Project Posner

Lead opinion by RICHARD A. POSNER

   Judge Richard A. Posner

   MEMORANDUM AND ORDER

   POSNER, Circuit Judge (sitting by designation). Both the Plaintiff and Defendant have made motions in limine. For the reasons set out on the following pages. I make the following rulings.

   SUMMARY

   1. Plaintiff's motion to exclude the testimony of a representative of Hale and Dorr is DENIED.

   2. Plaintiff's motion to exclude questioning Stephen Bruckner as to matters beyond his personal knowledge is GRANTED.

   3. Defendant's motion to exclude evidence pertaining to representations made by CCI not embodied in the 1982 contract is DENIED.

   4. Defendant's [notion to exclude evidence pertaining to representations made by CCI not embodied in the 1984 contract is DENIED.

   5. Defendant's motion to exclude evidence relating to damages for loss of capital or loss of business, including exhibits 112 and 113, is DENIED.

   6. Defendant's motion to exclude plaintiff's Exhibit No. 114 is DENIED.

   7. Plaintiff is ORDERED to produce copies of its exhibits 6-10 and of the documents identified in its responses to interrogatories as A8, B3, B4, B5, and B6 in order to substantiate its claim that the exhibits are identical to the 2 documents identified in its responses to interrogatories.

   8. The court GRANTS partial summary judgment, sua sponte, to defendant regarding claims against it under the Illinois Consumer Fraud Act.

   DISCUSSION

   1. Plaintiff's motion to exclude the testimony of a representative of Hale and Dorr is denied. Robert Wommack is the information director at Hale and Dorr, a Boston law firm. The firm uses (or has used) the Power 5/20 and the OfficePower and UDAP software--the same hardware and software at issue here. CCI wants him to testify that the systems were successfully networked at Hale and Dorr, which would go to the feasibility of success with CCI's product, a central issue in the case. It is thus relevant and admissible under the Fed.R.Evid. 402. If Midland believes there are relevant differences between the installations at Hale and Dorr and at Midland, it may seek to demonstrate this at trial.

   CCI never designated or produced to Midland documentation on the software and hardware configuration Hale and Dorr, or on whether Hale and Dorr received the same new release level and programming "patches" that Midland received. Midland raises this as an objection to admitting the 3 evidence, but it does not explicitly ask for discovery in the alternative. Midland had listed a representative of Hale and Dorr in its list of witnesses in the final pretrial order, apparently hoping that Hale and Dorr would testify against the defendant. Midland has thus had an opportunity to depose Mr. Wommack already. Midland can still request an opportunity to depose Mr. Wommack before trial, but to date no such request has been received by this court. Moore v Boating Industry Associations, 754 F2d 698, 714 (7th Cir), vacated for other reasons, 474 US 895 (1985).

   2. Plaintiff's motion to limit the scope of the questioning of Stephen Bruckner to matters within his personal knowledge is granted. The Court understands Mr. Bruckner's personal knowledge to include knowledge of the OfficePower software design, since he is an employee of CCI and designed the application software in question, OfficePower, though not UDAP. He has, however, no personal knowledge of the Midland installation.

   Pursuant to Rule 701, Midland seeks to limit the scope of Bruckner's testimony to subjects within his personal knowledge and thus to bar him 4 from testifying to opinions about technical matters. Midland points out that (1) defendant did not designate Bruckner as an expert and he was therefore not deposed as one, (2) after plaintiff's expert was disclosed and deposed, plaintiff asked defendant to identify any experts it would call, and defendant responded that it was not using experts in this case, and (3) this summer, defendant again confirmed that Bruckner was not being called as an expert, but said that it would ask him certain technical opinions.

   Although Rule 702 would have allowed someone of Bruckner's knowledge and experience to be qualified as an expert, defendant never designated him as such. Fed.R.Civ.P. 26(e) requires a party to supplement discovery requests pertaining to the identification of expert witnesses; this was never done. Thus CCI must limit Mr. Bruckner's examination to subjects within his personal knowledge, precluding opinion testimony. However, as a lay witness. Bruckner may testify to anything within his personal knowledge, which may include capabilities that he knows his software to have, or functions that as the programmer he knows that his software was designed to do.

   As to the argument that 5 Midland will be opening the door by reading parts of Bruckner's deposition into the record, CCI may at the appropriate lime ask to admit other parts of the deposition for the purpose of clarification if it believes that Midland has edited the deposition misleadingly.

