of acomplaint, not the merits of the case. Triad Assocs., Inc. v. Chicago Hous. Auth., 892 F.2d 583,
586 (7" Cir. 1989); Majchrowski v. Norwest Mortgage, Inc., 6 F.Supp.2d 946, 952 (N.D. Ill. 1998).
When considering a motion to dismiss pursuant to Rule 12(b)(6), the Court considers “whether relief
is possible under [any] set of facts that could be established consistent with [the] allegations.”
Bartholet v. Reishauer A.G. (Zurich), 953 F.2d 1073, 1078 (7" Cir. 1992).

The Court views all the facts alleged in the complaint, as well as any reasonable inferences
drawn from those facts, in the light most favorable to Plaintiff. Stachon v. United Consumers Club,
Inc., 229 F.3d 673, 675 (7" Cir. 2000). Dismissal is appropriate only where it appears beyond doubt
that under no set of facts would Plaintiff's allegations entitle him to relief. Henderson v. Sheahan,
196 F.3d 839, 846 (7" Cir. 1999); Kennedy v. National Juvenile Det. Ass'n, 187 F.3d 690, 695 (7"
Cir. 1999), The Complaint, however, must allege that each element of a cause of action exists in
order to withstand a motion to dismiss. Lucien v. Preiner, 967 F.2d 1166, 1168 (7" Cir. 1992).
Furthermore, Plaintiff “cannot satisfy federal pleading requirements merely by attaching bare legal
conclusions to narrated facts which fail to outline the bases of their claims.” Collins v. Snyder, No.
02 C 4493, 2002 WL 31749173, at *1 (N.D. Ill. Dec. 2, 2002) (citations and quotations omitted).
i. Choice of Law

The contract at issue contains a provision that states, “[t]his order and contract shall be
construed and interpreted in accordance with the law of the State of Kansas.” (R. 1-1, Compl., Ex.4
11.) A federal court sitting in diversity looks to the forum state — here Illinois — to determine how
its conflict of law principles treat choice of law clauses in contracts. DeValk Lincoln Mercury, Inc.
v. Ford Motor Co., 811 F.2d 326, 330 (7" Cir. 1987). Ilinois courts honor a contractual choice of

law clause unless the applicable law is “dangerous, inconvenient, immoral, or contrary to public


must allege: (1) a deceptive act or practice by Chromas; (2) Chromas’ intent to induce Team’s
reliance; (3) that the deception occurred in a course of conduct involving trade or commerce; and (4)
that the deceptive act proximately caused Team’s injury. Cozzi Iron & Metal, Inc. v. U.S. Office
Equip., Inc., 250 F.3d 570, 576 (7" Cir. 2001).

Defendant argues that Team cannot state a claim as a matter of law because it cannot prove
reasonable reliance in light of the signed Contract. This argument fails because, as the Seventh
Circuit has plainly stated, “a complaining party is not required to establish reliance, either actual or
reasonable, to state a claim under the Illinois Consumer Fraud Act.” Cozzi Iron & Metal, 250 F.3d
at 576-77 (district court erred “when it disposed of Cozzi's consumer fraud claim on the basis that
[claimant] could not establish that its reliance was reasonable” even though claim based on oral
representations made before plaintiff entered into contract that contained different terms). Chromas’
reliance on Ryan v. Wersi Elecs. GmbH & Co., 3 F.3d 174(7" Cir. 1993), is misplaced. The Seventh
Circuit in Ryan relied upon the essential elements of common law fraud in Illinois, rather than the
elements under the Illinois Consumer Fraud Act. Id. at 182 (emphasis added). Accordingly,
Chromas’ motion to dismiss Count Three is denied.

VI. Count Four — Breach of Express Warranty

In Count Four, Team alleges that Chromas created an express warranty by “representing that
the press system sold to Team would produce pressure sensitive paper, print, and die-cut on an in-
line basis, both through the statements of its agents, Fait, Laughlin, and Presseault, and through the
written descriptions of the press systems’ performance provided to Team, prior to the sale.” (R. 1-1,
Compl. 34.) Team does not allege that Chromas breached the written warranty in the Contract.

Instead, Plaintiff alleges that Chromas breached the oral “warranty” because the press system sold



the writing is inadmissible.” Temmen v. Kent-Brown Chevrolet Co., 535 P.2d 873, 878 (Kan. 1975)
(citations and quotations omitted). In other words, “a party may not rely on evidence of prior or
contemporancous verbal statements to contradict the terms of a written agreement.” Ramada
Franchise Sys., Inc. v. Tresprop, Ltd., 188 F.R.D. 610, 613 (D. Kan. 1999).

