In the

United States Court of Appeals

For the Seventh Circuit

____________

Nos. 06-4389, 07-1794, 07-2484

EXTRA EQUIPAMENTOS E EXPORTAÇÃO LTDA.,

Plaintiff-Appellant,

v.

CASE CORPORATION,

Defendant-Appellee.

____________

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 01 C 8591—Blanche M. Manning, Judge.

____________

ARGUED APRIL 1, 2008—DECIDED SEPTEMBER 3, 2008

____________

Before POSNER, RIPPLE, and ROVNER, Circuit Judges.

POSNER, Circuit Judge. Extra, a Brazilian distributor,

sued Case, a large U.S. manufacturer of farm and construction equipment, in the federal district court in Chicago,

charging fraud. Jurisdiction was based on 28 U.S.C.

§ 1332(a)(2), because the suit was between a citizen of a

state (Case) and citizens of a foreign country (Extra and its

boss—the latter no longer a party). The law governing the

substantive issues in the case is agreed to be that of Illinois.
2 Nos. 06-4389, 07-1794, 07-2484

The district judge dismissed the suit on the ground that

Case Brasil & Cia—Case’s wholly owned Brazilian subsidiary—was an indispensable party to the suit. Fed. R.

Civ. P. 19(b). Extra appealed and we reversed, 361 F.3d 359

(7th Cir. 2004), and the case went back to the district court

for discovery. Eventually Case moved for summary

judgment, which was granted, and Extra appeals. It also

appeals from the district court’s order awarding costs to

Case as the prevailing party.

In 1992 Case Brasil had hired Extra to distribute Case

products in Brazil. In 1999 Extra sued Case Brasil in a

Brazilian court, claiming that corrupt employees of the

subsidiary had caused it to overcharge Extra. Later that

year, a “Release of Claims and Settlement of Certain

Obligations” (we’ll call it the “release”) was negotiated

and signed in Illinois by Persio Briante, Extra’s president,

on behalf of Extra, and by James Sharman on behalf of Case

Brasil. Sharman was a vice president of Case Corporation,

not of Case Brasil; no one employed by the latter was

present at the negotiation or signed the release.

The release ended the Brazilian litigation and provided

among other things (most not pertinent to this case) that

Case Brasil would seek no more than $2 million in past-due

payments that it claimed Extra owed it under the 1992

distributorship contract. In exchange, Extra, besides

agreeing to drop its suit against Case Brasil and also

drop an objection it had lodged with Brazilian authorities

to a merger that Case wanted to make, agreed to give

Case information about the corrupt conduct of Case

Brasil’s employees that would enable Case to have them
Nos. 06-4389, 07-1794, 07-2484 3

removed (thus avoiding possible trouble with the Brazilian

government) without the parent or the subsidiary incurring liability to the terminated employees.

The present suit, which Extra filed in 2001, charges that

at the negotiation of the release Case’s representative,

Sharman, had promised that if Extra agreed to the

release, Case Brasil would retain Extra as a Case Brasil

distributor in good standing; that the promise was fraudulent because Case had no intention of fulfilling it; and that

after the release was signed, Case Brasil, claiming not to

be bound by the release because it hadn’t authorized its

parent to make it—indeed, contending that it had had no

wind of the negotiations or of the signing of the release—terminated Extra’s distributorship and refuses to

recognize the $2 million limit in the release on its money

claims. Thus, Extra charges, Case had “manipulated the

corporate distinction between itself and Case Brasil” by

falsely representing that the Case official who signed the

release was authorized to sign on behalf of Case Brasil.

Extra contends that as a result of the manipulation,

Case obtained the benefits of the release without

honoring either the obligations that the release placed on

it or Sharman’s oral promise to retain Extra as a Case

Brasil distributor. Instead Case Brasil quickly terminated

Extra as a distributor, precipitating a second Brazilian

suit by Extra, in which Extra claimed that the termination violated the 1992 contract. The Brazilian courts

agreed that there had been a breach of contract; but

specific performance was refused and the Brazilian litigation is now in the damages-determination phase.
4 Nos. 06-4389, 07-1794, 07-2484

The district court’s principal ground for dismissing the

present suit is a provision in the release captioned “No

Reliance On The Other Party.” It states that “Both parties

represent and warrant that in making this Release they

are relying on their own judgment, belief and knowledge

and the counsel of their attorneys of choice. The parties

are not relying on representations or statements made

by the other party or any person representing them

except for the representations and warranties expressed in

this Release.” A claim of fraud requires proof that the

victim of the fraud relied on the representations that he

contends are fraudulent. E.g., HPI Health Care Services, Inc.

v. Mt. Vernon Hospital, Inc., 545 N.E.2d 672, 681 (Ill. 1989);

Vigortone AG Products, Inc. v. PM AG Products, Inc., 316 F.3d

641, 644-45 (7th Cir. 2002) (Illinois law). Otherwise he

cannot have been hurt by the fraud. If reliance on the

allegedly fraudulent statements that Sharman made to

Briante in the negotiation of the release is negated by

the no-reliance clause, Extra’s fraud claim evaporates, as

the district court ruled.

Drafters of contracts worry lest in the event of a dispute

one of the parties ask the court to depart from the terms

of the written contract on the ground that it is not the

parties’ entire agreement—there are additional terms to

which they had agreed during the negotiations leading

up to the making of the contract. If such a claim enabled

the party making it to obtain a jury trial on the meaning

of the contract, the contractual process would be riven

by uncertainty. The law’s response to this problem is the

parol evidence rule, which, so far as bears on this case,

forbids the introduction of evidence (whether oral or
Nos. 06-4389, 07-1794, 07-2484 5

written) of what was said in the process of negotiating

a contract to vary the terms of the contract that resulted

from the negotiation, provided the contract seems clear

and complete. A.W. Wendell & Sons, Inc. v. Qazi, 626 N.E.2d

280, 287 (Ill. App. 1993); Maas v. Board of Trustees of Community College District No. 529, 418 N.E.2d 1029, 1042-44

(Ill. App. 1981); Utica Mutual Ins. Co. v. Vigo Coal Co., 393

F.3d 707, 713-14 (7th Cir. 2004). The rule implements the

parties’ intention to “simplify the administration of the

resulting contract and to facilitate the resolution of

possible disputes by excluding from the scope of their

agreement those matters that were raised and dropped or

even agreed upon and superseded during the negotiations.” 2 E. Allan Farnsworth, Farnsworth on Contracts,

§ 7.2, p. 224 (3d ed. 2004).

