Twitter LinkedIn Share this page Facebook RSS

Blogs

Illinois Law Blog Legal updates, news, and commentary from the attorneys of Baker Sterchi Cowden & Rice LLC

Illinois Supreme Court Confirms State's Biometric Information Privacy Act Has Real Teeth

February 18, 2019 | Lisa Larkin

In this age of face recognition, digital fingerprints, and iris scans, what allegations and proof of damages is sufficient to state a claim for the mishandling of biometric identifiers? Must the aggrieved party have suffered any actual damages beyond the improper collection, retention or disclosure of his biometric identifiers themselves? 

In Stacy Rosenbach, as Mother and Next Friend of Alexander Rosenbach v. Six Flags Entertainment Corporation, 2019 IL 123186, the plaintiff alleged violations under Illinois’ Biometric Information Privacy Act (740 ILCS 14/1 et seq. (2016)). The Act imposes restrictions on how private entities collect, retain, disclose, and destroy biometric identifiers, such as retina or iris scans, fingerprints, voiceprints, scans of hand or face geometry, or other biometric information. Under the Act, any person “aggrieved” by a violation of its provisions “shall have a right of action… against an offending party” and “may recover for such violation” the greater of liquidated or actual damages, reasonable attorney fees and costs, and any other relief, including an injunction, that the court deems appropriate. The issue in this particular case was whether a person qualifies as an “aggrieved” person and may seek liquidated damages and injunctive relief pursuant to the Act if he has not alleged some actual injury or adverse effect, beyond violation of his rights under the statute. The First District Court of Appeals answered this question in the negative, holding a plaintiff who alleges only a technical violation of the statute without alleging some injury or adverse effect is not an aggrieved person under the Act.

Since at least 2014 defendant Six Flags has used a fingerprinting process when issuing season passes to its Great America theme park. Plaintiff alleged the system scans pass holders’ fingerprints; collects, records and stores biometric identifiers and information gleaned from the fingerprints; and then stores that data in order to quickly verify customer identities upon subsequent visits to the park. 

Plaintiff’s 14 year old son was to visit the park on a school field trip in May or June 2014, and plaintiff purchased a season pass for him online. When he arrived at the park with his class, he had to complete the season pass sign-up process, which included scanning his thumb into defendant’s biometric data capture system. The complaint alleged that plaintiff was not informed in advance that the minor’s fingerprints were to be used as part of defendant’s season pass system and that neither the minor son nor his mother were informed in writing of the purpose or length of term for which his fingerprint had been collected. Neither of them signed any release or written consent for the collection, storage, use, dissemination, disclosure, or trade of the fingerprint or the associated biometric information. The complaint also alleged that, although the minor child has not visited the park since that school field trip, defendant has retained his biometric identifiers and information and has not disclosed what was done with the information or how long it will be kept. 

Plaintiff’s complaint sought redress for the minor child, individually and on behalf of all other similarly situated persons under the Act. The defendant moved to dismiss on the basis that the plaintiff had suffered no actual or threatened injury and something more than just a violation of the Act must be alleged to state a claim. The Appellate Court for the First District agreed with defendant and held that while the injury or adverse effect alleged need not be pecuniary, it must be something more than a technical violation of the Act. 2017 IL App (2d) 170317. 

The Illinois Supreme Court reversed upon de novo review. Basic principles of statutory construction dictate that if the legislature had wanted to impose a requirement limiting a plaintiff’s right to bring a cause of action to circumstances where he or she had sustained some actual damages, beyond violation of the rights conferred by the statute, it could have made its intention clear. The Act contains no such requirement. It simply provides that any person aggrieved by a violation of the Act shall have a right of action. While the Act does not define “aggrieved”, the state Supreme Court more than a century ago held that to be aggrieved simply “means having a substantial grievance; a denial of some personal or property right.” Glos v. People, 259 Ill. 332, 340 (1913). As held in Glos, “[a] person is prejudiced or aggrieved, in the legal sense, when a legal right is invaded by the act complained of or his pecuniary interest is directly affected by the decree or judgment.” Id. This is consistent, the court noted, with the dictionary definition of “aggrieved”, which includes definitions such as “suffering from an infringement or denial of legal rights” or “having legal rights that are adversely affected.”

