Krown1 FZC v. Crane Worldwide Logistics, LLC

Filing 38

MEMORANDUM Opinion and Order Signed by the Honorable John Robert Blakey on 2/26/2019. Mailed notice(gel, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
KROWN1 FZC,
Plaintiff,

Case No. 18-cv-3001

v.

Judge John Robert Blakey

CRANE WORLDWIDE LOGISTICS,
Defendant.
MEMORANDUM OPINION AND ORDER
Plaintiff Krown1 FZC sued Defendant Crane Worldwide Logistics for breach
of contract, alleging that Crane failed to make Krown1 its exclusive agent for
certain services, as required by the parties’ contract. See [19]. Crane moved to
dismiss for failure to state a claim under Rule 12(b)(6). See [25]. For the reasons
explained below, the motion [25] is denied.
Background
Defendant Crane is a full-service air, ocean, customs brokerage and logistics
company; effectively, Crane arranges for subcontractors to provide the actual
transportation services, including air, ground, and sea transportation.

[19], ¶9.

Plaintiff Krown1 specializes in transporting freight by air and provides all services
necessary to get freight from its point of origin to its destination.

Id. at ¶10.

Krown1 provides air transportation services, as well as any tangential ground
transportation services; Krown does not provide sea transportation services. Id.

Krown1 alleges that, in late 2014, Crane reached out to Krown1 to see if
Krown1 wanted to partner with Crane in bidding on the United States
Government’s Multimodal Contract HTC-711-15-R-R001 (the Multimodal 2
Contract). Id. at ¶11. Under that contract, the government would select a prime
contractor to provide air, land, and sea transportation in cooperation with various
subcontractors. Id. at ¶12. Krown1 agreed to partner with Crane to bid on the
Multimodal 2 Contract, subject to the two parties entering into an exclusive
agreement contract.

Id. at ¶ 13. The two companies joined forces with United

Airlines to submit a bid, which was ultimately successful. Id. United was named a
prime contractor under the Multimodal 2 Contract, and United, in turn, named
Crane its subcontractor; Crane, in turn, named Krown1 as its subcontractor. Id. at
¶14. Krown1 alleges that, under the parties’ arrangement, United and Crane would
contract with another subcontractor to provide sea transportation services, while
Krown1 would provide air transportation services, along with the ground
transportation associated with those air services. Id. at ¶15.
Additionally, Krown1 alleges, under the parties’ arrangement, United would
earn 2% and Crane was to earn 3% of a total bid, excluding certain charges, while
Krown1 would have final decision making on pricing for all bids submitted to the
government on air services to be performed under the Multimodal 2 Contract. Id. at
¶16. To memorialize this arrangement, on March 10, 2015, Crane and Krown1
executed an “Agreement for Subcontractor Services.” See [19-1]. The Agreement
recognized Crane’s role as a ‘freight forwarder” and Krown1’s desire “to identify and
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conclude a contract with [Crane] as a Subcontractor involved in the provision of Air,
Land and/or Ocean transportation for the Multimodal Contract HTC-711-15-R­R00l
at the best possible price to operate in the Middle East, Afghanistan and other
Areas as may be required under the said Contract.”

Id. at p. 2.

Under the

Agreement, Krown1 agreed to:
offer Support services for the bidding and fulfillment of the abovesaid
Contract including, but not limited to:
i.
Air/Sea or Land Transportation from the origin to the
destination or part thereof,
ii.
Associated Customs clearance, MOD and Diplomatic
permissions for the transfer and movement of cargo across various
states.
Id. Additionally, according to Krown1, the Agreement named Krown1 as Crane’s
exclusive agent, id at ¶¶17-18, as follows:
Exclusive Agency
The Company confirms this agreement to be exclusive for the
abovesaid Contract whether directly or indirectly except for Preexisting Contracts identified prior to the submission of Support Data
by Krown1. Any changes to the exclusivity must be agreed in writing
between the Company and Krown1.
[19-1], p. 2.
Krown1 alleges that, in approximately April or May of 2015, Crane asked
Krown1 to sign another vendor agreement for freight forwarding services, which did
not include an exclusive agent provision.

[19], ¶20.

