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Landale Signs and Neon, Ltd. v. Runnion Equipment Co.

United States District Court, N.D. Illinois, Eastern Division

December 22, 2016



          John Robert Blakey Judge

         Plaintiff Landale Signs and Neon, Ltd. (“Plaintiff”) contracted to purchase a truck-mounted crane from Defendant Runnion Equipment Company (“Defendant” or “Runnion”). During the pendency of that sale, an unknown third party (Defendant John Doe) intercepted information related to the transaction, utilized that information to pose as Runnion, and convinced Plaintiff to wire the vehicle's purchase price to him. Plaintiff alleges that Runnion, by allowing Defendant John Doe to intercept its information, is liable under theories of negligence, negligent misrepresentation, breach of fiduciary duty, and breach of contract (both express and implied). [22] at 5-14. Runnion has moved to dismiss all five claims. [13] (moving to dismiss claims for negligence, negligent misrepresentation, and breach of fiduciary duty); [23] (moving to dismiss claims for breach of express contract and breach of implied contract). For the reasons explained below, Runnion's motions are granted.

         I. Background [1]

         In April of 2016, Plaintiff and Runnion executed a sales contract for a truck-mounted crane worth $87, 625. [22] at 3. During the preceding negotiations, Plaintiff and Runnion communicated, at least in part, via e-mail. Id. On May 12, 2016, Plaintiff received an e-mail, ostensibly from Runnion, with instructions on how to wire the payment to Runnion pursuant to the terms of the agreement. Id. Plaintiff followed these instructions and remitted payment for the agreed amount of $87, 625. Id.

         Runnion subsequently informed Plaintiff that it never received the payment. Id. In response, Plaintiff showed Runnion the string of e-mails wherein an entity purporting to be Runnion instructed Plaintiff on how to make payment for the vehicle. Id. Plaintiff now alleges that Runnion's computer network, database, and servers were accessed by Defendant John Doe, who utilized the information he or she intercepted from Runnion in order to pose as Runnion and fraudulently instruct Plaintiff to wire him or her $87, 625. Id.

         Plaintiff further alleges that Runnion was aware or should have been aware that its computer network, database, and servers were being improperly accessed by Defendant John Doe. Id. at 4. During the parties' negotiations, Plaintiff's President, Mr. Darrell Brown, noticed that there was a delay in receiving e-mails from Runnion's President, Mr. Patrick Runnion. Id. Mr. Brown inquired as to the cause of this delay, and Mr. Runnion indicated that he was aware of potential interference with his e-mail account. Id. Mr. Runnion further represented that an unknown party had previously been intercepting his e-mails during a prior transaction (though Runnion in that instance was able to avert any potential theft). Id.

         Based upon the foregoing, Plaintiff brought claims against Runnion (for negligence, negligent misrepresentation, breach of fiduciary duty, breach of express contract, and breach of implied contract) and Defendant John Doe (for conversion and fraud). Id. at 5-11. Defendant John Doe has not yet been identified or served, while Runnion has moved to dismiss the claims pending against it.

         II. Legal Standard

         To survive Defendant's motion under Federal Rule of Civil Procedure 12(b)(6), the Second Amended Complaint must “state a claim to relief that is plausible on its face.” Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013). A “claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This Court must construe the Complaint in the light most favorable to Plaintiff, accept as true all well-pleaded facts, and draw all reasonable inferences in its favor. Id.; Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999). Statements of law, however, need not be accepted as true. Yeftich, 722 F.3d at 915. Rule 12(b)(6) limits this Court's consideration to “allegations set forth in the complaint itself, documents that are attached to the complaint, documents that are central to the complaint and are referred to in it, and information that is properly subject to judicial notice.” Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013).

         III. Analysis

         Plaintiff's claims against Runnion sound in: (1) negligence; (2) negligent misrepresentation; (3) breach of fiduciary duty; (4) breach of express contract; and (5) breach of implied contract. The Court will address each in turn.

