Pacific Cycle, Inc. v. PowerGroup International, LLC et al
OPINION AND ORDER re: 20 Motion for Partial Summary Judgment. Signed by Magistrate Judge Stephen L. Crocker on 8/30/2013. (lak)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
PACIFIC CYCLE, INC.,
POWERGROUP INTERNATIONAL, LLC,
(a/k/a POWERGROUP INTERNATIONAL, INC.),
TOMBERLIN AUTOMOTIVE GROUP, INC. and
This lawsuit presents a contract dispute arising out of an April 2009 license agreement
between plaintiff Pacific Cycle and defendant PowerGroup International, LLC. The agreement
licensed PowerGroup to sell Schwinn-branded motor scooters. Pacific Cycle terminated the
agreement in April 2012 due to PowerGroup’s failure to satisfy its payment and reporting
obligations, then commenced this action for contract damages and injunctive relief in the Circuit
Court for Dane County on June 28, 2012. PowerGroup removed the lawsuit to this court on
July 27, 2012 and filed counterclaims for breach of contract, fraudulent inducement and
rescission, asserting that during contract negotiations, Pacific Cycle had misrepresented facts
upon which PowerGroup had relied to its detriment when deciding to enter into the agreement.
This court has jurisdiction under the diversity statute, 28 U.S.C. § § 1332 and 1441(a).
Before the court is Pacific Cycle’s motion for partial summary judgment on its claim that
PowerGroup breached the license agreement, and on PowerGroup’s counterclaims. Essentially,
Pacific Cycle is seeking a determination from this court that PowerGroup is liable for breach of
contract in a specified amount of $1.56 million (plus costs and fees), while leaving for trial
questions as to whether the codefendants share this liability.
Summary judgment is proper if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with any affidavits, show that there is no genuine issue of material
fact and the moving party is entitled to judgment as a matter of law. F.R.Civ. P. 56(c); Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party has the initial burden of
demonstrating that it is entitled to summary judgment. Id. at 323. Once this burden is met, the
nonmoving party must designate specific facts to support or defend each element of the cause
of action, showing that there is a genuine issue for trial. Id. at 322-24; Fed. R. Civ. P. 56(e).
Whether seeking or opposing summary judgment, the parties must present admissible
evidence to show either that the movant is entitled to judgment as a matter of law, or conversely,
that disputed issues of fact remain such that a jury may return a verdict for the non-moving
party. Berry v. Chicago Transit Authority, 618 F.3d 688, 291 (7th Cir. 2010). Although a nonmoving party’s affidavit can constitute affirmative evidence to defeat a summary judgment
motion, conclusory allegations, unsupported by specific facts, will not suffice to meet this
burden. Payne v. Pauley, 337 F3.3d 767, 773-74 (7th Cir. 2003) (citing Lujan v. Nat'l Wildlife
Fed'n, 497 U.S. 871, 888 (1990)).
As discussed below, Pacific Cycle has presented admissible evidence establishing all
elements of its breach of contract claim and showing that PowerGroup cannot meet its burden
on its counterclaims. PowerGroup, however, has failed to meet its evidentiary burden, either in
opposition to Pacific Cycle’s contract claim or in support of its own counterclaims. Although
PowerGroup purports to dispute many of Pacific Cycle’s proposed facts, many of these disputes
are not “genuine” because they rest upon inadmissible evidence or conclusory allegations not
founded on personal knowledge or supported by specific facts. Gunville v. Walker, 583 F.3d 979,
985 (7th Cir. 2009) (“Admissibility is the threshold question because a court may consider only
admissible evidence in assessing a motion for summary judgment”). When the court considers
only those of PowerGroup’s proposed facts that are properly supported by admissible evidence,
then construes in PowerGroup’s favor that which remains, this evidence fails to establish that
any genuine disputes of material fact remain for a jury to resolve. Accordingly, I am granting
Pacific Cycle’s motion for summary judgment.
Solely for the purpose of deciding Pacific Cycle’s motion for summary judgment. I find
these facts to be material and undisputed:
I. The Parties
Plaintiff and counterclaim defendant Pacific Cycle, Inc. is a Delaware Corporation with
its principal office located in Madison, Wisconsin. Pacific Cycle is in the business of designing,
marketing and distributing bicycles and recreational products in the United States and around
the world using its portfolio of well-known brands, including the Schwinn brand.
Defendant and counterclaim plaintiff PowerGroup International, LLC is a limited liability
company organized under the laws of the State of Georgia with its principal office located in
Augusta, Georgia. Defendant Michael Tomberlin is the sole member, President and CEO of
PowerGroup.1 He is a citizen of Georgia. See Defs’ Answer, dkt. 5, ¶ 12.
Defendant Tomberlin Automotive Group, Inc. is a corporation organized under the laws
of the State of Georgia with its principal office located in Augusta. Tomberlin Automotive
Defendant PowerGroup International, Inc., does not exist and was named by plaintiff in error.
Group designs and engineers a wide range of on-road national highway Transportation and
Safety Administration compliant electric vehicles sold throughout the world with international
distributors in over 40 countries. Michael Tomberlin is the majority shareholder of Tomberlin
II. The License Agreement
A. Pacific Cycle Decides to Exit the Motor Sports Business
In 2004, Pacific Cycle created its Schwinn Motor Sports Division dedicated to the sale
of Schwinn-branded motor scooters. The Motor Sports division was founded by George Simone,
who held the position of Vice President Motor Sports and had overall responsibility for the
division. By 2007, Schwinn had captured 9% of the United States scooter market; by 2008, the
division was selling more than 5,000 scooters each year and generating annual revenue above
$6 million. Even so, Motor Sports was a small-volume business outside of Pacific Cycle’s core
business of bicycles and bike accessories.
Sometime in 2008, Pacific Cycle’s president, Alice Tillett, asked Simone to prepare a
business plan evaluating the costs and benefits of continuing the division. Simone submitted
his plan on September 5, 2008. Simone reported the Motor Sports Division’s difficulties with
its Chinese supplier, FYM, noting that “over the past 9 months FYM has faced a number of
challenges in its business and they have directly affected Schwinn Motor Sports.” Dec. of
George Simone, dkt. 21, exh. A. Simone reported that FYM had been having cash flow
problems that had led to increased lead times and a drop in quality. Id. Simone indicated that
“the common belief is that FYM is using new suppliers which may have lower quality standards
than previous ones,” and one goal of the Motor Sports Division was to broaden its supplier base.
Simone presented three options to Pacific Cycle: 1) keep and continue the Motor Sports
Division, then invest in infrastructure and more personnel to focus on product issues; 2) license
the Schwinn brand to someone else; or 3) form a joint venture with a Chinese manufacturer.
