Furthermore, "predominant" is not defined solely in quantitative terms. "Predominant" means, among other things, "having greatest ascendancy, importance, influence, authority, or force." WEBSTER'S II NEW RIVERSIDE UNIV. DICTIONARY 927 (1984).
The court cannot say that a sale of goods was the most important goal of the agreement between Midwest and Donnelly. All seven of the agreements appear necessary to consummate the sale, and six of the agreements were not related to assets. Moreover, despite the lower monetary value of intangible assets, the court infers from plaintiffs' amended complaint that these were the assets most important to plaintiffs. For example, plaintiffs' amended complaint indicates that the reason plaintiffs wanted to acquire the I.P. business was to make use of the I.P. business's "patents, trade secrets, technology, and operating know how regarding both bent glass and the glass coating industry generally." (Am. Compl. P 10.) The transaction likely would have had little value to Midwest without the transfer of Donnelly's intellectual property rights related to the I.P. business.
Thus, regardless of the sales price of the tangible assets, the court finds that the sale of the I.P. business was not a sale of goods, and therefore that the UCC does not apply to the agreement. This is not to say that another statute of frauds does not apply to the agreement, however.
The court agrees with plaintiffs that the agreement was one for the sale of an entire business, and that the transaction was to be completed within a week of the reaching of the agreement. However, the agreement included a provision for a 10-year lease of defendants' manufacturing facility. Under Illinois law, a contract that involves a transfer of real estate, including a long-term lease, must comport with the statute of frauds related to real estate.
In Feldman v. Allegheny Int'l, Inc., 850 F.2d 1217 (7th Cir. 1988), the Seventh Circuit addressed whether a purported contract for the purchase of a group of food-related companies had to be in writing and formally executed. On the facts before it, the court held that the answer was yes. The court stated that under Illinois law, contracts involving the transfer of real estate must be in writing and signed. Id. at 1222. The court noted that the alleged agreement for the sale of the companies involved the transfer of real property. Id.
Thus, the court agreed with the trial court that the alleged agreement, which was not reduced to writing and signed, violated Illinois' general statute of frauds regarding the transfer of real estate. Id. See also Pond v. Sheean, 132 Ill. 312, 323, 23 N.E. 1018, 1021 (1890) (contract involving personal property and real estate regarded in its entirety, and if void as to real estate, it is void as to personal property).
As in Feldman, the agreement for the sale of the I.P. property involves a land transfer covered by the statute of frauds, since the parties allegedly agreed to a 10-year lease with an additional five-year option. Though this lease was only a relatively minor part of the transaction, Feldman did not except minor aspects of a transaction from its rule that a contract involving a land transfer must be in writing and signed. Accordingly, the agreement for the sale of the I.P. business is subject to Illinois' statute of frauds regarding land transfers. See 740 ILCS 80/2.
c. Whether the agreement satisfies the statute of frauds
The important question now becomes whether the agreement was sufficiently reduced to writing and signed to satisfy the statute of frauds. Defendants, not surprisingly, claim that the signature pages signed by Jellison and included in the exhibits of plaintiffs' amended complaint do not satisfy the statute of frauds. Defendants contend that the signature pages are actually from earlier drafts of the documents that are included in plaintiffs' amended complaint, and therefore that they precede and are not related to the documents.
The Illinois statute of frauds requires contracts for a lease lasting longer than one year to be in writing and signed by the party to be charged. See 740 ILCS 80/2. Under the statute of frauds, no particular form of language need be used, as long as the intention of the parties can be established. Yorkville Nat'l Bank v. Schaefer, 71 Ill. App. 3d 137, 140, 388 N.E.2d 1312, 1314-15, 27 Ill. Dec. 263 (2d Dist. 1979) (citing Lipkin v. Koren, 392 Ill. 400, 407, 64 N.E.2d 890, 894 (1946)). In addition, the writing need not be on a single piece of paper, and all of the documents need not be signed, as long as the signed writing refers expressly to the unsigned writing or the documents are so connected, physically or otherwise, as to show that they relate to the same contract. Bower v. Jones, 978 F.2d 1004, 1008 (7th Cir. 1992) (citations omitted); Dickens v. Quincy College Corp., 245 Ill. App. 3d 1055, 1060, 615 N.E.2d 381, 384-85, 185 Ill. Dec. 822 (4th Dist. 1993) (citations omitted). In other words, the documents that are signed must be signed with "the full understanding of the connections to the contract." Dickens, 245 Ill. App. 3d at 1060, 615 N.E.2d at 384-85 (citations omitted).