Team correctly notes that Kansas recognizes an exception to the parol evidence rule where
the contract was procured or induced by fraudulent representations which were relied upon by the
other party.? See id. This exception, however, will only apply if the evidence tends “to establish
some independent fact or representation, some fraud in the procurement of the instrument, or some
breach of confidence concerning its use, and not a promise directly at variance with the promise of
the writing.” /d.; see also Flight Concepts Ltd. Partnership v. Boeing Co., 38 F.3d 1152, 1157 (10"
Cir. 1994) (where written contract directly contradicts oral representations, oral representations
cannot be fraudulent). Therefore, if prior or contemporaneous statements directly conflict with a
provision in the Contract, those statements will not be admissible.

Plaintiffs breach of contract claim cannot stand because the prior statements are directly in
conflict with the Contract’s integration clause. It goes without saying that in order to sustain a
breach of contract claim, Plaintiff must show that Defendant breached a contractual provision.
Instead of pointing to any language in the agreement to show Defendant’s breach, Plaintiff seeks to
bring in representations outside of the Contract and have them made part of the agreement. This is
not permitted, however, because the integration clause provides that the written contract “constitutes

the entire and exclusive agreement.” The extra-contractual statements are undoubtedly directly in

? Chromas argues that Illinois law does not recognize a fraud exception to the parol
evidence rule, but, as discussed above, Kansas law applies when construing the contract.

6


policy.” Jd. The parties have not argued that any applicable Kansas law would fall under an
exception. Accordingly, the Court will apply Kansas law.
WI. Count One — Breach of Contract
In Count One, Plaintiff alleges that Chromas breached the Contract. Chromas argues that
this count should be dismissed because Plaintiff bases its claim on representations allegedly made
outside of the written contract. Team does not argue that the oral representations or written
documents upon which they rely were incorporated by reference into the Contract. Moreover, aplain
reading of the Contract does not contain any reference to these items. Therefore, Plaintiff's breach
of contract claim cannot survive unless there is reason to look outside of the Contract.
Chromas maintains that an integration clause within the contract precludes Plaintiff's reliance
on the extra-contractual representations. The Contract states:
This order and contract expressly limits acceptance to the terms and
conditions stated herein and any additional terms proposed by Buyer

are objected to and rejected unless expressly assented to in writing by
Seller.

eK

This order and contract constitutes the entire and exclusive agreement
between the parties hereto and with respect to the equipment ordered
hereby and no supplement to, modification of, or waiver of the terms
and conditions hereof shall be valid unless made in writing and
executed by Buyer and an authorized representative of Seller at its
home office.

(R. 1-1, Compl., Ex. 4 442, 10.)
Under Kansas law, the parol evidence rule provides that “{w]hen a contract is complete,
unambiguous and free of uncertainty, parol evidence of a prior or contemporaneous agreement or

understanding, tending to vary or substitute a new and different contract for the one evidenced by


is entitled under Federal Rule of Civil Procedure 8(e)(2) to plead the alternative claims of breach of
contract and unjust enrichment despite the inconsistency between those claims, Plaintiff's unjust
enrichment claim must not include allegations of a specific contract governing the parties
relationship. See Vanguard Fin. Serv. Corp. v. R W Prof’! Leasing Servs. Corp., No. 98 C 1741,
1998 WL 774984, at *4 (N.D. Ill. Oct 27, 1998).

Plaintiff's reliance on Peddinghaus v. Peddinghaus, 692 N.E.2d 1221 (Ill. App. Ct. 1998),
is misplaced. The court in Peddinghaus allowed the beneficiary to maintain an unjust enrichment
claim because he sued to rescind the contract based fraudulent inducement. The plaintiff was
therefore seeking a finding that the contract in Peddinghous was not valid due to its fraudulent
procurement. Here, Plaintiff has alleged that the unjust enrichment is due to Defendant’s failure to
fulfill contractual terms. As such, Plaintiffs unjust enrichment claim must be dismissed without
prejudice.

Vv. Count Three — Consumer Fraud

In order to state a claim under the Illinois Consumer Fraud Act, 815 ILCS §505/2,’ a plaintiff

5 Section 505 states:

Unfair methods of competition and unfair or deceptive acts or
practices, including but not limited to the use or employment of
any deception, fraud, false pretense, false promise,
misrepresentation or the concealment, suppression or omission of
any material fact, with intent that others rely upon the concealment,
suppression or omission of such material fact, or the use or
employment of any practice described in Section 2 of the “Uniform
Deceptive Trade Practices Act”... in the conduct of any trade or
commerce are hereby declared unlawful whether any person has in
fact been misled, deceived or damaged thereby.

