Toll Processing Services, LLC v. Kastalon, Inc et al

Filing 110

MEMORANDUM Opinion and Order: Based on the foregoing, this Court grants summary judgment in favor of Kastalon on all three counts of the complaint 90 and denies summary judgment in favor of Toll Processing 84 . Civil case terminated. (For further details see order) Signed by the Honorable Sharon Johnson Coleman on 9/4/2015. Mailed notice(air, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
TOLL PROCESSING SERVICES, LLC,

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

Plaintiffs,
v.
KASTALON, INC., KASTALON
POLYURETHANE PRODUCTS, and
KASTALON, INC. t/d/b/a KASTALON
POLYURETHANE PRODUCTS,
Defendants.
_____________________________________
KASTALON, INC.,
Counter-Plaintiff,

v.

TOLL PROCESSING SERVICES, LLC,
Counter-Defendant.

Case No. 12-cv-10058

Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER
The plaintiff, Toll Processing Services, LLC, (“Toll Processing”), finds itself in the following
pickle. Toll Processing’s three-count Amended Complaint alleges conversion, negligence, and breach
of contract against defendant Kastalon, Inc. (“Kastalon”) stemming from an alleged oral contract to
store 57 pickle line rolls (“rolls”), which Kastalon sold for scrap after almost three years. The parties
each filed for summary judgment in their favor [84, 90]. The Court heard oral arguments on the
motions on July 6, 2015. For the reasons stated herein, the Court grants summary judgment in favor
of Kastalon and against Toll Processing.
Background
The following facts are not in genuine dispute. Toll Processing is a subsidiary of
International Steel Services, Inc., and its purpose is to own and operate a pickle line, which is a type
of equipment used in the steel industry. Toll Processing has no current employees or revenue and its

1

principal asset is the pickle line, according to Malvin Sander, Vice President, General Counsel and
Secretary of International Steel Services.
In 2006, Toll Processing purchased a pickle line “as-is, where-is” from Joseph T. Ryerson &
Sons (“Ryerson”) for $2,000,000. (Kastalon L.R. 56.1 Statement of Facts (“SOF”), Dkt. 91 at ¶ 6).
Part of the pickle line included rolls used to guide pieces of steel through acids tanks to clean the
steel. (Id. at ¶¶ 7, 8). The rolls consist of two parts, the steel core and the polyurethane cover. (Toll
Processing L.R. 56.1 SOF, Dkt. 86 at ¶ 12). The evidence presented does not conclusively provide
the exact number of rolls, varying between 57 and 60. Ultimately, the parties seem to agree there
were 57 rolls. (Toll Processing L.R. 56.1(b)(3) Resp. to Kastalon SOF, Dkt. 97 at ¶9). Not all the
rolls were from the 1989 original, but it is unknown how many are from 1989 or how many were
replaced sometime between 1989 and 2006. (Id.). The maintenance history of the rolls is also
unknown with any certainty, though Carlos Monzon, an employee of Ryerson and then Toll
Processing, testified that Ryerson did regular maintenance on the pickle line. (Id. at ¶¶ 10-12).
Several of the rolls were refurbished in November and December 2006 before the sale to Toll
Processing. (Dkt. 86 at ¶ 21; Kastalon L.R. 56.1(b)(3) Resp. to Toll Processing SOF, Dkt. 94 at ¶
14).
Kastalon is located in Alsip, Illinois, and provides equipment and repairs for the steel
industry. (Dkt. 86 at ¶ 2). Michael DeMent is Vice President of Kastalon and dealt regularly with
Paula Dent and Carlos Monzon at Ryerson and continued to deal with Paula Dent when she worked
for Toll Processing after the sale of the pickle line. (Dkt. 97 at ¶ 21). Paula Dent was employed by
Ryerson Coil Processing for 17 years and worked for Toll Processing as the Plant and Project
Manager for one year (April 2007-April 2008) as Toll Processing closed down and disassembled the
pickle line. (Dkt. 86 at ¶ 9). Gus Schempp was her supervisor, though she worked out of the
Ryerson facility. (Dkt. 91 at ¶ 30). Gus Schempp is a consultant retained by Toll Processing to
execute the pickle line project. (Dkt. 91 at ¶ 22).
In April 2007, Toll Processing began to disassemble the pickle line on Ryerson’s property,
using former Ryerson employees hired by Toll Processing. (Dkt. 97 at ¶ 24). In April 2008, when the
disassembly of the pickle line was complete, the employees hired by Toll Processing from Ryerson
were laid off because Toll Processing could not afford payroll to continue without a firm
commitment to relocate the pickle line. (Dkt. 97 at ¶ 27). No one informed Kastalon that Paula
Dent, Kastalon’s main contact person regarding the pickle line, had been laid off. (Dkt. 91 at ¶ 32).

