The opinion of the court was delivered by: Alesia, District Judge.
Before the court is plaintiff MAN Roland Incorporated's motion
to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6),
defendant Quantum Color Corporation's amended counterclaims. For
the following reasons, the court grants in part and denies in
part plaintiff MAN Roland Incorporated's motion to dismiss
Quantum Color Corporation's amended counterclaims.
Plaintiff MAN Roland Incorporated ("MAN Roland") brings this
diversity action against the defendant Quantum Color Corporation
("Quantum"). MAN Roland is a business incorporated under the laws
of Delaware with its principal place of business in Illinois.
Quantum is a business incorporated under the laws of New York
with its principal place of business in New York. The amount in
controversy exceeds $75,000. Thus, this court has original
subject matter jurisdiction pursuant to 28 U.S.C. § 1332.
This action allegedly arises out of a June 27, 1997 used
machinery contract between
the two parties.*fn1 In this contract, MAN Roland agreed to sell
a 1987 used press to Quantum for $405,000. According to MAN
Roland, Quantum agreed to pay $5,000 upon execution of the
contract, $265,000 upon delivery of the press, and the balance of
$135,000 upon commercial operation of the press. MAN Roland
alleges that it never received the balance even though Quantum
allegedly put the press into operation long ago. Any additional
facts, the court will discuss in further detail under the
A. Standard for deciding a Rule 12(b)(6) motion to dismiss
In addressing MAN Roland's motion to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(6), the court assumes that
the well-pleaded allegations of Quantum's amended counterclaims
are true and considers them in the light most favorable to
Quantum. See Gomez v. Illinois State Bd. of Educ.,
811 F.2d 1030, 1039 (7th Cir. 1987). If, when viewed in the light most
favorable to Quantum, the counterclaim fails to state a claim
upon which relief can be granted, the court must dismiss it.
See FED.R.CIV.P. 12(b)(6); Gomez, 811 F.2d at 1039. However,
the court may dismiss the counterclaim only if it appears beyond
a doubt that Quantum can prove no set of facts in support of its
claim that would entitle it to relief. See Conley v. Gibson,
355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
Even under the liberal notice pleading standard of the Federal
Rules of Civil Procedure, however, the counterclaim must include
either direct or inferential allegations respecting all material
elements of the claim asserted. Perkins v. Silverstein,
939 F.2d 463, 466 (7th Cir. 1991). Bare legal conclusions attached to
narrated facts will not suffice. Strauss v. City of Chicago,
760 F.2d 765, 768 (7th Cir. 1985).
Quantum styles both its first and second amended counterclaims
as allegations of a breach of contract. Although, in reality,
Quantum is asking this court to rescind the contract because MAN
Roland failed to deliver the "standard equipment" and failed to
install the equipment. Thus, the court will treat the first and
second amended counterclaims as allegations to state a claim for
recission of the contract.
Quantum has the right to rescind a contract of sale, if it
offered to return the article. See American Sanitary Rag Co. v.
United States Hoffman Machinery Corp., 320 Ill. App. 556,
51 N.E.2d 809, 811 (1943). Quantum did offer to return the press to
MAN Roland, (D.Countercl. ¶ 162), but MAN Roland would not accept
the return. (D.Countercl. ¶ 162). Thus, Quantum has fulfilled one
of the requirements for a claim of recission.
Furthermore, a party may seek recission of a contract only when
there has been a material breach by another party. See Arrow
Master, Inc. v. Unique Forming Ltd., 12 F.3d 709, 714 (7th Cir.
1993); Unique Watch Crystal Co. v. Kotler, 344 Ill. App. 54,
99 N.E.2d 728, 733 (1951). A material breach occurs when a party to
the contract "fails to perform an element of the agreement
without which the contract would not have been made." Stowe v.
Balsier, No. 88 C 4929, 1989 WL 32932, at *3 (N.D.Ill. Apr.4,
1989) (citing Trapkus v. Edstrom's, 140 Ill. App.3d 720, 95
Ill.Dec. 119, 489 N.E.2d 340, 344-45 (1986)).
Having determined that the contract is the final expression of
the parties, the court will now examine the contract to determine
if it contains any express warranties which MAN Roland breached.
