# Official Committee of Unsecured Creditors of Lois/USA, Inc. v. Conseco Finance Servicing Corp. (In Re Lois/USA, Inc.)

> United States Bankruptcy Court, S.D. New York · May 15, 2001 · 264 B.R. 69

URL: https://www.frixlaw.com/law-library/cases/1916413

## Case

- **Full name:** In Re LOIS/USA, INC., Lois/USA New York, Inc. Lois/USA Chicago, Inc. Debtors. the Official Committee of Unsecured Creditors of Lois/Usa, Inc Lois/USA New York, Inc., Lois/USA Chicago, Inc,, Plaintiff, v. Conseco Finance Servicing Corp. F/K/A Green Tree Financial Corp., and General Electric Capital Corporation Defendants
- **Court:** United States Bankruptcy Court, S.D. New York
- **Decided:** May 15, 2001
- **Citations:** 264 B.R. 69; 2001 Bankr. LEXIS 747; 2001 WL 726417
- **Precedential status:** Published
- **Opinion:** Opinion by Gerber
- **Judges:** Robert E. Gerber
- **Cited by:** 38 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/1916413

## How later opinions describe it (automated extraction)

- declining to make a substantive determination with respect to the extent to which a claim for violation of the implied covenant of good faith and fair dealing would support equitable subordination pending further development of the facts, but noting that if proven, such conduc…
- noting equitable subordination was traditionally limited to three circumstances: “(1) fraud, illegality or breach of a fiduciary duty; (2) undercapitalization; (3) control of use of the debtor as an alter ego for the benefit of the claimant^]”
- applying a New York interest analysis to several tort claims brought on behalf of debtor’s estate and concluding that the law of the debtor’s principal place of business governs

## Opinion text

DECISION ON MOTIONS TO DISMISS
ROBERT E. GERBER, Bankruptcy Judge.
Introduction
In this adversary proceeding — a “lender liability” action — the Official Committee of Unsecured Creditors (the “Committee”) in the chapter 11 cases of the debtor advertising agencies Lois/USA, Inc. (“Lois/ USA”); Lois/USA New York, Inc. (“Lois/ NY”) and Lois/USA Chicago, Inc. (“Lois/Chicago,” and collectively, “Lois”) seeks recovery, on behalf of the Lois estate, of not less than $45 million from the debtors’ former secured lenders, defendants Green Tree Financial Corp. (“Green Tree”)
1
and General Electric Credit Corporation (“GECC,” and together with Green Tree, the “Lenders”), and seeks equitable subordination of the Lenders’ claims.
In June 1999, Lois closed on a secured credit facility provided by the Lenders, for a maximum extension of credit of $30 million (but which, as a practical matter, would result in a considerably lesser amount being disbursed, by reason of borrowing base restrictions), replacing a $25 million maximum facility that had been provided by Sanwa Business Credit Corporation (“Sanwa”). The Lenders’ facility was documented, in part, by a 111-page Loan and Security Agreement, dated as of June 17, 1999 (the “Agreement”). The Committee alleges, among other things, that before the Agreement was signed, Green Tree made promises and representations to Lois with respect to the facility that ultimately became the subject of the Agreement, including representations as to the size of the facility that would be provided; the time by which. the financing would be made available; and the amounts that could be drawn down under its borrowing base formulas. These promises, the Committee alleges, after having been relied on to its detriment by Lois, were not kept, and representations made by Green Tree with respect to the prospective financing were fraudulently (or, alternatively, negligently) made.
GECC, as alleged by the Committee, is bound by the acts of Green Tree, which, after the closing of the loan, was agent for the facility. Also, the Committee alleges that the Lenders declared a nonpayment default under the new facility within approximately three months of closing on it, raising alleged questions as to their intention ever to perform under it, good faith in performance, or both. The Committee also has argued in its briefs (though significant portions of this were not so alleged in the Complaint) that the Lenders engaged in a variety of post-closing acts with the
*78
purpose or effect of exercising control over Lois’ operations for their own benefit — • including, perhaps most significantly, directing that unsecured creditors not be paid at the same time that the Lenders’ own loans were being paid down.
Based on those and other matters, the Committee asserts nine causes of action, including damage claims sounding or arguably sounding in contract, equity, fraud and other torts, and breach of fiduciary duty, in addition to the request for equitable subordination. But relying in substantial part on an Illinois statute that they assert protects them from claims of this nature,
2
Illinois common law (which they contend is applicable to all claims other than the claim for equitable subordination), and New York law — which they contend supports dismissal even if Illinois law does not apply — the Lenders have moved to dismiss all nine causes of action for failure to state a claim upon which relief can be granted.
3
The Lenders also seek dismissal of the fraud claims for failure to state the circumstances constituting the alleged fraud with the requisite particularity.
4
The matter was extensively briefed and argued.
5
The motions are granted in part and denied in part,
6
under the choiee-of-
*79
law principles, and for the reasons, set forth more fully below.
Major Issues
As pleaded in the Committee’s Amended Complaint (hereafter, “Complaint” or, in citations, “Cmplt”), the allegedly wrongful conduct took place principally in New York (and by telephone between Atlanta, Georgia and New York), and the alleged injury took place in New York. However, it is undisputed for purposes of this motion that Green Tree had an office in Illinois (though the transaction was effected principally with Green Tree’s Atlanta office); that GECC had an office in Chicago from which certain actions with respect to the loan were taken (though it had its principal office in Connecticut); that one of the debtors, Lois/Chicago, had an office in Chicago; that the loan was closed in Chicago; and that the Agreement provided, in relevant part (in addition to fixing Cook County, Illinois, as the exclusive forum for any disputes relating to the Agreement),
7
that
This Agreement and the other Financing Agreements have been submitted to [Green Tree] at its office in Illinois, and this Agreement ... shall be construed in all respects in accordance with, and governed by, all of the provisions of the [Illinois Uniform Commercial] Code and by the other internal laws (as opposed to conflicts of law provisions) of the State of Illinois....
(Agreement ¶ 10.7). The Agreement did not provide, however, that any and all disputes
with respect to the parties’ dealings
(or any analogous broader formulation of the scope of the parties’ choice-of-law agreement) would be governed by Illinois law.
With this as context, there are vigorously disputed issues of conflicts of law, particularly with respect to claims that do not require construction of (or are otherwise affected by) the parties’ contract, along with the consideration of the underlying substantive law after the Court determines the state(s) whose law provides the rule of decision. Issues debated by the parties, in this connection, include, among others, whether:
(a) The Lenders can rely on the Agreement’s choice-of-law provision to require application of the law of Illinois (and the Illinois Credit Agreements Act, in particular) when Illinois has a considerable nexus to the transaction, but when (with respect to the particular claim involved) it arguably lacks the predominant nexus to the locales of the allegedly wrongful conduct or of the alleged injury, and (at least as the Committee argues) would not be chosen as the state whose law is applied in the absence of a choice-of-law clause;
(b) Given the Agreement’s choice-of-law provision providing that the “Agreement” and the “other Financing Agreements” would be “construed ... in accordance with” and “governed by” Illinois law — but not providing for a broader scope — Illinois law should nevertheless be deemed to be applicable to claims not covered by that language, by reason of a broader forum selection clause,
8
providing for an Illinois forum
*80
for “any actions or proceedings
relating to
this Agreement or the other Financing Agreements” (emphasis added);
(c) Claims based on intentions not to honor promises with respect to financing to be provided in the future are actionable;
(d) The requisite duty exists upon which the Lenders can be held liable for alleged negligent misrepresentations with respect to the financing then under discussion;
(e) A fiduciary relationship between Lois and the Lenders can be found by reason of Lender conduct, notwithstanding a provision in the Agreement providing in substance that no fiduciary relationship should be found to exist;
9
(f) Claims may be asserted for promissory estoppel for promises made with respect to a financing that was intended to be, and later was, evidenced by a written contract, .and where an Illinois statute forecloses claims based on promises related to a credit agreement when such promises have not been reduced to writing; and
(g) Claims for “bad faith” or for violation of the implied covenant of good faith and fair dealing can lie in the absence of an underlying contract.
For the reasons described below, the Court concludes:
(a) The Agreement’s choice-of-law clause providing for the application of the law of Illinois will not be disregarded, and will be respected concerning matters within its scope;
(b) The Agreement’s choice-of-law provision will be applied only with respect to the matters within its scope, and thus will not be held to cover tort claims; the Court will not deem a more broadly drafted forum selection clause to be equivalent to, or to modify, a choice-of-law provision;
(c) Under the law of New York (determined to be applicable to the tort claims), claims of “promissory fraud”— allegations that Green Tree made a promise of further conduct knowing that it had no intention of performing, or with reckless disregard of whether or not it would — will be actionable, if and to the extent such can be proven;
(d) The requisite duty upon which the claim for negligent misrepresentation is based is lacking, and, for that reason,
*81
among others, a claim for negligent misrepresentation cannot lie here;
(e) Under the law of Illinois (determined to be applicable to the fiduciary duty claim), no fiduciary relationship between either of the Lenders, on the one hand, or Lois, on the other, can be found here;
(f) Under the law of Illinois (determined to be applicable to claims under, or requiring construction of, the Agreement), promissory estoppel cannot be asserted to enforce promises made with respect to a promised financing, especially one that was intended to be, and later was, evidenced by a written contract (i.e., the Agreement); and
(g) Under the law of Illinois, claims for “bad faith” and for the violation of the implied covenant of good faith and fair dealing cannot be asserted with respect to the period before the execution of the Agreement.
Facts
As alleged in the Complaint,
10
Lois operated a national full-service advertising and marketing communications company, with its corporate headquarters in New York, and with offices in Chicago and several other cities.
11
Its operations have now been consolidated in New York City, and its collective staff has been reduced to four employees.
12
Historically, Lois financed its working capital requirements through credit facilities with third-party lenders, relying on third-party financing to level fluctuations in its borrowing needs. In October 1997, Lois entered into a credit facility with Sanwa, which permitted borrowings up to $25 million, based on a percentage of eligible accounts receivable.
13
Pre-Closing Events
In the late 1990’s, in response to industry consolidation and slow revenues, Lois developed a plan for expansion through the acquisition of other advertising agencies. After several successful acquisitions, Lois continued its expansion strategy and sought to acquire 13 agencies over the course of eight months at a cost of $25.6 million (the “1998 Plan”).
14
In September 1998, Lois was conducting due diligence for the potential acquisition of one of those acquirees, but to consummate that acquisition and others, Lois would need additional funds. At this time, the balance under the Sanwa facility had fluctuated to a high of $20 million, and Lois sought an increase in the size of its facility to $40 million to fund the desired acquisitions. Sanwa informed Lois that Greek Tree had expressed an interest in the 1998 Plan, and in committing an additional $15 million over and above the $25 million commitment made by Sanwa.
15
While Sanwa initially expressed an interest in funding that $40 million line, Lois was told in December 1998 that Sanwa was going to be acquired by Fleet Capital
*82
Corp. (“Fleet”), and Lois was told, about a month later, that Fleet was not interested in participating in the credit facility at all, because Lois’ business structure did not fit into Fleet’s portfolio. Fleet informed Lois that Lois had to obtain a replacement lender for its existing facility no later than June 1999.
16
In response to Fleet’s decision not to renew or extend the credit facility, Lois’ management met with Green Tree in or about late January or early February 1999, to discuss the possibility that Green Tree would act as lead lending agent to take Fleet out and expand the credit facility. At this meeting, Lois stressed to Green Tree that timing was of the essence, because, among other things, without new and expanded financing, the status of acquisitions was unsure, as Lois was facing its seasonal downward variance in accounts receivable. Lois also told Green Tree that Lois’ auditors would not issue a “going concern” audit opinion without replacement financing, and that Lois would have to delay filing its Form 10-K — its annual report with the SEC — unless such financing was put into place quickly.
17
Green Tree “had no problem with Lois’ acquisition strategy and volunteered to assist in putting together a $45 million syndicated credit facility.”
18
In mid-February, 1999, Christopher Gouskos of Green Tree informed Lois that “Green Tree would put together a $45 million facility that would be structured under substantially similar terms as the existing credit facility between Sanwa and Lois.”
19
On or about February 23, 1999, Green Tree provided Lois with a proposal for a $45 million credit line, as set forth in a “Summary of Terms and Conditions.” The terms included a closing fee of .375% of the credit line, “a base rate of Eurodollar margin of 4- 3.5%,”
20
and a borrowing base of “85% of the eligible account receivables.” Lois “accepted the Summary of Terms and Conditions,”
21
and provided a deposit of $50,000 and a letter affirming Lois’ direction to the law firm of Winston and Strawn,
22
to commence the legal documentation relating to the loan and its obligations to satisfy the legal services bill.
23
At about this time, Green Tree then made a number of alleged misrepresentations, and/or promises, without an expectation of performing on them.
