Smith et al v. NVR, Inc.
Filing
74
MEMORANDUM Opinion and Order written by the Honorable Gary Feinerman on 12/5/2018.Mailed notice.(jlj, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PAUL SMITH and DEBORAH SMITH,
Plaintiffs,
vs.
NVR, INC.,
Defendant.
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17 C 8328
Judge Gary Feinerman
MEMORANDUM OPINION AND ORDER
In this diversity suit against NVR, Inc. on behalf of themselves and a putative class of
fellow homebuyers in the Tall Pines development in the Village of Plainfield, Illinois, Paul and
Deborah Smith alleged that their home did not conform to the features list and building plans that
NVR advertised to them and submitted to the Village. Doc. 1. On NVR’s motion under Civil
Rule 12(b)(6), the court dismissed without prejudice the Smiths’ claim under the Illinois
Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. (“ICFA”), and
much of their breach of contract claim. Docs. 44-45 (reported at 2018 WL 2718038 (N.D. Ill.
June 6, 2018)). The Smiths filed an amended complaint, Doc. 46, which NVR moves to dismiss
under Rule 12(b)(6), Doc. 57. The motion is granted in part and denied in part.
Background
In resolving a Rule 12(b)(6) motion, the court must accept the operative complaint’s
well-pleaded factual allegations, with all reasonable inferences drawn in the Smiths’ favor, but
not its legal conclusions. See Zahn v. N. Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th Cir.
2016). The court must also consider “documents attached to the complaint, documents that are
critical to the complaint and referred to in it, and information that is subject to proper judicial
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notice,” along with additional facts set forth in the Smiths’ brief opposing dismissal, so long as
those additional facts “are consistent with the pleadings.” Phillips v. Prudential Ins. Co. of Am.,
714 F.3d 1017, 1020 (7th Cir. 2013) (internal quotation marks omitted). The facts are set forth
as favorably to the Smiths as those materials permit. See Domanus v. Locke Lord, LLP, 847 F.3d
469, 479 (7th Cir. 2017). In setting forth the facts at this stage, the court does not vouch for their
accuracy. See Goldberg v. United States, 881 F.3d 529, 531 (7th Cir. 2018).
On April 28, 2016, the Smiths agreed to purchase from NVR a home in the Tall Pines
development. Doc. 46 at ¶ 8; Doc. 58-1 at 2. The Purchase Agreement states in pertinent part:
[T]he Home may be different than what You have seen in our advertisements
and marketing information. The Home will be constructed as shown on the
construction drawings (or blueprints), the grading plan, floor plans and other
plans related to the construction of the Home … together with the options You
selected on the Master Selection sheet … and any Change Orders we mutually
agree to … . All of these together are called the “Plans and Specifications.”
Doc. 58-1 at 2. The Agreement further provides that NVR “ha[s] the right to substitute similar
materials of substantially equivalent quality” and “reserve[s] the right to make changes in the
Plans and Specifications for purposes of mechanical installations, building code and site
requirements, and reasonable architectural design improvements subsequent to the date of this
Agreement.” Id. at 5. In November 2016, the Village of Plainfield issued a “Certificate of
Occupancy and Compliance” for the home, granting a “right to occupancy as a Duplex Permit”
and stating that the home “does comply with the provisions of the Zoning Ordinance of the
Village.” Doc. 58-2; Doc. 46 at ¶¶ 17-18.
Before purchasing the home, the Smiths visited an NVR sales center, where they met
with sales representatives Tammy Quinn and “Renee.” Doc. 46 at ¶¶ 9-10. Quinn provided the
Smiths with advertising and sales materials, including a brochure titled “Tall Pines at Grande
Park Included Features.” Id. at ¶ 11; Doc. 30-1. The brochure indicated that the home would
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have TAMKO 30-year architectural, self-sealing shingles and TIMBERLAKE wooden cabinets
in the kitchen and bathroom. Doc. 46 at ¶ 12; Doc. 30-1 at 2. The Smiths relied on those
representations when deciding to purchase, but later discovered that NVR had instead installed
25-year shingles and cabinets with an artificial non-wood wrap. Doc. 46 at ¶¶ 13-14. While the
actual shingles and cabinets are substantially inferior in quality than what was promised, they are
indistinguishable in appearance. Ibid.; Doc. 62 at 9-10.