Krown1 refused, and the

parties operated under the executed Agreement for nearly three years, with Krown1
regularly providing bid information on transportation services. Id. at ¶¶21, 25.

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Krown1 also alleges that, in reliance on the parties’ initial Agreement,
Krown1 expanded its operations to be able to meet the anticipated demands for
services under the Multimodal 2 Contract. Id. at ¶22. Krown1 anticipated that
Crane would reach a separate agreement with another subcontractor to provide sea
transportation services under the Multimodal 2 Contract. Id. at ¶26. Yet Crane
failed to hire a sea transport provider and, as a result, Krown1 secured less work
under the Agreement than anticipated. Id. at ¶¶26–28.
Finally, Krown1 alleges that, in early 2018, Crane stopped honoring the
exclusive agent provision of the parties’ Agreement. Id. at ¶32. In February 2018,
United won a bid under the Multimodal 2 Contract, and sent an email to Crane and
Krown1 so advising. Id. Krown1 sent Crane an email saying “Congratulations on
the win! Please find attached the charter contract for this move.”

[19-1], p. 9.

Crane responded by advising Krown1 that the award did not involve Krown1’s bid,
and that the parties would not be needing the contract Krown1 sent. [19], ¶33; [191], p. 9.
Krown1 filed this lawsuit on April 27, 2018.

In its amended complaint,

Krown1 alleges that Crane breached the Agreement for Subcontractor Services in
the following ways: (1) by using air transport service providers other than Krown1,
including on the bid awarded to Crane on February 15, 2018; (2) by indicating to
Krown1 that it would not provide Krown1 with any additional bids under the
Agreement unless Krown1 agreed to remove the exclusive agency provision from the
parties’ Agreement; (3) by not accepting Krown1’s pricing, and instead insisting
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that Krown1 lower its pricing so that Crane would earn a greater profit on work
done by Krown1 under the Agreement; and (4) by failing to identify a sea transport
service provider to provide sea transport services under the Multimodal 2 Contract,
thereby resulting in less work and profits for Krown1 under the parties’ Agreement.
[19], ¶¶43–46. Crane moved to dismiss for failure to state a claim under Federal
Rule of Civil Procedure 12(b)(6).
Legal Standard
Under 12(b)(6) the Court must construe the Complaint in the light most
favorable to Plaintiff, accept as true all well-pleaded facts and draw all reasonable
inferences in its favor. Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013).
Statements of law, however, need not be accepted true. Id. To survive Defendant's
motion under Rule 12(b)(6), the Complaint must “state a claim to relief that is
plausible on its face.” Id. A claim has “facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. Rule 12(b)(6) limits this Court’s
consideration to “allegations set forth in the complaint itself, documents that are
attached to the complaint, documents that are central to the complaint and are
referred

to

in

it,

and

information that

is

properly

subject

notice.” Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013).

5

to

judicial

Analysis
Under Illinois law, 1 to prevail on a breach of contract claim, a plaintiff must
prove: “(1) the existence of a valid and enforceable contract; (2) performance by the
plaintiff; (3) breach of contract by the defendant; and (4) resultant injury to the
plaintiff.” Asset Exchange II, LLC v. First Choice Bank, 953 N.E.2d 446, 455 (Ill.
App. Ct. 2011). “Only a duty imposed by the terms of a contract can give rise to a
breach.” TAS Distrib. Co. v. Cummins Engine Co., 491 F.3d 625, 631 (7th Cir. 2007)
(quoting W.W. Vincent & Co. v. First Colony Life Ins. Co., 814 N.E.2d 960, 967 (Ill.
App. Ct. 2004)).
Crane argues that Krown1’s claim fails because the alleged breaches are not
tied to any duty imposed under the parties’ Agreement.

That holds true with

respect to Crane’s alleged failure to hire a sea transport subcontractor. The parties
Agreement imposes no such obligation on Crane, and Krown1 does not allege
otherwise.

