Preview:

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
AD TAPE AND LABEL CO., INC.,
Plaintiff,
v.                                                                                       Case No. 08-CV-892
SILVER EAGLE LABS, INC.,
Defendant.
ORDER
On August 29, 2008, plaintiff Ad Tape and Label Co., Inc. (“ATL”) filed suit in
Waukesha County Circuit Court against defendant Silver Eagle Labs, Inc. (“SEL”).
On October 21, 2008, SEL removed the action to federal court.  ATL is a Wisconsin
corporation with its principal place of business in Menomonee Falls, Wisconsin; SEL
is a Nevada corporation with its principal place of business in San Mateo, California.
The parties are completely diverse, and a good-faith estimate of the amount-in-
controversy is well over $75,000, thus this court has jurisdiction over the matter
pursuant to 28 U.S.C. § 1332.   Because a substantial portion of the events giving
rise to the claims occurred in the Eastern District of Wisconsin, and because the
county in which the state court action was pending is located in the Eastern District
of  Wisconsin,  venue  is  proper  under                                                 28  U.S.C.  §  1391(a)(2)  and   28  U.S.C.
§ 1441(a).
On March  11,  2009, SEL served its First Set of Requests for Admission
(“RFA”) on ATL.   (Sarakas Decl. [Dkt. #21], Ex. B).  Per Fed. R. Civ. P. 36, ATL was




required to respond by April  13,  2009.    Fed. R. Civ. P.  36(a)(3).    ATL did not
respond.    Failure to  answer constitutes an  admission,  Mangan  v. Broderick  &
Bascom  Rope  Co.,  351  F.2d  24,  28  (7th  Cir.  1965),  and  an  admitted  fact  is
“conclusively established,” Fed. R. Civ. P. 36(b).   Thus, SEL may rely on the facts
established in its RFA in its motion for summary judgment.
SEL moved for summary judgment on June 5, 2009.   SEL sought summary
judgment as to each of ATL’s claims (Ct. 1: Breach of Contract; Ct. 2: Promissory
Estoppel; and Ct. 3: Account Stated), as well as to two of its own eleven counter-
claims (C.C. 1: Declaratory Judgment that the Parties’ Manufacturing Agreement is
Invalid, and C.C. 11: Conversion).   SEL filed proposed findings of fact in support of
its motion for summary judgment (see Def. Statement of Fact [“DSOF”] [Dkt. #19]).
In its proposed findings of fact, SEL noted the proposed facts to which ATL had been
unwilling to stipulate.   However, ATL failed to file a response to SEL’s proposed
2
findings of fact.1   Pursuant to Civil L.R. 56.2(e):                                                              “In deciding a motion for summary
judgment, the Court must conclude that there is no genuine material issue as to any
proposed finding of fact to which no response is set out.”   Thus, the court will adopt
and rely on SEL’s proposed facts.   See Salvadori v. Franklin School Dist., 221 F.
Supp. 2d 957, 960 (E.D. Wis. 2001) (“Because the plaintiff has not contested any of
1
Not only did ATL not oppose SEL’s proposed facts, but ATL also did not file any proposed facts of
its own in support of its opposition to summary judgment.
2
Civil L.R . 56.2(e) was supplanted by Civil L.R . 56(b)(4) when the new Local Rules went into effect
on January 26, 2010.   However, the briefing of the instant matter was concluded prior to that date, thus, said
briefing is governed by the rules in effect at that time.
-2-




the factual findings proposed by the defendants as contemplated under Local Rule
56.2, the court is permitted to conclude that the facts, as identified by the defendants
in their proposed findings of fact, are undisputed.”) (citing   Waldridge v. American
Hoechst Corp., 24 F.3d 918, 921-22 (7th Cir. 1994)).
In opposition to SEL’s motion for summary judgment, ATL filed an opposition
brief.   Regrettably, ATL’s submission proved unhelpful to the court since it failed to
identify or address several of the legal issues and cited only two cases without
reference to any proposed findings of fact in support of its position.   Nonetheless,
SEL is the moving party and, thus, maintains the burden of demonstrating that it is
entitled to summary judgment as to ATL’s claims as well as its own.   Because the
court finds that SEL has met this burden, the court is obliged to grant SEL’s motion
for summary judgment.
BACKGROUND
On October 19, 2006, PCI Technology, Inc. (“PCI”) - a company SEL had
contracted to manufacture nasal strips for SEL - was sold to Brady Medical LLC
(“Brady”).                                                                                 (DSOF ¶¶ 3-4).   Because Brady did not want to produce nasal strips for
SEL, SEL began searching for another manufacturer.                                         (Id. ¶6-7).   Before SEL had
found another manufacturer, PCI placed SEL’s nasal strip business with ATL to
continue shipment of SEL’s product while SEL continued its search for a long-term
nasal strip manufacturer.                                                                  (Id. ¶9).   One of the potential manufacturers that SEL
spoke with was a company named Aso, LLC (“Aso”).
-3-