815 ILCS § 505/2 (2002).


on 4
Minute Order Form (06/97)

United States District Court, Northern District of Mlinois

Namoer ine jae Amy J. St. Bve eyes
CASE NUMBER 02 C 5325 DATE 2/18/2003
CASE Team Impressions vs. Chromas Tech
TITLE
[In the following box (a) indicate the party filing the motion, ¢.g., plaimiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
(4) a Filed motion of [ use listing in “Motion” box above.]
(2) Q Brief in support of motion due
(3) im Answer brief to motion due. . Reply to answer briefdue__
(4) a Ruling/Hearing on __setfor____at
(5) im} Status hearing[held/continued to] [set for/re-set for] on setfor_ at
(6) Qo Pretrial conference[held/continued to] [set for/re-set for] on setfor ss at_—s
(7) Qo Trial{set for/re-set for})on___—__at
(8) a [Bench/Jury trial] [Hearing] held/continuedto_sat_
(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
COFRCP4(m) Ol Local Rule 41.1 CIFRCP41(a)(1) OO FRCP41(a)(2).
ao =f [Other docket entry} | Enter Memorandum Opinion and Order. Defendant’s motion to dismiss is

granted in part and denied in part. It is granted with respect to counts one, two and four. The Court
dismisses counts one and four with prejudice. The Court dismisses count two without prejudice. The
Court denies Defendant’s motion to dismiss with respect to count three. Count five stands as Defendant

did not move to dismiss it. Plaintiff has until 3/20/03 to file an amended complaint.

(1) @

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

No notices required, advised in
‘open court.

No notices required

umber of
notices

Notices mailed by judge's staff. ERY O ces

Notified counsel by telephone.

v Docketing to mail notices.

Mail AO 450 form.

initials

Copy to judge/magistrate judge.

fFB 18 203.

courtroom pe yd notice
THS deputy’s Ui Us

initials

Date/time received in
L central Clerk’s Office



CONCLUSION
Defendant’s motion to dismiss is granted in part and denied in part. The Court dismisses
Counts One and Four with prejudice based on the express language of the Contract and the parol
evidence rule. The Court dismisses Count Two without prejudice because it is a claim for unjust
enrichment that is based upon a specific contract. The Court denies Defendant’s motion to dismiss
with respect to Count Three because the Illinois Consumer Fraud Act does not require a showing that
the reliance by a plaintiff is reasonable.

DATED: February 18, 2003 ENTERED:

\ Mc

AMY J. ST. EY
United States District Judge

11


to Team has allegedly never operated as Chromas represented prior to the Contract’s execution. The
arguments here are essential the same as with the breach of contract claim. And the same result
follows.

The Contract contains specific provisions with respect to warranties. It expressly states each
of Chromas’ warranties and then adds: “THIS WARRANTY IS IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.” (R. 1-1, Compl., Ex.
446.)

Kansas’ parol evidence rule will not allow the introduction of statements or representations
outside of the Contract that directly contradict the agreement itself. Ramada Franchise Sys., 188
F.R.D. at 613. Because the Contract explicitly limits the warranties to those in the Contract itself,
evidence of extra-contractual warranties would be directly in conflict with the agreement. Therefore,
as with the breach of contract claim, Team cannot introduce parol evidence to support its breach of
warranty claim. Accordingly, evidence of the alleged oral warranties made prior to the time Team
entered the Contract is inadmissible, See Ray Martin Painting, Inc. v. Ameron, Inc., 638 F.Supp. 768

(D. Kan. 1986), and Count Four fails to state a claim for breach of these alleged oral warranties.

10


conflict with the integration clause, and therefore, Plaintiff cannot maintain a breach of contract
claim.

Where courts applying Kansas law have admitted evidence under the fraudulent
misrepresentation exception to the parol evidence rule, they have done so where the plaintiff’s claim
is for fraudulent inducement rather than breach of contract. See, e.g., Ramada Franchise Sys, 188
F.R.D. at 614 (applying fraud exception to fraudulent inducement count); Miles Excavating, Inc. v.
Rutledge Backhoe & Septic Tank Servs., Inc., 927 P.2d 517 (Kan. Ct. App. 1996) (reversing
dismissal of breach of contract and fraudulent inducement claims only to the latter cause of action).
Plaintiff has not alleged fraudulent inducement here and instead relies upon a breach of contract
claim that is clearly barred by the Contract’s integration clause. Team cannot rely on parol evidence
to assert a breach of contract claim. Accordingly, the Court dismisses Count One with prejudice.
IV. Count Two — Unjust Enrichment

A claim for unjust enrichment is based upon an implied, rather than a specific, contract.
Where a specific contract governs the relationship of the parties, “the doctrine of unjust enrichment
has no application.” People ex rel. Hartigan v. E&E Hauling, Inc., 607 N.E.2d 165, 177 (Ill. 1992)
(citations and quotations omitted). Chromas argues that the Court should dismiss Count Two
because an unjust enrichment clam cannot coexist with one for breach of contract. Team argues that
Count Two is pled in the alternative to the breach of contract count, thus it is not relying on a
contractual theory in its unjust enrichment claim.

