Ward Chrysler Center, Inc. v. ADP Dealer Services, Inc.

Filing 31

ORDER granting in part and denying in part 9 Motion to Dismiss. Signed by Chief Judge David R. Herndon on 8/14/2012. (mtm)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
WARD CHRYSLER CENTER, INC.,
Plaintiff,
v.
ADP DEALER SERVICES, INC.,
Defendant.

Case No. 12-cv-32-DRH-DGW
MEMORANDUM AND ORDER

HERNDON, Chief Judge:
i.

INTRODUCTION

Before the Court is defendant ADP Dealer Services, Inc.’s motion to dismiss
the complaint (Doc. 9, Reply Doc. 18). As plaintiff Ward Chrysler Center, Inc., has
responded, the motion is ripe for judicial resolution (Doc. 16). For the following
reasons, defendant’s motion is DENIED in part and GRANTED in part.
ii.

BACKGROUND

Plaintiff’s three count complaint arises from a contract the parties entered
into in April, 2009. Plaintiff, “contracted with [defendant] to provide hardware,
software and services for installation of a fully integrated telephone system at
[p]laintiff[‘]s automobile dealerships at Carbondale, Illinois and Cape Girardeau,
Missouri” (Doc. 2-1, pp. 3-4). Plaintiff’s complaint consists of Count 1: Negligent

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Misrepresentation; Count II: Negligence; and Count III: Breach of Contract (Doc.
2-1).
Pursuant to FEDERAL RULES

OF

CIVIL PROCEDURE 9(b), 10(b), and 12(b)(6),

defendant instantly seeks dismissal of plaintiff’s complaint in its entirety (Doc. 9).
As to Counts I and II, defendant alleges the economic loss doctrine of Moorman
Mfg. Co. v. Natl. Tank Co., 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443 (1982),
bars plaintiff’s requested relief. 1 As to Count III: Breach of Contract, defendant
argues plaintiff has not stated a plausible claim for relief under RULE 12(b)(6).
Plaintiff naturally disagrees with defendant’s legal assertions and alternatively
moves to amend its complaint should the Court feel plaintiff has not pled its
claims with sufficient particularity.
iii.
1.

LAW AND APPLICATION

Failure to State a Claim

FEDERAL RULE OF CIVIL PROCEDURE 8(a)(2) requires plaintiff provide a “short
and plain statement of the claim showing that [she] is entitled to relief.” A RULE
12(b)(6) motion challenges the sufficiency of the complaint to state a claim upon
which relief can be granted. Hallinan v. Fraternal Order of Police Chicago Lodge
7, 570 F.3d 811, 820 (7th Cir. 2009). The Supreme Court explained in Bell

1 The Court notes that defendant alternatively argues that plaintiff’s Count I impermissibly
commingles causes of action, negligent and intentional misrepresentation, in violation of RULE
10(b). It additionally argues that any allegations of intentional misrepresentation contained in
Count I are not pled with sufficient particularity under Rule 8(b). As to Count I, plaintiff solely
responds to defendant’s allegations concerning negligent misrepresentation. Plaintiff does not
contend that the allegations of Count I amount to a claim of intentional misrepresentation.
Moreover, as the Court dismisses the negligent misrepresentation allegations of Count I on the
basis of the economic loss doctrine, the Court does not address defendant’s alternative
arguments.

