Budnick Converting, Inc. v. Nebula Glass International, Inc.

Filing 119

ORDER DISMISSING CASE. Summary judgment is entered in favor of Budnick and Tesa and against Glasslam. Budnick is awarded damages from Glasslam in the amount of $2,473,353. The Clerk to enter judgment accordingly. Signed by Chief Judge David R. Herndon on 6/5/2012. (msdi)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS

BUDNICK CONVERTING, INC.,
Plaintiff/Counter-defendant,
v.
NEBULA GLASS INTERNATIONAL, INC.,
d/b/a GLASSLAM,
Defendant/Counter-plaintiff,
______________________________________________________________________________
NEBULA GLASS INTERNATIONAL, INC.,
d/b/a GLASSLAM,
Third Party Plaintiff,
v.
TESA TAPE, INC.,
Third Party Defendant.

Case No. 09-cv-646-DRH

ORDER
HERNDON, Chief Judge:
On March 30, 2012, this Court entered an order (Doc. 114) granting summary
judgment in favor of Budnick Coverting, Inc. (“Budnick”) and against Nebula Glass
International, Inc. d/b/a Glasslam (“Glasslam”). The Court found, however, that
issues still remained as to the amount of damages to which Budnick is entitled.
Accordingly, the Court ordered the parties to file supplemental briefs regarding the
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issues of damages. The parties have filed their briefs, raising four issues concerning
the following: 1) Whether Glasslam is entitled to reduce damages as a result of
Budnick’s alleged failure to mitigate; 2) Whether Budnick is entitled to recover
finance charges under the terms and conditions; 3) Whether Budnick is entitled to
recover attorneys fees under the terms and conditions; and 4) whether Glasslam is
an entitled to a reduction for alleged under performance. For the reasons stated
below, the Court orders that judgment be entered in favor of Budnick and against
Glasslam in the amount of $2,473,353.00.
I. Background
Budnick is claiming $2,473,353.00 in damages, consisting of the following:
•

$260,634.26 - material converted, delivered, and invoiced to Glasslam;

•

$1,210,377.11 - material in inventory ordered by Glasslam but refused;

•

$3,580.00 - expedited charges;

•

$898,568.84 - finance charges; and

•

$100,192.94 - attorneys fees.

•

$2,473,353.15 - Total.

The Court has already determined, and Glasslam did not dispute, that
Budnick’s terms and conditions apply to the case at hand.

Those terms and

conditions, which will be set forth more specifically where applicable below,
contained nine provisions governing: 1) “Prices”; 2) “Shipments”; 3) “Payments”; 4)
“Cancellations, Returns, and Assignments”; 5) “Limited Warranty, Inspection and
Claims”; 6) “Limits on Liability”; 7) “Force Majeure and Shortages”; 8) “Other
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Provisions”; and 9) “Exclusive Terms and Conditions.” (Doc. 97-17, p. 2).
II. Standard of Review
In a diversity case, the Court applies state law to substantive issues. RLI Ins.
Co. v. Conseco, Inc., 543 F.3d 384, 390 (7th Cir. 2008). Federal law governs
procedure. Fednav Int’l Ltd. v. Cont’l Ins. Co., 624 F.3d 834, 838 (7th Cir. 2010).
When neither party raises a conflict of law issue in a diversity case the applicable law
is that of the state in which the federal court sits. Id. In this case, that state is
Illinois. Under Illinois choice of law rules, however, litigants can stipulate to which
substantive law applies to their case so long as the stipulation is reasonable. Rexford
Rand Corp. v. Ancel, 58 F.3d 1215, 1219 n. 6 (7th Cir. 1995). Here, the Court notes
that Budnick’s terms and conditions state that Illinois law applies. Finding this to
be reasonable, the Court will apply Illinois law in this case. To the extent that the
Illinois Supreme Court has not yet spoken to any of the issues before the Court, the
Court shall apply the law as it would predict the Illinois Supreme Court would if
deciding the case. Mut. Serv. Cas. Ins. Co. v. Elizabeth State Bank, 265 F.3d 601,
612 (7th Cir. 2001).
Summary judgment is appropriate only when “the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.” FED. R. CIV. PROC. 56(c). A genuine
issue of material fact exists when the evidence is such that a reasonable jury could
find for the nonmovant. Buscaglia v. United States, 25 F.3d 530, 534 (7th Cir.
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1994).