Plaintiffs argument is not persuasive. The Complaint does not comport with Plaintiffs
alternative pleading theory argument because Team specifically alleges in Count Two that Chromas

failed “to provide the contracted for press system to Team.” (R. 1-1, Compl. 35.) While Plaintiff


two months later than promised. (/d. 23.) The press system was finally installed and assembled
in October 1999. According to Team, the press system “has never operated as promised or intended”
since its installation. (/d. 26.)

Team alleges that it has made repeated efforts to resolve the problems with the press system
and has notified Chromas of the problems. (/d. {27.) In response, “Chromas has also taken steps
to make the press system operable as promised.” (d.29.) None of these steps, however, have been
successful. (/d. 932.)

Team has not paid the remaining ten percent purchase price of the press system given that
it has not performed as promised. (/d. 30.) Team alleges that “Chromas has now demanded that
Team pay the remaining 10% balance and has refused to take any further steps to bring their press
system into properly functioning order.” (/d, 430.) Team alleges that it has “suffered damages in
the form of lost manpower, lost profits, wasted materials, and machine shut-down” as a result of the
press systems’ failure to perform as promised. (/d. §28.)

ANALYSIS

Team filed a five count complaint against Chromas. Count One alleges breach of contract.
Count Two alleges unjust enrichment. Count Three is based on a violation of the Illinois Consumer
Fraud Act, 815 ILCS §505/2, Count Four alleges breach of express warranty and Count Five alleges
breach of implied warranty. Defendant seeks to dismiss Count One through Four for failure to state
a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) arguing, in essence, that the contract
it signed with Team precludes these claims.

I. Legal Standard

The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency


Team entered a contract with Chromas’ predecessor, Aquaflex Systems, Inc., to purchase
certain press system equipment. In 1998, Aquaflex was a division of Didde Web Press Corporation
(“Didde”), and in March 1999, Aquafex changed its name to Chromas Technologies, Inc.
(hereinafter, Aquaflex is referred to as Chromas). Chromas has its principal place of business in St.
Bruno, Quebec, Canada.

Team alleges that Chromas initially presented the equipment at a sales promotional event in
September 1998 where Aquaflex’s representatives made certain oral representations about the
Aquaflex LX 1858 flexographic label printing and die cutting press system. (R. 1-1, Compl. 4411,
12, 14.) Team alleges that it relied on these oral representations in ultimately purchasing a printing
press system from Chromas. (/d. 18).

In addition, prior to the time Team and Chromas executed a contract, Chromas also gave
Team some written materials regarding the printing press system. Chromas provided Team with
printed information regarding the “print coat” and “UVSIL” printing systems by FlexoCoat
International Inc. (/d., Ex. 1.) It also gave them a cost-benefit analysis “as a part of its
representations of product performance.” (Id., Ex.2.)

The parties signed a “Machine Order and Contract” (the “Contract”) for order number 2548R,
dated September 22, 1998. (/d., Ex. 4.) The Contract was for the purchase of a Aquaflex LX 1850,
8 Color Press and Options. Team signed the Contract on October 8, 1998. The total purchase price
was $970,474 under the Contract. On December 15, 1998, the parties executed an addendum to the
Contract reflecting a new purchase price of $1,012,324. (dd. §21, Ex. 6.) On February 24, 1999, the
parties executed a second addendum to the Contract with a new purchase price of $1,000,699 for the

press system. (/d. 22, Ex.7.) Chromas delivered the press system to Team on June 28, 1999, over


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

EASTERN DIVISION
TEAM IMPRESSIONS, INC. )
Plaintiff, }
v. ; No. 02 € 5325
CHROMAS TECHNOLOGIES CANADA, INC. }
and ACAS ACQUISITIONS (CHROMAS), INC., _ )
Defendants.

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, Judge:
Defendant Chromas Technologies Canada, Inc. (“Chromas”) has moved to dismiss
Counts One through Four of this case pursuant to Federal Rule of Civil Procedure 12(b)(6) for

failure to state a claim. For the reasons set forth below, Defendant’s motion is granted in part

Dockers

FEB 18 2003

and denied in part.
BACKGROUND
Team Impressions, Inc. (“Team”), an Illinois corporation that is engaged in the business of
printing and producing labels and stickers for various applications, has brought a five count
complaint against Chromas.' The focus of the Complaint is a press system that Team purchased
from Defendant’s predecessor in interest and Team’s allegations that the press system failed to

perform as promised.

' Team also sued Chromas’ parent corporation, ACAS Acquisitions (Chromas), Inc., but
the Court previously granted ACAS’ motion to dismiss for lack of personal jurisdiction. (R. 17-1,
Jan. 15, 2003 Order.)