Weber-Stephen Products, LLC v. Sears Holdings Corporation
Filing
285
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang. For the reasons stated in the Opinion, Weber's motion for summary judgment 193 on the antitrust and breach of contract claims is granted in part and denied in part. Emailed notice(slb, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
WEBER-STEPHEN PRODUCTS LLC,
Plaintiff,
v.
SEARS HOLDING CORPORATION and
SEARS, ROEBUCK & CO.,
Defendant.
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No. 1:13-cv-01686
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
I. Introduction
Weber-Stephen Products LLC makes and sells Weber grills. Sears Holding
Corporation and Sears, Roebuck & Company own and operate retail and online
stores.1 Sears sold Weber’s grills until Weber stopped supplying Sears in 2012. Not
long after, Weber sued Sears, alleging, among other things, that Sears’s Kenmorebrand grills infringed some of Weber’s grill-related patents. Sears countersued.2
This Opinion resolves Weber’s motion for summary judgment against two of
Sears’s counterclaims. R. 193, Mot. Summ. J. One of those claims is a Walker
Process claim, the gist of which is that Weber obtained one of its grill patents by
fraud and then used the patent to monopolize the market for premium gas grills.
1
Except when necessary, the Opinion will refer to the two Defendants collectively as
Sears.
2The
Court has subject matter jurisdiction under 28 U.S.C. §§ 1331, 1338(a) & (b),
2201, 2202, and 1367(a). Docket citations are noted as “R. [docket entry number].”
Summary judgment is granted as to this claim because no reasonable jury could
conclude that Weber used the allegedly fraudulent patent to monopolize the
relevant market. The other claim is for breach of contract. Sears alleges that Weber
breached a 1998 agreement between the companies when Weber cut them off in
2012. Summary judgment is granted in part and denied in part as to this claim, as
explained below.
II. Background
A. Sears & Weber
Sears Holding Corporation wholly owns Sears, Roebuck & Company. SSOF
¶¶ 6-7.3 Sears owns and operates Kmart and Sears retail stores and the sears.com,
kmart.com, and kenmore.com retail websites. Id. ¶ 8. Sears also sells outdoor grills
and accessories under the Kenmore brand name. Id.
Weber-Stephen Products LLC is also in the grill business. Id. ¶ 2. Weber
designs, develops, manufactures, and provides outdoor gas, charcoal, and electric
grills and grilling accessories under the Weber brand name. Id. Weber holds certain
grill-related patents, including United States Patent No. 8,347,874, entitled “Grease
Drip Pan and Gas Tank Blocker for a Barbecue Grill.” Id. ¶ 3.
3Citations
to the parties’ Local Rule 56.1 Statements are “WSOF” (for Weber’s
Statement of Facts) [R. 196]; “SSOF” (for Sears’s Response to Weber’s Statement of Facts
and Additional Facts) [R. 215]; “WRSAF” (for Weber’s Response to Sears’s Additional Facts)
[R. 228], followed by the paragraph number. Where a fact is admitted, only the admitting
party’s statement is cited. The Court notes that some of WRSAF was stricken. R. 237. The
stricken portions were not considered.
2
B. The 1998 Agreement
Sears and Weber-Stephen Products Company (predecessor to party WeberStephens Products LLC) signed a written agreement titled “Sears, Roebuck and Co.
Universal Terms and Conditions.” Id. ¶ 38; R. 215-2, Agrmt. at 1. The agreement
applied to “all merchandise sold by [Weber] to [Sears] and shipped on or after Jan.
1, 1998.” Agrmt. at 1. Primarily, the agreement governs Weber’s role as a supplier
to Sears, providing standard terms for future transactions.
