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LEFEBVRE INTERGRAPHICS, INC. v. SANDEN MACH. LTD.

December 12, 1996

LEFEBVRE INTERGRAPHICS, INC., an Illinois corporation, Plaintiff/Counter-Defendant,
v.
SANDEN MACHINE LIMITED, a Canadian corporation, Defendant/Counter-Claimant.



The opinion of the court was delivered by: ALESIA

 Before the court is defendant Sanden Machine Limited's motion to dismiss Counts III, IV, and V of plaintiff Lefebvre Intergraphics, Inc.'s, complaint and all portions of the complaint seeking consequential damages. For the reasons that follow, the court grants in part and denies in part the motion to dismiss.

 I. BACKGROUND

 Plaintiff Lefebvre Intergraphics, Inc. ("Lefebvre"), an Illinois corporation with its principal place of business in Illinois, is a commercial printer. Defendant Sanden Machine Limited ("Sanden"), a Canadian corporation with its principal place of business in Ontario, Canada, manufactures and sells commercial printing presses. This case is before the court on the basis of diversity jurisdiction. See 28 U.S.C. § 1332.

 In March 1995, Lefebvre bought a commercial printing press from Sanden under a written contract. Sanden delivered the press in August 1995. Unfortunately, the press never properly functioned. Sanden repeatedly but unsuccessfully tried to fix the press between September 1995 and January 1996.

 Dissatisfied with the press, Lefebvre filed this lawsuit against Sanden. Lefebvre alleges breach of contract (Count I), breach of express warranty (Count II), breach of implied warranty of merchantability (Count III), fraudulent misrepresentation (Count IV), and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (Count V). Lefebvre also asks for rescission of the purchase contract (Count VI). In addition, in each of Counts I through V, Lefebvre asks for consequential damages.

 Sanden has moved to dismiss Counts III, IV, and V in their entirety, as well as all portions of the complaint that ask for consequential damages.

 II. DISCUSSION

 A. Standard for deciding a motion to dismiss

 When deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court must accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Cromley v. Board of Educ. of Lockport, 699 F. Supp. 1283, 1285 (N.D. III. 1988). If, when viewed in the light most favorable to the plaintiff, the complaint fails to state a claim upon which relief can be granted, the court must dismiss the case. See FED. R. CIV. P. 12(b)(6); Gomez v. Illinois State Board of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). However, the court may dismiss the complaint only if it appears beyond doubt that the plaintiff can prove no set of facts in support of its claims that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957).

 B. Count III -- Breach of implied warranty

 Sanden argues that Count III, alleging breach of an implied warranty, should be dismissed because the Uniform Commercial Code ("UCC"), which Illinois has adopted, expressly permits parties to a commercial transaction to agree to exclude all implied warranties, and the parties did so in the present case. Section 2-316(3)(a) of the UCC provides:

 
Unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is," "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty.

 810 ILCS 5/2-316(3)(a). In their purchase agreement, Lefebvre and Sanden agreed that the contract's warranty "is in lieu of all other warranties express or implied." (Compl. Ex. 2 App. A P 12.) Sanden contends that this provision "'makes plain that there is no implied warranty.'" (Def.'s Mem. of Law in Supp. of its Mot. to Dismiss at 6 (quoting 810 ILCS 5/2-316(3)(a)).)

 Lefebvre counters that notwithstanding the contract's warranty provision, Lefebvre still has a claim based on the implied warranty of merchantability. Lefebvre contends that under section 2-316(2) of the UCC, the language of a warranty provision must explicitly mention "merchantability" to disclaim the implied warranty of merchantability.

 Section 2-316(2) provides that "subject to subsection (3), to exclude the implied warranty of merchantability or any part of it[,] the language [of the warranty provision] must mention merchantability...." 810 ILCS 5/2-316(2). Section 2-316(3) provides that "notwithstanding subsection (2), ... all implied warranties are excluded by ... language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty." 810 ILCS 5/2-316(3)(a).

 The court agrees with Sanden that section 2-316 provides two ways in which contracting parties can waive the implied warranty of merchantability: expressly use the term "merchantability" in the waiver provision, or use language that "in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty." 810 ILCS 5/2-316(2) and (3).