Simone warned that no matter which course Pacific Cycle chose, it could not continue with its
current business model and it would have to focus on improving quality, observing that “[i]f we
cannot provide the necessary replacement part then that’s when we start losing dealers in
Tillett decided that the best option was for Pacific Cycle to get out of the motor scooter
business and to begin licensing the Schwinn brand to a company that had more experience in
the motor sports arena, so that Pacific Cycle could focus on its core businesses.
B. Pacific Cycle Meets PowerGroup
Enter Michael Tomberlin. In 2008 Simone had met Tomberlin by chance when they
both were in China visiting FYM’s facility. Tomberlin was there because FYM manufactured
electric vehicles for Tomberlin Automotive Group. Another Tomberlin company, PowerGroup,
sold and distributed its own line of products, including combustion-powered motorsports
products such as Tomberlin Outdoor™ branded off-road ATVs and motor scooters. PowerGroup
used a dealer direct business-to-business network of community-based motor sports retailers to
sell its products. Simone and Tomberlin began discussing the possibility of Pacific Cycle
entering a licensing agreement with PowerGroup.
In January 2009, Tomberlin met with Tillett, Simone and Robert Silvis, Pacific Cycle’s
general counsel. (It is unclear from the record if this meeting took place at Pacific Cycle’s offices
in Madison or PowerGroup’s offices in Augusta, but everyone agrees that the meeting occurred.)
Either during this meeting or at the end of 2008,2 Simone gave a PowerPoint presentation that
included information about Pacific Cycle’s dealer network and the Motor Sports Division’s 2009
pre-season orders, inventory and other information. Among the points Simone made were:
“Schwinn has placement in 471 dealerships, from Top 100 dealers
to boutique shops.”
2,486 pre-season orders had been placed for 2009, which
translated to $3,838,440.
Schwinn’s motor sports division was a “turn key operation.”
In this presentation and in subsequent discussions, Pacific Cycle’s representatives characterized
the Motor Sports Division as a growing, profitable business but explained that it did not fit
Pacific Cycle’s culture from a regulatory standpoint. Pacific Cycle’s executives told Tomberlin
that one of their primary issues related to the supply of scooters and parts from FYM, the
company where Pacific Cycle sourced its scooters.
Tomberlin made his own presentation during the January 2009 meeting. Tomberlin
stated that PowerGroup had substantial experience in the power sports industry, had its own
established dealers and was well-versed in the regulations governing motor vehicles. Tomberlin
also represented that he had a strong relationship with the owner of FYM and knew the family
well. Tillett saw this personal relationship as a strong advantage for Tomberlin: Pacific Cycle
The parties don’t dispute that this presentation was made, but there is uncertainty as to when.
was a relatively small customer of FYM’s and had trouble obtaining from FYM parts for its
products. Tomberlin, by contrast, seemed to have a significant relationship with FYM.
Discussions continued for the next few months. Simone provided Tomberlin with
documentation including spreadsheets, worksheets, financial data and PowerPoint slides, about
Motor Sports. Tomberlin asked for full disclosure of any issues that Pacific Cycle was currently
experiencing with its motor scooter line. In response to these questions, Simone represented
that dealers and customers were “hungry for orders.”
Near the end of March 2009, Tillett and Tomberlin exchanged and revised drafts of a
“deal memo” outlining the basic terms of a license agreement between Pacific Cycle and
PowerGroup. Meanwhile, Tomberlin requested validation of the pre-orders. On April 2, 2009,
Simone emailed Tomberlin another PowerPoint presentation and a spreadsheet, both of which
showed that Pacific Cycle had 2,486 pre-orders for scooters. The PowerPoint depicted two bar
graphs per month, one representing “forecast” totals for the month and the other showing “preseason order” totals for the month. The spreadsheet included more detailed information about
the pre-orders, breaking them down by dealer, dealer number, and the various types and
numbers of scooters ordered.
The “pre-season order” information that Pacific Cycle maintained represented
information that the division’s district sales managers collected from dealers about the models
and quantities of scooters they planned to order in the coming year. The orders were sometimes
taken on a paper form initially but ultimately were entered into Pacific Cycle’s computerized
SAP system. Simone obtained the data concerning pre-orders that he provided to Tomberlin
from the SAP system, not from any paper forms. Pre-season orders were actual, existing orders,
but dealers were not contractually bound to accept or pay for the quantities they pre-ordered.3
Simone testified that he used the pre-season orders as one tool to predict future sales.
That same day, April 2, 2009, Simone sent an email to Tomberlin that stated:
FYM has only shipped 50 scooters this week and for the most part
has not been communicating with us to what is going on. So with
that said I have changed the forecast to represent sales of what we
have in stock and the 50 pieces on the water. Not to be redundant
but until we correct the supply issue I can’t honestly project sales.
Simone attached a sales forecast that showed sales of only 189 scooters, which represented 139
in “current inventory” plus 50 “incoming units.” Obviously, 189 was a small fraction of Pacific
Based on these numbers, Simone made a “Conservative Bottom Range Sales & Revenue
Forecast,” that predicted gross revenue of $240,060 and gross profits of $114,978. Simone
believed this forecast to be accurate and reasonably reliable at the time it was made. Tomberlin
acknowledged receipt of the email by forwarding it to an employee and instructing him to
incorporate the inventory of Tomberlin scooters into the forecast.
Although PowerGroup states that it disputes this proposed finding of fact, it has not provided any
evidence to refute Simone’s testimony that dealers were not contractually bound to accept or pay for the
quantities they pre-ordered. See PowerGroup’s Response to Pacific Cycle’s PPFF, dkt. 30, # 40. Although
PowerGroup asserts that “[d]ue to lack of documentation, it is unknown as to whether dealerships could
refuse delivery of their pre-season orders with no penalty,” id., # 62, it did not bring any motion to compel
discovery prior to filing its response to the summary judgment motion, nor did it argue that it was unable
to respond to the motion because of any failure by Pacific Cycle to provide necessary discovery. See
F.R.Civ. P. 56(d) (court may allow time to take discovery if nonmovant shows by affidavit or declaration
that, for specified reasons, it cannot present facts essential to justify its opposition); Pretrial Conf. Order,
dkt. 10, at 3 (“Parties are to undertake discovery in a manner that allows them to m ake or respond to
dispositive motions within the scheduled deadlines.”). Having failed to avail itself of the remedies it had
available, PowerGroup’s complaint that it “lacks documentation” is insufficient to place into dispute
Pacific Cycle’s contention that a pre-order was not a binding contract. Further--and perhaps more
critically–as explained below, the undisputed evidence shows that Tomberlin knew this at the time.
