Judge Thomas R. Fitzgerald on Class Actions/Class Action Abuse

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Barbara's Sales, Inc. v. Intel Corporation (2007)


  • The majority opinion, written by Justice Thomas R. Fitzgerald, concluded, amongst other things, that defendant Intel's representation that its Pentium 4 computer processer was the best and fastest on the market, in contrast to its prior model, the Pentium 3 processer, was not a statement subject to attack as fraudulent, or as a "deceptive business practice" under the Illinois Consumer Fraud and Deceptive Business Practices Act. In so ruling the Court overturned the decision of the circuit judge where the case originated, in notorious Madison County, Illinois.


ISSUES:

The issue before the Court was whether Intel decieved an entire class of consumers "with a false representation implicit in the name Pentium 4, that the microprocesser was the best and fastest processer on the market."


HOLDINGS:

The court specifically held that Intel's acts of labeling its product the "Pentium 4" constiuted "puffing," which denotes the exaggerations reasonably expected of a seller as to the degree of quality of his or her product, the truth or falsity of which cannot be precisely determined, statements which, in "the usual sense signifies meaningless superlatives that no reasonable person would take seriously, and so it is not actionable as fraud,” rather than affirmative misprepresentation or fraud.


MAJORITY REASONING:

  • (1) One "Plaintiff states that while she remembers seeing advertisements, printed materials and commercials about Pentium 4/P4 processors in personal computers, she cannot specifically remember any particular advertisement or statement. She based her decision to purchase the computer on the label Pentium 4/P4 which meant to her that the computer was faster than the Pentium III or PIII.” "Other named plaintiffs could not recall any specific advertisements, from any source, containing a specific statement made by Intel that the Pentium 4 microprocessor was faster than the Pentium III processor."
  • (2) "[P]laintiffs can only identify one statement, the name “Pentium 4,” that was communicated to the entire class. Because this is indistinguishable from the use of the term “best,” a statement we found not actionable as puffery in Avery, we also find that the implicit representation inherent in the name Pentium 4 is mere puffery.
  • (3) Our precedent disallowing such actions premised on puffery is based on the sound reasoning that no reasonable consumer would rely on such an implicit assertion as the sole basis for making a purchase. A reasonable consumer would not rely on it because there is nothing specific or explicit about the name “Pentium 4,” or even its alleged implicit meaning of “4 is better than 3” or “best,” that can be said to have a specific attribute other than the actual processor itself. One can say almost anything is the “best” because it is a mere suggestion, a belief, or an opinion. It is not, standing alone, a representation of fact. Though plaintiffs may have correctly felt that “4 meant better than 3,” it is merely, as plaintiffs call it, “implicit” that it was best.
  • (4) No named plaintiff solely consulted the name “Pentium 4” before making the purchase. For example, plaintiff Donald Braddy consulted a Dell advertisement touting the Pentium 4's high performance as well as viewed different computers in retail stores before making his purchase on Dell's Web site
  • (5) Plaintiffs mistakenly make much of their expert's opinion that the “performance” of any Pentium 4 can be compared to any Pentium III according to a single benchmark. This is an issue the parties dispute and, if this case were to go forward, would need to be resolved at trial. However, there is nothing in the “4 is better than 3” marketing formulation that presents more than a vague promise of something better. Notably, the word “performance” was not a word that was communicated to the entire class. As such, plaintiffs' theory requires vague suggestion upon vague suggestion: that “best” means “performance,” that “performance” means “speed,” and that “speed” can be tested for all P4s and P3s according to one benchmark.
  • (6) "[W]e also note that a number of additional statements made by Intel are not actionable because no plaintiff was aware of these statements. Under Oliveira and its progeny, plaintiffs must prove that each and every consumer who seeks redress actually saw and was deceived by the statements in question."
  • (7) Internal Intel documents also show that Intel was aware of the Pentium 4's inferiority on certain tests. Nevertheless, it is not apparent that Intel ever made any false public claims as to benchmarking. Further, plaintiffs do not argue that Intel made any uniform misrepresentation regarding clock speed, or falsely claimed that its product possessed a clock speed that it did not have. Intel merely asserted that its product was the highest performance microprocessor, a representation which the class members do not allege they all received in common.





Price v. Philip Morris, Inc. (2005)


  • Justice Fitzgerald concurred in the majority opinion, which held that Based on these other authorities, read in conjunction with Illinois law, we conclude that the FTC could, and did, specifically authorize all United States tobacco companies to utilize the words “low,” “lower,” “reduced” or like qualifying terms, such as “light,” so long as the descriptive terms are accompanied by a clear and conspicuous disclosure of the “tar” and nicotine content. Thus Philip Morris could not be liable for defrauding smokers by using these terms, even if the terms were not accurate. In so ruling the Court overturned a contrasting $10.1 billion jury award out of notorious Madison County, Illinois. Justice Fitzgerald also specifically concurred in Justice Karmieir's Concurring Opinion.


