Zekman v. Direct American Marketers, Inc.

Annotate this Case
Zekman v. Direct American Marketers, No. 82817 (5/21/98)


Docket No. 82817--Agenda 10--November 1997.
THEODORE ZEKMAN, Appellee, v. DIRECT AMERICAN MARKETERS,
INC. (American Telephone and Telegraph Company et al., Appellants).
Opinion filed May 21. 1998.

JUSTICE MILLER delivered the opinion of the court:
Plaintiff, Theodore Zekman, brought this action in the circuit court of
Cook County against American Telephone and Telegraph Company, American
Telephone and Telegraph Company of Illinois, AT&T Communications, Inc.,
and AT&T Communications of Illinois, Inc. (collectively, AT&T), seeking
damages under statutory and common law theories of recovery. The circuit
court dismissed some of these claims and granted AT&T summary judgment
on others. The appellate court reversed. 286 Ill. App. 3d 462, 471. We allowed
AT&T's petition for leave to appeal (166 Ill. 2d R. 315) and now reverse the
judgment of the appellate court and affirm the judgments of the circuit court.

BACKGROUND
The procedural history of this case may be stated briefly. Patricia Rick
filed a class action in the circuit court of Cook County on May 20, 1992,
against Direct American Marketers, Inc. (Direct American), AT&T, and Illinois
Bell Telephone Company. Plaintiff was substituted as the named plaintiff and
class representative and filed an amended class action complaint (first amended
complaint). Count V of the first amended complaint alleged that AT&T violated
sections 2 and 2P of the Consumer Fraud and Deceptive Business Practices Act
(Act) (815 ILCS 505/2, 2P (West 1992)) by knowingly receiving the benefits
of Direct American's fraud. Plaintiff also alleged, in count VI, that AT&T
acquired moneys by means of a deceptive practice in violation of section 9 of
the Act (815 ILCS 505/9 (West 1992)). The trial judge granted AT&T's motion
to dismiss these claims. Plaintiff later filed second and third amended class
action complaints, which he withdrew in response to AT&T's dismissal
motions. Plaintiff then filed a fourth amended class action complaint (fourth
amended complaint), which alleged violations of section 2 of the Act by
AT&T. These allegations differed from those allegations in the first amended
complaint in that plaintiff now alleged direct conduct by AT&T in violation of
the Act. Plaintiff also alleged that AT&T committed common law fraud and
knowingly accepted the benefits of fraud in violation of the common law. The
trial judge granted AT&T's and Direct American's motions for summary
judgment.
Plaintiff appealed both the decision to dismiss plaintiff's claims against
AT&T in counts V and VI of the first amended complaint and the grant of
summary judgment on the fourth amended complaint. The appellate court
reversed and remanded the cause to the circuit court. 286 Ill. App. 3d at 471.
First, the appellate court found that summary judgment was improper on the
fourth amended complaint because there was a genuine issue of fact as to
whether Direct American's mailings caused plaintiff to believe that he had won
an award. 286 Ill. App. 3d at 469. Next, the appellate court reversed the trial
court's ruling dismissing counts V and VI of the first amended complaint. 286
Ill. App. 3d at 471.
Both AT&T and Direct American filed petitions for leave to appeal in
this court. We denied Direct American's petition (173 Ill. 2d 549) but allowed
AT&T's petition (166 Ill. 2d R. 315). We granted leave to the American
Association of Retired Persons to file a brief as an amicus curiae. 155 Ill. 2d
R. 345. As the question of class action status has not yet been reached, it is not
at issue here.

FACTS
On review of an order granting a motion to dismiss, all well-pleaded
facts in the complaint are accepted as true. Ziemba v. Mierzwa, 142 Ill. 2d 42,
47 (1991). The following general facts are relevant to our inquiry, and
additional facts are supplied as needed. Plaintiff received a series of separate
mailings from Direct American. The mailings generally did not solicit plaintiff
to purchase any product or service. Instead, the mailings indicated that plaintiff
had won a prize. Prizes listed on each mailing included large cash awards, as
well as discount coupons for various products or services. While it was possible
to respond by use of the mail, the mailings urged recipients to call a "900"
number in order to immediately claim their prize. By calling the "900" number,
recipients incurred charges, usually between $8 and $10 for the call. In addition
to stating the charge that applied to the call, the mailings informed the recipient
of the procedure for responding by mail and gave the odds of winning the
prizes. This information usually was in less conspicuous type. The mailings
often listed plaintiff's name next to the largest cash award. Plaintiff made
numerous calls to various different "900" numbers. Each time plaintiff called,
he won only discount coupons, and never a cash award. AT&T billed plaintiff
for the charges and retained a percentage of the charge for itself; the majority
of the charge went to Direct American.
