 505/2 (West 1996)), aprivate cause of action brought under section 10a(a) requires proofof "actual damage" (815 ILCS 505/10a(a) (West 1996)). Further,a private cause of action brought under section 10a(a) requiresproof that the damage occurred "as a result of" the deceptive actor practice (815 ILCS 505/10a(a) (West 1996)). As notedpreviously, this language imposes a proximate causationrequirement. See, e.g., Zekman, 182 Ill. 2d at 373; Martin, 163 Ill.2d at 52-54, 58-61. Thus, to adequately plead a private cause ofaction for a violation of section 2 of the Act, a plaintiff mustallege: (1) a deceptive act or practice by the defendant, (2) thedefendant's intent that the plaintiff rely on the deception, (3) theoccurrence of the deception in the course of conduct involvingtrade or commerce, and (4) actual damage to the plaintiff (5)proximately caused by the deception. Zekman, 182 Ill. 2d at 373;Connick,174 Ill. 2d at 501.

Defendant's primary contention on appeal is that plaintiff's"marketing theory" of causation is a legally insufficient statementof proximate causation and, therefore, that the circuit courtproperly dismissed plaintiff's amended complaint. In support ofthis contention, defendant repeats the same arguments which itraised in the appellate court regarding Martin. Defendant furtherargues that it was error for the appellate court to hold that Martin'srequirement of "transaction causation" applies only to casesinvolving securities fraud brought under the Act.

Defendant also raises an additional point regarding Martin.Defendant emphasizes that Martin's causation analysis was basedon common law principles of causation found in the tort offraudulent misrepresentation. See Martin, 163 Ill. 2d at 58-61.This fact is significant because, in the common law tort offraudulent misrepresentation, the causal link between thewrongdoer and the damage to the plaintiff is provided by theconcept of reliance. More precisely, in the common law tort offraudulent misrepresentation, the element of cause-in-fact isdefined as reliance. See Restatement (Second) of Torts