To make assurance doubly sure, parties to a written

contract commonly include in it an “integration” clause;

for if they do not, the party resisting the invocation of

the parol evidence rule can ask the judge to consider

extrinsic evidence bearing on the question whether the

parties really did intend the written contract to be the

complete and final articulation of their agreement. Utica

Mutual Ins. Co. v. Vigo Coal Co., supra, 393 F.3d at 714. The

parties did include an integration clause in the release.

It states: “This Release constitutes the entire agreement

between the parties, and this Release supersedes all prior

negotiations and agreements between the parties relating

to the subject of this Release.” So evidence of what was

said in the negotiations that led up to the signing of the

release would not be admissible—in a suit for breach

of contract.
6 Nos. 06-4389, 07-1794, 07-2484

That is a critical qualification. The parol evidence rule

is a rule of contract law, and a contract integration

clause is a privately negotiated supplement to the rule,

and most courts, including, we have assumed (though the

matter is not free from doubt), Illinois, hold that neither

the rule nor the clause prevents a disappointed party to

the contract from basing a tort suit on proof that in the

course of the negotiations the other party made fraudulent

representations. Vigortone AG Products, Inc. v. PM AG

Products, Inc., supra, 316 F.3d at 643-44; General Casualty

Co. v. Carroll Tiling Service, Inc., 796 N.E.2d 702, 708-09

(Ill. App. 2003); Pinken v. Frank, 704 F.2d 1019, 1022-23 (8th

Cir. 1983); 2 Farnsworth, supra, § 7.4, pp. 245, 247.

Granted, a suit for fraud is not a perfect substitute for a

suit for breach of contract. There are additional pleading

requirements, see, e.g., Fed. R. Civ. P. 9(b), and in Illinois

fraud must be proved by clear and convincing evidence,

and not just by a preponderance of the evidence, Hofmann

v. Hofmann, 446 N.E.2d 499, 506 (Ill. 1983); Williams v.

Chicago Osteopathic Health Systems, 654 N.E.2d 613, 619 (Ill.

App. 1995); Association Benefit Services, Inc. v. Caremark RX,

Inc., 493 F.3d 841, 852-53 (7th Cir. 2007) (Illinois law),

which is all that is required to prove a breach of contract. Also, the statute of limitations is shorter in a tort

suit than in a suit for breach of a written contract—five

years rather than ten. 735 ILCS 5/13-205, -206; LeBlang

Motors, Ltd. v. Subaru of America, Inc., 148 F.3d 680, 690-

91 (7th Cir. 1998) (Illinois law). On the other hand, punitive

damages can be awarded in a suit for an intentional tort,

such as fraud, but not (with rare exceptions, Morrow v. L.A.

Goldschmidt Associates, Inc., 492 N.E.2d 181, 183-86 (Ill.
Nos. 06-4389, 07-1794, 07-2484 7

1986); Zapata Hermanos Sucesores, S.A. v. Hearthside Baking

Co., 313 F.3d 385, 389-91 (7th Cir. 2002) (Illinois law)) in

a suit for breach of contract.

The tradeoffs are complex. But as this case, in which

the claim of fraud is based on statements made in a

negotiation that resulted in a contract, illustrates, a suit

for fraud can be a device for trying to get around the

limitations that the parol evidence rule and contract

integration clauses place on efforts to vary a written

contract on the basis of oral statements made in the

negotiation phase. The release nowhere promises to

retain Extra as a distributor of Case products; the fraud

suit is based on an alleged oral promise to that effect—made en route to the signing of a contract (the

release) that did not contain any such promise.

No-reliance clauses serve a legitimate purpose in closing

a loophole in contract law (thus resisting, in Judge

Kozinski’s colorful expression, the metastasizing of

contract law into tort law, Oki America, Inc. v. Microtech

Int’l, Inc., 872 F.2d 312, 315 (9th Cir. 1989)). They are, we

have held, enforceable in Illinois, Vigortone AG Products,

Inc. v. PM AG Products, Inc., supra, 316 F.3d at 644-45, as

elsewhere. Sundown, Inc. v. Pearson Real Estate Co., 8 P.3d

324, 331-32 (Wyo. 2000); Haygood v. Burl Pounders Realty,

Inc., 571 So. 2d 1086, 1088-89 (Ala. 1990); Rissman v.

Rissman, 213 F.3d 381, 383-85 (7th Cir. 2000); Manufacturers

Hanover Trust Co. v. Yanakas, 7 F.3d 310, 315-18 (2d Cir.

1993); First Financial Federal Savings & Loan Ass’n v. E.F.

Hutton Mortgage Corp., 834 F.2d 685, 687-88 (8th Cir. 1987);

Landale Enterprises, Inc. v. Berry, 676 F.2d 506, 507-08 (11th
8 Nos. 06-4389, 07-1794, 07-2484

Cir. 1982) (per curiam). But that is in general rather than

in every case. The purpose of such a clause is to head off

a suit for fraud, but the clause doesn’t say that; it uses

the anodyne term “reliance” and a lay person might not

realize how much he was giving up by agreeing to the

inclusion of the clause in his contract.