The home as constructed also includes materials that are substantially inferior to the
materials that the Village approved based on construction plans that NVR submitted during the
permitting process. Doc. 46 at ¶¶ 17-18. NVR installed a Goodman Manufacturing Condenser
model #GSX13031BE, a 2.5-ton unit rated at 30,000 British Thermal Units (“BTU”), rather than
the Goodman Manufacturing Condenser model #GSX130361E, a 3-ton unit rated at 36,000
BTU, that the Village had approved. Id. at ¶¶ 21-22. Likewise, NVR installed a Goodman
Manufacturing Furnace model #GMSS920603BNAA, rated at 60,000 BTU, rather than the
Goodman Manufacturing Furnace model #GMSS920804CN, rated at 80,000 BTU, that the
Village had approved. Id. at ¶¶ 19-20. In addition, the home’s heating, ventilation, and air
conditioning (“HVAC”) system includes duct work inferior to what the Village had approved.
Id. at ¶ 23. Moreover, although NVR’s plans indicated that the home’s joists would be supported
by web stiffeners, no web stiffeners were installed. Id. at ¶ 26. Finally, the home’s water supply
lines have a narrower diameter than indicated in the plumbing fixture calculations approved by
the Village. Id. at ¶ 24.
Village inspectors did not discover these discrepancies because, while significant in terms
of quality, they were inconspicuous in appearance and thus not readily detectable during
inspection. Id. at ¶¶ 18, 23, 25, 27; Doc. 62 at 9-10.
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Discussion
Like the original complaint, the amended complaint brings ICFA and breach of contract
claims under Illinois law.
I.
ICFA Claim
The ICFA claim alleges that NVR deceived the Smiths by providing them a home
inferior to the home that NVR advertised and that the Village approved in the permitting process.
Doc. 46 at ¶¶ 38-40. The ICFA “is a regulatory and remedial statute intended to protect
consumers, borrowers, and business persons against fraud, unfair methods of competition, and
other unfair and deceptive business practices.” Cohen v. Am. Sec. Ins. Co., 735 F.3d 601, 608
(7th Cir. 2013) (quoting Robinson v. Toyota Motor Credit Corp., 775 N.E.2d 951, 960 (Ill.
2002)). “To state a claim under the ICFA … [the Smiths] must plausibly allege: (1) a deceptive
act or promise by [NVR]; (2) [NVR’s] intent that [they] rely on the deceptive act; (3) the
deceptive act occurred during a course of conduct involving trade or commerce; and (4) actual
damage as a result of the deceptive act.” Haywood v. Massage Envy Franchising, LLC, 887 F.3d
329, 333 (7th Cir. 2018). T final element requires that the Smiths’ actual damages be
“proximately caused by [NVR’s] deceptive act.” Phila. Indem. Ins. Co. v. Chi. Title Ins. Co.,
