Opinion ID: 177377
Heading Depth: 2
Heading Rank: 5

Heading: Extension of the Court's Duncan/Paul Rulings

Text: The Borrowers contend that the district court erred in extending its December 2007 summary judgment rulings in Duncan/Paul. 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 (AA:7) and that they have raised a number of arguments, all of which have been rejected in earlier opinions and will not be addressed again. (AA:13.) 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 grant of summary judgment was proper based on the same grounds on which it was granted against Duncan and Paul is another question addressed below.) The Borrowers challenge the grant of summary judgment on the fraud set-off defense, which they assert was based on a lack of evidence of reliance (an essential element) by Duncan or Paul. See Linhart v. Bridgeview Creek Dev., Inc., 391 Ill.App.3d 630, 330 Ill.Dec. 843, 909 N.E.2d 865, 870 (2009). In the Duncan/Paul decision, the district court did note Duncan's and Paul's lack of an attempt to show reliance on the alleged misrepresentations. But the principal ground for the court's ruling was that the alleged misrepresentations were representations of legal opinion, which cannot support a claim for fraud. (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 (recognizing that appellants offered affidavits that detail their purported reliance on the Bank's alleged false and misleading statement regarding compliance with the margin regulations))). As a result, he has waived any such argument for purposes of this appeal. [10] See, e.g., O'Neal v. City of Chicago, 588 F.3d 406 (7th Cir.2009) (failure to make argument on appeal amounts to waiver). Nonetheless, the district court's analysis falters. The Borrowers argue that they identified a line of cases that recognizes an exception to the general rule that legal opinions cannot support a fraud claim, which the district court never considered. See West v. W. Cas. & Sur. Co., 846 F.2d 387, 394 (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 then 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 is an issue of fact. Id. (Whether a statement is one of fact or of opinion depends on all the facts and circumstances of a particular case.). Factors to be considered in determining this issue include the access of the parties to outside information, the parties' relative sophistication, and whether the speaker has specialized 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 considered statements of fact or opinion 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 the court concluded that the Borrowers failed to present evidence of scienter, which is necessary to prove a fraud set-off claim. As discussed, ruling on the basis of a lack of scienter was error. 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 set-off defense. Cf. Best, 554 F.3d at 702. 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 indicates that they may have enough evidence to raise an issue of fact on this matter. The questions whether they have presented enough evidence to satisfy the in the business of supplying information element and whether they can ultimately prevail on their negligent misrepresentation defense are left for the district court's determination.