Donald J. Ulrich Associates, Inc. v. TEC Air, Inc.

Filing 85

MEMORANDUM Opinion and Order Signed by the Honorable Sharon Johnson Coleman on 12/20/2016:Mailed notice(rth, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Donald J. Ulrich Associates, Inc.,
Plaintiff,
v.
Tec Air, Inc.,
Defendants.

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Case No. 15-cv-00657
Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER
This matter is before the Court on Plaintiff’s and Defendant’s cross motions for summary
judgment [74, 77]. Donald J. Ulrich Associates, Inc. (“Ulrich”) filed its three count first amended
complaint [23] against Tec Air, Inc. (“Tec Air”) alleging breach of contract and a violation of the
Illinois Sales Representative Act (“ISRA”) and asserting a claim for declaratory relief. Ulrich moves
for summary judgment as to the liability aspects of Counts I, II, and III, and Tec Air moves for
summary judgment on Count II and on Ulrich’s purported request for damages based on anticipated
future sales. For the following reasons, Ulrich’s motion for summary judgment [77] as to Counts I
and III is granted and Tec Air’s motion for summary judgment [74] is granted; Ulrich’s motion is
denied as to all other requests.
Background
The following facts are undisputed. Ulrich is an independent manufacturer’s representative
that represents principals to the automotive industry. (Dkt. 75 ¶ 1; Dkt. 77-2 ¶ 1). Tec Air produces
parts, components, and assemblies used in the manufacture of automobiles by original equipment
manufacturers. (Dkt. 75 ¶ 2; Dkt. 77-2 ¶ 2). In September, 2008, the parties entered into a written
sales agreement (the “Agreement”). (Dkt. 75 ¶ 4; Dkt. 75-1; Dkt. 77-2 ¶ 4; Dkt. 77-5). Under the

Agreement, Ulrich was to be the exclusive sales representative for Tec Air to certain customers listed
in the Agreement, including Behr and Valeo. (Dkt. 75-1 § 1.1, exhibit A; Dkt. 77-5 § 1.1, exhibit A;
Dkt. 77-2 ¶ 6). Section 6.2 of the Agreement provided that Tec Air was to pay commissions on any
sales solicited by Ulrich for the life of the product, (Dkt. 75 ¶ 5; Dkt. 77-2 ¶ 7), and in the event of a
termination of the Agreement, commissions were to be paid pursuant to section 9.1. (Dkt. 75 ¶ 7;
Dkt. 77-2 ¶ 8). The Agreement was set to last three years and was to automatically renew for
successive one-year terms unless terminated by written notice. (Dkt. 75 ¶ 6; Dkt. 75-1 § 8.1; Dkt.
77-2 ¶ 9; Dkt. 77-5 § 8.1). In the event of a breach, the non-breaching party was permitted to
terminate the Agreement by written notice only after it afforded the breaching party an opportunity
to cure. (Dkt. 75 ¶ 6; Dkt. 75-1 § 8.2; Dkt. 77-5 § 8.2).
Robert McMurtry (“Mr. McMurtry”), Tec Air’s president, testified that he believed the
parties’ relationship was terminated in 2013, (Dkt. 77-6 at 60:9-11), and, at the very latest, he
believed the Agreement was terminated when this lawsuit was filed. (Dkt. 77-6 at 69:9-11). Donald
Ulrich, Ulrich’s president and owner, declared by affidavit that he believed the Agreement between
the parties was terminated when this lawsuit was filed. (Dkt. 77-4 ¶ 10). Neither party, however,
has produced evidence of a written notice of termination.
Ulrich successfully solicited sales for Tec Air products from Behr and Valeo. (Dkt. 77-2
¶ 12). Mr. McMurtry, has admitted Ulrich is owed commissions for sales made to Behr and Valeo.
(Dkt. 77-2 ¶ 14). Mr. McMurtry testified that Tec Air still owed Ulrich more than $50,000 in sales
commissions. (Dkt. 77-6 at 68:14-22).

