DF Activities Corporation v. Brown
851 F.2d 920 (1988)
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Rule of Law:
Under the Uniform Commercial Code's Statute of Frauds, a plaintiff may not compel discovery to seek a judicial admission of an oral contract once the defendant has submitted a sworn affidavit denying that a contract for sale was made.
Facts:
- DF Activities Corporation (DF), through its art director Sarah-Ann Briggs, negotiated with Dorothy Brown in September and October 1986 to purchase a Willits Chair designed by Frank Lloyd Wright.
- DF alleges that in a phone conversation on November 26, 1986, Brown orally agreed to sell the chair to DF for $60,000.
- Following the alleged agreement, Briggs sent Brown a confirmation letter and a check for $30,000 as the first installment.
- Two weeks later, Brown returned the letter and check to DF.
- Brown included a handwritten note on the bottom of the returned letter stating, 'I have made other arrangements for the chair. It is no longer available for sale to you.'
- Subsequently, Brown sold the Willits Chair to another party for $198,000.
Procedural Posture:
- DF Activities Corporation sued Dorothy Brown for breach of contract in federal district court.
- Brown filed a motion to dismiss the lawsuit under Fed. R. Civ. P. 12(b)(6), arguing the alleged oral contract was unenforceable under the UCC Statute of Frauds.
- Brown attached a sworn affidavit to her motion, in which she denied ever agreeing to sell the chair to DF.
- The district court granted Brown's motion and dismissed the case.
- DF Activities Corporation, as the appellant, appealed the dismissal to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does the judicial admission exception to the UCC Statute of Frauds (UCC § 2-201(3)(b)) permit a plaintiff to continue with discovery after the defendant has submitted a sworn affidavit denying the existence of the alleged oral contract?
Opinions:
Majority - Posner, Circuit Judge
No. The judicial admission exception to the Statute of Frauds does not allow a plaintiff to proceed with discovery once the defendant has submitted a sworn affidavit denying the contract's existence. The purpose of the Statute of Frauds is to protect parties from the cost and burden of defending against claims of unacknowledged oral promises. While a simple denial in a pleading may not be enough to bar discovery, a sworn affidavit is conclusive. The possibility that a defendant, having already denied a contract under oath, would reverse their position and admit to the contract (and thus, potentially, to perjury) in a deposition is too remote to justify subjecting the parties to further, likely futile, legal proceedings. Once the defendant has denied the contract under oath, the 'safety valve' of the judicial admission exception is closed.
Dissenting - Flaum, Circuit Judge
No. A defendant's sworn denial should not create an absolute bar to further discovery; rather, the district court should have discretion to decide if discovery is warranted. The majority’s bright-line rule effectively renders the 'testimony' portion of the judicial admission exception meaningless, as it prevents a plaintiff from ever having the opportunity to question the defendant under oath to elicit an involuntary admission. In this specific case, Brown's affidavit was not a conclusive denial, as she stated she did not 'recall' the key conversation. This ambiguity justified further discovery, and the district court abused its discretion by disallowing it. The case should be remanded to permit DF to depose Brown.
Analysis:
This decision establishes a firm, bright-line rule in the Seventh Circuit that significantly strengthens the Statute of Frauds as a defense. It prioritizes judicial efficiency and the protection of defendants from protracted litigation over a plaintiff's opportunity to probe for a judicial admission. By allowing a sworn affidavit to terminate a case at the motion-to-dismiss stage, the ruling creates a powerful procedural tool for defendants and raises the evidentiary bar for plaintiffs seeking to enforce oral contracts for goods valued at over $500.
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