H.E.D. Inc v. Konica Minolta Business Solutions U.S.A. Inc. et al

Filing 119

OPINION AND ORDER: For the reasons set forth in the Opinion and Order, H.E.D.'s motion for summary judgment 82 is DENIED; defendants' cross-motion for summary judgment 89 is GRANTED, in part, and DENIED in part, and the three evidentia ry motions 91 , 106 , 108 are DENIED as moot. The parties are ORDERED to file a joint status report regarding their willingness to engage in a settlement conference before a Magistrate Judge by 10/13/2017. A trial date will be set under separate order. Signed by Senior Judge James T Moody on 9/29/2017. (jss)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
H.E.D. INC.,
d/b/a Sounds and Graphics;
Plaintiff,
v.
KONICA MINOLTA BUSINESS
SOLUTIONS U.S.A. INC.; KONICA
MINOLTA PREMIER FINANCE;
WILLIAM KOCHANNY;
Defendants.

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No. 2:14 CV 311

OPINION and ORDER
I.

BACKGROUND
This case stems from two contracts, a Premier Lease Agreement (“PLA”) and a

Maintenance Contract (“MC”), entered into by plaintiff H.E.D. Inc., a printing company
doing business as Sounds and Graphics (“H.E.D.”), in connection with its lease of a
C8000 Konica printer. (DE # 84-9; DE # 90-2.) On the other side of each of these
agreements was one or both of the Konica defendants in this case, Konica Minolta
Business Solutions U.S.A. Inc. (“KMBS”) and Konica Minolta Premier Finance
(“KMPF”), though as explained in more detail below, precisely who was a party to the
PLA is hotly debated. The PLA contained a waiver regarding warranties, a waiver
regarding certain types of damages, a proclamation that the lease constituted a “Finance
Lease” under the Uniform Commercial Code (“U.C.C.”), and a waiver of certain U.C.C.
rights.

Ultimately, the parties’ deal went sour, as H.E.D. claims the C8000 was unable to
handle papers of a certain thickness as necessary to fulfill orders placed by H.E.D.
customers. (DE # 4 at 3.) H.E.D. sued the Konica defendants for breach of warranty and
breach of contract, as well as defendant William Kochanny, an employee of KMBS, who
H.E.D. claims made misrepresentations regarding characteristics and capabilities of the
C8000. (DE # 4.)
Before the court are cross-motions for summary judgment, one brought by
H.E.D. (DE # 82), and one brought by the Konica defendants and Kochanny (DE # 89).
Three related evidentiary motions were filed. (DE ## 91, 106, 108.)1 After copious,
verbose, and often duplicative briefing, the motions are now ready for ruling.2 For the
reasons set forth below, H.E.D.’s motion for summary judgment is denied, defendants’
cross-motion for summary judgment is granted, in part, and denied, in part, and the
evidentiary motions are denied as moot, because the resolution of the issues raised
therein is not necessary for resolution of the motions for summary judgment.

1

Docket entry 106 was not styled as a motion, but effectively, it is one.

2

H.E.D. argues that defendants’ response to its motion for summary judgment
was filed four days late, which appears to be accurate. (DE # 94 at 1.) It seems
defendants filed its response as part of its cross-motion for summary judgment, without
seeking leave of court for the tardiness of the response portion. However, all of the
matters covered by the response are effectively covered in defendants’ own crossmotion for summary judgment and the various responses, replies, and sur-replies filed
later in the case, so even if the court were to strike the response brief, the subject matter
addressed therein would still exist before the court in some other form. H.E.D.’s
objection, while technically correct, serves no purpose and is disregarded.
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II.

LEGAL STANDARD
Federal Rule of Civil Procedure 56 requires the entry of summary judgment, after

adequate time for discovery, against a party “who fails to make a showing sufficient to
establish the existence of an element essential to that party’s case, and on which that
party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986). “[S]ummary judgment is appropriate–in fact, is mandated–where there are no
disputed issues of material fact and the movant must prevail as a matter of law. In other
words, the record must reveal that no reasonable jury could find for the non-moving
party.” Dempsey v. Atchison, Topeka, & Santa Fe Ry. Co., 16 F.3d 832, 836 (7th Cir. 1994)
(citations and quotation marks omitted).
The moving party bears the initial burden of demonstrating that these
requirements have been met. Carmichael v. Village of Palatine, Ill., 605 F.3d 451, 460 (7th
Cir. 2010). “[T]he burden on the moving party may be discharged by ‘showing’–that is,
pointing out to the district court–that there is an absence of evidence to support the
nonmoving party’s case.” Celotex, 477 U.S. at 325. Once the moving party has met his
burden, the non-moving party must identify specific facts establishing that there is a
genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986);
Palmer v. Marion County, 327 F.3d 588, 595 (7th Cir. 2003) (citing Celotex, 477 U.S. at 324).
In doing so, the non-moving party cannot rest on the pleadings alone, but must present
fresh proof in support of its position. Anderson, 477 U.S. at 248; Donovan v. City of
Milwaukee, 17 F.3d 944, 947 (7th Cir. 1994). In viewing the facts presented on a motion