AT&T can provide billing services for companies soliciting "900"
number calls so that the charge appears on the caller's long-distance bill.
AT&T has guidelines that impose minimum standards on those companies that
use its services. AT&T reviewed Direct American's mailings for the purpose
of ensuring that they complied with the AT&T guidelines and state and federal
laws prohibiting false, deceptive, and misleading advertising and trade practices.
At times, AT&T determined that Direct American's proposed mailings were
misleading and required Direct American to make changes before they were
sent. Sometimes AT&T did not determine a mailing to be misleading until after
it was already sent to customers and the customers had made and been billed
for calls to the "900" number. It was AT&T's policy to provide refunds for
customers who contested charges for their calls to Direct American.
Plaintiff was deposed. His deposition testimony provides in pertinent
part:
"Q. Well, was there a time when you were getting cards but you
were not responding, you were simply throwing them away?
A. No. I responded to--my name was on them. And I thought that
my name being on them meant something.
* * *
Q. All right. When you received the mail piece, did you read it?
A. In a cursory fashion.
Q. Approximately how much time did you spend reading it?
A. Enough time to see if my name was on it and if there was a cash
award on it. But I did not read the card carefully in any other way.
Q. And you made a telephone call?
A. Yes.
Q. Were you aware that you could have also found out whether or
not you won by mailing in and asking?
A. Yes. I had determined that from previous mailings when I began
getting them. However, I chose not to mail them in because it was
emphasized that it would take three or four weeks before it would even
be acted upon. And in that period of time, you wouldn't know.
Q. All right. Did you have any--strike that.
You also, knew, did you not, that there would be a charge from the
telephone company associated with the call to the 900 number?
A. Yes.
Q. And when you called, did you hear a message that told you that
you could hang up and not get charged for the telephone call?
A. Yes, I did.
* * *
Q. Were you being compelled to respond?
A. I wasn't compelled.
Q. It was your own decision?
A. Yes.
Q. And you were being given information in the mailing pieces,
correct?
A. I was responding to the fact that I have [sic] been given a
mailing that had my name on it with a certain amount of money that I
had won as an award.
Q. You said money--
A. Or a claim.
* * *
Q. Dr. Zekman, does that [referring to an exhibit of a mailing]
disclose to you that there are six different types of awards? Do you see
in the box where it says awards are?
A. Yes. But I did not carefully read what all the awards were. I was
only interested in whether I won an award.
Q. Right. And is it your testimony that you believed after you read
this that you had won a cash award?
A. I did not know whether I had won an award, a cash award. I was
responding to instructions in the hope that I did win a cash award.
Q. And you called rather than wrote because you were eager to find
out?
A. Yes.
* * *
Q. Do you remember approximately how many 900 number calls
you had placed--
A. No. I don't.
Q. More than ten?
A. I don't know because I don't see the bills. I don't pay the bills.
My secretary does that.
* * *
Q. And why did you save [the mailing pieces]?
A. Because I was becoming disillusioned with the whole process
that my name was appearing on the card and that I was told I had won
something and I did not."
While showing plaintiff his telephone records, testimony revealed that
on October 8, 1991, plaintiff made 11 calls to various "900" numbers and, on
October 26, 1991, plaintiff made a total of 13 calls to various "900" numbers.