24
In the first
*83
of these, “Lois was led to believe” that the credit facility then being discussed with Green Tree “would be based on two components”
25
— the first to be an asset-based working capital line of credit, to be calculated at approximately 85% of eligible receivables, and the second to be utilized for the funding of the 1998 Plan. However (as alleged on information .and belief), “Green Tree knew that it virtually was impossible for Green Tree to extend a $45 million credit line to Lois consisting of both of the above components.”
26
In what can be regarded as the second of the alleged misrepresentations, Green Tree determined not to expand the credit line beyond $30 million, but notwithstanding this determination, “Lois always was assured” by Gouskos, through the winter and early spring of 1999, “that the necessary credit facility of $45 million under substantially similar terms to the Sanwa facility would be arranged in order to implement the acquisition strategy and to ensure that adequate cash would be available to fund operations.”
27
Lois officers repeatedly told Gouskos that they had to have the loan closed prior to March 31, 1999, as it was needed to file the 10-K; because Lois wanted to close when its accounts receivable (which represented the borrowing base) were high; and because the additional capital was needed for the acquisitions.
28
“Gouskos assured Lois officers that the loan would close prior to March 31, 1999.”
29
However, the due diligence period dragged out, since (as alleged on information and belief) neither of the Lenders had significant experience in providing credit facilities to a service-based business like Lois, or had previously entered into a financing agreement with an advertising agency.
30
Throughout the due diligence period, the Lenders
31
“continued to assure Lois that the facility was a certainty, and that the terms would be substantially similar to Lois’ previous facility with Sanwa.” However, in mid-March 1999, Gouskos of Green Tree informed officers of Lois that the deal could be closed for $30 million, with Green Tree and GECC as participating lenders, and that Green Tree would continue to look for additional financing for the remaining $15 million after the closing. Lois was left with no choice but to agree to the reduction in the available financing, as securing alternate financing would have taken at least four or five months (at which point the Sanwa facility would have long been terminated, leaving Lois without any funding), and closing down Lois’ operations while it secured additional funding was also not an option, because once this was done in the advertising business, Lois’
*84
clientele would be lost immediately.
32
Throughout April and May, the closing of the credit facility continued to be delayed. At this point obtaining a replacement facility to fund day-to-day operations had become Lois’ paramount concern. However, “Lois had been lured so far down the path with the Lenders that it could not find alternative financing.”
33
At this point, Lois was entering the slow level of its business cycle, at which accounts receivable would reach their traditional low levels; was faced with the imminent termination of the Sanwa facility; and was under extreme pressure to file its 10-K with the SEC, which could not be completed until the financing was consummated.
34
At that point, the Lenders “took advantage of Lois’ situation to introduce more onerous terms to the proposed facility.”
35
In late April or early May, Gouskos and/or Kevin Thompson, also of Green Tree, told Lois that the interest rate and fees for the loan were being increased, at the demand of GECC; that the loan committee’s approval had expired; and that the Lenders would not .provide another commitment without obtaining a lending reserve against availability. Again, given the impending expiration of the Sanwa facility, Lois had no other option but to accept these terms.
36
On or about May 24, 1999' — three weeks before the Sanwa facility would expire— Lois received an offer sheet with substantially altered terms. The new terms greatly reduced Lois’ borrowing ability, and made the facility less attractive in other respects as well. The altered terms included (1) a commitment by the Lenders to provide only a $30 million facility (in contrast to the $45 million facility that was allegedly promised); (2) a more limited definition of eligible accounts receivable, which would be based on a closing audit to be completed by GECC; (3) an increase in the origination fee, from $375,000 to $600,000; (4) an increase in the interest rate, from LIBOR + 2.5% to LIBOR + 4%; (5) additional standards for acquisitions Lois might make, identified as “Acquisition Draw Limits”; and (6) a $3 million reserve to be maintained against availability.
37
In light of the intense time pressure on Lois, and the need for immediate replacement funding, Lois “had no recourse but to agree to the changing terms set by the Lenders.”
38
Posir-Closing Events
The closing took place on June 17, 1999, at the offices of Winston
&
Strawn.
39
The indebtedness on the Sanwa facility was repaid with the closing proceeds, but as a result of the reduction in the size of the facility and the “minimal actual availability” under it, Lois lost its planned acquisitions; the “1998 Plan was destroyed”; and Lois began a downward spiral that ultimately forced it into a severe liquidity crisis where it could not meet its daily
*85
operating expenses.
40
The diminished borrowing base implemented by the Lenders reduced Lois’ availability to approximately $22.5 million. Deducting the $3 million reserve, a $1 million letter of credit (a requirement under the facility), the payoff to Sanwa of $15.6 million, and the origination fee of $600,000, Lois was left with immediately available funds of only $2.3 million. This amount “was significantly less than anticipated,” and in no way sufficient to continue the 1998 Plan, “let alone meet the daily cash requirements of Lois.”
41
In response to the limited availability and anticipating liquidity problems, Lois made a number of requests of the Lenders to discuss a release of the reserve. However, Lois was advised no changes would be made, except for a change in interest accrual from quarterly to daily, with the result of making the cash availability even more restrictive. In September 1999, at a meeting at Lois’ offices attended by representatives of the Lenders, the Lenders “appeared indifferent to Lois’ requests for assistance”; Green Tree’s Gouskos “rebuked” Lois’ suggestion that the Lenders work with them so that all involved parties, including the trade creditors, would suffer as little. damage as possible; and Gouskos stated “that the Lenders were fully secured and they had every intention of collecting the full amount of their lien.”
42
In September of 1999, three months after the Agreement was executed, Green Tree declared a “technical”
43
default under the facility, resulting from Lois’ inability to timely pay its creditors, which had the immediate effect of raising the interest rate by an additional 2%, and making future lending under the facility conditional. Green Tree then ceased normal funding activity, and funded Lois on a day-to-day basis. Green Tree also sought to collect the accounts receivable directly, by sending out demand letters on October 4, 1999, “which actually resulted in a decrease in cash payments.”
44
By October 1, 1999 (at which time $8 million in obligations was outstanding to the Lenders), Lois’ bankruptcy was inevitable. In light of the financial crisis, Lois management determined that the most appropriate steps would be to halt, all payments except for those with respect' to one of its subsidiaries, Fogarty & Klein, for the purpose of saving the value of that enterprise. Green Tree, GECC and Lois met in New York to discuss a plan to sell Fogarty & Klein, at which time Lois also informed the Lenders that Lois intended to declare bankruptcy in the imminent future. However, “the Lenders’ indifference towards Lois’ financial condition was apparent at this meeting.” Gouskos “reiterated the fact that the Lenders were fully secured and that they didn’t care about Lois’ intentions.”
45
On October 15, 1999, Lois ceased operations. Lois/USA filed a voluntary petition for relief in this Court under chapter 11 of the Bankruptcy Code on October 20, 1999, followed by the voluntary petitions of its subsidiaries Lois/Chicago and Lois/New York on October 26, 1999.
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Claims Based on the Foregoing
In the context of the facts stated above, the Committee asserts nine claims for relief. Stripped to their essence, they are as follows:
1.Promissory Estoppel
(Claim for Relief #1)
In its claim based on promissory estop-pel, the Committee alleges in essence that Green Tree, acting on its own behalf and as agent for GECC, its alleged principal,
46
(1) promised to provide a credit facility of $45 million; (2) under substantially similar terms as the Sanwa facility. The Committee further alleges that Lois relied on the promises, by not seeking alternate financing, and that Lois’ reliance was both reasonable.and foreseeable.
47
The Committee further alleges that as a result of Lois’ reliance on Green Tree’s representations (which the Court, under
Conley
principles,
48
will deem to be equivalent to the alleged promises), Lois: (1) was precluded from obtaining the financing with a timing and on such reasonable terms as had been promised originally which would have allowed Lois to operate; (2) lost the cash flow from the planned acquisitions of thriving agencies; (3) lost the ability to obtain short-term financing that, even without the acquisitions, could have allowed Lois to survive and develop an alternative business plan; (4) was forced to agree to more onerous terms than originally agreed upon, including a higher fee structure, higher interest rate and lesser credit line, as listed above; and (5) was unable to file its Form 12B-25 with the SEC in a timely fashion, and was accordingly damaged.
49
2. Unjust Enrichment
(Claim for Relief #2)
In its claim for unjust enrichment, the Committee repeats some, and realleges all, of its earlier allegations, and notes that Green Tree (once more on its own behalf and as agent of GECC) received high returns on its investment in the credit facility, as it collected approximately $860,000 in fees from Lois, with little risk. The Committee alleges that the Lenders’ retention of the benefits they obtained from their unjust actions violates fundamental principals of equity and good conscience.
50
3. Equitable Subordination
(Claim for Relief
#
3)
In its equitable subordination claim, the Committee alleges that the Lenders breached an alleged fiduciary duty to Lois “by engaging in a pattern of misrepresentations and purposeful delays in closing the credit facility,” and by “using their leverage to obtain increased fees and interest amounts from Lois” — as a result of which Lois incurred additional unsecured credit which it could not pay. Equitable subordination, the Committee alleges, would be consistent with the Bankruptcy Code, and as a matter of equity, the Lenders’ claims
*87
should be subordinated to the claims of the unsecured creditors.
51
4. Fraudulent Misrepresentation
(Claim for Relief
#
k)
The Committee alleges that Green Tree, once more acting on its own behalf and as agent of GECC, its principal, made representations and led Lois to believe it would provide (1) a credit facility of $45 million; (2) under substantially similar terms as the Sanwa facility. Along with allegations, among other things, of reliance and damage, the Committee alleges (1) Green Tree made these representations with reckless disregard as to their truth or falsity, or knew that the representations were false, as it had ho intention of entering into a facility of that size or under terms similar to the terms of the Sanwa facility; and (2) Green Tree knew that the approval of the loan under substantially similar terms as the Sanwa facility could not be made.
52
5. Fraud
(Claim for Relief
#
5)
Insofar as the Court can discern, this claim is identical to its predecessor, except that it is based solely on an allegation of knowledge of the falsity of the promissory representations, and lacks the allegation of recklessness.
6. Negligent Misrepresentation
(Claim for Relief# 6)
The Committee then alleges that in the event that Green Tree did not know at the time of its representations to Lois that a $45 million credit facility could not be approved, Green Tree “should have known” that Lois’ financial condition, and the Lenders’ procedures with respect to loan approvals and fees, would preclude a $45 million facility with terms similar to the Sanwa facility. The Committee further alleges that Green Tree had a duty to make itself aware of “both correct bank procedures and of any financial problems Lois was having” prior to representing that the credit facility would be for $45 million under substantially similar terms as the Sanwa facility, and that in making its representations, “Green Tree personnel failed to exercise the degree of care or expertise of reasonably competent bank officers, which Lois was entitled to expect.”
53
The Committee further alleges that Green Tree had a duty to communicate accurate information when making representations to Lois concerning the terms of the credit facility, as Lois was relying on Green Tree’s representations concerning the facility in determining whether to proceed with the loan.
54
The Committee further alleges that once the credit facility was in effect, the Lenders asserted control over Lois’ finances (as they often advised Lois to defer payments on its accounts payable so as to make them
*88
only when absolutely necessary), and that this exercise of “such improper control” created “an additional fiduciary relationship”
55
between the Lenders and Lois, thus obligating them to act in accordance with Lois’ best interests. As alleged in the Complaint, Green Tree breached those “aforementioned duties” when it made its representations to Lois.
56
7. Bad Faith
(Claim for Relief
#
7)
The Committee alleges both pre- and post-Agreement acts in its next claim, for “bad faith.” In the former category, relating to pre-Agreement acts, are allegations that the Lenders (presumably including GECC) wrongfully secured a superior bargaining position through inducement and delay so that they were able to dictate the terms of the credit facility; that it was essential for Lois to have a replacement facility; that “Lois had no choice but to rely upon and place its confidence on the relationship with the [Lenders]”; that it “had every reason to rely on Green Tree’s representations”; and that it was forced to accept the terms of the new credit facility.
57
In the latter category, relating to post-Agreement acts, are allegations that Lois’ attempts to seek relief from the Lenders to remediate its financial crisis caused by the limited availability under the facility were futile, where the Lenders subsequently imposed greater restrictions and ultimately declared a technical default and ceased normal funding. By rejecting Lois’ attempted resolutions, the Committee alleges that the Lenders acted indifferently, arbitrarily and capriciously in rejecting Lois’ efforts “to work out an amicable resolution to the situation.”
58
8. Breach of the Implied Covenant of Good Faith and Fair Dealing
(Claim for Relief #8)
In this claim, the Committee alleges — all with respect to the time after the Agreement was executed — that the Lenders were aware of Lois’ urgent need for working capital to operate its business, the status of its accounts receivable, and the nature of its operations. The Committee then alleges that notwithstanding this knowledge and their commitment under the Agreement, the Lenders unjustifiably and without warning increased the borrowing restrictions, declared a “technical” default, and eventually ceased normal funding, leaving Lois with no opportunity to seek and secure alternative financing. In doing so, the Committee alleges, the Lenders “acted indifferently, arbitrarily and capriciously and in a manner inconsistent with Lois’ expectations of its business relationship with the [Lenders].”