Quantum alleges that the contract expressly warrants that the
press (1) "would be fit for its ordinary purposes," (2) "would
produce commercially acceptable two color process work in a
commercially acceptable manner," (3) "would operate in accordance
with its design specifications . . . and accepted mean time
between service calls," (4) "would be fit for defendant's
purposes," and (5) "would operate in reasonable accordance with
defendant's subjective operation, reliability and quality
requirements for the purchase of printing presses, printing
equipment, service and supplies of various kinds by defendant."
(D.Countercl. ¶ 150-54). MAN Roland, on the other hand, claims
that the contract disclaims all express warranties and thus, that
Quantum has failed to state a claim.
"An express warranty is a `creature of contract' that `arises
only because the warrantor has willed it into being by making the
requisite affirmation.'" Miller v. Showcase Homes, Inc., No. 98
C 2009, 1999 WL 199605, at *7 (N.D.Ill. Mar.31, 1999) (quoting
Collins Co. v. Carboline Co., 125 Ill.2d 498, 127 Ill.Dec. 5,
532 N.E.2d 834, 838 (1988)). A party to the contract, however,
may limit or exclude any express warranties so long as the "words
or conduct relevant to the creation of an express warranty and
words or conduct tending to negate or limit warranty shall be
construed wherever reasonable as consistent with each other." 810
Thus, Quantum has failed to state a claim for breach of express
warranty because the contract does not contain the express
warranties which Quantum alleges, and furthermore, the contract
disclaims all express warranties. Accordingly, the court grants
MAN Roland's motion to dismiss Quantum's third amended
In its fourth and fifth amended counterclaims, Quantum,
respectively, alleges that MAN Roland breached an implied
warranty of merchantability and breached an implied warranty of
fitness. MAN Roland argues that both of these counterclaims fail
to state a claim because the Uniform Commercial Code ("UCC"),
which Illinois has adopted, expressly permits parties to a
commercial transaction to contract to disclaim all implied
810 ILL.COMP.STAT. 5/2-316(3)(a). However, to specifically
disclaim the implied warranty of merchantability, the language
must conspicuously mention merchantability. Id. 5/2-316(2).
"Language in the body of a form is `conspicuous' if it is in
larger or other contrasting type or color." Id. 5/1-201(10).
In their contract, Quantum and MAN Roland agree that all
express, implied and statutory warranties are disclaimed.
(Pl.Compl.Ex. 1 ¶ 11). This disclaimer specifically states: "ALL
WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS, IMPLIED AND
STATUTORY, ARE HEREBY DISCLAIMED. ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY
DISCLAIMED. THE MACHINERY (INCLUDING ANY ACCESSORIES AND
COMPONENTS) IS SOLD `AS IS.'" (Pl.Compl.Ex. 1 ¶ 11). This
language clearly communicates that all warranties are excluded.
Furthermore, the language specifically mentions merchantability
and is written in a contrasting type set (large, bold letters).
Thus, MAN Roland has sufficiently called Quantum's attention to
the exclusion of warranties, including the implied warranty of
Because the disclaimer provision in the contract between MAN
Roland and Quantum is conspicuous and excludes all warranties,
the court finds that Quantum has not stated a claim for breach of
the implied warranty of merchantability or for breach of the
implied warranty of fitness. Accordingly, the court grants MAN
Roland's motion to dismiss Quantum's fourth and fifth amended
In its sixth and seventh amended counterclaims, Quantum,
that MAN Roland violated the Illinois Consumer Fraud and
Deceptive Business Practices Act, 815 ILL.COMP.STAT. 505/1 et
seq., by making fraudulent representations and by omitting
material facts. MAN Roland contends that the court should dismiss
both of these counterclaims for failure to state a claim because
the alleged misrepresentations and omissions did not have, or
could not have had, any effect on Illinois consumers.