   3. CCI requests an order "restraining plaintiff, and its attorneys, from interrogating witnesses or making statements or arguments, before the jury" regarding any purported representations . . . made to CCI not embodied in the 1982 contract . . . CCI puts forward three arguments in favor of this order. Only one of them is sound, and it alone is not sufficient.

   As a preliminary matter, it is necessary to decide what law applies to the fraud claims, both for the 1982 and the 1984 contracts. Federal courts in diversity cases apply the choice of law principles used by the state in which they sit. Klaxon Co v Stentor Electric Mfg Co, 313 US 487 (1941). Illinois has adopted the Second Restatement's "most significant contacts" test. Ingersoll v Klein, 46 Ill2d 42, 262 NE2d 593 (1970). According to the Second Restatement, for fraud the most significant 6 contacts are "the state where the plaintiff 's action in reliance took place" and "the state where the false representations were made." Restatement (Second) of Choice of Law § 148. Although the facts are somewhat unclear, Illinois would seem to he the place where these two events took place. See Case File, volume III #91, May 12, 1992 Order, p.7. So Illinois substantive law governs the fraud claims.

   CCI argues, however, that New York law should apply, because the 1982 contract says "This Agreement . . . shall be governed and construed by the laws of the state of New York." Similarly, the 1984 contract Says "This Agreement shall be governed in all respects by the laws of the State of New York. . . ." Even if the normal principle that contractual stipulations are irrelevant to fraud claims were disregarded, the clauses are not broad enough to create agreement that New York law would govern any fraud claims.

   CCI's argument that Midland waived its fraud claims on the 1982 contract by entering into the 1984 contract is wrong. The case law finds waiver only when there was knowledge of the prior fraud. Ainsworth Corp v Cenco, Inc, 107 Ill App 3d 435, 437 NE2d 817, 821 (1982); 7 Deutsch v Health Ins Plan, 573 F Supp 1433, 1441 (SD NY 1983). Although Midland admits that it knew that the representations were false by 1984, it never asserts that it knew in 1984 that CC! knew they were false at the formation of the 1982 contract. Thus, since Midland does not assert that it had knowledge of the fraud at the time it entered into the 1984 contract, CCI's waiver argument fails, unless it can prove that Midland indeed knew about its fraud.

   The 1982 agreement contains the following clause, "No representations . . . have been made which ire not expressly embodied herein." CCI argues that this clause negates any claim that Midland was induced to enter into the 1982 contract by any other representations. CCI's argument is based entirely on New York law. Danann Realty Corp v Harris, 5 NY2d 317, 184 NYS2d 599, 157 NE2d 597 (1959); Citibank, NA v Plapinger, 66 NY2d 90, 495 NYS2d 309, 485 NE2d 974, 976 (1985). The New York rule, however, is the minority rule. E. Allan Farnsworth, Contracts § 7.4 at 484 n.26 (2nd ed 1990); 8 John D. Calamari, Joseph M. Perillo, The Law of Contracts, § 9-21 at 371-72 (3rd ed 1987). Illinois is with the majority. Mother Earth, Ltd v Strawberry Camel, Ltd, 72 Ill App 3d 37, 390 NE2d 393, 406 (1979) ("The terms of any written agreement are irrelevant to a cause of action grounded . . . in tort. . . . We see no . . . significance in plaintiff's having signed a contract disclaiming any additional representations, where they have produced evidence that such representations were in fact made to them."). In addition, even under New York law, CCI's argument would fail, because the merger clause was general and vague." Danann, 157 NE2d at 598. Although the merger clause cannot be used to negate the fraud claim or exclude extrinsic evidence, it can serve as evidence that Midland did not rely on the representations and thus that the representations were not material. Calamari, Contracts § 9-21 at 372.

   CCI's one clearly meritorious argument relates to the Illinois Consumer Fraud Act. Midland's claims under the Act fail because it does not allege "public injury" as required 9 by the statute before the 1990 Amendments. Although one district court judge has given the 1990 Amendments retroactive effect, Lewis v Hermann, 775 F Supp 1137, 1153 (ND Ill 1991), the Seventh Circuit has rejected that position. A. Kush & Associates v American States Ins, 927 F2d 929, 939 (7th Cir 1991). Although CCI is correct that Midland has no claim under the Act, this fact does not prevent Midland from presenting evidence relevant to its common law fraud theory.