59
9. Breach of Fiduciary Duty
(Claim for Relief# 9)
This claim tracks, in very nearly the same words, Claim # 6, for negligent misrepresentation, and insofar as the Court can ascertain, the facts pleaded to support this claim are no different substantively.
*89
Like the negligent misrepresentation claim, this claim speaks of the exercise of allegedly improper control after the execution of the Agreement having created “an additional fiduciary relationship,”
60
but the Complaint is silent as to the existence of, or basis for finding, any earlier or other fiduciary relationship(s), particularly during the period before the execution of the Agreement, when the promises that are the heart of the Committee’s Complaint were allegedly made.
I.
Standards for Dismissal
As the Committee notes, the Lenders have to meet a very high standard for dismissal. Under well-settled principles, when considering a motion to dismiss under Rule 12(b)(6), the factual allegations in the complaint are presumed true, and are construed in favor of the pleader.
See, e.g., Luedke v. Delta Air Lines, Inc.,
159 B.R. 385, 389 (S.D.N.Y.1993) (Patterson, J.) (applying this standard, denying motion to dismiss third-party complaint). It has long been the law that “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”
Conley, supra,
355 U.S. at 45-46, 78 S.Ct. at 102;
accord Northrop v. Hoffman of Simsbury, Inc.,
134 F.3d 41, 44 (2d Cir.1997) (quoting
Conley); In re Granite Partners, L.P.,
210 B.R. 508, 514 (Bankr.S.D.N.Y.1997) (Bernstein, C.J.) (denying motion to dismiss complaint, noting dismissal would be proper only when the plaintiff would not be entitled to any type of relief, even if it prevailed on the merits of its factual allegations). As the Supreme Court held in
Scheuer v. Rhodes,
416 U.S. 232 , 94 S.Ct. 1683 , 40 L.Ed.2d 90 (1974):
When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test.
Id.
at 236 , 94 S.Ct. at 1686 .
Nevertheless, dismissal can and should be granted if the plaintiffs allegations, taken as true, along with any inferences that flow from them, are insufficient as a matter of law.
See, e.g., Sykes v. James,
13 F.3d 515, 519 (2d Cir.1993),
cert. denied,
512 U.S. 1240 , 114 S.Ct. 2749 , 129 L.Ed.2d 867 (1994) (applying the standard discussed above but nevertheless dismissing, where claims for relief were legally insufficient);
In re 80 Nassau
Assocs., 169 B.R. 832, 841 (Bankr.S.D.N.Y.1994) (Bernstein, C.J.) (applying this standard and granting motion to dismiss, with leave to amend, where allegations did not support claim of equitable subordination).
In addition to the complaint itself, a court may consider, on a motion to dismiss, the contents of any documents attached to the complaint or incorporated by reference; matters as to which it can take judicial notice; and documents in the possession of the non-moving party (i.e., the Committee here), or which the non-moving party knew of or relied on in connection with its complaint. See
Granite
*90
Partners,
210 B.R. at 514 . And where a plaintiff alleges a claim based on a written instrument, a court may consider such an instrument even if it was not attached to the complaint and incorporated under Rule 10(c).
See Barnum v. Millbrook,
850 F.Supp. 1227, 1232 (S.D.N.Y.1994),
aff'd without opinion,
43 F.3d 1458 (2d Cir.1994) (considering entire purchase and sale agreement that was partially incorporated in the complaint). Finally, if the allegations of a complaint are contradicted by other documents, the court need not accept as true the allegations in the complaint.
Id.
at 1232-1233.
61
II.
Choice-of-law Issues
In particular by reason of the potential effect of the Illinois Commercial Credit Act (a statute as to which New York apparently has no counterpart), and actual or arguable differences in the law of fraud when applied to promises and/or events which may take place in the future — the conflicts of law issues are among the most important in this case. For like reasons, they are the most vigorously disputed.
At the outset, however, the parties do not disagree. They agree or accept for the purposes of this motion
62
that when this Court analyzes the conflicts of law with respect to claims arising under state law, it starts with the choice-of-law rules of New York, the forum state in which it sits.
See Klaxon Co. v. Stentor Electric Mfg. Co.,
313 U.S. 487, 496 , 61 S.Ct. 1020, 1021 , 85 L.Ed. 1477 (1941) (federal courts must apply forum state’s conflicts of law rules in diversity cases).
63
In applying New York’s choice-of-law rules, however, the parties
*91
disagree vigorously, differing with respect to (a) whether this Court should honor the choiee-of-law provision in the Agreement; (b) the coverage of that provision (i.e., the claims to which it applies), if and to the extent that the contractual choice-of-law provision is given deference; and (c) the law to be applied if and to the extent that the Court is not bound by the contractual choice of law.
A.
Deference to Contractual Choice-of-law Provision
As noted above, the Agreement provided that it “shall be construed in all respects in accordance with, and governed by” the law of Illinois.
64
An important threshold issue then, is whether this provision properly can be disregarded.
At least one of the Lenders seemed at one point to argue that the parties’ invocation of Illinois law in the contract was determinative,
65
and the Committee argued that a predominance of contacts with a state other than Illinois would warrant disregarding the Illinois choice
of
law.
66
Each contention was overly broad. New York has choice-of-law rules applicable to instances in which the parties were silent as to the law that governs their dealings with each other — upon which the Committee, for understandable reasons, would like to rely. But where, as here, parties have agreed on a choice-of-law rule applicable in whole or in part to their dealings, the analysis is not the same as it would be if they were silent on the subject. As the New York Court of Appeals has held, “[a]s a general matter, the parties’ manifested intentions to have an agreement governed by the law of a particular jurisdiction are honored.”
Freedman v. Chemical Construction Corp.,
43 N.Y.2d 260 , 265 n. *, 401 N.Y.S.2d 176 , 372 N.E.2d 12 , 15 n. * (1977);
accord Turtur v. Rothschild Registry Int’l,
26 F.3d 304 , 310 (2d Cir.1994) (describing the New York law, and quoting
Freedman).
It is as though the law of the selected jurisdiction were incorporated into the agreement by reference.
Freedman,
43 N.Y.2d at 265 , n. *, 401 N.Y.S.2d 176 , 372 N.E.2d 12 (citing
Restatement, Conflicts of Law 2d
§ 187, Comment c). Likewise, as the Second Circuit has held (construing New York law), “[i]n the absence of a violation of a fundamental state policy, New York courts generally defer to the choice of law made by the parties to a contract.”
Cargill v. Charles Kowsky Resources, Inc.,
949 F.2d 51, 55 (2d Cir.1991).
The Second Circuit has also noted, however, that New York law allows a court to disregard the parties’ choice when the “most significant contacts” with the matter in dispute are in another state.
Id.
67
See
*92
also Haag v. Barnes,
9 N.Y.2d 554, 559 , 175 N.E.2d 441, 443 , 216 N.Y.S.2d 65, 68 (1961) (stating “traditional view” was that law governing a contract is to be determined by the intention of the parties, but noting that “[t]he more modern view” is that courts, instead of regarding as conclusive the parties’ intention (or the place of making or performance) would look to the law of the place with the most significant contacts with the matter of dispute — and then holding that “[wjhichever of these views one applies in this case,” Illinois law, the law contractually chosen, would apply).
Thus it has been said that “[wjhile it is true that some jurisdictions give determinative effect to a choice-of-law clause,” “New York is not one of them.”
S. Leo Harmonay, Inc. v. Binks Mfg. Co.,
597 F.Supp. 1014, 1024 (S.D.N.Y.1984) (Cooper, J.)
(“Harmonay
”),
aff'd without opinion,
762 F.2d 990 (2d Cir.1985). But that does not mean that a contractual choice of law can or should readily be disregarded. The better rule, as the
Harmonay
court noted, is that suggested by Judge Learned Hand in
Krenger v. Pennsylvania R. Co.,
174 F.2d 556, 560-561 (2d Cir.1949) (L.Hand, concurring),
cert. denied,
338 U.S. 866 , 70 S.Ct. 140 , 94 L.Ed. 531 (1949):
[Sjuch clauses are prima facie valid and will be upheld absent a showing that they result from fraud or overreaching, that they are unreasonable or unfair, or that enforcement would contravene a strong public policy of the forum.
597 F.Supp. at 1024-1025 .
As the Committee notes,
68
in making the determination whether to disregard a contractual choice-of-law provision, New York courts have followed the “substantial relationship” approach. That approach, which the
Harmonay
court noted “parallels Judge Hand’s rule,”
id.
at 1025 , was “stated succinctly,”
id.,
in
Restatement (Second) of Conflicts of Law (“Restatement”)
§ 187. It provides, in relevant part:
(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied ... unless either
(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or
(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.
*93
Id.
69
The Second Circuit has likewise applied this standard. As it noted in
Woodling v. Garrett Corp.,
813 F.2d 543 (2d Cir.1987), also construing New York law:
When such a provision exists and the jurisdiction chosen by the parties has a substantial relationship to the parties or their performance, New York law requires the court to honor the parties’ choice insofar as matters of substance are concerned, so long as fundamental policies of New York law are not thereby violated.
Id.
at 551 (citing
A.S. Rampell, Inc. v. Hyster Co.,
3 N.Y.2d 369, 381 , 165 N.Y.S.2d 475, 486 , 144 N.E.2d 371, 379 (1957);
Restatement
§ 187).
See also Krock v. Lipsay,
97 F.3d 640, 645 (2d Cir.1996) (stating, without articulated exceptions or qualifications, that “New York law gives full effect to parties’ choice-of-law provisions,” citing
Woodling).
While the Committee notes a number of objective indicia which it argues are relevant “when applying the substantial relationship test” — “to determine the state with the most significant contacts to the subject matter of the contract and thus the appropriate law of the case”
70
— the Committee has addressed the
Restatement
§ 187 criteria noted above to a notably lesser degree, and the Court believes that two separate standards, and concepts, may have been merged here. The indicia discussed by the Committee
71
track very nearly verbatim those listed in
Restatement
§ 188 to determine the state with the most significant contacts “[i]n the absence of an effective choice of law by the parties.”
72
While the Court agrees with the Committee that it is appropriate to consider the same indicia (though arguably along with others as well) when determining whether the state whose law has been invoked bears the requisite “substantial relationship” required under
Restatement
*94
§ 187, the inquiry does not (as the Committee argues
73
) require that the state whose law has been invoked be the state with “the
most
significant contacts.”
74
Rather, the Court must determine whether there is a reasonable nexus between the state whose law has been invoked (here, Illinois) and the parties to the contract and their transaction — whether or not the relevant contacts with that state (here, Illinois) predominate over the contacts with other states (e.g., New York, or even Georgia) whose law might alternatively have been chosen.
75
In our case, (1) one of the borrowers (Lois/Chicago) was in Illinois;
76
(2) GECC was, at least in some continuing way, in Illinois, and had an office in Chicago from which certain actions with respect to the loan were taken;
77
(3) Green Tree, according to the Agreement, had an office, of some kind, in Illinois;
78
(4) counsel for the Lenders (or at least Green Tree), Winston & Strawn, was in Illinois;
79
and (5)
*95
the place of contracting, i.e., the closing, was in Illinois.
80
(Other factors argued by the Lenders to represent additional contacts are rejected by this Court as unpersuasive, or at least not established on this record.).
81
These are fairly substantial, but hardly overwhelming, contacts, and this Court believes that if it were to weigh the relative contacts, it would not necessarily find that the Illinois contacts outweigh (especially, materially) the contacts with New York.
82
But that is not the test. Facts #1, #2, # 3 and # 5 (at least when in combination with each other) require the Court to find that the requisite basis for the parties’ invocation of the law of Illinois exists. The Court cannot say that there here is lacking a substantial relationship to the State of Illinois, nor that there is lacking a reasonable basis for Lois and the Lenders to have agreed on the applicability of the law of Illinois.
83
This Court’s conclusion in that regard is bolstered, it believes, by Comments e and/ to
Restatement
§ 187. Comment
e
provides, in relevant part:
Rationale.
Prime objectives of contract law are to protect the justified expectations of the parties and to make it possible for them to foretell with accuracy what will be their rights and liabilities under the contract. These objectives may best be attained in multistate transactions by letting the parties choose the law to govern the validity of the contract
*96
and the rights created thereby. In this way, certainty and predictability of result are most likely to be secured.
(Italics in original).
84
Predictability in result, and honoring the justified expectations of the parties, is important in connection with any contract, and is at least as important where lenders are putting substantial sums of their funds at risk, and the implementation of borrowers’ business plans may turn on lenders honoring their commitments to lend.
Of course there still are limits to the parties’ power so to agree. One, not argued to be relevant here, is that the law of the chosen state is contrary to the public policy of the forum state. Another is the requirement that there be a reasonable basis for the parties’ invocation of the law they chose to adopt. Comment / deals with the latter concern. It provides, in relevant part:
Requirement of reasonable basis for parties’ choice.