LOWER COURT HOLDING:

  • "[T]he Madison County, Illinois circuit court made two separate findings of fraud: (1) a finding that PMUSA's use of the terms “light” and “lowered tar and nicotine” was fraudulent and deceptive based on the known phenomenon of compensation, and (2) a finding that the members of the plaintiff class were defrauded because PMUSA failed to disclose that its “light” cigarettes were more mutagenic than full-flavor cigarettes. Counsel argued that, even if this court were to reverse on the merits of the first claim, the second portion of the circuit court's judgment must still stand."


THE MAJORITY'S HOLDINGS:

  • "[W]e conclude that the FTC could, and did, specifically authorize all United States tobacco companies to utilize the words “low,” “lower,” “reduced” or like qualifying terms, such as “light,” so long as the descriptive terms are accompanied by a clear and conspicuous disclosure of the “tar” and nicotine content in milligrams of the smoke produced by the advertised cigarette." On this basis, the Court reversed the Circuit Court, ruled in favor of Philip Morris, and negated the $10.1 billion verdict.


MAJORITY REASONING:


  • "It is sufficient if the authorization [to use certain terms] proceeds from regulatory activity, including the resolution of an enforcement action by means of a consent order."


  • "In addition, a consent order entered into by the FTC with one member of a regulated industry, which is published pursuant to statute, provides implied authority for other members of the regulated industry to engage in the same conduct. It would elevate form over substance to say that the FTC specifically authorized American Brands to use such descriptors so long as certain conditions were met, but did not thereby specifically authorize other members of the industry to act accordingly. Thus, while the authorization given to American Brands was express, the authorization given to the rest of the industry was implied, but no less specific."


  • "Because [Philip Morris] was specifically authorized to use the disputed terms without fear of the FTC challenging them as deceptive or unfair, it is exempt from civil liability under 10b(1) of the Consumer Fraud Act for the use of the terms so long as the other conditions set out in the consent orders were met. We find no evidence in the record that [Philip Morris] failed to use these terms in compliance with the terms of the consent orders."


  • "The increased mutagenicity of the smoke delivered by Marlboro Lights and Cambridge Lights cannot be a separate basis for a claim under the Consumer Fraud Act because, even if the terms “light” and “lowered tar and nicotine” do convey a message of safety, their use is specifically authorized by the FTC."


  • "In addition, any claim of fraud based on [Philip Morris']s failure to disclose increased mutagenicity is barred by this court's long-standing rule against imposing additional disclosure requirements beyond those established by statute or agency regulation."


  • Because we have concluded that the 1971 and 1995 consent orders provided specific authorization to all industry members to engage in the conduct permitted by the orders, these orders fall within the scope of section 4, even though PMUSA was not a party to either consent order.


  • "Even if, as the circuit court found, every purchaser must have relied to some degree on the disputed language, perhaps upon making the first purchases of a light cigarette, we question whether it can reasonably be said that the words “light” and “lowered tar and nicotine” actually deceived over a million people for decades.""


  • "We question, for example, whether all or most of the young people who began smoking long after these products were brought to market were deceived by the disputed words when choosing these brands of cigarettes. It may be just as likely that peer group pressure was the proximate cause of their adopting Marlboro Lights as their preferred brand. Similarly, there is no way of knowing how many smokers first tried Marlboro Lights because they were deceived by the promised lower level of tar, then tried one or more other brands, only to return to Marlboro Lights as a matter of personal preference. That is, that every smoker compensates fully for the effects of the lowered tar and nicotine cigarette. However, even if this is true with respect to smokers of full-flavor cigarettes who switch to the so-called “light” or “ low tar” brands, we question whether the members of the class who never smoked prior to smoking Marlboro Lights would have felt the need to compensate when they lacked a prior habit to compensate for."


  • "[R]ecognizing the primacy of federal law in this field, the Illinois statute itself protects companies from liability if their actions are authorized by federal law."


