because there are no allegations of false representations for
inducement into the contract.
The Agreement states, in pertinent part: "Buyer and Sellers
acknowledge and agree that the foregoing indemnification
provisions . . . shall be the exclusive remedy of Buyer and
Sellers with respect to the WEB Companies, and the transactions
contemplated by this Agreement." (Defs.Mot. to Dismiss, Ex. A, ¶
To state a claim for common law fraud under Illinois law, a
plaintiff must allege: (1) a false statement of material fact;
(2) knowledge or belief of the falsity by the party making the
statement; (3) intention to induce the other party to act; (4)
action by the other party in reliance on the truth of the
statements; and (5) damage to the other party resulting from such
reliance. Renovitch v. Kaufman, 905 F.2d 1040, 1049 (7th Cir.
1990) (quoting Bd. of Educ. v. A, C & S, Inc., 131 Ill.2d 428,
137 Ill.Dec. 635, 546 N.E.2d 580, 591 (1989)). Thus, an element
of a common law fraud claim is that the false statements induced
the party into entering into a contract. See id.
While the law generally does not allow for tort recovery for
what is essentially a breach of contract, it recognizes a clear
exception where the fraud vitiates the making of the contract or
where the plaintiff is fraudulently induced to enter into the
contract in the first place. See Johnson, 248 Ill. App.3d 859,
187 Ill.Dec. 634, 617 N.E.2d 1355, 1361 (1993). In their
complaint, plaintiffs allege many specific statements which they
claim defendants or their agent offered as true representations
of WEB's commerciability when, plaintiffs claim, such
representations were false. (Pls.Am.Compl. ¶¶ 39-45, 59-60.)
Further, plaintiffs allege that such false representations were
knowingly made by defendants (Am.Comp. ¶¶ 39-45, 59-60); that
defendants knew of plaintiffs' reliance on these statements
(id. ¶¶ 51-52, 54); and that these false statements "caused
plaintiffs to enter into the purchase of securities" (id. ¶
77). Thus, plaintiffs' complaint "may fairly be read as alleging
that [they] would not have entered into the contract with
defendant[s] but for the misrepresentations." Johnson v. George
J. Ball, 187 Ill.Dec. 634, 617 N.E.2d at 1361. Because the
courts clearly recognize that such a claim is an exception which
allows a tort action when the contract was fraudulently induced,
there is no bar to plaintiffs maintaining a separate cause of
action based on fraud in the inducement.
Defendants argue that plaintiffs have not alleged a claim of
fraud in the inducement and, therefore, this claim arises out of
the contract and is barred by the exclusive remedies clause. In
reviewing the law on this issue, the court was mindful that this
is a motion to dismiss. Thus, while plaintiffs have not
specifically labeled count IV as a fraud-in-the inducement claim,
they have alleged sufficient facts to survive a motion to
dismiss. Accordingly, the court denies defendants' motion to
dismiss count IV of plaintiffs' second amended complaint.
D. Motion to strike
Defendants also move, pursuant to Federal Rule of Civil
Procedure 12(f), to strike several paragraphs in plaintiffs'
second amended complaint, arguing that those paragraphs contain
allegations that are not material to plaintiffs' claims and that
they are unduly prejudicial to defendants. In this motion
defendants argue that those allegations relating to
representations made by Butler — a non-party business broker who
was only involved in pre-Agreement discussions — have no bearing
on plaintiffs' claims and are, thus, immaterial. The court
Under Rule 12(f) "the court may order stricken from any
pleading . . . any redundant, immaterial, impertinent or
scandalous matter." FED.R.CIV.P. 12(f). Courts generally disfavor
motions to strike. Tatum v. Davis, No. 95 C 1341,
1996 WL 388405, at *1 (N.D.Ill. July 9, 1996). Moreover, courts
will strike portions of a complaint only if the challenged
allegations are so unrelated to the present claim as to be void
of merit and unworthy of consideration. See Trustmark Life Ins.
Co. v. Univ. of Chicago Hosps., No. 94 C 4692, 1996 WL 68009, at
*1 (N.D.Ill. Feb.14, 1996).
Plaintiffs have brought a common law fraud claim, alleging that
they were induced to enter into the Agreement by representations
made prior to signing the Agreement. Further, plaintiffs allege
that Butler was a consultant retained by defendants to aid in the
sale of WEB and acted as an agent with the "full knowledge,
approval and authority" of the defendants. (Pls.Am.Compl. ¶¶ 26,
37.) Thus, any allegedly fraudulent statements made by Butler
could be attributed to defendants and, therefore, may be material
to plaintiffs' common law fraud claim. Accordingly, the court
denies defendants' motion to strike.
For the foregoing reasons, the court (1) grants defendants'
motion to dismiss count III of plaintiffs' second amended
complaint; (2) denies defendants' motion to dismiss count IV of
plaintiffs' second amended complaint; and (3) denies defendants'
motion to strike portions of plaintiffs' second amended
complaint. Accordingly, the court dismisses count III of
plaintiffs' second amended complaint.
© 1992-2003 VersusLaw Inc.