The forum will not apply the chosen law ... if the parties had no reasonable basis for choosing this law....
When the state of the chosen law has some substantial relationship to the parties or the contract, the parties will be held to have had a reasonable basis for their choice. This will be the ease, for example, when this state is that where performance by one of the parties is to take place or where one of the parties is domiciled or has his principal place of business. The same will also be the case when this state is the place of contracting except, perhaps, in the unusual situation where this place is wholly fortuitous and bears no real relation either to the contract or to the parties. These situations are mentioned only for purposes of example. There are undoubtedly still other situations where the state of the chosen law will have a sufficiently close relationship to the parties and the contract to make the parties’ choice reasonable.
(Italics in original).
85
In short then, this Court is not in a position to invalidate the parties’ choice, with respect to the construction and en
*97
forcement of their contract, of the law of Illinois. Even though, if they had chosen the law of New York, that decision likewise would have been honored by this Court, their choice of the law of Illinois will be honored here.
B.
Scope of Contractual Choice-of-Laiv Provision
Having determined that the contractual choice-of-law clause will be honored here, the Court then must turn to the next issue — -honored as to which claims?
The scope of the parties’ agreement to abide by Illinois law appears in their contractual language. It reads, in relevant part:
This Agreement
and
the other Financing Agreements...
shall be construed in all respects in accordance with, and governed by, all of the provisions
of
the [Illinois Uniform Commercial] Code and by the other internal laws (as opposed to conflicts of law provisions) of the State of Illinois....
(Agreement ¶ 10.7) (emphasis added).
86
That language, particularly when one takes the definitional cross reference to “Financing Agreements” into account, is about as broad as this Court can imagine when it comes to covering any actual or alleged agreement or contract. However, it is notably silent in covering matters other than agreements between the parties. It does not, by way of example, say what it easily could have — saying, in words or substance, that “any and all dealings between the parties with respect to the financing,” or that “any dispute between the parties with respect to the subject matter of the financing,” shall be governed by Illinois law. The Court must thus consider what, if any, claims other than those arising under the contract (or calling for construction of the contract) should properly be regarded as covered under this clause.
At one extreme, one of the Committee’s claims (# 8, which alleges violation of an implied covenant of good faith and fair dealing) seeks to enforce that covenant; if it is to be done, it must be done as an additional term of the Agreement.
Cf.
Echo,
Inc. v. Whitson Co.,
121 F.3d 1099, 1106 (7th Cir.1997) (claim for breach of implied covenant of good faith and fair dealing was within breach of contract claim, and did not stand alone as its own claim). The choice-of-law issue with respect to that claim is not a difficult one; this Court has little doubt that if, as the Court now has ruled, Illinois law governs the contract and the manner in which it is construed, it is no jump at all to find that
*98
any efforts to engraft implied terms into the Agreement (or to construe them) should be measured under the law of Illinois.
After that, however, it becomes more difficult. At the other extreme are claims (# 4, Fraudulent Misrepresentation; # 5, Fraud; and # 6, Negligent Misrepresentation) which are plainly in the nature of tort.
87
The parties are in disagreement as to whether the parties’ contractual choice-of-law clause fairly can be read to cover those claims as well. As the Second Circuit held in
Krock, supra:
Under New York law, a choice-of-law provision indicating that the
contract
will be governed by a certain body of law does not dispositively determine that law which will govern a claim of
fraud
arising incident to the contract.
97 F.3d at 645 (italics in original).
Numerous decisions of the Second Circuit and of District Courts in this district, all construing New York law, make clear that while a contractual choice-of-law provision will normally be enforced, if it is to cover claims other than those in contract, it must have been drafted sufficiently broadly to say so.
See Krock,
97 F.3d at 645 (“Although New York law gives full effect to parties’ choice-of-law provisions,” citing
Woodling ,
“the language in the loan documents between [the parties] does not apply to the case at hand.”);
Lazard Freres & Co. v. Protective Life Insurance Co.,
108 F.3d 1531, 1540 (2d Cir.1997),
cert. denied,
522 U.S. 864 , 118 S.Ct. 169 , 139 L.Ed.2d 112 (1997) (District Court rightly concluded that the choice-of-law provision in the contract should not control, because, under New York law, a contractual choice-of-law provision governs only a cause of action sounding in contract, not one sounding in tort);
Plymack v. Copley Pharm., Inc.,
1995 WL 606272 at *5 (S.D.N.Y.1995) (Wood, J.) (Under New York law, “[a] contractual choice-of-law provision ... does not bind the parties with respect to non-contractual causes of action”);
Rosenberg v. Pillsbury Co.,
718 F.Supp. 1146, 1150 (S.D.N.Y.1989) (Conner, J.) (‘While [a choice-of law] provision is effective as to breach of contract claims, it does not apply to fraud claims, which sound in tort.”).
See also Knieriemen v. Bache Halsey Stuart Shields, Inc.,
427 N.Y.S.2d 10, 12-13 , 74 A.D.2d 290, 293 (1st Dep’t 1980) (“That the parties agreed that their contract should be governed by an expressed procedure does not bind them as to causes of action sounding in tort.”).
See also Turtur, supra
and
infra,
26 F.3d at 310 (applying that same principle, but determining that the contractual language “is sufficiently broad to cover tort claims as well as contract claims”).
88
*99
In
Krock ,
as here, the Second Circuit confronted the issue of claims of fraud with respect to a contract with a choice-of-law clause. It noted that:
Under New York law, in order for a choice-of-law clause to apply to claims for tort arising incident to the contract, the express language of the provision must be “sufficiently broad” as to encompass the entire relationship between the contracting parties.
97 F.3d at 645 .
Decisions in the Second Circuit and in the Southern District of New York — all starting with the proposition that a contractual choice-of-law clause would be honored, but only with respect to the claims that it covered — have focused on the breadth of the choice-of-law clause to measure its scope. In
Krock, supra,
the Second Circuit found that the contractual language there was insufficiently broad to cover claims in fraud as well as those in contract, and thus approved the District Court’s decision to apply a different state’s law to the tort claims. By contrast, in
Turtur, supra,
the Second Circuit — applying the exact same principles — found the contractual language sufficiently broad to cover both kinds of claims. The difference in result in those two cases was explained by District Judge Lewis Kaplan in
Schuster v. Dragone,
67 F.Supp.2d 288 (S.D.N.Y.1999).
89
Describing the general principle, and then comparing
Turtur
and
Krock ,
he observed, in relevant part:
The effect of a governing law clause in circumstances like this depends on its breadth. In
Turtur...,
the Second Circuit considered a provision that said
“this note shall be governed by, and interpreted under, the laws of the State of New York applicable to contracts ... The parties hereby consent to the exclusive jurisdiction of the courts of the State of New York to resolve any controversy or claim arising out of or relating to this contract or breach thereof.”
There the Circuit found the “language ... sufficiently broad to cover tort claims as well as contract claims ‘arising out of or relating to’ ” the contract. On the other hand, in
Krock v. Lipsay, ...
the Circuit concluded that a clause providing more narrowly that “this Mortgage shall be governed by and construed in accordance with the laws of the Commonwealth of the State of Massachusetts” did not encompass fraudulent misrepresentation claims. The question, as the
Krock
court wrote, is whether “the express language of the provision ... [is] sufficiently broad’ as to encompass the entire relationship between the parties.”
Id.
at 290 (footnotes omitted).
Another of those cases, also evidencing the importance of parsing the contractual
*100
language, is the decision in
Bon Jour Group, Ltd. v. Elan-Polo, Inc.,
1997 WL 401814 (S.D.N.Y.1997) (Leisure, J.) — a case not the same as ours on its facts, but nevertheless quite comprehensive in its discussion insofar as relevant to this Court’s concerns. There the
Bon Jour
court was faced with a license dispute involving both breach of contract and fraud claims.
90
As here, the choice-of-law clause was narrow; it provided that:
The parties agree that this Agreement shall be governed by and interpreted pursuant to the Laws of the State of New York.
Id.
at *4 n. 6.
However, unlike our ease, the forum selection clause there was also rather narrow. It provided, in material part, that:
In the event of litigation between the parties concerning the alleged breach of this Agreement or the meaning, effect, application and/or interpretation of its terms, for the purpose of such litigation each party consents to the jurisdiction of the Supreme Court of the State of New York in and for the County of New York.
Id.
at *2.
The
Bon Jour
court first considered a forum selection dispute; it ruled that the forum selection clause was enforceable, but it noted its limitations — essentially the same we have here. It observed that in contrast to a clause in a Texas case that had been cited as precedent, covering “any suits or causes of action arising directly or indirectly from this Agreement,” which had been held to be broad enough to cover tort claims:
[T]he clause in the [agreement before the
Bon Jour
court] does not employ such broad language as “any litigation”; rather, it limits its coverage to claims for breach of contract and interpretation of terms.
Id.
It therefore held that the forum selection clause would be limited in effect to claims within its scope: ■
The forum selection clause at issue explicitly and clearly addresses breach of contract claims and attorney fees that arise out of such claims, and therefore the Court finds that the Contract Claim should be remanded to the state court. However, the scope of the clause does not cover tort-based claims such as fraudulent inducement. The forum selection clause does not mandate that Bon Jour litigate non-contractual claims in New York state court, and therefore the Court finds the forum selection clause inapplicable to plaintiffs Fraud Claim.
Id.
The
Bon Jour
court then engaged in a like analysis with respect to the choice-of-law issue. It noted that the Agreement stipulated that the applicable law was that of New York, but in order for the choice-of-law clause to apply to the Fraud Claim, the language of the clause had to encompass tort-based claims such as fraudulent inducement.
Id.
at *4 n. 6 (citing
Krock).
It noted that “[ejxamples of such broad language are comparable to the language this Court found necessary in order for the instant forum selection clause to have applied.”
Id.
As Judge Kaplan noted in
Schuster ,
“[t]he question, as the
Krock
court wrote, is whether the ‘express language of the
*101
provision ... [is] sufficiently broad’ as to encompass the entire relationship between the parties.” 67 F.Supp.2d at 290 . That is the test this Court must apply here.
91
The question here, as in
Krock, Turtur, Schuster,
and
Bon Jour,
is whether the language of the Agreement “[is] sufficiently broad’ as to encompass the entire relationship between the parties.”
Id.
In our case the terms of the Agreement’s choice-of-law clause, § 10.7, captioned “Applicable Law,” do not cover claims in fraud, a tort. And just as this Court was reluctant to rewrite the Agreement to delete the choice-of-law clause, it is reluctant to rewrite the Agreement to broaden the choice-of-law clause’s scope to cover claims that the choice-of-law clause did not address.
In this regard, however, there is another issue: to what degree should this Court consider language in a
forum selection
clause to add to, and/or modify, the terms of the
choice-of-law
clause? While Green Tree does not contend that the choice-of-law clause is sufficiently broad to cover claims other than those in contract, it relies on another clause, in a different section of the Agreement, captioned “Submission to Jurisdiction; Waiver of Jury and Bond.” (Agreement § 10.8). That provision, which is quoted in full above,
92
provides in substance that any actions
“relating to
this Agreement or the other Financing Agreements” are to be litigated in the Illinois courts. (Block caps deleted; italics added). This language (in contrast to the language in the choice-of-law clause, § 10.7) is sufficiently broad to cover the fraud claims relating to statements made in connection with the financing that ultimately was documented in the Agreement, but it is in a separate part of the Agreement — and in a forum selection clause, not the choice-of-law clause.
The choice-of-law clause does not address the court or courts in which the law is to be applied, and the forum selection clause does not address the law the chosen forum is to apply when the chosen forum— unlike as in the case here — hears the case. Among many other things, the former goes much more to the parties’ substantive rights, and the latter goes much more to the parties’ litigation needs, and in particular, the place where, and procedures under which, their substantive rights are determined. A choice-of-law clause and a forum selection clause are not the same, and address different needs and concerns.
However, Green Tree notes that in two cases (one decided by the Second Circuit), language in a choice of
forum
clause was applied to determine the scope of a choice-
of-law
clause.
See Turtur, supra,
26 F.3d at 309-310;
Bibeault v. Advanced Health Corp.,
1999 WL 301691 , *6, 1999 U.S. Dist. LEXIS 7173 , *17 (S.D.N.Y.1999) (Ward, J.) (following
Turtur).
Thus, Green Tree argues, in each case broader language in the forum selection clause was considered relevant in determining the coverage of the choice-of-law clause.
In
Turtur,
the contract provided:
[T]his note shall be governed by, and interpreted under, the laws of the State of New York applicable to contracts
*102
made and to be performed therein without giving effect to the principles of conflict of laws. The parties hereto consent to the exclusive jurisdiction of the courts of the State of New York to resolve any controversy or claim arising out of or relating to this contract or breach thereof.