THE FIRST AMENDED COMPLAINT
Counts I through IV of the first amended complaint were against Direct
American, and count VII was against Illinois Bell; neither defendant is a party
to this appeal. In count V of the first amended complaint, plaintiff alleged that
defendant AT&T knowingly received the benefits of Direct American's
deceptive practices in violation of sections 2 and 2P of the Act. In count VI,
plaintiff incorporated the allegations contained in count V and further alleged
that AT&T violated section 9 of the Act by acquiring moneys by means of a
deceptive practice under the Act. AT&T filed a motion to dismiss counts V and
VI, arguing that the complaint failed to state a cause of action. On January 26,
1993, the trial judge dismissed those counts with prejudice. The judge stated
that there was nothing in the Act, its legislative history, or case law to expand
the Act "to those who provide the vehicle by which the deception is
promulgated." Pursuant to Supreme Court Rule 304(a), the trial judge found
that there was "no just reason to delay enforcement of or appeal from" the
order. On plaintiff's motion to rehear and vacate the order, the trial judge
entered an order on March 12, 1993, vacating the January 26 dismissal order.
The March 12 order dismissed the counts without prejudice, allowed plaintiff
to file a second amended complaint, and vacated the Rule 304(a) language in
the January 26 order.
On April 12, 1993, plaintiff filed an "Agreed Motion" with no objection
from AT&T. The "Agreed Motion" contained a proposed order to replace the
March 12 order. In the motion, plaintiff explained that he wanted to be able to
both amend the complaint as to AT&T and preserve the appealability of the
trial court's dismissal of counts V and VI of the first amended complaint. On
April 12, the trial judge entered the order as agreed. The order: (1) vacated the
March 12 order; (2) dismissed with prejudice counts V and VI of the first
amended complaint; (3) vacated the Rule 304(a) language of the January 26
order; (4) allowed plaintiff to file a second amended complaint; and (5) was
entered nunc pro tunc as of March 12, 1993.
Initially, we address the status of counts V and VI of the first amended
complaint. Normally, a party filing an amended pleading waives any objection
to the trial court's ruling on former complaints. Foxcroft Townhome Owners
Ass'n v. Hoffman Rosner Corp., 96 Ill. 2d 150, 153 (1983). Thus, plaintiff
would apparently have waived appeal of the dismissal of counts V and VI of
the first amended complaint when he filed his second amended complaint. As
a general matter, however, a waiver rule is an admonition to the litigants, not
a limitation on the jurisdiction of the reviewing court. American Federation of
State, County & Municipal Employees, Council 31 v. County of Cook, 145 Ill. 2d 475, 480 (1991). Here, plaintiff filed the "Agreed Order" of April 12 "in
order to preserve the appealability of the Court's dismissal of Counts V and
VI" of the first amended complaint and to allow plaintiff leave to amend his
complaint. The trial judge entered the order the same day, and AT&T has not
questioned that part of plaintiff's appeal brought on the first amended
complaint. The ability to bring an appeal from two separate complaints based
on the same cause of action was neither raised nor briefed in this court. We
make no finding regarding its propriety at this time and address counts V and
VI of the first amended complaint on their merits.
Count V of plaintiff's first amended complaint alleged that AT&T
violated sections 2 and 2P of the Act by knowingly receiving the benefits of
Direct American's fraud. We must determine whether knowingly receiving the
benefits of another's fraud will support liability under sections 2 and 2P of the
Act.
In construing a statute, courts are required to ascertain and give effect
to the intent of the legislature. Varelis v. Northwestern Memorial Hospital, 167 Ill. 2d 449, 454 (1995). Faced with a question of statutory construction, courts
should first look to the language of the statute to determine the intent of the
drafters. Nottage v. Jeka, 172 Ill. 2d 386, 392 (1996). When the statutory
language is clear, no resort is necessary to other aids of construction. Henry v.
St. John's Hospital, 138 Ill. 2d 533, 541 (1990).
Section 2 lists conduct that violates the Act. Section 2 states:
"Unfair methods of competition and unfair or deceptive acts or
practices, including but not limited to the use or employment of any
deception, fraud, false pretense, false promise, misrepresentation or the
concealment, suppression or omission of any material fact, with intent
that others rely upon the concealment, suppression or omission of such
material fact, or the use or employment of any practice described in
Section 2 of the "Uniform Deceptive Trade Practices Act", approved
August 5, 1965 [815 ILCS 510/2 (West 1992)], in the conduct of any
trade or commerce are hereby declared unlawful whether any person has
in fact been misled, deceived or damaged thereby." 815 ILCS 505/2
(West 1992).