The Illinois Consumer Fraud Act ("ICFA") provides:
Unfair methods of competition and unfair or deceptive
acts or practices, including but not limited to the
use or employment of any deception, fraud, false
pretense, false promise, misrepresentation or the
concealment, suppression or omission of such material
fact, with the intent that others rely upon the
concealment, suppression or omission of such material
fact . . . are hereby declared unlawful whether any
person has in fact been misled, deceived or damaged
Id. 505/2. To state a claim under the ICFA, Quantum must allege
that: (1) MAN Roland engaged in a deceptive act or practice; (2)
MAN Roland intended that Quantum rely on the deception; and (3)
"the deception occurred in the course of conduct involving trade
or commerce." Adler v. William Blair & Co., 271 Ill. App.3d 117,
207 Ill.Dec. 770, 648 N.E.2d 226, 233 (1995). The ICFA
defines "trade" and "commerce" as "the advertising, offering for
sale, sale, or distribution of any services and any property,
tangible or intangible, real, personal or mixed, and any other
article, commodity, or thing of value wherever situated, and
shall include any trade or commerce directly or indirectly
affecting the people of this State." 815 ILL.COMP.STAT. 505/1(f).
MAN Roland does not assert that Quantum has failed to properly
allege either of the first two elements for a claim under the
ICFA. MAN Roland only contends that Quantum has failed to assert
that the alleged deception occurred in the course of conduct
involving trade or commerce because the alleged misrepresentation
or omission did not affect the people of Illinois. In making this
argument, MAN Roland relies on a line of cases from the District
Court for the Northern District of Illinois which hold that only
Illinois consumers have standing to sue under the ICFA. See Endo
v. Albertine, No. 88 C 1815, 1995 WL 170030, at *6 (N.D.Ill.
Apr.7, 1995) (Holderman, J.); Swartz v. Schaub, 818 F. Supp. 1214,
1214 (N.D.Ill. 1993) (Shadur, J.); Lincoln Nat'l Life Ins.
Co. v. Silver, 1991 U.S.Dist. LEXIS 13857, at *34-35 (N.D.Ill.
Oct. 1, 1991) (Weisberg, J.); Seaboard Seed Co. v. Bemis Co.,
632 F. Supp. 1133, 1140 (N.D.Ill. 1986) (Shadur, J.). Following
the line of reasoning in these cases, MAN Roland contends that
because Quantum's business and the press are located in New York,
that Quantum is not an Illinois consumer, and thus, does not have
standing to sue.
Interestingly, MAN Roland fails to address the fact that there
is a split within this district as to whether only Illinois
consumers have standing to sue or whether non-resident consumers
also have standing. In the cases which have found that
non-resident consumers also have standing to sue, the judges have
based their decisions upon a more liberal construction of the
ICFA. Tylka v. Gerber Prods. Co., 182 F.R.D. 573, 577-78
(N.D.Ill. 1998) (Norgle, J.); Nichols Motorcycle Supply Inc. v.
Dunlop Tire Corp., 913 F. Supp. 1088, 1139-40 (N.D.Ill. 1995)
(Castillo, J.) (vacated in part pursuant to settlement);
Cirone-Shadow v. Union Nissan of Waukegan, No. 94 C 6723, 1995
WL 238680, at *4-5 (N.D.Ill. Apr.20, 1995) (Kocoras, J.); Fry v.
UAL Corp., 136 F.R.D. 626, 637 (N.D.Ill. 1991) (Nordberg, J.);
see also Uniroyal Goodrich Tire Co. v. Mutual Trading Corp.,
749 F. Supp. 869, 878 (N.D.Ill. 1990) (Aspen, J.) ("Defendants
have failed to demonstrate just exactly how, given the Act's
broad definitional sweep and explicit mandate of liberal
Uniroyal Goodrich's allegations do not satisfy the `Illinois
contact' requirements of the Act."); Hartmann Co. v. Capital
Bank & Trust Co., 296 Ill. App.3d 593, 230 Ill.Dec. 830,
694 N.E.2d 1108, 1116 (1998) (quoting Duhl v. Nash Realty, Inc.,
102 Ill. App.3d 483, 57 Ill.Dec. 904, 429 N.E.2d 1267, 1277
(1981)) ("Our legislature enacted this statute to create `broad
protective coverage of consumers from the many types of deceptive
or unfair selling and advertising techniques used by
This court respectfully finds that the courts which interpreted
the ICFA to extend standing only to consumers who are Illinois
residents construed the ICFA too narrowly given the Illinois
legislature's statement that the ICFA "shall be liberally
construed to effect the purposes thereof." 815 ILL.COMP.STAT.