On November 16, 2006, SEL and ATL held a meeting at which SEL explained
its production requirements, and at which ATL assured SEL it had the preexisting
production capacity to accommodate SEL’s production needs.                                 (Id. ¶ 12-13).   The
parties also discussed various other issues related to the question of whether ATL
would be a suitable long-term partner for SEL.                                             (Id. ¶¶ 12, 14).
Also, on November 16, 2006, unbeknownst to SEL at the time, PCI shipped
all of SEL’s nasal strip production materials to ATL so that ATL could transition from
shipping SEL’s product to actually manufacturing SEL’s product.                            (Id. ¶¶ 14-15).
SEL learned of this on November 17, 2006.   (Id. ¶ 17).
Between November 2006 and December 2006, ATL and SEL continued to
discuss a potential manufacturing agreement.   (Id. ¶ 23).  During these discussions,
ATL assured SEL that it would only take three to four weeks from the date such an
agreement was reached until ATL could be in a position to satisfy SEL’s high-volume
production requirements.  (Id.)  Further, ATL represented that it could satisfy not only
the quantity production requirements, but also the quality requirements as well, while
remaining cost competitive.                                                                (Id.).
On December 4, 2006, SEL and Aso agreed that Aso would be SEL’s new
manufacturer.  (Id. ¶ 24).  SEL notified ATL of this occurrence on December 5, 2006.
(Id. ¶ 25).  However, on December 20, 2006, subsequent negotiations between Aso
and SEL broke down and, therefore, SEL resumed its discussions with ATL.                   (Id.
¶ 27).   During these renewed discussions, ATL again represented that it had pre-
-4-




existing  production  capacity  to  produce  high-quality  nasal  strips  on  a  cost-
competitive basis.                                                                         (Id. ¶ 27).   In response to such representations by ATL, SEL
signed a Manufacturing Agreement (“the Agreement”) with ATL on December 21,
2006.                                                                                      (Id. 28).   In the email correspondence between SEL’s president, Michelle
Lockwood, and  ATL’s  president, Donald  Dobert, that led  to  the  signing  of the
Agreement,  Lockwood  stated  that  SEL  would  sign  the  contract                        “with  the
understanding that [SEL and ATL would] create a sensible, reasonable, and mutually
beneficial termination addendum.”                                                          (Id. ¶ 30).   Dobert agreed to this condition.                              (Id.
¶ 31).
On January 31, 2007, ATL informed SEL that it was raising, by roughly fifty
percent, the per strip price it was charging SEL.   (Id. ¶ 34).  SEL protested the price
increase by withholding a portion of the invoices charged by ATL.                          (Id. ¶ 36).   In
response, ATL stated that it would cease nasal strip shipments to SEL customers
unless ATL’s invoices were paid in full.                                                   (Id. ¶  37).   Because SEL had no other
alternative that would allow it to keep its commitments to its customers, SEL paid
ATL’s increased price under protest.                                                       (Id. ¶¶ 38-39).
Despite ATL’s representations during the negotiations, it took nearly four
months for ATL to meet the specified production levels.                                    (Id. ¶ 41).   ATL’s faiure to
meet SEL’s production requirements resulted in thirteen cancelled orders and three
delayed shipments, ultimately costing SEL $691,757.52 in lost revenue.   (Id. ¶ 42).
-5-




In May 2007, SEL began receiving complaints from Target (one of the retailers
carrying SEL’s nasal strips) regarding the decrease in product quality since ATL
assumed manufacturing responsibilities for SEL’s nasal strips.                               (Id. ¶ 46).   On July
10, 2007, SEL completed a new webbing design for its strips.                                 (Id. ¶ 47).   The aim
of the new design was to improve quality and reduce production costs.                        (Id. ¶ 46).
ATL refused to implement the new design because it did not believe the design
would work.                                                                                  (Id. ¶¶ 48, 57).   Because ATL refused to implement the new design,
SEL entered in a manufacturing relationship with another manufacturer known as
Tapemark to produce strips utilizing the new design.   (Id. ¶ 58).  Ultimately, because
Target customers had been experiencing problems with the ATL produced strips,
SEL  transferred  all  of  its  future  Target  production  orders  to  Tapemark             -  the
manufacturer that agreed to implement the new webbing design.                                (Id. ¶ 61).
From January 2008 through September 2008, SEL continued having ATL
produce strips for SEL’s Walgreens (a retailer carrying SEL’s strips) orders because
Tapemark did not have the production capabilities to handle the orders for both
Target and Walgreens.   (Id. ¶ 63).   On September 5, 2008, ATL informed SEL that
ATL was unable to fill a Walgreens shipment order.   (Id. ¶ 64).   SEL responded by
notifying ATL that its refusal to fill the order constituted a termination of the parties’
relationship  and  further  demand  that  ATL  return  all  of  SEL’s  property  (mainly
consisting of packaging materials and production equipment).   (Id. ¶ 65).   ATL filed
the instant suit on September 15, 2008.
-6-