The parties reduced their “deal memo” to final form on or about April 7, 2009. Danna
Dueck, Pacific Cycle’s licensing manager, prepared a draft of the formal license agreement and
emailed it to Tomberlin on April 8, 2009. On April 9, Tomberlin emailed it back to Dueck with
revisions, expressing concern that the deal be finalized quickly:
We have a real sense of urgency to close this out early as possible.
I am concerned all the pre-orders from your dealers will fade away
if they believe we cannot supply them with product.
C. The License Agreement
After some additional discussion and revisions, Pacific Cycle and PowerGroup executed
the license agreement on or about April 16, 2009. Tomberlin has testified that Pacific Cycle
gave him all the documentation he had asked for to help him evaluate whether to enter the
The parties’ license agreement grants PowerGroup the right to sell Schwinn-branded
scooters in exchange for a 10% royalty. There were no minimum sales or royalty obligations for
2009 or 2010.
Beginning in 2011 (Contract Year 3), PowerGroup had minimum sales
requirements and was obliged to pay Pacific Cycle a minimum royalty of $300,000. The
minimums increase modestly each year thereafter through the agreement’s initial term, which
ends in 2014. The license agreement also provides that PowerGroup would purchase Pacific
Cycle’s existing inventory of parts and scooters, and that PowerGroup would provide warranty
service to the Schwinn scooters that Pacific Cycle had sold. Pacific Cycle agreed that it would
provide PowerGroup with “copies of all dealer agreements, files, warranty history, proof of
insurance, product programs, EPA certificates, pre-orders, state license and all other
documentation necessary to transition the business.”
The license agreement contains a broad non-assignment clause that prevents PowerGroup
from assigning or delegating any of its rights or responsibilities under the agreement. Paragraph
LICENSEE acknowledges that this agreement and the rights
granted herein are personal to the LICENSEE and, without the
prior written consent of LICENSOR, may not be assigned,
sublicensed, pledged, encumbered or otherwise affected, nor may
any of LICENSEE’s duties be delegated. Any attempted
assignment, sublicense, transfer or encumbrance shall be void and
shall constitute an incurable breach of this Agreement, entitling,
but not obligating LICENSOR to terminate this Agreement in
accordance with the provisions of Paragraph 10.2.
Exhibit B-2 to the license agreement, Royalty Rate and minimum Net Sales, provides:
Sales of 2009 products are contingent upon successful transfer of
all certificates, assignable dealer agreements, validity and collection
of existing preorders and the phase in of the 2010 EPA emissions
Similarly, in Exhibit B-7 to the license agreement, titled “Other Terms and Conditions,” the
parties expressly recognize a range of potential difficulties that PowerGroup would face in selling
Schwinn scooters. Among other things, Exhibit B-7 provides:
Both parties recognize that the manufacturer of Licensor’s scooters
is in an unknown condition however both note the level of
uncertainty with regard to future support and neither Licensor nor
Licensee shall bear the other’s exposure to support field inventory
and consumer product expectations.
Licensee acknowledges and understands that there is currently no
existing effort in obtaining 2010 certifications on behalf of
Licensor with regard to emissions and the potential of a delayed
launch of the 2010 model year.
Licensor agrees to assist Licensee to facilitate scooter support
previously sold by Licensor. Parts support may be a significant
issue and Licensee will assist in this area with on site personnel.
New manufacturing relationships may need to be put in place and
it is reasonable to anticipate an interruption in product flow.
The license agreement provides a remedy in the event the agreement is terminated for an
incurable breach. It specifies that in the event of termination, any unpaid balances of the
guaranteed minimum royalty “for each and every Contract Year within the Initial Term”
accelerate and become immediately due and payable to Pacific Cycle, “as liquidated damages and
not as a penalty.” Par. 10.2(b). PowerGroup also is liable for interest at 12% per annum for all
amounts due from the date due until the date of payment, Par. 4.5(b), and for Pacific Cycle’s
attorney’s fees incurred in this enforcement action. Par. 11.5. The license agreement was to be
governed by and interpreted under Wisconsin state law. Par. 11.3.
D. PowerGroup has Difficulties Meeting its Obligations under the Agreement
During the negotiation of the license agreement, Tomberlin and Tillett discussed the
possibility that PowerGroup would hire George Simone and members of the scooter sales team.
After the deal was finalized, Simone and some members of the sales team did in fact leave Pacific
Cycle and join PowerGroup, where Simone continued to be responsible for running the Schwinn
motor scooter program. (Simone left PowerGroup in April 2010.) At the time Simone left
Pacific Cycle, he was encouraged to take whatever files or information he deemed necessary to
run the motor scooter program at PowerGroup, which he did. According to Simone, during the
transition period, there was nothing that he requested from Pacific Cycle that he did not
promptly receive. In Simone’s opinion, Pacific Cycle provided all the information that he
needed to operate the Schwinn motor sports program at PowerGroup.
By Fall 2008, the United States economy had fallen into a major recession. In 2009,
scooter sales fell precipitously, sales did not meet forecasts, and dealers did not honor their preseason orders. According to statistics from the Motorcycle Industry Council published in the
magazine Powersports Business, scooter sales in the United States fell by 59 percent from 2008
(76,748 units sold) to 2009 (31,451 units sold). By Simone’s estimate, as many as 25 percent
of power sports dealers went out of business in 2009. By the end of 2009, PowerGroup had sold
only $280,538.80 worth of Schwinn product to 62 dealerships, only slightly more than Simone
had forecast in early April.
On February 25, 2010, Tomberlin sent an email to Tillett indicating that PowerGroup
was unlikely to be able to meet its minimum sales and royalty obligations due, in part, to the fact
that “less than five percent of the existing orders [were] being executed upon.” He reiterated
these concerns in a July 8, 2010 email in which he expressly asked that the Contract Year 3
minimums be eliminated. After a further exchange of information, on August 10, 2010, Tillett
emailed a draft proposal to Tomberlin that proposed amending the annual minimum sales
guarantees and royalty guaranty to numbers much lower than called for in the original license
agreement. In exchange, Tillett proposed, PowerGroup’s sales territory would be limited to the
United States and Canada and the renewal term would be removed. Tillett’s proposal concluded
with the statement, “This document is not a contract.”
Despite numerous requests by Pacific Cycle, neither Tomberlin nor anyone from
PowerGroup ever offered any concrete feedback to this proposal. The parties never executed any
amendments to the License Agreement.4
On September 18, 2010, Tomberlin emailed Dueck asking how Pacific Cycle wanted to
go about terminating dealers “that are not ordering but are still tying up a market.” Dueck
responded that Pacific Cycle was not terminating any dealerships at that time so long as the
dealers were willing to continue to try to sell the units they had in stock.
In an email to Dueck on October 12, 2010, Tomberlin stated that he “will request that
we supply you a list of the dealers that did not honor the orders you guys had in house and
provided to us as well as those that still have not ordered.”
