Contract: Saved from Death by Consumer Fraud Statute?
The Seventh Circuit (Easterbrook, Rovner, Evans) recently held that a hotel guest’s allegation that the hotel’s website misrepresented the room rate was not actionable as consumer fraud but, rather, sounded in breach of contract.
Using the hyatt.com website, BrittShaw made a reservation for a 3-night hotel stay at the Ararat Park Hyatt in Moscow, Russia. The website established a nightly room rateof $502. However, the website cautionedthat the conversion represented an approximate price based on the recentexchange rates, and that “the price paid at the time of hotel checkoutwill be of the currency initially quoted and displayed.”
Shaw stayed at the hotel for three nights and, uponcheckout, his bill was provided in Russian rubles. Shaw paid the bill using hisAmerican Express card, which charged him a roughly 3182 rubles for the room, taxes,and other amenities. Shaw’s hotel billreflected a hotel exchange rate of 32 Russian rubles per United States dollar, whereas the officialexchange rate set by the Central Bank of Russia on the date of check-out was28.01 Russian rubles per dollar. The result: Shaw paid approximately 14% morefor his room in U.S. dollars than the rate promised by the website.
Shaw pursued a class action againstHyatt, alleging unjust enrichment and violation of the Illinois Consumer FraudAct.* Shaw did not allege breach ofcontract, maintaining throughout the proceedings that there was no contractbetween him and Hyatt. The trialcourt granted Hyatt’s motion to dismiss both claims, and the Seventh Circuitaffirmed.
The Seventh Circuit held that there was an express contract between Shaw and Hyatt, and that ultimately resolved both of his claims. The court held that a breach of a contractual promise, without more, is not actionable under the Consumer Fraud Act.The court wrote:
Whatplaintiff calls “consumer fraud” or “deception” is simplydefendants’ failure to fulfill their contractual obligations. Were our courtsto accept plaintiff’s assertion that promises that go unfulfilled areactionable under the Consumer Fraud Act, consumer plaintiffs could convert anysuit for breach of contract into a consumer fraud action. However, it issettled that the Consumer Fraud Act was not intended to apply to every contractdispute or to supplement every breach of contract claim with a redundantremedy. [citation omitted] We believe that a “deceptive act orpractice” involves more than the mere fact that a defendant promisedsomething and then failed to do it. That type of “misrepresentation” occursevery time a defendant breaches a contract.
[*Apparently, the website specified that any disputes would be governed byIllinois law. Shaw booked the Moscow hotel room while on the internet in London; the parties disputed whether Shaw had established the requisite nexus of contact with Illinois to form a basis for the application of the Consumer Fraud Actto the transaction.]
Shaw v. Hyatt Int’l Corp, __ F.3d __, 2006 WL 2473417 (7th Cir. Aug. 30, 2006).