Mohawk Spring Div. of MW Indus., Inc. v. ZD Integrated Circuits, Inc.

MOHAWK SPRING DIVISION OF MW INDUSTRIES, INC., Plaintiff, v. ZD INTEGRATED CIRCUITS, INC., Defendant.

Case No. 17-cv-9227

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

December 10, 2018

Judge John Robert Blakey

MEMORANDUM OPINION AND ORDER

Plaintiff Mohawk Spring Division of MW Industries, Inc., a manufacturer of springs and wires, sued ZD Integrated Circuits, Inc. (ZDI), a seller and distributer, for failing to make payments under a supply agreement (the Supply Agreement). [25]. Plaintiff brings a two-count complaint: Count I alleges that Defendant breached the Supply Agreement; Count II alleges, in the alternative, that Defendant was unjustly enriched by selling Plaintiff's products without paying Plaintiff for them. Id. The parties have cross-moved for summary judgment on Plaintiff's claims. For the reasons explained below, this Court grants Plaintiff's motion [32] and denies Defendant's motion [30].

I. Background

The facts in this section come from Defendant's statement of undisputed facts [31] and Plaintiff's statement of undisputed facts [33].

As a preliminary matter, this Court has broad discretion to enforce the local rules governing summary judgment. See, e.g., Petty v. City of Chicago, 754 F.3d 416, 420 (7th Cir. 2014); Benuzzi v. Bd. of Educ. of Chi., 647 F.3d 652, 655 (7th Cir. 2011). Under the local rules, a party's responses to the other party's statements of fact must contain "specific references" to record evidence to justify any denial. Local R. 56.1(b)(3); see also Malec v. Sanford, 191 F.R.D. 581, 584 (N.D. Ill. 2000). Failure to respond to a statement results in the district court admitting the uncontroverted statement as true. Raymond v. Ameritech Corp., 442 F.3d 600, 608 (7th Cir. 2006).

Here, Defendant has failed to respond to paragraphs 1-6, 8-10, 12-22, 24-31, 34, and 38-52 of Plaintiff's statement of facts. Compare [33] with [35]. Thus, this Court deems those facts admitted.

A. The Parties

Defendant is a Florida corporation that brokers technical parts and components and provides supply chain services to manufacturers. [31] ¶ 1. Craig Zurman identifies himself as Defendant's sole director and officer. Id. ¶ 4. Plaintiff manufactures and sells various types of springs and wire forms. Id. ¶ 2.

In May 2016, Plaintiff's customer—Engineer Controls International, LLC (ECI)—announced a new supply chain initiative and engaged Defendant to act as a middle-man between it and Plaintiff. [33] ¶ 8. Pursuant to that initiative, ECI required that Defendant source products from Plaintiff for ultimate sale to ECI. Id.

B. Trexler

ECI introduced Plaintiff to Defendant's representative Eddie Trexler. Id. ¶ 11. Although Trexler was Defendant's General Sales Manager, Plaintiff initiallyunderstood Trexler to be Defendant's President. Id. ¶¶ 11, 19. In July 2016, Plaintiff began working with Trexler to fulfill ECI's orders. Id. ¶ 10.

Throughout the parties' relationship, Trexler made all decisions and issued all directives on behalf of Defendant. Id. ¶ 13. Plaintiff's only other contacts with Defendant were Defendant's warehouse staff and Claudia Walker, Trexler's assistant. Id. ¶ 14. Plaintiff never met, spoke with, or was even aware of Craig Zurman. Id.

And, although Trexler spoke periodically with Zurman, Zurman allowed Trexler to manage his accounts, including—primarily—Defendant's relationships with Plaintiff and ECI. Id. ¶ 23. Trexler did not submit sales, orders, or payments to Zurman for approval; rather, Trexler made payments and issued wire transfers on his own. Id. ¶ 24. Trexler also managed and directed all aspects of product purchases and sales between Plaintiff and ECI, including pricing, shipping, delivery, managing the inspection of products, negotiating product specifications between ECI and Plaintiff, and managing purchase orders and invoices. Id. ¶ 27.

Moreover, Zurman admitted that he never had any contact with Plaintiff; instead, he "entrusted" the relationship with Plaintiff to Trexler. Id. ¶ 34; [33-5] at 19. And, from Plaintiff's perspective and course of dealing, Trexler remained in charge of Defendant's relationship with Plaintiff. [33-1] at 3.

C. Defendant Falls Behind On Payments To Plaintiff

In August 2017, Plaintiff contacted Trexler because Defendant was significantly past due on payments it owed to Plaintiff. [33] ¶ 29; [33-1] at 3. At that time, Defendant owed Plaintiff approximately $1.1 million, and it was 60 daysoverdue. [33] ¶ 29. Plaintiff requested immediate payment and informed Trexler that it intended to withhold future shipments until Defendant paid the past due balance. Id. ¶ 30.