The Court concluded that when a private entity fails to comply with one of the Act’s requirements, that violation alone constitutes an invasion, impairment, or denial of the statutory rights of any person or customer whose biometric identifier or biometric information is subject to the breach. Such person or customer is clearly “aggrieved” within the meaning of the Act and is entitled to seek recovery under that provision with no need to plead or prove additional consequences. A contrary result would misapprehend the nature of the harm the legislature is attempting to mitigate through this legislation. “The Act vests in individuals and customers the right to control their biometric information by requiring notice before collection and giving them the power to say no by withholding consent.” When an entity violates the statutory procedures, such as what the defendant is alleged to have done here, the individual loses his right to maintain his biometric privacy, which is the precise harm the legislature sought to prevent by passing the Act in the first instance. “The injury is real and significant.”

This opinion creates a strong incentive for private entities, which might include not only theme parks but financial institutions, recreational facilities or health clubs, employers, etc., to conform to the law and prevent problems before they occur and cannot be undone.    

Buyer Beware: Illinois Supreme Court Protects Subcontractors from Implied Warranty Claims by Homeowners with No Contractual Relationship

February 12, 2019 | Richard Woolf and Douglas Hill

The Illinois Supreme Court recently overturned 35 years of precedent in holding that a purchaser of a newly constructed home cannot pursue a cause of action for breach of an implied warranty of habitability against a subcontractor where there is no contractual relationship between the two, explicitly overruling Milton v. Richards Group of Chicago Through Mach, 116 Ill. App. 3d 852 (1st Dist. 1983). In a victory for construction subcontractors, the court held that the homeowner’s claim for breach of the implied warranty of habitability is limited to those parties with whom the homeowner has a direct contractual relationship, typically the general contractor. Specifically, a subcontractor hired by the general contractor owes no such implied warranty to the homeowner.

The case of Sienna Court Condominium Association v. Champion Aluminum Corp., et al. arose from claims of water intrusion and other construction defects at a newly constructed 111-unit condominium complex in Evanston, Illinois. Acting on behalf of the owners of the individual units, the complex’s condominium association filed a lawsuit claiming that latent construction defects rendered the complex unfit for habitation. The pleadings alleged a contractual warranty claim against the developer, as well as claims for breach of an implied warranty of habitability against the general contractor, the architects, the engineers, and numerous materials suppliers and subcontractors.

The subcontractors and material suppliers filed a motion to dismiss arguing that they owed no implied warranty of habitability, in part because they had no direct contractual relationships with the individual homeowners or the association. Although the trial court denied the motion, it promptly certified the ruling for interlocutory appeal under a state rule allowing appellate courts to examine certain preliminary issues.

On appeal, the state Supreme Court overruled the trial court and ordered it to dismiss the claims against the subcontractors, holding that “the purchaser of a newly constructed home may not pursue a claim for breach of an implied warranty of habitability against a subcontractor where there is no contractual relationship.”

The doctrine of implied warranty of habitability is a “creature of public policy” that was first recognized by the Illinois Supreme Court in 1979. See Peterson v. Hubschman Construction Co., 76 Ill. 2d 31 (1979). It protects the first purchaser of a new home against latent defects that may render the house not reasonably fit for habitation, under the reasoning that a buyer “has a right to expect to receive that for which he [or she] has bargained and that which the builder-vendor has agreed to construct and convey to him, that is, a house that is reasonably fit for use as a residence.” Id. at 40.  Such a warranty, whether or not explicitly stated in a contract, exists “by virtue of the execution of the agreement” between the builder and the buyer. Id. at 41.

While the doctrine has expanded and been developed through case law over the years, the Illinois Supreme Court has never held that a homeowner may pursue a claim for breach of an implied warranty of habitability against a subcontractor with whom it has not contracted. That said, one intermediate appellate decision had allowed such a claim only where the homeowner “has no recourse to the builder-vendor,” this newly decided Supreme Court opinion overrules that decision and limits the applicability of the implied warranty of habitability to only those parties who have a direct contractual relationship with the plaintiff.

At the heart of this decision is the distinction between contract and tort law. Here, the plaintiff had contended that privity of contract should not be a factor because the implied warranty of habitability was a tort claim developed by the courts. The Supreme Court disagreed. It characterized the warranty as an implied contractual term imposed by the courts as a matter of public policy. Because the cause of action was based on an implied contractual term, if no contract exists between parties, neither does an implied warranty of habitability.

