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PRESSALITE CORPORATION v. MATSUSHITA ELECTRIC CORP.

April 3, 2003

PRESSALITE CORPORATION, AN ILLINOIS CORPORATION PLAINTIFF,
v.
MATSUSHITA ELECTRIC CORPORATION OF AMERICA, A DELAWARE CORPORATION DEFENDANT.



The opinion of the court was delivered by: Geraldine Soat Brown, United States Magistrate Judge.

MEMORANDUM OPINION AND ORDER

Plaintiff Pressalite Corporation ("Pressalite") has brought a five count complaint against defendant Matsushita Electric Corporation of America ("Matsushita") for breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness for particular purpose, common law fraud, and statutory fraud under the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS § 505/1 et seq.) ("the Consumer Fraud Act"). [Dkt # 1.] The case was removed from state court on the basis of diversity jurisdiction, and Matsushita has moved to dismiss all counts under Fed.R.Civ.P. 12(b)(6) for failure to state a claim for which relief can be granted. [Dkt # 6.] The parties have consented to the jurisdiction of a magistrate judge. [Dkt # 14, 15.] For the following reasons Matsushita's motion is GRANTED IN PART and DENIED IN PART. The motion is denied as to Counts I-III. The motion is granted with regard to Count IV and Count IV is dismissed without prejudice. The motion is granted with regard to Count V, which is dismissed with prejudice for failure to state a claim.

PRESSALITE'S COMPLAINT AND MATSUSHITA'S MOTION TO DISMISS

Pressalite's Complaint alleges the following facts, which are taken as true for purposes of the motion to dismiss. Pressalite contracted with Matsushita for Matsushita to provide batteries to Pressalite for use in Pressalite's manufacture of flashlights. (Compl. ¶ 3.) In April, 1999, purchasers of Pressalite's flashlights returned numerous flashlights to due to defective batteries. (Id.) Having been assured that the problem had been identified and corrected, Pressalite entered into a settlement agreement with Matsushita and continued to use Matsushita's batteries in its flashlights. (Id. ¶ 4.) Matsushita failed to remedy the defect or remove the defective batteries from distribution as promised. (Id. ¶ 18-19.) Following the settlement, Pressalite again began to receive flashlights returned due to defective batteries. (Id. ¶ 5.) After being contacted by Pressalite, Matsushita acknowledged that there was a second manufacturing defect in the batteries it had been supplying and that Matsushita had known about the defect at the time of the settlement agreement but remained silent while continuing to ship 1,600,000 defective batteries. (Id. ¶ 7.) Prior to and during the course of its relationship with Matsushita, Pressalite was promised by Matsushita that Matsushita would manufacture batteries that were of a high quality, free of defect and suitable as components for Pressalite's flashlights. (Id. ¶ 6.)

In its motion to dismiss, Matsushita argues that the agreement between the parties is governed by the "terms and conditions of sale" allegedly sent to Pressalite with every order. (Def.'s Mem. at 4.) These terms disclaim any warranties of merchantability and fitness for a particular purpose and state that the transaction is to be governed by the laws of New York. (Id., Ex. 3.) In its response to Matsushita's motion, Pressalite denies ever receiving the documents upon which Matsushita relies. (Pl.'s Resp. at 3.)

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move for dismissal on the basis of the plaintiff's "failure to state a claim upon which relief can be granted." The Rule further provides that on such a motion, if "matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56."

In deciding a Rule 12(b)(6) motion, a court must consider "whether relief is possible under any set of facts consistent with the allegations of the plaintiff's complaint." Pokuta v. Trans World Airlines, Inc., 191 F.3d 834, 839 (7th Cir. 1999). Thus, the court must "accept as true all well-pled factual allegations in the complaint and draw all reasonable inferences therefrom in favor of the plaintiff." Perkins v. Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). In addition, "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

I. Counts I-III: Breach of Express Warranty, Breach of Implied Warranty of Merchantability, Breach of Implied Warranty of Fitness for Particular Purpose.

