in Count II, the Szwebels seek damages “under the 49 U.S.C. § 32710(c).” (Compl. at 6.) The
Szwebels allege that Pap’s violated federal law by failing to use the title to the car as the instrument
to disclose the title history and odometer mileage. (Compl. {{ 29.) Pap’s denies that allegation
generally. (Answer §[ 29.) Pap’s has not objected to the sufficiency of the allegations of Count I.
Presuming that the Szwebels intended to assert a claim under the Federal Odometer Act, 49 U.S.C.
§ 32701 ef seq., rather than the repealed Motor Vehicle Information and Cost Saving Act, 15 U.S.C.
§ 1981 et seq., they appear to be seeking to invoke 49 U.S.C. § 32705, which is entitled “Disclosure
requirements on transfer of motor vehicles.” That section states that “a person transferring
ownership of a motor vehicle shall give the transferee the following disclosure: (A) Disclosure of
the cumulative mileage registered on the odometer... .” 49 U.S.C. § 32705(a)(1). Regulations
issued by the Department of Transportation under the authority of § 32705 require, inter alia, that
“each transferor shall disclose the mileage to the transferee in writing on the title.” 49 C.F.R. §
580.5(c). Federal jurisdiction is available for claims under the Federal Odometer Act, pursuant to
49 U.S.C. § 32710 and 28 U.S.C. § 1331.3 Supplemental jurisdiction under 28 U.S.C. § 1367 could
be available for the Szwebels’ state law claims.

Although the Szwebels have not pleaded a proper statutory basis for federal jurisdiction, it
appears that the complaint could be amended to do so. This court respectfully recommends that the

present Complaint be dismissed with leave to amend to allege a proper jurisdictional basis.

> 49 U.S.C. § 32710(b) states that “[a] person may bring a civil action to enforce a claim
under this section in an appropriate United States district court or in another court of competent
jurisdiction. The action must be brought not later than 2 years after the claim accrues. The court
shall award costs and a reasonable attorney’s fee to the person when a judgment is entered for that
person.”



act involving the plaintiff; or (3) potential for repetition. 815 ILCS 505/10a(a)(1). As discussed
above, the Szwebels allege that Pap’s violated federal law presumably the Federal Odometer Act,
which impacts the public interest. See Pigounakis v. Autobarn Motors, No. 98 C 5741, 1999 WL
754927 at *2 (N.D. Ill. Sept. 3, 1999)(Zagel, J.)(holding that violation of the federal and state
odometer laws has an impact on the public interest and thus is sufficient to satisfy section 505/10a(a)
of the ICFA). Therefore, the Szwebels have alleged a public injury in compliance with the ICFA.

In addition, the Szwebels have alleged facts sufficient to prove a public injury under
subsection (3), a potential for repetition. In McNair v. McGrath Lexus-Colosimo, Ltd., 11 F. Supp.
2d 990, 992 (N.D. Ill. 1998), the plaintiffs alleged that they purchased a used vehicle on the
condition that the dealership would install four new tires and would provide a service warranty from
any dealer in the nation. The dealership later refused to install the tires, and the warranty the
plaintiffs received was good only at the issuing dealership. /d. The court held that the dealership
had engaged in deceptive acts that had the potential for repetition, and thus that the ICFA
requirement was met. /d. In Pigounakis, the plaintiff alleged that the defendant sold him a vehicle
with a replaced odometer that showed the car had only 24,823 miles on it when the defendant knew
it had actual mileage over 100,000. 1999 WL 754927 at *1. The court found that a significant
potential for repetition existed because it was alleged that “the [defendant] committed the fraud as
part of his ordinary duties as general manager of a car dealership,” and that he continued to work in
that position. Jd. at *2. In this case, the Szwebels allege that Pap’s sold them a vehicle that was
seriously damaged for the price that one would sell a car that was in good condition. (Compl. {j 40.)
Such activity has the potential for repetition because Pap’s could sell a damaged vehicle to the next

unsuspecting consumer without revealing the latent damage. Keeping in mind that an ICFA claim


Szwebels signed a vehicle registration form which states that the vehicle was rebuilt. (Answer {4

15, 20.)