Several provisions are important to this motion. First, the agreement is
integrated: “This Agreement shall supersede all other agreements, communications
and understandings between the parties that are inconsistent with the terms
hereof.” Id. Second, it prohibits unwritten waivers: “No right of either party under
this Agreement may be waived except as expressly set forth in a writing signed by
the party waiving such right.” Id. at 4. Third, it requires Sears’s written consent to
assignment: “[Weber] shall not assign (by contract, operation of law or otherwise) its
rights or obligations under this Agreement … except with Sears prior written
consent.” Id. And finally there is a passage that obligates Weber to sell certain parts
to Sears for a certain amount of time:
PARTS – [Weber] shall sell to Sears any and all parts shown on
Merchandise part lists for a period of at least ten (10) years after the
date such Merchandise is last produced by [Weber]; provided, however,
that if [Weber] discontinues manufacturing or supplying any part
shown on any Merchandise parts list, [Weber] shall give Sears at least
ninety (90) days prior written notice of such discontinuance and
[Weber] shall promptly fulfill any and all orders placed by Sears within
such 90-day period. The price of parts shall be specified on the
applicable Purchase Orders, but in no event shall Seller charge Sears a
price greater than the lowest price charged by [Weber] to any other
3
customer for the same or similar parts sold on substantially similar
terms.
Id. at 3.4 Sears alleges that Weber breached this “Parts” provision by refusing to
sell Sears grills and parts at wholesale5 prices. R. 139, Sears’s Answer and
Counterclaims ¶¶ 19-30, 139-47.
C. Weber-Stephen Products LLC Buys
Weber-Stephen Products Co.’s Assets
In late 2010, Weber emailed Sears about a change in its business structure.
R. 196-7 at 4. The email, and an attached letter, made several points:
That the Stephen family, owners of Weber, and another private firm
were creating a new entity that would “purchase substantially all of
Weber[-Stephen Products Company’s] assets relating to the
manufacture and distribution of gas and charcoal grills and related
accessories”;
That the new entity would “continue to operate Weber’s business”;
And that Weber wanted Sears’s written consent to assign the 1998
agreement to the new entity.
4This
“Parts” provision could be read to conflict with an earlier passage providing
that “Nothing contained herein shall be construed as a commitment … by [Weber] to
supply[] any quantity of merchandise.” Agrmt. at 1. Weber quoted this passage in its
briefing, R. 227, Weber’s Reply Br. at 15, but did not rely on it to argue that it had no
obligation to sell Sears anything and therefore could not have breached the agreement by,
as Sears claims, refusing to sell Sears parts at wholesale. Accordingly, that argument is
waived. Williams v. Dieball, 724 F.3d 957, 962-63 (7th Cir. 2013). Also, Sears would have
had a strong counter-argument that the “Parts” provision controls over the more general
“nothing” section. See Brzozowski v. N. Trust Co., 618 N.E.2d 405, 408 (Ill. App. Ct. 1993)
(“[W]here ambiguities exist in a contract between two provisions, the more specific
provision relating to the same subject matter controls over the more general provision.”).
5The
contract does not say “wholesale.” It says that “in no event shall [Weber] charge
Sears a price greater than the lowest price charged by [Weber] to any other customer for
the same or similar parts sold on substantially similar terms.” Agrmt. at 3. For brevity, the
Court will use “wholesale” or “below retail” as a shorthand for the price dictated by this
provision.
4
Id. The new entity referred to in the letter turned out to be Weber-Stephen LLC, the
plaintiff and counter-defendant here. SSOF ¶ 85; R. 194-3 at 2; R. 217-55.
Sears responded by sending its “latest Universal Terms and Conditions”
agreement, which Sears said “the new entity will be required to sign in order to do
business with Sears and Kmart.” R. 196-7 at 2. This “latest” agreement is, in
content, similar to the 1998 agreement. No party contends that Weber, the new
entity or the old one, ever signed the “latest” agreement or that Sears ever gave
written consent to the assignment.
Nonetheless the new Weber entity and Sears continued to do business as if
the first contract had been formally assigned. R. 215-4 ¶¶ 3-7. The year after the
new entity took over, Weber sold Sears over 44,000 grills; the next year, over
35,000. Id. And Sears continued to pay Weber for the grills by transferring money to
the same Weber bank account it had always used. Id. ¶ 3. The matter of assignment
appears to have been dropped.
D. Sears Allegedly Violates Weber’s Minimum Advertised
Price Program and Weber Cuts Sears Off
After the “LLC” took over from the “Co.,” Weber developed an advertisingcompliance program for its “distributors, dealers, and resellers.” R. 215-12 at 2. The
program is called the Minimum Advertised Price (MAP) program. Id. The MAP
program allowed Weber to punish retailers that advertised Weber products at prices
that dipped below minimums set by Weber. Id. Under the program, retailers got
only two strikes before “termination (indefinitely) of buying privileges for Weber
Products ….” Id. at 3.
