Arcangel v. Yardi Systems
Key Takeaways
- 1 Consumer Fraud Act claims cannot be premised solely on a defendant's breach of a third-party contract.
- 2 Merchants have no duty under the Consumer Fraud Act to disclose the terms of their contracts with credit card networks.
- 3 Relevant for consumer protection litigators, class action defense counsel, and attorneys advising merchants on payment processing fee disclosures.
Summary
Carl Arcangel filed a putative class action in Cook County against Yardi Systems, Inc., alleging that Yardi's 3.5% credit card surcharge on rent payments made through its RentCafe platform violated the Illinois Consumer Fraud and Deceptive Business Practices Act and constituted unjust enrichment, because the fee allegedly exceeded the 3% cap permitted under Visa's merchant rules. The trial court dismissed the complaint with prejudice under section 2-615, finding the disclosed fee and the availability of a fee-free payment alternative defeated plaintiff's claims. The First District affirmed.
The appellate court held that both the deception and unfairness prongs of plaintiff's Consumer Fraud Act claim impermissibly reduced to a breach of contract theory — specifically, Yardi's alleged violation of the Visa Rules — without any independent basis for consumer harm. The court extended the established principle that a bare breach of contract is not actionable under the Consumer Fraud Act to third-party contracts, reasoning that plaintiff, at most an incidental beneficiary of the Visa Rules, could not derive a statutory consumer fraud claim solely from their breach. On deception, the court found no duty for merchants to disclose third-party contract terms, and no affirmative misrepresentation in Yardi's fee disclosure. On unfairness, the availability of a fee-free bank account autopay option defeated any oppressiveness argument. The unjust enrichment claim failed derivatively.
This decision is significant for class action defense counsel and consumer protection practitioners: it forecloses using alleged violations of payment network rules as a standalone predicate for Consumer Fraud Act liability and reinforces that disclosed fees paired with meaningful free alternatives will generally defeat both deception and unfairness claims.
Key Holdings
1. A Consumer Fraud Act claim cannot be premised solely on a defendant's alleged breach of a contract between third parties; the principle that a bare breach of contract is not actionable under the Act applies equally to third-party contracts.
2. Merchants have no duty under the Consumer Fraud Act to disclose the terms of their contracts with credit card networks or other third parties, and disclosing a surcharge amount creates no implied representation that the fee complies with those contracts.
3. A credit card surcharge is not unfair or oppressive under the Consumer Fraud Act where the merchant offers a meaningful, fee-free alternative payment method, even if some consumers may lack the practical ability to use that alternative.
4. An unjust enrichment claim predicated on the same conduct as a deficient Consumer Fraud Act claim must also be dismissed, as unjust enrichment is not a standalone cause of action absent independently unlawful or improper conduct.