505/11a. "To deny an out-of-state plaintiff standing to sue for a
wrong in Illinois rejects the ICFA's liberal application
directive . . . and results in an overtechnical construction of
the statute." Tylka, 182 F.R.D. at 577 (citations omitted).
Thus, this court finds that Quantum, as a non-resident consumer,
who purchased the press in Illinois from an Illinois corporation
has standing to sue under the ICFA. Accordingly, the court denies
MAN Roland's motion to dismiss Quantum's sixth and seventh
F. Claim for consequential damages
In MAN Roland's motion to dismiss Quantum's claims for
consequential damages, MAN Roland contends that the contract
contains a valid disclaimer of such damages under the UCC.
However, Quantum counters that the waiver is unconscionable, and
thus, should not be enforced.
The UCC allows contracting parties to limit their contractual
remedies. Section 2-719 provides:
Consequential damages may be limited or excluded
unless the limitation or exclusion is unconscionable.
Limitation of consequential damages for injury to the
person in the case of consumer goods is prima facie
unconscionable but limitation of damages where the
loss is commercial is not.
810 ILL.COMP.STAT. 5/2-719(3).
In the present case, the contract between MAN Roland and
Quantum disclaims consequential damages. Paragraph twelve of the
In no event shall Seller or the manufacturer of the
Machinery and Accessories (including its officers,
agents, employees, representatives, attorneys and
parent, subsidiary and affiliated companies) be
liable for damages of any nature, including without
limitation, special, direct, indirect, incidental or
consequential damages, whether or not relating to
or in any manner resulting from or arising out of any
nonconformity of the Machinery and Accessories to the
warranty herein, any defect in material and
workmanship, any performance or nonperformance by
Seller of any of the obligations or delay of delivery
or failure to deliver for whatever cause, other than
damages expressly provided for above.
(Pl.Compl.Ex. A ¶ 12) (emphasis added). Thus, based on the UCC's
acceptance of contractual waivers of consequential damages and
this express provision in the contract, the court finds that
Quantum waived its right to consequential damages when it signed
As for Quantum's argument that this provision of the contract
is unconscionable, the court is unable to assess this argument.
"In assessing whether a contractual provision should be
disregarded as unconscionable, Illinois courts look to the
circumstances existing at the time of the contract's formation,
including the relative bargaining positions of the parties and
whether the provision's operation would result in unfair
surprise." Cognitest Corp. v. Riverside Publ'g Co.,
107 F.3d 493, 499 (7th Cir. 1997). Quantum has not plead in any of its
counterclaims that this provision or any other provision of the
contract, for that matter, is unconscionable nor has it plead any
facts relating to this alleged unconscionability. Quantum only
alleges unconscionability in its response to MAN Roland's motion
to dismiss. Thus, the court will not and cannot assess whether
this provision is unconscionable. See Cognitest Corp., 107 F.3d
at 496 ("The complaint before us does not include an allegation
of unconscionability . . . and the district court was therefore
entitled to rely upon the limitation provision in concluding that
the contract precludes recovery."); see also Pierson v. Dean,
Witter, Reynolds, Inc., 742 F.2d 334, 339 (7th Cir. 1984)
("However, without any indication in the record that the
[plaintiff] . . . even alleged, much less proved, that they were
forced to unknowingly forfeit their rights in an unfair manner,
we cannot uphold the district court's finding that the
arbitration clause is unconscionable."). Accordingly, MAN
Roland's motion to dismiss Quantum's claims for consequential
damages is granted.
For the reasons set forth in this opinion, the court denies in
part and grants in part plaintiff MAN Roland's motion to dismiss
this case for failure to state a claim pursuant to Federal Rule
of Civil Procedure 12(b)(6). Accordingly, the court enters the
1. The court denies MAN Roland's Rule 12(b)(6) motion
to dismiss Quantum's first, second, sixth, and
seventh amended counterclaims.
2. The court grants MAN Roland's Rule 12(b)(6) motion
to dismiss Quantum's third, fourth and fifth
amended counterclaims and claim for consequential