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Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), that RULE 12(b)(6)
dismissal is warranted if the complaint fails to set forth “enough facts to state a
claim to relief that is plausible on its face.”
In making this assessment, the district court accepts as true all well-pled
factual allegations and draws all reasonable inferences in the plaintiff's favor. See
Rujawitz v. Martin, 561 F.3d 685, 688 (7th Cir. 2009); St. John's United Church
of Christ v. City of Chicago, 502 F.3d 616, 625 (7th Cir. 2007). Even though
Twombly (and Ashcroft v. Iqbal, 556 U.S. 662 (2009)) retooled federal pleading
standards, notice pleading remains all that is required in a complaint. “A plaintiff
still must provide only ‘enough detail to give the defendant fair notice of what the
claim is and the grounds upon which it rests and, through his allegations, show
that it is plausible, rather than merely speculative, that he is entitled to relief.’”
Tamayo v. Blagojevich, 526 F.3d1074, 1083 (7th Cir. 2008).
The Seventh Circuit has offered further direction on what (post- Twombly &
Iqbal) a complaint must do to withstand dismissal for failure to state a claim. In
Pugh v. Tribune Co., 521 F.3d 686,699 (7th Cir. 2008), it further reiterated:
“surviving a Rule 12(b)(6)motion requires more than labels and conclusions;” the
allegations must “raise a right to relief above the speculative level.” Similarly, the
court remarked in Swanson v. Citibank, N.A., 614 F.3d 400, 403 (7th Cir. 2010):
“It is by now well established that a plaintiff must do better than putting a few
words on paper that, in the hands of an imaginative reader, might suggest that

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something has happened to her that might be redressed by the law.” Judge
Posner later explained that Twombly and Iqbal:
[R]equire that a complaint be dismissed if the allegations do not state
a plausible claim. The Court explained in Iqbal that “the plausibility
standard is not akin to a ‘probability requirement,’ but it asks for
more than a sheer possibility that a defendant has acted unlawfully.”
This is a little unclear because plausibility, probability, and
possibility overlap.
...
But one sees more or less what the Court was driving at: the fact that
the allegations undergirding a plaintiff’s claim could be true is no
longer enough to save it
...
[T]he complaint taken as a whole must establish a nonnegligible
probability that the claim is valid, though it need not be so great a
probability as such terms as “preponderance of the evidence”
connote.
...
After Twombly and Iqbal a plaintiff to survive dismissal “must plead
some facts that suggest a right to relief that is beyond the ‘speculative
level.’”
Atkins v. City of Chicago, 631 F.3d 823, 831–32 (7th Cir. 2011) (citing In re
marchFIRST Inc., 589 F.3d 901, 905 (7th Cir. 2009)); see also Smith v. Medical
Benefit Administrators Group, Inc., 639 F.3d 277, 281 (7th Cir. 2011) (Plaintiff's
claim “must be plausible on its face,” that is, “[t]he complaint must establish a
nonnegligible probability that the claim is valid.”). With these principles in mind,
the Court turns to plaintiff’s complaint.
2.

Economic Loss Doctrine

As the Seventh Circuit recently explained, the economic loss doctrine,
known as the Moorman doctrine in Illinois, bars recovery in tort for purely
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economic losses arising out of a failure to perform contractual obligations. Wigod
v. Wells Fargo Bank, 673 F.3d 547, 567 (7th Cir 2012) (applying Illinois law)
(citing Moorman, 435 N.E.2d at 448-49). There are a number of exceptions to the
economic loss doctrine. However, each relies on the general rule that, “[w]here a
duty arises outside of the contract, the economic loss doctrine does not prohibit
recovery in tort for the negligent breach of that duty.” Id. (citing Congregation of
the Passion, Holy Cross Province v. Touche Ross & Co., 159 Ill.2d 137, 201
Ill.Dec. 71, 636 N.E.2d 503, 514 (1994)). Thus, the application of the Moorman
doctrine depends on whether the defendant’s duty arose by operation of contract
or existed independent of the contract. Id. at 567-68 (citing Catalan v. GMAC
Mortg. Corp., 629 F.3d 676, 693 (7th Cir. 2011) (applying Illinois law); 2314
Lincoln Park West Condo. Ass’n v. Mann, Gin, Ebel & Frazier, Ltd., 136 Ill.2d
302, 144 Ill.Dec. 227, 555 N.E.2d 346, 351 (1990)).
3.
Under