771 F.3d 391, 402 (7th Cir. 2014).
The ICFA prohibits both “unfair” and “deceptive” acts or practices. 815 ILCS 505/2; see
Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 575 (7th Cir. 2012) (noting that actionable
conduct may be deceptive, unfair, or both). While allegations of unfair acts under the ICFA need
only satisfy the notice pleading standard of Rule 8(a), see Pirelli Armstrong Tire Corp. Retiree
Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 446 (7th Cir. 2011), allegations of deceptive
acts “sound[] in fraud” and are subject to Rule 9(b)’s heightened pleading standard, see
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Haywood, 887 F.3d at 333. Because the Smiths allege only deceptive acts, Doc. 46 at ¶¶ 38 (“As
detailed throughout [the] Amended Complaint, [NVR] deceived new home purchasers and the
Village of Plainfield.”), 39 (“[NVR’s] acts and omissions created a likelihood of deception and
had the capacity to deceive new home purchasers and the Village.”), 40 (alleging that NVR
“misrepresent[ed] the actual finished product” and intended “that new home purchasers would
rely on the deception when purchasing a home[] and that the Village would rely on the deception
when issuing a permit”), their ICFA claim must satisfy Rule 9(b). See Haywood, 887 F.3d at
333 (holding that an ICFA claim alleging unfair practices “still sounds in fraud [when] it relies
upon the same baseline allegation that [the defendant] intentionally misled consumers”); Pirelli,
631 F.3d at 446 (holding that an ICFA claim alleging that the defendant “concealed” or
“misrepresented” information is subject to Rule 9(b)).
Rule 9(b) provides that “[i]n alleging fraud … , a party must state with particularity the
circumstances constituting fraud.” Fed. R. Civ. P. 9(b). Typically, “[t]hat means that [the
complaint] must specifically allege the ‘who, what, when, where, and how of the fraud.’”
Haywood, 887 F.3d at 333 (quoting Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 737
(7th Cir. 2014)). “A principal purpose of requiring that fraud be pleaded with particularity is, by
establishing this rather slight obstacle to loose charges of fraud, to protect individuals and
businesses from privileged libel (privileged because it is contained in a pleading).” Kennedy v.
Venrock Assocs., 348 F.3d 584, 594 (7th Cir. 2003). That said, it is important to avoid “an
overly rigid view of the [who, what, when, where, and how] formulation” and to recognize “that
the precise details that must be included in a complaint ‘may vary on the facts of a given case.’”
United States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 776 (7th Cir.
2016) (quoting Pirelli, 631 F.3d at 442).
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In seeking dismissal, NVR argues that the amended complaint’s ICFA allegations are not
sufficiently particular under Rule 9(b), that any misrepresentations to the Smiths about the
shingles and cabinets amounted only to breach of contract, and that no misrepresentation to the
Village about the HVAC system, joists, and water supply lines proximately caused any damages
to the Smiths. Doc. 58 at 6-10. The court turns first to NVR’s representations regarding the
shingles and cabinets, Doc. 46 at ¶¶ 10-14, before considering its representations regarding the
HVAC system, joists, and water supply lines, id. at ¶¶ 19-27.
As noted, before purchasing their home, the Smiths met at the Tall Pines sales center with
NVR sales representatives Tammy Quinn and Renee, who gave them advertising materials
describing various features, including shingles and cabinets, that their home would include. Id.
at ¶¶ 9-12; Doc. 30-1 at 2 (reproducing the brochure). The Smiths relied on these representations
in purchasing their home, as NVR intended, but later found the cabinets and shingles to be
inferior to what the brochure described. Doc. 46 at ¶¶ 13-14, 40-41.
These allegations, which are more detailed than those in the original complaint, satisfy
Rule 9(b) by setting forth when (before the home purchase in April 2016) and where (the Tall
Pines sales center) the misrepresentations occurred, who (Tammy Quinn and Renee) and what
(the advertising materials) was involved, and how (providing the Smiths with the advertising
materials) the scheme was accomplished. See Camasta, 761 F.3d at 737 (holding that fraud
allegations need not “provide the precise date, time, and location” of the advertisement “or every
word that was included on it,” but must include more than an “assertion that merchandise was
offered at sales prices”) (internal quotation marks omitted); Pirelli, 631 F.3d at 445 (holding that
allegations of fraud “need to provide firsthand facts or data to make [their] suspicions plausible,”
but need not provide “comprehensive” data). That the Smiths do not provide even further
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details—the exact date and time that they visited the sales center, Renee’s last name, or more
information about the oral representations they heard—does not preclude them from complying
with Rule 9(b) given the details they were able to provide. See Gandhi v. Sitara Capital Mgmt.,
LLC, 721 F.3d 865, 870 (7th Cir. 2013) (holding insufficient under Rule 9(b) allegations lacking
“any precision” about the alleged misrepresentations); Ackerman v. Nw. Mut. Life Ins. Co., 172
F.3d 467, 470 (7th Cir. 1999) (noting that an “approximate date” is sufficient under Rule 9(b)).