26 F.3d at 309.
93
Without parsing the two sentences of that paragraph, Green Tree argues that the
Turtur
court “rejected the argument that such language only covered contract claims, specifically holding that ‘this language is sufficiently broad to cover tort claims as well as contract claims.’ ”
94
That contention clearly is correct in terms of the
Turtur
court’s bottom line; the
Turtur
court used language in the second sentence of that paragraph — the forum selection clause — to broaden the scope of the first sentence, the choice of law.
95
However, Green Tree does not argue, and review of
Turtur
does not suggest, that the parties in
Turtur
briefed or argued whether language in a forum selection clause properly should be deemed to modify the choice-of-law clause, or that the
Turtur
court ruled on that issue or focused on it.
96
Needless to say, decisions of the Second Circuit are binding on this Court. However, here we have two decisions of the Second Circuit,
Krock
and
Turtur,
which, while not inconsistent,
97
tend to send this Court in different directions. If, as Green Tree argues, provisions in different sections of the Agreement, dealing with different concepts, are thrown into a single pot, the forum selection clause would make Illinois law applicable to tort (as well as other non-contract) claims as well. If, on the other hand, this Court follows the Second Circuit’s directive in
Krock
— to determine whether the “express language of the provision ... [is] sufficiently broad’ as to
*103
encompass the entire relationship between the parties” — this Court must parse the choice-of-law clause to determine what it said, and consider the forum selection clause’s broader coverage only with respect to any effort by the Lenders to rely on it with respect to an appropriate
forum selection.
Here the choice-of-law clause and the forum selection clause are not only distinct; they are in separate sections of the Agreement. Understandably, Green Tree does not argue that the choice-of-law clause, found in § 10.7, is broad enough to cover claims in tort. Nor does it argue that the language in the forum selection clause section of the Agreement, § 10.8, is informative with respect to the parties intent as to their choice of law. Because, without discussing whether they should, two courts (including one whose decisions are binding on this Court) merged the two clauses, and did not focus on the distinctions between the two, Green Tree asks this Court to do likewise.
This Court believes that it cannot do so consistent with
Krock .
Where, as here, the Second Circuit in
Krock
has given the lower courts a clear directive to determine the parties’ intent, and it does not appear that the Second Circuit in
Turtur
gave the lower courts a directive to consider forum selection clauses as fungible with choice-of-law clauses, this Court believes that it must follow
Krock .
It holds, accordingly, that the choice-of-law clause does not cover claims in tort.
98
C.
Choice of Law for Particular Claims
Having determined that the choice-of-law clause covers contract claims alone, the Court then turns to the appropriate alternative choice of law applicable to each of the claims. Those decisions turn on whether the contractual choice of law covers the claim in question, and, if it does not, traditional conflicts - of law analysis applicable to issues for which there has been no effective contractual choice of law. To the extent not previously discussed,
99
the Court’s analysis in that regard follows.
1. Promissory Estoppel (Claim for Relief
#
1)
The Committee’s claim based on promissory estoppel is in substance a claim that an alternative contract should be found to exist, or at least that promises not embodied in the final Agreement should be enforced. The enforcement of promises is the meat of contract. Likewise, the enforcement of any promises not embodied in the final contract is subject to the contract itself, where, as here, the contract express
*104
ly provides for the extent to which it supersedes any other agreements.
Thus the Court considers a clause of the Agreement, captioned “Entire Agreement” and relating to earlier representations, understandings and agreements (the “Entire Agreement Clause”),
100
relevant not just substantively, but also to the Court’s determination with respect to the law under which any earlier agreements should be enforced. Without prejudging, for conflicts of law purposes, the substantive significance of that clause, the Lenders should be free to argue that the Agreement’s Entire Agreement Clause is determinative, or at least relevant, to the Committee’s efforts to enforce alleged, earlier agreements or promises. As this Court has ruled, the Lenders have a right to have the Agreement — including, obviously, its Entire Agreement Clause — construed under the law of Illinois. Fairness and logic require that the totality of efforts to enforce agreements or promises in contravention of the Entire Agreement Clause, or in light of it, likewise be governed under the law of Illinois.
Indeed, at least where, as here, Lois and the Lenders agreed to
both
the Entire Agreement Clause and the Agreement’s choice-of-law provision — providing that the Agreement and the other Financing Agreements would be “construed ... in accordance with” and “governed by” the law of Illinois — applying the law of another jurisdiction to claims having the purpose or effect of circumventing that clause would undermine, or at least raise a substantial risk of undermining, that combination of contractual agreements. Once more, this Court considers the predictability of contractual relations to be an important concern.
Thus, although this Court is aware that the parties’ contractual choice of law was limited to the law by which the Agreement and the other Financing Agreements (which would not, by any fair reading, include any alternative agreement or promise that is alleged to have been made) were governed, this Court believes that holding alternative theories of contract or promise to be governed by the law of a different jurisdiction would materially undercut the parties’ choice of the law of Illinois to govern their contract, and would materially impair the Lenders in arguing the relevance of a contractual provision— the Entire Agreement Clause — to which all parties to the Agreement had agreed.
Two other considerations reinforce the Court’s decision in this regard. The first is that the parties’ agreement that their contract would be construed under, and governed by, the law of Illinois suggests that any claims enforcing alternative promises, or otherwise in the nature of contract, likewise should be governed by the law of Illinois, for to do otherwise would lead to a risk of confusion and/or uncertainty. The second is that when Lois and the Lenders signed on to the law of Illinois to govern their contract, they knew or can fairly be charged with knowledge that the law of Illinois included Illinois statutory law applicable to contracts like the Agreement, such as the ICAA. It would be anomalous, and risk undercutting the purpose (or at least effect) of their
*105
choice of law, to deprive them of the consequences of statutory law they might have intentionally wished to invoke.
101
While reliance on these additional considerations (which would apply even in the absence of an integration clause like the Entire Agreement Clause) may be unnecessary here (given the presence of an integration clause whose significance the parties should be free to argue), they provide additional comfort to this Court in dealing with the narrower set of facts with which it is presented here.
2. Breach of Fiduciary Duty (Claim for Relief
#
9)
The claim for breach of fiduciary duty here (and in particular, the threshold allegation that the Lenders owed a fiduciary duty to Lois) is, in this Court’s view, properly regarded as subject to the choice of law that the parties made applicable to their contract, i.e., the law of Illinois. The Committee has disclaimed any contention of fiduciary duty for the period preceding the formation of the Agreement.
102
For the period thereafter, it is at least appropriate, if not essential, to consider the contract that provides the context for the fiduciary duty claim. Where, in that contract, the parties have contractually agreed that they are not undertaking fiduciary duties to each other, as Lois and the Lenders did here (the “Fiduciary Duty Clause”),
103
each has a contractual right— as the Court has ruled above, by the law of Illinois — to argue the relevance of the contractual Fiduciary Duty Clause, and/or to have its effect judicially determined. Thus, determining the existence of the fiduciary duty that is the underpinning of this claim necessarily requires consideration and construction of the Agreement, and/or any relevant policy of the state of Illinois with respect to whether provisions in agreements of the character of the Fiduciary Duty Clause are enforceable.
The Court reaches the same result using traditional conflicts of law analysis, based on an analysis of interests and contacts. If, upon execution of the Agreement, Lois placed trust and confidence in the Lenders, it did so in the context of the Agreement, if not as a consequence of it. Factors relevant to contract issues, when the contract was closed in Illinois (and when pre-contract promises and representations in New York constituting alleged fraud are much less relevant) have a much stronger nexus to the state of Illinois than those applicable to the claims in tort.
104
Additionally, the Court believes that in considering the relevant interests and con
*106
tacts applicable to the claim of breach of fiduciary duty, it is appropriate to consider the risk that applying the law of a jurisdiction other than Illinois would subvert any contractual rights which, at least arguably, are conferred upon parties under the law of Illinois. The claim of breach of fiduciary duty will be governed by the law of Illinois.
S. Unjust Enrichment (Claim for Relief #2)
With one exception, requiring separate discussion, the reasons set forth with respect to the claims for promissory estoppel and for breach of fiduciary duty cause this Court to believe that the claim for unjust enrichment similarly should be governed by the law of Illinois. The exception is the presence of an additional factor— though it likewise suggests application of the law of Illinois.
The additional factor is that at least the great bulk of the consideration paid by Lois to the Lenders — the essence of the claim for unjust enrichment
105
— was paid under the Agreement,
106
and the rights, if any, to the return of that consideration cannot be considered without at least some consideration of the Agreement and its terms. The Court is sensitive to the fact that not all of what is or what might be argued to be consideration or enrichment to the Lenders was paid pursuant to the Agreement — e.g., some was paid back in or about February 1999, as a step incident to going forward with the financing and the drafting of the Agreement and the other Financing Agreements — but the entitlement to those payments (or the return of those payments) is subject to litigation to which the Entire Agreement Clause is or may be relevant. Since the Agreement, including its terms — e.g., the Entire Agreement Clause — is governed by the law of Illinois, once more it would be inappropriate to consider these claims to be subject to the law of another jurisdiction.
A
Bad Faith (Claiuz for Relief
#
7)
The Committee’s bad faith claim, Claim for Relief # 7, is based on an amalgam of pre-and post-Agreement conduct. The Committee alleges that before the execution of the Agreement, the Lenders “wrongfully secured a superior bargaining position through inducement and delay so that they were able to dictate the terms of the credit facility,”
107
and that at that time “Lois had no choice but to rely upon and place its confidence on the relationship with the [Lenders].”
108
The Committee also alleges that after the execution of the Agreement, once Lois had pledged all of its assets, the Lenders placed additional restrictions on Lois’ borrowing so that there was no possibility that Lois could continue its operations,
109
took no steps to provide relief to remediate Lois’ financial crisis (which was caused by the limited availability under the facility), and, instead, imposed greater restrictions on the loan, and eventually declared a default and ceased normal funding.
110
*107
Especially in the absence of an allegation of an independent duty to Lois that was violated, the Court considers the allegations as to the post-Agreement phase to be variants of concerns as to the Lenders’ performance under the Agreement (with or without reliance on an implied covenant of good faith and fair dealing), best regarded as sounding in contract, and subject to the parties’ agreement to apply the law of Illinois to claims of that nature. Likewise, the allegations as to the pre-Agreement phase — again, in the absence of an allegation of an independent duty to Lois that existed at that time and was violated, and with recognition of the allegation of Lois’ reliance upon expectations resulting from its relationship to the Lenders — are analogous, in this Court’s view, to the allegations of promissory estoppel, which the Court has ruled should be governed by the law of Illinois.
Additionally, the viability of these claims cannot be considered without considering the potential effect of the Entire Agreement Clause, § 10.15 of the Agreement, which plainly must be construed under the law of Illinois.
Accordingly, the Court finds that Claim for Relief # 7, Bad Faith, must be considered, along with the other contract claims, under the law of Illinois.
5. Tort Claims (Claims for Relief
#
I (Fraudulent Misrepresentation); # 5 (Fraud); and
#
6 (Negligent Misrepresentation))
In the absence of an effective choice of law applicable to tort claims, this Court looks to the relative contacts applicable to the underlying claims. This analysis is governed by
Restatement
§ 188, and, more fundamentally, the cases construing New York law that hold similarly.
To determine whose law governs the claims sounding in tort in the absence of an applicable choice-of-law provision, this Court, under the principles of
Babcock v. Jackson,
12 N.Y.2d 473 , 240 N.Y.S.2d 743 , 191 N.E.2d 279 (1963), applies an “interest analysis” to determine which jurisdiction- — New York or Illinois — has the greatest interest in such claims.
See, e.g., Krock, supra,
97 F.3d at 645 ;
Bon Jour Group,
1997 WL 401814 at *4. Specifically, this Court focuses on two matters to determine this greater interest: (1) what are the significant contacts, and in which jurisdiction are they located; and (2) whether the purpose of the law is to regulate conduct or allocate loss.
See Krock,
97 F.3d at 645 (New York makes clear that “contacts obtain significance only to the extent that they relate to the policies and purposes sought to be vindicated by the conflicting laws”).
As to the first inquiry — -requiring identification of the significant contacts and the jurisdiction in which they are lo
cated
— Krock is again relevant. The Second Circuit commented in
Krock
that in all interest analyses addressed to an alleged tort, “the significant contacts are, almost exclusively, the parties’ domiciles and the locus of the tort.”
Id.; see also Bon Jour Group,
1997 WL 401814 at *4 (for tort claims, “the significant contacts are the parties’ domiciles and the locus of the tort”).
The second inquiry requires consideration of the purpose of the rule of law whose choice of law is at issue, and in particular, whether its purpose is to regulate conduct or allocate loss. In the case of conduct-regulating laws — rules governing conduct to prevent injuries from occurring,
see Padula v. Lilarn Properties Corp.,
84 N.Y.2d 519, 522 , 620 N.Y.S.2d 310 , 644 N.E.2d 1001, 1002 (1994) — the law of the place of the tort generally will be determinative.
See, e.g., M.H. Segan L.P.