Counts I-III of Pressalite's complaint allege that Matsushita's sale of defective products constituted a breach of both express and implied warranties. (Compl. ¶¶ 12-17.) Matsushita has moved to dismiss these counts on the grounds that it expressly and conspicuously disclaimed liability for all warranties other than those stated in a written contract that allegedly governed the terms and conditions of sale. (Def.'s Mem. at 2-3.) Pressalite maintains that it did not receive the alleged contract, and consequently, was not aware of any warranty disclaimers. (Pl.'s Resp. at 3-4.)

A. Sufficiency of Pressalite's Claims

a. Count I: Breach of Express Warranty

Pressalite alleges that when Matsushita sold and delivered defective batteries to Pressalite it breached a prior express warranty that the batteries would be high quality, free from defects, and subject to strict quality control. (Compl. ¶¶ 6, 12.) Under the Illinois Uniform Commercial Code ("IUCC"), "[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise." 810 ILCS § 5/2-313(a). Thus, "[t]o state a claim for breach of express warranty, the buyer must allege that the seller made: (1) an affirmation of fact or promise made to the plaintiff; (2) relating to the goods; (3) which becomes part of the basis of the bargain; and (4) guaranteeing that the goods will conform to the affirmation or promise." Int'L Bd. of Teamsters Local 734 Health & Welfare Trust Fund v. Phillip Morris, Inc., 34 F. Supp.2d 656, 664 (N.D. Ill. 1998), aff'd., 186 F.3d 818 (7th Cir. 1999).

Pressalite's Complaint includes allegations that Matsushita made affirmations to Pressalite relating to the goods for sale. (Compl. ¶¶ 6, 12.) Pressalite also alleges that Matsushita guaranteed the goods would conform to those affirmations. (Id. ¶¶ 3-4, 6, 12.) Although Pressalite does not state explicitly that the affirmations became part of the "basis of the bargain," it alleges that it based its decision to continue to use Matsushita as a supplier of goods on those assurances. (Id. ¶¶ 3-4.) Under Illinois law, a buyer must show reliance on the seller's representations in order for those representations to form part of the basis of the bargain. Coryell v. Lombard Lincoln-Mercury Merkur, Inc. 544 N.E.2d 1154, 1158 (Ill.App. Ct. 1989).

The test for whether a vendor's representation is an express warranty is "whether the vendor assumes to assert a fact of which the buyer is ignorant, or merely states an opinion or judgment on a matter of which the vendor has no special knowledge, and on which the buyer may be expected also to have an opinion and to exercise his judgment." Weiss v. Rockwell Mfg. Co., 293 N.E.2d 375 (Ill.App. Ct. 1977) (citing Keller v. Flynn, 105 N.E.2d 532, 536 (Ill.App. Ct. 1952)). In the first case there is a warranty, in the second, however, there is not. Id. While "it is not necessary to the creation of an express warranty that the seller use formal words such as `warrant' or `guarantee' or that he have a specific intention to make a warranty, . . . an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty." 810 ILCS § 5/2-313(a)(2). Thus, "sales talk which relates only to the value of the goods or the seller's personal opinion or commendation of the goods is considered puffing and is not binding on the seller." Redmac, Inc. v. Computerland of Peoria, 489 N.E.2d 380, 382 (Ill. App. Ct. 1986).

Vendors' assertions to customers that their products are of high quality and that the customers will be pleased with the products are viewed as "puffing," rather than express warranties. See Olin Mathieson Chemical Corp. v. Moushon, 235 N.E.2d 263, 264 (Ill.App. Ct. 1968) (Plaintiff's oral statements to defendant that his product was of good quality, good results would be obtained and the customer would be pleased were statements of the seller's opinion rather than an express warranty); Royal Business Machines, Inc. v. Lorraine Corp. 633 F.2d 34, 42 (7th Cir. 1980) (under Indiana UCC provision identical to Illinois provision, seller's descriptions of goods as being of "high quality," requiring "few repairs" and likely to produce "substantial" profits for the buyer were viewed as expressions of the seller's opinion of the goods' value and not an express warranty). Conversely, sellers' statements to a buyer that a product will be "free of defects" upon delivery and will "work for a reasonable time" can create an ...


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