JURISDICTION

A federal court must satisfy itself that there is a basis for federal jurisdiction, even if no party
raises the issue. Kanzelberger v. Kanzelberger, 782 F.2d 774, 777 (7° Cir. 1986). The Szwebels
submit that the federal court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1332 and 15
US.C. § 1989. (Compl. { 2.) Although lack of jurisdiction is not the basis of its motion to strike,
Pap’s denies that either of these two sections is applicable. (Answer { 2.) Pap’s is correct.

First, 28 U.S.C. § 1332 grants original jurisdiction to district courts over a civil action
between citizens of different states if the amount in controversy exceeds $75,000. There must be
complete diversity between the parties, which means that “no plaintiff share[s] common citizenship
with any defendant.” County of Cook v. Mellon Stuart Co., 812 F. Supp. 793, 796 (N.D. Ill. 1992);
citing Strawbridge v. Curtiss, 7 U.S. 267 (1806). In the instant case, the plaintiffs are both citizens
of Illinois, and Pap’s is an Illinois corporation. Therefore, diversity is not complete and the court
cannot assert jurisdiction under 28 U.S.C. § 1332. The second basis for jurisdiction alleged by the
Szwebels, 15 U.S.C. § 1989, was repealed in 1994, along with the balance of the Motor Vehicle
Information and Cost Savings Act, 15 U.S.C. § 1981, et seg., which now exists, in pertinent part, as
the Federal Odometer Act, 49 U.S.C. § 32701 et seq.

Fairly and liberally construed, it appears that the Szwebels are attempting to plead a claim
under the Federal Odometer Act, notwithstanding their inapt citation and reference to the now-

repealed Motor Vehicle Information and Cost Savings Act. For example, in their prayer for relief



DEFENDANT’S MOTION TO STRIKE
Assuming that the Szwebels will replead to allege federal jurisdiction without changing

Count II, Defendant’s motion is considered.

A. Standard of Review

Pap’s calls its motion a “motion to strike.” A motion to strike under Federal Rule of Civil
Procedure 12(f) allows the court to strike “any redundant, immaterial, impertinent, or scandalous
matter” from any pleading. Fed. R. Civ. P. 12(f). In the instant case, Pap’s does not claim that
Count II is redundant, immaterial, impertinent, or scandalous, but rather that it is insufficient to
support a claim for violation of the ICFA. Thus, the motion more properly arises under Fed. R. Civ.
P.12(b)(6) as a motion to dismiss. See Abraham v. North Ave. Auto, Inc., No. 00 C 1764, 2001 WL
1002067 at *4 (N.D. Ill. Aug. 24, 2001)(Grady, J.)(treating a motion to strike as a Rule 12(b)(6)
motion to dismiss because the defendant’s actual issue with the complaint was that it failed to state
a claim upon which relief could be granted). A motion to dismiss under Rule 12(b)(6) challenges
the sufficiency of the complaint for failure to state a claim upon which relief can be granted.
General Elec, Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7" Cir. 1997). It is
well established that “a complaint should not be dismissed for failure to state a claim unless it
appears beyond doubt that the plaintiffcan prove no set of facts in support of his claim which would
entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see also Pokuta v. Trans Worid
Airlines, Inc., 191 F.3d 834, 839 (7th Cir. 1999). For the purposes of a motion to dismiss, the court
accepts as true “all well-pled factual allegations in the complaint and draw[s] all reasonable
inferences therefrom in favor of the plaintiff.” Perkins y. Silverstein, 939 F.2d 463, 466 (7" Cir.

1991).


should be construed liberally in order to provide the broad range of protection that the ICFA
contemplates, Fisher v. Quality Hyundai, Inc., No. 01 C 3243, 2002 WL 47968 at *4 (N.D. Ill. Jan.

11, 2002)(Darrah, J.), the Szwebels’ complaint is sufficient to satisfy the ICFA.

CONCLUSION
This Court respectfully recommends that Pap’s motion to strike be denied; however, the
Complaint should be stricken with leave to amend to assert a proper basis for federal jurisdiction.
Specific written objections to this report and recommendation may be served and filed within
10 business days from the date that this order is served. Fed. R. Civ. P. 72(a). Failure to file
objections with the District Court within the specified time will result in a waiver of the right to
appeal all findings, factual and legal, made by this Court in the report and recommendation.

