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Smith v. The Thomson Corporation-Class Action Defense Cases: Defense Wins Cross-Appeal In Fraud Class Action Based On Overcharges Because Plaintiff Failed To Prove Damages

Illinois Appellate Court Reverses Judgment in Favor of Class Action Plaintiff Because Evidence Demonstrated that Plaintiff Suffered no Damages and Because Trial Court’s Calculation of Damages was Flawed

A law firm filed a class action in Illinois state court against suppliers of legal products to law firms alleging Illinois and Minnesota statutory consumer fraud claims based on the allegation the defendants “add[ed], on a pro rata basis, a $6 per CD-ROM shipping-and-handling charge to the monthly billing statements sent to the plaintiff pursuant to a subscription agreement . . . without identifying the added charge and in contravention of the defendants’ previous practice of not charging customers for shipping and handling.” Smith, Allen, Mendenhall, Emons & Selby v. The Thomson Corp., ___ N.E.2d ___, 2006 WL 2947653 (Ill.App. October 26, 2006) [Slip Opn., at 2]. Following a bench trial, the court entered an $8.5 million judgment in favor of plaintiff, but denied prejudgment interest and attorney fees. Plaintiff appealed the limitation on its award; defense attorneys cross-appealed from the underlying judgment. Id., at 1. The Appellate Court reversed the underlying judgment, rendering plaintiff’s appeal moot.

The Appellate Court recognized the heavy burden that must be met to reverse a judgment for lack of evidence, acknowledging that such reversal is warranted “only when an opposite conclusion is apparent or when finding appear to be unreasonable, arbitrary, or not based upon the evidence presented at trial.” Slip Opn., at 2. Despite this difficult burden, the Court concluded that “many reasons exist to reverse the order of the trial court,” id. The “most fundamental” of these reasons is that plaintiff failed to establish that it had suffered any damages. Id. The Court summarized the testimony of a named partner in the plaintiff law firm stating that “he (1) recognized the price increase, (2) conducted a cost-benefit analysis, and (3) chose to continue receiving the CD-ROMs.” Id. This testimony established “that the firm had not suffered any damages.” Id.

The Appellate Court also explained that the manner in which the trial court calculated damages would have compelled reversal in any event. The trial court “reach[ed] the astronomical sum” of $8.5 million in damages by accepting plaintiff’s claim that mailing sleeves cost 23¢ each and the drop-shipping charge for each CD-ROM was 87¢ and thus used a $1.10 as the “actual cost” that should have been charged per CD-ROM. This figure entirely ignored the additional costs that plaintiff admitted were properly part of the handling and shipping charge, “such as the costs of employees who pick CD-ROMs from warehouse shelves and place them into packages.” Slip Opn., at 4. This failure “constitutes a secondary, independent ground for reversal of the trial court’s order.” Id.

Download PDF file of Smith v. The Thomson Corp.