J.P. STADTMUELLER, District Judge.
This case arises out of a contract dispute over a national marketing campaign. (See generally Docket #39). On June 24, 2016, and pursuant to Federal Rule of Civil Procedure 56, the plaintiff, CNH Industrial America LLC ("CNH"), moved for summary judgment with respect to: (1) its breach of contract claim; and (2) the defendant's, Jones Lange LaSalle Americas, Inc., ("JLL"), declaratory judgment counterclaim.
As described more fully below, the Court concludes that numerous disputes of material fact exist in this case. Accordingly, an award of summary judgment pursuant to Rule 56 is inappropriate, and the Court will deny CNH's motion in its entirety. (Docket #74).
CNH is a limited liability company organized and existing under the laws of the State of Delaware, with its principal place of business located at 700 State Street, Racine. (Docket #39 ¶ 1). It manufactures and sells farming and construction equipment through a network of dealers under several name plates, including the New Holland brand at issue in this action. (Docket #39 ¶ 1).
JLL is a corporation organized and existing under the laws of the State of Maryland, with its principal place of business located at 200 East Randolph Drive, Chicago, Illinois. (Docket #39 ¶ 2). It provides property management and project management services to clients, including clients within the borders of the Eastern District of Wisconsin. (Docket #39 ¶ 2).
In 2007, CNH began to undertake a corporate rebranding program for its New Holland Agriculture line of products (the "Rebranding Program"). (Docket #95 ¶ 1). The Rebranding Program would involve, among other things, the manufacture and installation of new signage at more than one thousand of its dealers in the United States and Canada. (Docket #95 ¶ 1).
CNH chose to retain a project manager for the Rebranding Program. (Docket #95 ¶ 2). CNH selected JLL for that position (Docket #95 ¶ 2), and, to that end, CNH and JLL entered into a Service Agreement on April 7, 2008 ("Service Agreement") (Docket #95 ¶ 3). Under the Service Agreement, JLL further negotiated agreements with three sign manufacturers—Icon Identity Solutions, Priority Signs, Inc., and Thomas Sign & Awning Company, Inc.—pursuant to which each would manufacture and install signs for the Rebranding Program. (Docket #95 ¶ 4). CNH was a third-party beneficiary under each of those three agreements. (Docket #95 ¶ 4).
The Service Agreement between CNH and JLL detailed various obligations on behalf of the parties. As it relates to this case, the Service Agreement imposed the following obligations on JLL:
(Docket #95 ¶ 5).
Vinyl was an essential component to this sign-manufacturing process. The company selected to provide the vinyl for the Rebranding Program was Arlon. (Docket #95 ¶ 7). Specifically, the Arlon Series 2500 vinyl was chosen as the sole vinyl to be utilized for the project. (Docket #97 ¶ 8). Generally, five signs were manufactured and installed at each dealer location (one of which had two sign faces). (Docket #95 ¶ 9). Of those, two signs are owned by CNH. (Docket #95 ¶ 9). The other three signs are owned by the individual dealer. (Docket #95 ¶ 9).
Sometime after selecting Arlon as the vinyl supplier, JLL began negotiating the terms of the Arlon vinyl warranty. (Docket #95 ¶ 13). Though many factual disputes surrounding this negotiation are unresolved, the parties agree that the vinyl warranty that ultimately appeared in Exhibit E to the agreements made between JLL and the sign manufacturers stated: "Arlon Vinyl Extended Warranty B 7 year warranty on 1st surface. 2nd surface on exterior sign applications is 9 years. There is no charge for parts/labor/shipping for 1-year from date of installation." (Docket #95 ¶ 15). The parties also agree that the aforementioned language was not drafted by JLL. (Docket #95 ¶ 16). Rather, Adam Cook ("Mr. Cook"), JLL's assigned project manager until approximately the second quarter of 2009, testified that he "believed" that the language quoted above was drafted by one of the sign manufacturers. (Docket #95 ¶¶ 12, 16).
Two problems arose during the course of the sign manufacturing process. First, in late 2008, the vinyl delivered by Arlon began to check and crack when applied to the New Holland signs. (Docket #95 ¶ 24). Though the parties dispute the cause of the 2008 failure and manner in which it was resolved, it is undisputed that sign fabrication continued thereafter. (Docket #95 ¶¶ 24-31). Second, in late 2010 or early 2011, CNH began to receive additional reports from its dealers that signs fabricated and installed for the Rebranding Program were again failing due to cracking, checking and fading. (Docket #95 ¶ 31; see also Figures 1 and 2).