ANALYSIS
I.                                                                                          Summary Judgment Standard
Summary judgment is appropriate where the movant establishes that there is
no genuine issue of material fact and that it is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “Material
facts” are those facts which “might affect the outcome of the suit,” and a material fact
is “genuine” if a reasonable finder of fact could find in favor of the nonmoving party.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).  Summary judgment
is appropriate where a party has failed to make “a showing sufficient to establish the
existence of an element essential to that party's case and on which the party will
bear the burden of proof at trial.” Celotex,  477 U.S. at  317.    A party opposing
summary judgment may not rest upon the mere allegations or denials of the adverse
party's pleading, but must set forth specific facts showing that there is a genuine
issue for trial. Fed. R. Civ. P. 56(e).  Any doubt as to the existence of a material fact
is to be resolved against the moving party.   Anderson, 477 U.S. at 255.
II.                                                                                         Validity of Manufacturing Agreement
SEL maintains that it is entitled to summary judgment as to ATL’s Breach of
Contract claim (Ct. 1) and as to its own Declaratory Judgment counterclaim (C.C. 1)
because the December 21, 2006 Manufacturing Agreement (“the Agreement”) is too
indefinite  to  be  enforceable.                                                            “[I]ndefiniteness  as  to  an  essential  term  of  the
agreement prevents the creation of an enforceable contract, because a contract
-7-




must be definite as to the parties’ basic commitments and obligations.”  Management
Computer Services, Inc. v. Hawkins, Ash, Baptie & Co., 557 N.W .2d 67, 75 (Wis.
1996) (bold in original).  3 According to SEL, the Agreement is indefinite as to two
essential terms:   price and mechanism of termination, therefore, the Agreement is
not an enforceable contract.
A.                                                                                      Price
With respect to pricing, the Agreement states:
PRICING,   DESCRIPTION   OF   PRODUCTS   AND
PRODUCT SPECIFICATIONS
Pricing, description of products and product specifications
are  set  forth  in  Exhibit                                                            “A”  attached  or  as  may  be
periodically updated as necessary.
PRICING
All prices are F.O.B. shipping point (ATL) unless otherwise
agreed to in writing.   In filling orders, delivery of 100% of
order constitutes filling the order.   Silver Eagle shall be
billed for quantities actually shipped.  Prices are subject to
change upon thirty (30) days notice in writing.
(Lockwood Decl. Ex. D).   The parties never executed “Exhibit A,” nor did they ever
reach an agreement as to the price ATL would charge SEL for the strips it (ATL)
produced.                                                                               (DSOF ¶ 33).
Wisconsin courts have held that “[p]rice is an essential term of any contract,
and  all agreements  must be  definite  regarding  compensation.”    McLaughlin  v.
Madson, 1992 WL 276589, 1 (Wis. App.) (citing Goebel v. National Exchangors,
Inc., 277 N.W .2d 755, 765 (Wis. 1979)).   “In the absence of such information, there
3
The parties agree that W isconsin law applies.
-8-




is no meeting of the minds and therefore no contract.”   McLaughlin, at 1  (citing
Todorovich v. Kinnickinnic Mut. L. & B. Assoc., 298 N .W . 226, 227 (Wis. 1941)).
Courts have, however, recognized two exceptions to this rule.   McLaughlin, at 1.
“First, the contract is enforceable if the parties provide a practicable and objective
means by which a court may determine the compensation, and the compensation
is not left to the future will of the parties.”   Id. (citing 1 CORBIN ON CONTRACTS
§  97, AT  423-24  (1963)).                                                              “Second, while the parties may have expressed an
agreement  in  terms  so  indefinite  that  the  price  cannot  be  determined,  their
performance may cure the defect.”   McLauglin, at 1 (citing   Nelsen v. Farmers Mut.
Auto. Ins. Co., 90 N.W .2d 123, 131 (Wis. 1958)).
ATL argues that the Agreement specifies that the price may be changed with
thirty days notice, thus no definite price was ever intended.  However, this argument
fails to appreciate that there must be some mechanism for the determination of
price, as evidenced by the language regarding Exhibit A.  Since the Agreement does
not provide a mechanism for the determination of a price, and essentially leaves
price to the future will of the parties, the first exception above is inapplicable.
ATL’s only other argument is that, throughout most of the parties’ relationship,
SEL received invoices from ATL and paid those invoices without questioning the
price per strip.   However, the undisputed facts proffered by SEL establish that SEL
did dispute ATL’s price increases, and only paid the price charged by ATL because
ATL refused to deliver SEL’s products to the retailers if SEL did not pay in full.
-9-