In the trade, no-reliance clauses are called “big boy”

clauses (as in “we’re big boys and can look after ourselves”). But if someone who is not a big boy—indeed is

not even represented by counsel—signs a big-boy clause,

there can be a problem, and this has led some courts to

require, before such a clause can be enforced, an inquiry

into the circumstances of its negotiation, to make sure

that the signatory knew what he was doing. See Brown

v. Earthboard Sports USA, Inc., 481 F.3d 901, 920-21 (6th

Cir. 2007); AES Corp. v. Dow Chemical Co., 325 F.3d 174, 180-

81 (3d Cir. 2003); see also Rissman v. Rissman, supra, 213

F.3d at 387-89 (concurring opinion). (The D.C. Circuit

appears to be on both sides of the question. Compare OneO-One Enterprises, Inc. v. Caruso, 848 F.2d 1283, 1286-

87 (D.C. Cir. 1988), with Whelan v. Abell, 48 F.3d 1247, 1258

(D.C. Cir. 1995).)

Whether Illinois would permit or require such an

inquiry we do not know, but will assume an affirmative

answer. It would not follow that the enforceability of

such a clause could never be decided, as Extra seems to

believe, without a trial. When no reasonable jury could

find that the signatory did not understand the meaning

of the no-reliance clause that he signed, the issue of

enforceability can be resolved on summary judgment. FMC
Nos. 06-4389, 07-1794, 07-2484 9

Technologies, Inc. v. Edwards, 2007 WL 1725098, at *2-6 (W.D.

Wash. June 12, 2007); see Cozzi Iron & Metal, Inc. v. U.S.

Office Equipment, Inc., 250 F.3d 570, 574 (7th Cir. 2001)

(Illinois law); MBIA Ins. Corp. v. Royal Indemnity Co., 426

F.3d 204, 214-19 (3d Cir. 2005). And that is the case here.

Briante is the president of a very large company, and

he was represented at the negotiation of the release by

Brazilian and New York lawyers, all experienced in

commercial transactions. Extra is a big boy and acted

through counsel. It does not argue that its lawyers were

unfamiliar with no-reliance clauses or failed to explain

all the terms of the release to Briante, or that Case’s

representatives misrepresented the meaning of the noreliance clause—that is not among the frauds alleged.

It argues instead that the representations that underlie its

fraud claim were not “made by the other party”—that is,

by Case Brasil—“or any person representing” it, as required by the no-reliance clause. Case Brasil was the

other party, and Sharman, who signed for Case Brasil, is

not employed by that company, but by Case Corporation.

But we do not understand the relevance of who employed Sharman. Extra admits that Sharman represented

at the negotiation that he was authorized to sign for Case

Brasil, and it does not argue that this was a false representation. And Case admits that Sharman had at least apparent authority to bind Case Brasil. That must be right. He

was the only signatory on Case Brasil’s behalf, signing

directly below the legend CASE BRASIL & CIA in the

signing space of the release. If he had neither actual nor

apparent authority to bind Case Brasil, the contract was not

agreed to by one of its two parties and is therefore unen-
10 Nos. 06-4389, 07-1794, 07-2484

forceable. But Extra does not argue that it is unenforceable.

It would like to have the benefit of that $2 million ceiling

on money owed Case Brasil. If Extra sued to enforce the

release, and Case Brasil defended on the ground that

Sharman had lacked the authority to make a contract on

Case Brasil’s behalf, Extra would be indignant and the

defense would be laughed out of court.

Extra is driven to argue that while Sharman was authorized to sign the release on behalf of Case Brasil, the

representations that Extra is complaining about are representations that he made on behalf of Case rather than

Case Brasil and therefore he was not speaking as a representative of the latter. This bit of wordplay does violence

to the language of the no-reliance clause, which refers to

representations by a party’s representative—and Sharman

was representing Case Brasil, a party (the only party,

besides Extra). It is also unrealistic. Extra itself argues

that in promising to retain Extra as a distributor,

Sharman was trying to get Extra to sign the release so

that Case Brasil could obtain at no cost evidence of corruption that would enable it to fire its misbehaving employees and thus avoid getting into trouble with the

Brazilian government without incurring liability to

them. If Sharman was lying, as Extra contends, he was

lying on behalf of both his employer and the employer’s

wholly owned subsidiary—in which he had a special

interest because he was in charge of Case’s Latin American subsidiaries, which included Case Brasil.

So the no-release clause is valid and applicable. And if

it weren’t, that would not save the day for Extra. For its
Nos. 06-4389, 07-1794, 07-2484 11

suit is a suit for fraud, and the significance of the noreliance clause, which does not depend on its enforceability

in contract law, is that its language and the circumstances

of its negotiation render Extra’s reliance on Sharman’s

supposed oral misrepresentations unreasonable as a

matter of law. The principle behind a no-reliance clause

is, as this court explained in Rissman v. Rissman, supra, 213

F.3d at 384, “functionally the same as a doctrine long

accepted in this circuit: that a person who has received

written disclosure of the truth may not claim to rely on

contrary oral falsehoods.” Thus, whether a person reasonably appears to have authority to sign a contract on

behalf of a party is a different question from whether

a reasonable person would rely on such a person’s representations. Had Sharman disclaimed authority to act on

behalf of Case Brasil, how could Extra reasonably have

relied on his oral representations about what Case

Brasil would do? If Santa Claus had showed up at the

bargaining table in place of Sharman, his absence of

apparent authority to bind Case Brasil would not render

Extra’s reliance on his oral promises reasonable.

Notice too that the no-reliance clause refers to the

“party’s representative”—a term broader than apparent

authority. A person may “represent” another without

giving the impression that he has the authority to bind

the person he represents—lawyers represent companies

in mergers without having apparent authority to consummate the transaction.

Case’s written disclosure in the no-reliance clause, in

short, made Extra’s reliance on oral representations
12 Nos. 06-4389, 07-1794, 07-2484

unreasonable no matter what Case’s (or Sharman’s)

authority, actual or apparent, was vis-à-vis Case Brasil. If

Case had authority, actual or apparent, then Extra was

bound by the no-reliance clause; if Case didn’t even

have apparent authority, Extra was unreasonable in

relying on its oral representations. 

