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Dyson, Inc. v. Syncreon Technology America Inc.

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

July 11, 2019

DYSON, INC., Plaintiff,



         Dyson, Inc. has sued Syncreon Technology (America), Inc., alleging that Syncreon breached its contract to provide third-party logistics services to Dyson. Dyson also alleges that Syncreon committed fraud, fraudulent inducement, and conversion. Syncreon has counterclaimed, alleging breach of contract, unjust enrichment, and promissory estoppel. Both parties have moved for summary judgment-Syncreon on all of Dyson's claims, and Dyson on various aspects of Syncreon's counterclaim.


         The following facts are undisputed except where otherwise noted. Dyson is an Illinois company that designs and manufactures vacuum cleaners and other home goods. Rather than handle the distribution of its inventory in-house, Dyson contracts with third-party providers of logistics services. In 2016, it decided to terminate its agreement with the company that had previously served as its logistics provider. After issuing a request for proposals, Dyson settled on Syncreon as its new logistics provider. The two companies executed a master services agreement in February 2017.

         The arrangement was short-lived. Both parties acknowledge that the process of transitioning Dyson's business to Syncreon was plagued with difficulties, though they disagree about why. Among other problems, Dyson alleges that deliveries were delayed and incorrectly shipped, customers were improperly billed, and Syncreon's record-keeping and labeling were deficient. In May 2017, Dyson began transferring some of its business back to its previous logistics provider, and by July it decided to terminate the agreement with Syncreon entirely.

         The two companies discussed the possibility of entering a written transition agreement, and Syncreon even drafted a proposed agreement. Dyson alleges that, in an effort to coerce Dyson into accepting the proposal, Syncreon refused to return some of Dyson's inventory under the pretext of conducting a full inventory analysis. Dyson ultimately rejected Syncreon's proposal, however, and the parties never executed a written contract to modify the master services agreement or formally terminate their relationship.

         Dyson commenced this suit in August 2017. It alleges that Syncreon breached the master services agreement by committing serious errors and failing to devote adequate resources to the performance of its contractual obligations. Dyson also alleges that Syncreon committed fraud by making false statements about its capabilities to induce Dyson to enter into the master services agreement and that Syncreon converted Dyson's goods by refusing to return them after the contract had terminated. Syncreon filed a counterclaim, alleging breach of contract, unjust enrichment, and promissory estoppel.

         Syncreon has moved for summary judgment on all of Dyson's claims. Dyson has also filed a motion for partial summary judgment on counts 2 and 3 of the counterclaim (unjust enrichment and promissory estoppel) and to bar certain categories of damages. For the reasons stated below, the Court denies both motions.


         "Summary judgment is proper where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law." Richardson v. Chi. Transit Auth., 926 F.3d 881, 886 (7th Cir. 2019) (internal quotation marks omitted). In considering a motion for summary judgment, the Court construes all facts and draws all reasonable inferences "in favor of the party against whom the motion under consideration was filed." Id. The party opposing summary judgment must "present specific facts establishing a material issue for trial, and any inferences must rely on more than mere speculation or conjecture." Giles v. Godinez, 914 F.3d 1040, 1048 (7th Cir. 2019).

         A. Syncreon's motion for summary judgment

         1. Fraud claims

         Syncreon argues that it is entitled to summary judgment on Dyson's claims for fraud and fraudulent inducement because the master services agreement contains a "no-reliance" clause that prevents Dyson from establishing that it justifiably relied on Syncreon's alleged misrepresentations. Syncreon also contends that the allegedly fraudulent statements are expressions of opinion, not statements of material fact. Finally, it argues that the fraud claims are barred because they substantially overlap with Dyson's claim for breach of contract.

