Finally, WH-TV’s proposed amended third-party complaint alleges that General
Instrument and Motorola breached warranty repair obligations of Zenith that General Instrument
assumed under the Asset Purchase Agreement. This court dismissed a previous version of WH-
TV’s breach of warranty claim because the Asset Purchase Agreement provided that General
Instrument would only assume such warranty obligations that arose from and after the closing
date, and all of the problems alleged in the original claim arose before the closing date.

However, the proposed amended third-party complaint now alleges that certain problems with
the set-top boxes arose after the closing date, and that Motorola caused at least some of these
problems.

General Instrument and Motorola argue that they did not assume even these warranty
obligations with respect to WH-TV, because WH-TV denies that the terms of the warranty
General Instrument assumed were part of WH-TV’s original bargain with Zenith. WH-TV rests
its breach of warranty claim on Zenith’s guarantee in its September 1998 proposal that the set-top
boxes would function as described. WH-TV denies timely receiving sales orders from Zenith
that contained a warranty with “standard terms” that warranted that the goods would be free from
defects in material, design and workmanship, and conform to the applicable specifications and/or
drawings, but limited relief for breach of warranty to “repair and replacement of defective or
nonconforming goods.” According to General Instrument and Motorola, under the Asset
Purchase Agreement, General Instrument did not assume any of Zenith’s warranty obligations
beyond the standard terms. Therefore, because WH-TV has denied receiving the sales orders
containing the standard terms of Zenith’s repair warranty, General Instrument and Motorola

cannot be liable for a breach of warranty.



unambiguous promise; (2) plaintiffs reasonable reliance on the promise; (3) the reliance must

have been expected and foreseeable by defendant; and (4) injury from the reliance. Fischer v.

First Chicago Capital Markets, Inc., 195 F.3d 279, 283 (7" Cir. 1999).

WH-TV’s proposed amended third-party complaint alleges that Motorola, through its
actions and statements, promised and knowingly falsely represented to WH-TV that it had
assumed various of Zenith’s contractual responsibilities to correct problems in the set-top boxes.
The complaint alleges that WH-TV was not aware that these representations were false. The
complaint further alleges that Motorola expected WH-TV to rely on Motorola’s assumption of
these responsibilities. According to WH-TY, it relied on Motorola’s representations by delaying
enforcing the warranty through legal or other action against Zenith, and by not seeking an
alternative supplier of set-top boxes or other repair solutions. WH-TV alleges that its reliance on
Motorola’s representations resulted in delays in marketing its digital television service. Although
WH-TV’s allegation that it was somehow injured by not knowing that Motorola was not
contractually obligated to perform repair work is not terribly convincing, the estoppel claims
appear to be sufficient to withstand a motion to dismiss against Motorola.

WH-TV’s proposed amended third-party complaint also alleges estoppel claims against
General Instrument. The complaint alleges that Motorola made the above promises and
representations, and took the above actions, as the agent of an undisclosed principal, General
Instrument. Alternatively, alleges the complaint, General Instrument, doing business as Motorola
Broadband Communications Sector, made the promises and representations and took the actions.
Although General Instrument and Motorola challenge WH-TV’s ability to show an agency

relationship, at this stage WH-TV’s allegation that such a relationship exists is sufficient.


A breach of express warranty claim cannot stand where there has not been “a breach of an
affirmation of fact or promise that was made a part of the basis of the bargain.” Hasek v.
DaimlerChrysler Corp., 745 N.E.2d 627, 634 (Ill. App. Ct.), appeal denied, 755 N.E.2d 477 (Ill.
2001). In the Asset Purchase Agreement between Zenith and General Instrument, General
Instrument assumed Zenith’s warranty repair obligations “on products manufactured by the
Division and listed in Section 2.28 of the Disclosure Schedule.” That schedule lists the set-top
boxes purchased by WH-TV. It is enough that WH-TV has alleged that a warranty formed the
basis of its bargain with Zenith, and that General Instrument assumed Zenith’s warranty
obligations. Whether WH-TV’s relief in a breach of warranty claim against General Instrument
and Motorola would be limited to repair and replacement of nonconforming goods is a question
that the court need not address at this stage.

ORDERED: WH-TV’s Motion to For Leave to File First Amended Third-Party

Complaint [255-1] is granted.

DATED: FEB 12 2003



‘Minute Order Form (06/97)

United States District Court, Northern District of [linois

ame of Assigned Jud i Sitting Judge if Oth
sore Magistrate Judge George W. Lindberg than Assigned Judge
CASE NUMBER 01 C 4366 DATE 2/12/2003
CASE Zenith Electronics Corp. vs. WH-TV Broadcasting Corp.
TITLE

of the motion being presented.]