There is more that is wrong with Extra’s suit. Extra’s

theory is that Sharman made oral misrepresentations in

the negotiation in order to induce Extra to agree to the

release. That sounds like a fraud designed to induce the

victim to sign a contract; and the remedy for fraud in

the inducement is to rescind the contract. Tower Investors,

LLC v. 111 East Chestnut Consultants, Inc., 864 N.E.2d 927,

939 (Ill. App. 2007); Kochert v. Adagen Medical Int’l, Inc., 491

F.3d 674, 678-79 (7th Cir. 2007). But Extra is emphatic

that it is not charging fraud in the inducement and has no

desire to rescind the release. The fraud it charges is an

oral promise—to retain it as a distributor for Case

Brasil—that Case did not intend to honor. But what

damages could it have incurred as a result of the fraud? It

is not contending that it would be better off had it not been

induced to sign the release. It complains about being

terminated as a distributor. But that is the subject of its

Brazilian suit for breach of the distributorship contract.

It does not argue that the termination was more costly to

it because of Sharman’s promise not to terminate it.

So the suit was properly dismissed, and we move to the

issue of costs. The district court awarded Case, as the

winning party, some $116,000 in court costs. Rule 54(d) of

the civil rules provided (when the costs were awarded
Nos. 06-4389, 07-1794, 07-2484 13

in this case—the rule now reads “costs—other than attorney’s fees—should be allowed to the prevailing party,” but

the committee note explains that the change is only

“stylistic”) that the costs specified in 28 U.S.C. § 1920 “shall

be allowed as of course to the prevailing party unless

the court otherwise directs.” Extra argues that the district

court should have “otherwise direct[ed],” awarding no

costs, to punish Case for not presenting its defense

based on the no-reliance clause until almost five years

after Extra filed this suit. The argument is frivolous. The

process for awarding court costs is intended to be summary. Extra wants to turn it into an inquest on the

winning party’s litigation strategy. Should Case have

filed a motion to dismiss based on the no-reliance clause?

Should it have filed its motion for summary judgment

earlier? Did it need discovery in order to establish the

enforceability and applicability of the no-release clause?

Was it a foot-dragging defendant? These are not issues

that a district court should have to resolve in order to

decide whether a tiny fraction of the expenses of a protracted litigation, now almost seven years old, should

be shifted from the losing to the winning party.

Extra also complains about two of the cost items—courtreporter attendance fees of some $8,700 and translation

fees of almost $76,000—that the judge awarded. The first

complaint has no merit. The statute authorizes the

award as costs of “fees of the court reporter for all or any

part of the stenographic transcript necessarily obtained

for use in the case.” 28 U.S.C. § 1920(2). Some reporters

charge a separate fee for attending the trial or hearing that

they make a stenographic transcript of; others roll that
14 Nos. 06-4389, 07-1794, 07-2484

fee into the fee for the transcript itself. Since the reporter

cannot make the transcript without attending the hearing,

the separate attendance fee is properly regarded as a

component of the fee for the transcript. Held v. Held, 137

F.3d 998, 1002 (7th Cir. 1998); Finchum v. Ford Motor

Co., 57 F.3d 526, 534 (7th Cir. 1995); Arrambide v. Wal-Mart

Stores, Inc., 33 Fed. Appx. 199, 203 (6th Cir. 2002) (per

curiam).

There is greater merit to Extra’s complaint about the

award of translation fees. The statute refers to “compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses and costs of special

interpretation services under [28 U.S.C. § 1828].” 28 U.S.C.

§ 1920(6) (emphasis added). (Section 1828 creates a program for the provision of interpretation services in

federal criminal and habeas corpus proceedings.) The

specificity of section 1920(6), and the character of section

1920 as a whole, makes us reluctant to interpret “interpreters” loosely to include translators of written documents,

in this case the exhibits presented by Case at depositions

and in support of its motion for summary judgment, and

also the exhibits on its list of proposed trial exhibits. An

interpreter as normally understood is a person who

translates living speech from one language to another.

He is a type of translator, see, e.g., Yu Cong Eng v. Trinidad,

271 U.S. 500, 508-09 (1926); Gjerazi v. Gonzales, 435 F.3d

800, 807 (7th Cir. 2006); Ememe v. Ashcroft, 358 F.3d 446,

448 (7th Cir. 2004), but the translator of a document is not

referred to as an interpreter. Robert Fagles made famous

translations into English of the Iliad, the Odyssey, and the

Aeneid, but no one would refer to him as an Englishlanguage “interpreter” of these works.
Nos. 06-4389, 07-1794, 07-2484 15

We are mindful that the Sixth Circuit in BDT Products,

Inc. v. Lexmark Int’l, Inc., 405 F.3d 415, 419 (6th Cir. 2005),

held that the statute allows the award of costs for translating documents. (Other decisions have allowed such

awards, but BDT is the only reported appellate decision

that we have found in which the meaning of the statute

was placed in question.) The only reason the court

gave was that “the definition of interpret expressly includes to ‘translate into intelligible or familiar language.’

Webster’s Third New International Dictionary 1182 (1981).”

But the statutory term is “interpreters,” not “interpret.”

The same dictionary defines “interpreter” (so far as

might relate to the statute) as “one that translates; esp: a

person who translates orally for persons who are conversing in different tongues.” Id. The qualification in “especially” leaves open the possibility that an interpretation

can sometimes be of a document. And indeed it can be: a

judge interprets statutes, and might sometimes (though

rarely) be referred to as a statutory interpreter. But he is

not a translator. If a judge translated the French Code of

Criminal Procedure into English, we would not say that

he had “interpreted” the French code into English.

There are plenty of loose interpretations; so we do not

wish to deny the possibility of stretching section 1920 as

far as urged by Case. But it would be a stretch, and

there should be a good reason for disfiguring statutory

language before wielding the knife, and there is not here.