5
About five months after the program went live, R. 215-16 at 2, Weber notified
Sears that “both Sears and Kmart have breached the MAP Program” and “the
consequences for a second confirmed breach of MAP Program is the immediate and
indefinite loss of buying privileges for Weber Products from Weber and any of its
distributors.” Id. Sears protested the violation. R. 215-17 at 2-3. In response, Weber
agreed to lift the sanction for the first violation, but again warned Sears that “ANY
additional confirmed breach of Weber’s MAP Program by either Sears or Kmart will
result in the immediate indefinite loss of buying privileges for Weber Products.”
R. 215-20 at 2.
Also in May, Weber personnel met with Sears personnel to give notice that
Weber “would stop selling WEBER brand grills and accessory products to Sears,
Roebuck & Co., for all of its retail channels, for the upcoming 2013 selling season.”
R. 215-30 at 2. (The summary judgment evidence does not make clear what impact
Sears’s MAP violations had on this decision, if any.) Weber confirmed this decision
by letter dated August 27, 2013. Id. This meant an end to the business relationship
between Weber and Sears. Id. Before cutting Sears off completely though, Weber
allowed Sears to place final, bulk orders of replacement parts, at below-retail prices.
Id. at 3; R. 215-4 ¶¶ 9-11. Sears made those allowed purchases. R. 215-4 ¶¶ 9-11.
Since then Sears has had to make part purchases, as necessary to service its
customers, at retail prices. Id.
6
F. This Case
Shortly after ending its business relationship with Sears, Weber sued Sears
for, among other things, infringing the ’847 patent. R. 1, Compl. Sears
counterclaimed, alleging, among other things, that Weber breached the 1998
agreement and that Weber obtained the ’847 patent by fraud, rendering its attempt
to enforce that patent here a violation of the antitrust laws. Sears’s Answer and
Counterclaims. Now, Weber moves for summary judgment on Sears’s contract and
patent-related antitrust claims.
III. Standard of Review
Summary judgment is proper “if the movant shows that there is no genuine
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 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). In evaluating summary judgment motions,
courts must view the facts and draw reasonable inferences in the light most
favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007). The
Court may not weigh conflicting evidence or make credibility determinations,
Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir. 2011), and
must consider only evidence that can “be presented in a form that would be
admissible in evidence” at trial, Fed. R. Civ. P. 56(c)(2). The party seeking summary
judgment has the initial burden of showing that there is no genuine dispute and
that they are entitled to judgment as a matter of law. Carmichael v. Village of
7
Palatine, 605 F.3d 451, 460 (7th Cir. 2010); see also Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986); Wheeler v. Lawson, 539 F.3d 629, 634 (7th Cir. 2008). If this
burden is met, the adverse party must then “set forth specific facts showing that
there is a genuine issue for trial.” Anderson, 477 U.S. at 256.
IV. Analysis
A. The Walker Process Claim (Count X)
Generally speaking, competitors may sue each other for monopolization no
matter how the alleged monopoly is achieved. One section of the antitrust laws
provides the private right of action: “[A]ny person who shall be injured in his
business or property by reason of anything forbidden in the antitrust laws may sue
… and shall recover threefold the damages by him sustained, and the cost of suit,
including a reasonable attorney’s fee.” 15 U.S.C. § 15. And another section “forbids”
monopolization: “Every person who shall monopolize, or attempt to monopolize, or
combine or conspire with any other person or persons, to monopolize any part of the
trade or commerce among the several States, or with foreign nations, shall be
deemed guilty ….” 15 U.S.C. § 2. A Walker Process claim is a species of
monopolization claim that targets the use of a fraudulently obtained patent to
obtain or maintain a monopoly. See Walker Process Equip., Inc. v. Food Mach. &
Chem. Corp., 382 U.S. 172, 176 (1965).6
6Walker
Process claims are frequently brought as counterclaims by those accused of
patent infringement. They are, however, infrequently successful: “Although extremely
unsuccessful before the courts, antitrust plaintiffs continue to raise Walker Process claims
as an offensive litigation tactic. The threat of treble damages and the protracted and costly
litigation of antitrust claims lead many executives to reassess the benefits of protracted
legal action.” David R. Steinman, Danielle S. Fitzpatrick, Antitrust Counterclaims in Patent
8
Without Walker Process liability, monopolization-via-patent would be legal,
because patents legitimately function as a limited grant of antitrust immunity.