         A. Negligence

         To adequately state a claim for negligence under Illinois law, a party must allege that “the defendant owed him a duty, that the defendant breached this duty, and that he suffered an injury that was proximately caused by the defendant's breach.” Lewis v. CITGO Petroleum Corp., 561 F.3d 698, 702 (7th Cir. 2009).

         1. Economic Loss Doctrine

         Runnion initially argues that Plaintiff's negligence claim fails pursuant to Moorman Manufacturing Company v. National Tank Company, 435 N.E.2d 443 (Ill. 1982). Moorman brought the “economic loss” doctrine to Illinois, such that plaintiffs could no longer sue in tort for certain claims seeking the “recovery of solely economic loss.” Id. at 448. Moorman defined “economic loss” as “damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits-without any claim of personal injury or damage to other property.” Id. at 449 (internal citation omitted). By its own terms, the Moorman economic loss doctrine does not apply where “a duty arises outside of a contract.” Nixon v. United States, 916 F.Supp.2d 855, 861-62 (N.D. Ill. 2013) (internal quotations omitted); see also R.J. O'Brien & Assocs., Inc. v. Forman, 298 F.3d 653, 656 (7th Cir. 2002) (“Moorman dictates that, when a contract sets out the duties between the parties, recovery should be limited to contract damages, even though recovery in tort would otherwise be available.”); Golf v. Henderson, 876 N.E.2d 105, 113 (Ill.App.Ct. 2007) (“The Moorman doctrine, however, does not apply when a duty arises that is extracontractual.”). In the end, when attempting to determine whether the economic loss doctrine applies, “the key question is whether the defendant's duty arose by operation of contract or existed independent of the contract.” Wigod v. Wells Fargo Bank, 673 F.3d 547, 567-568 (7th Cir. 2012)

         For the purposes of its negligence claim here, Plaintiff explicitly characterizes Runnion's duty as arising outside of the parties' contract. [17] at 8 (“In this instance, Runnion's duty to protect Landale's sensitive information was independent from the parties' contractual agreement.”). Because the putative duty at issue here is grounded in Illinois common law, as opposed to the parties' contract, the economic loss doctrine fails to apply. Wigod, 673 F.3d at 658 (economic loss doctrine does not apply when the defendant's duty “existed independent of the contract”).

         2. Common Law Duty

         Plaintiff's attempt to invoke a common law duty to safeguard another party's information implicates an obvious question; namely, whether such a duty actually exists as a matter of Illinois law. This “is a question of law for the court to decide.” Simpkins v. CSX Transp., Inc., 965 N.E.2d 1092, 1096 (Ill. 2012) (internal quotations omitted). The rulings of the Illinois Supreme Court are controlling on this issue. See ADT Sec. Servs. v. Lisle-Woodridge Fire Prot. Dist., 672 F.3d 492, 498 (7th Cir. 2012). Absent a definitive ruling from the Illinois Supreme Court, this Court will also look to decisions from the Illinois Appellate Court. See Pisciotta v. Old Nat. Bancorp, 499 F.3d 629, 635 (7th Cir. 2007) (“[W]hen the intermediate appellate courts of the state have spoken to the issue, we shall give great weight to their determination about the content of state law, absent some indication that the highest court of the state is likely to deviate from those rulings.”).

         The Illinois Supreme Court has not yet determined whether there is a common law duty to safeguard another party's confidential information. The Illinois Appellate Court, however, had occasion to consider this theory in Cooney v. Chicago Public Schools, 943 N.E.2d 23 (Ill.App.Ct. 2010), appeal denied, 949 N.E.2d 657 (Ill. 2011) (table decision). Cooney was initiated after the Chicago Board of Education enlisted a contractor to print and mail more than 1, 700 packets of health insurance information to former Chicago public school employees. Id. at 27. The contractor packaged and mailed the materials in such a way that each recipient received information about every other recipient, including their names, addresses, marital status, and social security numbers. Id. A number of individual and class-action lawsuits were brought against the Board of Education and the ...

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