fact was concealed led to his injury.” Trustees of AFTRA Health Fund, 303 F.3d at 777
(applying Illinois law and quoting Schrager v. North Cmty. Bank, 767 N.E.2d 376, 384
(Ill. 2002)). Thus, fraudulent concealment is like fraudulent misrepresentation except
that the fraud is based on silence in the face of a duty to speak rather than an
affirmative misrepresentation.

Eagle states that Defendants had a duty to speak with respect to the testing of the
containment fill stations. Eagle believes this duty arose because Defendants’
representations in the sales literature and in the Contract created a duty to speak
regarding the circumstances of the testing. Although the sales literature was provided
to Eagle, there is no evidence that it was ever discussed by the parties. Furthermore,
contrary to Eagle’s clear implication (see Pl. Opp. at 17), Defendants did not expressly
acknowledge that Eagle was relying on the accuracy of the sales literature. As a matter
of law, no duty to speak arose on account of the sales literature. The Contract
representations, however, are a different story. In section 4.1(18), HEC represented
that it had no knowledge of any material adverse facts, and in section 4.1(30), HEC
represented that it did not make any misleading representations in the Contract by
omitting material facts. Thus, HEC contractually obliged itself to speak up regarding

any material adverse facts and any material facts needed to make other contractual

-13-



Eagle’s responses to the twelve statements and have them deemed admitted because
the Dead-Man’s Act clearly does not apply in this case since no party to the action is
a representative of the deceased Howard Liebovitz (Eagle’s former president). In
partially resisting the motion (only as to paragraphs 18-21, 28, 29, and 40), Eagle
explains that the citation to the Dead-Man’s Act was inadvertent and that it meant to
cite to 735 ILCS 5/8-301 (similar to the Dead-Man’s Act but applying in cases where
the deceased was an agent of a party). Although it claims the citation to the Dead-
Man’s Act was inadvertent, Eagle fails to explain why it ever, under either statute,
denied paragraphs 22, 26, 30, 45, and 46. In fact, Eagle states that it denied all twelve
paragraphs “because most of those paragraphs purported to offer evidence concerning
the substance of 1998 conversations between Defendants’ corporate agents, all of
whom are still alive and Plaintiff's former president, Howard Liebovitz, who is
deceased.” (Pl. Resp. § 2 (emphasis added).) Eagle’s position is egregiously
inappropriate. By its own admission, Eagle has denied at least one of the twelve
paragraphs for no good faith reason whatsoever. Moreover, looking at the merits of
Eagle’s denials, it appears that several, and not just one, of the denials are wholly
inappropriate. For instance, Eagle denied six paragraphs (paragraphs 18-22, 26, and
30) despite that all of the evidence in support of those paragraphs came from Eagle’s

own agents, and not from an adverse party. See 735 ILCS 5/8-301 (clearly barring only

-4.



certificate for one of the fill station lines without actually testing it; and (4) representing
that two specific containment fill stations were capable of safely refilling SCUBA
cylinders.
A. — Sales Literature

HEC does not dispute that its sales literature contained false statements
regarding the containment fill stations’ capabilities. Rather, HEC maintains, in part,
that it did not intend for Eagle to rely on the sales literature. There is no evidence in
the record to support a finding of intent. The only evidence even relevant to this issue
is the fact that Defendants provided Eagle with a copy of the sales literature shortly
after initiating contact with Eagle regarding the sale of their business. (PI. Stmt. of
Facts 4 90.) In fact, Eagle admits that the sales literature was never discussed with any
of the key Eagle representatives prior to executing the Contract (Def. Stmt. of Facts J
40), nor does Eagle present any evidence that the sales literature was ever discussed
with anyone else at Eagle.

