Lefebvre Intergraphics, Inc. v. Sanden Machine Ltd., 96 C 2478.

• Decision Date: 12 December 1996
• Docket Number: No. 96 C 2478.,96 C 2478.
• Citation: 946 F.Supp. 1358
• Parties: LEFEBVRE INTERGRAPHICS, INC., an Illinois corporation, Plaintiff/Counter-Defendant, v. SANDEN MACHINE LIMITED, a Canadian corporation, Defendant/Counter-Claimant.
• Court: U.S. District Court — Northern District of Illinois

946 F.Supp. 1358

LEFEBVRE INTERGRAPHICS, INC., an Illinois corporation, Plaintiff/Counter-Defendant, v. SANDEN MACHINE LIMITED, a Canadian corporation, Defendant/Counter-Claimant.

No. 96 C 2478.

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

December 12, 1996.

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Wallace Cyril Solberg, Gardner, Carton & Douglas, Chicago, IL, for Plaintiff/Counter-Defendant.

Susan Leah Mahoney, Winston & Strawn, Chicago, IL, Thomas J. Quigley, Winston & Strawn, New York City, for Defendant/Counter-Claimant.

MEMORANDUM OPINION AND ORDER

ALESIA, District Judge.

Before the court is defendant Sanden Machine Limited's motion to dismiss Counts III, IV, and V of plaintiff Lefebvre Intergraphics, Inc.'s, complaint and all portions of the complaint seeking consequential damages. For the reasons that follow, the court grants in part and denies in part the motion to dismiss.

I. BACKGROUND

Plaintiff Lefebvre Intergraphics, Inc. ("Lefebvre"), an Illinois corporation with its principal place of business in Illinois, is a commercial printer. Defendant Sanden Machine Limited ("Sanden"), a Canadian corporation with its principal place of business in Ontario, Canada, manufactures and sells commercial printing presses. This case is before the court on the basis of diversity jurisdiction. See 28 U.S.C. § 1332.

In March 1995, Lefebvre bought a commercial printing press from Sanden under a written contract. Sanden delivered the press in August 1995. Unfortunately, the press never properly functioned. Sanden repeatedly but unsuccessfully tried to fix the press between September 1995 and January 1996.

Dissatisfied with the press, Lefebvre filed this lawsuit against Sanden. Lefebvre alleges breach of contract (Count I), breach of express warranty (Count II), breach of implied warranty of merchantability (Count III), fraudulent misrepresentation (Count IV), and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (Count V). Lefebvre also asks for rescission of the purchase contract (Count VI). In addition, in each of Counts I through V, Lefebvre asks for consequential damages.

Sanden has moved to dismiss Counts III, IV, and V in their entirety, as well as all portions of the complaint that ask for consequential damages.

II. DISCUSSION

A. Standard far deciding a motion to dismiss

When deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court must accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Cromley v. Board of Educ. of Lockport, 699 F.Supp. 1283, 1285 (N.D.Ill. 1988). If, when viewed in the light most favorable to the plaintiff, the complaint fails to state a claim upon which relief can be granted, the court must dismiss the case. See FED.R.CIV.P. 12(b)(6); Gomez v. Illinois State Board of Educ., 811 F.2d 1030, 1039 (7th Cir.1987). However, the court may dismiss the complaint only if it appears beyond doubt that the plaintiff can prove no set of facts in support of its claims that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

B. Count III — Breach of implied warranty

Sanden argues that Count III, alleging breach of an implied warranty, should be dismissed because the Uniform Commercial Code ("UCC"), which Illinois has adopted, expressly permits parties to a commercial transaction to agree to exclude all implied warranties, and the parties did so in the present case. Section 2-316(3)(a) of the UCC provides:

[U]nless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is," "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty.

810 ILCS 5/2-316(3)(a). In their purchase agreement, Lefebvre and Sanden agreed that the contract's warranty "is in lieu of all other warranties express or implied." (Compl. Ex. 2 App. A ¶ 12.) Sanden contends that this provision "`makes plain that there is no implied warranty.'" (Def.'s Mem. of Law in Supp. of its Mot. to Dismiss at 6 (quoting 810 ILCS 5/2-316(3)(a)).)

Lefebvre counters that notwithstanding the contract's warranty provision, Lefebvre still has a claim based on the implied warranty of merchantability. Lefebvre contends that under section 2-316(2) of the UCC, the language of a warranty provision must explicitly mention "merchantability" to disclaim the implied warranty of merchantability.