  • “[Philip Morris] is permitted by the FTC to so advertise its cigarettes if they meet the FTC's standard. Philip Morris is required to adhere to the FTC's regulation of ‘lights' advertising. The FTC requires disclosure of Cambridge Filter Method tar and nicotine ratings in cigarette advertisements, and has stated that a cigarette may be advertised as light if its rating using the FTC Method is less than 15mg using the FTC Method. Therefore, any contention that Philip Morris' advertising of these two cigarette brands as ‘Lights' is misleading squarely confronts the FTC's mandate that cigarette companies disclose FTC Method results in their advertising and use the Method to determine whether a particular cigarette may be classified as ‘Light.’ ”


  • [In] the 1987 testimony before Congress of then-chairman of the FTC Daniel Oliver, in which he described the FTC's preference for informal regulation via the use of enforcement actions and consent orders rather than formal rulemaking. Oliver stated that it is “more efficient” to bring a single case against one industry actor than to use scarce resources to engage in rulemaking and that in “the case of the cigarette industry,” it was “entirely reasonable to suppose that one action against [one] cigarette company would have an effect on all of them, and that you would not have to make a rule.”


EXPRESSION OF JUDICIAL PHILOSOPHY IN MAJORITY OPINION:

ON JUDICIAL RESTRAINT IN DEFERENCE TO THE LEGISLATURE: "Finally, we share the concerns expressed by plaintiffs and their amici about the devastating health effects of smoking and, in particular, the scourge of smoking among young people. We emphasize that because this action is barred by section 10b(1) of the Consumer Fraud Act, it is unnecessary to reach the merits of plaintiffs' claim that PMUSA intentionally deceived the public. Our resolution of the present case is in no way an expression of approval of PMUSA's alleged conduct. Nevertheless, as justices, our role is to apply the law as it exists, not to decide how the law might be improved. We must defer to the policy of the legislature as expressed in the language of the Consumer Fraud Act. Therefore, plaintiffs and others who would seek to alter the conduct of tobacco companies must take their case to the General Assembly, where they might seek amendment of section 10b(1); to the FTC, where they might seek changes in regulations; or to Congress, where they might seek amendments to the Labeling Act."


HOLDING IN JUSTICE KARMEIER AND JUSTICE FITZGERALD'S CONCURRING OPINION


  • "[P]laintiffs failed to establish that they sustained actual damages. In reaching this conclusion, I hasten to add, as the majority opinion did, that rejection of plaintiffs' cause of action should in no way be construed as an endorsement of [Philip Morris]]'s conduct. Our reversal of the circuit court's judgment is not an exoneration of [Philip Morris]. It is merely a conclusion that this particular cause of action by this particular group of claimants seeking this particular form of recovery cannot be sustained under the law of Illinois.


REASONING OF CONCURRING OPINION:

  • "The requirement of actual damages means that the plaintiff must have been harmed in a concrete, ascertainable way. That is, the defendant's deception must have affected the plaintiff in a way that made him or her tangibly worse off. Theoretical harm is insufficient. Damages may not be predicated on mere speculation, hypothesis, conjecture or whim."
  • "The record in the case before us shows that PMUSA developed and marketed Marlboro Lights and Cambridge Lights cigarettes in response to heightened public concern over health risks posed by smoking. The company believed that it could forestall declining sales by offering a product which consumers perceived as better for them than conventional “full-flavored” brands. Pursuant to that strategy, PMUSA advertised Marlboro Lights and Cambridge Lights cigarettes in a way that led consumers to believe that the brands posed a lower health risk than their “full flavored” counterparts. In reality, and as PMUSA was fully aware, the so-called “light” cigarettes not only offered no health benefits, but were actually more toxic."


  • "When a consumer chooses one product over another in the belief that it will be less harmful to his or her health, only to discover later that it may have been more harmful, the existence of damages might seem self-evident. In this case, however, plaintiffs are not seeking damages based on any heightened adverse effects on their health. Personal injury is not at issue. The losses for which plaintiffs seek compensation are purely economic. Their claim is simply that they did not receive what they bargained for. They paid for health benefits they did not get." * * * Significantly, however, Price also admitted that she continued smoking PMUSA's light cigarettes even after this litigation alerted her to the fact that the cigarettes were not, in fact, any healthier and may actually be more harmful than the regular version of those cigarettes. News that PMUSA's low tar and light representations were illusory likewise did not deter Fruth from continuing to smoke, although he testified that he did switch back from lights to regulars."


  • "Whatever valuation the class representatives may have placed on the health component of light cigarettes, that valuation had no observable economic consequences. Neither Price nor Fruth offered any testimony suggesting that switching from regulars to lights resulted in their paying any more for cigarettes than they would have otherwise. There was no price disparity between light cigarettes and their full-flavored counterparts, and there is no indication that the switch from regulars to lights caused them to buy more packages of cigarettes. The price they paid did not go up. The quantity they purchased did not increase. No additional ancillary or incidental costs were identified. Moreover, neither Price nor Fruth complained that the cigarettes were not worth what they paid for them. To the contrary, Price's continued purchase of lights even after being alerted to their lack of health benefits suggests that she was entirely satisfied with the value of what she received for her cigarette-purchasing dollar."