B. Contractual Representations

Eagle claims that it was defrauded by four representations made in the Contract:
Section 4,1(20)(a) and schedule 4.1(20) and sections 4.1(18) and 4.1(30).
Section 4. 1(20)(a) and schedule 4. 1(20), whether taken together or individually,

are totally irrelevant to Eagle’s fraud claims. Section 4.1(20)(a) of the Contract states:

-9.


ornot Defendants are, technically speaking, bound by Cahill’s and Holmes’s testimony
is not relevant to the summary judgment motion. In their summary judgment motion,
Defendants must show that there is no genuine issue of disputed material fact. Bay v.
Cassens Transport Co., 212 F.3d 969, 972 (7th Cir. 2000). Thus, assuming the content
of paragraphs 101 and 102 are material in the first place, all Eagle needs to show is that
there is, at the least, a disputed issue. The testimony of Holmes and Cahill is sufficient
to show just that.

In paragraphs 84 and 85, Eagle asserted that its expert, Robert Weir, stated
certain opinions, the substance of which is unimportant to the motion to strike. (Pl.
Stmt. of Facts FJ 84 and 85.) Defendants, disagreeing with the expert’s opinions,
denied that the expert even made the opinions. (Def. Resp. to Pl. Stmt. of Facts {| 84
and 85.) For example, in paragraph 85, Eagle asserted:

Plaintiff's mechanical engineering expert, Robert Weir, concluded that

the failures during the modified Cadet fill station testing “should have

prompted an urgent and immediate review of its use in the Cadet product

line.”

(Pl. Stmt. of Facts J 85.) Defendants responded:

Deny. The unsupported opinion is not based upon any test
conducted by Plaintiff's expert.

(Def. Resp. to Pl. Stmt. of Facts { 85.) All Eagle asserted was that Mr. Weir

“concluded” a certain opinion. Since Defendants have no support in the record for

-6-



evidence of a deceased agent’s conversations presented by an adverse party).
Additionally, Eagle denied part of paragraph 29 relating to a meeting attended by the
now deceased Liebovitz but also attended by two additional agents of Eagle. See 735
ILCS 5/8-301 (clearly barring only evidence ofa deceased agent’s conversations when
no other surviving agent of same party was present). Although we have only
specifically found deficiencies in seven of Eagle’s twelve denials, we may grant the
motion to strike in its entirety:

[W]e have emphasized the importance of local rules and ‘have

consistently and repeatedly upheld a district court's discretion to require

strict compliance with its local rules governing summary judgment.’

Bordelon y. Chicago Sch. Reform Ba. of Trustees, 233 F.3d 524, 527 (7th

Cir.2000) (upholding the district court's decision to strike response in its

entirety rather than selectively due to failure to comply with local rules).
Metropolitan Life Ins., 297 F.3d at 562. Def. Stmt. of Facts paragraphs 18-22, 26,
28-30, 40, 45, and 46 are deemed admitted.
Il. Plaintiff’s Motion to Strike

Eagle moves to strike four of Defendants’s responses to its 56.1(b)(3)(B)
Statement of Material Facts (“P1. Stmt. of Facts”). In paragraphs 101 and 102, Eagle
asserted that Defendants made certain admissions and cited to the depositions of two

former employees of HEC for support. Defendants denied the paragraphs stating that

it was not bound by John Cahill’s or Derreck Holmes’s deposition testimony. Whether


proof at trial. Jd. The nonmovant may not rest upon mere allegations in the pleadings
or upon conclusory statements in affidavits; it must go beyond the pleadings and
support its contentions with proper documentary evidence. Jd. A genuine issue of
material fact exists when "the evidence is such that a reasonable jury could return a
verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). With these principles in mind, we now tum to the summary judgment motion
before us.
I. Fraudulent Misrepresentation