As a result of the sign failures, CNH dealers went through a process of reporting failed signs to either CNH or JLL. (Docket #95 ¶ 34). If the failure was reported to CNH, then CNH would, in turn, report the failure to JLL. (Docket #95 ¶ 34). JLL would then initiate a claim with the sign manufacturer that manufactured the sign, and that sign manufacturer would then contact Arlon to initiate a warranty claim seeking payment for manufacture of a new sign face and its installation. (Docket #95 ¶ 34).
At this time, Arlon deemed product failures of the sort at issue to be failures for which the vinyl warranty would be available. (Docket #95 ¶ 33). And, until approximately mid-2014, Arlon agreed to pay the full replacement cost of sign faces on which its failed vinyl was affixed. (Docket #95 ¶ 36). At no point during this period of time did Arlon refuse to pay for any sign faces based upon the date of installation, the nature of the failure, or any other factor. (Docket #95 ¶ 36).
In mid-2014, however, Arlon stopped fully funding the replacement of sign faces. (Docket #95 ¶ 37). And, in August 2014, Arlon advised JLL that it would no longer fund remediation of any of the failed signs. (Docket #95 ¶ 40). Instead, Arlon offered to fund remediation of additional signs at a price of $3,000.00 per dealer site. (Docket #95 ¶ 40). CNH did not accept this offer, and instead entered into a Common Interest Agreement with JLL in December of 2014 to resolve various issues related to the failed signs. (Docket #95 ¶¶ 40-41).
Though JLL disputes the propriety of CNH's data gathering, CNH estimates that, to date, signs have failed and need to be replaced at 686 dealers across the country. (Docket #95 ¶¶ 42-44). Based on this number and CNH's recent sign remediation contract, CNH estimates that correcting the remaining failed signs will cost CNH and its dealers no less than $5,382,875.00. (Docket #95 ¶ 44-45).
When a party files a motion for summary judgment, it is their "contention that the material facts are undisputed and the movant is entitled to judgment as a matter of law." Hotel 71 Mezz Lender LLC v. Nat. Ret. Fund, 778 F.3d 593, 601 (7th Cir. 2015) (citing Fed. R. Civ. P. 56(a)). "Material facts" are those facts which "might affect the outcome of the suit," and "summary judgment will not lie if the dispute about a material fact is `genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Thus, to have a genuine dispute about a material fact, a party opposing summary judgment "must do more than simply show that there is some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 474 U.S. 574, 586 (1986); namely, the party in opposition "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e).
"Where . . . the movant is seeking summary judgment on a claim as to which it bears the burden of proof, it must lay out the elements of the claim, cite the facts it believes satisfies these elements, and demonstrate why the record is so one-sided as to rule out the prospect of a finding in favor of the non-movant on the claims." Hotel 71 Mezz, 778 F.3d at 601. In analyzing whether summary judgment should be granted, a court must draw all reasonable inferences from the materials before it in favor of the non-moving party. Id. When a court denies a motion for summary judgment, it "reflects the court's judgment that one or more material facts are disputed or that the facts relied on by the motion do not entitle the movant to judgment as a matter of law." Id. at 602.
In its motion for summary judgment, CNH makes three arguments that the Court will address herein. (Docket #74). First, CNH argues that it is entitled to judgment as a matter of law with respect to its breach of contract claim against JLL. (Docket #74). According to CNH, JLL has breached the Service Agreement by:
(Docket #74). As a result of these four breaches, CNH argues that it is entitled to judgment as a matter of law against JLL in the amount of $5,382,875.00. (Docket #74). Second, for the same reasons that it prevails on the aforementioned breach of contract claim, CNH argues that the Court should dismiss JLL's declaratory judgment counterclaim. (Docket #74).
In response, JLL argues that factual disputes underlying both CNH's contract claim and its own declaratory judgment counterclaim preclude the entry of summary judgment in CNH's favor. (Docket #87). Moreover, JLL argues that its affirmative defense of waiver, and the Limitation of Liability provision appearing in the parties' Service Agreement, preclude, if not cap, CNH's recovery in this case. (Docket #87).
For the reasons described below, the Court concludes that: (1) genuine issues of material fact preclude the grant of summary judgment in CNH's favor; and (2) that JLL may argue the defense of waiver and the applicability of the Limitation of Liability provision, despite its failure to plead these positions in its amended answer.
As described above, CNH's breach of contract claim and JLL's declaratory judgment claim raise similar, though not identical issues. At this juncture of the litigation, however, the Court is satisfied that a large body of disputed fact precludes the entry of judgment as a matter of law for CNH on either of the claims.
"The elements for a breach of contract in Wisconsin are familiar; the plaintiff must show a valid contract that the defendant breached and damages flowing from that breach." Matthews v. Wisconsin Energy Corp. Inc., 534 F.3d 547, 553 (7th Cir. 2008) (citing Northwestern Motor Car, Inc. v. Pope, 51 Wis.2d 292, 296, 187 N.W.2d 200 (Wis.1971)).