We cannot find a “spirit” in section 1920 that might

guide an interpretation unmoored from the statutory

language. The items allowable as costs are a hodgepodge. There is no purposive explanation for why some

items are in and others out. To include translation fees
16 Nos. 06-4389, 07-1794, 07-2484

would simply complicate the process of awarding court

costs—the concern that underlies our rejection of Extra’s

attempt to avoid having to pay costs on the basis of

Case’s alleged “unreasonable delay” in interposing its

determinative defense to Extra’s suit. For while there is

a natural limit to the expense of interpreters—the amount

of time that witnesses (including deponents) undergo

live examination—there is no natural limit on the

number of documents that can be translated in aid of a

claim or defense. A suit of the magnitude of Extra’s suit

(remember, it’s almost seven years old) can generate

millions of pages of documents. A large fraction of the

documents in this case are in Portuguese, not to mention

the countless pages of Brazilian statutes and cases that

might be relevant to the litigation. It is ominous that 65

percent of the costs awarded in this case were for translation, and of that amount only 11 percent was for interpretation. Was all that translation of written documents necessary? We do not think a district judge should be required

to wade into such issues without a clearer directive from

Congress. (Because this ruling creates a conflict with

another circuit, we have circulated the opinion, in advance

of issuance, to the entire court under 7th Cir. R. 40(e).

No judge voted to hear the case en banc; Judge Flaum did

not participate in the consideration of the matter.)

To summarize, the judgment for the defendant on the

merits is affirmed. The award of costs is affirmed in part

and reversed in part, and the matter of costs is remanded

to the district court for redetermination. 

AFFIRMED IN PART, REVERSED IN PART,

AND REMANDED.
Nos. 06-4389, 07-1794, 07-2484 17

The scheme operated as follows: Extra and other distributors 1

had open accounts with Case Brasil that reflected the amounts

owed by one entity to the other. As part of the scheme, Case

(continued...)

RIPPLE, Circuit Judge, concurring in part and dissenting

in part. The district court granted summary judgment

in favor of Case with respect to both Extra’s fraud and

promissory fraud claims. The panel majority affirms the

district court with respect to both counts. I join the panel

majority’s determination that the district court properly

dismissed Extra’s fraud claim. With respect to Extra’s

promissory fraud count, however, I would reverse the

judgment of the district court and remand the case for trial.

I

A.

In this diversity action, Extra Equipamentos E

Exportação, Ltda. (“Extra”) asserts claims of fraud and

promissory fraud against Case Corporation (“Case”). Case

is a manufacturer of farm and construction equipment;

Case Brasil is a wholly owned subsidiary of Case organized

under the laws of Brazil. From 1992 until 2001, Extra

operated as a distributor of Case equipment under a

distribution agreement with Case Brasil (the “1992 distribution agreement”).

In 1999, Case began having serious concerns about the

allegedly illegal or improper conduct of executives at Case

Brasil. From 1997 until 1999, Mario Hirose allegedly had

been operating a “charge-back” scheme to inflate both 1
18 Nos. 06-4389, 07-1794, 07-2484

(...continued) 1

Brasil would approve farm equipment loans for customers

whom they knew could not pay off the loans. Whenever a

customer defaulted on such a loan, Case Brasil’s management

would transfer these loans from Case Brasil’s books to the

open accounts kept with distributors like Extra. This resulted

in losses to the distributor as well as a windfall to Case

Brasil’s management because it enabled management to

inflate improperly their bonuses based on false sales figures.

Case Brasil’s profits and the bonuses of Case Brasil’s

management; Hirose also allegedly was extorting from

Persio Briante, Extra’s owner and president, R$50,000

per month as a condition for continuing the 1992 distribution agreement. Although Case became aware of, and

was investigating, the alleged corruption at Case Brasil, it

was unable to garner sufficient evidence to terminate

Hirose and his corrupt colleagues. In 1999, based on

Hirose’s corrupt conduct, Extra sued Case Brasil in Brazilian court.

At the same time that it was investigating Case Brasil

executives, Case also was seeking to have a proposed

merger approved by CADE, a Brazilian agency with the

regulatory authority to approve business mergers. Extra

had filed objections to the merger. Case was aware of these

objections; indeed, at one time, Case executives met with

Briante and his counsel regarding these objections.

Briante’s lawyer informed Brian Cahill, a senior in-house

counsel at Case, that Briante was most concerned about

alleged improper charge-backs to Extra’s open account

and that the CADE objections were filed to get Case’s

attention.
Nos. 06-4389, 07-1794, 07-2484 19

Cahill met with Briante in October 1999. On behalf of

Case, Cahill had three issues to discuss: (1) additional

information needed to fire Hirose and his associates;

(2) objections to the pending merger; and (3) the chargeback issue. The parties could not resolve these issues;

later, however, Briante’s lawyer called Cahill to indicate

Briante’s interest in another meeting and also to express

concern for Briante’s safety if he should meet with Case

people again in Brazil. It was therefore agreed that Briante

would fly to the United States and would meet with Case

management in an airplane hangar at an airport in

Waukegan, Illinois.

The parties met in Waukegan. Extra was represented

by Briante, who had with him Extra’s Brazilian and

American attorneys as well as Extra’s financial advisor.

Case was represented by James Sharman, Cahill and

William Dietrick, a Case outside attorney. Sharman

introduced himself as a Case Vice-President and head of

Case’s Latin American operations. It is undisputed that

Sharman is not an officer of Case Brasil. Cahill testified

in a deposition that he did not inform Extra’s representatives that Sharman was not an officer of Case Brasil.

After a full day of negotiations, the parties reached an

agreement (the “Release”). The Release recites that it is

between Extra and Case Brasil; James Sharman signed

the Release on behalf of Case Brasil. Throughout this

litigation, moreover, Case has maintained that the “actual

party” to the Release was Case Brasil. R.173 at 1-2.

The Release contains a no-reliance clause:

No Reliance On The Other Party: Both parties represent and warrant that in making this Release they
20 Nos. 06-4389, 07-1794, 07-2484

are relying on their own judgment, belief and knowledge and the counsel of their attorneys of choice. The

parties are not relying on representations or statements made by the other party or any person representing them except for the representations and warranties expressed in this Release.