NVR argues that even if the Smiths’ allegations regarding the shingles and cabinets
satisfy Rule 9(b), they establish no more than breach of contract. Doc. 58 at 7-8. True enough,
“[a] breach of contractual promise, without more, is not actionable under the [ICFA].” Phila.
Indem. Ins. Co., 771 F.3d at 402 (quoting Avery v. State Farm Mut. Auto. Ins. Co., 835 N.E.2d
801, 844 (Ill. 2005)); see also Greenberger v. GEICO Gen. Ins. Co., 631 F.3d 392, 399 (7th Cir.
2011) (holding that the ICFA “is not intended to apply to every contract dispute or to supplement
every breach of contract claim with a redundant remedy”) (internal quotation marks omitted).
That said, allegations of breach plus “some stand-alone allegation of a fraudulent act or practice”
can state an ICFA claim. Greenberger, 631 F.3d at 400; see also Terrazzino v. Wal-Mart Stores,
Inc., ___ F. Supp. 3d ___, 2018 WL 3921301, at *6 (N.D. Ill. Aug. 16, 2018) (“Although an
ICFA claim must include more than simply breach-of-contract allegations, a promise to perform
future conduct can give rise to a claim of fraud if the false promise or representation of future
conduct is alleged to be the scheme employed to accomplish the fraud.”) (internal quotation
marks omitted). The alleged fraudulent conduct may be an affirmative misrepresentation or the
omission or concealment of material facts. See Galvan v. Nw. Mem. Hosp., 888 N.E.2d 529, 539
(Ill. App. 2008) (holding that, in addition to “fraudulent misrepresentation,” “[a]n omission or
concealment of a material fact in the conduct of trade or commerce constitutes consumer fraud”);
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Pappas v. Pella Corp., 844 N.E.2d 995, 999, 1004 (Ill. App. 2006) (holding that “[c]oncealment
[of a material fact] is actionable [under the ICFA] where it is employed as a device to mislead,”
even if the concealment occurs “by silence”).
Here, NVR’s misrepresentations concerning the cabinets and shingles go beyond breach
of contract; according to the Smiths, NVR in advertising materials promised high-quality
products to induce the sale but then, unbeknownst to them, installed substantially inferior
versions. Doc. 46 at ¶¶ 13-14; Doc. 62 at 9-10. It is plausible that reasonable consumers would
rely on NVR’s pre-sale representations regarding the natural wood cabinets and 30-year shingles
and then not realize that they had received 25-year shingles and veneer cabinets; accordingly, by
installing inferior cabinets and shingles nearly identical in appearance to what it represented in
its brochure but not disclosing any deviation, NVR could conceal the substitutions from the
Smiths’ untrained eyes. See Suchanek v. Sturm Foods, Inc., 764 F.3d 750, 756 (7th Cir. 2014)
(noting that the ICFA protects against “statement[s] … likely to mislead (either through a
statement or material omission) a reasonable consumer”); cf. Bober v. Glaxo Wellcome PLC, 246
F.3d 934, 939 (7th Cir. 2001) (holding that no deception occurs when information available to
consumers “would dispel any” misimpression caused by the defendant’s statements). And by
alleging that NVR intentionally misrepresented which shingles and cabinets would be installed
and then concealed its breach by using shingles and cabinets whose similar appearance
prevented discovery of the undisclosed substitution, the Smiths have stated a viable ICFA claim
as to the shingles and cabinets. See Greenberger, 631 F.3d at 400 (noting that “allegations of
systemic fraud and violation of” the ICFA become actionable when they “involve[] affirmative
acts of misrepresentation and not a simple breach of contract multiplied over a prospective
plaintiff class”); Kirkpatrick v. Strosberg, 894 N.E.2d 781, 795 (Ill. App. 2008) (upholding a
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punitive damage award under the ICFA where a seller advertised that the ceiling height in new
condominium units would be nine feet despite knowing that it would be several inches shorter);
Gehrett v. Chrysler Corp., 882 N.E.2d 1102, 1115 (Ill. App. 2008) (holding that the plaintiff
stated a viable ICFA claim, and not just breach of contract, where the defendant allegedly
concealed brand information “so as to deceive plaintiffs about the true” nature of what they were
purchasing); cf. Avery, 835 N.E.2d at 857 (declining to find that an insurer engaged in deceptive
conduct where “it disclosed the use of [the inferior replacement] part” to the insureds).