 The Illinois Supreme Court apparently has not addressed the issue of whether section 2-316(2) is limited in its application by section 2-316(3)(a). At least one lower Illinois court has disagreed with this court's reading of section 2-316 and held that "unless the word 'merchantability' appears in a written disclaimer, the implied warranty of merchantability survives the language of disclaimer," Schultz v. Jackson, 67 Ill. App. 3d 889, 893, 385 N.E.2d 162, 165, 24 Ill. Dec. 395 (3d Dist. 1979), regardless of whether the disclaimer language otherwise "makes plain that there is no implied warranty." 810 ILCS 5/2-316(3)(a). However, another Illinois court has criticized this construction of section 2-316. See J.D. Pavlak, Ltd. v. William Davies Co., Inc., 40 Ill. App. 3d 1, 5, 351 N.E.2d 243, 247 (1st Dist. 1976).

 This court is not bound by the decision of lower Illinois courts where the Illinois Supreme Court has not ruled on the matter. Smith v. Navistar Int'l Transp. Corp., 957 F.2d 1439, 1443 (7th Cir. 1992) (citing White v. United States, 680 F.2d 1156, 1161 (7th Cir. 1982); D'Acquisto v. Washington, 640 F. Supp. 594, 619 (N.D. Ill. 1986)). In the absence of any guidance on the question from the Illinois Supreme Court or any federal court, the court declines to follow Schultz because it is inconsistent with the plain language of section 2-316(2) and (3)(a). The court finds that section 2-316(2) applies "subject to" section 2-316(3); that section 2-316(3)(a) applies "notwithstanding" section 2-316(2); and therefore that section 2-316(3)(a) serves to limit the application of section 2-316(2).

 Because the waiver provision in the purchase contract between Lefebvre and Sanden plainly excludes all express and implied warranties not explicitly set forth in the contract, the court finds that Lefebvre has no cause of action for breach of the implied warranty of merchantability. Accordingly, the court grants Sanden's motion to dismiss Count III.

 C. Count IV -- Fraudulent misrepresentation

 Sanden contends that Lefebvre has failed to state a claim for fraudulent misrepresentation because Lefebvre has not alleged all of the elements necessary to make out a claim for fraudulent misrepresentation.

 To state a claim for fraudulent misrepresentation under Illinois law, a plaintiff must allege the following: (1) the representation was a statement of material fact, rather than a mere promise or opinion; (2) the statement was false; (3) the person making the statement knew or believed that the representation was false; (4) the person to whom the representation was made reasonably relied on the truth of the statement; (5) the statement was made for the purpose of causing the other party affirmatively to act; and (6) the reliance by the person to whom the statement was made led to his injury. LaScola v. U.S. Sprint Communications, 946 F.2d 559, 567-68 (7th Cir. 1991).

 In its complaint, Lefebvre alleges that Sanden personnel represented that the printing press "could produce the printing that [Lefebvre] required in a commercially acceptable manner," and "could produce commercially acceptable four color process work." (Compl. PP 8, 9, and 10.) Lefebvre also alleges that Sanden did not inform Lefebvre of previous problems with the same printing press model and a similar model. (Id. PP 34-38.) Lefebvre alleges that Sanden made these misrepresentations to induce Lefebvre to enter into the purchase contract and that Lefebvre relied on the misrepresentations and entered into the purchase contract. (Id. PP 40, 47.)

 Sanden contends first that the alleged misrepresentations were not statements of fact, but were merely promises or expressions of opinion. "To support an action for fraud, the alleged misrepresentation must be one of fact and not an expression of opinion." People ex rel. Peters v. Murphy-Knight, 248 Ill. App. 3d 382, 387, 618 N.E.2d 459, 463, 187 Ill. Dec. 868 (1st Dist. 1993) (citing Duhl v. Nash Realty, Inc., 102 Ill. App. 3d 483, 429 N.E.2d 1267, 57 Ill. Dec. 904 (1st Dist. 1981); Equity Capital Corp. v. Kreider Transp. Serv., Inc., 967 F.2d 249 (7th Cir. 1992)). A statement that "merely expresses an opinion or that relates to future or contingent events, rather than past or present facts, does not constitute an actionable representation." West v. Western Cas. and Sur. Co., 846 F.2d 387, 393 (7th Cir. 1988). See also Murphy-Knight, 248 Ill. App. 3d at 387, 618 N.E.2d at 463 ("statements regarding future events are considered opinions, not statements of fact").