R.157, Ex. 9 at 5-6. Under the terms of the Release, Case

was assured of Briante’s full cooperation and support in

rectifying Case’s problems with its Brazilian operations.

Case Brasil, for its part, assured that it would provide to

Extra a “standard” Case “Commercial Representative

Agreement and Technical Services Agreement.” Id., Ex. 9

at 1. With respect to the charge-back issue, Case Brasil

agreed to cap at R$2 million the total amount of monies

that Extra owed to Case Brasil. In exchange, Extra

dropped the suit that it had instituted in 1999 in Brazilian

courts. Additionally, Extra released all claims that it

might have had against Case Brasil, including any claims

regarding the charge-back scheme, Hirose’s alleged

extortion and objections to Case Brasil’s then-pending

merger.

Extra, in compliance with the terms of the Release,

provided Case with information about the operations of

Case Brasil, namely that Hirose was extorting money or

other favors from Case dealers, which allowed Case to

terminate Hirose’s employment. Indeed, Sharman and

Cahill flew to Brazil the following day to fire Hirose; other

Case officials fired Hirose’s staff.

At this point in the litigation, the record does not permit

a definitive determination as to the extent to which Case
Nos. 06-4389, 07-1794, 07-2484 21

Brasil failed to comply with the Release or whether Case

Brasil repudiated the contract. According to Extra, Case

Brasil has ignored, almost completely, its obligations under

the Release by failing to tender proper Commercial Representative and Technical Services agreements to Extra. Case

Brasil officers called the Release “stupid” and said that

it “made no sense at all.” In 2001, moreover, Case Brasil

attempted to force Extra into signing a novation that

would have released Case Brasil from its obligations

under the Release. In that document, Case Brasil asked

Extra to recognize a debt of R$10,365,000, despite the

R$2 million cap set in the Release. After Extra refused to

sign the novation, Case Brasil terminated Extra’s line of

credit and refused to sell to Extra any spare parts of Case

equipment. Case Brasil informed Extra that Extra’s

credit would be restored if Extra signed the novation.

According to Extra, Case Brasil executives repeatedly

demanded that Extra desist from attempting to enforce

the terms of the Waukegan agreement and threatened

Extra’s position as a distributor of Case equipment if

Extra did not comply with Case Brasil’s demands.

Case, in contrast, contends that Case Brasil has performed fully and that termination of the 1992 distribution

agreement was permissible under the terms of the distribution agreement itself and occurred only after negotiations to extend the agreement (through Case’s tendering

of the Commercial Representative and Technical Services

agreements to Extra) had failed. In any event, Case contends, after Case Brasil’s perceived breach of the 1992

distribution agreement, Extra sued Case Brasil in Brazil for

wrongful termination; Brazil’s highest court held that
22 Nos. 06-4389, 07-1794, 07-2484

See Fed. R. Civ. P. 19. See generally Republic of Philippines 2

v. Pimentel, 128 S. Ct. 2180, 2184-85, 2188 (2008) (discussing

changes to the 2007 amendments to Rule 19).

Case Brasil could terminate, although it might owe Extra

some damages. This issue still is being litigated in

Brazilian courts.

B.

Extra asserts claims of fraud and promissory fraud

against Case. In our previous disposition in this case, we

reversed the judgment of the district court, which had

dismissed Extra’s suit on the ground that Case Brasil was

an indispensable party to the suit, and remanded the 2

case for further proceedings. See Extra Equipamentos E

Exportação v. Case Corp., 361 F.3d 359 (7th Cir. 2004) [hereinafter Extra I]. In reversing the judgment of the district

court, we noted repeatedly that Extra’s suit was based on

Case’s alleged fraud in negotiating the Release. See id. at

360-61, 362-63. Specifically, we noted that Extra was

contending that Case had manipulated its corporate

form to dupe Extra into signing the Release while concomitantly preserving Case Brasil’s ability to repudiate the

Release. Id. On remand, the district court denied Case’s

motion to dismiss. After the parties had conducted discovery, Case filed a motion for summary judgment.

The district court granted summary judgment on all

claims based on the Release’s no-reliance clause and on this

court’s decision in Rissman v. Rissman, 213 F.3d 381, 383-84
Nos. 06-4389, 07-1794, 07-2484 23

In Rissman v. Rissman, 213 F.3d 381, 383-84 (7th Cir. 2000), we 3

held that “a written anti-reliance clause precludes any claim

of deceit by prior representations.” See also id. at 388-89 (Rovner,

J., concurring) (noting that this is not a per se rule and that

courts should continue to apply a totality of the circumstances

approach).

(7th Cir. 2000). In this case, the district court explained 3

that Rissman applied only with “limited value” because a

no-reliance clause “is typically a shield one party uses to

deflect the opposing party’s claims of fraud.” R.174 at 8.

Although the district court recognized that Case is not a

party to the Release, which was between Case Brasil and

Extra, it believed that “the non-reliance clause [nevertheless] bears on the critical issue” whether “Extra’s reliance

on Case’s oral representations [was] reasonable[.]” Id. The

court ruled that Extra’s reliance on Case’s representations

was not reasonable, as a matter of law. In support of this

determination, the district court explained that, when

Extra met with Case to negotiate the Release, Extra was

“under the impression” that Sharman was representing

Case Brasil because both Sharman and Cahill had said so.

As a result, Sharman was “any person representing” the

parties, under the terms of the no-reliance clause. Under

Illinois law, both fraud and promissory fraud require

proof of reliance. Consequently, the district court dismissed both the fraud and the promissory fraud claim.

As relevant here, Case also had moved, in the alternative, for summary judgment with respect to Extra’s promis-
24 Nos. 06-4389, 07-1794, 07-2484

Under Illinois law, a plaintiff may prove promissory fraud by 4

establishing all of the elements of fraud and, additionally, by

establishing that the false statement concerns future conduct

rather than an existing or preexisting material fact and that the

false statement of future conduct is part of a pattern or scheme

to defraud. Steinberg v. Chi. Med. Sch., 371 N.E.2d 634, 640-41 (Ill.