We agree with AT&T that the plain language of section 2 of the Act
does not include anything that makes it unlawful to knowingly receive the
benefits of another's fraud. As this court stated in Laughlin v. Evanston
Hospital, 133 Ill. 2d 374, 390 (1990), "[t]he language of the Act shows that its
reach was to be limited to conduct that defrauds or deceives consumers or
others." To allow plaintiff to recover for AT&T's knowingly receiving the
benefits of Direct American's fraud would require us to read into the statute
violations that are not a part of the statutory text.
Canons of statutory interpretation additionally guide our decision that
knowingly receiving the benefits of another's fraud is not actionable under
section 2 of the Act. When a statute provides a list that is not exhaustive, as
section 2 does ("including but not limited to ***"), the class of unarticulated
things will be interpreted as those that are similar to the named things. Board
of Trustees of Southern Illinois University v. Department of Human Rights, 159 Ill. 2d 206, 211 (1994). The common feature of the forms of conduct listed in
section 2 of the Act is that they involve actions directly done by the perpetrator
of the fraud. Knowingly receiving the benefits of another's fraud, however,
more closely resembles a form of secondary liability. We believe that a claim
for knowingly receiving the benefits of another's fraud is not so similar to the
enumerated violations of section 2 of the Act that the legislature intended for
it to be a cause of action under that statute. With no clear indication from the
legislature that such conduct violates section 2 of the Act, we cannot extend
liability to those who knowingly receive the benefits of another's fraud.
Section 10a of the Act, which is the provision that authorizes a private
individual to bring a cause of action under the Act, supports our decision.
Section 10a(a) states that "[a]ny person who suffers damages as a result of a
violation of this Act committed by any other person may bring an action
against such person." 815 ILCS 505/10a(a) (West 1992). The plain language of
section 10a(a) provides a private cause of action against "such person" that
"committed" the violation of the Act. The statute does not provide for a cause
of action against those who knowingly receive benefits from the person
committing the violation. In the face of such language, we will not create a
cause of action under section 2 of the Act for knowingly receiving the benefits
of another's fraud.
Plaintiff also alleged in the first amended complaint that AT&T violated
section 2P the Act by knowingly receiving the benefits of Direct American's
fraud. Section 2P specifically relates to the disclosure of conditions on offers
of free prizes, gifts, or gratuities. Section 2P states:
"It is an unlawful practice for any person to promote or advertise
any business, product, or interest in property, by means of offering free
prizes, gifts or gratuities to any consumer, unless all material terms and
conditions relating to the offer are clearly and conspicuously disclosed
at the outset of the offer so as to leave no reasonable probability that
the offering might be misunderstood." 815 ILCS 505/2P (West 1992).
We believe that this provision clearly relates only to the person offering
the free prizes, gifts or gratuities. The plain language of this statute does not
pertain to those who knowingly receive the benefits of another's fraud.
We also conclude that plaintiff fails to state a cause of action under
section 9 of the Act, as alleged in count VI of the first amended complaint.
Section 9 states:
"Subject to an order of the court terminating the business affairs of
any person after receivership proceedings held pursuant to this Act, the
provisions of this Act shall not bar any claim against any person who
has acquired any moneys or property, real or personal, by means of any
practice herein declared to be unlawful." 815 ILCS 505/9 (West 1992).
The language of section 9 states that the provisions of the Act "shall not
bar" certain claims. We do not believe that this language affirmatively gives
rise to any claims. Further, the reference in section 9 to receivership
proceedings must logically be read in conjunction with section 8 of the Act,
which pertains to the distribution of assets of a person placed in receivership.
When understood in that context, section 9 appears to refer only to claims
against sellers placed in receivership. See Rice v. Snarlin, Inc., 131 Ill. App. 2d
434, 442 (1970). As this situation is not before us, section 9 is inapposite and
count VI of the first amended complaint must be dismissed.
We hold that sections 2 and 2P of the Act do not provide for a cause
of action against a person who knowingly receives the benefits of another's
fraud. Further, section 9 of the Act is inapplicable in the present case. Thus, we
reverse that portion of the appellate court decision that reversed the trial court's
order dismissing counts V and VI of the first amended complaint.