As to the HVAC system, joists, and water supply lines, NVR contends that the Smiths
cannot show that its alleged misrepresentations proximately caused their damages. Doc. 58 at 910. Alleging proximate cause under the ICFA requires “the deceptive act [to be] the but-for
cause of the damage.” Haywood, 887 F.3d at 333 (internal quotation marks omitted). For
reasons too obvious to state, but-for causation can exist only if the plaintiffs’ purchase “occurred
after the [defendant’s] allegedly fraudulent statements.” Connick v. Suzuki Motor Co., 675
N.E.2d 584, 595 (Ill. 1996). “Although proximate cause in an [ICFA] claim is typically an issue
of fact, a court may determine it as a matter of law where only one conclusion is evident.”
Haywood, 887 F.3d at 334 (internal quotation marks omitted).
By contrast to their allegations regarding the cabinets and shingles, the Smiths do not
allege that NVR’s advertising materials referenced the HVAC system, joists, or water supply
lines. Doc. 46 at ¶ 12; Doc. 30-1. Rather, the Smiths allege that NVR made misrepresentations
regarding those components to the Village during the permitting process and that they were
indirectly deceived by those misrepresentations. Doc. 46 at ¶¶ 15-27, 40.
The ICFA recognizes “indirect deception” claims as long as the consumer “indirectly”
receives “communication or advertising from the defendant.” De Bouse v. Bayer, 922 N.E.2d
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309, 316-17 (Ill. 2009); see also Shannon v. Boise Cascade Corp., 805 N.E.2d 213, 218 (Ill.
2004) (“[I]t is enough that the statement[] by the defendant be made with the intention that it
reach the plaintiff and influence his action and that it does reach him and that he does rely upon
it, to his damage.”) (internal quotation marks omitted). The Smiths, however, do not allege that
they became aware of NVR’s misrepresentations to the Village regarding the HVAC system,
joists, or water supply lines before they agreed to buy their home. Doc. 46 at ¶¶ 15-18 (alleging
that the Village reviewed the building plans that NVR submitted during the permitting process
without stating whether the plans reached the Smiths before their purchase). Accordingly,
because the Smiths neither “[saw] nor heard” NVR’s alleged misrepresentations to the Village
before their purchase, “[they] cannot have relied on the statement[s] and, consequently, cannot
prove proximate cause.” De Bouse, 922 N.E.2d at 316; see also Camasta, 761 F.3d at 737-38
(“A sales receipt provided to a consumer after a purchase cannot show what was supposedly
advertised; the representation must have been made to him before the purchase of the
merchandise.”).
It follows that the Smiths cannot pursue their ICFA claim to the extent it rests on NVR’s
alleged misrepresentations to the Village regarding the home’s HVAC system, joists, and water
supply lines. Because the Smiths have already been given one chance to replead their ICFA
claim, the dismissal is with prejudice. See Bausch v. Stryker Corp., 630 F.3d 546, 562 (7th Cir.
2010) (“Generally, if a district court dismisses for failure to state a claim, the court should give
the party one opportunity to try to cure the problem … .”). Dismissal with prejudice also is
warranted due to the Smiths’ failure to request a chance to replead in the event of dismissal. See
Haywood, 887 F.3d at 335 (“Nothing … in any of our cases[] suggests that a district court must
give leave to amend a complaint where a party does not request it … . To the contrary, we have
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held that courts are within their discretion to dismiss with prejudice where a party does not make
such a request … .”).