1977). The elements of fraud are: (1) the defendant made a false

statement of material fact; (2) the defendant knew or believed

that the statements were false, or the statements were made

with a reckless disregard of whether they were true or false;

(3) the statements were made with the intent to induce action;

(4) the plaintiff reasonably believed the statements and justifiably acted in reliance on those statements; and (5) the plaintiff

suffered damages as a result. Kapelanski v. Johnson, 390 F.3d

525, 530 (7th Cir. 2004) (Illinois law).

sory fraud claim on the ground that Extra had no evi- 4

dence of a scheme to defraud. The district court rejected

this alternative basis for granting summary judgment. It

concluded that “Extra has offered evidence to support

its allegations of a scheme to defraud.” Id. at 12. Specifically, the district court noted that

according to Extra’s owner, Persio Briante, as soon as

Case got the information it wanted from Extra, it

reneged on its various agreements. Specifically, Case

failed to stop Case Brasil from terminating the distribution agreement with Extra. Briante also contends

that Case allowed Case Brasil to pressure Extra into

forfeiting either the $2 million cap on Case Brasil’s

liability or risk Case Brasil terminating the distribution

agreement (which Case Brasil eventually did). Evi-
Nos. 06-4389, 07-1794, 07-2484 25

dence of a series of broken promises, even if the

promises are all related, is sufficient to prove a scheme

to defraud.

Id. at 12-13.

Finally, the district court also declined to grant summary judgment with respect to the promissory fraud

claim on the alternative ground that Extra could not

establish proximate causation between Case’s alleged

misrepresentation and Extra’s damages. Id. at 13-14.

II

A.

Extra contends that Case Brasil’s promises as set forth

in the Release (that Case Brasil would provide a commercial representative agreement to renew the 1992

distribution agreement and that it would cap Extra’s

liability for the charge-backs at R$2 million) were, as we

explained in our previous opinion, the “bait dangled before

Extra to persuade it” to provide evidence of Hirose’s fraud

and extortion, dismissing its then-pending Brazilian suit,

releasing any future claims that it might bring against Case

Brasil, and dropping its objections to Case Brasil’s proposed merger. Extra I, 361 F.3d at 363. Indeed, as we

explained in our prior opinion, Extra’s theory of the case

is that “Case . . . manipulated the corporate distinction

between itself and Case Brasil by falsely representing that

the Case official who signed the agreement [Sharman] was

authorized to sign on behalf of Case Brasil.” Id. at 360

(emphasis supplied) (internal quotation marks omitted).
26 Nos. 06-4389, 07-1794, 07-2484

The panel majority’s application of the no-reliance clause

simply ignores Extra’s promissory fraud theory. Under

Illinois law, as a general matter, “misrepresentations of

intention to perform future conduct, even if made

without a present intention to perform, do not generally

constitute fraud.” HPI Health Care Servs. v. Mount Vernon

Hosp., Inc., 545 N.E.2d 672, 682 (Ill. 1989). Illinois courts,

however, have “recognized an exception to this rule,”

under which “such promises are actionable if ‘the false

promise or representation of future conduct is alleged to

be the scheme employed to accomplish the fraud.’ ” Id.

(quoting Steinberg v. Chi. Med. Sch., 371 N.E.2d 634, 641 (Ill.

1977)); see also Desnick v. Am. Broadcasting Cos., Inc., 44

F.3d 1345, 1354 (7th Cir. 1995) (“Unlike most states nowadays, Illinois does not provide a remedy for fraudulent

promises (’promissory fraud’)—unless they are part of a

‘scheme’ to defraud.” (emphasis added)). Accordingly, a

promissory fraud action, under Illinois law, requires that

a plaintiff prove that (1) the defendant made a false and

material statement concerning future conduct; (2) as part

of a scheme to defraud; (3) knowing that the statements

were false, or the statements were made with a reckless

disregard of whether they were true or false; (4) the

statements were made with the intent to induce action;

(5) the plaintiff reasonably believed the statements and

justifiably acted in reliance on those statements; (6) the

plaintiff suffered damages as a result. Kapelanski v. Johnson,

390 F.3d 525, 530 (7th Cir. 2004) (Illinois law); Steinberg,

371 N.E.2d at 641.

Based on the no-reliance clause, the district court granted

summary judgment to Case with respect to both Extra’s
Nos. 06-4389, 07-1794, 07-2484 27

fraud and promissory fraud claims. The no-reliance clause,

the district court determined, would prevent Extra, as a

matter of law, from proving reliance, which is an

element of both fraud and promissory fraud.

The district court erred, however, in dismissing Extra’s

promissory fraud claim on the basis of the no-reliance

clause. Many of the fraudulent statements upon which

Extra has predicated this suit are repeated and reenforced

in the Release itself, and, by its own terms, the no-reliance

clause does not apply to “representations and warranties

expressed in” the Release. R.157, Ex. 9 at 5-6. For example,

the Release specifically contains the following terms:

Before October 1999, Case Brasil promises to provide to

Extra standard Case Commercial Representative and

Technical Services agreements; Case Brasil promises that

any charge-backs made by Case Brasil against Extra’s open

account would be reversed; and Case Brasil promises that

it will cap Extra’s liabilities at R$2 million. R.157, Ex. 9.

Because Extra’s promissory fraud claim is predicated

upon the “representations and warranties expressed in”

the Release itself, the no-reliance clause, by its plain

language, cannot prevent Extra from establishing reliance as a matter of law on that claim. R.157, Ex. 9 at 5-6.

In addition to adhering to the plain language of the noreliance clause, this result is consistent with the policy

justifications for strictly enforcing such clauses. By memorializing conclusively the terms governing a transaction,

no-reliance clauses mitigate the risks of skullduggery and

faulty memory. Rissman, 213 F.3d at 384. It allows the

parties to “ensure[] that both the transaction and any
28 Nos. 06-4389, 07-1794, 07-2484

subsequent litigation proceed on the basis of the parties’

writings.” Id. As the court in Rissman recognized, where

a party has incorporated allegedly fraudulent terms

into the agreement, these concerns are not implicated.