2

After Paula Dent was laid-off, Michael DeMent of Kastalon called Gus Schempp, and they
exchanged emails. (Dkt. 97 at ¶ 32).
Malvin Sander, an officer and attorney for Toll Processing, who was responsible for
negotiating the purchase of the pickle line from Ryerson, did not recall looking at the rolls
individually, but he inspected the pickle line assets as a whole. He did not personally document the
condition of the pickle line. (Dkt. 91 at ¶ 34). Schempp never inspected the rolls, does not know the
age of the rolls, does not know what needed to be done to the rolls, and does not know the value of
the rolls when they were purchased from Ryerson. (Id. at ¶ 35).
Paula Dent orally contacted Michael DeMent in January 2008 to arrange for the rolls to go
to Kastalon. (Id. at ¶ 38). DeMent knew that Toll Processing had purchased the pickle line and was
planning to disassemble it and rebuilt it at another location. (Id. at ¶ 39). In early 2008, Kastalon
transported the rolls in four shipments from Ryerson’s facility at 720 E. 111th Street in Chicago to
Alsip for storage at its facility. (Id. at ¶ 40). Initially the rolls were stored inside Kastalon’s building.
(Id.) Paula Dent did not specifically discuss with DeMent whether the rolls were to be kept inside or
outside. (Id. at ¶ 45). When the rolls arrived at Kastalon some of them needed repair. (Dkt. 97 at ¶
42). No one from Toll Processing inspected or viewed the Rolls at Kastalon at any point in time.
(Dkt. 91 at ¶ 43).
Paula Dent was aware that Kastalon expected to be compensated for the shipment and
storage of the rolls. (Id. at ¶ 46). Schempp authorized and directed Dent to contact Kastalon to have
the rolls transported and stored at Kastalon’s facility. (Dkt. 86 at ¶ 20). Malvin Sander testified that
Dent had no authority to enter into contracts on behalf of Toll Processing unless Schempp
authorized it. (Dkt. 91 at ¶ 48). Although no specific time frame for storage was discussed, Kastalon
believed it would be a short time, and Schempp testified that both parties initially believed that the
plan to re-install the pickle line would be completed “in the ensuing months.” (Gus Schempp Dep.
Tr. at 155:3-16). Schempp could not answer the question of what Kastalon’s obligations would be if
Toll Processing never issued a purchase order to Kastalon. (Dkt. 97 at ¶ 50). Sander testified that he
agreed it would be unreasonable for Toll Processing to expect Kastalon to hold onto the rolls
forever. (Dkt. 91 at ¶ 52).
After March 2008, Paula Dent had no contact with Kastalon about the rolls. (Id. at ¶ 53). In
October 2008, DeMent called Schempp regarding the rolls and also sent him an email requesting to
be informed about the progress of the pickle line. (Id. at ¶ 54). The rolls were stored inside Kastalon
for approximately two years and moved once to a different location inside the building, requiring a
3

