The opinion of the court was delivered by: JOHN A. NORDBERG
Plaintiff Continental Leavitt Communications, Ltd. ("CLC") has sued Defendant PaineWebber Incorporated ("PWI") in a three count First Amended Complaint. Now before the Court is PWI's Motion for Summary Judgment.
Plaintiff sells and distributes electronic products wholesale. In January of 1991, Cellular Depot, Inc. d/b/a Cellular Wholesale ("Cellular"), a customer having past dealings with CLC, approached CLC about purchasing a large volume of electronic products. Both parties wanted to go through with the deal, but CLC would not extend Cellular unsecured credit and Cellular would not pay COD. By way of compromise, Cellular proposed a credit purchase whereby Cellular would post bearer bonds as collateral.
On January 14, 1991, for CLC's consideration prior to closing the proposed deal, Cellular sent four bearer bonds issued by the General Motors Acceptance Corporation of Canada, Limited ("GMAC"). Each bond had a face amount of ten thousand Canadian dollars. Over the period of January 14 to February 10, 1991, CLC received a total of eighteen such bonds.
On either January 16 or 17, 1991, Melvyn F. Cohen, CLC's chief financial officer, and Ina Nudleman (now Jones), a CLC employee, went to PWI's offices in Northbrook, Illinois, taking several of the GMAC bonds with them. Cohen and Nudleman met with David Munwes, a PWI employee and stock broker. Although CLC did not have an account with any brokerage firm, including PWI, it had previously, in July of 1985, established a retirement plan for its employees. The plan, now known as the Continental Leavitt Communications, Ltd. Profit Sharing Plan and Trust (the "Plan"), had maintained an account at PWI since June 5, 1989. Munwes was responsible for the Plan's account and was Cohen's contact at PWI for dealings with respect to the Plan. The two enjoyed a "very cordial" relationship and spoke once or twice a month regarding the Plan's account at PWI. Based on that relationship, Cohen had contacted Munwes and asked him to evaluate Cellular's GMAC bonds. Munwes told him to bring them to his office at PWI. (Cohen Aff. P 14.) According to Cohen, he took the bonds to Munwes to:
Cohen, Nudleman and Munwes met for between ten and thirty minutes. Cohen told Munwes about the potential sale to Cellular, showed him the bonds, asked if the bonds would be good collateral and also asked whether, if necessary, PWI would cash in the bonds for CLC. Munwes looked at the bonds and then left his office with them, stating that he wanted someone else to look at them. Munwes was gone for five to ten minutes. When he returned, he stated that the bonds were "good, genuine and authentic." (Cohen Aff. P 19.) Munwes also stated that PWI would dispose of the bonds if CLC obtained from Cellular a letter authorizing CLC to dispose of the bonds in the event of default. (Cohen Aff. P 19.) Munwes hoped that CLC would use PWI to dispose of the bonds, if necessary, and would have charged CLC a fee to do so. Cohen left the meeting feeling "comfortable" that the bonds were sufficient collateral. (Munwes Dep. at 107-09.)
CLC accepted the eighteen GMAC bonds as collateral, extended Cellular credit, and obtained the necessary paper work from Cellular to liquidate the bonds. Cellular eventually defaulted on its credit payments and CLC instructed PWI to redeem the bonds for cash. Before the bonds were redeemed, however, they were seized by the Federal Bureau of Investigation. Apparently, the bonds had been stolen prior to their having been authenticated; they were missing their "certificate of authentication" signatures, making them nonnegotiable.
CLC claims to have lost $ 119,883.65 as a result of its inability to liquidate the bonds and collect on Cellular's debt. Having attempted, without success, to obtain recompense from PWI, CLC has filed this lawsuit claiming that Munwes's erroneous advice resulted in the loss. In its Amended Complaint, CLC seeks to recover on theories of negligent representation, promissory estoppel, and breach of fiduciary duty. In the instant motion, PWI contends that each of these theories must fail.
1. Standard on Summary Judgment
Summary judgment is appropriate when:
The pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed. R. Civ. P. 56(a). A party moving for summary judgment bears the initial burden of informing the district court, and the nonmoving party, of the basis for its motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). This requirement necessitates that the moving party point to those portions of the record or of the nonmovant's case which it believes demonstrate the absence of a genuine issue of material fact. See id. Once the moving party has carried its initial burden of pointing to defects in the nonmoving party's case, the nonmoving party must come forward with evidence sufficient to create a material issue of fact. See Celotex Corp. v. Catrett, 477 U.S. at 322-23.
The standard for granting summary judgment "mirrors" the standard for a directed verdict under Rule 50(a) of the Federal Rules of Civil Procedure. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). That is, summary judgment is appropriate when there can be but one reasonable conclusion as to the verdict. Id. Where, however, reasonable minds could differ as to what conclusion is dictated by the evidence, summary judgment should be denied. Id. at 250-51. In making the determination whether reasonable persons could differ as to the evidence, the Court must consider whether the nonmovant has put forth sufficient evidence to satisfy the substantive evidentiary standard for its case. Id. at 255. Here, CLC must prove its case by a preponderance of the evidence.
The state of Illinois recognizes the tort of negligent misrepresentation. Zahorik v. Smith Barney, Harris Upham & Co., 664 F. Supp. 309, 313 (N.D. Ill. 1987). Negligent misrepresentation is an exception to the rule, known as the Moorman doctrine in Illinois, that one cannot recover economic damages based on a negligence theory. Moorman Mfg. Co. v. National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443, 61 Ill. Dec. 746 (Ill. 1982). However, economic losses may be recovered for torts such as intentionally false representations, i.e. fraud, and for negligently false representations when made by one in the business of supplying information for the guidance of others in their business transactions, i.e. negligent misrepresentation. While there are varying standards for negligent misrepresentation, see Onita Pac. Corp. v. Trustees of Bronson, 315 Ore. 149, 843 P.2d 890, 895 (Or. 1992) (discussing history and standards of the tort), Illinois recognizes the tort as stated in the Restatement (Second) of ...