Background

• Lyon sued Illinois Paper in federal court in Illinois for breach of a partnership contract claiming Illinois Paper warranted that all reviewed lease transactions would be valid and enforceable.
• The partnership agreement, governed by Minnesota law, gave Lyon a first-right review of Illinois Paper’s maintenance-inclusive leases.
• Illinois Paper warranted and indemnified Lyon against losses from breaches of the representations and warranties.
• A Village of Bensenville lease, 6-year term, was not allowed under Illinois law (municipal leases capped at 5 years), leading to nonpayment.
• District court treated Lyon’s claim as a breach of warranty based on a representation of law; Seventh Circuit certified questions on reliance.
• Minnesota Supreme Court reformulated the certified questions to focus on whether a breach of a contractual representation of future legal compliance is actionable without proof of reliance, and answered affirmatively.

Issues

Key Cases Cited

• Parkside Mobile Estates v. Lee, 270 N.W.2d 758 (Minn. 1978) (representation of law actionable in contract context)
• Park Nicollet Clinic v. Hamann, 808 N.W.2d 828 (Minn. 2011) (reliance not required in breach of contract; subsequent authorities cited)
• Midland Loan Fin. Co. v. Madsen, 217 Minn. 267 ( Minn. 1944) (reliance as element in warranty claims; distinguishes contract vs. tort)
• Pieh v. Flitton, 170 Minn. 29 (Minn. 1927) (misrepresentation of law generally not actionable in contract context)
• Baehr v. Penn-O-Tex Oil Corp., 258 Minn. 533 (Minn. 1960) (elements of contract in promises not requiring reliance)
• Alley Construction Co. v. State, 300 Minn. 346 (Minn. 1974) (reliance in warranty context discussed in earlier line of cases)
• Davis v. Re-Trac Mfg. Corp., 276 Minn. 116 (Minn. 1967) (distinguishes tort reliance from contract-based claims)