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for summary judgment, the court must construe all facts in a light most favorable to the
non-moving party and draw all reasonable inferences in favor of that party. Chmiel v. JC
Penney Life Ins. Co., 158 F.3d 966 (7th Cir. 1998).
III.

DISCUSSION 3
Though the parties have filed separate cross-motions for summary judgment, the

issues addressed in the motions are nearly identical, as are the responses and replies
thereto. It is wasteful and unnecessary to address each motion separately, as they
involve significant substantive overlap. Therefore, in the context of this opinion, the
court addresses the issues generally, with an eye to the ultimate question of the
existence of a genuine issue of material fact, while simultaneously keeping in mind the
summary judgment burden-shifting standard and relevant burdens of persuasion.
A.

Parties Subject to the PLA

At the outset, the court must address a matter critically important to the crossmotions for summary judgment: the identity of the parties subject to the PLA. The
importance of this issue is clear from the full page of fine print covering the second
page of the PLA: H.E.D. waived a number of its rights vis-a-vis the other party or
parties to the PLA, whomever they may be. (DE # 84-9.) Specifically, H.E.D. waived its
right to recover consequential, indirect, or incidental damages (id. ¶ 12), “rights under
Article 2A (508-522) of the UCC” (id.), and the right to sue for express or implied

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All of the parties have applied Indiana law in their briefs, so the court applies
the same in this opinion.
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warranties, including merchantability and fitness for particular purpose (id. ¶ 5). For
this reason, the court addresses this question of contract interpretation, first.
“The goal of contract interpretation is to determine the intent of the parties when
they made the agreement.” Tender Loving Care Mgmt., Inc. v. Sherls, 14 N.E.3d 67, 72
(Ind. Ct. App. 2014). This court must examine the plain language of the contract, read it
in context and, whenever possible, construe it so as to render every word, phrase, and
term meaningful, unambiguous, and harmonious with the whole. Id. Construction of
the terms of a written contract generally is a pure question of law. Id. If, however, a
contract is ambiguous, the parties may introduce extrinsic evidence of its meaning, and
the interpretation becomes a question of fact. Broadbent v. Fifth Third Bank, 59 N.E.3d
305, 311 (Ind. Ct. App. 2016). “A word or phrase is ambiguous if reasonable people
could differ as to its meaning.” Id.
The PLA, a two-page4 lease agreement, bound H.E.D. to a certain number of
payments over a certain term of months in exchange for use of the C8000. (DE # 84-9 at
2.) At the top of the PLA, a “Konica Minolta” logo appears. (Id.) Underneath the logo, it
states:

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Initially, H.E.D. argued that the court should only consider the first page of the
lease, and not the second, but it later abandoned this argument. (DE # 114.) Defendants
objected to this abandonment, seemingly concerned that the record would be wiped
clean of the evidentiary foundation H.E.D. laid for its initial argument, preventing
defendants from properly cross-examining certain witnesses at trial. (DE # 117.) As no
move was made to strike any documents or evidence, this objection seems misplaced,
but the court notes for the sake of completeness that it has disregarded any references to
H.E.D.’s “one-page lease” argument, but has not stricken any related evidence from the
record.
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This Premier Lease Agreement (“Agreement”) is written in “Plain English.”
The words you and your refers to the customer (and its guarantors). The
words Lessor, we, us, and our refer to Konica Minolta Premier Finance, a
program of Konica Minolta Business Solutions U.S.A., Inc., its subsidiaries
and affiliates. (Supplier)
(Id., bold in original.) Even from just this opening sentence, it is easy to see why
confusion has ensued over the PLA. Are both KMPF and KMBS lessors? Only KMPF
and its subsidiaries and affiliates? Only KMPF? If the latter, why the use of the plural
“we, us, and our”?
The rest of the agreement further confuses the issue. Further down on the page, a
“Customer Confidence Guarantee” appears, indicating the commitment of “Konica
Minolta Business Solutions” to maintaining and, if necessary, replacing the leased
equipment. (Id.) However, at the bottom, signature lines appear, and “Konica Minolta
Premier Finance” is listed above the title “LESSOR.” (Id.) Below that, a section
regarding guarantors begins: “As additional inducement for us, Konica Minolta
Premier Finance to enter into the Agreement . . . .” (Id.) On the second page of the PLA,
it states: “You acknowledge that none of Supplier or their representatives are our agents
and none of them are authorized to modify the terms of this Agreement.” (Id. at 3.)
At this point, the identity of the party or parties to the contract (other than
H.E.D.) is clear as mud. While plural is used consistently in reference to the “lessor,” the
lessor is delineated as only KMPF in the signature line. Further, in the guarantor
section, KMPF is specifically indicated as constituting “us,” but not KMBS. The second
page of the agreement also draws a distinction between the “Supplier” (presumably