In order to be granted, Defendants’ motion for summary judgment on its
fraudulent misrepresentation claim must demonstrate an absence of evidence in the
record to support a reasonable jury’s finding that “(1) [HEC] intentionally made a false
statement of a material fact; (2) [Eagle] had a right to rely on that false statement;
(3) the statement was made for the purpose of inducing reliance thereon; (4) [Eagle]
in fact relied on the statement; and (5) [Eagle] suffered injury as a direct result."
Trustees of AFTRA Health Fund v. Biondi, 303 F.3d 765, 777 (7th Cir. 2002) (applying
Illinois law and quoting Rolando v. Pence, 769 N.E.2d 1108, 1112-13 (III. 2002)).
Eagle states the following alleged representations constitute fraudulent
misrepresentation: (1) representations regarding the containment fill stations made in

HEC sales literature; (2) specific representations in the Contract; (3) issuance of a test

-8-


Minute Order Form (06/97)

United States District Court, Northern District of Illinois

m Site ;
Nameotasseneduiee | _ Charles P. Kocoras payer
CASE NUMBER 01 C 4032 DATE 2/28/2003
CASE Eagle Compressors, Inc. vs. HEC Liquidating Corp et al
TITLE

[in the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

of the motion being presented.]

ay

49-1) to strike, grant in part and deny in part Plaintiff's motion (Doc 56-1) to strike, and deny Defendants’

motion (Doc 28-1) for summary judgment.

| [For further detail see order attached to the original minute order.]

MOTION:
DOCKET ENTRY:
(1) QO Filed motion of [ use listing in “Motion” box above.]
(2) oO Brief in support of motion due
(3) Oo Answer brief to motion due___. Reply to answer brief due___
(4) Oo Ruling/Hearingon___—_sset for at.
(5) | Status hearing set for 3/25/2003 at 9:30 A.M..
(6) Qa Pretrial conference[held/continued to] {set for/re-set for]on___—ssetfor__—s—aat_—
(7) oO Trial[set for/re-set for]on___—_—at
(8) QO [Bench/Jury trial] [Hearing] held/continued to. sat
(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) Local Rule 41.1 CFRCP41(a)(1) CFRCP41(a)(2).
(10) MM [Otherdocketentry) ENTERMEMORANDUM OPINION: We grant Defendants’ motion (Doc

No notices required, advised in open court.

No notices required.
a umber of notices

Notices mailed by judge's staff.
" MAR 0 3. 2003
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Mail AO 450 form. Ave abit am
Copy to Magistrate Judge Denlow.
| Copy to Magfstrate Judge Denlow
«1 ! 2g “
<ourtroom Ge OluY 8¢ S34 bu datgfited notice
SCT deputy’s
initials cement
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testing actually indicated there were defects, and because none of the testing or
omission of testing was disclosed to Eagle. Four months before the Contract was
executed, HEC issued a test certificate for its Baron containment fill station although
no test was ever performed.' (P1. Stmt. of Facts 47.) Although HEC attempted to test
the Cadet line of fill stations for its capability to contain SCUBA cylinder explosions
at above normal pressures, it never actually did. (Pl. Stmt. of Facts § 97.) HEC
conducted a series of videotaped tests that indicated problems with the Cadet
containment fill stations. (Pl. Stmt. of Facts [J 69-82.) None of this information was
disclosed to Eagle prior to executing the Contract. A reasonable jury could find that
HEC’s representations in sections 4.1(18) (that it does not know of any material
adverse facts) and 4.1(30) (that it did not omit any material facts so as to be
misleading) defrauded Eagle into entering into the Contract.

C. The So-Called False Test Certificate

As just mentioned, HEC issued a test certificate for its Baron product without
ever testing it. That certificate, however, was never seen by Eagle until after the

Contract was executed. For obvious reasons, a fraudulent misrepresentation claim

' HEC maintains that it innocently issued the test certificate because it thought
the Baron had already been tested and the certificate had been lost, misplaced, etc. (Pl.
Stmt. of Facts J] 44-50.)) HEC, however, has yet to offer evidence to support its
contention that the testing actually did occur.

-1l1-



[HEC] has not given any guarantee or warranty in respect of any of the
products sold or services provided as part of the Business [(being sold to
Eagle)], except warranties and conditions made in the ordinary course of
the Business and in the form of the standard written warranty and except
for warranties implied by law.