(DSOF ¶ 36-38).   There was no meeting of the minds at any point between the
parties as to the price that would be charged, or as to the mechanism by which the
price would be determined.   ATL seems to maintain that the fact that SEL paid the
price ATL charged means that the parties agreed.  However, this fails to appreciate
the  nature  of  the  relationship  between  SEL,  ATL,  and  the  retailers  ATL  was
supplying.  If SEL had done as ATL suggests, and registered its disagreement by not
paying the price asked by ATL, ATL made it clear that it would not ship SEL’s
products to SEL’s customers.  It is not as though SEL could simply immediately turn
to another manufacturer in order to have its orders filled.   The only way SEL could
avoid failing its customers was to pay whatever price ATL demanded.
In contrast, in Nelsen v. Farmers Mutual Auto Ins. Co., 90 N.W .2d 123 (Wis.
1958), the Wisconsin Supreme Court found that Nelsen (an independent contractor)
and  Farmers  Mutual  Services  did  have  an  enforceable  contract,  despite
indefiniteness as to compensation, because for six years the company paid Nelsen
a certain commission rate and Nelsen accepted it without complaint.   Id. at  50.
Clearly, the plaintiff in Nelsen, if he did not agree with the rate he was being paid,
could have simply stopped performing services for Farmers Mutual Services.   The
fact that he did not do so, nor did he object to the rate he was paid, brought the case
within the above second exception.   Conversely, in the instant case, SEL had no
choice but to pay the rate charged, and SEL did register its disagreement regarding
the price charged.
-10-




In some situations, courts have been willing to impose a “reasonable price”
when a contract does not indicate the price.   For example, in Herder Hallmark
Consultants, Inc. v. Regnier Consulting Group, Inc., 2004 WI App 134, 685 N.W .2d
564, the court found that a contract lacking a price for the transfer of a business from
plaintiff to defendant was, nonetheless, enforceable because the conduct of the
parties implied that a reasonable price should be imposed.  Id. ¶¶ 7-15.  In that case,
though, the defendant had completely taken over the plaintiff’s business and was
running it, but had not paid because the parties had yet to agree on a price.  Id. ¶ 11.
The court reasoned that clearly there was a meeting of the minds between the
parties regarding the sale of the business and that, as commercial actors in the
marketplace, the parties had both intended a reasonable or market price for the
transaction.   Id. ¶ 15.
Such rationale does not translate to the instant case.   Clearly, a party that
takes over another party’s business intends to pay for that business.   However, it
cannot be said that a party that places orders for nasal strips from a manufacturer,
and pays the amount charged by that manufacturer, intends to be obligated to an
exclusive seven year contract with that manufacturer.  Indeed, SEL had been placing
orders with ATL and paying for them for some time before the Agreement was
signed.  Conversely, in Herder, the defendant’s taking over of the plaintiff’s business
could only mean that defendant intended to form a binding contract for the purchase
of the business from plaintiff.   Further, it is commonplace for businesses to be
-11-




appraised and have a value placed on them  at a fixed point in time.    Thus, a
reasonable market price for a given business at a fixed point in time is a relatively
insular and objectively quantifiable notion.   The per unit price for a manufactured
product (especially one for which the design will change over time) for a seven year
period is not nearly as susceptible to objective determination.   To say in the instant
case that the parties intended a “reasonable market price” would be to completely
ignore the nature of the business in which they were engaged.   See McLaughlin, at
2 (explaining that Wisconsin courts will not imply a promise to pay a reasonable
amount if the parties failed to specify the amount in a services contract).
Since the Agreement is indefinite as to an essential term (price), and since
neither  of  the  previously  articulated  exceptions  apply,  the  Agreement  is
unenforceable for indefiniteness.   Nothing about the course of the parties’ dealings
evidences that there was ever (especially at the time the Agreement was signed) a
meeting of the minds as to either the appropriate price, or the mechanism by which
the price would be determined.
B.                                                                                                    Termination Provision
The Agreement states the following:
TERM OF AGREEMENT
This exclusive Manufacturing Agreement shall be for a
period  of  eighty-four                                                                               (84)  months  beginning  on  the
effective date.4
4
No definition is given for  “effective date.”   The effective date could reasonably be the date the
Agreement was signed; it could also reasonably be the date the on which the Agreement was completed
(through the addition of Exhibit A and a termination provision).
-12-




(Lockwood Decl., Ex. D).   Despite the fact that the Agreement purports to be an
exclusive contract binding SEL to ATL for seven years, nowhere in the Agreement
is there a termination provision, nor any language setting forth a mechanism by
which either party could terminate the contract.   SEL maintains that a termination
provision is an “essential term” of a seven year exclusive manufacturing agreement,
and that the absence of a termination provision renders the Agreement indefinite and
thus unenforceable.
“Certainty of contract terms and definiteness require mutual assent by way of
a meeting of the minds.”   Metropolitan Ventures, LLC v. GEA Associates, 2006 WI
71, ¶ 24, 717 N.W .2d 58.   In order to determine if there is sufficient evidence of
objective mutual assent, the court is to examine both the wording of the contract as
well as the surrounding circumstances in an attempt to discern the parties’ intent.
Id.
The wording of the Agreement is silent as to when or how the parties may
terminate the Agreement.   Were the Agreement for an indefinite period of time, the
lack of a termination provision would almost certainly not be capable of rendering the
Agreement unenforceable for indefiniteness.  Rather, in such a case the court would
merely find that the Agreement was terminable at will upon reasonable notice.
However, the Agreement is not for an indefinite duration.  Thus, to interpret the lack
of a termination provision, as meaning that the Agreement was terminable at will
upon reasonable notice, would entirely eviscerate the duration provision of the
-13-