CNH claims that JLL breached the Service Agreement by failing to properly negotiate and document Arlon's vinyl warranty. However, much is unknown and disputed regarding the development of the terms of the warranty, and, more importantly, the parties dispute the actual terms of the warranty itself. (Docket #95 ¶¶ 13-23).
Regarding the vinyl warranty negotiations, the parties do not agree on the extent to which various actors were and/or should have been involved in the process. While on the one hand Mr. Cook testified that he "believed" that one of the sign manufacturer's drafted the warranty language, he does not remember the "details" of the negotiations. (Docket #95 ¶¶ 13, 16, 23). According to his testimony, the only portion of the negotiations that Mr. Cook remembers relates to a comparison of Arlon's warranty to 3M's warranty. (Docket #95 ¶ 13). Thus, because: (1) the parties did not provide the Court with any other testimony regarding the warranty's negotiations; and (2) there is no documentary evidence that catalogues or re-counts those negotiations, trial will serve to elucidate who participated in the negotiation process and the manner in which the negotiations proceeded. (Docket #95 ¶¶ 14, 17, 19).
Moreover, CNH provides the Court will no definition or comparative representation of what constitutes the "best possible warranty" for the vinyl at issue in this case. According to JLL, Mr. Cook engaged in at least some comparison of other company's warranties, i.e., that of 3M's; and, according to JLL, Arlon's vinyl price and proposed warranty terms were superior to that of Arlon's competitors. (Docket #95 ¶ 13; Docket #95 JLL Proposed Fact ¶¶ 9-10, 19). Thus, without resolution as to a standard and/comparison for industrial vinyl warranties, the Court cannot fairly determine whether JLL breached its duty to negotiate in this regard.
Even more to the point, the parties disagree on the ultimate outcome of the vinyl warranty negotiations. At bottom, the only documented language evidencing the warranty's negotiations is a thirty-three word statement that appeared in Exhibit E to the sign manufacturer's contracts with JLL. (Docket #95 ¶ 14). That language reads:
(Docket #95 ¶ 15).
The parties actively dispute whether this statement accurately and completely describes Arlon's vinyl warranty. On the one hand, CNH has presented testimony from Arlon's Rule 30(b)(6) representative suggesting that the language does not contain standard warranty terms that are issued by the vinyl company. (Docket #95 ¶ 18). For its part, JLL's employees have offered three separate articulations of what the Arlon warranty's terms were, none of which correspond exactly to the quoted language above. (Docket #95 ¶ 20). CNH also proffers a different interpretation of the warranty and its coverage for replacing and repairing failed signs. (Docket # 95 ¶¶ 15, 22).
To be sure, with so many disputed facts about the terms of the underlying warranty itself, the Court is satisfied that the grant of summary judgment with respect to JLL's duties to "negotiate" and "document" the same is inappropriate at this juncture.
Next, CNH claims that JLL failed to satisfy its quality control obligations under the Service Agreement. At the heart of this theory are certain actions that were allegedly taken in response to an early failure in Arlon's vinyl in 2008. (Docket #95 ¶¶ 24-30).
In 2008, the Rebranding Program experienced an early interruption due to checking and cracking of the vinyl being placed on the New Holland signs. (Docket #95 ¶¶ 24-25). According to CNH, the 2008 vinyl failure is particularly critical because the testimony from former Arlon employees suggests that: (1) the issues underlying the 2008 vinyl failure also caused the systemic sign failures in dispute in this case; and (2) that certain employees from Arlon were aware of the defective vinyl all along and continued to sell it anyway. (Docket #95 ¶ 28). The parties dispute the extent to which JLL was aware and/or could have prevented this purportedly continuing vinyl failure. (Docket #15 ¶ 27).
While neither of the parties dispute that some sort of vinyl failure occurred in 2008 (Docket #95 ¶24), they do not agree as to the cause or nature of this failure. (Docket #95 ¶ 24). The parties also dispute what actions JLL took in response to the 2008 failure. (Docket #95 ¶25). While CNH asserts that JLL failed to make any inquiry of Arlon as to the cause of the failure, and simply accepted Arlon's assurance that the problem was found and cured, JLL maintains that it continued to monitor the manufacturing and fabrication process to ensure the signs did not demonstrate any failures. (Docket #95 ¶ 25). Moreover, assuming JLL failed to intervene in the 2008 failure to the extent CNH now expects, Mr. Cook's testimony suggests that such actions may have been motivated by cost and/or time saving measures. (Docket #95 ¶ 25). CNH's knowledge of and/or involvement in the 2008 failure are facts neither of the parties address.