PowerGroup admits that no formal amendment was executed but it insists that the parties were
“operating under” the reduced minimums proposed by Tillett in her August 2010 email. PowerGroup’s
sole support for this assertion is a conclusory declaration to that effect by Tomberlin. Dkt. 28, ¶11.
This evidence does not give rise to a genuine dispute of fact on this issue. Tomberlin’s
declaration— which is unsupported by specific facts— is flatly contradicted by the numerous emails sent
by Pacific Cycle asking for a response to Tillett’s proposal, which it never received. See Plt.’s PPFF Nos.
83-94 (all undisputed). In particular, on Decem ber 19, 2011, Pacific Cycle’s Danna Dueck wrote to
PowerGroup’s Adam Harris, asking for “an update on your discussions with [Tomberlin] regarding your
review of the deal m emo provided and how you see us moving forward,” and noting that, “[a]t this time,
your active license agreement has some large financial commitments for 2011 which will become due with
your Q4 2011 royalty report and payment (1/31/12).”
In the face of this specific evidence, which reflects Pacific Cycle’s understanding that the terms of
the original agreement still were in effect, Tomberlin’s bald assertion that the parties were operating under
the minimums proposed by Tillett is insufficient to create a dispute of fact. See, e.g., Turner v. The Saloon,
Ltd., 595 F.3d 679, 690-91 (7th Cir. 2010) (party opposing summary judgment cannot rely on unsupported
ipse dixit that is flatly refuted by the hard evidence offered by its opponent); Drake v. 3M , 134 F.3d 878,
887 (7th Cir. 1998) (“Rule 56 demands something more specific than the bald assertion of the general
truth of a particular matter, rather it requires affidavits that cite specific concrete facts establishing the
truth of the matter asserted.”).
E. Breach and Notice by Pacific Cycle
Unknown to Pacific Cycle, effective January 1, 2011, PowerGroup merged with another
company owned by Tomberlin, Asian Ventures LLC.
Also, effective January 2, 2011,
PowerGroup entered a “Management Agreement” with Tomberlin Automotive Group, pursuant
to which Tomberlin Automotive Group undertook PowerGroup’s responsibilities and exercised
PowerGroup’s rights under the license agreement. These actions, which PowerGroup did not
disclose to Pacific Cycle, constituted “incurable breaches” of the non-assignment provision in
paragraph 9.1(b) of the license agreement, which prohibited any “delegation” of PowerGroup’s
duties and any “transfer” of PowerGroup’s “rights, obligations, or both.”
At the end of 2011 and the beginning of 2012, Dueck pressed PowerGroup for overdue
payments and royalty reports. Tomberlin responded by email on January 24, 2012 that he
regarded PowerGroup’s Schwinn decision to be an “error” and asked Dueck to “suggest the best
path to execute this separation.” On February 21, 2012, Pacific Cycle sent PowerGroup a notice
of breach; on April 9, 2012, counsel for Pacific Cycle sent PowerGroup a termination notice.
Pacific Cycle received no response.
Pacific Cycle sued PowerGroup, Tomberlin Automotive Group and Tomberlin for breach
of contract in the Circuit Court for Dane County. PowerGroup timely removed the case to this
court, alleging diversity jurisdiction. The present motion for summary judgment is directed
solely against PowerGroup.
I. Pacific Cycle’s Claim for Breach of Contract
To succeed on its breach of contract claim, Pacific Cycle must show: 1) a valid contract;
2) breach of that contract; and 3) damages. Matthews v. Wisconsin Energy Corp., Inc., 642 F.3d
565, 571 (7th Cir. 2011) (glossing Wisconsin law); Cousin Subs Systems Inc. v. Better Subs
Development Inc., 2011 WL 4585541, *9 (E.D. Wis. Sept. 30, 2011). PowerGroup does not
dispute Pacific Cycle’s proposed facts showing that PowerGroup breached the License Agreement
by failing to submit sales reports and failing to pay royalties for the third or fourth quarters of
2011, by merging with Asian Ventures and by entering a management agreement with
Tomberlin Automotive Group.
Instead, PowerGroup defends against the motion for summary judgment by arguing that
the License Agreement is voidable, either because it was fraudulently induced or because Pacific
Cycle was the first to breach. See Tietsworth v. Harley-Davidson, Inc., 2004 WI 32, ¶ 36, 270 Wis.
2d 146, 677 N.W. 2d 233 (contract fraudulently induced is void or voidable). It asks the court
to rescind the contract.5
In its reply brief, Pacific Cycle argues that PowerGroup waived its right to rescind because it
waited too long to assert its right and affirmed the contract by continuing to seek and accept warranty
payments from Pacific Cycle even after it learned of the alleged misrepresentations. In addition, it
contends that rescission is not an available remedy here because it is impossible to return Pacific Cycle to
the position it was in prior to executing the license agreement with PowerGroup. See dkt. 33, at 12-13.
Although these are strong arguments, PowerGroup waived them by failing to raise them until its reply
brief. See W ilson v. Giesen, 956 F.2d 738, 741 (7th Cir. 1992) (“This argument is waived, however, as the
plaintiff failed to raise it until his reply brief, leaving the defendants no chance to respond.”).
II. PowerGroup’s Claim of Fraudulent Inducement
To establish that it was fraudulently induced to enter into the License Agreement,
PowerGroup must prove that 1) Pacific Cycle made a representation of fact; 2) the
representation of fact was false; 3) PowerGroup believed and relied on the misrepresentation to
its detriment or damage; 4) the misrepresentation was made by Pacific Cycle with knowledge
that it was false or recklessly without caring whether it was true or false; and 5) the
misrepresentation was intended to deceive PowerGroup and to induce PowerGroup to act on it
to its detriment or damage. Tietsworth, 2004 WI 32, ¶ 13, 270 Wis. 2d 146, 157, 677 N.W.
Powergroup also must show that the misrepresentation occurred before contract
formation, Kaloti Enterprises, Inc. v. Kellogg Sales Co., 2005 WI 111, ¶30, 283 Wis. 2d 555, 699
N.W. 2d 205, and that PowerGroup’s reliance on the misrepresentation was reasonable. Kailin
v. Armstrong, 2002 WI App 70 ¶ 31, 252 Wis. 2d 676, 702, 643 N.W. 2d 132, 146.6 Silence
or the failure to disclose a fact is treated as equivalent to representing the nonexistence of that
fact, if the silent party was under a duty to disclose it. Ollerman v. O'Rourke Co., 94 Wis. 2d 17,
These are the same elements that PowerGroup m ust prove to establish its counterclaim for
fraudulent inducement. Accordingly, both its tort claim and its affirmative defense to Pacific Cycle’s
breach of contract claim based on fraudulent inducement fail for the same reasons. PowerGroup cites no
authority for its suggestion to the contrary. See Br. in Opp., dkt. 26 at n.2.