Agreement.  Since no mutual assent regarding a termination provision is discernible
from the language of the contract, the court will look to the parties’ negotiations and
the conduct of the parties in order to attempt to ascertain the intent of the parties.
See Lindquist Ford, Inc. v. Middleton Motors Inc., 2007 WL 3287848, 6 (W .D. Wis.
2007) rev’d on other grounds, Lindquist Ford, Inc. v. Middleton Motors Inc., 557,
F.3d 469 (7th Cir. 2009).
The primary conduct of the parties, relevant to their intent in regards to a
termination provision, is found in an exchange of emails attendant to the formation
of the Agreement.  During the negotiation of the terms of the Agreement, Lockwood
emailed Dobert and stated:
No problem with the changes.  We should put in language
that deals with termination: e.g., buyout of ATL or Silver
Eagle and how  that would affect the contract to avoid
outcomes like that of PCI’s sale to Brady.   We can do this
later as an addendum.
For your comfort level, I am willing to sign the revised
contract  with  the  understanding  that  we  will  create  a
sensible, reasonable, and mutually beneficial termination
addendum  or  [sic]  any  other  complexity  we  have  not
foreseen.
(Lockwood Decl., Ex. C).   Dobert replied: “Yes, this is very much ‘okay’ with me.”
(Id.).   SEL argues that this evidences that the parties intended that the Agreement
was simply an “agreement to agree,” and thus did not take effect until the addition
of a termination provision.   ATL argues that the termination provision was only
concerned with the eventuality of a buyout, and thus the parties intended that the
-14-




contract only be terminable in the eventuality of a buyout of one of the companies.
(Pl. Br. Opp. S.J. at 4).   Conversely, ATL argues that the fact that SEL continued to
place orders with ATL meant that SEL was comfortable with the Agreement and saw
no need to add a termination provision, thus, the parties mutually assented to not
having a termination provision.                                                          (Id. at 5).
Plaintiff’s  first  argument  is  unavailing.    The  court  does  not  agree  that
Lockwood’s email evidences that the parties only intended for the Agreement to be
terminable in the eventuality of a buyout.   It may be that that is what the parties
intended.   Or it may be that Lockwood wanted to raise the termination provision
issue through the utilization of a neutral example, rather than by stating that such a
provision was necessary in case ATL failed to produce quality strips or failed to
implement SEL’s design upgrades.   The court simply cannot ascertain the intent of
the parties as to the terms of the termination provision.
Plaintiff’s second argument is more availing.   As already established, the
nature of SEL’s business required that it continue to place orders with ATL because,
regardless of how SEL felt about ATL, the fact is that at the time SEL had no other
company to fill its orders.   Thus, the mere fact that SEL continued to place orders
despite the lack of a termination provision does not indicate an intent that the
contract not contain a termination provision.   However, the fact that SEL never
proffered a termination provision, nor actively sought to negotiate the terms of such
a provision, does indicate an intent that the Agreement not have a termination
-15-




provision.   This would not be the case if SEL could claim that its intent was for SEL
and  ATL’s  relationship  to  remain  simply  on  a  purchase  order  basis  until  the
Agreement  was  completed                                                                                       (through  the  addition  of  a  termination  provision).
However, such an argument would not be very convincing, as SEL’s conduct  -
5
namely, sending a letter to ATL alleging breach of the Agreement                                                - evidences that
at some point in time SEL thought that the Agreement had become binding, and yet
6
it still did not seek the addition of a termination provision.                                                  (See Lockwood Decl.,
Exs. M & Q).
In the final analysis, it remains unclear whether there was ever any mutual
assent as to a termination provision.   The email exchange between Lockwood and
Dobert makes it clear that, at the time of signing, there was mutual assent that the
Agreement was conditioned on the addition of a termination agreement.   However,
the conduct of the parties does evidence an intent to have a contract without a
termination provision.   Though having a seven year exclusive contract without a
termination provision seems completely unreasonable, SEL has not pointed to any
5
ATL argues that, in doing so, SEL ratified the Agreement.   However, as SEL points out:  “The
doctrine of ratification does not apply to a contract which is void at its inception.”   Greenlee v. Rainbow
Auction/Realty Co., Inc., 582 N .W .2d 93, 97 (W is. App.).
6
The reason this line of reasoning is relevant to this analysis, but not to the analysis regarding the
lack of a price, is because conceivably the parties could intend to have a contract without a termination
provision, as this line of reasoning suggests.   However, the court has cited ample case law articulating the
necessity of a price or a mechanism for determining price.
-16-