Finally, NVR moves to dismiss the Smiths’ prayer for punitive damages. Doc. 58 at 1213. The proper vehicle for this challenge is a Rule 12(f) motion to strike, not a Rule 12(b)(6)
motion. See Scott v. Chuhak & Tecson, P.C., 725 F.3d 772, 783-84 (7th Cir. 2013) (affirming
“the district court’s decision to strike the estate’s request for punitive damages”). The motion to
strike is denied because the ICFA permits punitive damage awards, see Oshana v. Coca-Cola
Co., 472 F.3d 506, 512 (7th Cir. 2006); Crittenden v. Cook Cnty. Comm’n of Human Rights, 990
N.E.2d 1161, 1168-69 (Ill. 2013), and the complaint’s allegations regarding the cabinets and
shingles, read in the light most favorable to the Smiths, suggest a calculated pattern of deception
upon which a punitive damage award could rest. See Parks v. Wells Fargo Home Mortg., Inc.,
398 F.3d 937, 942 (7th Cir. 2005) (explaining that Illinois law allows punitive damages where a
defendant “exhibit[s] a conscious and deliberate disregard” for consumers’ rights that goes
beyond “mere inadvertence, mistake, or errors of judgment”) (internal quotation marks and
alteration omitted); Martin v. Heinold Commodities, Inc., 643 N.E.2d 734, 757 (Ill. 1994) (noting
in an ICFA case that punitive damages are available when “torts are committed with fraud”)
(quoting Kelsay v. Motorola, Inc., 384 N.E.2d 353, 359 (Ill. 1978)).
II.
Breach of Contract Claim
As noted, the Smiths’ contract claim alleges that NVR breached the Purchase Agreement
by installing home shingles, cabinets, joists, HVAC components, and water supply lines inferior
to those required by the Agreement. Doc. 46 at ¶¶ 12-14, 18, 42-44; Doc. 58-1 at 5. In its
previous opinion, the court declined to dismiss the contract claim as it pertained to the shingles
and cabinets because it is plausible that the shingles and cabinets installed in the Smiths’ home
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were not “similar materials of substantially equivalent quality” to what NVR promised in the
Agreement. 2018 WL 2718038, at *5 (internal quotation marks omitted). The court, however,
dismissed the contract claim as it pertained to the HVAC system, floor joists, and water supply
lines because the Smiths did not allege how, given the Village’s issuance of the necessary
permits, the HVAC system, floor joists, and water supply lines could have violated the building
code or the Agreement. Id. at *4. The court concluded that, absent allegations that the Village’s
inspection was “deficient” or that the defects were “concealed” from or “otherwise not
discovered” by the inspectors, the Smiths did not plausibly allege that NVR breached the
Agreement as to the HVAC system, joists, and water supply lines. Ibid.
In the amended complaint, the Smiths allege that even though the HVAC system, joists,
and water supply lines that NVR installed were substantially inferior to those it set forth in the
plans submitted to the Village, the Village did not discover that inferiority during the inspection
process due to the similarity in appearance between what the plans called for and what NVR
installed. Doc. 46 at ¶¶ 18, 23, 25, 27. The question here is whether those allegations cure the
flaw that resulted in dismissal of the original complaint’s contract claim concerning the HVAC
system, joists, and water supply lines.
Under Illinois law, a plaintiff claiming breach of contract must allege: “(1) the existence
of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) breach of
contract by the defendant; and (4) resultant injury to the plaintiff.” Avila v. CitiMortgage, Inc.,
801 F.3d 777, 786 (7th Cir. 2015). “A court must initially look to the language of a contract
alone, as the language, given its plain and ordinary meaning, is the best indication of the parties’
intent.” Right Field Rooftops, LLC v. Chi. Cubs Baseball Club, LLC, 870 F.3d 682, 690 (7th Cir.