*108
v. Hasbro, Inc.,
924 F.Supp. 512, 522 (S.D.N.Y.1996) (Cote, J.) (where the law of fraudulent misrepresentation regulates conduct, the court should look to the “locus” jurisdiction). By contrast, cases involving loss-allocating rules — rules that prohibit, assign or limit liability after a tort occurs (such as charitable immunity statutes, vicarious liability statutes and contribution rules,
see Padula,
84 N.Y.2d at 522 , 620 N.Y.S.2d 810 , 644 N.E.2d 1001 ) — turn in significant part on the domiciles of the parties.
See Krock,
97 F.3d at 646 .
Here it is plain that we are faced with conduct-regulating rules of law — scrutinizing the conduct of the parties, and determining what is, or is not, actionable conduct. Thus, the Court looks to the choice-of-law rules applicable to rules of law of that character.
As noted, the choice-of-law rules applicable to the determination of conduct-regulating rules of law — such as those determining what is tortious — -look to the law of the place of the tort. For actions sounding in fraud, the substantive law of the state in which the injury was suffered — rather that the state where the fraudulent conduct was initiated — usually governs.
See Sack v. V.T. Low,
478 F.2d 360, 365-66 (2d Cir.1973) (“[W]hen a person sustains loss by fraud, the place of wrong is where the loss is sustained, not where fraudulent representations are made”).
Based on these principles, the law to be applied with respect to the misrepresentation claims turns on the locus of the tort — or, implementing the rules for determining that — where Lois was located and sustained any alleged injury. “[A] cause of action for fraud arises where the loss is sustained and that loss from fraud is deemed to be suffered where its economic impabt is felt, normally the plaintiffs residence.”
Sack,
478 F.2d at 366 .
See also Bon Jour Group,
1997 WL 401814 at *4 (where the location of the alleged tort is not apparent, “the tort is deemed to occur where the party resides and sustained an economic loss resulting from the tort”);
In re Smith Barney, Harris Upham & Co. v. Luckie,
85 N.Y.2d 193, 207 , 647 N.E.2d 1308, 1316 , 623 N.Y.S.2d 800, 808 (1995),
cert. denied,
516 U.S. 811 , 116 S.Ct. 59 , 133 L.Ed.2d 23 (1995) (in context of applying New York’s borrowing statute, N.Y. C.P.L.R. § 202 , fraud claims are governed by the law “where the injury occurred — generally, the place where the investors resided and sustained the economic impact of the loss”).
111
Lois’ headquarters and principal place of business were located in New York.
112
If Lois was wronged as a result of the alleged representations, it was injured in New York.
The law of New York, accordingly,
113
will be applied in determining the adequacy of
*109
the Committee’s allegations for fraud, fraudulent misrepresentation, and negligent misrepresentation.
III.
Legal Sufficiency of Individual Claims
A.
Promissory Estoppel (Claim for Relief
#
1)
Underlying the Committee’s promissory estoppel claim (Claim for Relief # 1) are a number of representations and/or promises allegedly made by the Lenders, upon which the Committee’s further allegations rest, and where the failure to honor the alleged promises is the foundation of the Committee’s claims. The most important of those allegations are that the facility would be in the amount of $45 million; that it would be “substantially similar” as the Sanwa facility; and that it would be made available by March 31, 1999. While in other places, other alleged representations/promises are alleged, going into more detail (e.g., that the financing would permit the funding of both acquisitions and day-to-day operating expenses), they share the common characteristic of representing one or more alleged promises by the Lenders as what the financing facility then under discussion would provide,
114
which the Lenders thereafter failed to honor. Boiled down to their essence, the allegations as a whole are one or more promises, and failures, to lend.
The Lenders argue that under the law of Illinois (which the Court has now held governs the promissory estoppel claim), claims based on such promises are unenforceable, particularly where the alleged promises precede and are inconsistent with the Agreement that Lois and the Lenders ultimately entered into. In this connection, the Lenders call the Court’s attention to the ICAA.
115
Section 2 of the ICAA provides:
*110
[a] debtor may not maintain an action on or in any way related to a credit agreement unless the credit agreement is in writing, expresses an agreement or commitment to lend money or extend credit or delay or forbear repayment of money, sets forth the relevant terms and conditions, and is signed by the creditor and the debtor.
815 ILCS 160/2.
116
Significantly, the ICAA covers not just an action
“on"
a credit agreement; it also covers an action
“in any way related”
to one. By its terms, it covers both actions to enforce the promise itself to lend money (or to engage in the other described lender-borrower acts), and actions that “in any way relate[]” to such a promise. Courts that have considered the effect of the ICAA have construed it in accordance with its plain language, applying the ICAA to bar claims for promissory estoppel in connection with actual or alleged credit agreements, in the procedural context of motions to dismiss and for summary judgment.
See Whirlpool Financial Corp. v. Sevaux,
96 F.3d 216, 225-226 (7th Cir.1996) (affirming summary judgment in favor of lender where ICAA barred affirmative defenses and counterclaims, including, among other things, promissory estoppel);
Help at Home, Inc. v. Medical Capital, L.L.C.,
1999 WL 1269395 , *3, 1999 U.S. Dist. LEXIS 19802 , *7-*9 (N.D.Ill.1999) (granting motion to dismiss claims, including, among others, claims for promissory estoppel, arising out of alleged promise to extend credit, concluding that ICAA barred such claims);
General Electric Capital Corp. v. Donogh Homes, Inc.,
1993 WL 524814 , *3, 1993 U.S. Dist. LEXIS 17690 , *7-*8 (N.D.Ill.1993) (granting lender’s motion to dismiss guarantors’ counterclaims that were based on oral agreement, including, among others, promissory estoppel);
Klem v. First Nat’l Bank of Chicago,
275 Ill.App.3d 64, 66-68 , 211 Ill.Dec. 828 , 655 N.E.2d 1211, 1212-13 (2d Dist.1995) (affirming dismissal of various claims, including promissory estoppel claim).
117
*111
While the Committee is vigorous in its argument that Illinois law should not apply, it makes only a modest showing of a basis for allowing the promissory estoppel claim to survive once Illinois law (and hence the ICAA) is determined to be applicable. As its first point, the Committee cites
Thomas v. National Canada Finance Corp.,
1995 WL 54473 (N.D. Ill. Feb.7 1995) — a diversity case decided under Illinois law (and a relatively early case construing the ICAA, before there was substantial precedent under it) — for the proposition that the ICAA does not bar claims for promissory estoppel. Unquestionably,
Thomas
holds as the Committee says it does.
118
However, it appears that
Thomas
has not been cited or relied on since that time, and the Seventh Circuit (under Illinois law) and a considerable number of Illinois state cases (in its intermediate appellate courts), have held, expressly or impliedly, to the contrary — in connection with promissory estoppel claims and other equitable substitutes for enforcing a promise.
See Whirlpool Financial Corp.,
96 F.3d at 225 (promissory estoppel);
Klem,
275 Ill.App.3d at 66, 67 , 211 Ill.Dec. 828 , 655 N.E.2d at 1212, 1213 (promissory estoppel);
Donogh Homes,
1993 WL 524814 at *2, *3 (promissory estoppel);
McAloon,
274 Ill.App.3d at 763, 211 Ill.Dec. 281 , 654 N.E.2d 1091 (equitable estoppel);
Machinery Transports,
293 Ill.App.3d at 210, 227 Ill.Dec. 283 , 687 N.E.2d 533 (“the fact that an action is grounded in something other than contract law does not change the applicability of the [ICAA]”);
McBride Chevrolet,
267 Ill.App.3d at 372, 204 Ill.Dec. 676 , 642 N.E.2d at 142 (“There is no limitation as to the type of actions by a debtor which are barred by the Act, so long as the action is in any way related to a credit agreement”). For that reason, this Court does not believe that it can appropriately regard
Thomas
as indicative of present Illinois law.
As its second point, the Committee notes Illinois caselaw where one of Illinois’ intermediate appellate courts,
see Machinery Transports,
293 Ill.App.3d at 210 , 227 Ill.Dec. 283 , 687 N.E.2d at 535-536 , “recognizing the potential abuses of a strict application of the [ICAA], has urged the legislature to reconsider the harsh language of the [ICAA] as the ‘strict application of this stature can easily lead to disastrous consequences in the hands of unscrupulous lenders.’ ”
119
Here too the Committee accurately conveys what the
Machinery Transports
court said, but the Committee fails to address the fact that
*112
the
Machinery Transports
said what it did while recognizing that, for better or worse, that was what Illinois law provided — “reluctantly agree[ing]” with earlier Illinois cases holding that “all actions relying on an oral agreement are barred by the [ICAA].” The
Machinery Transports
court said, in essence, that steps to address “disastrous” consequences that could result under this statute were a matter for the legislature, rather than the courts.
120
This Court (particularly as a federal court, sitting in what amounts to a diversity case) must hold similarly.
See McBride Chevrolet,
267 Ill.App.3d at 372-373 , 204 Ill.Dec. 676 , 642 N.E.2d at 142 (“We recognize such an interpretation causes a harsh result for bank customers in some circumstances. The [ICAA] is very broadly worded, however, and dictates such a result”);
McAloon,
274 Ill.App.3d at 765 , 211 Ill.Dec. 281 , 654 N.E.2d at 1095-1096 (same,
citing McBride Chevrolet).
The Committee has failed to point to the requisite writing evidencing the promises it wishes to enforce, and (with the exception of the Agreement itself, which the Committee is not asking the Court to enforce, and which is inconsistent with the promises the Committee seeks to enforce here), the Court can find no document in the record, either in the Complaint or as referred to in the briefing on the motions, that complies with Section 2 of the ICAA. Accordingly, Claim # 1, for promissory es-toppel, must be dismissed for that reason.
Additionally, while, under Illinois law, promissory estoppel can provide an alternative to consideration as a basis for treating a promise as a contractual undertaking,
121
a claim for promissory estoppel cannot be maintained where the alleged promise forming the basis of the claim is followed by a written contract containing different terms.
See All-Tech, supra,
174 F.3d at 869 (affirming preclusion of claim for promissory estoppel where there was an express contract governing the relationship out of which the promise emerged). In
Mack v. Earle M. Jorgensen Co.,
467 F.2d 1177 (7th Cir.1972), where the allegations were rather similar to those here, the Seventh affirmed the District Court’s refusal to submit a promissory estoppel claim to the jury. The Seventh Circuit stated:
We are not aware of any decision applying the doctrine of promissory estoppel where, as in the instant case, the alleged oral agreement or promise was followed by a written contract, the terms of which are in direct conflict with the alleged oral agreement or promise.
Id.
at 1179 .
For that reason too, the promissory es-toppel claim, Claim # 1, is dismissed.
B.
Unjust Enrichment (Claim for Relief #2)
Under Illinois law, the theory of unjust enrichment is based upon a finding of a “contract implied in law,” and requires
*113
a showing that the defendant has voluntarily accepted a benefit which it would be inequitable for him to retain without payment, since the law implies a promise to pay compensation when valuable services are knowingly accepted.
See, e.g., Premier Electrical Construction Co. v. La Salle Nat’l Bank,
132 Ill.App.3d 485, 496 , 87 Ill.Dec. 721 , 477 N.E.2d 1249, 1257 (1st Dist.1984) (setting forth this principle and concluding trial court properly denied plaintiffs leave to amend complaint to include claim for unjust enrichment).
However, a claim for unjust enrichment cannot stand where there is an express contractual agreement. As the Illinois Supreme Court held in
La Throp v. Bell Federal Savings & Loan Association,
68 Ill.2d 375 , 12 Ill.Dec. 565 , 370 N.E.2d 188 (1977),
cert. denied,
436 U.S. 925 , 98 S.Ct. 2818 , 56 L.Ed.2d 768 (1978):
[WJhere there is a specific contract which governs the relationship of the parties, the doctrine of unjust enrichment has no application.
Id.
at 391, 12 Ill.Dec. 565 , 370 N.E.2d 188 .
See also Perez v. Citicorp Mortgage Inc.,
301 Ill.App.3d 413, 425 , 234 Ill.Dec. 657 , 703 N.E.2d 518, 526 (1st Dist.1998) (“The theory of unjust enrichment is based on a contract implied in law and, therefore, does not apply where there is a specific contract that governs the relationship of the parties.”) (citing
People ex rel. Hartigan v. E & E Hauling, Inc.,
153 Ill.2d 473, 497 , 180 Ill.Dec. 271 , 607 N.E.2d 165, 177 (1992) (concluding unjust enrichment was properly dismissed where an express contract governs the relationship of the parties)).
Additionally, the ICAA once more stands in the way of the Committee’s unjust enrichment claim, which, as just noted,
see Premier,
132 Ill.App.3d at 496 , 87 Ill.Dec. 721 , 477 N.E.2d 1249 ;
Perez,
301 Ill.App.3d at 425 , 234 Ill.Dec. 657 , 703 N.E.2d 518 , is based on a contract implied in law. The ICAA defeats all claims that are in any way related to a credit agreement, and the “fact that an action is grounded in something other than contract law does not change the applicability of the Act.”