7
cases stating that a contract must have a termination provision                                                       (as opposed to a
price, which it has been established that a contract must set a price or a mechanism
for determining price).   Though the conduct of the parties strongly suggests that
there was a mutual assent not to have a termination provision, the negotiation of the
parties very strongly suggests that there was, at the inception of the Agreement,8
mutual assent that the Agreement would be conditioned upon the addition of a
termination provision.  Whether this scenario renders the contract unenforceable due
to indefiniteness is a difficult question to answer, 9but ultimately the court finds that
it is impossible to determine the intent of the parties in regards to a termination
provision, and that the contract is, thus, unenforceable due to the indefiniteness of
the existence and terms of such a provision.
A contract that is indefinite as to its essential terms is unenforceable unless
the conduct of the parties cures the defect.  The Agreement was clearly indefinite as
to price, and nothing about the conduct of the parties cured this defect.  Further, the
court notes that a finding that the parties assented to a “reasonable price” is neither
workable nor appropriate in the instant case.   Because there was never mutual
7
SEL did cite to Lindquist Ford for the proposition that the lack of a termination provision renders a
contract unenforceable.   2007 W L 3287848.  However, Lindquist Ford is inapposite because in that case the
plaintiffs claimed that the defendant breached a termination provision.  Id. at 6.  Thus, the lack of a termination
clause was fatal to plaintiffs’ claim  because such claim  was premised on the breach of the termination
provision.   In the instant case, ATL’s claim is premised on the breach of the exclusivity provision, not the
termination provision.
8
See Metropolitan Ventures, 2006 W I ¶ 22, n. 9 (“The definiteness requirement is an issue of contract
formation, not interpretation.).
9
The difficulty of which is exponentially exacerbated by the plaintiff’s inexcusable failure to point the
court to any relevant case law.
-17-




assent between the parties as to the issue of price, the parties never successfully
formed a contract.   Thus, SEL is entitled to summary judgment on ATL’s Breach of
Contract claim, as well as on its own claim  for Declaratory Judgment that the
Agreement is voidable.   Completely independently, the contract is also voidable
because the facts evidence a lack of mutual assent as to the existence and the
composition of a termination provision.
III.                                                                                         Avoidability of the Manufacturing Agreement
While the court is confident that the Agreement is unenforceable due to
indefiniteness (particularly as to price), a reversal of the court as to this matter would
not  significantly  alter  the  outcome.    This  is  because,  wholly  apart  from  being
unenforceable due to indefiniteness, the Agreement is voidable by SEL because
SEL’s assent was induced through material misrepresentations.  See First Nat. Bank
and Trust Co. of Racine v. Notte, 293 N.W .2d 530, 538 (Wis. 1980) (“When a party’s
manifestation  of  assent  is  induced  by  either  a  fraudulent  or  a  material
misrepresentation by the other party, the contract is voidable by the recipient if he
is justified in relying on the misrepresentation.”) (quoting Restatement (Second) of
Contracts § 306(1)).
SEL’s unopposed proposed findings of fact demonstrate that, during  the
parties’ December 2006 discussions (after SEL’s discussions with Aso broke down),
ATL renewed its assertion that it had the pre-existing production capacity to meet
SEL’s quality and quantity requirements.  SEL has also established that it took ATL
-18-




four  months                                                                                  (not  the  promised  three  to  four  weeks)  to  meet  SEL’s  quantity
requirements, and that ATL continued to struggle with the quality requirements.
Thus, SEL has established that ATL misrepresented its capabilities.   However, the
court   makes   no   findings   as   to   ATL’s   knowledge   of   the   falsity   of   its
misrepresentations.  See Whipp v. Iverson, 168 N.W .2d 201, 204 (Wis. 1969) (“It is
not necessary for rescission of a contract that the party making a misrepresentation
should  have  known  that  it  was  false.  Recovery  is  allowed  even  though
misrepresentation is innocently made because [i]t would be unjust to allow one who
has made false representations, even innocently, to retain the fruits of a bargain
induced by such representations.”) (citation omitted).
ATL’s misrepresentations were of a material nature.   “A misrepresentation is
material if it is likely to induce a reasonable person to manifest his assent, or if the
maker knows that it is likely that the recipient will be induced to manifest his assent
by the representation.”  Notte, 293 N.W .2d at 538.  ATL has admitted, through SEL’s
RFA, that “in October 2006 [SEL] told ATL that whether ATL could meet [SEL]’s
nasal strip production requirements was an important consideration for [SEL] as
[SEL] decided whether to use ATL to produce nasal strips.”   (Sarakas Decl., Ex. B,
No. 41).   Given this admission, any argument that ATL’s representations regarding
production capacity were not material would be disingenuous.
Not only were ATL’s misrepresentations of a nature likely to induce SEL’s
assent, but they did induce SEL’s assent.  The unopposed proposed findings of fact
-19-