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KMBS) and the plural pronoun. However, KMBS appears in the Customer Confidence
Guarantee section of the PLA, and use of the plural pronouns would be consistent with
reading the contract as binding both KMBS and KMPF. Defendants claim that KMBS
and KMFP are the same entity, but Indiana law instructs us to give meaning to each
term, Tender Loving Care, 14 N.E.3d at 72, and defendants’ argument would require the
court to decide that the parties used two different and very specific terms to mean the
same thing, which is at best counterintuitive and at worst bordering on illogical.
In short, no interpretation of the PLA is entirely consistent, indicating ambiguity.
As such, the court cannot make a determination on this point at the summary judgment
phase, as ambiguous contract provisions involve questions of fact. Broadbent, 59 N.E.3d
at 311. Thus, both parties’ motions for summary judgment are denied to the extent that
they seek resolution of this question.
B.

Warranty Disclaimer

H.E.D. argues that, regardless of who is a party to the PLA, certain provisions
contained therein are unenforceable as a matter of law. Defendants, of course, argue
that they are entitled to summary judgment regarding the enforceability of the same.
The first of these provisions is the warranty disclaimer appearing in paragraph 5 of the
second page of the PLA. H.E.D. argues that it is unenforceable because it is not
conspicuous. The warranty disclaimer in question states:
5. WARRANTY DISCLAIMER: WE MAKE NO WARRANTY EXPRESS
OR IMPLIED, INCLUDING THAT THE EQUIPMENT IS FIT FOR A
PARTICULAR PURPOSE OR THAT THE EQUIPMENT IS
MERCHANTABLE.
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(DE # 84-9 at 3, ¶ 5, bold in original.)
Indiana’s version of the U.C.C., which the parties appear to agree governs the
PLA, provides that a contract can exclude warranties of merchantability and fitness for
a particular purpose if such exclusion is conspicuous. Ind. Code § 26-1-2.1-214.
“Conspicuous” is defined as “so written that a reasonable person against whom it is to
operate ought to have noticed it.” Id. § 26-1-1-201(10). The statute further states that
“[l]anguage in the body of a form is conspicuous if it is in larger or other contrasting
type or color.” Id.
In this case, the warranty disclaimer is in bold face type, distinct from both the
surrounding paragraphs and even some of the sentences in the same paragraph, which
are not in bold. (DE # 84-9 at 3, ¶ 5.) It is also in capital letters, whereas approximately
five-sixths of the page is not. (Id.) Of the five, short, bolded segments of the second page
of the PLA, only three of them are also capitalized (the warranty disclaimer being one of
them). (Id.) The disclaimer appears in the middle of the page, and is the lead sentence in
a separate paragraph related to warranties, and the paragraph is separated by a full line
space from the paragraphs above and below it. (Id.) It is fully conspicuous, and
complies with the Indiana Code.
H.E.D. argues that Jerry Alderman Ford Sales, Inc. v. Bailey, 291 N.E.2d 92, 102 (Ind.
Ct. App. 1972), requires this court to find the warranty disclaimer inconspicuous. In that
case, the court held that a jury did not err in finding the existence of an implied
warranty not excluded by a written disclaimer, because the jury could have found that

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the disclaimer, which was located at the extreme bottom of the second, non-signature
page of the contract, was not conspicuous. Id. H.E.D. also cites Jones v. Abriana, 350
N.E.2d 635, 571 (Ind. Ct. App. 1976), where the court found a warranty exclusion
inconspicuous where it was placed on the reverse side of the form “buried in a whole
page of fine print” and underlined, as was “nearly half the page.”
The disclaimer in this case is not at the extreme bottom of the page, so this case is
distinguishable from Jerry Alderman at least in that respect, but additional information
about the type face and font of the disclaimer in that case is not available, so the court
cannot further compare. Jones is also distinguishable, as in this case, very few phrases
are bolded in the fine print contained on the second page of the PLA, compared to the
underlining that appeared on nearly half of the page in Jones. Of the five bolded
segments, only three are also capitalized. In this case, when the totality of the document
is examined, the disclaimer appears conspicuous. Summary judgment is granted to
defendants on this issue.
C.

