The opinion of the court was delivered by: ELAINE E. BUCKLO, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Telular Corporation ("Telular"), a Delaware corporation
with its principal place of business in Illinois, designs and
manufactures telecommunications devices. In 1996, Telular entered into a
contract to purchase digital signal processors ("DSPs") from defendant
Mentor Graphics Corporation ("Mentor"), an Oregon corporation with its
principal place of business in Oregon. Telular was developing a product
to be built with a DSP designed by Texas Instruments ("TIC50"), but
purchase of DSPs from Texas Instruments was not feasible. Mentor informed
Telular that it produced a clone of the TIC50, the M320C50. Telular
claims that after purchasing M320C50s from Mentor, they did not perform
as allegedly promised.
Telular filed a three-count complaint alleging fraudulent inducement,
violation of the Illinois Consumer Fraud Act, and breach of contract. I
dismissed the Consumer Fraud Act claim,
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finding that an Oregon choice of law provision in the contract
precluded application of the Illinois act. Telular Corp. v. Mentor
Graphics Corp., No. 01 C431 (N.D. Ill., filed Jan. 22, 2001) (order
dismissing Count II). I also granted summary judgment in favor of Mentor
with respect to the breach of contract claim. Telular Corp. v. Mentor
Graphics Corp., No. 01 C431 (N.D. Ill., filed Nov. 25, 2003). Mentor
now moves for summary judgment as to Count I, the fraudulent inducement
claim, arguing that plaintiff cannot establish the necessary elements of
fraud under Oregon law. I deny the motion.
Summary judgment is appropriate where the record and affidavits, if
any, show that there is no genuine issue of material fact and that the
moving party is entitled to judgment as a matter of law. Lexington
Ins. Co. v. Rugg & Knopp, 165 F.3d 1087, 1090 (7th Cir. 1999);
Fed.R.Civ.P. 56(c). I must construe all facts in the light most
favorable to the non-moving party and draw all reasonable and justifiable
inferences in favor of that party. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 255 (1986).
Under Oregon law, Telular must establish nine elements to recover for
fraud:
(1) a representation; (2) its falsity; (3) its
materiality; (4) the speaker's knowledge of its
falsity or ignorance of its truth; (5) the
speaker's intent that the representation should be
acted upon by the hearer in the manner reasonably
contemplated; (6) the hearer's ignorance of the
representation's falsity; (7) the hearer's
reliance on the truth of the representation; (8)
the hearer's right to rely thereon; and (9) the
hearer's consequent and proximate injury.
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Goodyear Tire & Rubber Co. v. Tualatin Tire & Auto,
Inc., 879 P.2d 193, 211-12 (Or. Ct. App. 1994). Telular must
establish these elements by "clear and convincing evidence". Riley
Hill Gen. Contractor, Inc. v. Tandy Corp., 737 P.2d 595, 605-06
(Ore. 1987) (stating that such evidence makes the truth of the facts
asserted highly probable").
Telular presents evidence that potentially established that
misstatements were made. Telular states that Jack Scherer, a sales
representative for Mentor, stated that the M320C50 was a "clean room
clone" of the TIC50. A product brochure provided by Mentor stated that
the M320C50 was compatible with the industry standard devices. Finally,
Mentor's Tony Mastrianni stated that the M320C50 would run identically to
the TIC50 and that processes run would be transparent. These statements
did not prove to be true, as the M320C50 did not function identically to
the TIC50,
Mentor argues, however, that Telular cannot establish that Mentor knew
these representations were false when it made them or acted with reckless
disregard of the falsity of the statement, or that Mentor did so
intending to deceive Telular. See, e.g., Huszar v. Certified Realty
Co., 562 P.2d 1184, 1186 (Ore. 1977) (scienter
requirement). Mentor argues that Telular has presented no evidence
supporting this element, specifically stating that Telular has only
deposed two Mentor employees and that no evidence in the record supports
a finding of scienter.
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In answer, Telular points to evidence stating that the M320C50 was an
existing product. Telular argues that the capabilities of the M320C50
were therefore "susceptible of accurate knowledge" and Mentor must have
known that its statements were false. See, e.g., Joplin v.
Nunnelly, 134 P. 1177, 1179-80 (Or. 1913); Corbin v. Preston et
al., 218 P. 917, 922 (Or. 1923). Whether the statements by Mentor
were promises, as argued by Mentor, or representations of present fact,
as argued by Telular, Mentor's knowledge remains a question for the
factfinder. Mergenthaler Linotype Co. v. Evans, 69 F.2d 287, 289
(9th Cir. 1934) (applying Oregon law). Telular need not present direct
proof of fraud to prevail. Id.
Mentor also argues that Telular had no right to rely on representations
it made about the M320C50's performance. This issue has already been
settled, in Telular's favor. In my Memorandum Opinion and Order of
September 11, 2003 (Sept, 11 Order), I found that Oregon law protects
"the foolishly credulous as against the machinations of the designedly
wicked." Johnson v. Cofer, 281 P.2d 981, 985 (Or. 1950). I also
found that "it is ultimately the burden of the trier of fact to resolve
the conflicting claims of a party who has been fraudulent and a party who
has been careless in believing a fraudulent representation." Sept. 11
Order at 11. Mentor's motion for summary judgment with
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respect to Count I is DENIED.
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