Trexler then called Zurman, informing him that Defendant was in arrears and that Plaintiff would not ship additional products unless Defendant began payment. [31] ¶ 12. Zurman instructed Trexler to discuss a repayment plan with Plaintiff, id. ¶ 13, and agreed to Trexler's suggestion to pay Plaintiff $200,000 to put an end to Plaintiff's shipping hold, [33-5] at 21. Zurman never spoke with Plaintiff directly about Defendant's arrearage; rather, he "entrusted" the parties' relationship to Trexler and, to that end, told Trexler to "fix it." Id.

Plaintiff and Trexler then negotiated payment schedules to address the past due balance; eventually, the parties agreed to a payment schedule, and Defendant resumed payments. [33] ¶ 31.

C. The Parties Execute The Supply Agreement

The parties next entered into the Supply Agreement, which finalized Defendant's payment terms and set forth the terms and conditions for future sales. Id. ¶ 35; [33-4]. The Supply Agreement had an August 25, 2017 effective date, and the parties' representatives signed it on September 7, 2017. Id. Zurman testified that he had no knowledge of the Supply Agreement until this lawsuit and that he fired Trexler upon learning of both. [31] ¶¶ 15, 17.

The relevant provisions of the Supply Agreement are as follows.

Section 3.04(a) of the Supply Agreement provides:

Buyer acknowledges and agrees that, as of the Effective Date, Buyer is past due on payments to Supplier in an aggregate amount of $1,064,000 (the "Past Due Amount"). The Parties acknowledge and agree that the Past Due Amount, along with the invoice amounts reflected on Exhibit B attached hereto (collectively, such aggregate invoice amounts together with the Past Due Amount, the "Paydown Amount"), shall be due and payable in accordance with the payment schedule set forth on Exhibit B.

[33-4] at 5.

In addition, Section 3.04(d) entitles Plaintiff to interest, costs, and attorney's fees for any late payments:

Buyer shall make all payments hereunder by wire transfer or check and in US dollars. Buyer shall pay interest on all late payments at the lesser of the rate of 1.5% per month or the highest rate permissible under applicable law, calculated daily and compounded monthly. Buyer shall reimburse Supplier for all costs incurred in collecting any late payments, including, without limitation, attorneys' fees. In addition to all other remedies available under this Agreement or at law (which Supplier does not waive by the exercise of any rights hereunder), Supplier shall be entitled to suspend the delivery of any Products if Buyer fails to pay any amounts due and payable by reason of any set-off of any claim or dispute with Supplier, whether relating to Supplier's breach, bankruptcy or otherwise.

Id.

Section 4.02 of the Supply Agreement provides termination rights:

In addition to any remedies that may be provided under this Agreement or applicable law, Supplier may terminate this Agreement and/or any or all Purchase Orders, in whole or in part, with immediate effect upon written notice to Buyer, if Buyer:

(a) fails to pay any amount when due under this Agreement;

(b) has not otherwise performed or complied with this Agreement, in whole or in part;

(c) fails to provide Supplier, within a commercially reasonable time after Supplier's request (but in no case exceeding five (5) days after such request), with adequate and reasonable assurance of Buyer's financial capability to perform timely all of Buyer's obligations under this Agreement; or(d) becomes insolvent, files a petition for bankruptcy or commences or has commenced against it proceedings relating to bankruptcy, receivership, reorganization or assignment for the benefit of creditors.

Id. at 5-6.

Finally, Exhibit B of the Supply Agreement sets forth a payment schedule, pursuant to which Defendant agreed to make weekly payments to Plaintiff from August 25, 2017 through December 15, 2017. Id. at 18.

While Plaintiff performed under the Supply Agreement by sending product shipments, [33] ¶ 44, Defendant made only two weekly payments, id. ¶ 42. In November 2017, Plaintiff's representatives visited Defendant's office to discuss and potentially resolve the past due balance owed; the parties, however, did not reach resolution at that time. Id. ¶ 45. A few weeks later, Plaintiff accepted the return of $250,000 worth of inventory Plaintiff previously sold to Defendant to reduce Defendant's obligation. Id. ¶ 46.

On December 6, 2017, Plaintiff sent Defendant a termination letter pursuant to Section 4.02 of the Supply Agreement, therein terminating the Supply Agreement. Id. ¶ 48. Defendant owes $960,284.04 under the Supply Agreement. Id. ¶ 50.

II. Legal Standard

Summary judgment is proper where there is "no dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine dispute as to any material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. SeeCelotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

In determining whether a genuine issue of material fact exists, this Court must construe all facts and reasonable inferences in...