## Facts

- Classic Cheesecake Company, an Indiana bakery, sought capital to expand distribution to prospective Las Vegas hotel and casino customers.
- On July 27, 2004, Classic’s principals approached JPMorgan Chase Bank to seek an SBA-guaranteed loan; SBA approval was required and Classic stressed urgency.
- A bank vice president requested financial documents and, according to Classic, orally indicated the loan would be approved if a principal’s defaulted, federally backed student loans were paid off.
- On September 17, 2004, the vice president told Classic the loan was “a go,” but Classic took steps consistent with understanding approval was not final, including asking that repayment confirmations be sent to the bank to speed review.
- Internally, Chase personnel expressed concerns about Classic’s leverage, cash flow, and profitability.
- Approximately two and a half months after the application, Chase denied the loan.
- Classic alleged it relied on the oral assurances by paying off the student loans and delaying efforts to obtain alternative financing, claiming more than $1 million in losses from missed opportunities and delay.
- Classic’s federal ECOA claim was resolved in its favor with modest relief; the dispute on appeal concerned dismissal of supplemental Indiana state-law reliance claims under Rule 12(b)(6).

## Issues

1. Whether Indiana’s credit-agreement statute of frauds barred enforcement of the bank’s alleged oral assurances regarding loan approval.
2. Whether Classic’s alleged reliance losses constituted the “unjust and unconscionable injury and loss” required under Indiana law to enforce an oral agreement otherwise within the statute of frauds.

## Decision

- The Seventh Circuit affirmed dismissal of the supplemental state-law claims under Rule 12(b)(6).
- The court held that, even assuming the alleged oral assurances were made, Classic’s allegations did not show the exceptional “unjust and unconscionable injury and loss” necessary to avoid the statute of frauds.
- The court emphasized the short duration of the alleged reliance and that Classic understood SBA approval was still pending.
- The court concluded that ordinary commercial reliance and lost-opportunity damages from an unconsummated loan negotiation were insufficient to override the writing requirement.

## Legal Principles

- Under Indiana law, a credit agreement falling within the statute of frauds generally must be in writing to be enforceable.
- Indiana recognizes a narrow exception permitting enforcement of an oral agreement only when nonenforcement would cause “unjust and unconscionable injury and loss.”
- Routine promissory-estoppel-type reliance in commercial lending, especially over a short period and where approval remains contingent (including third-party approval), typically does not satisfy the exception.

## Conclusion

The court held that Indiana’s statute of frauds barred Classic’s reliance-based state claims because the alleged harms from paying off student loans and delaying alternative financing during a brief approval process did not amount to the extraordinary injury required to enforce an unwritten loan commitment.


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