Section 2-316(2) provides that "[s]ubject to subsection (3), to exclude the implied warranty of merchantability or any part of it[,] the language [of the warranty provision] must mention merchantability...." 810 ILCS 5/2-316(2). Section 2-316(3) provides that "[n]otwithstanding subsection (2), ... all implied warranties are excluded by ... language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty." 810 ILCS 5/2-316(3)(a).

The court agrees with Sanden that section 2-316 provides two ways in which contracting parties can waive the implied warranty of merchantability: expressly use the term "merchantability" in the waiver provision, or use language that "in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty." 810 ILCS 5/2-316(2) and (3).

In the purchase contract between Lefebvre and Sanden, paragraph 12 provides: "This warranty is in lieu of all other warranties express or implied." This language clearly communicates that all warranties, except the warranty explicitly set forth in the contract, are excluded. The language is not ambiguous or vague. Thus, paragraph 12 excludes all implied warranties, including the implied warranty of merchantability, by using "language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty." 810 ILCS 5/2-316(3)(a).

The Illinois Supreme Court apparently has not addressed the issue of whether section 2-316(2) is limited in its application by section 2-316(3)(a). At least one lower Illinois court has disagreed with this court's reading of section 2-316 and held that "unless the word `merchantability' appears in a written disclaimer, the implied warranty of merchantability survives the language of disclaimer," Schultz v. Jackson, 67 Ill.App.3d 889, 893, 24 Ill.Dec. 395, 398, 385 N.E.2d 162, 165 (3d Dist.1979), regardless of whether the disclaimer language otherwise "makes plain that there is no implied warranty." 810 ILCS 5/2-316(3)(a). However, another Illinois court has criticized this construction of section 2-316. See J.D. Pavlak, Ltd. v. William Davies Co., Inc., 40 Ill.App.3d 1, 5, 351 N.E.2d 243, 247 (1st Dist.1976).

This court is not bound by the decision of lower Illinois courts where the Illinois Supreme Court has not ruled on the matter. Smith v. Navistar Int'l Transp. Corp., 957 F.2d 1439, 1443 (7th Cir.1992) (citing White v. United States, 680 F.2d 1156, 1161 (7th Cir.1982); D'Acquisto v. Washington, 640 F.Supp. 594, 619 (N.D.Ill.1986)). In the absence of any guidance on the question from the Illinois Supreme Court or any federal court, the court declines to follow Schultz because it is inconsistent with the plain language of section 2-316(2) and (3)(a). The court finds that section 2-316(2) applies "subject to" section 2-316(3); that section 2-316(3)(a) applies "notwithstanding" section 2-316(2); and therefore that section 2-316(3)(a) serves to limit the application of section 2-316(2).

Because the waiver provision in the purchase contract between Lefebvre and Sanden plainly excludes all express and implied warranties not explicitly set forth in the contract, the court finds that Lefebvre has no cause of action for breach of the implied warranty of merchantability. Accordingly, the court grants Sanden's motion to dismiss Count III.

C. Count IV — Fraudulent misrepresentation

Sanden contends that Lefebvre has failed to state a claim for fraudulent misrepresentation because Lefebvre has not alleged all of the elements necessary to make out a claim for fraudulent misrepresentation.

To state a claim for fraudulent misrepresentation under Illinois law, a plaintiff must allege the following: (1) the representation was a statement of material fact, rather than a mere promise or opinion; (2) the statement was false; (3) the person making the statement knew or believed that the representation was false; (4) the person to whom the representation was made reasonably relied on the truth of the statement; (5) the statement was made for the purpose of causing the other party affirmatively to act; and (6) the reliance by the person to whom the statement was made led to his injury. LaScola v. U.S. Sprint Communications, 946 F.2d 559, 567-68 (7th Cir.1991).

In its complaint, Lefebvre alleges that Sanden personnel represented that the printing press "could produce the printing that [Lefebvre] required in a commercially acceptable manner," and "could produce commercially acceptable four color process work." (Compl. ¶¶ 8, 9, and 10.) Lefebvre also alleges that Sanden did not inform Lefebvre of previous problems with the same printing press model and a similar model. (Id. ¶¶ 34-38.) Lefebvre alleges that Sanden made these misrepresentations to induce Lefebvre to enter into the purchase contract and that Lefebvre relied on the misrepresentations and entered into the purchase contract. (Id. ¶¶ 40, 47.)

1. Whether Sanden made statements of material fact

Sanden contends first that the alleged misrepresentations were not statements of fact, but were merely promises or expressions of opinion. "To support an action for fraud, the alleged misrepresentation must be one of fact and not an expression of opinion." People ex rel....