Rather, Krown1 alleges that it “anticipated” that Crane would hire

another subcontractor to provide sea transportation services under the Multimodal
2 Contract. [19] at ¶26. In fact, the only language in the parties’ contract relating
to sub-contracting provides that “Krown1 shall have the right to enter into any
subcontract/marketing arrangement that will mutually benefit the Company and
Krown1.” [19-1], p. 3. As a result, the Court agrees with Crane that Krown1 cannot
state a claim for breach of contract based upon any failure on Crane’s part to hire a
The parties’ Agreement provides that disputes arising thereunder shall be resolved in the Courts of
the UAE, in accordance with the laws of the UAE. [19-1], p. 4. Both parties represented in their
court filings and in open court, however, that they want their dispute resolved here, in accordance
with Illinois law.
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sea transport subcontractor (as alleged in paragraphs 45 and 46 of the Amended
Complaint).

See, e.g., Bortz v. Bank of Am., N.A., No. 16-CV-5338, 2016 WL

7104288, at *4 (N.D. Ill. Dec. 6, 2016) (Plaintiff cannot allege a claim for breach of
contract without identifying a provision of the agreement that was actually
breached); Burke v. 401 N. Wabash Venture, LLC, No. 08 CV 5330, 2010 WL
2330334, at *2 (N.D. Ill. June 9, 2010) (If Plaintiff fails to allege a contract provision
that was breached, “the claim is merely possible, not plausible.”).
Similarly, the parties’ signed Agreement remains silent on pricing and profit
sharing.

Nevertheless, Plaintiff alleges that under the parties’ “arrangement,”

Krown1 retained “final decision making on pricing for all bids submitted to the
government on air services to be performed under the Multimodal 2 Contract.” [19]
at ¶16. In support, the Complaint attaches an email exchange in August 2015,
months after they executed the Agreement, and these emails detail certain pricing
and profit-sharing terms. See [19-1], p. 6. Shiv at Krown1 emailed John Weir at
Crane “to reconfirm” the parties’ “commercial arrangement” that Crane would get
“3% of the Total Bid excluding any accessorial or pass through charges” and Krown1
would have “final say over the per lb pricing to be submitted to the government.”
Id. John Weir responded with an email stating “Ok let’s start with this for now and
excluding LTO’s.” Id. The import of these emails may ultimately be diminished in
light of the integration clause in the parties’ Agreement. See, e.g., Davis v. G.N.
Mortg. Corp., 396 F.3d 869, 878 (7th Cir. 2005) (under Illinois law, parol evidence
may not be used to add terms to a fully integrated agreement). At this juncture,
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however, the emails, read in conjunction with the Agreement, make plausible
Krown1’s claim that Crane breached the parties’ Agreement by failing to accept
Krown1’s pricing.
Krown1’s claim that Crane breached the exclusivity provision in the parties’
Agreement is also plausible. Crane concedes that the parties’ Agreement includes
the above “Exclusive Agency” provision, but it argues that the provision does not
mean what Krown1 alleges it means.

Crane claims that the provision did not

require Crane to use Krown1 for all air transport service work it did under the
Multimodal 2 Contract, as Krown1 alleges. Rather, Crane argues, the provision
limited the parties’ arrangement to work Krown1 performed for Crane on the
Multimodal 2 Contract. See [26], pp. 4–5. Thus, Crane explains, if Crane were to
engage Krown1 to perform work under a different contract, the subject Agreement
and its terms would not apply. Id. at 5. To be sure, Crane’s reading finds support
in the emails attached to Krown1’s complaint, as they propose that the parties
would need to execute a new contract to cover any work awarded to United on the
successful 2018 bid. But at this stage of the proceedings, the Court cannot say that
Krown1’s reading of the Exclusive Agency provision is implausible. Accordingly,
Krown1’s breach of contract claim may proceed.
Conclusion
For the reasons explained above, Crane’s motion to dismiss [25] is denied,
and Krown1 may proceed on its claim that Crane breached the parties’ Agreement
for Subcontractor Services by failing to honor pricing terms and by failing to use
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Krown1 exclusively for services performed under the Multimodal 2 Contract. Based
on the operative complaint, Krown1 may not pursue a breach of contract claim
based upon any alleged failure to hire a sea transport subcontractor (as alleged in
paragraph 46 of the Amended Complaint). The case is set for a case management
conference on March 13, 2019 at 9:45 a.m. in Courtroom 1203.
Dated: February 26, 2019

Entered:
____________________________
John Robert Blakey
United States District Judge

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