The court found support for its reasoning in prior cases holding that parties were free to include in their contracts a waiver of the implied warranty of habitability. “A person may choose not to commence an action in tort,” the court wrote, “but he [or she] cannot waive a duty imposed by the courts” (emphasis added). The fact that the implied warranty of habitability is subject to waiver is “a conclusive indication that a cause of action for breach of the warranty must be based in contract, not in tort.”

The court also noted that if a claim for breach of an implied warranty of habitability was based in tort, as the plaintiffs had argued, it would be precluded by the “economic loss doctrine.” This somewhat complex doctrine grew out of product liability law but is now frequently applied in construction cases. In its simplest form, it provides that “an action for economic loss requires the plaintiff to be in contractual privity with the defendant,” preserving the “distinction between tort and contract” by denying remedies in tort for complaints that are based in contract. 

Under the economic loss doctrine, also known as the Moorman doctrine in Illinois, tort claims for purely economic losses—without accompanying claims of personal injury or damage to other property—are limited to cases of fraud or misrepresentation.  See Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69 (1982).  Here, the court found that the latent defects that formed the basis of the condominium owners’ claims were “the definition of pure economic loss […], i.e., when the product disappoints the purchaser’s commercial expectations and does not conform to its intended use.”

This decision provides meaningful protection to Illinois subcontractors. It insulates them from tort claims asserted by dissatisfied homeowners whose complaints should be addressed with the general contractor whom they hired and with whom they have a contractual relationship. It is then left to the general contractor to seek defense, indemnity, and/or contribution from the various trades responsible for the claimed defects, all according to the terms of their respective contracts. 

The ruling protects subcontractors’ freedom to negotiate the allocation of risks and liabilities directly with the general contractor without fear that they will face some additional and unforeseen exposure in tort if the homeowner ends up unhappy with the finished product delivered by the general contractor. This security is especially important to subcontractors that did not agree to guarantee the quality of the entire home and often only worked on a small portion of the overall project. By not allowing homeowners to bring direct actions for breach of an implied warranty of habitability against a subcontractor with whom they have no contractual relationship, the Illinois Supreme Court has in one decision strengthened contract law in Illinois, reined in attempts to unnecessarily broaden tort law, and reaffirmed the legal distinction between the two. 

Illinois Supreme Court Further Defines Product Liability Seller Exception

January 28, 2019 | Michael Hunter

Plaintiff Mark Cassidy was injured while at work in Mendota, Illinois. He filed a Complaint in Cook County against U.S.-based China Vitamins, a distributor of an imported flexible bulk container of vitamins that allegedly broke and injured him.  He alleged strict product liability, negligent product liability and res ispa loquitur.  China Vitamins denied that it manufactured the container, and it identified the manufacturer of the containers as Chinese-headquartered Taihua Shanghai Taiwei Trading Company Limited (Taihua). 

Cassidy then filed an Amended Complaint adding Taihua.  Taihua filed an Answer, but its counsel then withdrew.  The court entered a default judgment after Taihau failed to retain new counsel.  After Cassidy presented evidence, the court entered judgment of over $9.1 million against Taihua. 

In the interim, China Vitamins sought and obtained summary judgment on the basis that it was a mere distributor pursuant to 735 ILCS 5/2-621(b).

Thereafter, Cassidy sought to discover and collect assets from Taihua, as well as third-parties.  He was unsuccessful and filed a motion to reinstate China Vitamins under 735 ILCS 5/2-621(b)(4).  China Vitamins opposed the motion.  The trial court denied Cassidy’s motion, finding that he had not met the statutory reinstatement requirements. The trial court made the order final and appealable under Illinois Supreme Court Rule 304(a). 

The Illinois Appellate Court for the First District rejected its prior interpretation of 2-621(b) as set forth in Chraca vs. U.S. Battery Manufacturing Co., 214 Il App. (1st ) 132325, 24  N.E.3d 183.  The court interpreted the statutory language to require a showing that the manufacturer is “judgment proof” or “execution proof” rather than “bankrupt or no longer in existence” before a previously dismissed seller or distributor could be reinstated as a party.  It remanded the case to the trial court for an initial determination of whether Taihua group was unable to satisfy the default judgment entered against it under this new standard.  The Illinois Supreme Court granted China Vitamins’ petition for leave to appeal pursuant to Supreme Court Rule 315(a).