established  that  SEL  entered  into  the  Agreement  with  ATL,                                                “based  on  the
representations by ATL that it could manufacture high-quality nasal strips on a high-
volume and cost-competitive basis.”                                                                              (DSOF ¶ 28).
Lastly, SEL was justified in relying on ATL’s representations as to ATL’s
production capabilities.     A party’s reliance would not be “unjustified unless [its] fault
amounts to a failure to act in good faith or to conform [its] conduct to reasonable
standards of fair dealing.”   Notte,  293 N.W .2d at  539.    ATL argues that SEL’s
reliance was unjustified 10because SEL’s representatives visited ATL’s location twice
prior to the signing of the Agreement, thus SEL knew ATL’s capabilities.                                         (Pl. Br.
Opp. Mot. S.J. at 8).   However, ATL does not cite any facts  (such as a lack of
machinery, or personnel, that would have been apparent at inspection) that would
support its argument.   Absent evidence that SEL’s inspection of ATL’s location
should have alerted a reasonable person to ATL’s lack of production capacity, the
court finds that such an inspection evidences acting in good faith and fair dealing on
SEL’s part.   The fact remains that ATL was in a far better position to know its own
production capabilities than was SEL.   SEL knew that ATL had received all of the
materials from PCI, so ATL knew the production quantity that would be expected of
it.   Additionally, SEL trusted ATL because ATL had been chosen for it by PCI, with
whom SEL had previously worked.  Given these considerations, the court finds that
10
The justifiable-reliance prong of the test was the only prong to which ATL raised a somewhat
meritorious defense.   As to the other prongs, ATL merely tried to argue against facts to which it had already
admitted by failing to respond to SEL’s RFA and proposed findings of facts.
-20-




SEL’s fault in relying on ATL’s representations certainly does not amount to a failure
to act in good faith or to conform to reasonable standards of fair dealing.
It is conceivable that it could be argued that SEL’s failure to seek rescission
of the Agreement upon learning of ATL’s misrepresentations should bar it from now
seeking to hold the contract voidable.   ATL makes no such argument, and it is not
the court’s role to create arguments for a party to litigation.   Because SEL was
reasonably induced to assenting to the Agreement as a result of ATL’s material
misrepresentations, SEL is entitled to avoid the contract if it is later held that the
Agreement was in fact an enforceable contract.
IV.                                                                                      ATL’s Claims of Promissory Estoppel and Account Stated
SEL has moved for summary judgment on counts two and three (Promissory
Estoppel and Account Stated, respectively) of ATL’s complaint.  ATL’s brief does not
oppose  SEL’s  motion  for summary  judgment as  to  these  claims, thus, ATL  is
deemed to have abandoned these claims and SEL is accordingly awarded summary
judgment as to these two claims.   Palmer v. Marion County, 327 F.3d 588, 597-98
(7th Cir. 2003) (deeming plaintiff's negligence claim abandoned because he failed
to argue it in his district court brief in opposition to summary judgment);   Bombard
v. Fort Wayne Newspapers, Inc.,  92 F.3d  560,  562 n.  2  (7th Cir.1996)  (plaintiff
abandoned claim after failing to respond to arguments in defendant's motion for
summary judgment).
-21-




It is true that a party that fails, at the summary judgment phase, to respond to
arguments against its claims does not always necessarily abandon such claims.   A
party may "stand on its pleadings" if those pleadings are supported by admissible
evidence that creates a material factual question that the moving party fails to refute.
Thornton v. Evans, 692 F.2d 1064, 1074 (7th Cir. 1983).  However, ATL’s pleadings
are not supported by admissible evidence that creates a material factual question.
A claim of promissory estoppel involves answering three questions:                         “(1)
whether the promise is one which the promisor should reasonably expect to induce
action or forbearance of a definite and substantial character on the part of the
promisee; (2) whether the promise induced such action or forbearance; and  (3)
whether injustice can be avoided only by enforcement of the promise.”  Bicknese v.
Sutula,  2003 WI  31,  ¶  12,  660 N.W .2d  289.    In the instant case, the admitted
evidence  establishes  that  SEL’s  promise  to  enter  into  a  seven-year  exclusive
contract with ATL was premised on the execution of a termination agreement.
Further, equitable relief (such as promissory estoppel) is not available to a party with
unclean hands.   Zinda v. Krause, 528 N.W .2d  55, 62  (Wis. App. 1995).   In the
instant  case,  ATL’s  unilateral  price  increases,  failure  to  meet  production
requirements, and refusal to implement SEL’s design changes were at least equally,
if not more so, responsible for the demise of the relationship as any of SEL’s
conduct.
-22-




