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Judges: Integration clause doesn’t preclude introduction of parol evidence

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The 7th Circuit Court of Appeals held Tuesday that in the absence of a factual inquiry, the mere presence of an integration clause doesn’t preclude a party from introducing parol evidence that it was fraudulently induced to enter into the agreement as a whole. The decision came in a dispute involving a settlement agreement that one party sought to invalidate based on claims of fraudulent inducement.

Judson Atkinson Candies Inc. and Kenray Associates Inc. settled two lawsuits through an agreement that required Kenray to pursue its insurer for coverage of Atkinson’s claims that Kenray failed to satisfy certain technology agreements and representations. But after Kenray’s insurer Hoosier Insurance Co. won judgments that it did not have to provide coverage for Atkinson’s claims, Atkinson alleged that it had been fraudulently induced to enter into the agreement by relying on oral representations made by Kenray that its insurer would cover the claims when in fact it already knew it would not.

As part of the settlement, the parties entered into a covenant not to execute, which contained language the District Court concluded was an integration clause: “The parties agree this agreement represents the parties’ sole agreement.”

Magistrate Judge William G. Hussmann Jr. held that because the covenant contained an unambiguous integration clause, parol evidence could not be considered to vary the terms of the agreement. But if Atkinson could show there was fraud in the inducement specific to the integration clause, then it may still be able to circumvent the parol evidence rule and prevail on its claim.  

“The question before us then lies at the intersection of … two legal principles. To wit, where a party to a contract alleges fraudulent inducement and the contract in question has a valid integration clause, must the party demonstrate that it was fraudulently induced to agree to the integration clause itself before it can rely upon prior representations to vitiate the contract, or is it sufficient for a party to show that it was fraudulently induced to enter into the contract as a whole? Relying upon Circle Centre(Dev. Co. v. Y/G Ind., L.P., 762 N.E.2d 176, 179 (Ind. Ct. App. 2002), the district court found that, before Atkinson could invoke any parol evidence, it had to show that it had been fraudulently induced to agree to the integration clause itself. Because we believe that this is too narrow a reading of Indiana law, we reverse,” wrote Judge John Z. Lee, of the Northern District of Illinois, sitting by designation.

“The imposition of an inflexible rule that would require a party claiming fraudulent inducement to demonstrate that he or she was fraudulently induced to agree to the integration clause itself would unreasonably restrict the trial court’s ability to conduct the factual analysis that the Indiana Supreme Court requires,” he continued in Judson Atkinson Candies, Incorporated v. Kenray Associates, Incorporated, Charles A. McGee and Kenneth J. McGee, 12-1035, 12-1036.

The Circuit Court ruled that by invoking a categorical rule without conducting a case-by-case analysis,  the magistrate judge’s decision is inconsistent with the Indiana Supreme Court’s pronouncements in Franklin v. White, 493 N.E.2d 161, 166 (Ind. 1986) and the Indiana Court of Appeals decisions of Prall v. Ind. Nat’l Bank, 627 N.E.2d 1374, 1378 (Ind. Ct. App. 1994), and its progeny.  

The case goes back to the District Court for further proceedings.

 

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  1. Call it unauthorized law if you must, a regulatory wrong, but it was fraud and theft well beyond that, a seeming crime! "In three specific cases, the hearing officer found that Westerfield did little to no work for her clients but only issued a partial refund or no refund at all." That is theft by deception, folks. "In its decision to suspend Westerfield, the Supreme Court noted that she already had a long disciplinary history dating back to 1996 and had previously been suspended in 2004 and indefinitely suspended in 2005. She was reinstated in 2009 after finally giving the commission a response to the grievance for which she was suspended in 2004." WOW -- was the Indiana Supreme Court complicit in her fraud? Talk about being on notice of a real bad actor .... "Further, the justices noted that during her testimony, Westerfield was “disingenuous and evasive” about her relationship with Tope and attempted to distance herself from him. They also wrote that other aggravating factors existed in Westerfield’s case, such as her lack of remorse." WOW, and yet she only got 18 months on the bench, and if she shows up and cries for them in a year and a half, and pays money to JLAP for group therapy ... back in to ride roughshod over hapless clients (or are they "marks") once again! Aint Hoosier lawyering a great money making adventure!!! Just live for the bucks, even if filthy lucre, and come out a-ok. ME on the other hand??? Lifetime banishment for blowing the whistle on unconstitutional governance. Yes, had I ripped off clients or had ANY disciplinary history for doing that I would have fared better, most likely, as that it would have revealed me motivated by Mammon and not Faith. Check it out if you doubt my reading of this, compare and contrast the above 18 months with my lifetime banishment from court, see appendix for Bar Examiners report which the ISC adopted without substantive review: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS

  2. Wow, over a quarter million dollars? That is a a lot of commissary money! Over what time frame? Years I would guess. Anyone ever try to blow the whistle? Probably not, since most Hoosiers who take notice of such things realize that Hoosier whistleblowers are almost always pilloried. If someone did blow the whistle, they were likely fired. The persecution of whistleblowers is a sure sign of far too much government corruption. Details of my own personal experience at the top of Hoosier governance available upon request ... maybe a "fake news" media outlet will have the courage to tell the stories of Hoosier whistleblowers that the "real" Hoosier media (cough) will not deign to touch. (They are part of the problem.)

  3. So if I am reading it right, only if and when African American college students agree to receive checks labeling them as "Negroes" do they receive aid from the UNCF or the Quaker's Educational Fund? In other words, to borrow from the Indiana Appellate Court, "the [nonprofit] supposed to be [their] advocate, refers to [students] in a racially offensive manner. While there is no evidence that [the nonprofits] intended harm to [African American students], the harm was nonetheless inflicted. [Black students are] presented to [academia and future employers] in a racially offensive manner. For these reasons, [such] performance [is] deficient and also prejudice[ial]." Maybe even DEPLORABLE???

  4. I'm the poor soul who spent over 10 years in prison with many many other prisoners trying to kill me for being charged with a sex offense THAT I DID NOT COMMIT i was in jail for a battery charge for helping a friend leave a boyfriend who beat her I've been saying for over 28 years that i did not and would never hurt a child like that mine or anybody's child but NOBODY wants to believe that i might not be guilty of this horrible crime or think that when i say that ALL the paperwork concerning my conviction has strangely DISAPPEARED or even when the long beach judge re-sentenced me over 14 months on a already filed plea bargain out of another districts court then had it filed under a fake name so i could not find while trying to fight my conviction on appeal in a nut shell people are ALWAYS quick to believe the worst about some one well I DID NOT HURT ANY CHILD EVER IN MY LIFE AND HAVE SAID THIS FOR ALMOST 30 YEARS please if anybody can me get some kind of justice it would be greatly appreciated respectfully written wrongly accused Brian Valenti

  5. A high ranking Indiana supreme Court operative caught red handed leading a group using the uber offensive N word! She must denounce or be denounced! (Or not since she is an insider ... rules do not apply to them). Evidence here: http://m.indianacompanies.us/friends-educational-fund-for-negroes.364110.company.v2#top_info

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