Opinion ID: 788221
Heading Depth: 2
Heading Rank: 2

Heading: Summary Judgment on Sturman's Fraudulent Inducement Counterclaim

Text: 67 As one of its counterclaims at trial, Sturman alleged that Caterpillar fraudulently induced it to execute the amendment to the JDA by misrepresenting its scope. At trial, Caterpillar filed a motion for summary judgment as to all of Sturman's counterclaims, which the district court resolved in Caterpillar's favor. With respect to the fraudulent inducement claim, the district court held that the evidence produced was insufficient to create a genuine issue of material fact and thereby preclude summary judgment. In particular, the court found that Mrs. Sturman's contemporaneous notes from the negotiations of the terms of the amendment demonstrated that Caterpillar clearly communicated to Sturman that the release was to cover anything from the JDA that Caterpillar was utilizing or would utilize in the future. It further found Mr. Sturman's affidavit self-serving and insufficient to create a genuine issue of material fact. It therefore concluded that Caterpillar did not fraudulently induce Sturman into signing the JDA amendment. 5 68 We review the district court's grant of summary judgment de novo. See Davis v. Con-Way Transp. Cent. Express, Inc., 368 F.3d 776, 782 (7th Cir.2004). Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Fed. R.Civ.P. 56(c). The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). 69 On appeal, Sturman argues that the district court improperly granted summary judgment because there were genuine issues of material fact as to whether Caterpillar fraudulently induced Sturman to enter into the amendment, which contained the release. Sturman contends that Caterpillar falsely represented that it was considering only two inventions (not including the integrated spool valve technology) to be within the scope of the JDA. Given its repeated inquiries into which technology was covered by the JDA, Sturman argues, it was misled, in part, by Anthony Woloch's November 16, 1993, letter, which identified only two Sturman poppet-valve designs as arising under the JDA. Sturman avers it understood this response to be a representation that Caterpillar did not consider Mr. Sturman's integrated spool valve design to have been made or conceived pursuant to the JDA. According to Sturman, had it known Caterpillar was using the design, it would have negotiated different terms for the amendment. Furthermore, Sturman contends, the district court erred by dispositively resolving the issue on the basis of Mrs. Sturman's contemporaneous notes; at best, it argues, they provide evidence for arguments to a jury. Finally, Sturman notes, a release is not effective against a claim of fraudulent inducement of that release under Illinois law. 70 Caterpillar contends otherwise, arguing that the district court properly granted summary judgment on Sturman's counterclaims as released under the amendment to the JDA. Focusing on the necessary elements of a fraudulent inducement claim, Caterpillar asserts that Sturman did not raise a genuine issue as to whether Caterpillar made a knowingly false statement of material fact for the purpose of inducing reliance, and that Sturman actually relied to its detriment. In particular, Caterpillar focuses, as did the district court, on Mrs. Sturman's contemporaneous notes, which it contends demonstrate that Sturman knowingly and willingly released all future claims. According to Caterpillar, because Sturman reviewed and signed the unambiguous release language, it cannot contend that Caterpillar misrepresented its scope, which is a legal and not a factual question. In addition, Caterpillar avers, Anthony Woloch's letter does not amount to a false statement because it never suggested that the two inventions over which Caterpillar asserted its rights were the only inventions it believed were conceived under the JDA. 71 We hold that the district court erred by granting summary judgment in Caterpillar's favor because, in one limited respect, we think that sufficient allegations of fraudulent inducement have been made to create a genuine issue of material fact. The amendment to the JDA, which contained the release, provided, in pertinent part, that Sturman 72 release and forever discharge Caterpillar, Inc.... from any and all claims, demands, actions or causes of actions at law or equity relating to or arising out of i) ACTUATORS and/or DRIVER CIRCUITS created under the PROGRAM (including derivatives thereof) which are manufactured by CATERPILLAR, ... and/or ii) any subject matter of the [JDA]. 73 There is a genuine issue as to whether, during the negotiations of the terms of the amendment, Caterpillar knowingly and falsely created the impression that it considered only two inventions to have been developed under the JDA, and that the integrated spool valve design was not one of them. 74 First, drawing all justifiable inferences in favor of Sturman, there are genuine issues of material fact as to whether Anthony Woloch's letter to Sturman was false or misleading with respect to the contemporaneous negotiation of the JDA amendment. Anthony Woloch, in his letter to Sturman on November 16, 1993, stated that Exhibit A lists the inventions naming [Mr. Sturman] as a co-inventor and arising under the [JDA] between our companies. But Exhibit A listed only the patent applications that matured into the '131 and '219 patents and never mentioned the spool valve technology. 75 While we agree with Caterpillar that Woloch's letter did not state that Exhibit A listed the only inventions Caterpillar then believed were created under the JDA, one can justifiably infer that Sturman may have been lulled into thinking that this was then Caterpillar's belief. Likewise, Caterpillar argues that Woloch's letter left open the question of what the JDA covered by asking Sturman if it knew of any other inventions that arose thereunder. But one might also reasonably infer that Woloch's letter suggested that Caterpillar otherwise had a complete list of the technology created pursuant to the JDA, only to be supplemented by Sturman. 76 Second, Mrs. Sturman's contemporaneous notes also demonstrate the existence of genuine issues of material fact. Drawing all justifiable inferences, these notes show that Sturman understood Caterpillar's representation regarding the technology at issue to be the 2 applications w/ Eddie as co-inventor, and that Mrs. Sturman asked Would it be just these two applications as spelled out [in the] Nov. 16 letter from [Anthony Woloch]? Mrs. Sturman's notes thus reflect the confusion that arose from the language in Anthony Woloch's letter; they suggest that Sturman understood Caterpillar to lay claim to only those two inventions under the JDA mentioned in Woloch's letter. 77 In conclusion, applying the standard for summary judgment and drawing all inferences in favor of Sturman, we conclude that the district court improperly granted summary judgment in favor of Caterpillar on the issue of Sturman's counterclaim of fraudulent inducement. Specifically, material issues of fact exist regarding whether Caterpillar knowingly intended to deceive Sturman with false statements to induce Sturman's signing of the amendment. In particular, as discussed above, one could justifiably infer from both Anthony Woloch's letter of October 16, 1993, and Mrs. Sturman's contemporaneous notes from the JDA amendment negotiations that Sturman was led to believe that Caterpillar understood the JDA to cover only the two patent applications and not the integrated spool valve technology. It is on this limited basis that we reverse the district court's grant of summary judgment as to the fraudulent inducement counterclaim. Sturman's other allegations of fraudulent inducement concerning the scope of the release raise no material issues of fact, as, under Illinois law, interpretation of the language of the release is a question of law governed by the traditional rules of contract interpretation. Hoseman v. Weinschneider, 322 F.3d 468, 473 (7th Cir.2003). Contrary to arguments advanced by Caterpillar, however, the language of the release cannot be used to prevent a court from inquiring into whether the release itself may have been fraudulently induced. As with any contract, a release may be set aside if there is fraud in the inducement. Id. at 476 (internal quotations and citations omitted); see also Lawrence v. Muter Co., 171 F.2d 380, 384 (7th Cir.1948) (noting that fraudulent inducement can serve to vitiate a release even when the release language was unequivocal). We therefore reverse the grant of summary judgment on Sturman's fraudulent-inducement counterclaim in favor of Caterpillar and remand for trial. 6