crane and 4 to 5 hours of labor. (Id. at ¶¶ 55-56). The rolls were greased, wrapped, taken outside of
Kastalon’s building, stacked, and covered with tarps to protect them from the elements, which took
approximately 10 hours of labor. (Dkt. 97 at ¶ 57). Robert Snyder, Plant Manager at Kastalon,
testified that the condition of the rolls did not change while in Kastalon’s possession. (Dkt. 91 at ¶
58).
Sometime in November or December 2010, prior to disposal of the rolls, DeMent contacted
Paula Dent and Carlos Monzon to ask about the status of Toll Processing. (Id. at ¶ 63). In response
to DeMent’s inquiry about the company, Dent and Monzon informed him only they were still
unemployed. (Id.) DeMent did not ask the status of the rolls or inform either Dent or Monzon that
Kastalon intended to dispose of the rolls. (Dkt. 86 at ¶ 27). No one at Kastalon inspected the rolls
to determine their condition prior to disposal. (Id. at ¶ 28). In December 2010, Kastalon had the
rolls scrapped by a local recycler and received $6,380.80. (Dkt. 91 at ¶ 67). In June 2011, Schempp
called DeMent who informed Schempp that the rolls had been scrapped. (Dkt. 86 at ¶ 30; Dkt. 91 at
¶ 68). Schempp stated at a meeting in August 2011 of representatives of Toll Processing and
Kastalon that he could “kick himself” for not calling Kastalon because he might have been able to
prevent the scrapping of the rolls. (Dkt. 91 at ¶ 69).
In 2011, Toll Processing obtained quotes for replacement rolls for the pickle line from
various companies, the lowest of which was $311,750, plus $104,945 for the roll covers (quote from
Kastalon), for a total replacement cost of $416,695. (Id. at ¶¶ 38-39).
Legal Standard
A party is entitled to summary judgment if all of the pleadings, the discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue of material fact and that the
movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). When considering a
summary judgment motion, the Court construes the facts and all reasonable inferences in the light
most favorable to the non-moving party. Abdullahi v. City of Madison, 423 F. 3d 763, 773 (7th Cir.
2005). The party who bears the burden of proof on an issue may not rest on the pleadings or mere
speculation, but must affirmatively demonstrate that there is a genuine issue of material fact that
requires a trial to resolve. Celotex v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 91 L. Ed. 2d 265
(1986). On cross-motions, summary judgment is appropriate only when evidence as a whole shows
there is no genuine dispute as to any material fact, Davis v. Time Warner Cable of Southeastern Wis., L.P.,
651 F.3d 664, 671 (7th Cir. 2011), regardless to which motion the evidence is attached. Las Vegas
Sands, LLC v. Nehme, 632 F.3d 526, 532 (9th Cir. 2011).
4

Discussion
Toll Processing moves for summary judgment in its favor on each count of the complaint.
Kastalon cross-moves for summary judgment in its favor on each count of the complaint, and also
moves for summary judgment on its counterclaim for unjust enrichment or quantum meruit. The
Court will address each count in turn.
1. Count I: Conversion
Toll Processing moves for summary judgment in its favor on its conversion claim, arguing
that it contracted with Kastalon for the transportation and storage of the rolls and that Kastalon
wrongfully converted the rolls by selling them for scrap without consulting Toll Processing. In order
to establish a claim for conversion Toll Processing must establish that it has a right to the property,
an absolute and unconditional right to immediate possession, that it made a demand, and Kastalon
wrongfully and without authorization assumed control, dominion, or ownership over the property.
Cirrincione v. Johnson, 184 Ill. 2d 109, 115 (1998).
Kastalon argues that it is entitled to summary judgment in its favor because Toll Processing
failed to make a demand for return of the rolls. Toll Processing asserts that there was a demand
when Gus Schempp called Mike DeMent to request a quote for reconditioning the rolls in June of
2011. Toll Processing alternatively claims that a demand is unnecessary because there was an
independent act of conversion in the form of Kastalon selling the rolls to a recycler. See Fortech LLC
v. RW Dunteman Co., 366 Ill. App. 3d 804, 852 N.E. 2d 451, 462 (2006); Pavilon v. Kaferly, 204 Ill. App.
3d 235 (1990).
Even if Toll Processing made a demand, it came too late. Toll Processing abandoned the
rolls. A party claiming abandonment of the property must prove intent to relinquish rights to the
property. See Michael v. First Chicago Corp., 139 Ill. App. 3d 374, 382, 487 N.E.2d 403 (2d Dist. 1985).
Kastalon argues it can show abandonment as a matter of law if the property is left “unexplained” for
a “considerable period of time” or “unreasonable period of time.” Spies v. DeMayo, 396 Ill. 255, 275
(1947) (27 months was unreasonable); see also Pieszchalski v. Oslager, 128 Ill. App. 3d 437, 448 (5th
Dist. 1984) (2 years was unreasonable); Shannon v. Stookey, 59 Ill. App. 3d 573, 576 (5th Dist. 1978) (5
months was not unreasonable). This Court agrees with Kastalon that Toll Processing abandoned the
rolls by not communicating with Kastalon at all between early 2008 when Kastalon transported the
rolls for storage and June 2011 when Gus Schemp called to request a quote. Accordingly, this Court
finds that Kastalon’s abandonment of the rolls negates its claim for conversion.

