Landale Signs and Neon, Ltd. v. Runnion Equipment Company et al

Filing 41

MEMORANDUM Opinion and Order Signed by the Honorable John Robert Blakey on 4/3/2017. Mailed notice(gel, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LANDALE SIGNS AND NEON, LTD.,
Plaintiff,
v.
RUNNION EQUIPMENT CO. and
JOHN DOE,

Case No. 16-cv-7619
Judge John Robert Blakey

Defendants.
MEMORANDUM OPINION AND ORDER
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 has, at various points, alleged that Runnion is
liable under theories of negligence, negligent misrepresentation, breach of fiduciary
duty, and breach of contract (both express and implied). [22] at 5-14.
On December 22, 2016, the Court dismissed Plaintiff’s Second Amended
Complaint. [29] at 1-19. The dismissal of Plaintiff’s contractual theories, however,
was without prejudice, and Plaintiff re-alleged those same contractual claims in its
Third Amended Complaint. [33] at 1-13.

Two motions are currently before the Court: Plaintiff’s request that the Court
reconsider its dismissal with prejudice of Plaintiff’s negligence claim, [31] at 1-4,
and Runnion’s motion to dismiss Plaintiff’s Third Amended Complaint, [34] at 1-5.
As more fully explained below, both motions are denied.
I.

Background 1
In April of 2016, Plaintiff and Runnion executed a sales contract for a truck-

mounted crane worth $87,625.

[33] 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 to pose as Runnion and fraudulently instruct Plaintiff
to wire him or her $87,625. Id. at 3-4.
Plaintiff further alleges that Runnion was aware or should have been aware
that its computer network, database, and servers were being improperly accessed

1

This section is based upon Plaintiff’s Third Amended Complaint. [33] at 1-17.

2

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.
Plaintiff now alleges that, as part of the foregoing negotiations, Runnion
“agreed to complete the transaction with the intent to safeguard any sensitive
information from disclosure to third parties,” and the “parties’ mutual intent
constitute[d] a meeting of the minds regarding safeguarding sensitive information
from disclosure to third parties.” Id. at 12.
II.

Legal Standard
To survive Defendant’s motion to dismiss under Federal Rule of Civil

Procedure 12(b)(6), the Third 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

3

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).
Plaintiff’s motion for reconsideration, meanwhile, is made pursuant to
Federal Rule of Civil Procedure 60(b)(1), which permits the Court, in the exercise of
its discretion, to relieve a party from an order on the grounds of “mistake,
inadvertence, surprise, or excusable neglect.”

Relief under Rule 60(b)(1) is

“regarded as an extraordinary remedy which is granted only in exceptional
circumstances.” Longs v. City of S. Bend, 201 F. App’x 361, 364 (7th Cir. 2006).
III.

Analysis
A.

Plaintiff’s Motion for Reconsideration

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). The
Court previously ruled that because Illinois law does not recognize a duty to
safeguard another party’s confidential information, Plaintiff’s negligence claim was
untenable. [29] at 6-8. The Court declines to revisit this determination, as more
fully explained below.

4

To determine whether a particular duty exists under Illinois law, federal
courts look first to the Illinois Supreme Court. See ADT Sec. Servs., Inc. v. LisleWoodridge Fire Prot. Dist., 672 F.3d 492, 498 (7th Cir. 2012) (“These questions are
ones of first impression. Our duty is to interpret the Act as best we predict the
Illinois Supreme Court would.”). Absent a ruling from the Illinois Supreme Court,
federal courts turn to decisions of the Illinois Appellate Court, which are accorded
“great weight.” See Pisciotta v. Old Nat. Bancorp, 499 F.3d 629, 635 (7th Cir. 2007).
In fact, when determining the “content of state law,” this Court will not depart from
the rulings of the Illinois Appellate Court “absent some indication that the highest
court of the state is likely to deviate from those rulings.” Id.
The Illinois Appellate Court has already declined to create “a new legal duty
[to safeguard another party’s private information] beyond legislative requirements
already in place.” Cooney v. Chicago Public Schools, 943 N.E.2d 23, 29 (Ill. App. Ct.
2010), appeal denied, 949 N.E.2d 657 (Ill. 2011) (table decision). There is also no
“indication” that the Illinois Supreme Court would deviate from Cooney’s holding;
indeed, the plaintiffs’ appeal in Cooney was denied. Id.
Plaintiff’s renewed attempts to evade Cooney are unavailing. First, Plaintiff
suggests that this Court erred by considering Runnion’s duty argument at all, as it
was raised for the first time on reply. This contention is a non-starter. Federal
courts may consider arguments raised on reply at their discretion.