   4. CCI's puts forth two arguments in favor of excluding evidence of "representations . . not embodied in the 1984 contract." First it argues that New York law does not allow a cause of action for fraud when "the only fraud charged relates to a breach of contract." Trusthouse Forte (Garden City) Management, Inc v Garden City Hotel, Inc, 106 AD2d 271, 483 NYS2d 216, 218 (1984); Paper Corp v Schoeller Technical Papers, 759 FSupp 1039, 1044 (SD NY 1991). Illinois has a similar doctrine, but its scope is much narrower. It bars fraud claims only when the sole breach relates to a promise 10 to do something in the future. Where the defendant "misrepresented an existing or past fact," a fraud claim arises. Sorkin v Blackman, Kallick & Co, 184 Ill App 3d 873, 540 NE2d 999, 1004 (1989). Midland's complaint alleges misrepresentations of existing facts relating to the capabilities of CCI's computers, not merely failure to perform promises. And even with respect to "misrepresentations of intention to perform future conduct," Illinois recognizes an exception where the misrepresentation is "the scheme employed to accomplish the fraud." HPI Health Care Services v Mt Vernon Hospital, Inc, 131 Ill2d 145, 545 NE2d 672, 682 (1989). That exception is so broad that it probably swallows the rule. Lovejoy Electronics, Inc v O'Berto, 873 F2d 1001, 1004 (7th Cir 1989).

   Midland's second argument relates to the Illinois Consumer Fraud Act and is identical to the argument discussed above with respect to the 1982 contract. Although the argument succeeds, it does not justify the exclusion of all evidence of representations relating to the 1984 agreement. Midland can still 11 introduce evidence relevant to its common law fraud theory.

   5. CCI would like to exclude evidence of "any claim for loss of capital or loss of business earnings." including exhibits 112 and 113. CCI argues that this evidence should be excluded because exhibits 112 and 113 were shown to CCI only in July of 1992, less than a week before the trial was originally scheduled. Exhibit 112 is "Group-Midland Management's Statements 1978-1987," and exhibit 113 is "plaintiff's Itemization of Damages (and supporting documentation)." Midland claims that it provided an "itemization of damages" in the 1988 Final Pretrial Order, and that it could not produce exhibits 112 and 113 before July 1992 because "the actual documents . . . were only compiled this summer." Although it is regrettable that Midland did not produce these documents earlier. CCI has now had almost three months to examine the documents. Because the prejudice to CCI of admittance is therefore small, while the harm to Midland of exclusion would be high, the documents will not be excluded. Exclusion of evidence is a very tough sanction. Even the cases cited by CCI apply such a harsh sanction only where there was surprise at trial. 12 Fortino v Quasar Co, 950 F2d 389, 396 (7th Cir 1991); Holiday Inns, Inc v Robertshaw Controls Co, 560 F2d 856, 858 (7th Cir 1977) (notice of new theory four days before trial). Here, CCI will have had over three months to prepare its defense. If CCI needs additional discovery to respond to these documents, CCI may ask the court for permission for additional discovery. Moore v Boating Industry Associations, 754 F2d 698, 714 (7th Cir 1985), vacated for other reasons, 474 US 895 (1985).

   6. Defendant's objection to plaintiff's exhibit no. 114 is overruled. CCI objects to this exhibit because it consists of documents bundled together. CCI describes the documents as "121 pages of handwritten notes and typewritten material purportedly from a number of plaintiff's agents." CCI claims to have objections to every single page of the document, but it lists only general objections as examples in its brief--authentication problems, relevance, personal knowledge of the witness. It does not match any objection to any specific page of the exhibit. CCI thus has failed to identify 13 deficiencies with sufficient specificity to make a reasoned examination of its objection. Its motion is therefore denied.

   7. As part of its motion to exclude evidence of representation relating to the 1982 contract, CCI would like to exclude "certain brochures identified as plaintiff's exhibits 6-10," because "plaintiff admits that it did not rely on these brochures or any purported misrepresentations . . . they contain." Midland argues that its responses to interrogatories explicitly state that it did rely on these brochures and that at the time of the interrogatories the brochures were labeled A8, B3, B4, B5, and B6. It is impossible to decide this question without inspecting the brochures and discovery materials.

   8. As discussed above, Midland's claims under the Illinois Consumer Fraud Act fail because of the public injury requirement. Summary judgment for CCI on these claims is therefore appropriate.

   Richard A. Posner, Circuit Judge

   (Sitting by designation)

Date: October 2, 1992