Lorentzen v. Anderson Pest Control, 64 F.3d 327, 330 (7" Cir. 1995).

ENTER:

Geraldine Sodt Brown
United States Magistrate Judge

Dated: July 28, 2003


Mi te Order Form 36197)

United States District Court, Northern District of Illinois

Name of Assigned Judge George M. Marovich Sitting Judge if Other Geraldine Soat Brown
or istrate Judge than Assigned Judge
CASE NUMBER 02 C 7797 DATE 7/28/2003
CASE Szwebel vs. Pap’s Auto Sales
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented. ]
DOCKET ENTRY:
O) i) Filed motion of [ use listing in “Motion” box above.]
2) Oo Brief in support of motion due
(3) oO Answer brief to motion due. . Reply to answer brief due.
(4) oO Ruling/Hearing on set for at
(5) a Status hearing[held/continued to] [set for/re-set for] on set for at
(6) a Pretrial conference{held/continued to] [set for/re-set for] on set for at
(7) a Trial[set for/re-set for] on at
(8) o [Bench/Jury trial] [Hearing] held/continued to at
(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}
OCOFRCP4(m) OlLocal Rule 41.1 COFRCP41(a\(1) © FRCP41(a)(2).
(10) a {Other docket entry] Report and Recommendation to Hon. George Marovich submitted herewith. For the
reasons set out in the Report and Recommendation, this court respectfully recommends that defendant’s Pap’s
Auto Sales’ motion to strike be denied; however, the complaint should be stricken with leave to amend to assert
a proper basis for federal jurisdiction. Specific written objections to this report and recommendation may be served
and filed within 10 business days from the date that this order is served. Fed. R. Civ. P. 72(a). Failure to file
objections with the District Court within the specified time will result in a waiver of the right to appeal all
findings, Factual and legal, made by this Court in the report and recommendation, Lorentzen v, Anderson Pest
Control, 64 F.3d 327, 330 (7th Cir. 1995). Enter Report and Recommendation.
pot Bur
(amp) a For further detail see Report and Recommendation attached to the origindl minute order.
No notices required, advised in open court Document
No notices required. Number
umber of novices
| Notices mailed by judge’s staff. UL 9 9? nn
Notified counsel by telephone. dae docketed
Docketing to mail notives nan pamigerns @
Mail AO 450 form, : doctting py inl ay
oY | Copy to judge/magistrate judge.
7128/2003
daze miled notice
courtroom
MW deputy’s we
initials
Date/time received in
central Clerk’s Office ing deputy inal



B. Count II: ICFA
In order to establish a violation of the ICFA, a plaintiff “must show that (1) the defendant committed
a deceptive act, such as the misrepresentation or concealment of a material fact; (2) the defendant
intended to induce the plaintiff's reliance on the deception; and (3) the deception occurred in a
course of conduct involving trade or commerce.” Petri v. Gatlin, 997 F. Supp. 956, 967 (N.D. Ill
1997); citing, inter alia, Thacker v. Menard, Inc., 105 F.3d 382, 386 (7th Cir. 1997), Connick v.
Suzuki Motor Co., 675 N.E.2d 584, 593 (Ill. 1996). A concealed fact is material if a buyer would
have acted differently had she known the information, or if it concerned the kind of information a
buyer would likely rely upon in making a decision to purchase. Connick, 675 N.E.2d at 595. Here,
the Szwebels allege that Pap’s committed a deceptive act: the concealment of the fact that the 1997
Honda Civic was seriously damaged and had been issued a salvage title. (Compl. {{[ 12-13.) The
Szwebels contend that they would not have purchased the vehicle had they known it had suffered
such damage. (/d. | 21.) Thus, the Szwebels allege that Pap’s concealed a material fact.
Furthermore, it is alleged that Pap’s intended that the Szwebels would rely on the deception that the
car was roadworthy. (/d. 24-25.) Finally, it is undisputed that the alleged deception occurred in
the course of trade or commerce - the sale of motor vehicles. Therefore, the Szwebels have met the
three requirements necessary to sufficiently state a claim under the ICFA.