See United

States v. Wilson, 962 F.2d 621, 627 (7th Cir. 1992) (exercising discretion to consider
issue raised for the first time in a reply brief); In re Leventhal, No. 10-br-12257,

5

2012 WL 1067568, at *3 (Bankr. N.D. Ill. Mar. 22, 2012) (“Arguments offered for the
first time in a reply are therefore ordinarily deemed waived. Nevertheless, courts
have the discretion to overlook a waiver.”) (internal citation omitted); Digan v.
Euro–American Branks, LLC, No. 10-cv-799, 2012 WL 668993, at *2 (N.D. Ill. Feb.
29, 2012) (“Because this Court prefers to decide issues on the merits to the extent it
is possible, it declines to exercise its discretion to deem the entirety of Digan’s
arguments waived.

The Court will consider her arguments . . . .”).

Moreover,

consideration of the duty argument here was particularly appropriate, as it arose
naturally on reply given the parties’ relative positions regarding the application of
the economic loss doctrine. See generally [29] at 4-5.
Plaintiff next attempts to distinguish Cooney by arguing that its negligence
claim here is made pursuant to a general duty of care, while Cooney concerned a
putative duty to safeguard confidential information. This argument is belied by
Plaintiff’s allegations. See [33] at 5 (“Runnion had a duty to exercise reasonable
care in safeguarding, securing, and protecting the sensitive information sent by
Landale.”) (emphasis added).

Plaintiff’s argument also contravenes applicable

precedent, which was cited by the Court in its previous decision. See [29] at 7
(citing Dolmage v. Combined Ins. Co. of Am., No. 14-cv-3809, 2015 WL 292947, at *6
(N.D. Ill. Jan. 21, 2015) (rejecting plaintiff’s attempt “to circumvent the Illinois
Appellate Court’s holding in Cooney by arguing that unlike the plaintiff in Cooney,
she is alleging that Defendant violated the well-established ordinary standard of
care”)).

6

Finally, Plaintiff suggests that Cooney is not controlling here because, inter
alia: (1) Runnion had prior knowledge of a data breach; (2) Runnion is not a data
collector; (3) Plaintiff’s injury was foreseeable, such that this Court should infer the
existence of a duty under the seminal case of Palsgraf v. Long Island Railroad, 248
N.Y. 339 (1928) (Cardozo, J.); (4) Runnion created a situation conducive to John
Doe’s criminal acts; and (5) Runnion gratuitously undertook a duty to safeguard
Plaintiff’s information. [32] at 4-12.
Each of these arguments fundamentally misapprehends the relatively simple
task before the Court today. The only pertinent question is whether the Illinois
Supreme Court would conclude that Runnion was obligated to safeguard Plaintiff’s
confidential information as a matter of Illinois tort law.

In Cooney the Illinois

Appellate Court answered this question in the negative, and there is no indication
that the Illinois Supreme Court would disagree. The Court declines “to adopt a
substantive innovation in Illinois law.” Worix v. MedAssets, Inc., 869 F. Supp. 2d
893, 897-98 (N.D. Ill. 2012) (internal quotation omitted). Accordingly, Plaintiff’s
motion for reconsideration is denied.
B.

Defendant’s Motion to Dismiss

Defendant’s current motion to dismiss concerns Plaintiff’s claims for breach
of express contract and breach of implied contract. The Court analyzes these claims
together, as their elements substantially overlap.

Compare VanDerMolen v.

Washington Mutual Finance, Inc., 835 N.E.2d 61, 69 (Ill. App. Ct. 2005) (required
elements for a breach of express contract claim under Illinois law are: (1) the

7

existence of a valid and enforceable contract; (2) performance by the plaintiff; (3) a
breach by the defendant; and (4) an injury) with New v. Verizon Commc’ns, Inc., 635
F. Supp. 2d 773, 782-83 (N.D. Ill. 2008) (“to prove an implied contract the party
asserting the contract must show the same elements as an express contract, as well
as a meeting of the minds and a mutual intent to contract”).
Runnion argues that Plaintiff’s breach of contract claims fail because: (1)
Plaintiff has failed to perform its obligations; (2) Plaintiff has not identified “some
written and material provision of the written contract that has been breached”; (3)
Plaintiff has failed to “state a cause of action for breach of an implied duty of good
faith and fair dealing”; and (4) as to the implied contract claim only, Plaintiff has
failed to allege the requisite “meeting of the minds.”

[35] at 3-7.

The Court

addresses each argument in turn.
1.

Plaintiff’s Performance

To be sure, performance by the plaintiff is an essential element of breach of
contract claims under Illinois law. See Veath v. Specialty Grains, Inc., 546 N.E.2d
1005, 1013 (Ill. App. Ct. 1989) (“It is a fundamental principle of the law that in
order for one to recover upon a contract, he must have performed his part of the
contract.”) (internal quotation omitted); see also 360networks Tenn., LLC v. Illinois
Cent. R. Co., No. 05-cv-3198, 2010 WL 2167394, at *2 (N.D. Ill. May 28, 2010) (To
“recover for a breach of contract, a plaintiff must prove, inter alia, that it complied
with all of its material obligations under the contract.”) (internal quotation
omitted).