  • [Plaintiff] presented the results of an internet survey they had commissioned. Plaintiffs have not cited, and I am not aware of, any authority that would permit the opinions of internet survey respondents to establish actual damages under the Consumer Fraud Act where, as here, the class representatives have not been shown to share the survey respondents' views and have not themselves been harmed in the way those who answered the survey claimed they would be under the hypotheticals presented to them.


  • "Even if I could look past these problems, plaintiffs' damages model is insufficient as a matter of law to support the circuit court's judgment. Plaintiffs contend that their damages under the benefit-of-the-bargain rule, as applied to the facts of this case, are equal to the difference between the value the cigarettes would have had if they possessed the qualities they were represented to have and their value as actually sold."


  • "Dr. Jeffrey Harris, postulated that the price of lights would have to be discounted by 77.7% before consumers would still be willing to buy them, assuming the cigarettes were the same healthwise as their full-flavored counterparts. When the hypothetical was changed to assume that lights might be more harmful than regular cigarettes, Harris' analysis determined that the amount of the discount would have to be increased to 92.3%. Based on these figures, plaintiffs argued that the difference between the hypothetically discounted prices and the prices consumers actually paid showed that consumers had significantly overpaid for [Philip Morris]'s light cigarettes in the false hope that those cigarettes would be healthier for them. In plaintiffs' view, the difference was equivalent to the value of the perceived health benefit of the lights, and the overpayment was the measure of plaintiffs' damages."


  • Professors Robert Solow and George Akerlof, both recipients of the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, submitted a brief as amici curiae attesting that the benefit-of-the-bargain rule expressed by our court in Gerill Corp. v. Jack L. Hargrove Builders, Inc., comports with accepted principles of economics. Although they made general statements in support of the basic theoretical and methodological approach taken by Harris, Solow and Akerlof also noted that the “the actual measurement of damages under the applicable legal standard is intrinsically difficult to implement under the facts and circumstances of this case” and that, under those facts and circumstances, “there may be more than one way to measure damages.” One senses from these remarks, and from amici's lack of elaboration in evaluating plaintiffs' approach, a certain unease with plaintiffs' damages calculations. It is no wonder.


  • If a plaintiff cannot prove that he was any worse off financially as a result of the defendant's deceit, his personal feelings of disappointment or dissatisfaction with the transaction are of no consequence. Financial loss is not measured by subjective feelings. It is determined by the choices and values actually available to a consumer in the marketplace.
  • The need for objective, market-based standards to prove financial loss is not being raised here for the first time. It was recognized by defendant's damages expert and is fatal to the plaintiffs' damages model. While the Internet survey commissioned for this case may have shown that survey respondents would have placed a lower subjective value on cigarettes that lacked the health qualities claimed by PMUSA in its marketing of Marlboro Lights and Cambridge Lights, the marketplace demonstrated that, in reality, consumers would not have paid less to satisfy their tobacco habits had the lights' true properties been known. They would not have stopped smoking, for they were addicted, and they could not have bought cigarettes that cost 77.7% less or 92.3% less, for no such cigarettes existed. At most, they would have reverted back to “full-flavored” versions of the cigarettes.
  • Significantly, and as I have already observed, the price charged by PMUSA for such cigarettes, and the price consumers were willing to pay despite the absence of claimed health benefits, was precisely the same as the price charged for “lights.” In marked contrast to the situation with many products aimed at health consciousness, there was no cost differential for consumers between the “healthy” and “regular” versions of the product. Accordingly, while PMUSA's misrepresentations may have deceived consumers into altering their purchasing decisions, the net change in consumers' economic position as a result of those misrepresentations was zero. In other words, plaintiffs may not have received the benefit of their bargain, but the bargain ( i.e., obtaining what were thought to be healthier cigarettes than they would otherwise have purchased) cost them nothing extra. In terms of pecuniary harm, plaintiffs were unaffected. Their financial status remained the same.


  • Plaintiffs' consumer fraud claim cannot be revived on the theory that they might be entitled to an award of nominal damages notwithstanding their inability to show actual damages. Nominal damages can only be awarded where a plaintiff prevails in a case. As already discussed, however, a plaintiff cannot sustain a private right of action under the Consumer Fraud Act unless he or she has sustained actual damages. Unless all of the elements of the cause of action, including the element of actual damages, are established, nominal damages cannot be recovered.
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