Pacific Cycle argues that, insofar as PowerGroup appears to be seeking tort dam ages for the
misrepresentation, its claim is barred by W isconsin’s economic loss doctrine. Because I have concluded
that PowerGroup has not adduced evidence from which a reasonable jury could find the essential elements
of intentional misrepresentation in the first place, it is unnecessary to consider the economic loss doctrine.
Insofar as PowerGroup is seeking only the contract remedy of rescission, then Pacific Cycle appears to
agree that the economic loss doctrine does not apply. See Harley-Davidson M otor Co., Inc. v. PowerSports,
Inc., 319 F.3d 973, 985 (7th Cir. 2003) (W isconsin’s economic loss doctrine does not bar misrepresentation
claims for contract rescission).
24, 288 N.W.2d 95, 99 (1980). A party to a business transaction is under a duty to disclose
facts basic to the transaction where the other party would reasonably expect disclosure of those
misrepresentations of fact relating to three primary issues: 1) pre-season orders; 2) dealers; and
3) the “turn key” nature of Pacific Cycle’s Motor Sports Division. In addition, PowerGroup
contends that Pacific Cycle failed to disclose two facts: 1) the fact that dealers were “stuffed”
with inventory; and 2) that Pacific Cycle would continue to exert control over dealers after the
agreement’s execution. I consider each of these contentions in turn:
A. Pre-season orders
PowerGroup contends that Pacific Cycle, through Simone, misrepresented that the 2,486
pre-season orders shown on the spreadsheets were “real, actual orders already placed by the
dealers” that Tomberlin could count on as “assets in existence,” when in fact they were merely
“expected” orders that might or might not mature into actual sales. This contention has two
threads: first, that Simone lied about the quantity of the orders; second, that he lied about the
certainty of the orders. According to Tomberlin, he based his decision to execute the license
agreement on his understanding that existing, guaranteed orders would “make [the deal] cash
PowerGroup’s claim with respect to the existence of 2,486 pre-season orders fails because
it has adduced no evidence showing that the statement was false when made. Simone testified
that he pulled the number 2,486 from Pacific Cycle’s SAP system, and that the data in this
system had been inputted by the district sales managers who had contact with the dealers. He
provided a spreadsheet to Tomberlin which itemized each order and provided supplemental
detail, including the name and number of the dealer who placed the order and the various types
and numbers of scooters ordered. Tomberlin has acknowledged receiving this spreadsheet.
Notwithstanding the detailed information Simone provided about the pre-orders,
PowerGroup suggests that the numbers were made up because the orders did not come to
fruition and because Pacific Cycle did not provide the underlying paper documentation for each
of the 2,486 orders entered into the SAP database, in spite of repeated requests by Tomberlin
for that documentation. Even granting all reasonable inferences in PowerGroup’s favor, this
evidence does little more than show “some metaphysical doubt as to the material facts,” which
is not enough to defeat a motion for summary judgment. Matsushita Elec. Indus. Co., Ltd. v.
Zenith Radio Corp., 475 U.S. 574, 586 (1986). The fact that these pre-season orders did not
mature into actual sales is different from saying the dealers never actually placed these pre-orders
in first place. Simone has provided an explanation for the dealers’ failure to honor their preseason orders—the economic downturn—that PowerGroup has not placed genuinely into
dispute. As for the asserted lack of documentation, Tomberlin acknowledged that he had
obtained from Pacific Cycle all the information he needed to decide whether to enter into the
license agreement. The mere fact that Pacific Cycle may not have produced a piece of paper for
all 2,486 orders is not enough to establish the falsity of Simone’s spreadsheet. Finally, even if
the number 2,486 somehow were to have been false or inaccurate, PowerGroup has no evidence
to show that Simone–or anyone else at Pacific Cycle–knew this. In sum, PowerGroup has
presented no evidence that 2,486 pre-season orders did not in fact exist in April 2009, or that
if they didn’t, Simone had any reason to know his data was inaccurate.
But this segues to the second aspect of PowerGroup’s claim with respect to the pre-orders,
which is that Simone falsely represented that these pre-season orders were “in the tube,”
“bankable,” or somehow otherwise guaranteed such that they would cash flow the agreement.
Pacific Cycle first denies that Simone ever made such a representation–for summary judgment
purposes, the court assumes that he did– then argues that even if he did, summary judgment
still is appropriate because any reliance by PowerGroup on this representation could not have
been reasonable at the time PowerGroup actually signed the License Agreement. This is because
on April 2, 2009, two weeks before the parties executed the License Agreement, Simone emailed
Tomberlin his precipitously-reduced sales forecast. In that email, Simone announced
FYM has only shipped 50 scooters this week and for the most part
has not been communicating with us to what is going on. So with
that said I have changed the forecast to represent sales of what we
have in stock and the 50 pieces on the water. Not to be redundant
but until we correct the supply issue I can’t honestly project sales.
Pacific Cycle argues that, in light of this no-nonsense disclaimer and plain notification of a
supply problem, Tomberlin had no reasonable basis to continue to rely on any prior
representation that the pre-season orders would “cash flow” the deal. What’s more, Pacific Cycle
argues, Tomberlin’s subsequent April 9, 2009 email to Pacific Cycle’s Dueck–still a week before
the license was executed–reflects his understanding that the pre-orders were not guaranteed
because they might “fade away”:
We have a real sense of urgency to close this out early as possible.
I am concerned all the pre-orders from your dealers will fade away
if they believe we cannot supply them with product.
PowerGroup does not address either of these emails in its response brief. In its proposed
findings of fact, however, it proposes as a fact that Simone’s second April 2, 2009 email “only
related to FYM’s ability to supply the requested quantity of pre-ordered scooters, and in no way
called into question the number of pre-season orders placed by the dealers.” PowerGroup’s
PPFF, dkt. 27, #49. Fair enough. But this raises a critical question that PowerGroup does not
answer: If the sole existing supplier of Schwinn motor scooters could not supply the requested
quantity of pre-ordered scooters, then what basis did Tomberlin have for relying on any
representation that the pre-orders would cash flow the deal? Did he believe that he could coax
FYM to build and ship 2,297 more scooters (that’s 46 shipments of 50 scooters) or find a new
supplier in time to satisfy the “banked” pre-orders?7 Or did he believe he could demand
payment from the dealers who had pre-ordered even though he could not fulfill their orders?
Tomberlin doesn’t say.
More damaging still, Tomberlin doesn’t explain what he meant when he expressed his
concern to Dueck that “all the pre-orders from your dealers will fade away if they believe we
cannot supply them with product.”