{In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION:

DOCKET ENTRY:

(1) Oo Filed motion of [ use listing in “Motion” box above.]

(2) a Brief in support of motion due

(3) im Answer brief to motion due___- Reply to answer briefdue___

(4) ao Ruling/Hearingon___setfor__at

(5) im} Status hearing[held/continued to] [set for/re-set for]on___—setfor___att

(6) a Pretrial conference[held/continued to] [set for/re-set for]on___—ssetfor_—— at.
(7) Qa Trial[set for/re-set for]on__— at

(8) o [Bench/Jury trial] [Hearing] held/continued to_____at

(9) i) This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4(m) OlLocal Rule 41.1 C1 FRCP41(a)(1) ( FRCP41(a)(2).

is granted. Enter memorandum opinion and order.

(1) [For further detail see order attached to the original minute order.]

(io) =i [Other docket entry] _WH-TV’s motion for leave to file first amended third-party complaint(255-1)

Y | Nonotices required, advised in open court,

No noti ed.
ices requires umber of notic

Document
Number

Notices mailed by judge’s staff.

Notified counsel by telephone.

Docketing to mail notices.

Mail AO 450 form,

ting deputy initials

Copy to judge/magistrate judge.

4

46

oe #4

éabhited noice
courtroom

SLB deputy’s ann
initials +
Date/time received in
central Clerk's Office rang deputy nts



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION -
a
ZENITH ELECTRONICS CORPORATION, ) >
) FEB 1 3 2003
Plaintiff, )
) 01 C 4366
v ) weet
) Judge George W. Lindberg ~>“*" |"
WH-TV BROADCASTING CORPORATION, ) 4 7003
) v fa) \
Defendant. )

MEMORANDUM OPINION AND ORDER

WH-TV Broadcasting Corporation (“WH-TV”) moves to file an amended third-party
complaint, alleging claims of equitable estoppel, promissory estoppel, and breach of express
warranty against Motorola, Inc. (“Motorola”) and General Instrument Corporation (“General
Instrument”). Motorola and General Instrument respond that WH-TV’s motion should be
denied, as amendment would be futile. For the reasons stated below, the motion to file an
amended third-party complaint is granted.

Generally, leave to amend the complaint is liberally granted. Fed. R. Civ. P. 15(a).
However, leave to amend may be denied where amendment is futile. Foman y. Davis, 371 U.S.
178, 182 (1962). Amendment is futile where the amended claim would be incapable of surviving
amotion to dismiss. Glick v. Koenig, 766 F.2d 265, 268 (7" Cir. 1985).

According to the allegations in the proposed amended complaint, Zenith Electronics
Corporation (“Zenith”) agreed to sell set-top boxes to WH-TV, a cable television operator. WH-
TV used the set-top boxes in connection with providing digital television service to its
customers. In a September 1998 proposal, Zenith promised that the boxes would function as \

proposed, and would comply with digital video broadcast (“DVB”) standards. Zenith also /\


separately promised that the boxes would contain an enhanced electronic program guide.
According to WH-TV, the set-top boxes it bought from Zenith did not live up to Zenith’s
promises. Zenith made efforts to correct some of the problems, but was unsuccessful.

On July 17, 2000, Zenith and General Instrument entered into an Asset Purchase
Agreement, under which Zenith sold to General Instrument its division that had designed,
developed, and manufactured the set-top boxes. Under the agreement, General Instrument agreed
to assume certain liabilities in connection with the operation of the business, including certain of
Zenith’s warranty repair obligations.

Motorola is General Instrument’s parent corporation. After the Asset Purchase
Agreement was executed, Motorola personnel continued Zenith’s efforts to make the WH-TV
set-top boxes DVB-compliant, provide a fully functioning electronic program guide, and correct
some of the other functional problems WH-TV experienced with the set-top boxes. However,
according to WH-TV, Motorola failed to make the set-top boxes fully DVB-compliant, provide a
fully functional electronic program guide, or fix software problems in a timely manner. In
addition, WH-TV alleges that Motorola created some new software problems.

The court first examines WH-TV’s proposed estoppel claims. The elements of equitable
estoppel under Illinois law are: (1) words or conduct amounting to a misrepresentation or
concealment of a material fact; (2) defendant’s knowledge that the representation was false; (3)
plaintiff's lack of knowledge as to the falsity of the representation; (4) defendant’s intention or
reasonable expectation that the misrepresentation would be acted upon; (5) plaintiffs
detrimental, good faith reliance on the misrepresentation; and (6) prejudice to the plaintiff if the
defendant is permitted to deny the falsity of the misrepresentation or concealment. Vaughn v.

Speaker, 533 N.E.2d 885, 890 (II. 1988). The elernents of promissory estoppel are: (1) an