Pap’s argues that the Szwebels’ ICFA claim should be dismissed for failing to provide proof
of “a public injury, a pattern, or an effect on consumers and the public interest generally,” as is
required in order to state a cause of action against a defendant who is a used vehicle dealer. 815
ILCS 505/10a(a). That section of the ICFA goes on to state that proof of a public injury may be

shown by: (1) violation of a statute that has a public interest impact; (2) repeated acts prior to the


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

JUL 2 9 2603

ug

MARIANNA SZWEBEL, et al.,
Plaintiffs, Cause No. 02 C 7797
v. Judge George M. Marovich

Magistrate Judge Geraldine Soat Brown
PAP’S AUTO SALES, INC.,
Defendant.

To: The Honorable George M. Marovich
United States District Court Judge

REPORT AND RECOMMENDATION

Geraldine Soat Brown, United States Magistrate Judge

Plaintiffs Marianna Szwebel and Margaret Szwebel (“the Szwebels”) allege that defendant
Pap’s Auto Sales, Inc. (“Pap’s” or “Defendant”) committed a number of violations of federal and
Illinois law relating to the sale of an automobile.’ [Dkt # 1.] The Szwebels are residents of the State
of Illinois. (Compl. 3.) Pap’s is a car dealership incorporated in Illinois and located in Chicago,
Illinois. (Answer 9.) The Complaint alleges violation of the federal Motor Vehicle Information
and Cost Saving Act in Count I, violation of the Illinois Consumer Fraud and Deceptive Business
Practices Act (“ICFA”), 815 ILCS § 505/2 et seq., in Counts If and V, common law fraud in Count
I, and breach of implied warranty in Count IV. The District Judge referred to this court Pap’s

motion to strike Count II of the Complaint. [Dkt ## 12, 15.] For the following reasons, this court

' State Farm International Services, Inc. was also named as a defendant but has been

dismissed pursuant to a settlement with the Szwebels. [Dkt # 11.]

1

aN



respectfully recommends the following: Defendant’s motion should be DENIED; however, because
the Complaint fails to plead the proper federal statute to provide a basis for federal jurisdiction, and
that defect appears readily correctable, the Complaint should be stricken with leave to amend to

assert a proper basis for federal jurisdiction.

BACKGROUND

The Szwebels allege the following facts, which are taken as true for the purposes of
Defendant’s motion. Leatherman y. Tarrant County Narcotics Intelligence & Coordination Unit,
507 U.S. 163, 164 (1993). On December 31, 2001, the Szwebels purchased a used 1997 Honda
Civic automobile from Pap’s under the belief that the vehicle was roadworthy. (Comp!.{/ 10.) Some
time prior to the purchase date, the car had been in an accident and had sustained serious damage.
(Cd. {{ 12, 15.) The vehicle had been cosmetically repaired to conceal evidence of the prior accident,
and thus the Szwebels were unaware of any latent damage to the car when they purchased it. (/d.
49 14-15.) Furthermore, the State of Indiana had issued salvage titles’ for the vehicle on three
occasions in 2000, (/d. | 13.) Upon purchasing the vehicle, the Szwebels were not informed about
the salvage titles, and Pap’s conspired to hide the title to the vehicle from the Szwebels to prevent
them from discovering that the car was salvaged. (Jd. {| 16-17.) The Szwebels relied upon the
visual appearance of the car and Pap’s representations, and would not have purchased the vehicle

had they known about the damage or the salvage title. (/d. 4] 21, 24.) Pap’s Answer alleges that the

2 “A salvage title is issued on a vehicle damaged to the extent that the cost of repairing the
vehicle for safe operation exceeds its fair market value; or a vehicle that has been declared a Total
Loss by an insurer or other state or jurisdiction. Some states treat Junk titles the same as Salvage
but the majority use this title to indicate that a vehicle is not road worthy and cannot be titled again
in that state.” Carfax Glossary of Terms, available at
http://www.carfax.com/Definitions/Glossary.cfm (accessed on 6/19/03 at 1:05:20 pm CST).

2