2017) (quoting Gallagher v. Lenart, 874 N.E.2d 43, 58 (Ill. 2007)). “[I]f the language of the
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contract is susceptible to more than one meaning, it is ambiguous. If the contract language is
ambiguous, a court can consider extrinsic evidence to determine the parties’ intent.” Ibid.
As noted, the Purchase Agreement provides that the home would be constructed as shown
on the “Plans and Specifications,” Doc. 58-1 at 2, but reserves for NVR “the right to substitute
similar materials of substantially equivalent quality” and to make changes “for purposes of
mechanical installations, building code and site requirements, and reasonable architectural design
improvements,” id. at 5. The plans that NVR submitted to the Village as part of the permitting
process are among the “Plans and Specifications” referenced by the Agreement. Doc. 58-1 at 2
(defining “Plans and Specifications” to include “plans related to construction of the [h]ome”).
Accordingly, for a breach to have occurred, the HVAC system, joists, and water supply lines that
NVR installed in the Smiths’ home must not be substantially equivalent in quality to the HVAC
system, joists, and water supply lines in the plans submitted to the Village, and the substitution
must not have been for a purpose allowed by the Agreement.
As a threshold matter, NVR argues that the contract claims do not satisfy Rule 8(a)
because the Smiths do not specify the contractual provisions that NVR allegedly breached. Doc.
58 at 10-11; Doc. 63 at 10. This argument fails because the amended complaint repeatedly
alleges that the HVAC system, water supply lines, and joists were not constructed with “similar”
materials of “substantially equivalent quality” to the materials set forth in the plans NVR
submitted to the Village, Doc. 46 at ¶¶ 18, 20, 22-24, 26, which mirrors the language used in the
above-referenced clause of the Agreement, Doc. 58-1 at 5. By placing NVR on notice of how it
allegedly breached the Purchase Agreement, the contract claim satisfies Rule 8(a). See Foster v.
Principal Life Ins. Co., 806 F.3d 967, 971 (7th Cir. 2015) (“Specific facts are not necessary; the
statement [in the complaint] need only give the defendant fair notice of what the claim is and the
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grounds upon which it rests.”) (internal quotation marks and alteration omitted); In re
Ameriquest Mortg. Co. Mortg. Lending Practices Litig., 589 F. Supp. 2d 987, 991 (N.D. Ill.
2008) (“[The pleadings] may not have expressly named each of the pertinent contracts or pled
every relevant detail, but [plaintiffs] are not required to do so under Rule 8. The allegations …
are sufficient to give [the defendants] fair notice of the contract actions against them and enable
them to conduct a meaningful investigation into such claims and possible defenses.”) (footnote
omitted).
The Smiths claim that NVR installed an HVAC system with inferior performance, Doc.
46 at ¶¶ 20, 22-23, water supply lines that are narrower, id. at ¶ 24, and framing joists with less
support, id. at ¶ 26, than those called for by NVR’s plans, id. at ¶¶ 18-24, 26. Unlike the original
complaint, the amended complaint alleges how the home could have passed the Village’s
inspection despite significant deviations from the HVAC system, joists, and water supply lines
approved during the permitting process: the deviations were not visually apparent to a building
inspector determining overall compliance with the plans. Id. at ¶¶ 18, 23, 25, 27. It is entirely
plausible that visually subtle but functionally significant deviations in HVAC performance, water
supply capacity, and framing support would not be detected during a routine inspection
encompassing a wide range of home features. See Clark v. Runyon, 116 F.3d 275, 279 n.5 (7th
Cir. 1997) (“[I]t is plausible to think that [an official] might have performed his inspections
without thinking about the accuracy of [a specific item in] the posted notices.”).