The movant in a motion for summary judgment bears the burden of

demonstrating the absence of a genuine issue of material fact by specific citation to
the record; if the party succeeds in doing so, the burden shifts to the nonmovant to
set forth specific facts showing that there is a genuine issue of fact for trial. FED. R.
CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). In considering
motions for summary judgment, a court construes all facts and draws all inferences
from the record in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 255 (1986).
III. Analysis
As mentioned above, and in the Court’s prior order granting Budnick
summary judgment, Glasslam did not dispute that Budnick’s terms and conditions
apply to the case at hand; nor did Glasslam dispute that the Illinois UCC applies.
“‘When commercial parties of equal bargaining power allocate the risk of loss by
contract, . . . there is a strong public policy to give effect to the private allocation.
Under the U.C.C., commercial parties can allocate the risk of loss from defects
through warranties, disclaimers and limitations on warranties.’” Collins Co. v.
Carboline Co., 532 N.E.2d 834, 838 (Ill. 1988) (quoting Henry Heide, Inc. v. WRH
Prods. Co., 766 F.3d 105, 109 (3rd Cir. 1985)).
A. Failure to Mitigate
First, Glasslam argues that it is not responsible to reimburse Budnick for the
damages it incurred as a result of Budnick’s failure to mitigate damages by selling
the goods which have sat in the warehouse of Budnick and Tesa without documented
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attempts to sell these goods on the open market. Glasslam contends that it is
entitled to recover its damages under either §§ 810 ILCS 5/2-708 or 2-709 because
there is no other market for the tape, a custom product made for Glasslam’s unique
requirements. Second, Budnick argues that uncontradicted testimony exists that
establishes that attempts were made to sell the tape after Glasslam rejected it, but
these attempts were unsuccessful. Third, Budnick contends that Glasslam waived
any claim that Budnick failed to mitigate damages by failing to raise this as an
affirmative defense. Fourth, Budnick alternatively attests that “in the alternative to
the above, Section 2-709 permits recovery of the contract price ‘if the seller is unable
after reasonable effort to resell them at a reasonable price or the circumstances
reasonably indicate that such effort will be unavailing.’ 810 ILCS 5/2-709.”
Section 810 ILCS 5/2-709 provides as follows:
When the buyer fails to pay the price as it becomes due the seller may
recover, together with any incidental damages under the next Section,
the price
(a) of goods accepted or of conforming goods lost or damaged within a
commercially reasonable time after risk of loss has passed to the buyer;
and
(b) of goods identified to the contract if the seller is unable after
reasonable effort to resell them at a reasonable price or the
circumstances reasonably indicate that such effort will be unavailing.
810 ILCS 5/2-709. A seller who is not entitled to damages under § 810 ILCS 5/2709, “shall nevertheless be awarded damages for non-acceptance under [§ 810 ILCS
5/2-708].”

Section 810 ILCS 5/2-708 provides that “the measure of damages for

non-acceptance or repudiation by the buyer is the difference between the market
price at the time and place for tender and the unpaid contract price together within
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any incidental damages provided in this Article, but less expenses saved in
consequences of the buyer’s breach.” § 810 ILCS 5/2-708.
Here, the Court finds that Budnick is able to recover damages under § 810
ILCS 5/ 2-709 because there is no other market for the tape, a custom product made
for Glasslam’s unique requirements, and because the record establishes that
Budnick made a reasonable effort to resell the tape at a reasonable price or the
circumstances reasonably indicate that such effort would be unavailing due to the
fact that the tape was a unique product made specifically for Glasslam’s use. See §
810 ILCS 5/2-709. Thus, Glasslam has not established that Budnick has failed to
mitigate its damages and Budnick is entitled to recover the price of the goods
identified in the contract.
Furthermore,“failure to mitigate damages is an affirmative defense under
Illinois law.” Partners, Am. Eagle Historic Props., Inc. v. Lee, 921 F.2d 122, 125
(7th Cir. 1990) (citing, e.g., Toushin v. Gonsky, 77 Ill. App. 3d 508 (1979)). Failure
to timely assert an affirmative defense may result in a finding by the Court that
defendant waived the defense. Venters v. City of Delphi, 123 F.3d 956, 968 (7th Cir.
1997). “‘The failure to plead an affirmative defense in the answer works a forfeiture
only if the plaintiff is harmed by the defendant’s delay in asserting it.” Matthews v.
Wis. Energy Corp., Inc., 642 F.3d 565, 570 (7th Cir. 2011) (quoting Carter v. United
States, 333 F.3d 791, 796 (7th Cir. 2003)). Here, Budnick would clearly be harmed
if Glasslam were to be able to raise this affirmative defense after summary judgment
had already been entered in favor of Budnick.
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See Venters, 123 F.3d at 968