McAloon, supra,
274 Ill.App.3d at 764 , 211 Ill.Dec. 281 , 654 N.E.2d 1091 ;
accord McBride Chevrolet, supra,
267 Ill.App.3d at 372 , 204 Ill.Dec. 676 , 642 N.E.2d 138 .
The Committee’s claim for unjust enrichment is based upon allegations that the Lenders retained benefits under the Agreement (“receiving high returns on its investment in the credit facility with little risk”), and, possibly, in anticipation of the Agreement’s execution. Either way, the claims for unjust enrichment — which are directly predicated on the Agreement, and plainly “related to” it — cannot survive under the ICAA.
For each of those reasons, the unjust enrichment claim, Claim for Relief # 2, is dismissed.
C.
Fraudulent Misrepresentation and Fraud (Claims for Relief #1 and #5)
To decide the motions here, it is unnecessary to discuss all of the necessary allegations to plead a claim in fraud. The heart of the parties’ dispute, at least on these 12(b)(6) motions, is the nature of the representations/promises that are alleged to be fraudulent.
The Lenders note that the claims of fraud and fraudulent misrepresentation that the Committee asserts here do not relate to assertions as to past or present facts, but to future events — representations as to what would happen in the future, and/or promises to be performed in the future. Such claims are not infrequently referred to as based on “promisso
*114
ry fraud.” Especially given the context in which any such representations/promises were made (discussing the terms of undertakings that would be embodied in financing agreements to be executed down the road), Green Tree argues that claims based on such statements are not actionable.
122
However, under the law of New York, which this Court has now held to cover the tort claims, promissory fraud is actionable. In New York, a statement of present intention is deemed a statement of a material existing fact, sufficient to support a fraud action.
See Channel Master Corp. v. Aluminium Ltd. Sales, Inc.,
4 N.Y.2d 403, 407-408 , 151 N.E.2d 833, 835 , 176 N.Y.S.2d 259, 262 (1958);
Sabo v. Delman,
3 N.Y.2d 155, 160 , 143 N.E.2d 906, 908 , 164 N.Y.S.2d 714, 716 (1957). A variant of that may also be actionable — where the statement is made “with the knowledge that the act will not be performed.”
Landes v. Sullivan,
651 N.Y.S.2d 731, 734 , 235 A.D.2d 657, 660 (3rd Dep’t 1997). As the New York Court of Appeals reiterated in
Channel Master,
quoting
Sabo :
[T]he allegations in the complaint describe a case where a defendant has fraudulently and positively as with personal knowledge stated that something was to be done when he knew all the time it was not to be done and that his representations were false. It is not a case of prophecy and prediction of something which it is merely hoped or expected will occur in the future, but a specific affirmation of an arrangement under which something is to occur, when the party making the affirmation knows perfectly well that no such thing is to occur. Such statements and representations when false are actionable.
4 N.Y.2d at 407-408 , 176 N.Y.S.2d 259 , 151 N.E.2d 833 .
In other words, allegations that a person or entity made a promise with a then-existing intention not to perform it support a cause of action in fraud under New York law. Numerous other cases, in New York’s state and federal courts, have recognized this principle.
See, e.g., Chase Manhattan Bank N.A. v. Perla,
411 N.Y.S.2d 66, 68 , 65 A.D.2d 207, 210 (4th Dep’t 1978) (allegation that defendant made a statement concerning a future act with the knowledge or intention that such act would not occur was sufficient to support action for fraud);
Thayer v. Dial Industrial Sales, Inc.,
85 F.Supp.2d 263, 273 (S.D.N.Y.2000) (Conner, D.J.) (denying motion to dismiss fraud claim where facts alleged defendants made misrepresentations regarding compensation and ownership interest to induce plaintiff to work while knowing they did not intend to fulfill
*115
the promises);
The Matterhorn Group, Inc. v. SMH (U.S.) Inc., (In re Matterhorn Group, Inc.)
2000 WL 1174215 *7 (Bankr.S.D.N.Y.2000) (Bernstein, C.J.) (statement of present intention was a statement of existing fact, and would support a fraud claim).
The Second Circuit, construing New York law, has likewise confirmed this, though stating the principle in the negative.
See Cohen v. Koenig,
25 F.3d 1168, 1172 (2d Cir.1994) (“The failure to fulfill a promise to perform future acts is not ground for a fraud action unless there existed an intent not to perform at the time the promise was made.”);
Murray v. Xerox Corp.,
811 F.2d 118, 121 (2d Cir.1987) (same).
That is the allegation the Committee has made here. After alleging, in ¶ 111 of the Complaint (with an imperfect, but adequate, allegation that “Green Tree led Lois to believe”), that Green Tree in substance represented that Green Tree would provide a credit facility of $45 million under substantially similar terms as the Sanwa facility, the Committee continues:
At the time that Green Tree made such representations, Green Tree knew that the representations were false as it had no intention of entering into a facility of that size or under those terms with Lois.
Cmplt. ¶ 113.
An allegation of that character meets the pleading requirements to state a cause of action under
Channel Master
and
Sabo .
Green Tree’s motion to dismiss the two causes of action
123
premised on this doctrine is denied.
D.
Negligent Misrepresentation (Claim for Relief
#
6)
Green Tree attacks Claim for Relief # 6, for negligent misrepresentation, on two grounds. It argues (1) that the Committee’s allegation of reasonable reliance on the misrepresentations, while pleaded, cannot be taken at face value, because it could not have been reasonable as a matter of law,
124
and (2) that the claim is deficient for its failure to establish that Green Tree had the requisite duty upon which allegations of negligent misrepresentation could be based.
125
*116
Green Tree bases its arguments on the law of Illinois,
126
and for the most part — • despite its contention that New York law governs the tort claims — the Committee responds under the law of Illinois.
127
However, as previously noted, the Court has determined that the viability of the tort claims, including the claim for negligent misrepresentation, must be gauged under the law of New York; Green Tree’s contentions, which have similar basis under New York law, will be assessed accordingly.
1. Reliance
New York law, like that of Illinois, has a requirement that any reliance on alleged negligent misrepresentations be reasonable.
See Hydro Investors, Inc. v. Trafalgar Power, Inc.,
227 F.3d 8, 20 (2d Cir.2000) (identifying, as one of the elements of a negligent misrepresentation cause of action, that “the plaintiff
reasonably
relied”) (emphasis added).
128
Green Tree argues that reliance cannot be reasonable, as a matter of law, where the supposed misrepresentations “contradict the express terms of a written contract.”
129
However, the Committee responds that a distinction should be made between misrepresentations that are made in the context of a
then-existing
contract, and a contract that was not entered into until later. That distinction is understandable, as the reasonableness of any reliance by the recipient of the misrepresentations would have to be based on information as it was then known.
130
But that does not end the
*117
analysis. Green Tree observes that each of
Glass
and Gruen'
Industries
likewise addressed representations made
before
the contradictory contract-was entered into,
131
and points out language in each questioning the legitimacy of reliance at a time when the prospective party knew that a later agreement was to be finalized.
132
That is a point that the Lenders should certainly be free to make, but the question is in what procedural posture in this adversary proceeding. Each of
Glass
and
Gruen Industries
made the above quoted comments not in the context of a 12(b)(6) motion, but rather on summary judgment, after a full factual record had been developed. In essence Green Tree argues, as was successfully argued in
Glass
(but on a summary judgment motion), that any representations or promises were
“implicitly
contingent upon the negotiation of a final contract,” 133 F.3d at 1004 (emphasis added).
133
That might be so here too, and it might have been naive for business people to rely on the representations that are here alleged to have been made, but the Complaint makes allegations of
unconditional
promises, and it is inappropriate— particularly under
Conley
— to dismiss claims of that character on a motion under Rule 12(b)(6). The Court will not dismiss the negligent misrepresentation claim on this ground.
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%. Duty
A more difficult question, however, is raised with respect to the existence of the required duty that triggers liability for negligent misrepresentation.
134
Under New York law, the party charged with the negligent misrepresentations must have a contractual duty to the other, or there must be some other basis for finding the duty in the context of the parties’ dealings.
See White v. Guarente,
43 N.Y.2d 356, 362-363 , 372 N.E.2d 315, 319 , 401 N.Y.S.2d 474, 478 (1977) (the author of the negligent misrepresentations must be “bound by some relation of duty, arising out of contract or otherwise”);
Mallis v. Bankers Trust Co.,
615 F.2d 68, 82 (2d Cir.1980),
cert. denied,
449 U.S. 1123 , 101 S.Ct. 938 , 67 L.Ed.2d 109 (1981) (same);
Islanders, supra,
71 F.Supp.2d at 119 (same, citing
Mallis).
Noting that “not all representations made by a seller of goods or provider of services will give rise to a duty to speak with care,” the New York Court of Appeals observed in
Kimmell, supra,
that:
[Liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified.
89 N.Y.2d at 263, 652 N.Y.S.2d 715 , 675 N.E.2d 450 . The
Kimmell
court went on to say that to impose tort liability, “there must be some identifiable source of a special duty of care.”
Id.
at 264, 652 N.Y.S.2d 715 , 675 N.E.2d 450 . The existence of such “a special relationship” may give rise to “an exceptional duty regarding commercial speech and justifiable reliance on such speech.”
Id.
In the Complaint (other than twice alleging, in conclusory terms, the existence of the required duty, without stating the basis upon which the alleged duty existed),
135
the Committee identified only one source or basis for the required duty: an alleged fiduciary relationship between Green Tree and Lois.
136
However, the Court cannot find the required duty based on this allegation. There is no basis in the record, in either the pre- or post-Agreement phases, for finding that the parties agreed to impose such a fiduciary duty on either of the Lenders; to the contrary, when they executed the Agreement, the Lenders and Lois expressly agreed that no fiduciary duty could be found to exist. Moreover, the Committee itself states that “the Committee does not allege, and is not relying on, a pre-contract fiduciary duty here.”
137
Accordingly, and for the reasons noted below with respect to the “fiduciary duty” claim,
138
the Court finds that the requisite duty cannot be found to be based on the allegation of a fiduciary duty.
There remains the question as to whether the requisite duty can be based on anything else. Here, the factual context is a prospective borrower and lender discussing the terms of a future contract with
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respect to a loan, and where the borrower is allegedly relying on negligent representations as to what the contract then under discussion will provide. Our case does not involve a then-existing contractual or other legal relationship between the parties, a factor that was found to be significant by the New York Court of Appeals in the landmark case of
Ultramares v. Touche,
255 N.Y. 170 , 174 N.E. 441 (1931) (Cardozo, C.J.), which found the requisite duty lacking, insofar as a negligence claim was concerned, with respect to an accountant’s report of its review of a balance sheet— even though it was foreseeable, and even expressly contemplated, that the accountant’s report would be delivered to banks, creditors and other third parties. Nor does our case involve circumstances like those where one makes representations to another in the absence of privity, at the request or for the benefit of one with whom the speaker is in privity — “a relationship so close as to approach that of privity,”
see Prudential
— such as the delivery of a legal opinion or measurement report, where it is contemplated that the plaintiff recipient will rely on it.
Compare Prudential, infra,
80 N.Y.2d at 385, 605 N.E.2d at 322, 590 N.Y.S.2d at 835 (borrower’s counsel who furnished legal opinion had a duty that ran to lender; relief denied for other reasons);
White, supra,
43 N.Y.2d at 362-363, 401 N.Y.S.2d 474 , 372 N.E .2d 315 (accountants auditing limited partnership had a duty to an identifiable group of limited partners);
Glanzer v. Shepard,
233 N.Y. 236, 239 , 135 N.E. 275, 276 (1922) (Cardozo, J.) (public weigher, hired by the seller to weigh goods, realizing that the buyer would rely on his certificate to pay for them, had a duty that ran to buyer). Thus this Court must determine whether in the absence of either of those circumstances,
139
there is anything else upon which to ground the requisite duty.
In a discussion synthesizing the New York law at the time, the Second Circuit, speaking through Judge Friendly, noted in
Mollis
that “[r]ecent years have seen some advance from
Ultramares,
supra, the most restrictive of these classic decisions.” 615 F.2d at 81-82 . The
Mallis
court parsed the requirements for establishing liability for negligent misrepresentations as two: (1) were the allegedly negligent misrepresentations “expressed directly, with knowledge or notice that (they would) be acted upon,” and (2) was the entity charged with the negligent misrepresentations “bound by some relationship of duty, arising out of contract or otherwise”?
Id.
at 82 .
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In
Mallis
(where it was alleged that a bank had made representations at a closing for the sale of stock owned by its borrower and held by the bank as collateral), the Second' Circuit ruled that the District Court should have submitted to the jury the negligent misrepresentation claim, predicated on representations allegedly made by the bank that facilitated the sale and partial repayment of the loan to the bank. While the Second Circuit noted as “true” that a literal reading of the language in
Ultramares
suggested that the New York courts would apply the more restrictive requirement of a formal legal relationship to claims based on negligent misrepresentation, it characterized the reference to a legal relationship in
Ultra-mares
as essentially dictum. In looking at the then-most recent decision of the Court of Appeals,
White ,
the Second Circuit noted that “such conflict as there may be between
Glanzer
and
Ultramares
was not explicitly resolved.”