 That is, the misrepresentation "must be an affirmance of fact and not a mere promise or expression of opinion or intention; or in other words 'the fraud must be in the original contract or transaction, and not in its nonfulfillment.'" Zaborowski v. Hoffman Rosner Co., 43 Ill. App. 3d 21, 23, 356 N.E.2d 653, 655, 1 Ill. Dec. 465 (2d Dist. 1976). In addition, statements that are "nothing more than a recommendation of one's product are not representations of fact, but rather [are] 'mere commendation or opinion' and are not actionable as fraud." Murphy-Knight, 248 Ill. App. 3d at 388, 618 N.E.2d at 464 (quoting Spiegel v. Sharp Elec. Corp., 125 Ill. App. 3d 897, 902, 466 N.E.2d 1040, 1044, 81 Ill. Dec. 238 (1st Dist. 1984)).

 Sanden argues that its allegedly fraudulent representations regarding the ability of the printing press to meet Lefebvre's needs were not statements relating to past or present facts, but rather were statements about future or contingent events. See West, 846 F.2d at 393. It also argues that the allegedly fraudulent statements amounted to "mere commendation or opinion." Spiegel, 125 Ill. App. 3d at 902, 466 N.E.2d at 1044. Sanden asserts that its statements regarding the printing press's capabilities were analogous to the statements in Spiegel that a copier would make "picture perfect" copies. Id.

 Lefebvre counters that Sanden's statements should be treated as statements of material fact. Lefebvre likens its situation to that of the plaintiffs in Murphy-Knight. In that case, defendants supplied thermal banks for the heating, ventilation, and air conditioning (HVAC) system in the State of Illinois Center. After the HVAC system failed to meet performance specifications, plaintiffs sued defendants for fraudulent misrepresentation, alleging that defendants had misrepresented that their equipment could meet the performance specifications. Murphy-Knight, 248 Ill. App. 3d at 388, 618 N.E.2d at 464. The allegedly fraudulent statements were that the thermal banks were "as called for in the specifications," and had a "capacity of '100,000 pounds of ice at 2 1/2 inch thickness.'" Murphy-Knight, 248 Ill. App. 3d at 388, 618 N.E.2d at 464. The specifications required the thermal banks to produce "100,000 pounds of ice in 2 1/2 [inch] thickness in 12 hours under certain conditions." Id.

 Defendants argued that the statements were not actionable as fraud because the statements related to future events. The court disagreed. It stated that although the alleged representations related to the performance of the thermal banks upon their installation as part of the HVAC system, the court nevertheless was convinced that the representations should be treated as ones of present fact rather than future performance. Id. The court found that according to the allegations of the complaint, the representations "concerned a machine of known physical characteristics and its capabilities based upon the application of certain mathematical formulae and laws of physics to those physical properties." Murphy-Knight, 248 Ill. App. 3d at 388-89, 618 N.E.2d at 464. The court stated further that the representations concerned "the capabilities of a machine which was either in existence at the time the statements were made, or one of a known, specified, and certain type. As such, the statements at issue here must be considered representations of existing fact, and thus actionable as fraud." Murphy-Knight, 248 Ill. App. 3d at 389, 618 N.E.2d at 464.

 The court found a dearth of Illinois case law regarding representations such as the ones in that case, so it relied on similar cases from other jurisdictions. See id. (citing Maxwell Ice Co. v. Brackett, Shaw & Lunt Co., 80 N.H. 236, 116 A. 34 (1921) ("Representations by an expert on power to one not having equal knowledge as to the amount of energy which standard makes of motors and engines will develop are not future promises, but are statements with reference to known facts based on tests and mathematical computations. Such representations differ materially from 'sellers' talk' or mere opinion expressed to one having equal knowledge or equal opportunities for knowledge"); Bareham & McFarland, Inc. v. Kane, 228 A.D. 396, 240 N.Y.S. 123 (A.D. 1930) (representations that heater, when installed in home, would heat building to 70 degrees in zero-degree weather, that fuel would cost no more than $ 350 per season, and that gas for pilot light would not exceed $ 1 per month held to "relate to the inherent capacity, character and quality of the heater, and what it was actually capable of doing" and thus constitute "positive statements of existing facts"); ...


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