Walker Process, 382 U.S. at 177 (‘“A patent … is an exception to the general rule
against monopolies’”) (quoting Precision Instrument Mfg. Co. v. Automotive
Maintenance Mach. Co., 324 U.S. 806 (1945)). A successful Walker Process claim
pierces that immunity. “The gist of [a Walker Process] claim is that since [the
patent-holder defendant] obtained its patent by fraud it cannot enjoy the limited
exception to [the antitrust laws] but must answer … to those injured by any
monopolistic action taken under the fraudulent patent claim.” Id. at 176 (emphasis
added). Note the focus on monopolistic action “taken under” the patent. The Walker
Process claim must focus on monopolistic actions involving the fraudulent patent;
monopolistic actions that do not are irrelevant. See Delano Farms Co. v. California
Table Grape Comm'n, 655 F.3d 1337, 1351 (Fed. Cir. 2011) (“A patent owner or
assignee that enforces a patent that was procured by fraud on the PTO loses the
exemption from antitrust liability that ordinarily protects a patent holder in its
enforcement efforts.”).
This narrow focus has consequences for how plaintiffs must prove their
Walker Process claims. After a Walker Process plaintiff proves that the defendant’s
patent was obtained by fraud, see C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340,
Infringement Cases: A Guide to Walker Process and Sham-Litigation Claims, 10 TEX.
INTELL. PROP. L.J. 95, 99 & n.22 (2001) (noting that “a 1993 survey found that since
January 1, 1985, only two out of twenty-five cases in which Walker Process claims were
finally adjudicated were successful …. Since 1993, only one case has found liability for a
Walker Process claim …. And only one published case appears to have survived summary
judgment since 1993”).
9
1364 (Fed. Cir. 1998),7 the plaintiff must then prove all the elements of a typical
monopolization claim. Walker Process, 382 U.S. at 177-78. One of those elements is
“the willful acquisition or maintenance of [monopoly] power as distinguished from
growth or development as a consequence of a superior product, business acumen, or
historic accident.” United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966). The
Walker Process plaintiff must prove this “willful acquisition or maintenance”
element solely by reference to the defendant’s use of the fraudulently obtained
patent. See Walker Process, 382 U.S. at 177-78 (“To establish monopolization or
attempt to monopolize a part of trade or commerce under § 2 of the Sherman Act, it
would then be necessary to appraise the exclusionary power of the illegal patent
claim in terms of the relevant market for the product involved.”). Monopolistic
actions that having nothing to do with the patent do not count—monopolization by
patent is key.
Here, Weber argues that Sears cannot show monopolization by patent: “Sears
… cannot show that Weber engaged in exclusionary conduct—meaning that it used
the ’874 patent to exclude Sears from selling grills. This is the sine qua non of a
Walker Process claim and is the only alleged wrongful conduct in Count X.” R. 195
[Weber’s Br.] at 9. To survive this challenge, Sears needed to submit evidence
sufficient to allow a reasonable jury to find that Weber used the ’847 patent to
“dominate” the market and “drive all or most substitutes from” it. Brunswick Corp.
v. Riegel Textile Corp., 752 F.2d 261, 264-65 (7th Cir. 1984) (“If a patent has no
7Weber
conceded this element, but just for purposes of the motion. Weber’s Br. at 4,
n.1.
10
significant impact in the marketplace, the circumstances of its issuance cannot have
any antitrust significance.”).8 Sears completely failed to do so.
Although Sears argued that Weber holds monopoly power in the market for
premium gas grills, Sears never argued that Weber used the ’847 patent to get that
power. R. 224, Sears’s Resp. Br. at 8-9. The closest Sears came was its argument
that Weber’s filing of this patent-infringement suit, based on the ’847 patent, has
caused Sears antitrust injury. Id. at 10-11. Sears claims that this suit excluded it
from the relevant market, in the antitrust sense, by forcing it to modify its grill
design and incur the costs of defending this case. Id. But, even assuming Sears is
right as to antitrust injury, it would not follow that Sears’s claim would survive
summary judgment.
