United States District Court, N.D. Illinois
March 25, 2004.
The opinion of the court was delivered by: PHILIP REINHARD, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff, Economic Studies, Inc., filed a two-count complaint
against defendant, Kenneth Ehredt, alleging a breach of contract in Count
I based on a written personal guaranty signed by defendant, and seeking
punitive damages for a bad faith and willful breach of contract in Count
II. Defendant has filed a counterclaim alleging violations of the
"Illinois Consumer Fraud Act" and the "Deceptive Business Practices Act."
Jurisdiction is based on diversity of citizenship as plaintiff is a New
York corporation with its principal place of business in New Jersey,
defendant is a citizen of Illinois, and the amount in controversy exceeds
$75,000. Defendant has moved to dismiss Count II for failure to state a
claim, and plaintiff has moved to dismiss defendant's counterclaim as
well as to strike defendant's jury demand.
Dismissal is warranted under Fed.R.Civ.P. 12(b)(6) if the court
concludes after examining the Plaintiff's factual allegations and any
inferences reasonably drawn therefrom in a light most favorable to the
plaintiff, that the plaintiff can prove no set of facts in support of his
claims that would entitle him to relief. Yasak v. Retirement Board of the
Policemen's Annuity and Benefit Fund of Chicago, 357 F.3d 677, 678 (7th
The court will first address defendant's motion to dismiss Count II of
plaintiff's complaint. The written guarantee that provides the basis for
the complaint provides that New York law shall apply, and the parties
agree that New York law applies.
The crux of defendant's motion to dismiss is that New York law does not
recognize a claim for punitive damages in a "straightforward breach of
contract" case. Plaintiff, in turn, contends that New York law allows for
recovery of punitive damages for breach of contract where the breach is
willful and in bad faith.
The controlling case on the issue is Rocanova v. Equitable Life
Assurance Society of the United States, 83 N.Y.2d 603, 634 N.E.2d 940
(1994), decided shortly after the decision in Hudson Motors Partnership
v. Crest Leasing Enterprises, Inc., 845 F. Supp. 969 (E.D. N.Y. 1994), a
case relied on by both plaintiff and defendant here. See Reuben H.
Donnelly Corp, v. Mark I Marketing Corp., 893 F. Supp. 285 (S.D. N.Y.
1995) (questioning Hudson In light of Rocanova). In Rocanova, the court
of appeals held that, to recover punitive damages in a breach of contract
case, a private party must not only demonstrate egregious tortious
conduct by which he was aggrieved, but also that such conduct was part of
a "pattern of similar conduct directed at the public generally."
Rocanova, 83 N.Y.2d at 613, 634 N.E.2d at 944. Such an extraordinary
remedy will be available only in a limited number of instances.
Rocanova, 83 N.Y.2d at 613, 634 N.E.2d at 944. Here, the court grants
defendant's motion to dismiss Count II as it fails to allege either
egregious tortious conduct or a pattern of similar conduct directed at
the general public.
The court turns next to plaintiff's motion to dismiss defendant's
counterclaim. The court grants the motion to dismiss because the
counterclaim fails to allege an identifiable cause of action. The court
notes that the allegations of the counterclaim ARB more in the nature of
a defense to enforcement of the guarantee as opposed to a separate cause
of action. Defendant is cautioned to carefully consider seeking leave to
That leaves plaintiff's motion to strike defendant's jury demand. A
jury waiver will be enforced if it was made knowingly and voluntarily.
Sutter Insurance Co. v. Applied Systems, Inc., 2004 WL 161508, * 7 (N.D.
Ill. Jan. 26, 2002). Whether the right to a jury has been waived is
governed by federal rather than state law even in diversity cases.
Household Commercial Financial Services, Inc. v. Suddarth, 2002 WL
31017608, * 8 (N.D. Ill. Sept. 9, 2002). While it is not clear in this
circuit which party bears the burden on the issue of the voluntariness of
the waiver, it is clear that the party seeking to avoid a purported
waiver must come forth with some evidence that calls the voluntariness
into question. Sutter, at * 7; Bonfield v. Aamco. Transmissions, Inc.,
717 F. Supp. 589, 595 (N.D. Ill. 1989).
In this case, the validity of the waiver cannot be determined at this
point in the litigation as defendant's theory of invalidity depends on
factual matters outside the four corners of the guarantee and defendant
has had no opportunity to submit evidence In that regard. Thus, the court
denies the motion to strike defendant's jury demand.
For the foregoing reasons, the court grants defendant's motion to
dismiss Count II of the complaint, grants plaintiff's motion to dismiss
the counterclaim, and denies plaintiff's motion to strike defendant's
© 1992-2004 VersusLaw Inc.