SARA L. ELLIS, United States District Judge.
Plaintiff Richelieu Foods, Inc. ("Richelieu"), a private label food company, brought this lawsuit against Defendants New Horizon Warehouse Distribution Center, Inc. ("New Horizon") and Ray Emerick's Warehouse Co., Inc. ("Emerick") for breach of contract and fraud arising out of New Horizon's alleged failure to properly invoice Richelieu for warehouse storage charges.
Richelieu is a private label food company that operates manufacturing facilities throughout the country, including in Elk Grove Village, Illinois. On July 1, 2009, Richelieu entered into a warehouse services agreement with New Horizon for warehouse storage and services at New Horizon's facilities in Itasca, Illinois. Pursuant to that agreement, New Horizon was to provide Richelieu with storage for Richelieu's food products, handling, and other accessorial services at New Horizon's warehouse facility. Section 2.6 of the agreement provided:
Ex. C to Def.'s L.R. 56.1 Stmt. § 2.6. Exhibit A to the agreement provided several different overflow storage rates, for "Dry 15 Days Inbound Storage," "Dry 15 Days Recurring Storage," "Refrigerated 15 Days Inbound Storage," and "Refrigerated 15 Days Recurring Storage." Id. Ex. A. Pursuant to Exhibit A, the Overflow Storage Charge was to be charged on a 15-day basis. Exhibit A also specified the price for handling and other services. Section 2.3 of the agreement, titled "Price and Payment Terms," provided:
Id. § 2.3. James Campbell, Richelieu's vice president of manufacturing at its Elk Grove Village facility, was aware of the 30-day notice provision.
Exhibit B to the Agreement provided certain key performance indicators ("KPI") for the agreement. Specifically, New Horizon was required to provide order accuracy, on time shipping, and inventory accuracy (as it related to physical inventory) at a 99.5% standard, and damage monitoring at a 99.975% standard. Inventory accuracy is a comparison of the book record showing of products to the actual quantity of products in the warehouse. The agreement did not specify a KPI for invoicing accuracy.
To keep track of its products, Richelieu used an enterprise resource planning ("ERP") system called JustFood, which was specifically designed for food processing and manufacturing. JustFood included an inventory program that identified inventory by location, so that it was possible to determine how many stock keeping units ("sku") or cases were at New Horizon at any given time. Richelieu also had a general spreadsheet that it could use to estimate the number of pallets of product necessary for a certain number of cases or skus.
Additionally, when goods were transferred from Richelieu's Elk Grove Village facility to New Horizon, Richelieu generated a bill of lading and a packing slip. The bill of lading included a general description of the products included in the shipment and the number of pallets being transported. The packing slip indicated the total number of cases that were transported. When New Horizon received the goods, it issued a warehouse receipt to Richelieu. The receipts identified the particular skus and number of cases received. The receipts were sent to Richelieu's Vicky Knaack or Mark Windt, the plant controller at the Elk Grove Village facility. Richelieu would then match the warehouse receipt against the bill of lading to ensure there were no discrepancies. If there were discrepancies, Windt would contact New Horizon to have them addressed.
For Richelieu goods shipped from New Horizon to Richelieu customers, Richelieu received bills of lading and packing slips generated by New Horizon. These outbound
New Horizon sent a number of different invoices to Richelieu for its services. It issued weekly invoices for accessorial services. These invoices summarized all the items that New Horizon received from Richelieu's facility as well as all shipments that left New Horizon's facility over the previous week. Windt's receptionist performed a full audit of these weekly invoices to ensure they were correct. New Horizon also invoiced Richelieu monthly for the Fixed Monthly Storage Charge and on the 1st and 15th of the month for any Overflow Storage Charges. Windt reviewed these invoices for reasonableness, after which, if there were no issues, he would initial the invoices and send them to corporate headquarters for processing and payment. Richelieu paid all invoices from May 2009 through the end of December 2011.
On July 22, 2010, Windt emailed Gail Boulos, the administrative assistant to Laura Dickerson, New Horizon's president. Windt inquired about Invoice 300098H, asking "Can you help me understand how this report is calculated vs. the monthly storage?" Ex. 5 to Ex. B to Def.'s L.R. 56.1 Stmt. at D0047. After some discussion among Windt, Boulos, Dickerson, and Alan Dickes, New Horizon's IT Director, Dickerson explained to Windt:
Id. at D0045. Windt clarified that he was concerned with the invoice at issue because the number for the "the monthly storage pallets was very close to the 2 week pallets which is where I couldn't understand how this was being calculated." Id. Windt and Dickerson then spoke by phone. Windt testified that in that conversation Dickerson told him that New Horizon was "billing per the contract." Ex. E to Def.'s L.R. 56.1 Stmt. 108:12-13. Windt did not review the contract to verify that this was true, however. After their conversation, on August 19, 2010, Dickerson sent the following email to Windt:
Ex. 5 to Ex. B to Def.'s L.R. 56.1 Stmt. at D0044. Windt then authorized payment of Invoice No. 300098H.
