The Illinois Appellate Court for the First District recently held that the voluntary payment doctrine should not be applied to defeat state UDAP claims, and that the defendant's refund to the plaintiff did not moot the action due to the fact that the plaintiff's reasonable attorney's fees could exceed that amount.
A copy of the opinion is available at: http://www.illinoiscourts.gov/Opinions/AppellateCourt/2013/1stDistrict/1122063.pdf.
A consumer filed a lawsuit against a retailer, alleging a violation of the Illinois Consumer Fraud and Deceptive Business Practice Act (the "Act"). Specifically, the consumer alleged that the retailer collected sales tax on the full amount of a retail purchase, even though part of that purchase was subsidized by a federal voucher program. The retailer tendered $1,000 to the consumer, without admitting liability.
Both parties moved for summary judgment. The consumer called attention to the testimony of an employee of the retailer, indicating that the retailer's policy was to assess tax only on the net price, and not on the portion subsidized by the federal program.
The lower court determined that because the retailer had a policy of not taxing the subsidized portion of purchases, and of refunding any taxes mistakenly assessed, any damages suffered by the consumer were due to his failure to seek a refund. The consumer appealed.
On appeal, the Court first analyzed whether the retailer's tender of $1,000 to the consumer mooted the action. It answered in the negative, noting that consumer alleged that his attorney fees were far in excess of the tendered amount. Because the lower court did not determine whether fees should or should not be awarded, the Court held that "we cannot say that the [retailer's] tender to the [consumer] mooted this appeal."
The Court scrutinized the retailer's argument that the consumer's claim failed on the grounds that Illinois law requires collection of the sales tax at issue, and the consumer's counterargument that the Illinois Department of Revenue (the "Department") issued a bulletin directing retailers not to charge tax on the portion of purchases subsidized by the federal program (the "bulletin").
The Court sided with the consumer. To reach its conclusion, the Court first noted that the Department's bulletin was entitled to "some deference," but was not binding on the Court. Therefore, the Court examined Illinois' taxation scheme, and determined that "because the federal government is exempt from sales tax, its voucher reimbursement cannot be taxed as would the typical manufacturer's coupon, and indeed, cannot be taxed at all."
Accordingly, the Court rejected the retailer's argument that Illinois law requires the collection of the tax at issue. The Court also considered the retailer's argument that the consumer never sought a refund, and instead filed the instant lawsuit, and the lower court's related holding that the proximate cause of any injuries suffered by the consumer was his failure to seek a refund. However, the Court noted that the lower court "may have been correct that the [consumer's] failure to seek a refund caused his injury, but that revelation does not mean that the defendant's actions were not also a cause of that injury."
The Court also considered whether the consumer's claim might be barred by the voluntary payment doctrine. It answered in the negative, citing case law to the effect that the voluntary payment doctrine "does not apply where the payment was procured by deception or fraud." See Jenkins v. Concorde Acceptance Corp., 345 Ill. App. 3d 669, 675 (2003). Further, the Court noted that the voluntary payment doctrine should not apply to defeat claims brought under the Illinois Consumer Fraud and Deceptive Business Practice Act. Ramirez v. Smart Corp. 371 Ill. App. 3d 797, 805 n.2 (2007).
The Court therefore determined that the consumer's allegation of a violation of the Illinois Consumer Fraud and Deceptive Business Practice Act was well-plead, and that a genuine issue of material fact existed such that the lower court erred in granting summary judgment to the retailer.
Accordingly, the Court reversed the lower court's judgment and remanded the matter for further proceedings.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
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Chicago, Illinois 60602
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Admitted to practice law in Illinois
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