llinois’ highest state court has bottled up a class action vs Walgreens, as justices said a man can’t claim the retail pharmacy chain defrauded him by charging Chicago's bottled water tax on his Perrier and LaCroix.
One of the court’s justices, however, worried the ruling could hand a new weapon to companies and others to more easily combat claims of fraud under Illinois’ consumer fraud laws.
On June 20, the Illinois Supreme Court ruled 6-1 to disallow a class action brought by plaintiff Destin McIntosh, who asserted, when he bought sparkling water from a Chicago Walgreens store, the retailer wrongly charged him a 5-cent per bottle tax, which should have applied only to plain, bottled water.
Illinois Supreme Court Justice P. Scott Neville
| Illinoiscourts.gov
The court’s majority essentially determined McIntosh had no claim against Walgreens because the retailer charged a tax it believed was required, did not attempt to deceive customers by hiding the charge from him, and did not seek to keep the overpayment for itself, but paid the tax to the city as it believed it was required by law to do.
The majority decision was authored by Justice P. Scott Neville. Chief Justice Lloyd A. Karmeier, and justices Rita B. Garman, Robert R. Thomas, Anne M. Burke and Mary Jane Theis concurred in the decision.
“McIntosh does not dispute that the Walgreens receipts accurately reflected that the bottled water tax was charged on exempt purchases, nor does he contend that Walgreens did not remit the bottled water tax it collected on those purchases to the City or was unjustly enriched by the erroneous collection of the tax,” Justice Neville wrote in the majority opinion.
“McIntosh has not pointed to any information set forth on the receipt that was factually inaccurate. As a consequence, McIntosh has not alleged any misrepresentation of a material fact as the basis for his claim under … the Consumer Fraud Act.”
Justice Thomas L. Kilbride dissented, stating in his opinion, the majority’s reliance on the so-called “voluntary payment doctrine” established a dangerous precedent for future consumer fraud claims and could douse future lawsuits.
“In my view, application of the voluntary payment doctrine to claims brought under the Consumer Fraud Act is not only in direct conflict with the public policy underlying that Act, but its application as an affirmative defense to Consumer Fraud Act claims undermines the legislature’s intent in enacting the consumer protection statute,” Kilbride wrote in his dissent. “Use of the doctrine thus poses a threat to the effectiveness of the Consumer Fraud Act.”
The decision centered largely on the voluntary payment doctrine, which prevents legal actions to recover payments made by one party to another, if the payment was not coerced and if the person paying the money knew, or at least should have known, what was being charged.
In this case, McIntosh had asserted Walgreens had violated Illinois consumer fraud law by charging Chicago’s tax on bottled water for an assortment of other bottled beverages, including sparkling water, soft drinks, flavored waters and mineral waters.
After news reports raised concerns about the improper tax collections, Walgreens said it fixed the problem. Following those same news reports in 2016, McIntosh, through his attorney Joseph Siprut, of Siprut P.C., of Chicago, filed his class action complaint. McIntosh did not deny his receipt listed the tax charge. But he claimed Walgreens should have refunded the money to the customers who paid the tax.
Cook County Judge Diane Larsen dismissed the lawsuit, finding the voluntary payments doctrine should bar McIntosh’s lawsuit. Plaintiffs in McIntosh’s position, who didn’t protest when paying tax, Larsen said, can’t later sue to get their money unless they can demonstrate “facts sufficient to form a basis for protesting the tax under duress.”
On appeal, however, a three-justice panel of the Illinois First District Appellate Court overruled Larsen, finding in a situation in which the voluntary payments doctrine conflicts with the Illinois Consumer Fraud Act, the ICFA claim should be allowed to proceed.
In this case, the appellate justices found, when McIntosh bought such drinks as Perrier, LaCroix and Smeraldina, he didn’t know they were exempt from the city tax, but Walgreens should have known, yet charged the city bottled water tax anyway.
Walgreens then took the case to the Illinois Supreme Court, asserting the First District Appellate ruling effectively “nullifies the voluntary payment doctrine,” the high court said.
The majority sided with Walgreens on the question. Justices said they found “nothing” in past cases on the question “that lends support to McIntosh’s argument that claims brought under the Consumer Fraud Act are categorically exempt from the voluntary payment doctrine.”
The justices further said they did not believe state lawmakers intended to use the Consumer Fraud Act to “alter the voluntary payment doctrine” or whether the doctrine could be applied to judge consumer fraud lawsuits.
“Indeed, the voluntary payment doctrine specifically applies where the payment sought to be recovered was obtained illegally,” Neville wrote, for the majority.
In this case, the justices said McIntosh purchased his bottled water, the tax was listed on the receipt, and he did not protest or take any action until he later saw news reports about Walgreens practices.
They noted courts presume, as a starting point, everyone is, or should be, aware of the law before deciding to make a purchase or take other actions.
McIntosh argued the receipt he received merely represented Walgreens’ assertion the tax was legal, and misled him into paying the tax. But the court’s majority said that represented a misinterpretation of state law on the part of McIntosh and his lawyers.
McIntosh does not argue that he was compelled to pay the bottled water tax because the purchase of carbonated or flavored water was a necessity and could not have been obtained from any other source without paying the municipal tax,” Neville wrote.
“Instead, he contends that his claim falls within the exception for fraud. McIntosh argues that Walgreens knowingly overcharged him by misrepresenting the legality of the bottled water tax that was charged on exempt purchases. He predicates this argument on the contention that the receipt issued by Walgreens for such an exempt purchase constitutes a representation that the tax was required by the ordinance. We do not agree.
“Under Illinois law, a receipt constitutes prima facie evidence as to payment of the amount reflected in the receipt…
“Where the nature and amount of a charge is fully disclosed, the plaintiff cannot successfully assert that he or she was operating under a mistake of fact with regard to the charge.”
Walgreens has been represented in the case by attorneys with the firm of Morgan, Lewis & Bockius LLP, of Chicago.