About a year and a half later, on December 6, 2011, Windt emailed Boulos, Dickerson, and Helen Haaland, New Horizon's Inventory Control Manager, asking to review "the time frame covered as well as the calculations" for three invoices, Nos. 300916H, 300922H, and 300940H. Ex. 6 to Ex. B to Def.'s L.R. 56.1 Stmt. Dickerson responded the next day by email:
Id. Windt considered these statements to be consistent with those Dickerson made in August 2010 as to how New Horizon billed for overflow storage.
In January 2012, Richelieu hired A.T. Kearney, a management consulting company, to review its warehousing logistics. Stuart Klein, an A.T. Kearney analyst, was assigned to the project. Klein requested and received data from New Horizon, including files providing monthly pallet in and pallet out totals for 2011 separated by pallet type. Klein concluded that New Horizon had been overbilling Richelieu for storage, a conclusion he shared with Richelieu and New Horizon. Windt later continued Klein's analysis, using the weekly invoices and inbound and outbound bills of lading to determine what charges Richelieu believed to be appropriate.
On March 22, 2012, representatives from Richelieu and New Horizon met and discussed various issues, including Richelieu's claim that it had been overpaying for storage throughout the course of the parties' relationship. The parties did not reach a resolution of the invoicing dispute at that meeting. On March 26, 2012, Dickerson sent Richelieu a letter summarizing its position on the issue:
Ex. I to Pl.'s L.R. 56.1 Stmt. This was the first time the 30-day notice provision of Section 2.3 was raised with Richelieu.
On April 12, 2012, Windt sent Dickerson a letter further disputing New Horizon's manner of billing for storage:
Ex. 11 to Ex. B to Def.'s L.R. 56.1 Stmt. On June 21, 2012, Dickerson informed Windt that if Richelieu did not pay the unpaid amounts on its invoices-$171,632.38-by June 27, 2012, New Horizon would exercise its general warehouse lien and sell the products in its possession. On June 25, 2012, Richelieu formally terminated the agreement, claiming that New Horizon had failed to cure its past breaches of the agreement, which included failing to reimburse Richelieu $493,413.00 in what it considered "excessive and improper storage charges." Ex. L to Pl.'s L.R. 56.1 Stmt.
Despite the breakdown in the parties' relationships, Dickerson and Dickes acknowledged during their depositions that the way New Horizon invoiced Richelieu for overflow storage did not comply with Section 2.6 of the agreement, although they maintained that New Horizon complied with Exhibit A of the agreement. Windt admitted that he does not believe that New Horizon's alleged improper billing was malicious or that New Horizon was trying to cover up or hide any improper billing. Similarly, Klein testified that the method New Horizon used was "faulty," but that this "wasn't intentional, but, instead, an accident due to misunderstanding." Ex. G to Def.'s L.R. 56.1 Stmt. 93:22-94:10. Campbell acknowledged that the problem was not that the number of pallets stored at New Horizon was misrepresented but rather that New Horizon incorrectly invoiced Richelieu.
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. To determine whether a genuine issue of fact exists, the Court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed.R.Civ.P. 56 & advisory committee's notes. The party seeking summary judgment bears the initial burden of proving that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In response, the non-moving party cannot rest on mere pleadings alone but must use the evidentiary tools listed above to identify specific material facts that demonstrate a genuine issue for trial. Id. at 324, 106 S.Ct. 2548; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir.2000). Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir.2000), the Court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
New Horizon first argues that summary judgment should be granted in its favor on Richelieu's breach of contract and fraud claims because Richelieu waived any claims it had related to invoicing prior to April 12, 2012 by not timely notifying New Horizon of the alleged disputes. New Horizon relies on Section 2.3 of the agreement, which provides that failure to notify New Horizon of "any dispute relating to any invoice or portion thereof within thirty (30) days of receipt of the invoice" operates as a waiver of the dispute. Ex. C to Def.'s L.R. 56.1 Stmt. § 2.3. Such notice provisions are routinely enforced. See Strom Eng'g Corp. v. Int'l Fiber Corp., No. 3:12-CV-035, 2013 WL 5274704, at *5-6 (S.D.Ohio Sept. 18, 2013) (enforcing notice provision regarding disputed invoices); Barber Auto Sales, Inc. v. United Parcel Servs., Inc., 494 F.Supp.2d 1290, 1295-96 (N.D.Ala.2007) (plaintiff's failure to comply with notice provision entitled defendant to judgment on breach of contract claim); Powers Law Offices, PC v. Cable & Wireless USA, Inc., 326 F.Supp.2d 190, 193 (D.Mass.2004) (collecting cases strictly enforcing similar notice provisions in the telecommunications area).