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Legal Standard
Summary judgment is appropriate where the pleadings, depositions, admissions and
affidavits demonstrate that there is no genuine issue as to any material fact and that the movant is
entitled to summary judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex v. Catrett, 477 U.S.
317, 324, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). Summary judgment is appropriate where the
nonmoving party has failed to make a sufficient showing on an essential element of his case with
respect to which it has the burden of proof. Celotex, 477 U.S. at 322-23.
Discussion
Ulrich first moves for summary judgment as to Tec Air’s liability for breach of contract
(Count I). A party is liable for breach of contract if there is a valid and enforceable contract,
substantial performance by the plaintiff, a breach by the defendant, and resultant damages. W.W.
Vincent and Co. v. First Colony Life Ins. Co., 814 N.E.2d 960, 967, 351 Ill. App. 3d 752 (1st Dist. 2004).
The parties do not dispute that the Agreement is a valid and enforceable contract, nor do they
dispute that Ulrich performed its duties under the Agreement by procuring business for Tec Air
from Behr and Valeo. Tec Air admits that it has not paid Ulich commissions for Behr and Valeo
sales. The Court grants summary judgment in favor of Ulrich as to Tec Air’s liability for Count I
because it is clear that Tec Air breached the Agreement. The only remaining issue on Count I is the
issue of damages.
Tec Air moves for summary judgment on Ulrich’s ISRA claim (Count II). ISRA provides
that “[a]ll commissions due at the time of termination of a contract . . . shall be paid within 13 days of
termination, and commissions that become due after termination shall be paid within 13 days of the
date on which such commissions become due.” 820 ILCS 120/2 (emphasis added); 820 ILCS 120/3
(civil remedies for ISRA violations). ISRA is intended to protect sales representatives from being
denied commissions that are due or may become due after a contract is terminated. Fararo v. Sink
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LLC, Nos. 01 C 6956, 01 C 6957, 2002 WL 31687671, at *7 (N.D. Ill. Nov. 27, 2002) (Coar, J.);
Klessman & Assoc., Inc. v. American Sensors, Inc., No. 97 C 0556, 1998 WL 246481, at *1 (N.D. Ill. Apr.
28, 1998) (Grady, J.). ISRA, therefore, will not apply to a sales relationship where a contract is still
in effect.
Tec Air argues that because neither party satisfied the termination requirements of the
Agreement, the Agreement is still in effect and therefore, Ulrich’s ISRA claim is precluded. Sections
8.1 and 8.2 – the only provisions in the Agreement that discuss termination – require that the parties
give each other written notice of termination.

If the parties fail to properly terminate the

Agreement, the Agreement automatically renews for successive one-year terms. (Dkt. 75-1 § 8.1;
Dkt. 77-5 § 8.1). The parties failed to provide each other with written notice of termination,
therefore the Agreement has renewed itself on an annual basis and is still in effect.
Ulrich contends that strict compliance with sections 8.1 and 8.2 is not required because Tec
Air’s breach should not permit it to take advantage of the terms of the Agreement. In support of
this contention, Ulrich cites Assaf v. Trinity Med. Ctr., 696 F.3d 681 (7th Cir. 2012), and James v.
Lifeline Mobile Medics, 792 N.E.2d 461, 341 Ill. App. 3d 451 (4th Dist. 2003).
The defendant in Assaf agreed to employ the plaintiff in 2010 and 2011 in exchange for a
release of claims. 696 F.3d at 683-84. Pursuant to the Assaf agreement, the employment was to
renew on an annual basis unless either party chose to terminate the relationship. Id. at 684. Before
the end of 2011, the defendant informed the plaintiff that it was terminating the relationship,
thereby foreclosing the opportunity for employment in 2012. Id. at 685. The plaintiff argued that
because the defendant breached the Assaf agreement by not employing him in 2010 and 2011, it
should not be permitted to exercise the non-renewal option. Id. The Seventh Circuit concluded
that, despite its breach, the defendant properly exercised the non-renewal option, and the nonrenewal option did not unfairly impair plaintiff’s rights under the Assaf agreement. Id. at 686.
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The parties in James also entered into a settlement agreement. 792 N.E.2d at 462. There, the
defendant agreed to pay the plaintiff two lump sum payments, the total of which would have been
less than the jury award in plaintiff’s favor, in exchange for a release. Id. The plaintiff sought to
enforce the original and more costly judgment after the defendant breached the James agreement by
failing to make timely payments. Id. at 463. The James court observed that a defendant who
breaches a contract should not be able to take advantage of the terms of a contract that benefit him
– in this case, the lower cost and freedom from further proceedings. Id. at 464. As a result, the
James court declined to enforce the settlement agreement. Id. at 464-65.
Here, the Court finds that sections 8.1 and 8.2 of the Agreement are more comparable to the
non-renewal option in Assaf than the provisions in James.

