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Classic Cheesecake Co., Inc. v. JPMorgan Chase Bank, N.A. - 546 F.3d 839 (7th Cir. 2008)


Courts resist efforts by a plaintiff to get around limitations imposed by contract law by recasting a breach as a tort. With specific reference to efforts to get around the statute of frauds, the Indiana Court of Appeals has explained that the substance of an action, rather than its form, controls whether a particular statute has application in a particular lawsuit. The Indiana statute of frauds applies to an agreement by a bank to loan money.


Plaintiff corporation sued defendant bank pursuant to the Equal Credit Opportunity Act, 15 U.S.C.S. § 1691 et seq.; the claim was resolved in its favor, but it received only modest relief. The corporation appealed from the U.S. District Court for the Southern District of Indiana, Indianapolis Division's dismissal of its supplemental claims pursuant to 28 U.S.C.S. § 1367 under Fed. R. Civ. P. 12(b)(6). Indiana courts had held that an oral agreement that Indiana's statute of frauds, Ind. Code § 26-2-9-5, would otherwise render unenforceable created a binding contract if failing to enforce the agreement would produce an unjust and unconscionable injury and loss. The corporation averred that it incurred loss as it relied on a loan officer's oral representations that a loan it would be approved. Section 26-2-9-5 required agreements to lend money to be in writing. 


Did the bank's conduct in making an oral promise to make a loan inflict an unjust and unconscionable injury and loss?




The federal court of appeals affirmed. The weight of the unjust and unconscionable injury and loss doctrine fell on the gravity of the injury. The more protracted the period during which reliance costs were incurred, the stronger the inference that the oral promise was as the corporation represented. The duration of reliance, though, was much shorter than in other cases, and it was more easily imagined as based on hope than on a promise. Further, reliance was not reasonable. Thus, the case involved routine promissory estoppel, which was not enough to defeat the statute of frauds.

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