As noted above, Pacific Cycle argues that the only
reasonable inference that can be drawn from this statement is that Tomberlin understood that
the pre-orders had not been banked and still could be lost. Indeed, it is difficult to infer what
else Tomberlin could have meant, especially because PowerGroup doesn’t tell us. If this was not
in fact Tomberlin’s understanding at the time he sent his email, then one would have expected
It’s not of record whether Tom berlin was more successful than Pacific Cycle at prying more
scooters out of FYM .
PowerGroup to have offered clarification from Tomberlin or at least proposed an alternate
inference that could be drawn from Tomberlin’s April 9 email. It has done neither.
Pacific Cycle argues that the only reasonable inference that can be drawn from
Tomberlin’s email is that he understood that the pre-orders were not equivalent to certified
checks, bearer bonds, or piles of cash: they can “fade away.” In fact, the uncertainty of the preorders resulting in actual sales is reflected in the License Agreement itself: the agreement provides
that sales of 2009 products “are contingent upon successful transfer of all certificates, assignable
dealer agreements, validity and collection of existing preorders and the phase in of the 2010 EPA
emissions certificates.” (emphasis added). As with the April 9 email, PowerGroup does not
advance any competing inferences that can be drawn from this language.
Of course, credibility determinations, the weighing of the evidence and the drawing of
legitimate inferences from the facts are jury functions, not those of the court, see Stokes v. Board
of Educ., of the City of Chicago, 599 F.3d 617, 619 (7th Cir. 2010), but in the absence of any
argument from nonmovant PowerGroup that there is another way to interpret this documentary
evidence, then movant Pacific Cycle’s proposed inference—which is eminently reasonable—
becomes the conclusive inference. See, e.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249
(1986) (all that is required to defeat motion for summary judgment “is that sufficient evidence
supporting the claimed factual dispute be shown to require a jury or judge to resolve the parties’
differing versions of the truth at trial”)(quoting First National Bank of Arizona v. Cities Service Co., 391
U.S. 253, 288-89 (1968)); Abdullahi v. City of Madison, 423 F.3d 763, 773 (7th Cir. 2005) (“At
summary judgment a court may not assess the credibility of witnesses, choose between competing
inferences or balance the relative weight of conflicting evidence.”) (emphasis added); Bullwinkel
v. New England Mut. Life Ins. Co., 18 F.3d 429, 432 (7th Cir. 1994) (reasonable inference that
plaintiff’s breast lump discovered to be cancerous in one month was also cancerous two months
before became “conclusive” where plaintiff failed to present evidence or make any arguments
that record supported competing inference); Fitzgerald v. Santoro, 707 F.3d 725, 733 (7th Cir.
2013) (“the inference [plaintiff] asks us to draw in this case . . . strikes us as unreasonable. At
best, [plaintiff] raises some metaphysical doubt as to a material fact. That is not enough.”);
Howell v. Motorola, 633 F.3d 552, 559 (7th Cir. 2011) (nonmovant’s suggestion that a jury might
infer from the circumstances that he signed movant’s release unknowingly “is just an assumption
. . . it is not evidence.”)
Absent competing inferences, there is no work for a jury to do. Although the question
whether a party’s reliance was reasonable is “ordinarily a question of fact,” Metavante Corp. v.
Emigrant Sav. Bank, 619 F.3d 748, 766-67 (7th Cir. 2010) (citing Sciano v. Hengle, 1 Wis. 2d 273,
83 N.W. 2d 689, 692 (1957)), where the facts are undisputed, reasonable reliance is a question
of law. Ritchie v. Clappier, 109 Wis.2d 399, 406, 326 N.W.2d 131, 134 (1982). As the court
explained in All-Tech Telecom, Inc. v. Amway Corp., 174 F.3d 862, 867 (7th Cir. 1999):
The victim of a misrepresentation about a product who learns the
truth before he buys, but decides to buy the product anyway,
cannot complain about the misrepresentation. First Credit Corp. v.
Behrend, 45 Wis.2d 243, 172 N.W.2d 668, 671-72 (1969); Foss v.
Madison Twentieth Century Theaters, Inc., 203 Wis.2d 210, 551
N.W.2d 862, 865-66 (1996). Whatever he has relied on, it is not
See also Ritchie, 109 Wis.2d at 399, 326 N.W.2d at 134 (“Courts will refuse to act for the relief
of one claiming to have been misled by another’s statements who blindly acts in disregard of
knowledge of their falsity or with such opportunity that by the exercise of ordinary observation,
not necessarily by search, he would have known. He may not close his eyes to what is obviously
discoverable to him.”) (quoting Jacobsen v. Whitley, 138 Wis. 434, 437, 120 N.W. 285, 286
(1909)). On the evidence actually in the record, the only reasonable inference that can be drawn
is that Tomberlin knew before he signed the License Agreement that he could not count on the
pre-orders as “bankable” assets that would finance the deal. Stated another way, no reasonable
jury could conclude that it was reasonable for Tomberlin to sign the License Agreement because
he was relying on the guaranteed nature of the reported 2,486 pre-orders. As made clear by the
authorities cited above, a representation upon which no reasonable reliance may be placed will
not support a misrepresentation action.
PowerGroup contends that Simone represented that Pacific Cycle falsely represented that
it had an active dealer network of 471 dealers. This alleged misrepresentation fails because
PowerGroup’s evidence is not admissible and in any event, it does not show that Simone’s
statement was false when made.
To show that Pacific Cycle lied about its dealer network, PowerGroup relies on a
spreadsheet, which PowerGroup’s attorney asserts is dated July 25, 2008, that appears to
contain a list of approximately 380 dealers, and another list of 79 dealers on a worksheet labeled
However, this spreadsheet is inadmissible because no witness has
authenticated it. “To be admissible, documents must be authenticated by and attached to an
affidavit that meets the requirements of Rule 56(e) and the affiant must be a person through
whom the exhibits could be admitted into evidence.” Article II Gun Shop, Inc., v. Gonzales, 441
F. 3d 492, 496 (7th Cir. 2006).
PowerGroup introduced this document into the record by attaching it to an affidavit
from its litigation attorney in this lawsuit, Richard Braun. Attorney Braun does not say where
the document came from, who prepared it, he does not explain how he knows the date of the
document, and he does not explain (and probably is not qualified to explain) what the document
means when it says “Kaput Dealers.”8 Furthermore, the document, which Braun avers is dated
July 2008, does not establish that Pacific Cycle did not have 471 dealers five months later, when
Simone gave his PowerPoint presentation to Tomberlin. Finally, there is no evidence that
Simone was aware of the document or knew (as suggested by PowerGroup) that he was making
a false statement when he represented that Pacific Cycle had 471 dealers. Accordingly, even if
the document could be authenticated, it does not support a claim of fraudulent inducement
because it does not show that Simone’s assertion in late 2008 or early 2009 that there were 471
dealers was false or that Simone had reason at that time to know it was false.