Rissman, 213 F.3d at 383 (noting that the plaintiff who

was suing for fraud did not contend that any misrepresentation in the agreement itself was untrue or misleading).

In sum, the panel majority’s application of the noreliance clause does not take into account Extra’s promissory fraud claim. Extra claims that Case, as part of a

scheme to defraud, has manipulated its corporate

form—that is, the distinction between it and its subsidiary,

Case Brasil—to dupe Extra into signing the Release and

divulging information that Case needed while concomitantly scheming to ensure that Extra would not obtain

the benefits of the Release. Having obtained from Extra

the requisite information to fire Hirose and his corrupt

associates as well as a blanket release of all claims, Case

failed to ensure that Case Brasil follow the terms of the

Release. The no-reliance clause cannot prevent Extra

from proving reliance, as a matter of law, with respect to

its promissory fraud claim.

The panel majority’s opinion further obscures the

importance of the foregoing analysis by faulting Extra

for maintaining that it is seeking damages rather than

rescission. Supra at 12. Extra’s complaint and the

Release itself, however, elucidate why Extra did not seek

rescission as a remedy. As Illinois law recognizes, rescission of the Release cannot not place Extra in the status quo

ante because the consideration that it tendered to Case
Nos. 06-4389, 07-1794, 07-2484 29

cannot be recovered. See, e.g., Klucznik v. Nikitopoulos, 503

N.E.2d 1147, 1150 (Ill. App. Ct. 1987) (“[A] court will not

grant rescission of a contract in any event where the

status quo ante of the parties cannot be restored.”); see

also Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress Int’l,

Ltd., 1 F.3d 639, 641 (7th Cir. 1993) (“A successful

rescission action annuls the contract and returns the

parties to the status quo ante.”). As consideration for

Case’s (allegedly unfulfilled) promises set forth in the

Release, Extra released all claims against Case Brasil,

including the suit that it had instituted in 1999 regarding

Case Brasil’s charge-back scheme; the Release might also

encompass any claims that Extra may have had for

Hirose’s extortion of Extra and Mr. Briante. Rescission

would mean little to Extra if the Brazilian statute of

limitations has expired or an equivalent to our laches

doctrine prevents Extra from suing on these claims.

Similarly, only damages can recompense Extra for the

lost opportunity that it allegedly suffered when it agreed

to divulge to Case information regarding Hirose and

Case Brasil’s corruption and to drop its objections to

Case’s then-pending merger. Rescission, in short, is

“simply not feasible” in this case. Jones v. InfoCure Corp.,

310 F.3d 529, 535 (7th Cir. 2002) (internal quotation marks

and citation omitted).

B.

As discussed above, Illinois law requires that Extra, to

win its promissory fraud claim, establish that Case engaged in a scheme to defraud. In discussing Illinois law, we
30 Nos. 06-4389, 07-1794, 07-2484

have noted that “the distinction between a mere promissory fraud and a scheme of promissory fraud is elusive,

and has caused, to say the least, considerable uncertainty,

as even the Illinois cases acknowledge.” Desnick, 44 F.3d

at 1354. Despite this uncertainty, we continued, “it is not

our proper role as a federal court in a diversity suit to read

‘scheme’ out of Illinois law; we must give it some meaning.” Id. We concluded: “Our best interpretation is that

promissory fraud is actionable only if it either is particularly egregious or, what may amount to the same thing,

it is embedded in a larger pattern of deceptions or enticements that reasonably induces reliance and against

which the law ought to provide a remedy.” Id.

The district court rejected Case’s claim that it was

entitled to summary judgment based on Extra’s failure

to proffer evidence with respect to this element of the

promissory fraud claim. The district court believed that

Extra has alleged sufficient evidence to create a genuine

issue of material fact as to whether Case engaged in a

scheme to defraud. According to Extra, Case reneged on

various provisions of the Release as soon as it received

the information that it sought from Extra. Moreover,

Case allowed Case Brasil to ignore, almost completely,

its obligations under the Release by failing to tender

proper Commercial Representative and Technical

Services agreements to Extra. Case Brasil officers called

the Release “stupid” and said that it “made no sense at

all.” In 2001, Case Brasil attempted to force Extra into

signing a novation that would have excused Case Brasil

from its obligations under the Release. In that document,

Case Brasil asked Extra to recognize a debt of

R$10,365,000, despite the R$2 million cap set in the Release.
Nos. 06-4389, 07-1794, 07-2484 31

After Extra refused to sign the novation, Case Brasil

terminated Extra’s line of credit and refused to sell to

Extra any spare parts of Case equipment. Case Brasil

informed Extra that Extra’s credit would be restored if

Extra signed the novation. According to Extra, Case

Brasil executives repeatedly demanded that Extra desist

from attempting to enforce the terms of the Waukegan

agreement and threatened Extra’s position as a distributor of Case equipment if Extra did not comply with

Case Brasil’s demands.

Whether Extra has adduced sufficient evidence that

Case engaged in a scheme to defraud is a close issue. Given

that this action is before us on summary judgment and

given that, contrary to Case’s suggestions, the parties are

disputing vigorously whether Case was complicit in

Case Brasil’s (alleged) failure to comply with the

Waukegan agreement, Extra should be allowed to proceed

with its promissory fraud claim. Extra has adduced

sufficient evidence to allow a jury to conclude that Case

engaged in a scheme with Case Brasil to dupe Extra into

signing the Release and divulging the information that

Case needed while concomitantly scheming to ensure

that Extra would not obtain the benefits of the Release.

Conclusion

For the foregoing reasons, I would reverse the judgment of the district court with respect to Extra’s promissory fraud claim and remand for a jury trial on that issue.

9-3-08