(reversing summary judgment in favor of defendants on the statute of limitations
defense and remanding for trial after concluding that the defendants waived their
statute of limitations defense when defendants did not mention that defense until
they filed their reply in support of its motion for summary judgment, submitted a
year after the case was filed). Thus, the Court finds that Glasslam has waived the
affirmative defense of failure to mitigate.
B. Finance Charges
Second, Glasslam contends that under the “terms and conditions” Budnick
cannot recover finance charges relating to materials that were never shipped to
Glasslam, and that the Interest Act, § 815 ILCS 205/0.01 et seq., appears to limit the
collectible interest on a loan to 5% per annum, rather than the 18% per annum
contemplated by the contract. With regard to Glasslam’s quarrel over the finance
charges, Budnick claims that Glasslam misconstrues the “terms and conditions”
applicable to the sales and that paragraph three of the “terms and condition” makes
clear that the finance charges also apply where full payment of the purchase price is
not paid when due. Budnick further contends that § 815 ILCS 205/1's 5% interest
rate cap per year does apply to the present circumstances as § 815 ILCS 205/4
expressly permits any rate, amount of interest or compensation for transactions
made to corporations or between businesses.
Paragraph three of the terms and conditions provides, in relevant part, as
follows:
3. Payments. If the full payment of the purchase price is not received
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when due as specified on the face hereof or, if not so specified, within
30 days after the shipment date, Budnick Converting, Inc. reserves the
right to charge interest on any unpaid balance at a rate of up to 1 ½%
per month (or the highest rate permitted by applicable laws; if lower)
from the due date.
Based upon the plain language of the terms and conditions, Budnick is entitled
to recover finance charges from Glasslam. Paragraph three clearly provides that
finance charges apply in one of two situations: 1) “[i]f the full payment of the
purchase price is not received when due as specified on the face hereof or, [2)] if not
so specified, within 30 days after the shipment date . . . .” Here, the evidence shows
that the purchase orders for the tape each show a payment term of “net 30" on the
face, meaning that payment was due within 30 days. It is undisputed that Glasslam
failed to make payment. Thus, Budnick is entitled to charge interest on the unpaid
balance.
As to Glasslam’s argument with regard to the Interest Act, it is a non-starter.
Section 815 ILCS 205/1 of the Interest Act provides that “[t]he rate of interest upon
the loan or forbearance of any money, goods or thing in action, shall be five dollars
($ 5) upon one hundred dollars ($ 100) for one year, and after that rate for a greater
or lesser sum, or for a longer or shorter time, except as herein provided.” § 815 ILCS
205/1. The Illinois Interest Act, however, “‘does not apply to transactions involving
corporations.’” Asset Exchange II, LLC v. First Choice Bank, 953 N.E.2d 446, 451
(Ill. App. Ct. 2011) (citing Bank of Am. N.A. v. Shelbourne Dev. Group, Inc., 732 F.
Supp. 2d 809, 821 (N.D. Ill. 2010); Computer Sales Corp. v. Rouseonelos Farms,
Inc., 190 Ill. App. 3d 388, 392 (Ill. App. Ct. 1989); Jones & Brown, Inc. v. W.E.
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Erickson Constr. Co., 73 Ill. App. 3d 481, 483 (Ill. App. Ct. 1979)). Moreover, “if the
transaction involves a sale rather than a loan, it is not subject to the limitation on
interest.” Computer Sales Corp., 190 Ill. App. 3d at 392. “The parties to the
contract could agree that defendant would pay interest at a rate higher than the
maximum rate provided in the usury statute.” Id. “Defendant contracted to pay
interest at the rate of 1 ½ % per month, and plaintiff was entitled to interest as
provided by the contract.” Id.
C. Attorneys Fees
Third, Glasslam posits that while the “terms and conditions” contain an
attorneys fees provision which may govern the purchase orders at issue, Budnick has
failed to establish a sufficient nexus between the “terms and conditions” and these
purchase orders as other “terms and conditions” without attorneys fees provisions
are in the stream of commerce with Glasslam. Alternatively, it is Glasslam’s position,
that if even if Budnick establishes an entitlement to attorneys’ fees, it has not
established how it arrived at its calculation of attorneys’ fees. Budnick responds to
Glasslam’s attorneys fees argument by noting that the Court has already ruled that
the “terms and conditions,” including the attorneys fees provision applied to these
transactions, and that requiring Budnick to submit detailed bills of its attorneys fees
is not the law in Illinois.
“Attorneys fees cannot be awarded to successful litigant in courts of law or
equity in the absence of an authorizing statute or contract.” Ebert v. Thompson, 282
Ill. App. 3d 385, 388 (Ill. App. Ct. 1996) (citing Verni v. Int’l Manor of Oak Park
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Condo., Inc., 99 Ill. App. 3d 1062, 1064 (Ill. App. Ct. 1981)). An award of attorney
fees and costs is within the discretion of the trial court and absent an abuse of
discretion, that award will be upheld. Taghert v. Wesley, 343 Ill. App. 3d 1140,
1148 (Ill. App. Ct. 2003).
Here, Glasslam does not contest that the terms and conditions contain an
attorney’s fees provision; rather, Glasslam speculates about whether the terms and
conditions apply or whether some other set of terms and conditions that do not
contain an attorneys fees provision apply to the transactions at issue.

