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American Kitchen Delights, Inc. v. National Railroad Passenger Corp.

United States District Court, Seventh Circuit

December 19, 2013

AMERICAN KITCHEN DELIGHTS, INC., Plaintiff,
v.
NATIONAL RAILROAD PASSENGER CORP., Defendant.

MEMORANDUM OPINION AND ORDER

JOHN Z. LEE, District Judge.

Plaintiff American Kitchen Delights, Inc. sued Defendant National Railroad Passenger Corp., alleging Defendant fraudulently induced Plaintiff to enter into a contract by representing that Defendant would purchase 3 million pizzas over a three-year term. In the alternative, Plaintiff alleges that Defendant negligently misrepresented that it would purchase 3 million pizzas over the three-year term. Plaintiff also alleges that Defendant extended the contract by means of an oral agreement, only to breach the agreement by terminating the relationship eight months prior to its expiration. For the reasons stated herein, the Court grants Defendant's motion to dismiss Plaintiff's fraud in the inducement (Count I) and negligent misrepresentation claims (Count II) and denies Defendant's motion to dismiss Plaintiff's breach of oral contract claim (Count III).

Facts

The following facts are taken from Plaintiff's Amended Complaint and are accepted as true for purposes of resolving this Motion to Dismiss.[1] See Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 763 (7th Cir. 2010).

Plaintiff American Kitchen Delights, Inc. ("American Kitchen") is in the food preparation business and Defendant National Railroad Passenger Corp. (a/k/a "Amtrak") is in the railroad passenger transportation business. (Am. Compl. ¶¶ 4-5 (Count I).) Amtrak represented to American Kitchen that Amtrak would purchase 1 million pizzas per year over a period of three years. ( Id. ¶ 9.) Amtrak made these representations through its employees and agents over the phone and in person at American Kitchen's facilities. ( Id. ) American Kitchen does not recall the identities of the Amtrak employees and agents who made the representations, but lists three individuals it believes made them. ( Id. )

On or about October 1, 2007, American Kitchen entered into a written Supply Agreement with e-Gatematrix ("e-Gate"). e-Gate served as the purchasing agent for the designated purchaser, Amtrak. ( Id. ¶ 6; Supply Agreement 1, Ex. 1 to Mem. Supp. Mot. Dismiss.) Under the terms of the Supply Agreement, American Kitchen agreed to prepare different styles of pizzas for the exclusive benefit of Amtrak for the period from October 1, 2007, until September 30, 2009, with a one-year renewal option. (Am. Compl. ¶¶ 6-7 (Count I).) The pricing and terms of the Supply Agreement were negotiated on behalf of Amtrak, and Amtrak placed orders directly with American Kitchen. ( Id. ¶ 8.) American Kitchen charged lower prices for its pizzas based on the volume of pizzas Amtrak represented that it would purchase. ( Id. ¶ 11.) Around December 31, 2008, e-Gate terminated the Supply Agreement with American Kitchen. ( Id. ¶ 9 (Count II).) On or around the same date, American Kitchen made an oral agreement with Amtrak for Amtrak to continue purchasing pizzas from American Kitchen. ( Id. ) On approximately September 30, 2009, American Kitchen and Amtrak orally agreed to a reduction in price of the pizzas in exchange for a one-year extension of the pizza production contract. ( Id. ) The terms of the oral agreement provided that Amtrak was to make an effort to purchase or "burn off" American Kitchen's inventory of pizza that it had presumably prepared for Amtrak. ( Id. ¶ 12.) On or about January 28, 2010, Amtrak terminated the oral contract and failed to make an effort to purchase or "burn-off" American Kitchen's inventory. ( Id. ¶¶ 11, 14.) Amtrak ordered a total of approximately 986, 000 pizzas from American Kitchen. ( Id. ¶ 12 (Count I).) Defendant now moves to dismiss Plaintiff's claims pursuant to Rule 12(b)(6).

Legal Standard

A motion under Rule 12(b)(6) challenges the sufficiency of the complaint. Christensen v. Cnty. of Boone, 483 F.3d 454, 457 (7th Cir. 2007). Under the federal notice pleading standards, "a plaintiff's complaint need only provide a short and plain statement of the claim showing that the pleader is entitled to relief, sufficient to provide the defendant with fair notice of the claim and its basis." Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008) (internal quotations omitted); see also Fed.R.Civ.P. 8(a). When considering a motion to dismiss under Rule 12(b)(6), the Court must "accept[] as true all well-pleaded facts alleged, and draw[] all possible inferences in [the plaintiff's] favor." Id.

A complaint, however, must also allege "enough facts to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). For a claim to have facial plausibility, a plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678.

Discussion

I. Fraud in the Inducement

Amtrak moves to dismiss American Kitchen's fraud in the inducement claim, arguing that: (1) a statement of future intent is not actionable; (2) the claim is barred by the express language of the Supply Agreement; and (3) American Kitchen failed to plead fraud with particularity as required by Federal Rule of Civil Procedure 9(b). Amtrak's request to dismiss American Kitchen's fraud in the inducement claim is granted.

Fraud in the inducement is a form of common-law fraud. Lagen v. Balcor Co., 653 N.E.2d 968, 972 (Ill.App. Ct. 1995) (internal citation omitted). The elements of common-law fraud in Illinois are: (1) a false statement of material fact; (2) knowledge or belief by the maker that the statement was false; (3) an intention to induce the plaintiff to act; (4) reasonable reliance upon the truth of the statement by the plaintiff; and (5) damage to the plaintiff resulting from this reliance. Id.

Here, American Kitchen fails to allege that Amtrak made a false statement of material fact, which is fatal to its fraud in the inducement claim. Amtrak's alleged representation that it planned to purchase 1 million pizzas a year was not a statement of material fact, but instead a statement of its future intention. Under Illinois law, statements of future intention are not actionable. See Ault v. C.C. Servs., Inc., 597 N.E.2d 720, 772 (Ill.App. Ct. 1992). Even "a false representation of intention or future conduct, if not amounting to a matter of fact, is not a fraud in law." Roda v. Berko, 81 N.E.2d 912, 915 (Ill. 1948); see also Miller v. Sutliff, 89 N.E. 651, 652 (Ill. 1909) ("A mere breach of a contract does not amount to a fraud, and neither a knowledge of inability to perform, nor an intention not to do so, would make the transaction fraudulent."). In Ault, the defendant's agent intended to induce the plaintiff to enter an employment contract by misrepresenting that another employee would be terminated and the plaintiff would be assigned the terminated employee's accounts. Ault, 597 N.E.2d at 721. The plaintiff accepted the contract, but the defendant failed to terminate the employee or reassign the employee's accounts to the plaintiff. Id. Although the plaintiff "alleged the misrepresentations were knowingly false in that the defendant did not intent to terminate [the employee, ]" the appellate court upheld the trial court's ...


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