Finance Lease Designation

H.E.D. argues that the portion of the PLA which designates that the PLA is a
“Finance Lease” under the U.C.C. is also inconspicuous, and defendants argue the
opposite. The finance lease designation reads:
THIS AGREEMENT CONSTITUTES A “FINANCE LEASE” AS DEFINED
IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE.
(DE # 84-9 at 3, ¶ 5, bold in original.) H.E.D.’s arguments in this regard are virtually
identical to its arguments related to the warranty disclaimer, discussed immediately
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above, and the arguments fail for the same reasons. Like the warranty disclaimer, the
finance lease designation is one of only three provisions on the page in bold face, capital
letters. The designation appears in the middle of the page, in a series of paragraphs that
are visually separated by lines of space. This provision is conspicuous, and defendants
are entitled to summary judgment on this issue.
D.

Lost Profits under PLA

The parties dispute whether the PLA excludes lost profits as a form of damages,
and both sides seek summary judgment on the issue. The PLA contains a provision
limiting damages, which reads:
YOU AGREE THAT WE WILL NOT BE RESPONSIBLE FOR ANY
CONSEQUENTIAL INDIRECT OR INCIDENTAL DAMAGES FOR ANY
REASON WHATSOEVER. . . . [Y]ou waive lessee’s rights under Article 2A
(508-522) of the UCC.
(DE # 84-9 at 3, ¶ 12.)
The parties appear to agree that foreseeable damages constitute direct damages,
not consequential damages, and it is difficult to imagine how lost profits are not
foreseeable when the lessee of a printer is a printing business. Thus, H.E.D.’s lost profits
would not be excluded by the consequential damages waiver in paragraph 12 of the
PLA.
However, this point is moot because the waiver of rights under Article 2A,
Sections 508-522, of the U.C.C. operates to bar H.E.D.’s recovery of lost profits.
Indiana’s version of the U.C.C. states that “[c]onsequential damages resulting from a
lessor’s default include: . . . any loss resulting from general or particular requirements
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and needs of which the lessor at the time of contracting had reason to know . . . .” Ind.
Code § 26-1-2.1-520. At the time of contracting, defendants surely had reason to know
of H.E.D.’s general requirements and needs regarding printers for its printing business.
After all, H.E.D. was in the business of printing, and defendants were in the business of
leasing printers to those in the business of printing. To read the situation any other way
fails to comply with common sense. Accordingly, H.E.D.’s lost profits constitute
consequential damages under Section 26-1-2.1-520, and the rights to recover under that
section were waived by H.E.D. in paragraph 12 of the PLA. Defendants are entitled to
summary judgment on this issue.
E.

Lost Profits under MC

Defendants seek a ruling from the court stating that they are not liable for lost
profits under the MC. The MC does indeed name “lost profits” as an excluded form of
damages. (DE # 90-2 at 4, ¶ 19.) H.E.D. does not dispute this. Defendants are entitled to
summary judgment on this point.
F.

Claims Regarding Employees’ Statements

H.E.D. seeks a ruling from the court that certain representations made by Konica
employees, including Kochanny, constituted express warranties. Similarly, defendants
seek a ruling from the court that it is entitled to summary judgment on the fraud claim
against Kochanny, which is based on his purported representations to H.E.D. However,
the court finds that genuine issues of material fact exist regarding whether any
representations or misrepresentations occurred and the content and context of those

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representations or misrepresentations. These are questions of fact and credibility that
the court cannot answer at this stage. Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003).
Accordingly, both parties’ motions for summary judgment are denied in this regard.
IV.

CONCLUSION
For the foregoing reasons, H.E.D.’s motion for summary judgment (DE # 82) is

DENIED; defendants’ cross-motion for summary judgment (DE # 89) is GRANTED, in
part, and DENIED, in part, and the three related evidentiary motions (DE ## 91, 106,
108) are DENIED as moot. The parties are ORDERED to file a joint status report
regarding their willingness to engage in a settlement conference before a Magistrate
Judge by October 13, 2017. A trial date will be set under separate order.
SO ORDERED.
Date: September 29, 2017
s/James T. Moody
JUDGE JAMES T. MOODY
UNITED STATES DISTRICT COURT

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