5

Even if this Court did not find that Toll Processing had abandoned the rolls, the economic
loss doctrine (“the Moorman Doctrine”) bars recovery for purely economic loss in tort. Toll
Processing contends that it is at least entitled to $6,380.80, the scrap value of the rolls. There is a
dearth of authority applying the Moorman Doctrine to conversion claims, but a couple cases in this
district provide some guidance. In Vanco US, LLC v. Brink’s Inc., the district court found the
economic loss doctrine did not bar the conversion claim where the loss stemmed from the plaintiff
pocketing defendant’s money that was meant to pay the defendant’s ISPs. Vanco US, LLC, v. Brink’s
Inc., No. 09 C 6416, 2010 U.S. Dist. LEXIS 133997, *16 (N.D. Ill. Dec. 14, 2010) (Darrah, J.). There,
the court found that the loss was not the type of “economic loss” contemplated by the doctrine. Id.
In Lansing v. Carroll, on the other hand, the district court found that the economic loss doctrine
barred the defendant’s conversion claim because the defendants were only seeking to recover for
harm to a contract-like interest. Lansing v. Carroll, No. 11 C 4153, 2012 U.S. Dist. LEXIS 144250,
*10-11 (N.D. Ill. Oct. 5, 2012) (Lefkow, J.). In Lansing, the court noted and cited the cases indicating
a split in the application of the economic loss doctrine to conversion claims. Id. at *8-9 (collecting
cases). Ultimately, however, the court found that there was no extra-contractual duty to the
defendant not to convert his property. In so finding the court followed Wigod v. Wells Fargo Bank,
N.A., 673 F.3d 547, 567 (7th Cir. 2012), and considered “the key question [to determine the
application of the Moorman Doctrine] is whether the defendant’s duty arose by operation of contract
or existed independent of the contract.” Id. at *7. Here, the Moorman doctrine bars Toll Processing’s
conversion claim because it alleges a purely economic loss stemming from Kastalon’s alleged
contractual duty to store the rolls and not to convert them to its own purposes.
This Court finds that thirty-two months of storage with no definite stated time parameter
and no communication is unreasonable and constitutes abandonment. Although it may have been
prudent for Kastalon to inform Toll Processing of its intention to sell the rolls as a courtesy,
Kastalon did not unreasonably believe that Toll Processing had abandoned the rolls after such a
length of time with no demand. Even if Toll Processing had not abandoned the rolls, this Court
finds that Toll Processing cannot recover damages for conversion because the Moorman economic
loss doctrine applies.
2. Count II – Negligence
“‘A bailment is the delivery of property for some purpose upon a contract, express or
implied, that after the purpose has been fulfilled, the property shall be redelivered to the bailor, or
otherwise dealt with according to his directions, or kept until he reclaims it.’” Wausau Ins. Co. v. All
6