Antitrust injury is not the same as willful acquisition of monopoly power. And
Sears never argues that this single lawsuit—or any other evidence—could allow a
reasonable jury to infer that Weber, by use of the ’847 patent, dominates the
market. Accordingly, Weber has failed to offer any proof on this necessary part of its
claim. Celotex, 477 U.S. at 323 (“[T]here can be ‘no genuine issue as to any material
fact,’ since a complete failure of proof concerning an essential element of the
nonmoving party's case necessarily renders all other facts immaterial.”). Summary
judgment is therefore appropriate.
8District
Courts must apply Federal Circuit law to the “fraudulently obtained”
element of a Walker Process claim and their own regional Circuit law to the monopolization
element. Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1068 (Fed. Cir.
1998). Accordingly, Seventh Circuit law applies to the antitrust issues raised by this
motion.
11
Based on Sears’s briefing, it appears as though Sears thought it could prove a
Walker Process claim by proving any kind of monopolization. This would explain
why Sears focuses so much of its evidence and briefing on Weber’s MAP program.
Sears’s Resp. Br. at 9. The declaration of Sears’s economist, for example, relies
almost exclusively on MAP to argue that Weber has monopoly power. R. 215-23 at
12-28. It mentions the ’847 patent only in passing: “Lastly, note that if the evidence
supports Sears’ contention that Weber fraudulently obtained the ’847 patent, then
Weber’s current actions in attempting to enforce that patent … would constitute an
anticompetitive tactic ….” Id. at 27. This passage, and others, show that Weber’s
economist never considered whether—much less concluded that—Weber used the
’847 patent to obtain its market power. Her report, therefore, is of no help to Sears.
Against Sears’s lack of evidence, Weber offers a substantial showing that the
’847 patent does not dominate the market, let alone was used to acquire a
monopoly. Sears was never excluded from the relevant market by the ’847 patent. A
Sears representative explained that, in spite of this litigation, Sears has “continued
to sell the [allegedly infringing] grill from the day we initially launched it.” R. 196-2
at 19:18-24, 22:11-24, 23:2-18. The same representative admitted, generally, that
the gas-grill market is extremely competitive, with lots of consumer options: “The
United States is an incredibly competitive market. There’s a lot of consumer choice.
There’s a lot of options. There’s many different products that you compete with ….”
Id. at 72:6-19. Of the premium gas grill market, the representative said there was
“much less competition,” but he still had to concede that Sears and others compete
12
with Weber. Id. at 73:5-74:23. This unrebutted evidence suggests that the ’847
patent lacks the necessary “antitrust significance.” Brunswick, 752 F.2d at 264-65.9
B. The Breach of Contract Claim (Count XII)
Sears alleges that Weber breached the 1998 agreement in 2012 when Weber
refused to allow Sears to continue to buy Weber parts at below-retail prices. Sears’s
Answer and Counterclaims ¶¶ 19-30, 139-47. Weber seeks summary judgment
against this claim for two reasons. First, Weber argues that Sears sued the wrong
“Weber” entity. Weber’s Br. at 11-12. And second, Weber argues that Sears has no
damages. Id. at 12-13. The Court rejects both arguments, although Sears will be
limited to seeking at trial only those damages consistent with the theory of breach it
pled, as explained below.
1. The Weber Entity
The parties to the 1998 Agreement were Sears10 and Weber-Stephen
Products Company. Agrmt. at 1. In late 2010, The Stephens Family and a private
investment group created Weber-Stephen Products LLC. The LLC then acquired
substantially all the assets of Weber-Stephen Products Company. R. 196-7 at 3;
SSOF ¶ 85; R. 194-3 at 2; R. 217-55. Sears’s breach of contract claim identifies the
LLC as the defendant. Sears’s Answer and Counterclaims. The LLC argues that it
9The
parties also disputed other aspects of the Walker Process claim, including the
validity of Sears’s market definition and whether Weber had market power within that
market. Because Sears failed to show that a question of fact on the ’847 patent’s “antitrust
significance” in the market, it is unnecessary to address these other issues, which presented
much closer questions.
10Sears
includes the holding company and the “& Roebuck” entity. No one has
argued that the distinction matters here.
13
was not a party to, and therefore not bound by (and incapable of breaching), the
1998 agreement. Weber’s Br. at 11. Sears’s briefing in opposition appears to make
four arguments. Sears’s Resp. Br. at 12-14. The Court will address each one. Two
are independently sufficient to withstand summary judgment; the other two are not
persuasive.