This

speculation does not create a genuine issue of material fact. When the Court ruled
on the parties’ motions for summary judgment, Glasslam did not contest that the
terms and conditions containing the attorneys fees provision applied.

Simply

referring to a sample order that contained terms and conditions without an attorneys
fee provision does not create a genuine issue of material fact with regard to the
transactions at issue that did contain those terms and conditions.
Moreover, Glasslam does not suggest that Budnick’s attorney’s fees are
unreasonable in this case, and the affidavit of Budnick’s vice president of sales
indicates that Budnick has paid all of the fees owed to their attorneys (Doc. 91-1),
making it prima facie reasonable. See Arthur v. Catour, 216 Ill. 2d 72, 82 (Ill. 2005)
(“The prima facie reasonableness of a paid bill can be traced to the enduring
principle that the free and voluntary payment of a charge for a service by a consumer
is presumptive evidence of the reasonable or fair market value of that service.”).
Thus, Budnick is entitled to be awarded its attorney’s fees.
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D. Under Performance
Lastly, Glasslam argues that a genuine issue of material fact exists regarding
whether and to what extent Budnick satisfied the essential elements terms of its
agreement in that it actually shipped 8 to 12% few linear feet of the tape per spool
than the 30,000 linear feet it promised to deliver under the purchase order. As to
Glasslam’s final argument regarding whether the proper amount of tape was shipped,
Budnick again asserts that this issue has already been decided by the Court. The
Court agrees.
In Glasslam’s response to Budnick’s motion for summary judgment, Glasslam
made this same argument and the Court found it baseless for a number of reasons.
Glasslam has submitted nothing to the Court to create a genuine issue of material
fact on this issue now and, in any event, it appears that under the terms and
conditions this argument has been waived by Glasslam. That relevant provision
provides as follows:
Buyer will promptly inspect all Products delivered to it. Any claim
against Budnick Conversting, Inc. under the Limited Warranty or
otherwise for shortages or for damages to or defects in the delivered
Products that are observable in a reasonable visual inspection will be
deemed waived unless the claim is made in writing to Budnick
Converting, Inc. within 30 days after such delivery.
Thus, Glasslam’s argument is without merit and is denied.
IV. Conclusion
For the reasons stated above and in the Court’s previous order dated March
30, 2012 (Doc. 114), summary judgment is entered in favor of Budnick and Tesa and

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against Glasslam. Budnick is awarded damages from Glasslam in the amount of
$2,473,353. The Clerk is to enter judgment accordingly.
IT IS SO ORDERED.
Signed this 5th day of June, 2012.

Digitally signed by
David R. Herndon
Date: 2012.06.05
13:14:06 -05'00'

Chief Judge
United States District Court

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