Kraft Foods Group, Inc. v. AFS Technologies, Inc.
Filing
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MEMORANDUM Opinion and Order. Signed by the Honorable James B. Zagel on 6/18/2015. Mailed notice(ep, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
KRAFT FOODS GROUP, INC.,
a Virginia corporation,
Plaintiff/Counter-Defendant,
Case No. 14 C 5104
Judge James B. Zagel
v.
AFS TECHNOLOGIES, INC.,
a Delaware corporation,
Defendant/Counterclaimant.
MEMORANDUM OPINION AND ORDER
This matter comes before the Court on Defendant/Counterclaimant AFS Technologies,
Inc.’s motion to amend its counterclaims. Plaintiff Kraft Foods Group, Inc. filed a complaint
against Defendant/Counterclaimant on July 3, 2014 and Defendant/Counterclaimant filed an
answer and counterclaim on July 9, 2014. This Court dismissed Defendant/Counterclaimant’s
fraud claim on December 5, 2014. Defendant/Counterclaimant now moves to amend its
complaint to re-plead its fraud claim and add claims for unjust enrichment and breach of the
implied covenant of good faith and fair dealing.
Courts should freely give leave to amend a complaint when justice so requires. Fed. R.
Civ. P. 15(a)(2). Kraft Foods Groups, Inc. moves to deny AFS’s motion to amend its
counterclaims, not because AFS’s claims were delayed or would unduly prejudice Kraft, but
because it claims AFS’s amendment is futile and its proposed claims could not survive a motion
to dismiss. 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.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007).
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Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. “Leave to amend, however, should only be denied on the ground
of futility when the proposed amendment is clearly insufficient or frivolous on its face.”
Johnson v. Oroweat Foods Co., 785 F.2d 503, 510 (4th Cir. 1986)(citing Davis v. Piper Aircraft
Corp., 615 F.2d 606, 613 (4th Cir.1980), cert. dismissed, 448 U.S. 911, 101 S.Ct. 25, 65 L.Ed.2d
1141 (1980).
AFS has bolstered its original allegations with sufficient facts to state a cause of action
for fraud. AFS has alleged that Kraft had a specific plan that it had been working on for several
years, which it concealed from AFS, to “prematurely exit” from AFS’s business and migrate to
competitor Blacksmith prior to the expiration of the proposed three-year term. AFS asserts that,
knowing of Kraft’s plan to prematurely exit, Mr. Bednarski, Senior Buyer for Kraft, and Ms.
Haas, working on behalf of Kraft, falsely represented to AFS the terms of the agreement on
multiple occasions in phone calls and emails. Kraft contends that this is not a false statement
because the parties entered into a three-year extension and that the only question is whether Kraft
had a right to terminate early. AFS’s allegations are not merely a contract claim, however, but
center on the question of whether Kraft knowingly made a false statement to induce AFS to
provide it a lower rate.
Kraft argues that AFS’s claim for fraud is barred by Illinois’ promissory-fraud doctrine,
under which Illinois generally does not recognize a cause of action based on a false promise.
AFS has, however, sufficiently alleged facts that fit into exceptions to the rule. First, AFS alleges
facts that indicate that Kraft’s “intention behind the intentionally false promise [was] to induce
the promisee to act for the promisor’s benefit” and so AFS’s claim is actionable. Price v.
Highland Cmty. Bank, 722 F. Supp. 454 (N.D. Ill. 1989) aff'd, 932 F.2d 601 (7th Cir. 1991).
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Additionally, AFS alleges that it was Kraft’s false promise or representation regarding its future
conduct that was the scheme used to accomplish the fraud. Carroll v. First Nat. Bank of
Lincolnwood, 413 F.2d 353, 358-59 (7th Cir. 1969). AFS’s motion to amend its complaint is
granted as to its claim for fraud.
AFS may also amend its complaint to include a claim for unjust enrichment, as it has pled
this claim in the alternative to its breach of contract claim.
It is undisputed that AFS may not maintain an independent cause of action for breach of
the implied covenant of good faith and fair dealing, as pled in Count IV of AFS’s proposed
amended counterclaim. While this doctrine may be used as a “rule of construction,” Count IV,
pled by AFS as an alternative, independent cause of action, is dismissed.
ENTER:
James B. Zagel
United States District Judge
DATE: June 18, 2015
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