By the terms of the Agreement,

compliance with sections 8.1 and 8.2 does not require Ulrich to forfeit anything, nor does it excuse
Tec Air’s obligations to pay commissions. Strict compliance with sections 8.1 and 8.2, therefore,
would not benefit Tec Air in the same way the breaching defendant would have benefited from
enforcement of the settlement agreement in James.
Ulrich further argues that compliance with sections 8.1 and 8.2 is not necessary because both
parties believed that the Agreement was terminated when Ulrich filed suit. (Dkt. 77-2 ¶ 27; Dkt.
77-4 ¶ 10). Ulrich offers no authority to support the proposition that the parties’ beliefs can
terminate the Agreement. Ulrich also fails to provide any authority that the parties’ beliefs satisfy or
override sections 8.1 or 8.2 of the Agreement.
Ulrich has not shown that either party has provided written notice of termination;
consequently, pursuant to section 8.1, the Agreement has renewed every year since 2011 and is still
in effect. Summary judgment in favor of Tec Air on Count II is therefore granted because ISRA is
inapplicable. Ulrich’s motion for summary judgment on the issue of liability as to Count II must be
denied because, as a matter of law, it cannot maintain an ISRA claim.
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Ulrich moves for summary judgment on Count III. Count III seeks a declaratory judgment
that Tec Air is liable to pay sales commissions for all business Ulrich secured on behalf of Tec Air
pursuant to the Agreement. Tec Air agrees that Ulrich is entitled to commissions on products sold
to customers for the life of the product, even if the Agreement is terminated. Summary judgment as
to Count III is therefore granted in favor of Ulrich and against Tec Air. The Court finds that Tec
Air must pay Ulrich commissions, pursuant to the terms of the Agreement, for all sales covered by
the Agreement, even if the sales occur after the Agreement is terminated.
Finally, Tec Air moves for summary judgment on Ulrich’s purported request for damages
for “anticipated future sales.” Ulrich argues that it is entitled to damages for its “expectation
interest” on future sales. Merry Gentleman, LLC v. George and Leona Prods., Inc., 799 F.3d 827, 828-29
(7th Cir. 2015). Expectation damages, however, “measure the loss to the injured party caused by the
breach; they restore the injured party to the place it would have been in had the contract been
performed.” W. Bend Mut. Ins. Co. v. Procaccio Painting & Drywall Co., 794 F.3d 666, 679 (7th Cir.
2015). Here, Ulrich can only expect to receive commissions after Tec Air has received payment
from customers.

(Dkt. 75-1 § 6.3; Dkt. 77-5 § 6.3).

Tec Air, therefore, cannot breach the

Agreement by withholding commissions on future sales which have yet to occur. Put differently,
Ulrich has yet to suffer any injury related to future sales. The Court grants summary judgment in
favor of Tec Air as to any purported request by Ulrich for damages for future sales.

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Conclusion
For the foregoing reasons, Tec Air’s motion for summary judgment is granted and Ulrich’s
motion for summary judgment is granted in part and denied in part.
IT IS SO ORDERED.
_____________________________
SHARON JOHNSON COLEMAN
United States District Judge
DATED: December 20, 2016

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