C. “Turn-key” nature of operation
Next, PowerGroup contends that Pacific Cycle falsely characterized its motor scooter
division as a “turn-key” operation. As a starting point, how can PowerGroup reconcile its claim
that Tomberlin reasonably believed that Pacific Cycle’s Motor Sports division was “turn key”
That said, the dictionary definition of “kaput” is pretty clear: “(1) utterly finished, defeated or
destroyed; (2) unable to function; (3) hopelessly outmoded.” www.merriam-webtser.com/dictionary/kaput,
accessed August 21, 2013. But without input from the document’s creator–or some other qualified person
from Pacific Cycle, such as a 30(b)(6) witness–we do not know what was meant by the term’s use here,
or what the shelf-life of the designation was. It smacks of evidentiary bootstrapping for PowerGroup’s
litigation attorney to attempt to authenticate and interpret his opponent’s document on a pivotal fact.
when, before he signed the License Agreement, Simone was warning him that FYM was not
shipping scooters and Pacific Cycle’s previous sales forecasts were out the window? Tomberlin
was well aware that the lack of supply was an urgent problem that needed quick resolution lest
the pre-orders fade away; such concerns are not what come to mind when one envisions a “turn
key” operation. Tomberlin’s subjective belief that he could fix what he thought was broken with
Pacific Cycle’s supply problems demonstrated the self-confidence of an able handy man eyeing
a fixer-upper, not the anxious reliance of a first-time buyer expecting a flawless, trouble-free
In any event, I agree with Pacific Cycle that this statement is merely a vague expression
of puffery or opinion on which no reasonable person would rely. See, e.g., Searls v. Glasser, 64
F. 3d 1061, 1066 (7th Cir. 1995) (term “recession-resistant” too vague to constitute a material
statement of fact and was better deemed “optimistic rhetoric”). PowerGroup does not suggest
that the term “turn key” has any particularized meaning in the motor sports industry or
otherwise indicates that the term has a well-defined, universally understood meaning. All it
relies upon is Tomberlin’s own understanding of the term, which is that “all the ingredients to
be successful are there. You just have to walk through the door and do the deal.” PowerGroup’s
PPFF, ¶25. Such vague predictions of future success, however, are not actionable; indeed, even
“success is itself a subjective term.” Vaughn v. General Foods Corp., 797 F.2d 1403 (7th Cir.
Pacific Cycle’s description of its Motor Sports division as a “turn key” operation is akin
to statements made by General Foods' regarding the “viability” of its Burger Chef System and
the potential of its company in Vaughn, 797 F.3d at 1411, or to Snap-On’s statements that a
potential Snap-On Tool dealer would make as much money as doctors or lawyers, that the tools
would “sell themselves,” that a Snap-On dealership is a “no-risk proposition” and that Snap-On
territories are all the same in Loula v. Snap-On Tools Corp., 175 Wis. 2d 50, 55-56, 498 N.W. 2d
866 (Wis. Ct. App. 1993). As in both Vaughn and Loula, the representation that the motor
sports division was a “turn-key” operation is merely an expression of opinion designed to
encourage investment by new franchisees and not actionable as fraud.
D. Dealers “Stuffed” with Inventory
Next, PowerGroup contends that Pacific Cycle failed to disclose that its key dealers were
“stuffed” with inventory that exceeded retail demand, which contradicts its assertion that the
dealers were “hungry for orders.” As proof that the active dealers were “stuffed” with inventory,
PowerGroup relies on an inventory report that purportedly shows the scooters remained in
dealers’ inventory for an average of 205 days, which it argues would be a lower number if the
demand was as represented by Pacific Cycle.
Like the “kaput” dealer spreadsheet, the inventory report is inadmissible because it is not
authenticated. Again, the report was submitted by litigation counsel, who does not explain
where the document came from or what it is. When Tillett was questioned about this report at
her deposition, she could not identify it or offer any knowledge to help understand it, and could
not say whether the inventory levels disclosed on the report were high or low. To the court’s
knowledge, PowerGroup did not follow up by requesting an explanation from a 30(b)(6) witness.
Absent a witness who can explain the provenance or meaning of the report, PowerGroup has
failed to show a genuine dispute of fact on this aspect of its fraudulent inducement claim.
Moreover, a party’s duty to disclose arises only when the disclosing party knows that the
relying party is unaware of the fact. Kaloti, 2005 WI 111, at ¶20, 283 Wis. 2d 555, 699, N.W.
2d 205. PowerGroup has no evidence to show that Pacific Cycle knew that PowerGroup did not
have a copy of the inventory report. Indeed, given the lack of authentication of the report, the
document could have come from PowerGroup’s files. Further, Tomberlin testified that he had
been provided with all the documentation he needed in order to make the decision whether to
enter into the license agreement. There is simply no evidentiary basis to support a claim that
Pacific Cycle knowingly failed to disclose the inventory report.
E. Approach to Termination of Dealers
Because PowerGroup’s last contention is not exactly clear, I set it out in full:
Pacific Cycle sent a press release to each of the active dealerships,
and voiced that PowerGroup would receive control over the
dealership accounts. However, Pacific Cycle continued to
maintain control over the dealerships, thus preventing
PowerGroup from effectively utilizing them and/or terminating
dealerships that were no longer active to develop its own dealer
channel. . . . They also knew that PowerGroup would have to
develop its own dealer network to sell motor scooters, but would
have difficulty doing so under state regulations unless Pacific Cycle
terminated inactive dealerships.
Br. in Opp., dkt. 26 at 22. PowerGroup contends that “[t]hese are facts of which George
Simone and Pacific Cycle had exclusive knowledge, and which under the circumstances
PowerGroup would reasonably expect truthful disclosure.”
Like so many of PowerGroup’s other contentions, this one fails on multiple levels, not
least of which is a lack of evidence. PowerGroup fails to present admissible evidence regarding
the “state regulations” to which it refers (the cited portion of Tillett’s deposition does not
support the proposed fact), any evidence to support its contention that PowerGroup “had to
develop its own dealer network” in order to sell scooters, any specific evidence supporting its
claim that Pacific Cycle’s refusal to terminate non-active dealers impeded PowerGroup from
approaching other dealers, or any evidence that anyone at Pacific Cycle “knew” any of these
alleged facts at the time of license negotiations. It also fails to offer any evidence to show that
it reasonably relied on statements made by Pacific Cycle in its press releases to dealers, or that
Pacific Cycle knew or should have known that PowerGroup would rely on these statements. See
Rendler v. Markos, 154 Wis. 2d 420, 429, 453 N.W. 2d 202, 205 (Ct. App. 1990) (“A complaint
pleading negligent or intentional misrepresentation must allege that the defendant
misrepresented a fact to the plaintiff or to a third person with intent that it would be
communicated to or influence the plaintiff.”).