Id.
at 83. The
Mal-lis
court thought it more appropriate to rely on
Glanzer ,
which was also “more in consonance with the rule in other jurisdictions.”
Id.
In language that spoke in terms of “buyers” and “sellers” — rather than in terms of the party making the representation, the party allegedly relying, and, where applicable, the customer or other party for whose benefit any representations were made — the
Mallis
court displayed a belief that the New York courts would henceforth base decisions on a duty arising “out of contract or otherwise” on “the
Glanzer
notion of prevailing standards and buyer expectations.”
Id.
140
Since then, however, the New York Court of Appeals has continued to underscore the importance of the then-existing relationship between the parties.
See Eiseman, supra,
70 N.Y.2d at 187-188, 518 N.Y.S.2d 608 , 511 N.E.2d 1128 (the relationship of the parties must be such that “the one has the right to rely upon the other for information, and the other giving the information owes a duty to give it with care”). More concretely, the New York Court of Appeals has also stated:
This Court has long held that before a party may recover in tort for pecuniary loss sustained as a result of another’s negligent misrepresentations there must be a showing that there was either actual privity of contract between the parties or a relationship so close as to approach that of privity.
Prudential Insurance Co. of America v. Dewey, Ballantine, Bushby, Palmer & Wood,
80 N.Y.2d 377, 382 , 605 N.E.2d 318, 320 , 590 N.Y.S.2d 831, 833 (1992);
accord Eiseman,
70 N.Y.2d at 188 , 518 N.Y.S.2d 608 , 511 N.E.2d 1128 (stating that “in commercial actions for the negligent preparation of financial reports,” the Court of Appeals had “further required” the actual privity or “something approaching privity” that was thereafter referred to in
Prudential).
141
While that requirement would hardly be inconsistent with the bottom line result in
Mallis
— which in this Court’s
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view would have been decided no differently with the benefit of the later decisions in
Eiseman
and
Prudential
142
— it nevertheless requires courts to continue to focus on the contractual or other relationship between the party making the alleged misrepresentations and the party relying on them at the time the alleged misrepresentations are made. Significantly, “[fjore-seeability of injury does not determine the existence of duty.”
Eiseman,
70 N.Y.2d at 187 , 518 N.Y.S.2d 608 , 511 N.E.2d 1128 .
Does the relationship between a borrower and lender — and a
prospective
borrower and lender at that — satisfy those requirements? Though the New York Court of Appeals has not addressed the issue, numerous other courts have, and they have uniformly held that even an
existing
relationship between borrower and lender does not provide the requisite relationship to impose the duty necessary for a claim of negligent misrepresentation.
See Fab Industries v. BNY Financial Corp.,
675 N.Y.S.2d 77, 78 , 252 A.D.2d 867, 367 (1st Dep’t 1998) (affirming dismissal of negligent misrepresentation claim; a factoring bank did not have the requisite “special or fiduciary relationship” with its customer);
Banque Nationale de Paris v. 1567 Broadway Ownership
Assocs., 625 N.Y.S.2d 152, 154 , 214 A.D.2d 359, 360-361 (1st Dep’t 1995) (affirming grant of summary judgment on negligent misrepresentation defense asserted by guarantor of bank debt against bank);
Durante Bros. & Sons, Inc. v. Flushing Nat’l Bank,
755 F.2d 239, 252 (2d Cir.1985),
cert. denied,
473 U.S. 906 , 105 S.Ct. 3530 , 87 L.Ed.2d 654 (1985) (affirming refusal of District Court to submit negligent misrepresentation claim to jury, in suit by bank customer against bank; under New York law);
Village on Canon v. Bankers Trust Co.,
920 F.Supp. 520, 531-532 (S.D.N.Y.1996) (Koeltl, J.) (dismissing, under Rule 12(b)(6), negligent misrepresentation claim brought by borrower against its lender; under New York law).
As the First Department held in
Banque Nationale de Paris :
There is no fiduciary duty or privity of contract arising out of the contractual arm’s length debtor and creditor legal relationship between a borrower and a bank which would give rise to a cause of action for negligent misrepresentation.
625 N.Y.S.2d at 154 .
143
Durante Bros,
has some significant similarities to this case. There it was alleged that defendant Flushing National Bank negligently represented the Bank’s willingness to lend plaintiff Durante $100,000. Relying on the principles described above, the Second Circuit affirmed a directed verdict in favor of the bank on that claim, finding the requisite duty of care missing. “An ordinary creditor-debtor relationship between bank and customer does not create such a duty of care.” 755 F.2d at 252 .
The Second Circuit went on to note:
In the present case, no special relationship was shown between Durante and the Bank that could support a claim for
*122
negligent representation. Rather, as Durante’s owner testified at trial, Durante was “trying to get more and more credit from the Flushing National Bank,
so eventually we could work ... into
a regular banking relationship with the bank.”
Id.
(emphasis in original). It distinguished
Mollis
on factual grounds, and continued:
Durante has called to our attention no New York case, and we are aware of none, ruling that liability may be imposed on a defendant for a negligent promissory misrepresentation that could not give rise to liability for either fraud or breach of contract, where there was no special relationship between plaintiff and defendant.
Id.
at 252-253 .
Also instructive is
Village on Canon .
There the court considered, on a 12(b)(6) motion to dismiss, claims by borrower Village on Canon (“VOC”) against its lender Bankers Trust alleging negligent misrepresentation arising out of the lender’s failure to extend a bridge loan. According to the complaint, the borrower VOC, which had received a bridge loan from the lender Bankers Trust, “received oral assurances from Bankers Trust that the bridge loan would be extended if permanent financing was not arranged” before the maturity date of the bridge loan. 920 F.Supp. at 525 . These assurances, according to the complaint, were negligently made, and the lender’s failure to extend the loan, as the lender allegedly promised to do (combined with certain other allegedly wrongful conduct) caused the failure of the borrower’s real estate venture.
The allegations were held to fail to state a claim upon which relief could be granted. The requirement of a “special relationship between the parties” was not satisfied.
Id.
at 531-532 . Once more, based on the principles described above, the allegations failed to establish the requisite duty.
144
Durante Bros,
and
Village on Canon
found the requisite relationship lacking even though, in each case, the borrower was
already
in contractual privity with the lender, by reason of an earlier loan. In
Durante Bros.,
the $100,000 to be loaned was “in addition to amounts already loaned to it,” 755 F.2d at 244 , and in
Village on Canon ,
the allegedly negligent representation was in the context of an extension of the then-existing loan agreement between borrower and lender.
See
920 F.Supp. at 525-526 . In our case, at the time the allegedly negligent representations were made, Lois and the Lenders had not even come into the borrower-lender relationship that was held to be inadequate in those cases. This case, then, is an even weaker case for finding the necessary relationship, and if the courts in
Durante Bros,
and
Village on Canon
were not in a position to find the requisite duty there, this Court
*123
plainly is not in a position to find the requisite duty here.
145
The Court will dismiss Claim # 6, for negligent misrepresentation, for failure to show the requisite duty.
8. Representations as to the Future
The negligent misrepresentation claim must also be dismissed for another reason. While promissory fraud may be actionable if one makes a promise intending not to perform on it, allegedly negligent misrepresentations as to what will happen in the future have been treated differently by the New York courts. It has been repeatedly held in New York that “[promises of future conduct are not actionable as negligent misrepresentations.”
See Murray, supra,
811 F.2d at 123 ;
Hydro Investors, supra,
227 F.3d at 20-21 (“[T]he alleged misrepresentation must be factual in nature and not promissory or relating to future events that might never come to fruition.”);
Sheth v. New York Life Insurance Co.,
709 N.Y.S.2d 74, 75 , 273 A.D.2d 72, 74 (1st Dep’t 2000) (“The purported misrepresentations relied upon by plaintiffs may not form the basis of a claim for fraudulent and/or negligent misrepresentation since they are conclusory and/or constitute mere puffery, opinions of value or future expectations.”);
Bango v. Naughton,
584 N.Y.S.2d 942, 944 , 184 A.D.2d 961, 963 (3rd Dep’t 1992) (negligent misrepresentation claim was properly dismissed for failure to state a claim because the alleged representations were “mere expressions of future expectation”);
Margrove Inc. v. Lincoln First Bank of Rochester,
388 N.Y.S.2d 958, 960 , 54 A.D.2d 1105, 1107 (4th Dep’t 1976) (“The alleged negligent misstatements all relate to promised future conduct, if misstatements they be, and there is a lack of any element of misrepresentation as to an existing material fact so as to come within the doctrine of negligent misrepresentation .... ”).
Here the fraud claims, which have not been dismissed, cover the possibility that Green Tree’s promises of $45 million in financing, under the terms of the earlier financing, were made with the intent not to perform them, and/or knowing that they could not happen. Here, however, the claim is not one of fraud, but of negligence — that Green Tree failed to ascertain facts which, if discovered, would have caused it to have ascertained that its predictions of future events were unrealistic. That is a very different thing, and is not actionable in New York. The negligent misrepresentation claim is dismissed on that ground as well.
E.
Breach of the Implied Covenant of Good Faith and Fair Dealing (Claim for Relief
#
8)
Under the law of Illinois, which this Court has now held to be appli
*124
cable to this claim,
146
every contract contains an implied covenant of good faith and fair dealing.
See Echo, supra,
121 F.3d at 1106 ;
RTC v. Holtzman,
248 Ill.App.3d 105, 112 , 187 Ill.Dec. 827 , 618 N.E.2d 418, 424 (1st Dist.1993). These implied covenants may come into play where one party to a contract is vested with broad contractual discretion and requires that party to exercise that discretion “reasonably and with proper motive, not arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectations of the parties.”
Id.; accord Perez, supra,
301 Ill.App.3d at 424 , 234 Ill.Dec. 657 , 703 N.E.2d 518 (quoting Holtzman);
Voyles v. Sandia Mortgage Corp.,
311 Ill.App.3d 649, 655 , 244 Ill.Dec. 192 , 724 N.E.2d 1276, 1280 (2d Dist.2000) (quoting
Perez ,
and noting that it quoted
Holtzman); TIAA-LaSalle, supra,
295 Ill.App.3d at 73, 229 Ill.Dec. 408 , 691 N.E.2d 881 (same).
As construed in Illinois, the term “good faith” has been held to refer to “an implied undertaking not to take opportunistic advantage in a way that could not have been contemplated at the time of the drafting, and which therefore was not resolved explicitly by the parties.”
Kham & Nate’s Shoes No. 2, Inc. v. First Bank of Whiting,
908 F.2d 1351, 1357 (7th Cir.1990) (setting forth this principal in the context of discussing inequitable conduct).
While under the law of Illinois there thus is doctrine, based on the implied covenant of good faith and fair dealing, upon which, given a proper state of facts, the Committee could proceed, there are nevertheless limits to the application of that doctrine. For one, it has been held in Illinois that courts will not permit implied agreements to overrule or modify the express contract of the parties, since “[express covenants abrogate the operation of implied covenants.”
Holtzman,
248 Ill.App.3d at 113 , 187 Ill.Dec. 827 , 618 N.E.2d 418 (affirming lower court and concluding affirmative defense of breach of the covenant of good faith and fair dealing was inapplicable).
147
For another, where an alleged breach of such a duty is based upon an alleged oral credit agreement, courts have declined to extend the implied duty of good faith and fair dealing to that alleged oral agreement.
TIAA-LaSalle,
295 Ill.App.3d at 74 , 229 Ill.Dec. 408 , 691 N.E.2d 881 (declining to extend the implied duty of good faith and fair dealing where party was attempting to “bootstrap the alleged breach of a duty of good faith and fair dealing stemming from the written credit agreement into an alleged breach of a duty of good faith and fair dealing arising from the purported oral credit agreement”);
Holtzman,
248 Ill.App.3d at 113 , 187 Ill.Dec. 827 , 618 N.E.2d 418 (disallowing defendants’ affirmative defense of a breach of the covenant of good faith and fair dealing where defendants’ offer was not based on clear and concrete terms but rather rested upon speculation).
In our case, the Committee has alleged a variety of acts, after the execution of the Agreement,
148
that the Commit
*125
tee has alleged to be violative of the implied duty of good faith and fair dealing. In particular, the Committee alleges that:
Notwithstanding their commitment in the [A]greement, their knowledge of the condition of the business and despite Lois’ efforts to reach an amicable resolution to Lois’ financial situation, the [Lenders] in breach of the convenant [sic.] of good faith and fair dealing in the agreements, unjustifiably and without warning increased the borrowing restrictions, declared a technical default and eventually ceased normal funding.
(Cmplt-¶ 160).
With respect to this allegation, it is premature and inappropriate to speculate what the evidence will show. It is possible, however, that the Committee could show that the Lenders did not in fact exercise discretion afforded to

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/1916413. Public record. Not legal advice.