         a. No-reliance clause

         Because fraud claims under Illinois law require the plaintiff to show that it justifiably relied on the defendant's misrepresentations, a clause in a contract stating that the parties did not rely on any representations or promises outside the contract bars claims of fraud. ADM All. Nutrition, Inc. v. SGA Pharm Lab, Inc., 877 F.3d 742, 749- 750 (7th Cir. 2017). Both the Seventh Circuit and the Illinois Appellate Court have held that an integration clause-i.e., a provision stating that the contract represents the full and complete agreement of the parties-does not by itself constitute a no-reliance clause for the purposes of defeating a fraud claim. See Vigortone Ag Prods., Inc. v. PM AG Prods., Inc., 316 F.3d 641, 644-45 (7th Cir. 2002); W.W. Vincent & Co. v. First Colony Life Ins. Co., 351 Ill.App.3d 752, 760, 814 N.E.2d 960, 968 (2004) ("As a general rule, an integration clause will not preclude a plaintiff from relying upon extrinsic evidence in order to establish a cause of action for fraud.").

         Syncreon argues that the master services agreement contains a no-reliance clause and that Syncreon is therefore entitled to summary judgment on Dyson's fraud claims. In relevant part, section 23.12.1 of the contract reads,

This Agreement, including all Exhibits, and Attachments, hereunder, constitutes the entire agreement between the parties in connection with the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written, between the parties.

         Master Services Agreement, Def.'s Ex. 8, dkt. no. 153-9, § 23.12.1. Syncreon argues that the clause's reference to "all prior . . . understandings" broadly disclaims reliance on any extra-contractual representations and thus makes section 23.12.1 a no-reliance clause.

         Syncreon's argument is unavailing because section 23.12.1 does not disclaim reliance. What differentiates a no-reliance clause from an integration clause is that a no-reliance clause specifically indicates that the parties have not relied on any extra-contractual representations in agreeing to the contract. See Vigortone, 316 F.3d at 645 (noting that the disputed contractual provision was "a standard integration clause" because it "contains no reference to reliance"); Mukite v. Advocate Health & Hosps. Corp., No. 15 C 7604, 2016 WL 4036755, at *5 (N.D. Ill. July 28, 2016) (explaining that a contract did not include a no-reliance clause because it did not "warrant, represent, declare, or acknowledge that the parties relied only on the representations set forth in the Agreement"). No reference to reliance-or any synonyms thereof-appears in section 23.12.1. And the use of the word "understandings" does not meaningfully differentiate the clause in this case from a standard integration clause. As the Seventh Circuit explained in Vigortone, the purpose of an integration clause is to "prevent[] a party to a contract from basing a claim of breach of contract on agreements or understandings, whether oral or written, that the parties had reached during the negotiations. . . ." Vigortone, 316 F.3d at 644 (emphasis added). That is precisely what section 23.12.1 does.

         Because the provision of the master services agreement on which Syncreon relies is solely an integration clause, it does not preclude Dyson's fraud claims.

         b. Material falsehoods

         Syncreon next argues that it is entitled to summary judgment because the misrepresentations it allegedly made to Dyson are not actionable as fraud. At the threshold, however, Syncreon argues that Dyson is precluded from relying on any of Syncreon's statements other than those specifically alleged in Dyson's amended complaint. Syncreon rests its argument on Federal Rule of Civil Procedure 9(b), which requires that a party alleging fraud or mistake "must state with particularity the circumstances constituting fraud or mistake." It also points to the Seventh Circuit's decision in Kennedy v. Venrock Associates, 348 F.3d 584 (7th Cir. 2003), in which the court noted that the purpose of Rule 9(b) "is thwarted by the filing of a stealth complaint in which allegations of fraud are avoided only to be added later by way of brief or other filing." Id. at 594.

         But Rule 9(b) is a rule of pleading, not a rule of evidence. Cf. Cornielsen v. Infinium Capital Mgmt., LLC, 916 F.3d 589, 598 (7th Cir. 2019) (noting that "[h]eightened pleading requirements apply to complaints alleging fraud" and explaining that the reason for this rule is that "[g]reater precomplaint investigation is warranted in fraud cases"). Syncreon cites no cases applying Rule 9(b) to preclude consideration of allegedly fraudulent statements at the summary judgment stage merely because they were not specifically mentioned in the pleadings. Nor has Syncreon alleged that the disclosure of these statements during ...

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