The Illinois Supreme Court addressed how subsection 2-621(b)(4), requiring the plaintiff to show that “the manufacturer is unable to satisfy any judgment as determined by the court” prior to reinstatement of a seller or distributor, is be applied. 

The majority opinion, authored by Justice Kilbride, overruled Chraca to the extent it held that the plaintiff must show the manufacturer is either bankrupt or no longer in existence under 2-621(b)(4).  The court held that if a plaintiff asserting product liability claims can establish “other circumstances” that effectively bar recovery of the full damages awarded against a manufacturer, a non-manufacturer in the chain of distribution may be reinstated as a defendant under section 2-621(b)(4).  The court remanded the case to the trial court for consideration of the sufficiency of the evidence concerning Cassidy’s efforts to collect the default judgment.

While the Supreme Court declined to detail the specific evidentiary showing necessary, instead noting that “the precise formula needed to satisfy the plaintiff’s evidentiary reinstatement burden is best adduced by the trial court,” it appears to have impliedly provided some direction. For example, the Court noted there was evidence Taihua group had a functioning website which strongly suggested it has close continuing business ties with Europe and North America.  The website also mentioned a domestic sales office in the state of Georgia, foreign sales offices in France and Germany and a central warehouse in Germany.  The court found that the record suggests viable avenues for Cassidy’s collection efforts may remain untapped.

In reaching its conclusion, the majority noted that if section (b)(4) was interpreted to mean bankrupt or no longer in existence as Chraca suggests, it would be duplicative of section (b)(3), which is contrary to fundamental rules of statutory construction.  The court noted the language in (b)(4) is much broader than (b)(3).  The court also noted the fundamental policies underlying Illinois strict product liability law and public policy remain the same: “[T]o provide full compensation to plaintiffs injured due to defective or unsafe products whenever possible based on differences of the parties’ degree of culpability."  The majority found that its interpretation of (b)(4) “harmonizes the plain language of Section 2-621(b), when read in its entirety, the legislature’s intent, and the public policies underlying the enactment of our strict product liability laws to create cohesive and consistent statutory scheme.”

Justice Karmier authored the dissent, taking issue with how the majority framed the question before it.  He opined that the majority erroneously focused on a plaintiff’s ability to enforce a judgment rather than a manufacturer’ ability to satisfy it.  He opined a plaintiff must provide evidence that a manufacturer has no ability to meet its obligation, as opposed to evidence of his or her efforts to enforce it, in order to seek reinstatement a non-manufacturer defendant pursuant to 2-621(b)(4).  He further took issue with the majority’s emphasis on the public policy behind strict product liability law generally.  He argued that to the extent policy purposes are to be considered it should be those behind 2-621, which is to limit financial exposure of sellers, not to ensure full recovery for plaintiffs.

There remain open questions as to how 2-621(b)(4) is to be applied by a trial court.  Ultimately, the analytical dispute between the majority and the dissent may be one of semantics. Focusing on evidence of plaintiff’s efforts to collect the judgment from the manufacturer rather the manufacturer’s ability to satisfy it may be two sides of the same analytical coin. Both analyses will focus on the identification of a manufacturer’s assets and the plaintiff’s ability to secure those assets for payment.     

Related Services: Product Liability

Attorneys: Michael Hunter

Subscribe
About Illinois Law Blog

The BSCR Illinois Law Blog examines significant developments, trends and changes in Illinois law on a broad range of topics that are of interest to Illinois practitioners and to businesses evaluating risks under Illinois law or managing litigation subject to Illinois law. Learn more about the editor, Lisa Larkin.

DISCLAIMER

The Illinois Law Blog is made available by Baker Sterchi Cowden & Rice LLC for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. Your use of this blog site alone creates no attorney client relationship between you and the firm.

CONFIDENTIAL INFORMATION

Do not include confidential information in comments or other feedback or messages related to the Illinois Law Blog, as these are neither confidential nor secure methods of communicating with attorneys. The Illinois Law Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.