THE FOURTH AMENDED COMPLAINT
In count V of the fourth amended complaint, plaintiff again alleged that
AT&T violated section 2 of the Act. Unlike the allegations in the first amended
complaint, that AT&T knowingly received the benefits of a fraud, the
allegations here asserted that AT&T directly violated the Act by reviewing,
revising, and approving Direct American's deceptive solicitations and recorded
messages. Plaintiff further alleged that AT&T violated the Act by billing
plaintiff for his calls to the "900" numbers in an allegedly misleading manner.
The remaining counts against AT&T in the fourth amended complaint--counts
VI and VII--alleged common law fraud. AT&T moved to dismiss the fourth
amended complaint. A trial judge temporarily assigned to the case denied
AT&T's motion to dismiss the counts against it in the fourth amended
complaint; AT&T then answered the complaint.
AT&T later filed what it termed a "Motion for Summary Judgment on
Unique Facts of Plaintiff's Individual Claim." AT&T argued in the motion that
plaintiff's deposition testimony demonstrated that plaintiff was not actually
deceived by the mailings or the telephone bills and that plaintiff therefore could
not establish that any of AT&T's alleged misconduct had caused him injury.
With specific reference to the statutory cause of action pleaded in count V of
the fourth amended complaint, AT&T contended that the plaintiff's deposition
established that the conduct complained of was not the proximate cause of any
harm, as the Act requires. See Connick v. Suzuki Motor Co., 174 Ill. 2d 482,
501 (1996) (though plaintiff need not establish reliance, valid claim by private
plaintiff must show that alleged fraud proximately caused injury complained
of). AT&T also argued that it was entitled to summary judgment on the
common law counts. Following a hearing, the trial court granted AT&T's
motion for summary judgment.
On review, the appellate court agreed with AT&T's contention that the
Act required the plaintiff to establish proximate cause. The appellate court
found plaintiff's deposition testimony to be inconclusive and incomplete on this
issue, however, and therefore reversed the trial judge's grant of summary
judgment. Dissenting, Justice Gordon believed that "plaintiff's admitted conduct
precludes him from seeking any recovery under the relevant provisions of [the]
Act." 286 Ill. App. 3d at 472 (Gordon, J., dissenting).
The elements of a claim under section 2 of the Act are: (1) a deceptive
act or practice by the defendant; (2) defendant's intent that plaintiff rely on the
deception; and (3) the occurrence of the deception in the course of conduct
involving trade or commerce. Connick, 174 Ill. 2d at 501. As we noted in our
earlier discussion, section 10(a) of the Act, which governs private causes of
action under the statute, mandates that an individual's damages be "a result of
a violation of [the] Act." 815 ILCS 5/10a(a) (West 1992). Thus, this court
requires that a successful claim by a private individual suing under the Act also
demonstrate that the fraud complained of proximately caused plaintiff's injury.
Connick, 174 Ill. 2d at 501; see also Warren v. LeMay, 142 Ill. App. 3d 550,
569 (1986). This requirement would pertain as well to alleged violations of
section 2P of the Act, which plaintiff also cites.
Unlike the allegations in the statutory counts in the first amended
complaint, discussed previously, count V of the fourth amended complaint
asserts that AT&T directly violated the statute. At issue here is whether AT&T
is entitled to summary judgment on these allegations because plaintiff's
deposition establishes that the conduct complained of was not the proximate
cause of his injury. Summary judgment is proper "where the pleadings,
affidavits, depositions, admissions, and exhibits on file, when viewed in the
light most favorable to the nonmovant, reveal that there is no genuine issue as
to any material fact and that the movant is entitled to judgment as a matter of
law." Busch v. Graphic Color Corp., 169 Ill. 2d 325, 333 (1996). Our review
of an order granting summary judgment is de novo. Outboard Marine Corp. v.
Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992).
We believe that plaintiff's deposition testimony precludes him from
establishing that the alleged misconduct by AT&T, including its supposed
participation in Direct American's own asserted violations of the Act,
proximately caused his damages. In the deposition, plaintiff acknowledged that
when he received the mailings he did not know whether he had won a cash
award and that he made the telephone calls only in the hope that he had won
such an award. Plaintiff also said that he understood that he would be charged
for each call he made. Plaintiff recalled that at the beginning of each call, he
heard a recorded message telling him that he could avoid any charge for the
call by immediately hanging up.