Illinois

Count I: Negligent Misrepresentation
law,

to

state

a

cause

of

action

for

negligent

misrepresentation, a complaint must first allege facts establishing that the
defendants owed a duty to communicate accurate information. Hoover v. Country
Mut. Ins. Co., --- N.E.2d ----, 2012 WL 2926166, * 8 (Ill. App. July 18, 2012).
Thus, in accordance with the Moorman doctrine, this duty must arise separately
from the parties’ contractual relationship. Specifically, Illinois courts have
recognized a duty to communicate accurate information in two circumstances.
First, Illinois courts have imposed a duty to avoid negligently conveying false

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information where the information results in physical injury to a person or harm
to property. Id. (citing Brogan v. Mitchell Int’l., Inc., 181 Ill.2d 178, 183, 229
Ill.Dec. 503, 629 N.E.2d 276 (1998)). Second, Illinois courts have imposed a duty
to avoid negligently conveying false information where one is in the business of
supplying information for the guidance of others in their business transactions.
Id.; Moorman, 435 N.E.2d at 452.
Instantly, plaintiff argues the Moorman doctrine does not bar its claim for
negligent misrepresentation, as defendant is in the business of supplying
information for the guidance of others in their business transactions. Concerning
this

exception’s

application,

Illinois

courts

have

“held

that

negligent

misrepresentation actions are almost universally limited to situations involving a
defendant who, in the course of his business or profession, supplies information
for the guidance of others in their business relations with third parties.” Id. (citing
Lang v. Consumers Ins. Serv., Inc., 222 Ill.App.3d 226, 235, 164 Ill.Dec. 825,
583 N.E.2d 1147 (1991); Black, Jackson & Simmons Ins. Brokerage, Inc. v. Int’l.
Bus. Mach. Corp., 109 Ill.App.3d 132, 135, 64 Ill.Dec. 730, 440 N.E.2d 282
(1982)).
To state a claim based on this negligent misrepresentation exception to
Moorman, a plaintiff must demonstrate that: (1) defendant is in the business of
supplying information for the guidance of others in their business dealings; (2)
defendant provided information that constitutes a misrepresentation; and (3)
defendant supplied the information for guidance in plaintiff’s business dealings.

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Tolan and Son, Inc. v. KLLM Architects, Inc., 308 Ill.App.3d 18, 28, 241 Ill.Dec.
427, 719 N.E.2d 288 (1999) (citation omitted). The allegation that a defendant is
in the business of providing information for the guidance of others is a legal
conclusion that must be supported by well-pled factual allegations. Id. at 296; Fox
Assoc., Inc. v. Robert Half Int’l., Inc., 334 Ill.App.3d 90, 95-96, 267 Ill.Dec. 800,
777 N.E.2d 603 (2002).
Thus, this exception does not generally apply to cases involving
representations made by sellers of tangible products or services to reliant buyers.
Lang, 583 N.E.2d at 1153-54. In such a case, the information is generally
incidental to the transaction, pertinent solely to the contractual dealings between
the two parties, and no third party reliance is implicated. Rankow v. First
Chicago Corp., 870 F.2d 356, 364 (7th Cir. 1989) (applying Illinois law)
(“Obviously, a great many businesses involve an exchange of information as well
as tangible products- manufacturers provide operating or assembly instructions,
and sellers provide warranty information of various kinds. But if we ask what the
product is in each of the cases, it becomes clear that the product (a building,
precipitator, roofing materials, computer or software) is not itself information,
and that the information is merely incidental.”); Fireman’s Fund Ins. Co. v. SEC
Donohue, Inc., 176 Ill.2d 160, 223 Ill.Dec. 424, 679 N.E.2d 1197 (1997); Knox
College v. Celotex Corp., 117 Ill.App.3d 304, 72 Ill.Dec. 703, 453 N.E.2d 8
(1983).