Moreover, as explained in the court’s prior opinion, 2018 WL 2718038, at *4, the
Agreement does not define the terms “similar materials” and “substantially equivalent quality” or
the “mechanical installations, building code and site requirements, and reasonable architectural
design improvements” that could permit substitution. Doc. 58-1 at 5. Because what is “similar,”
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“substantially equivalent,” or “reasonable” in one context may not be in another, especially in
connection with a complex project like home construction, those contractual terms are
ambiguous. See Amerisure Ins. Co. v. Roll Serv., Inc., 2002 WL 31101269, at *5 (N.D. Ill. Sept.
19, 2002) (“‘Similar quality’ is an ambiguous term because it is susceptible to more than one
reasonable meaning.”) (Illinois law); see also Bowlers’ Alley, Inc. v. Cincinnati Ins. Co., 108 F.
Supp. 3d 543, 558 (E.D. Mich. 2015) (declining to determine as a matter of law “whether
synthetic lanes are of ‘comparable material and quality’ to wood” when the contract does not
define “comparable”) (Michigan law); Nat’l Presbyterian Church, Inc. v. GuideOne Mut. Ins.
Co., 82 F. Supp. 3d 55, 59 (D.D.C. 2015) (finding ambiguous the contractual phrase “other
property of like kind and quality”) (D.C. law); Trout Brook S. Condo. Ass’n v. Harleysville
Worcester Ins. Co., 995 F. Supp. 2d 1035, 1044 (D. Minn. 2014) (holding that “[t]he terms
‘similar materials’ and ‘material of like kind and quality’ simply cannot be defined, as a matter
of law”) (Minnesota law); RSR Corp. v. Johnson Controls Battery Grp., Inc., 2014 WL
12531156, at *2 (N.D. Tex. Jan. 28, 2014) (holding the term “substantially similar” to be
“ambiguous”) (Wisconsin law); Ace European Grp. v. Sappe, 2012 WL 3638690, at *5 (D.N.J.
Aug. 21, 2012) (concluding that the meaning of “reasonably” is ambiguous and “inherently
involves a fact-based inquiry into what is reasonable under the particular circumstances
involved”) (New Jersey law); French v. State Farm Fire & Cas. Co., 950 N.E.2d 303, 309 (Ind.
App. 2011) (explaining that defining the “ambiguous” term “similar construction” requires a
“fact-sensitive” analysis in which several factors are considered) (Indiana law).
Accordingly, the plausibility of the Smiths’ allegations that the Village’s inspection did
not discover significant discrepancies between the plans and the home, together with the facial
ambiguity of key contractual terms, allow the contract claims to survive dismissal. See Newman
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v. Metro. Life Ins. Co., 885 F.3d 992, 1000 (7th Cir. 2018) (holding that, given “facial
ambiguity” in the disputed provision, the “contract claim survives [the defendant’s] motion to
dismiss” and “the parties may introduce extrinsic evidence to substantiate their reading of the
contract”) (Illinois law); NanoeXa Corp. v. Univ. of Chi., 2011 WL 1399264, at *4 (N.D. Ill.
Apr. 13, 2011) (“Because the agreement is ambiguous with respect to the scope of the rights
granted to the [the plaintiff], the declaratory judgment claim survives dismissal under Rule
12(b)(6). Proper interpretation of the agreement will require extrinsic evidence, which the
parties may adduce in discovery and present at summary judgment and, if the case survives, at
trial.”) (Illinois law) (citing cases). With extrinsic evidence of how “similar,” “substantially
equivalent,” and “reasonable” should be defined, Doc. 58-1 at 5, along with evidence of which
substitutions occurred, the court at summary judgment or a jury at trial will be better positioned
to determine whether NVR breached the Purchase Agreement.
Conclusion
NVR’s motion to dismiss the amended complaint is granted in part and denied in part.
The ICFA claim is dismissed with prejudice insofar as it concerns NVR’s alleged representations
regarding the HVAC system, joists, and water supply. The Smiths may proceed with the
contract claim in its entirety and with the ICFA claim to the extent it alleges misrepresentations
regarding the shingles and cabinets.
December 5, 2018
United States District Judge
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