For the sake of completeness, the Court considers the two unpersuasive
arguments. First, Sears argues that, in the course of this litigation, the LLC
admitted—twice—that it was a party to the contract: once in its motion to dismiss
briefing and once in jurisdictional briefing. Id. at 12; SSOF ¶¶ 83-84. The motion to
dismiss briefing, however, never actually concedes that the LLC is the proper party
to the contract. R. 43-1 at 14, 15, 17. And even if it did, the concession would be
irrelevant to this motion because accepting an opponent’s allegation as true in a
motion to dismiss is not accepting the allegation as proven fact for purposes of
summary judgment or trial.
The jurisdictional briefing is similarly unhelpful to Sears. All the LLC said
was that Sears’s contract claim was “so related” factually to the LLC’s patent
infringement claim that this Court should exercise supplemental jurisdiction over
the contract claim. R. 107 at 2, 8. For claims to be “so related” requires only a “loose
factual connection.” See Ammerman v. Sween, 54 F.3d 423, 424 (7th Cir. 1995). So
all the LLC has conceded is that the contract claim and the infringement claim have
a loose factual connection. From that, it does not necessarily follow that the LLC is
bound by the 1998 agreement. Sears asserts—but fails to explain—otherwise.
14
The second unpersuasive argument is that Sears and the LLC allegedly
formed a new contract. Illinois law allows contract formation based on conduct
where the parties’ writings would not otherwise support it. See 810 ILCS 5/2-207(3).
It is possible that the LLC and Sears did form a contract in this way. The LLC
appears to have taken over for the Company in late 2010. For another two years or
so after that the LLC and Sears appear to have continued to do business as if
Weber’s corporate form had not changed. R. 215-4 ¶¶ 4-7. The LLC continued to
supply Sears with Weber grills and Sears continued to sell them. Id. This conduct
could support the existence of a new contract.
But this does not help Sears because “a plaintiff may not amend his
complaint through arguments in his brief in opposition to a motion for summary
judgment.” Grayson v. O'Neill, 308 F.3d 808, 817 (7th Cir. 2002) (rejecting
argument that amounted to an unpled theory of liability) (quoting Shanahan v. City
of Chicago, 82 F.3d 776, 781 (7th Cir.1996)). Here, Sears pled a breach of the 1998
agreement explicitly. Sears’s Answer and Counterclaims ¶¶ 19-20, 139-47. It did not
plead a breach of some new, implied-by-conduct contract. Accordingly, this
argument is rejected.
There are, however, two arguments advanced by Sears that require denial of
summary judgment. First, Sears argues that Weber-Stephen Products Company’s
conduct worked an assignment of the agreement to the LLC. Weber responds,
rightly, that the contract required Sears’s written consent to any assignment, and
that consent was sought but not obtained. R. 227, Weber’s Reply Br. at 14. Weber
15
adds (this time wrongly) that Sears was incapable of waiving its right to consent in
writing. Id. Weber argues that “[a] signed agreement which excludes modification
… except by a signed writing [which this agreement does] cannot otherwise be
modified.” Id. (emphasis omitted) (citing 810 ILCS 5/2-209(2)). But Weber ignores a
later subsection within the same code provision: “Although an attempt at
modification or rescission does not satisfy the requirements of [the section Weber
relies on] it can operate as a waiver.” 810 ILCS 5/2-209(4). So Sears was capable of
waiving its right to written consent.
So the question is whether a reasonable jury could find that they did. To get
there, Sears must show either that Weber reasonably relied on its asserted waiver
or that the waiver was clear and unequivocal. Cloud Corp. v. Hasbro, Inc., 314 F.3d
289, 297 (7th Cir. 2002) (relying on Illinois law). Here, Sears can show—to the
degree
necessary
on
summary
judgment—reasonable
reliance.
Sears
has
undisputed evidence that Weber continued to sell Sears tens of thousands of grills
after Sears failed to sign and return Weber’s consent-to-assignment letter. R. 215-4
¶¶ 4-7; R. 196-7. From Weber’s willingness to make those sales, a reasonable jury
could infer Weber relied on Sears’s waiver of its right to consent in writing.
