## Facts

- NewSpin Sports, LLC developed “SwingSmart,” a sensor module for sports equipment that analyzes swing metrics.
- Arrow Electronics, Inc. met with NewSpin multiple times in 2010–2011 regarding component requirements and Arrow’s ability to supply them.
- NewSpin alleged Arrow represented it understood SwingSmart’s specifications and had successfully provided similar components to other customers.
- In August 2011, the parties entered a Materials and Manufacturing Management Agreement under which Arrow would use “reasonable commercial efforts” to procure components, manage subcontractors, assemble, test, and ship completed units pursuant to NewSpin’s purchase orders.
- NewSpin issued purchase orders in late 2011; Arrow shipped components in mid-2012.
- NewSpin alleged the components were defective and nonconforming; it built about 7,500 units, shipped 3,219, and claimed 697 were wholly inoperable.
- NewSpin alleged damages including payments to Arrow of $598,488, about $200,000 in support/testing/repair costs, and harm to reputation and vendor relationships.
- NewSpin also alleged Arrow made post-shipment statements that concealed the defects and misled NewSpin about their causes and remediation.
- NewSpin sued in January 2017 asserting contract, warranty, unjust enrichment, negligent misrepresentation, and fraud theories; the district court dismissed all claims as untimely and denied reconsideration and leave to amend.

## Issues

1. Whether Illinois (the forum) limitations law applies despite a contractual New York choice-of-law clause.
2. Whether the parties’ agreement was predominantly for the sale of goods, triggering Article 2’s four-year statute of limitations.
3. Whether unjust enrichment and negligent misrepresentation, as pleaded, were duplicative of time-barred contract claims.
4. Whether the fraud claims were governed by the UCC four-year period or Illinois’s five-year fraud limitations period, and whether they stated an independent tort.
5. Whether the district court abused its discretion in denying leave to amend.

## Decision

- The court applied Illinois limitations rules because statutes of limitations are treated as procedural under the forum’s choice-of-law approach.
- The court held the agreement was predominantly for the sale of goods; the UCC four-year limitations period barred NewSpin’s contract-based claims filed more than four years after the 2012 delivery.
- The court affirmed dismissal of unjust enrichment and negligent misrepresentation as pleaded because they were duplicative of the time-barred contract theory.
- The court reversed dismissal of the fraud claims, holding Illinois’s five-year fraud limitations period applied and the allegations described misrepresentations of present fact collateral to contract performance.
- The court reversed the denial of leave to amend and remanded for further proceedings.

## Legal Principles

- In diversity cases applying forum choice-of-law rules, statutes of limitations are generally governed by the law of the forum as a procedural matter, notwithstanding a contractual choice-of-law clause.
- A mixed goods-and-services contract is governed by UCC Article 2 when its predominant purpose is the sale of goods; the UCC limitations period applies to claims based on nonconforming goods.
- Quasi-contract and tort claims that merely restate a contract-performance dispute may be treated as duplicative and dismissed with the contract theory.
- Fraud may proceed as an independent tort when based on misrepresentations of present fact collateral to the contract, rather than merely a failure to perform contractual promises; such claims are subject to the limitations period applicable to fraud.
- Leave to amend under Rule 15(a) should be freely granted absent adequate reasons to deny it; denying amendment can be an abuse of discretion when proposed changes could cure pleading and theory defects early in the case.

## Conclusion

The Seventh Circuit held that Illinois limitations law controlled, affirmed dismissal of time-barred UCC-governed contract claims and duplicative quasi-contract/tort claims as pleaded, revived timely fraud claims based on collateral misstatements of present fact, and ordered that NewSpin be allowed to amend its complaint on remand.


NewSpin Sports, LLC v. Arrow Elecs., Inc., 910 F.3d 293 (7th Cir. 2018)