Chicagoland Moving & Storage Co., 333 Ill. App. 3d 1116, 1121 (2d Dist. 2002) (quoting American
Ambassador Casualty Co. v. Jackson, 295 Ill. App. 3d 485, 490, 229 Ill. Dec. 728, 692 N.E.2d 717
(1998)). To recover under a bailment theory, a plaintiff must establish (1) an express or implied
agreement to create a bailment; (2) a delivery of the property in good condition; (3) the bailee’s
acceptance of the property; and (4) the bailee’s failure to return the property or the bailee’s
redelivery of the property in a damaged condition. Id.
A prima facie case of bailment creates a rebuttable presumption that the defendant acted
negligently. Id. A bailee is not the insurer of the bailed property, but the bailee must exercise
reasonable care under the circumstances. Id. (citing Ortiz v. Warren Chevrolet, Inc., 24 Ill. App. 3d 199,
202, 321 N.E.2d 77 (1974)). Whether a bailee exercised reasonable care under the circumstances is
ordinarily a question of fact, but may be decided as a matter of law on summary judgment if the
undisputed facts conclusively demonstrate that the bailee has exercised its duty. Id.
From the undisputed facts there seems to be an implied bailment, the rolls were delivered,
and not returned. However, this claim fails for the same reason that Toll Processing’s conversion
claim fails. Kastalon’s duty was only to act with reasonable care. The fact that no particular duration
for any purported bailment was agreed upon, it was reasonable for Kastalon, which is not a storage
facility, to conclude that Toll Processing had abandoned the rolls after thirty-two months with no
contact. Accordingly, this Court finds against Toll Processing and in favor of Kastalon on the
negligence count.
3. Count III – Breach of Contract
“Oral agreements are binding so long as there is an offer, an acceptance, and a meeting of
the minds as to the terms of the agreement. The terms of a contract will be found to be definite and
certain, and therefore the contract enforceable, if a court is able to ascertain what the parties have
agreed to, using proper rules of construction and applicable principles of equity.” Bruzas v.
Richardson, 408 Ill. App. 3d 98, 105, 945 N.E. 2d 1208, 1215 (1st Dist. 2011).
Toll Processing asserts that the parties have a valid and enforceable oral contract that was
created when Paula Dent contacted Kastalon and Kastalon agreed to transport and store the rolls in
exchange for Toll Processing using Kastalon’s refurbishing services when it came time to repossess
and put the rolls back into use. Kastalon argues that there is no enforceable contract because Paula
Dent had no authority to enter a contract on behalf of Toll Processing, there was no meeting of the
minds as to the terms of the agreement, and there is no consideration since Toll Processing was
never obligated to use Kastalon for the repairs. Thus, Kastalon contends that Toll Processing’s
7

promise was illusory. See Carter v. SSC Odin Operating Co. LLC, 2012 IL 113204, 976 N.E. 2d 344,
351 (Ill. 2012).
Although there was perhaps an attempt to formulate a contract, it fails for indefiniteness and
lack of consideration. Further, there does not appear to have been a meeting of the minds on the
duration of the contract. Kastalon is adamant that it believed that Toll Processing was only going to
store the rolls at its facility for a short period of time, a belief bolstered by the fact that Kastalon was
not a storage facility. For its part, Toll Processing insists that there was no limit on duration.
According to Toll Processing, Kastalon was to store the rolls until Toll Processing issued a purchase
order for Kastalon to refurbish the rolls, an eventuality that Toll Processing admits might never
happen. Toll Processing’s assertion that Kastalon assumed the risk that Toll Processing might never
have Kastalon refurbish the rolls must fail. In order for a valid contract to exist there must be
consideration. An illusory promise cannot act as consideration. “‘Where there is no other
consideration for a contract the mutual promises of the parties constitute the consideration, and
these promises must be binding on both parties or the contract falls for want of consideration[.]’”
Carter v. SSC Odin Operating Co., LLC, 2012 IL 113204, P21 (Ill. 2012) (quoting Armstrong Paint &
Varnish Works v. Continental Can Co., 301 Ill. 102, 108, 133 N.E. 711 (1921)). Here, there was nothing
to bind Toll Processing. Accordingly, this Court finds there was no contract, Toll Processing cannot
prevail on this claim, and Kastalon is entitled to judgment in its favor.
Conclusion
Based on the foregoing, this Court grants summary judgment in favor of Kastalon on all
three counts of the complaint [90] and denies summary judgment in favor of Toll Processing [84].
At oral argument on the motions, Kastalon stated on the record that it would withdraw its
counterclaims for unjust enrichment and quantum meruit if this Court found in favor of Kastalon and
against Toll Processing on the conversion, negligence, and breach of contract claims. Judgment as a
matter of law is therefore entered in favor of Kastalon and against Toll Processing. Civil case
terminated.
IT IS SO ORDERED.
Date:

9/4/15
Entered: _____________________________
SHARON JOHNSON COLEMAN
United States District Judge

8