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Accordingly, courts view the applicability of this exception on a continuum;
pure information providers at the opposite end from pure good providers. Tolan,
719 N.E.2d at 297. Courts have held that the pure information end encompasses
accountants and attorneys, Congregation, 636 N.E.2d at 515, insurance brokers,
Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., No. 91 C 6103, 1994 WL 687579,
* 15 (N.D.Ill. Dec. 7, 1994), stockbrokers, Penrod v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 68 Ill.App.3d 75, 24 Ill.Dec. 464, 385 N.E.2d 376 (1979),
real estate brokers, Rankow, 870 F.2d 356; Duhl v. Nash Realty, Inc., 102
Ill.App.3d 483, 57 Ill.Dec. 904, 429 N.E.2d 1267 (1981); Olson v. Hunter’s Point
Homes, LLC, 2012 WL 19649, *3 (Ill. App. Jan. 4, 2012), termite inspectors,
Perschall v. Raney, 137 Ill.App.3d 978, 92 Ill.Dec. 431, 484 N.E.2d 1286 (1985),
and environmental assessors, Tribune Co. v. Geraghty & Miller, Inc., No. 97 C
1889, 1997 WL 438836 (N.D.Ill. July 25, 1997).
The tangible product end encompasses businesses that supply tangible
goods and/or non-informational goods or services. Thus, while the entity may
exchange information, the information relates solely to the goods or services and
is thus, “supplied incidental to the sale of the product.” Tolan, 719 N.E.2d at 297
(citation omitted). Finally, as to the businesses that lie between the two extremes,
“[t]he critical question . . . is whether the information is an important part of the
product offered. These businesses will be deemed to be in the business of
supplying information if the information furnished along with the noninformational goods or services is central to the business transactions. Id. at 297-

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98 (citing Gen. Electric Capital, Corp. v. Equifax Serv., Inc., 797 F.Supp. 1432,
1443 (N.D.Ill. 1992)).
Applying these principles to the instant case, the Court concludes that
plaintiff has failed to allege that defendant is in the business of supplying
information for the guidance of others in their business dealings. As to
defendant’s specific business, plaintiff states it, “contracted with [defendant] to
provide hardware, software and services for installation of a fully integrated
telephone system at [p]laintiff[‘]s automobile dealerships in Carbondale, Illinois
and Cape Girardeau, Missouri” (Doc. 2-1, p. 4). Further, plaintiff states
defendant, “provided information to [plaintiff] concerning the purchase and
installation of an integrated phone system at various automobile dealerships
operated by [p]laintiff” (Doc. 2-1, p. 4). Plaintiff additionally states, “[defendant]
provided the above information in the course of the business as retail sellers and
installers of phone systems such as that which was provide[d] to [p]laintiff” (Doc.
2-1, p. 5).
These allegations demonstrate that any information provided to plaintiff
was clearly incidental to its role as a retail seller of the phone system it sold
plaintiff. Any duty existing between the parties arises solely from their contractual
relationship. Defendant’s product is not information, but the tangible product and
services it provides as a retailer seller of phone systems. Moreover, plaintiff has
not alleged that it used any information defendant provided in its business dealing
with third parties. Thus, as plaintiff has not adequately alleged that defendant is

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in the business of supplying information for the guidance of others in their
business dealings, plaintiff’s Count I is dismissed pursuant to the Moorman
doctrine.
4.

Count II: Negligence

Defendant additionally argues that the Moorman doctrine bars plaintiff’s
Count II: Negligence. Plaintiff’s negligence claim alleges,
15. Plaintiff [] contracted with [d]efendant [] to provide
hardware, software and services for the installation of a fully
integrated telephone system at [p]laintiff’s automobile dealerships in
Carbondale, Illinois and Cape Girardeau, Missouri.
16. [Defendant] had a duty to exercise ordinary care in
providing and installing the phone system so that it functioned
properly and worked in conjunction with [p]laintiff’s existing
systems.
17. [Defendant], its agents and employees, were negligent and
failed to exercise a reasonable degree of care in the installation of the
phone system, such that the system has experienced numerous and
pervasive problems as detailed more fully in Count I of this Petition.
18. As a direct and proximate result of [defendant’s] negligence
in installing the phone system [plaintiff] has been damaged.
(Doc. 2-1, p. 7).
Plaintiff’s response fails to address the applicability of the Moorman
doctrine to its negligence claim. Regardless, it is clear that plaintiff’s negligence
claim is barred pursuant to Moorman. The duty which plaintiff alleges defendant
breached clearly arises solely from the parties’ contractual relationship. Thus,
plaintiff’s rights are contractual in nature. If defendant breached the parties’
agreement, plaintiff’s remedies lie in the law of contract. See Wells Fargo Bank,