(Contract § 4.1(20)(a).) Schedule 4.1(20) simply provides a copy of the standard
warranty HEC gave its customers on all products sold in the ordinary course of its
business. Eagle’s reliance on section 4.1(20)(a) and schedule 4.1(20) of the Contract
is incomprehensible. Those portions of the Contract will not be further considered with

respect to the fraud claims.
Section 4.1(18) of the Contract states:

[HEC] has no knowledge of any facts which could reasonably be
expected to result in the loss of any customers or sources of revenue of
the Business which, in the aggregate, would be material to the [assets,
liabilities, operations, activities, earnings, prospects, affairs, or financial
position] of the Business.

(Contract § 4.1(18).) Section 4.1(30) of the Contract states:
No representation or warranty contained in this Agreement (including the
Schedules attached hereto) or any other document executed and delivered
by [HEC] in connection with this Agreement contains any untrue
statement of a material fact, or omits to state any material fact which is

necessary in order to make the statements contained therein not
misleading.

(Contract § 4.1(30).) Eagle argues that these representations were false when made

because HEC did not adequately test its containment fill stations, because some of the

-10-



their position that Mr. Weir did not so conclude, Defendants’ responses to paragraphs
84 and 85 are stricken. The corresponding statements are deemed admitted.

It is unfortunate that so much client and judicial resources are being consumed
to resolve an issue involving a straightforward rule (Local Rule 56.1) that is designed
to isolate and narrow issues for efficient adjudication of summary judgment motions.
It should be further noted that our granting of the motion with respect to paragraphs 84
and 85 in no way condones Eagle’s use of those paragraphs to indirectly assert its
expert’s opinion rather than simply including an affidavit of Mr. Weir as provided for
in Local Rule 56.1(a)(1).

We grant the motion with respect to paragraphs 84 and 85 and deny it with
respect to paragraphs 101 and 102.

SUMMARY JUDGMENT

Summary judgment is appropriate when the record, viewed in the light most
favorable to the nonmoving party, reveals that there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as a matter of law. Bay,
212 F.3d at 97. The moving party bears the initial burden of showing that no genuine
issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The
burden then shifts to the nonmoving party to show through specific evidence that a

triable issue of fact remains on issues on which the nonmovant bears the burden of

-7-



MOTIONS TO STRIKE

I. Defendants’ Motion to Strike

The enforcement of our local rules governing summary judgment is committed
to the discretion of this court. Metropolitan Life Ins. v. Johnson, 297 F.3d 558, 562
(7th Cir. 2002). In connection with the pending motion for summary judgment, HEC
and Hamworthy submitted a Local Rule 56.1(a) Statement of Material Facts (“Def.
Stmt. of Facts”). Local Rule 56.1(a) requires the factual statements to be supported in
the record by admissible evidence. Stinnett v. Iron Works Gym/Executive Health SPA,
Inc., 301 F.3d 610, 613 (7th Cir. 2002); Malec v. Sanford, 191 F.R.D. 581, 585 (N.D.
Ill. 2000). Eagle denied twelve of the factual statements therein based on its assertion
that the evidence relied upon was inadmissible. Eagle argues that such evidence is
inadmissible because the corresponding witnesses are rendered incompetent under 735
ILCS 5/8-301. See FED. R. EvID. 601 (with respect to state causes of action, “the
competency of a witness shall be determined in accordance with State law”).