In order to establish a cause of action for account stated, a party must show:
“(1) an agreement as to a balance due on a disputed claim was reached; (2) one
party promised to pay the balance; and (3) the balance remains unpaid.”   Newgard
ex rel. Newgard v. Bank of America, 2007 WI App. 161, ¶ 12, 735 N.W .2d 578.
According to ATL’s complaint, the balance due is the balance outstanding on SEL’s
unpaid invoices.                                                                         (Notice of Removal, Ex. 1, ¶¶ 31-33).   ATL has not pointed the
court to any admissible evidence, such as copies of unpaid invoices, supporting this
claim.   Nor has ATL directed the court to any admissible evidence supporting that
the parties ever agreed to the amount owed as to these unpaid invoices.
Nothing in the admitted evidence creates a material factual question as to
either ATL’s Promissory Estoppel claim, or its Account Stated claim.   Further, ATL
has failed to oppose entry of summary judgment on behalf of SEL as to these
claims.   Therefore, the court deems these claims abandoned.   SEL is, accordingly,
entitled to summary judgment as to counts two and three of ATL’s complaint.
V.                                                                                       Conversion
SEL  moves  for  summary  judgment  as  to  its  eleventh  counterclaim,
Conversion.   The parties agree that the general elements for a claim of conversion
are:                                                                                     “(1)  intentionally  controlling/taking  property  belonging  to  another;   (2)
controlling/taking property without the owner's consent; and (3) those acts resulting
in serious interference with the rights of the owner to possess the property.”  Bruner
v. Heritage Companies,  593 N.W .2d  814,  818  (Wis. App.  1999).   Because it is
-23-




uncontested that ATL lawfully and legitimately obtained possession of the property
underlying this claim, SEL’s claim is for the variant where a party wrongfully refuses
“to surrender property originally lawfully obtained.”  Product Credit Ass’n of Madison
v. Nowatzski, 280 N.W .2d 118, 123 (Wis. 1979).   Under this variant, “a demand by
the rightful owner and a refusal by the alleged tortfeasor are necessary elements of
the tort.”   Id.
Through its non-response to SEL’s Request for Admissions, ATL has admitted
(and thus conclusively established) that in September, October, November, and
Decmber  of  2008,  SEL  demanded  the  return  of  all  of  its  property  from  ATL.
(Sarakas Decl. [Dkt. #21], Ex. B, Nos. 7-10).   ATL has also admitted that it has not
returned the property to SEL, and that SEL has thus been prevented from using its
property.                                                                                (Id. Nos. 11-18).   However, ATL has not admitted that its retention of
SEL’s property was “wrongful” or that its retention of the property resulted from its
“refusal” to return the property.   According to Dobert, the property has not been
returned to SEL because of a dispute between the parties regarding which party
should pay for shipping.  (Dobert Decl. [Dkt. #29] ¶ 87).  Because ATL’s position that
it should not have to pay to ship the property (a position that the court makes no
finding regarding) could be a legitimate position, it would be premature for the court
to rule definitively that ATL has converted SEL’s property.   However, Dobert also
stated that the property was not ready for shipment until December 15, 2008.   (Id.).
Because SEL has not shown that the delay, from September 2008 to December 15,
-24-




2008, was wrongful, the court will not state definitively that ATL converted SEL’s
property during that time frame.   However, it is clearly possible that ATL committed
conversion by not returning SEL’s property, or by interfering with SEL’s right to use
of its property until December 15, 2008.   Whether or not ATL did in fact commit
conversion through these actions remains a question for the finder of fact.
CONCLUSION
The  Agreement  between  the  parties  was  sufficiently  indefinite  as  to  the
essential terms regarding pricing, such that the contract was never properly formed
and is thus unenforceable.   Independently of the Agreement’s indefiniteness as to
price, the Agreement was also sufficiently indefinite as to a termination provision,
such that the contract was never properly formed and is thus unenforceable.   If the
Agreement is  found  to  be  enforceable, SEL  is  permitted  to  avoid  the  contract
because SEL’s assent was induced through material misrepresentations upon which
SEL justifiably relied.  Additionally, ATL neither opposed SEL’s motion for summary
judgment as to its second and third claims, nor did its pleadings (and the attached
evidence)  present  a  material  factual  question  as  to  those  claims.    ATL  thus
abandoned its second and third claims.   Though SEL demonstrated some of the
elements necessary to sustain a claim for conversion, it did not fulfill all of the
elements, and thus it is not entitled to summary judgment as to that claim.
Accordingly,
-25-




IT IS ORDERED that defendant’s motion for summary judgment (Docket #18)
be and the same is hereby GRANTED as to the first, second, and third claim of
plaintiff’s complaint; and
IT IS FURTHER ORDERED that defendant’s motion for summary judgment
(Docket  #18)  be  and  the  same  is  hereby  GRANTED  as  to  the  first  claim  of
defendant’s counterclaims; and
IT IS FURTHER ORDERED that defendant’s motion for summary judgment
(Docket  #18) be  and the same is hereby DENIED as to the eleventh claim  of
defendant’s counterclaims.
Dated at Milwaukee, Wisconsin, this 26th day of March, 2010.
BY THE COURT:
J.P. Stadtmueller
U.S. District Judge
-26-

Download 28373.pdf

Wisconsin Law