Without resolution as to the circumstances of the 2008 failure, the actions taken by the parties in response to the 2008 failure, and whether the same problems underlying the 2008 failure actually caused the sign failures that began in late 2010 or early 2011, summary judgment on this theory of breach will not be granted.
Finally, with respect to its fourth theory of breach, CNH argues that, once the signs began to systemically fail across the country, JLL breached its duty to properly administer Arlon's vinyl warranty. (Docket #95 ¶¶ 31-41). For obvious reasons, many of the factual disputes related to what the actual terms of Arlon's warranty were are relevant to this theory of breach. As an example, CNH argues that JLL failed to accurately inform CNH that Arlon's warranty did not require a full refund and replacement of failed signs for a full seven years. (Docket #95 ¶ 38). For its part, JLL maintains that CNH had access to the same warranty language that it argues control this case, namely, that which was contained in Exhibit E to the sign manufacturer's contracts. (Docket #95 ¶ 38). The ultimate terms of the warranty and how/whether those terms were communicated among the parties are still open questions in this case.
CNH also posits that JLL failed to inform CNH of the warranty's approaching expiration date, despite JLL's ability to do so. (Docket #15 ¶ 39). As JLL highlights, it is unclear whether this fact supports CNH's theory of breach, as it does not appear that the Service Agreement explicitly required JLL to give advance notice of warranty expirations. (Docket #95 ¶ 39). Nonetheless, CNH maintains that JLL's failure to provide advance warning of the warranty's expiration undermined CNH's ability to take appropriate steps to avoid being left without warranty coverage for the failed signs. (Docket #95 ¶ 39).
In sum, because the facts outlined above, in conjunction with the actual terms of the Arlon warranty itself, are disputed, the Court will defer their resolution for trial.
Apart from the breach of contract claim, CNH also argues that JLL is not entitled to assert: (1) the defense of waiver; and (2) that CNH's damages should be capped in accordance with the Limitation of Liability provision articulated in the Service Agreement. (Docket #93). The Court concludes, however, that excluding further argument on these issues is not appropriate under the circumstances.
At bottom, CNH argues that both of JLL's purported defenses—i.e., that of waiver and the Limitation of Liability provision—must fail because they were not properly pled in JLL's amended answer. (Docket #93). More specifically, with respect to waiver, CNH points out that JLL failed to comply with Civil Local Rule 15 by failing to re-plead the affirmative defense in its amended answer. See Civ. L. R. 15(a) ("Any amendment to a pleading, whether filed as a matter of course or upon a motion to amend, must reproduce the entire pleading as amended, and may not incorporate any prior pleading by reference."). In addition, because CNH argues that JLL's assertion of the Limitation of Liability provision is an affirmative defense, CNH claims that JLL violated Federal Rule of Civil Procedure 8(c) by failing to properly plead them.
Nonetheless, many courts facing similar technical violations have declined to impose such a harsh sanction as CNH proposes. See, e.g., Pensacola Motor Sales Inc. v. E. Shore Toyota, LLC, 684 F.3d 1211, 1222 (11th Cir. 2012) ("[I]f a plaintiff receives notice of an affirmative defense by some means other than pleadings, the defendant's failure to comply with Rule 8(c) does not cause the plaintiff any prejudice. When there is no prejudice, the trial court does not err by hearing evidence on the issue.") (internal citations omitted); Moore, Owen, Thomas & Co. v. Coffey, 992 F.2d 1439, 1445 (6th Cir. 1993), as amended on denial of reh'g (Aug. 31, 1993) ("It is well established, however, that failure to raise an affirmative defense by responsive pleading does not always result in waiver."); Charpentier v. Godsil, 937 F.2d 859, 863 (3d Cir. 1991) ("It has been held that a `defendant does not waive an affirmative defense if [h]e raised the issue at a pragmatically sufficient time and [the plaintiff] was not prejudiced in its ability to respond.'") (quoting Lucas v. United States, 807 F.2d 414, 418 (5th Cir. 1986)); see also 5 Charles A. Wright & Arthur R. Miller, Fed. Practice and Procedure: Civil 2d § 1278. Instead of such a rigid approach, most courts ruling on motions to strike or related arguments consider both the notice-oriented purpose of Federal Rule of Civil Procedure Rule 8(c) and whether the failure to comply with the procedural requirement has caused undue prejudice. See MCI Telecommunications Corp. v. Ameri-Tel, Inc., 881 F.Supp. 1149 n.21, 1158 (N.D. Ill. 1995) (collecting cases).
In this case, the Court concludes that the wiser exercise of discretion is to allow JLL to argue waiver and the Limitation of Liability provision.
In sum, the Court concludes that genuine issues of material fact preclude the granting of summary judgment in CNH's favor. In addition, the Court will permit JLL to address its waiver and Limitation of Liability arguments at trial.
Accordingly,