As stated above, Eagle summarily denied (without supporting evidence) twelve
of Defendants’ statements of fact. (Pl. Resp. to Def. Stmt. of Facts Jf 18-22, 26, 28-30,
40, 45, and 46.) Eagle’s original stated reason for its denials was that the assertions
contained in those twelve paragraphs relied on inadmissible evidence barred by the

Illinois Dead-Man’s Act, 735 ILCS 5/8-201. HEC and Hamworthy move to strike

3-



representations not misleading. A reasonable jury could find that this duty to speak
extends to the facts and circumstances surrounding the testing of the products.
CONCLUSION
Based on the foregoing analysis, we grant Defendants’ motion to strike, grant

in part and deny in part Plaintiff's motion to strike, and deny Defendants’ motion for

summary judgment.
Charles P. Kocoras
Chief Judge
United States District Court
FEB 2 8.2003
Dated: 2

-14-


BACKGROUND

Plaintiff Eagle Compressors, Inc., formerly known as Emergency Products, Inc.
(‘Eagle’), purchased HEC’s business of manufacturing, selling, servicing, repairing,
and maintaining breathing air compressor products for $2,152,949. The parties
executed an Asset Purchase Agreement (the “Contract”) on January 23, 1999. After
the Contract was executed, a competitor company discovered (and brought to Eagle’s
attention) that certain products Eagle was manufacturing as a continuation of the HEC
business were defective. Specifically, the products at issue are containment fill
stations. Containment fill stations fill self-contained breathing apparatus (“SCBA”)
and self-contained underwater breathing apparatus (“SCUBA”) cylinders with
compressed air. In the event that a SCBA or SCUBA cylinder ruptures and explodes
under the tremendous pressure they normally can withstand, a containment fill station
is supposed to safely contain the explosion. After executing the Contract, it became
apparent to all parties that some of the fill station product lines Eagle purchased from
HEC were defective with respect to containing cylinder explosions. Consequently,
Eagle brought this action against HEC and its parent corporation, Hamworthy, for
fraudulent misrepresentation, fraudulent concealment, and breach of contract. HEC

and Hamworthy move for summary judgment on the fraud claims.


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

DOCKETEn

EAGLE COMPRESSORS, INC., an Illinois MAR @ 3 2093

corporation f/k/a Emergency Products, Inc.,
Plaintiff,

vs. 01 C 4032
HEC LIQUIDATING CORP., a Delaware
corporation f/k/a Eagle Compressors, Inc.;
HAMWORTHY BELLISS & MORCOM LTD.,
a United Kingdom corporation; and ARTHUR
ANDERSEN, L.L.P., a North Carolina limited
liability partnership,

we ON SS SS SS SS SW

Defendants.

MEMORANDUM OPINION

CHARLES P. KOCORAS, Chief District Judge:

This matter comes before the court on motions to strike brought by both sides
and a motion for summary judgment brought by Defendants HEC Liquidating
Corporation, formerly known as Eagle Compressors, Inc. (“HEC”) and Hamworthy
Belliss & Morcom Ltd. (“Hamworthy”). For the reasons set forth below, we grant

Defendants’ motion to strike, grant in part and deny in part Plaintiff's motion to strike,

SY

and deny Defendants’ motion for summary judgment.


cannot be based on a representation that was not made until after the harm was

sustained.

D. The Modified Cadet Containment Fill Stations

Eagle alleges that it was defrauded by HEC’s sale of at least two modified Cadet
fill stations to a third party. Eagle states that HEC represented the modified Cadet fill
stations as capable of safely refilling SCUBA cylinders. (Pl. Opp. at 8.) Eagle does
not, however, allege, much less offer, any evidence in support, that HEC made the
alleged representations to Eagle. In all likelihood, the representations would have been
made only to the third party purchaser. We will not assume they were made to Eagle.
IL Fraudulent Concealment

In order to be granted, HEC’s motion for summary judgment on its fraudulent
concealment claim must demonstrate an absence of evidence in the record to support
a reasonable jury’s finding of “(1) the concealment of a material fact; (2) that the
concealment was intended to induce a false belief, under circumstances creating a duty
to speak; (3) that the innocent party could not have discovered the truth through a
reasonable inquiry or inspection, or was prevented from making a reasonable inquiry
or inspection, and relied upon the silence as a representation that the fact did not exist;
(4) that the concealed information was such that the injured party would have acted

differently had he been aware of it; and (5) that reliance by the person from whom the

-12-