Chr Hansen Inc v. Centrome Inc
Filing
34
DECISION AND ORDER signed by Judge Lynn Adelman on 6/27/16 denying 23 Motion for Reconsideration. (cc: all counsel) (dm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
______________________________________________________________________
CHR. HANSEN INC.,
Plaintiff,
v.
Case No. 15-cv-0150
CENTROME INC.,
Defendant.
______________________________________________________________________
DECISION AND ORDER
Plaintiff Chr. Hansen Inc. brings this action for breach of contract against
defendant Centrome Inc., alleging that defendant breached an indemnification
agreement between the parties by failing to indemnify plaintiff in litigation regarding a
product plaintiff sold to defendant. On December 31, 2015, I denied defendant’s motion
to dismiss. The primary issue in that motion was whether plaintiff had pleaded itself out
of court by stating in the complaint that it does not have a copy of the back side of the
invoice which contained the indemnification agreement language. I concluded that
plaintiff had not pled itself out of court because the complaint alleged sufficient facts
which, taken as true, allowed me to infer that the indemnification agreement existed.
Defendant has filed a motion for reconsideration, arguing that my original decision
constitutes a manifest error of law. See Caisse Nationale de Credit Agricole v. CBI
Indus., Inc., 90 F.3d 1264, 1269 (7th Cir. 1996).
Nothing in defendant’s motion for reconsideration causes me to change my
original decision. To state a valid claim, the complaint must allege (1) a valid contract,
(2) that defendant breached, (3) and that damages flowed from that breach. Matthews
v. Wis. Energy Corp., Inc., 534 F.3d 547, 553 (7th Cir. 2008). As discussed in my
previous decision, plaintiff has pled in a non-conclusory fashion that a valid contract
between the parties existed, including an indemnification provision, by alleging that it
provided defendant with an invoice containing a clearly marked indemnification
provision, that the invoice contained an acceptance provision stating that by accepting
the product defendant also accepted the indemnification agreement, and that defendant
accepted those terms by accepting the product and repeatedly ordering more from
plaintiff without objecting to the indemnification provision. This plausibly alleges an offer,
acceptance, and consideration.
Defendant argues that by alleging that it cannot prove the existence of the
portion of the invoice containing the indemnification provision, plaintiff has admitted that
it cannot prove the first element of its claim. However, defendant misstates plaintiff’s
allegations. Plaintiff does not allege that it cannot prove the existence of the
indemnification provision; it merely alleges that it does not possess a copy of the invoice
containing the indemnification provision. Discovery may lead to admissible evidence
which plaintiff can use to establish the existence and content of the indemnification
provision. For example, plaintiff may be able to obtain a full copy of an invoice, or it may
be able to obtain other secondary evidence which supports the existence of the
provision. Thus, plaintiff has not pleaded itself out of court.
Defendant challenges my statement in my original decision that plaintiff can use
secondary evidence to prove the existence and content of the indemnification
agreement, arguing that I applied federal evidentiary law to a question of state
substantive law. However, defendant confuses the question of whether plaintiff can
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prove the existence of the contract with the question of whether plaintiff can prove that
the contract complies with Wisconsin’s statute of frauds. These two issues are separate.
First, plaintiff must prove that an indemnification agreement existed. How plaintiff proves
the existence and content of the contract is a question of federal evidentiary law, see
Stutzman v. CRST, Inc., 997 F.2d 291, 294 (7th Cir. 1993), which allows plaintiff to use
other evidence to prove the contents of the agreement. See U.S. v. McGaughey, 977
F.2d 1067, 1071 (7th Cir. 1992); Fed. R. Evid. 1004. If plaintiff can prove the
indemnification provision in fact existed on the back of an invoice that was delivered to
defendant, then state substantive law governs whether the provision complied with
Wisconsin contract law and the statute of frauds. How plaintiff may prove that the
indemnification agreement complied with Wisconsin law is a substantive question
governed by state law. See Monetti, S.P.A. v. Anchor Hocking Corp., 931 F.2d 1178,
1181–82 (7th Cir. 1991).
Defendant argues that because plaintiff does not possess a copy of the
indemnification agreement, it has pled itself out of court because it cannot allege that
defendant accepted the provision under Wisconsin law. Wis. Stat. § 402.207(2)(b)
requires express acceptance by the other party of any additional terms to a contract
which materially alter the terms of the original agreement. Defendant contends that the
indemnification agreement was a material alteration requiring its express acceptance,
and that “express acceptance” requires plaintiff to prove that it signed the invoice
containing the indemnification provision. Resch v. Greenlee Bros. & Co., 128 Wis. 2d
237, 244–45 (Ct. App. 1985). It follows that if plaintiff cannot produce the invoice, it
cannot produce a signed invoice. First, it is unclear whether, under Wisconsin law, a
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signature is required in a situation where, as here, an acceptance provision also
allegedly accompanied the indemnification agreement. See Deminsky v. Arlington
Plastics Mach., 249 Wis. 2d 441, 456 (Ct. App. 2001) (“[W]e note that even where a
party does not sign a writing containing a proposed ‘material alteration’ to a contract of
sale, that party may still be deemed to have assented by conduct to its incorporation.”);
Waukesha Foundry, Inc. v. Indus. Eng’g, Inc., 91 F.3d 1002, 1008–09 (7th Cir. 1996)
(concluding that “consent can be inferred from other things besides the unsurprising
character of the new term: even from silence, in the face of a course of dealings that
makes it reasonable for the other party to infer consent from a failure to object”). More
importantly, it is unclear at this point whether plaintiff will or will not be able to prove
acceptance. If plaintiff is able to prove the existence of the indemnification agreement, it
may also be able to obtain evidence of express agreement during discovery. The fact,
alone, that plaintiff has pled that it does not possess a copy of the invoice does not
foreclose this possibility, nor does it foreclose the possibility that an exception to
Wisconsin’s statute of frauds applies. 1 These are issues that will be fact-driven and are
best determined at summary judgment, and, as I noted in my original opinion, plaintiff is
not required to anticipate such affirmative defenses in its complaint. See Massey v.
Merrill Lynch & Co., Inc., 464 F.3d 642, 650 (7th Cir. 2006).
1
There are numerous exceptions to the statute of frauds. See, e.g., Wis. Stat. §
402.201(3)(b) (waiver exception); § 402.201(3)(c) (acceptance exception); § 402.202
(evidence of course of dealing or additional terms may be used to supplement final
written expression of agreement); § 402.207(3) (“Conduct by both parties which
recognizes the existence of a contract is sufficient to establish a contract for sale
although the writings of the parties do not otherwise establish a contract.”). By citing
these examples, I do not imply that any of them applies in this case. I merely cite them
as illustrative examples of the fact that numerous exceptions exist which may or may
not apply in this case depending on the facts that come out during discovery.
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THEREFORE, IT IS ORDERED that defendant’s motion for reconsideration (ECF
No. 23) is DENIED.
Dated at Milwaukee, Wisconsin, this 27th day of June, 2016.
s/ Lynn Adelman
__________________________
LYNN ADELMAN
District Judge
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