Lovejoy Electronics, Inc. v. O'BERTO

616 F. Supp. 1464, 1985 WL 2471, 1985 U.S. Dist. LEXIS 16259
CourtDistrict Court, N.D. Illinois
DecidedSeptember 4, 1985
Docket84 C 1543
StatusPublished
Cited by13 cases

This text of 616 F. Supp. 1464 (Lovejoy Electronics, Inc. v. O'BERTO) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lovejoy Electronics, Inc. v. O'BERTO, 616 F. Supp. 1464, 1985 WL 2471, 1985 U.S. Dist. LEXIS 16259 (N.D. Ill. 1985).

Opinion

MEMORANDUM OPINION

WILL, District Judge.

This case arises from a contractual dispute involving the development and sale of a computer chip known as the “HOHM 8081.” In the amended complaint, plaintiff-counterdefendant Lovejoy Electronics, .Inc. (“Lovejoy”) alleges breach of contract, breach of fiduciary duty, and negligence on the part of defendant-counterplaintiff Gerald N. O’Berto (“O’Berto”). Lovejoy also alleges breach of contract on the part of defendant International Microcircuits, Inc. O’Berto has countered with charges against Lovejoy of breach of contract and fraud.

Before us is Lovejoy’s motion for summary judgment on O’Berto’s amended counterclaim. For the reasons stated herein, we grant the motion in part and deny it in part. Pursuant to Fed.R.Civ.Pro. 56(d), an order will be entered specifying uncontroverted issues to be “deemed established” for purposes of any further proceedings in this case.

Japanese Exclusivity Clause

On March 16, 1980, Lovejoy and O’Berto executed a written contract (“Consulting Agreement”) under the terms of which O’Berto was to supply, at O’Berto’s direct cost of procurement, all Lovejoy’s requirements of the HOHM 8081 chip. Consulting Agreement, 1110. In exchánge for these sales and O’Berto’s consulting services, Lovejoy agreed to make certain royalty payments to O’Berto. Id. at U 12(a)-(d). The Consulting Agreement expressly provided that it was to be interpreted in accordance with Illinois law. Id. at U 19.

The first question for our consideration is whether O’Berto is precluded, as a matter of law, from recovering for Lovejoy’s alleged violation of the Consulting Agreement’s “Japanese exclusivity clause.” Consulting Agreement, 1118. Under the terms of that clause, O’Berto was to have the exclusive right to market the HOHM 8081 in Japan. Lovejoy appears to concede that, two and one-half months after the Consulting Agreement was executed, Love-joy granted J.H. Fenner & Co. (“Fenner”) a non-exclusive right to sell products embodying the HOHM 8081 in Japan. Despite the apparent conflict between this arrangement (“Fenner Agreement”) and the Japanese exclusivity clause of the Consulting Agreement, Lovejoy contends that an action for breach of contract may not be maintained against it because O’Berto cannot prove damages. According to Lovejoy, damages are an essential element of a *1467 breach of contract claim under Illinois law. Lovejoy notes that O’Berto stated in his deposition that he knew of no sales activity by Fenner in Japan and that he himself had taken no affirmative steps to promote new business there. Lovejoy contends that this testimony establishes, as a matter of law, that O’Berto cannot prove damages, and that he therefore cannot recover for breach of contract under Illinois law.

It is not necessary for us to discuss the elements of a contract claim under Illinois law because, even assuming that Lovejoy is correct on the law, its approach to summary judgment is wide of the mark. The fact that O’Berto, in his deposition, could point to no specific instances of competition from Fenner does not establish that no such competition in fact took place. At trial, O’Berto may yet be able to prove that Fenner made sales in Japan or that Fenner or Lovejoy interfered in some other fashion with O’Berto’s business there. In the absence of any sworn proof inconsistent with his pleadings, O’Berto is not obliged, on an adverse motion for summary judgment, to produce specific evidence in support of his claim for relief. Adickes v. S.H. Kress & Co., 398 U.S. 144, 156-60, 90 S.Ct. 1598, 1607-10, 26 L.Ed.2d 142 (1970). As his claim is well-pleaded, the burden rests upon the movant, Lovejoy, to refute the pleading allegations with sworn proof. Herman v. National Broadcasting Co., 744 F.2d 604, 607 (7th Cir.1984), cert. denied, — U.S. —, 105 S.Ct. 1393, 84 L.Ed.2d 782 (1985). Because Lovejoy has produced no evidence tending to preclude the possibility that its noncompliance with the Japanese exclusivity clause damaged O’Berto, summary judgment cannot be granted in its favor.

Fenner Royalties Provision

Lovejoy next challenges O’Berto’s claims respecting the “Fenner royalties provision” of the Consulting Agreement. In his counterclaim, O’Berto asserts that, during the negotiations leading up to the Consulting Agreement, Lovejoy promised that it would include in the Fenner Agreement a provision whereby Fenner would agree to pay O’Berto a royalty of $20,000 per year for three years. O’Berto contends that Love-joy’s failure to provide for these royalty payments constitutes breach of contract and fraud. In support of these allegations, O’Berto offers five items of proof: (1) a preliminary draft of the Fenner Agreement containing the Fenner royalties provision; (2) sworn testimony that he was shown this draft and that he relied on it in entering the Consulting Agreement; (3) a first draft of the Consulting Agreement in which reference was made to O’Berto’s third party rights under the Fenner Agreement; (4) O’Berto’s deposition testimony that Pat Hennessy, a Lovejoy officer, told him that the Fenner royalties provision would be included in the Consulting Agreement; and (5) O’Berto’s testimony that, when he asked Hennessy why the provision was not included in the final draft of the Consulting Agreement, Hennessy told him: “Don’t worry about it, we will include it in the Lovejoy-Fenner contract [Fenner Agreement] as terms of a ... minimum royalty for the first three years.” O’Berto Deposition of January 24, 1985 at 23.

Lovejoy asserts that each of these items of proof is barred by the parol evidence rule. Specifically, it urges the Court to take note of paragraph 19 of the Consulting Agreement, which provides that “[t]his Agreement represents the parties’ entire understanding with respect to the subject matter hereof and supersedes all prior contracts, agreements, understandings and communications with respect to such subject matter.” In Lovejoy’s view, the Consulting Agreement is an integrated writing that may not be supplemented by extrinsic evidence.

We disagree. While Illinois courts follow the general rule that a writing complete on its face may not be varied or contradicted by evidence outside the writ *1468 ing, it is well settled that fraud in the inducement may be proved by extrinsic evidence. Shanahan v. Schindler, 63 Ill.App.3d 82, 94-95, 20 Ill.Dec. 239, 248-49, 379 N.E.2d 1307, 1316-17 (1978); American Buyers Club v. Honecker, 46 Ill.App.3d 252, 254, 5 Ill.Dec. 666, 667-68, 361 N.E.2d 1370, 1371-72 (1977). Fraud “goes to the very heart of the agreement itself,” Olin Corp. v. Aspinwall, 384 F.Supp. 773 (N.D.Ill.1974), vitiating the mutual assent necessary to the creation of a valid contract.

The fact that the contract purports on its face to be a valid integration does not alter this result. Caliber Partners, Ltd. v. Affeld,

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Cite This Page — Counsel Stack

Bluebook (online)
616 F. Supp. 1464, 1985 WL 2471, 1985 U.S. Dist. LEXIS 16259, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lovejoy-electronics-inc-v-oberto-ilnd-1985.