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673 F.3d at 568 (“If, for example, an architect bungles a construction design, the
Moorman doctrine bars the aggrieved owner’s suit for negligence. The shoddy
workmanship is a breach of the design contract rather than a failure to observe
some independent duty of care owed to the world at large.”) (citation omitted).
Accordingly, plaintiff’s Counts I and II are dismissed with prejudice. Plaintiff’s
request for leave to file an amended complaint is denied at this time, as a
proposed amendment to a pleading or amended pleading itself must be submitted
at the time the motion to amend in filed. See SDIL-LR 15.1.
5.

Count III: Breach of Contract

Finally, defendant seeks dismissal of plaintiff’s Count III: Breach of
Contract. Defendant’s motion merely cites certain provisions of the MSAs,
including warranty provisions, as the basis of its motion. Defendant states
plaintiff has failed to state a claim for relief that is plausible on its face, pursuant
to RULE 12(b)(6). The required elements of a breach of contract claim in Illinois
are the standard common law elements: “(1) offer and acceptance, (2)
consideration, (3) definite and certain terms, (4) performance by plaintiff of all
required conditions, (5) breach, and (6) damages.” Assoc. Benefit Serv., Inc. v.
Caremark RX, Inc., 493 F.3d 841, 849 (7th Cir. 2007) (quoting MC Baldwin Fin.
Co. v. DiMaggio, Rosario & Veraja, LLC, 364 Ill.App.3d 6, 300 Ill.Dec. 601, 845
N.E.2d 22, 30 (2006)). Plaintiff’s breach of contract claims alleges,
20. In April, 2009, [p]laintiff and [d]efendant entered into an
agreement whereby [d]efendant would install a new phone system at
[p]laintiff[‘]s business.

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21. Defendant had an obligation to perform its duties in
installing the phone system in a skillful and workmanlike manner.
22. Included and implicit within the Agreement was the
understanding that the phone system provided would be fit for the
purpose intended and would satisfactorily perform its intended
function.
23. Defendant [] breached the Agreement between the parties
in that the phone system has experienced numerous and pervasive
problems as detailed more fully in Count I of this Petition which
[defendant] has failed and refused to address or correct and by
failing to provide on-site training for the system as provided and
agreed upon.
24. Plaintiff [] has duly performed all parts of the agreement
required to be performed of it.
25. Defendant[‘s] [] breach of the agreement has resulted in
damages to [p]laintiff.
(Doc. 2-1, p. 8). Accordingly, plaintiff has stated a claim for relief that is plausible
on its face. The Court has not been called upon to interpret the relevant
contractual provisions. Thus, defendant’s motion to dismiss plaintiff’s Count III:
Breach of Contract pursuant to RULE 12(b)(6) is denied.

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iv.

CONCLUSION

For the foregoing reasons, the Court GRANTS in part defendant’s motion
(Doc. 9). Accordingly, plaintiff’s Count 1: Negligent Misrepresentation and Count
II: Negligence are DISMISSED with prejudice. Further, defendant’s motion is
DENIED in part, as plaintiff’s Count III: Breach of Contract states a claim for
relief that is plausible on its face. Finally, plaintiff’s request for leave to file an
amended complaint is DENIED at this time.
IT IS SO ORDERED.
Signed this 14th day of August, 2012.

Digitally signed by
David R. Herndon
Date: 2012.08.14
11:05:15 -05'00'
Chief Judge
United States District Court

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