Plaintiff further acknowledged in the deposition that he knew that he
could respond to the award notices by means of the mail instead of by calling
the designated "900" number. Plaintiff explained that he did not use the mail,
however, because he was eager to learn if he had won a cash prize. Plaintiff
said that he continued to make calls even though he knew he had won only
discount coupons with every previous call. On occasion, plaintiff made
numerous calls in short periods of time, winning only discount coupons with
each call.
On this record, we do not believe that there exists a genuine issue of
material fact whether the allegedly deceptive nature of the solicitations received
by plaintiff caused him to incur the charges for the "900" number calls. Rather,
it appears that plaintiff understood the requirements and costs of the program.
Aware that he could respond to the solicitations through the mail, plaintiff
instead voluntarily chose to learn about the prizes in a more expeditious, yet
more expensive, manner.
The preceding discussion also answers the plaintiff's further contention
that he was deceived by AT&T's manner of billing for the calls. By his own
admission, plaintiff knew that he had not necessarily won cash prizes, that he
did not have to call a "900" number to learn if had won such a prize, and that
he would incur a charge if he did choose to learn his prize status by placing the
calls. Nonetheless, plaintiff alleged that the bills were deceptive because they
failed to disclose that his long-distance service would not be terminated if he
refused to pay for the calls to Direct American. We note that plaintiff has not
cited any authority in support of the contention that AT&T bore that duty.
Although apparently it was AT&T's policy not to charge for calls to these
numbers if customers complained about them, AT&T's conduct in that regard
appears to be voluntary. In addition, we note plaintiff's statement in his
deposition that he did not read or pay the bills himself, delegating those duties
to his secretary. Accordingly, plaintiff could not have been misled by the
allegedly deceptive nature of the bills. Plaintiff also alleged that the bills
misrepresented that they contained only tariffed telephone charges when, in
fact, they contained contest entry fees, which are not tariffed charges. The bills,
which are included in the record, do not make any representation regarding
whether the charges are tariffed or not, however, and they plainly identify each
"900" call and the cost of the particular call.
In sum, based on the testimony by plaintiff at his deposition, we do not
believe that there remains a genuine issue of material fact whether the alleged
violations of the Act by AT&T proximately caused his damage, for plaintiff's
testimony demonstrates that he was not deceived by AT&T's actions. Plaintiff's
statement in the deposition that he became disillusioned with the fact that his
name appeared on cards and he "was told [he] had won something and [he] did
not" is insufficient to show proximate cause between the alleged fraud by
AT&T and plaintiff's alleged damage. In fact, plaintiff always did win
something, though the prizes--discount coupons--were disappointing to him. As
noted by the dissenting justice below, plaintiff was induced to place the calls
"by the mere receipt of a personalized notice announcing that he won a prize,
which, by his own admission, could have consisted of coupons rather than
cash." 286 Ill. App. 3d at 472 (Gordon, J., dissenting). We therefore reverse
that portion of the appellate court judgment that reversed the trial court's grant
of summary judgment on count V of plaintiff's fourth amended complaint.
As a final matter, we note that AT&T has asserted, in its briefs and oral
argument before this court, that plaintiff did not appeal from the portion of the
circuit court judgment that granted AT&T's motion for summary judgment on
the two common law counts against the company. The appellate court opinion
does not address these counts. AT&T has not shown the plaintiff's supposed
abandonment of these counts, however, by evidence in the record, nor has it
presented in this appeal anything more than a brief argument in opposition to
those counts. Still, plaintiff does not dispute AT&T's contention that he failed
to appeal that portion of the adverse circuit court judgment, or make any
argument in support of the common law counts. In view of plaintiff's silence
on this question, we do not feel compelled to search the record in this case to
rebut AT&T's claim of abandonment. Accordingly, we offer no opinion on the
merits of those counts.

CONCLUSION
For the foregoing reasons, the judgment of the appellate court is
reversed, and the judgments of the circuit court of Cook County are affirmed.

Appellate court judgment reversed;
circuit court judgments affirmed.