According to plaintiffs' amended complaint, each signature page that was signed by Jellison was attached, at the time of the signing, either to a cover sheet describing what document it was that Jellison was executing or to the entire document. (See Am. Compl. PP 32-33; id. Ex. B through O). The lease agreement was one of the documents allegedly executed by Jellison. (See id. Ex. C.).
However, defendants contend that the signed signature pages were not physically attached to the actual documents that evidenced the parties' alleged agreement, but rather were attached to earlier draft documents. Thus, defendants argue that the signature pages do not relate to the parties' alleged agreement. In addition, defendants argue that the signature pages precede the alleged agreement, and therefore cannot satisfy the statute of frauds.
The court finds that defendants' arguments require the court to resolve questions of fact, making dismissal under Rule 12(b)(6) inappropriate. Defendants' arguments require the court to determine whether the signature pages were attached to draft or final documents; the content of the draft documents; whether the terms of the draft documents differed from the terms of the final documents;
when the parties reached agreement on the terms of the lease or any other aspects of the transaction; when the signature pages were signed; whether the signature pages were signed before or after the parties reached agreement on the lease or any other aspect of the transaction; whether Jellison signed the signature pages with "full understanding" of their connection to the agreement as a whole;
and, most important, what the parties intended by Jellison's executing the signature pages. The answers to these questions are not apparent from the pleadings.
The resolution of these questions is more appropriately reserved for summary judgment, if they can be answered by evidentiary submissions accompanying a motion for summary judgment, or trial. Based on plaintiffs' amended complaint and the reasonable inferences that the court can draw from it, the court simply cannot say that the signature pages appended as exhibits to plaintiffs' amended complaint fail to satisfy the statute of frauds.
2. Lack of authority
Defendants contend that the breach of contract claim fails for another reason -- the Donnelly board of directors did not authorize the alleged final agreement for the sale of the I.P. business; thus, there was no final agreement. Specifically, defendants claim that consummation of the agreement was authorized only if the final agreement was consistent with the board's resolution. According to defendants, the final agreement was not consistent with the resolution because, at a minimum, the price term in the agreement did not contain an adjustment based on the balance sheet at the time of closing, as required by the resolution. Also, defendants claim that Jellison was not authorized to approve the agreement on his own, and that plaintiffs knew this. Last, defendants claim that the board approved a transaction only pursuant to the letter of intent. The letter of intent provided that a final agreement was to be reached no later than December 15, 1996, with a closing date no later than December 31, 1996, and that if those dates were not met, the letter of intent would terminate and the transaction be deemed abandoned. Because those dates came and went with no final agreement, according to defendants, the letter of intent expired, and with it, the board's grant of authority.
Defendants oversimplify the issue of authority. Regardless of the terms of the letter of intent or resolution, plaintiffs' amended complaint alleges facts that indicate that the parties continued to negotiate towards the sale of the I.P. business well past the deadlines established by the letter of intent. According to the amended complaint, Jellison handled all the negotiations on behalf of Midwest; Baumgardner apparently was not involved at all in the negotiations. Plaintiffs allege that Jellison eventually agreed to the essential terms of the transaction, and the closing on the sale was to take place January 20-22, 1997. Thus, plaintiffs' allegations indicate that despite what the letter of intent and resolution provided, the parties disregarded the strict provisions in those documents and negotiated towards and reached a final agreement on the sale of the I.P. business.
Moreover, the court notes that nothing in the letter of intent prevented the parties from continuing negotiations and reaching an agreement after the expiration of the letter of intent. It appears that defendants are attempting to put such a restriction on the letter of intent only after the fact that the agreement fell through.
The court also is not persuaded that the paragraph of the resolution giving Jellison and Baumgardner authority to negotiate with Midwest and to consummate the transaction meant that both Jellison and Baumgardner had to negotiate and agree to consummate the transaction. The resolution provided:
... Dwane Baumgardner and William Jellison are authorized to continue to negotiate with Midwest and to proceed with consummation of the transactions if, in their judgment, satisfactory definitive agreements consistent with this resolution can be achieved.
... Dwane Baumgardner and William Jellison, or either of them, are hereby authorized to execute and deliver any and all documents and certificates which may be necessary or convenient in order to consummate the sale of the assets of the I.P. business, ..., and are authorized to take any and all other action necessary in order to consummate the said transaction in accordance with this resolution.