Court Opinion

ID: 9477905
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:34:30.176207+00
Date Added: 2024-06-11T17:46:07.173591
License: Public Domain

FLAUM, Circuit Judge,
dissenting.
Because I disagree with the majority’s holding that additional discovery is prohibited whenever a defendant raises a statute of frauds defense and submits a sworn denial that he or she formed an oral contract with the plaintiff, I respectfully dissent. Neither would I hold, however, that a plaintiff is automatically entitled to additional discovery in the face of a defendant’s sworn denial that an agreement was reached. Rather, in my view district courts should have the authority to exercise their discretion to determine the limits of permissible discovery in these cases. This flexibility is particularly important where, as here, the defendant’s affidavit does not contain a conclusive denial of contract formation.1 While district courts have broad discretion in discovery matters, I believe the district court abused that discretion in the present case.
I.
The purpose of the statute of frauds “is to protect a party from the fraudulent and perjurious claim of another that an oral contract was made and not to prevent an oral contract admittedly made from enforcement.” URSA Farmers Coop. Co. v. Trent, 58 Ill.App.3d 930, 16 Ill.Dec. 348, 350, 374 N.E.2d 1123, 1125 (1978) (citing Cohn v. Fisher, 118 N.J.Super. 286, 287 A.2d 222 (1972)). The statute is also designed to protect innocent parties from the expense of defending against allegations that they breached a contract that is not evidenced by a writing. As the majority notes, there is no Illinois case law conclusively deciding a plaintiff’s right to obtain further discovery when a defendant denies the existence of an oral contract in a sworn affidavit. Relevant case law in other jurisdictions is split between the position that the majority adopts today and a rule permitting additional discovery (and in some cases full trials) in statute of frauds cases. Compare, e.g., Garrison v. Piatt, 113 Ga. App. 94, 147 S.E.2d 374 (1966); M & W Farm Serv. Co. v. Callison, 285 N.W.2d 271 (Iowa 1979); Franklin County Coop, v. MFC Serv., 441 So.2d 1376 (Miss.1983); and Duffee v. Judson, 251 Pa.Super. 406, 380 A.2d 843 (1977) with Triangle Mktg. Inc. v. Action Indus. Inc., 630 F.Supp. 1578 (N.D.Ill.1986); and Boylan v. G.L. Morrow Co., Inc., 63 N.Y.2d 616, 468 N.E.2d 681, 479 N.Y.S.2d 499 (1984). See also Kaufman, Corbin on Contracts § 320, at 368 (Supp. Part 1 1984) (summary judgment inappropriate until plaintiff “has been able to conduct discovery sufficient to show that no admission of the contract will be made.”).
A.
Although it is difficult to give full effect to both the statute of frauds and the admissions exception thereto, that is what we must attempt to do.2 In my view, these provisions can best be reconciled by allow*925ing district courts to exercise their discretion to determine when additional discovery is likely to be fruitful and when it is being-sought just to improperly pursue a defendant who is clearly entitled to the protection of the statute of frauds.
If a denial is a complete bar- to additional discovery, the exception to the statute of frauds for admissions made in a “pleading, testimony or otherwise in court that a contract for sale was made” would be rendered virtually meaningless. Ill.Rev.Stat. ch. 26, para. 2-201(3)(b) (emphasis added). In Illinois involuntary admissions can satisfy the admissions exception to the statute of frauds. See URSA Farmers, 58 Ill.App. 3d 930, 16 Ill.Dec. 348, 374 N.E.2d 1123. Such involuntary admissions will be almost impossible under the majority’s rule because the plaintiff will never have an opportunity to examine the defendant in order to elicit an involuntary admission. Either the defendant will make a fatal admission in his or her affidavit and the statute of frauds exception will be satisfied without resort to the testimony component, or the defendant will deny the contract in his or her pleadings3 and the case will be dismissed before a testimonial admission is possible. A blanket rule prohibiting any further discovery once the defendant denies under oath that a contract was formed is therefore too inflexible.
Similarly, I would not adopt a rule that requires district courts to allow additional discovery in every one of these cases. I would leave the decision to the discretion of the district judge. In cases where a defendant does not explicitly deny under oath that an oral contract was reached, or where there is some indication that the statute of frauds is being used to perpetrate a fraud, it would be permissible to allow the plaintiff to question the defendant under oath to ensure that he or she personally denies that the parties formed an oral contract. This does not mean, however, that summary judgment is never appropriate when the statute of frauds is raised as an affirmative defense. If a defendant who conditionally denies contract formation in his or her pleadings or affidavit specifically denies that an agreement was reached in a deposition, summary judgment might well be appropriate at that stage of the litigation. A simple denial in an affidavit, however, should not trigger foreclosure of further discovery in every case.
B.
In the present case I think the district court abused its discretion by disallowing any additional discovery once Brown filed her motion to dismiss and accompanying affidavit. The majority argues that it would be futile for DF Activities Corporation (“DF”) to take Brown’s deposition. Brown is unlikely to admit any facts from which a reasonable trier of fact could conclude that an oral contract was formed because, in the face of her affidavit, such admissions would leave her exposed to perjury charges. In my view, this overstates the content of Brown’s affidavit. While Brown denied that any oral or written agreement was reached in both her answer and motion to dismiss, such a blanket denial is curiously missing from her affidavit. Rather, in her affidavit Brown stated only that she did not accept any offer from Domino’s Farms or Sarah Briggs for the sale of the Willits chair and that she does not recall having a conversation with Sarah Briggs on November 26, 1988. Deposing Brown therefore would not necessarily be a futile effort. It is possible that under questioning during a deposition Brown would remember the November 26 conversation during which Briggs claims she and Brown reached an agreement for the sale of the chair. Although any convenient pri- or memory lapse might be viewed with suspicion if a deposition elicited additional information, it is highly unlikely that it would lead to perjury charges. On the facts of this case, I believe the district court abused its discretion when it refused to allow DF to take Brown’s deposition.
*926II.
I share the majority's concern that one of the purposes of the statute of frauds is to protect litigants from the cost of defending breach of contract claims based on alleged agreements that are not supported by written documentation. The statute of frauds, however, contains a specific exception for cases in which a party admits in a pleading, testimony, or otherwise in court that an oral contract was reached, and that provision must be given some effect. The testimonial admissions provision would be virtually meaningless if a district court could never exercise its discretion to permit additional discovery in the face of a defendant’s sworn denial in an affidavit.
Because in my view the district court abused its discretion when it prohibited further discovery, I would remand this case to the district court with instructions to permit discovery to continue at least to the point where DF is given an opportunity to depose Brown. If Brown then denies under oath during her deposition that any oral contract was made, summary judgment might well be appropriate at that time.

. When a defendant denies in his or her answer that an oral contract was formed, but does not attach an affidavit, a more compelling case exists for allowing the district court to determine when discovery should end.

. In relevant part, § 2-201 of the Illinois Commercial Code provides that:
(1) Except as otherwise provided in this Section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his [or her] authorized agent or broker....
(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable
(b) if the party against whom enforcement is sought admits in his [or her] pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted....
Ill.Rev.Stat. ch. 26, para. 2-201 (emphasis added).

. The statute of frauds is an affirmative defense. Shugan v. Colonial View Manor, 107 Ill.App.3d 458, 63 Ill.Dec. 82, 87, 437 N.E.2d 731, 736 (1982). Under Federal Rule of Civil Procedure 12(b) and § 2-613 of the Illinois Code of Civil Procedure, Ill.Rev.Stat. ch. 110, para. 2-613, it must be raised in the defendant’s answer to the complaint.