Opinion ID: 219846
Heading Depth: 2
Heading Rank: 3

Heading: Extension of the Duncan/Paul Rulings

Text: The Borrowers contend that the district court erred in extending its Duncan/Paul summary judgment rulings. The court's opinion states that [t]he instant defendants raise the same counterclaims and defenses and the court's ruling in [ Duncan/Paul ] will not be revisited. Costello, 2008 WL 4646335, at . The Borrowers argue that such language shows that the district court did not reach the substance of their defenses but merely gave its earlier rulings preclusive effect. Although one might draw such a conclusion if the quoted language is taken out of context, we do not read this language in a vacuum. The record reveals that the district court gave the Borrowers an opportunity to present their own arguments and evidence and gave them some consideration. We understand the district court as saying that it was adopting both its prior rulings and its supportive reasoning. (Whether the grants of summary judgment were proper based on the same grounds on which it was granted against Duncan and Paul is another question addressed below.) The Borrowers challenge the grants of summary judgment on the fraud set-off defense, which they assert was based on a lack of evidence of reliance by Duncan or Paul. In the Duncan/Paul decision, the district court noted that the defendants had not attempted to show reliance on the alleged misrepresentations. But the principal ground for the court's ruling was that the alleged misrepresentations were expressions of legal opinion, which cannot support a fraud claim. (SA:178) (citing City of Aurora v. Green, 126 Ill.App.3d 684, 81 Ill.Dec. 739, 467 N.E.2d 610, 613 (1984) (As a general rule, one is not entitled to rely upon a representation of law since both parties are presumed to be equally capable of knowing and interpreting the law.)). Thus, it is not surprising that the court did not view the Borrowers' declarations, which seem to support a reasonable inference of reliance, as requiring a result different from that reached in Duncan/Paul. (The Trustee does not argue that the Borrowers' affidavits could not support a reasonable inference of justifiable reliance; he merely criticizes them as self-serving. (See Appellee's Br. 60-61.) As a result, he has waived any such argument for purposes of this appeal. [7] See, e.g., O'Neal v. City of Chicago, 588 F.3d 406, 409 (7th Cir.2009) (declining to consider argument not made on appeal)). Nonetheless, the district court's analysis falters. The Borrowers argue that they identified an exception to the general rule that legal opinions cannot support a fraud claim and the district court never considered it. See West v. W. Cas. & Sur. Co., 846 F.2d 387 (7th Cir. 1988). In West, we recognized that under Illinois law, [a] statement that, standing alone, appears to be a statement of opinion, nevertheless may be a statement of fact when considered in context. Id. at 393. We quoted an Illinois Supreme Court opinion: Wherever a party states a matter which might otherwise be only an opinion, but does not state it as the expression of the opinion of his own, but as an affirmative fact material to the transaction, so that the other party may reasonably treat it as a fact and rely upon it as such, then the statement clearly becomes an affirmation of the fact within the meaning of the rule against fraudulent misrepresentation. Id. (quoting Buttitta v. Lawrence, 346 Ill. 164, 178 N.E. 390, 393 (1931)). Thus, whether a statement is one of fact or opinion depends on the factual circumstances. Id. Factors to be considered in determining whether a plaintiff reasonably relied on an opinion as though it were a statement of fact include the access of the parties to outside information, the parties' relative sophistication, and whether the speaker has held himself out as having special knowledge. Id. at 393-94. Therefore, it is not `the form of the statement which is important or controlling, but the sense in which it is reasonably understood.' Id. at 394 (quoting Prosser and Keeton on Torts § 109, at 755 (W. Keeton 5th ed.1984)). The district court's opinion does not reflect consideration of whether the alleged misrepresentations should be treated as statements of fact under this authority. The Trustee further argues that the district court did not have to address the fraud set-off defense in order to rule in his favor because it concluded that the Borrowers failed to present evidence of scienter, which is necessary to prove a fraud set-off claim. As discussed, the court erred in granting summary judgment on the basis of a lack of proof of scienter. E.g., Sublett, 463 F.3d at 736 ([I]f the moving party does not raise an issue in support of its motion for summary judgment, the nonmoving party is not required to present evidence on that point, and the district court should not rely on that ground in its decision.). So, too, it would be error to extend the Duncan/Paul rulings on the basis of a lack of evidence of scienter, particularly where the Trustee did not even argue below that a failure of proof of scienter warranted summary judgment on the fraud setoff defense. Cf. Best, 554 F.3d at 702-03. The district court erred in granting summary judgment to the Trustee on the fraud set-off defenses. The Borrowers also challenge the district court's failure to address the merits of their negligent misrepresentation set-off defense. In the Duncan/Paul summary judgment ruling, the court held that the record did not support the claim that either Comdisco or the Bank was in the business of supplying information for the guidance of others in their business transactions (SA:182), which is necessary for that defense. The Borrowers submit that they had such evidence but the court did not consider it. The Trustee has not challenged this assertion on appeal, and our review of the materials cited by the Borrowers suggests that they may have enough evidence to raise an issue of fact on this matter. Whether they have presented enough evidence to satisfy the in the business of supplying information element and whether they ultimately can prevail on their negligent misrepresentation defense are for determination in the district court.