Furthermore, as Pacific Cycle points out, information regarding how Pacific Cycle later
would treat dealers who were not actively selling Schwinn motor scooters does not relate to a
present fact in existence at the time of the negotiation of the license agreement, but concerns a
future event. To constitute an actionable misrepresentation (or material omission), the fact
misrepresented or omitted must “relate to present or pre-existing events or facts and may not
be merely a prediction of future events or an unfilled promise.” Fed. Deposit Ins. Corp. v.
Lauterbach, 626 F.2d 1327, 1334 (7th Cir. 1980). PowerGroup does not present any evidence
of any discussions during negotiation of the license agreement concerning how Pacific Cycle
would handle a dealer who was not selling Schwinn motor scooters or who had not honored its
pre-season orders; that issue did not arise until Tomberlin emailed Dueck in September 2010
to ask about terminating dealers “that are not ordering but still tying up a market.” Pacific
Cycle’s decision 17 months after the agreement was executed that it would not terminate dealers who
were not ordering product did not relate to facts existing at the time the agreement was executed.
In sum, PowerGroup has failed to present admissible evidence from which a reasonable
juror could find that Pacific Cycle fraudulently induced it into entering the license agreement.
Accordingly, its fraudulent inducement defense to the breach of contract claim, as well as its tort
claim for misrepresentation, both fail.
III. Breach of Contract
PowerGroup alternatively argues, as both a counterclaim and a defense to Pacific Cycle’s
breach of contract claim, that it was relieved of its obligations under the License Agreement
because Pacific Cycle was the first to materially breach the contract. See Mgmt. Computer Servs.,
Inc. v. Hawkins, Ash, Baptie & Co., 206 Wis. 2d 158, 183, 557 N.W. 2d 67, 77 (1996) (“It is well
established that a material breach by one party may excuse subsequent performance by the
other.”). “A breach is material if it destroys the essential object of the agreement or deprives the
non-breaching party of a benefit that the party reasonably expected.” Int’l Prod. Specialists, Inc.
v. Schwing Am., Inc., 580 F.3d 587, 595 (7th Cir. 2009). If the breach is relatively minor, the
non-breaching party will not be excused from its contractual performance. Cabinet Ingenuity &
Design, LLC v. Vill. Park Dev., LLC, 2011 WI App 136, ¶16, 337 Wis. 2d 426, 805 N.W. 2d 734
(unpublished), rev. denied, 2012 WI 2, 338 Wis. 2d 322, 808 N.W. 2d 714.
PowerGroup contends that Pacific Cycle breached the term of the License Agreement that
required it to provide PowerGroup with “copies of all dealer agreements, files, warranty history,
proof of insurance, product programs, EPA certificates, pre-season orders, state license and all
other documentation necessary to transition the business.”
According to Tomberlin,
PowerGroup never received any of the pre-season order forms or dealer agreements.
Even assuming this is a technical breach of the disclosure provision, PowerGroup has
failed to present evidence that the breach caused any injury or otherwise destroyed the essential
object of the agreement. As Pacific Cycle points out, the spreadsheet that Simone sent to
Tomberlin in early April 2009 included full information about each pre-order, including the
dealer who placed the order, the order number and the models and quantities ordered. Although
PowerGroup asserts that without the dealer agreements and pre-season orders, it was “powerless”
to enforce its rights, it fails to explain how or why this is so. Furthermore, PowerGroup’s
assertion erroneously assumes that it had “rights” to enforce with respect to the pre-season
orders; the undisputed facts adduced in this proceeding, however, show that the dealers were
under no contractual obligation to fulfill their pre-season orders. Finally, Tomberlin’s conclusory
assertion that the documents were “necessary” to run the Motor Sports division successfully is
insufficient to refute Simone’s testimony that he had all the documentation regarding pre-season
orders and the dealer network that he needed. It is undisputed that Simone, not Tomberlin, was
in charge of executing PowerGroup’s business plan for Schwinn motor scooters. All told,
PowerGroup has failed to present evidence from which a jury could find that Pacific Cycle
materially breached the License Agreement.
IV. Breach of Contract Damages
Having established as a matter of law that PowerGroup has no viable defense to its
breach of contract claim, Pacific Cycle asks this court to enter judgment in its favor in the
amount of $1.56 million, which represents the sum of the minimum royalties owed by
PowerGroup under the terms of the License Agreement, plus interest at a rate of 12% per annum
and attorneys’ fees. PowerGroup has not disputed that the minimum royalties in the license
agreement are reasonable stipulated damages. Instead, it argues vaguely that there are disputes
of fact as to whether the parties were operating under the reduced royalty terms in the August
2010 proposal by Pacific Cycle and whether PowerGroup is entitled to any offsets, “including
warranty claims, returned inventory and investment necessary to rebuild the ‘turn key’ Motor
PowerGroup’s first argument is a dead letter: I already have found it to be undisputed
that PowerGroup never accepted Pacific Cycle’s August 2010 proposal; therefore, the original
terms of the license agreement remain in effect.
Its second argument also fails for lack of proof.
Although Tomberlin avers that
PowerGroup incurred “significant cost and expense” covering Pacific Cycle’s warranty obligations
under state and federal law, it offers no particularized evidence showing the amount of these
costs. Likewise, it fails to present any itemization of any other costs or expenses it incurred that
might operate to offset the amount of royalties due or otherwise reduce the amount of liquidated
damages owed under the Agreement. When, as here, the moving party discharges its burden of
showing it is entitled to judgment as a matter of law, the non-movant is obligated to respond by
pointing to specific evidence in the record showing that a material dispute of fact exists. “[S]aying
so doesn’t make it so; summary judgment may only be defeated by pointing to admissible
evidence in the summary judgment record that creates a genuine issue of material fact.” U.S.
v. 5443 Suffield Terrace, Skokie, Ill., 607 F.3d 504, 510 (7th Cir. 2010). At this “put up or shut
up” juncture in the lawsuit, it is not enough for PowerGroup to state generally that it incurred
“significant” costs that give rise to a dispute about damages; it was required to propose specific
facts showing those expenses and establishing a legal entitlement to a reduction in the liquidated
damages called for by the parties’ agreement. Having done neither, PowerGroup has not shown
a material dispute of fact concerning damages.
It is ORDERED that:
(1) Plaintiff Pacific Cycle’s motion for summary judgment on its
breach of contract claim against PowerGroup and on
PowerGroup’s counterclaims is GRANTED.
(2) PowerGroup’s counterclaims are DISMISSED WITH PREJUDICE.
Entered this 30th day of August, 2013.
BY THE COURT:
STEPHEN L. CROCKER
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