Finally, Sears appears to argue that the LLC is bound by the contract as the
Company’s “successor.” Illinois follows the general rule that when a company buys
another’s assets, the buyer does not take on the seller’s liabilities. Vernon v.
Schuster, 688 N.E.2d 1172, 1175 (Ill. 1997). One exception to this rule is when the
acquiring company agrees, explicitly or implicitly, to do so. Id. at 1175-76. Here,
16
there is evidence from which a reasonable jury could infer that the LLC agreed to
take on the Company’s obligations under the 1998 agreement. First off, the
Company offered to assign the contract to the LLC. R. 196-7 at 4 (“Weber will
assign its rights under the Agreement …”). The Company probably had the LLC’s
consent to make that offer. After all, the Company involved the same people as the
LLC and one apparent purpose of the LLC’s acquisition of the Company’s assets
was for the LLC to take over the Company’s business. Id. (“Following the
[acquisition], Weber’s existing management team will continue to operate Weber’s
business.”). Also, the LLC did, in fact, act as though it had taken over the contract
for the Company. R. 215-4 ¶¶ 4-7. It continued for roughly two years to perform on
the 1998 agreement as if the agreement had, in fact, been assigned. Id.
In sum Weber’s “wrong Weber” argument is rejected. At trial, Sears may
argue that the Company assigned the contract to the LLC or that the LLC
succeeded to the Company’s contractual obligations by express or implied
agreement.
2. Damages
Sears claims two11 types of damages from Weber’s breach of the 1998
agreement’s “Parts” provision. First, Sears wants the lost profits it could have had if
11Sears’s
principal declarant, a Mr. Alt, appears to claim other types of contract
damages in his declaration in opposition to Weber’s motion. R. 215-4. He says that “After
Weber cut Sears off, Sears was forced to make rough estimates of how many Weber
replacement parts it might need in the future and to make one last bulk purchase from [the
third party]. Since Sears may never need to use those replacement parts, Sears may get
stuck with excess inventory. Further, since Sears was required to make a bulk purchase up
front, Sears was deprived of the opportunity cost of using that money elsewhere unless and
17
Weber had continued to let it sell grills. Sears’s Resp. Br. at 14. But “[t]he measure
of damages is the amount which will compensate the party for loss which either
fulfillment of the contract would have prevented, or which breach has caused.”
Melrose Park Nat’l Bank v. Carr, 618 N.E.2d 839, 845 (Ill. App. Ct. 1993) (internal
citations omitted). In other words, Sears cannot get damages that have nothing to
do with the breach. Here, awarding lost profits based on grills is inappropriate
because the alleged breach is of the “Parts” provision, which says nothing about
grills. The contract did not require Weber to sell Sears grills at all. Agrmt. at 1
(“Nothing contained herein shall be construed as a commitment by Sears to
purchase, or by Seller to supply, any quantity of merchandise”). It only required
Weber to sell Sears parts. Agrmt. at 3. Moreover, Sears never pled anything even
hinting at damages based on lost grill sales. Sears’s Answer and Counterclaims ¶¶
19-30, 139-47; Grayson, 308 F.3d at 817 (rejecting unpled theory raised for first
time in opposition to summary judgment).
Second, Sears claims as damages the difference between what it paid on
Weber.com for replacement parts and the wholesale cost of those parts. Sears’s
Resp. Br. at 15. This makes sense. The contract says that Weber had to sell Sears
the parts and that they had to sell them, in effect, at wholesale. Agrmt. at 3. Weber
did sell Sears replacement parts, and perhaps still does, but it does so at retail. R.
215-4 ¶ 11. Accordingly, Sears—if it proves the other elements of the claim at
until needed, as well as the time value of money.” Id. ¶ 10. Sears’s brief, however, nowhere
argues these possible damages theories. Accordingly, they are waived.
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trial—is entitled to these damages. For that reason, Weber’s damages argument is
rejected.
V. Conclusion
Weber’s summary judgment motion is granted as to Sears’s Walker Process
claim and granted as to Sears’s damages theory that Weber’s alleged breach of the
1998 agreement entitles Sears to whatever profits it lost when Weber stopped
selling it grills. The motion is otherwise denied. Sears may bring its contract claim
to trial to recover the difference between what it should have paid for parts under
the contract and what it did pay.
ENTERED:
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: February 24, 2014
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