8

Plaintiff concedes that it was contractually obligated to pay Runnion the
purchase price of the truck-mounted crane, and that it instead sent those funds to
John Doe. [37] at 4. Plaintiff nevertheless contends that its breach of contract
claims remain viable, as its non-performance was precipitated by Runnion’s breach.
Id. (citing Cummings v. Beaton & Assocs., Inc., 618 N.E.2d 292, 303 (Ill. App. Ct.
1992)); see also Richelieu Foods, Inc. v. New Horizon Warehouse Distribution Ctr.,
Inc., 67 F. Supp. 3d 903, 911-12 (N.D. Ill. 2014) (wrongful prevention doctrine
precludes a defendant “who prevents the fulfillment of a condition” from defeating
“liability by asserting the failure of the condition he himself has rendered
impossible”).
The Court agrees. Plaintiff has competently alleged that Runnion agreed to
“safeguard any sensitive information from disclosure to third parties,” Runnion
breached this obligation, and Runnion’s breach occasioned Landale’s nonperformance. [33] at 1-13. These allegations, taken as true for the purposes of the
present motion only, qualify for application of the wrongful performance doctrine.
2.

Failure To Identify Written Provision

Defendant’s suggestion that Plaintiff was obligated to identify “some written
and material provision of the written contract that has been breached,” [35] at 4,
misconstrues federal pleading standards.

Even though “Plaintiff [still] has not

attached” the full complement of contractual documents related to the sale here, the
Court must nevertheless “accept Plaintiff’s factual allegations as true and draw all
reasonable inferences in Plaintiff’s favor.” Dolmage, 2015 WL 292947, at *7; see

9

also Odeluga v. PCC Cmty. Wellness Ctr., No. 12-cv-07388, 2013 WL 4552866, at *7
(N.D. Ill. Aug. 27, 2013) (“Under Illinois state civil procedure, a plaintiff asserting a
claim based on a written contract must attach that contract to her pleadings.
Federal Rule of Civil Procedure 8, however, makes no similar demand and, instead,
requires only a short and plain statement of the plaintiff’s claims.”) (internal
quotation omitted).
In its Third Amended Complaint, Plaintiff alleges that: (1) Defendant had a
previous security failure; (2) the parties discussed Defendant’s previous security
failure “[d]uring the negotiations” regarding the vehicle at issue; (3) the parties
then entered into a sales contract; (4) Defendant’s security was compromised again,
resulting in damage to Plaintiff; and (5) Defendant’s second security failure
constituted a breach of its confidentiality obligations under the parties’ sales
contract. [33] at 1-6, 11-12. After drawing all reasonable inferences in Plaintiff’s
favor, it is plausible to surmise that the parties’ sales contract included
confidentiality obligations that addressed the security concerns discussed by the
parties during their negotiations.

At this early stage, “Plaintiff has sufficiently

alleged that [the confidentiality obligations were] part of the contract between
Plaintiff and Defendant.” Dolmage, 2015 WL 292947, at *7.
3.

Implied Covenant of Good Faith and Fair Dealing

Defendant’s argument that Plaintiff has failed to “state a cause of action for
breach of an implied duty of good faith and fair dealing,” [35] at 4, is a nonsequitur—no such cause of action exists under Illinois law. See Spadoni v. United

10

Airlines, Inc., 47 N.E.3d 1152, 1165 (Ill. App. Ct. 2015) (“Illinois law does not
recognize an independent cause of action for breach of implied duty of good faith
and fair dealing in a contract.”).

Instead, the Court must determine whether

Plaintiff has competently alleged a breach of the parties’ contract, and the implied
duty of good faith and fair dealing simply serves as “a construction aid in
determining the intent of the parties where an instrument is susceptible of two
conflicting constructions.” Id. (internal quotation omitted). As discussed supra,
Plaintiff’s present allegations clear this hurdle.
4.

Meeting of the Minds

Finally, Plaintiff’s Third Amended Complaint competently alleges that the
parties achieved the requisite meeting of the minds, in two separate statements
that were absent from Plaintiff’s earlier pleadings: “Upon information and belief,
Runnion agreed to complete the transaction with the intent to safeguard any
sensitive information from disclosure to third parties,” and the “parties’ mutual
intent constitutes a meeting of the minds regarding safeguarding sensitive
information from disclosure to third parties.” [33] at 12.
Defendant suggests these allegations are violative of the parol evidence rule,
“conclusory,” and implausible. See generally [35] at 6-7; [38] at 3. These arguments
overstate Plaintiff’s burden at this early juncture. Plaintiff has plausibly alleged
that, in light of Runnion’s previous security breaches, the parties mutually agreed
to safeguard each other’s information as part of their sales agreement. See supra at
11.

11

IV.

Conclusion
For the reasons discussed above, both Plaintiff’s motion for reconsideration

[31] and Defendant’s motion to dismiss [34] are denied.

Date: April 3, 2017

Entered:

____________________________________
John Robert Blakey
United States District Judge

12