Richelieu argues, however, that the notice provision does not apply to bar its claims for several reasons. First, Richelieu maintains that its dispute does not relate to invoices but rather "stems from New Horizon's systematic breach and fraudulent application of the entire Agreement itself" and thus falls outside of the notice provision. Doc. 84 at 7. This essentially amounts to an argument that the notice provision applies only insofar as the invoice is correct. But "[t]his argument is without merit and renders the Waiver Provision a nullity" for "interpreting the Waiver provision as only restricting the right of a billed party to challenge a correct and properly chargeable invoice ... would render such provision practically meaningless." P.R. Tel. Co. v. SprintCom, Inc., 662 F.3d 74, 96 (1st Cir.2011). The notice provision instead must be read as applying not only to charges that were proper but also to charges that may have been improper under the terms of the agreement. Id. Indeed, although in the context of determining whether to require arbitration, the Seventh Circuit concluded that a provision requiring arbitration of disputes over invoice amounts covered claims that the defendant committed fraud "through various misrepresentations of the number of lines it had transcribed and the intentional billing of [plaintiff] for a substantially greater amount," in addition to claims that the defendant "breached the contract through overcharging." Welborn Clinic v. MedQuist, Inc., 301 F.3d 634, 640 (7th Cir.2002). Here, the notice provision is broader than in Welborn Clinic, for it includes "any dispute relating to any invoice or portion thereof." Thus, Richelieu's attempt to artificially narrow the notice provision fails. See id. (noting that the arbitration provision did not even require arbitration of all claims "related to" or "arising out of" invoice disputes but rather was narrower in requiring arbitration only of disputes over invoice amounts).
Next, Richelieu relies on the wrongful prevention doctrine, arguing that to the extent the notice provision applies, Richelieu's compliance is excused because of New Horizon's wrongful and fraudulent conduct. The wrongful prevention doctrine provides that "a party who prevents the fulfillment of a condition upon which his own liability rests may not defeat his liability by asserting the failure of the condition he himself has rendered impossible." Cummings v. Beaton & Assocs.,
Richelieu further argues that New Horizon waived enforcement of the notice provision. Waiver is the voluntary and intentional relinquishment of a known right and may be express or implied. Wells v. Minor, 578 N.E.2d 1337, 1346, 219 Ill.App.3d 32, 161 Ill.Dec. 691 (1991). New Horizon may have impliedly waived the notice provision through conduct inconsistent with the intent to enforce that provision. Id. Implied waiver may be found where an unexpressed intention to waive can be clearly inferred from the circumstances or New Horizon's conduct misled Richelieu into a reasonable belief that a waiver occurred. Batterman v. Consumers Ill. Water Co., 634 N.E.2d 1235, 1236,
Here, New Horizon did not raise the notice provision until March 26, 2012, after it had been working with Richelieu and its consultant, Klein, to address "alleged errors in invoices which [New Horizon] issued to [Richelieu] during the course of [their] relationship." Ex. I to Pl.'s L.R. 56.1 Stmt. Klein's analysis encompassed not just the most recent invoice that would have fallen within the notice provision but all invoices going back to 2009 — well outside of the time limit if New Horizon was strictly enforcing the notice provision. Dickerson's March 26, 2012 letter further suggested that New Horizon was invoking the notice provision only after determining that a future business relationship with Richelieu was no longer a possibility. See Ex. I to Pl.'s L.R. 56.1 Stmt. ("[I]n view of our business relationship with your company and the potential to continue doing business with your company, we initially agreed to examine the issue. Based upon our meeting with your company and your consultant last Thursday, it became clear that we will no longer continue to do business with your company after our current agreement ends.... [A]ny dispute your company may have had relating to any invoice has been waived since your company failed to notify us of any dispute within the applicable 30-day time period. Accordingly, we will no longer participate in any review of invoices for alleged invoicing errors."). New Horizon's actions could reasonably be viewed as having led Richelieu to understand that the notice provision was waived, particularly where it had never been invoked previously. Thus, there is at least a question of whether New Horizon's conduct can be read to support a finding of waiver, which precludes granting summary judgment in New Horizon's favor. Cf. McFadyen Consulting Grp., Inc. v. Puritan's Pride, Inc., 87 A.D.3d 620, 928 N.Y.S.2d 87, 89 (2011) (summary judgment properly granted where party did not raise a triable issue "as to whether it timely gave written notice to McFadyen that it disputed any invoices at issue, or as to whether McFadyen waived, either orally or in writing, the requirement of timely written notice of disputes as to invoices"). This dispute regarding waiver also applies to bar summary judgment based on New Horizon's argument that Richelieu waited too long in notifying New Horizon of the dispute regardless of the notice provision, for again New Horizon's actions could be read as suggesting that such delay did not matter.
Finally, Richelieu argues that enforcing the notice provision with respect to its fraud claim would be against public policy. But several Illinois appellate court cases suggest that a party may contractually waive the right to bring a fraud claim, such as through the inclusion of a notice provision. Krilich v. Am. Nat'l Bank & Trust Co. of Chicago, 778 N.E.2d 1153, 1161, 334 Ill.App.3d 563, 268 Ill.Dec. 531 (2002) (fraudulent misrepresentation claims dismissed based on contractual waiver); RBS Citizens, N.A. v. RTG-Oak Lawn, LLC, 943 N.E.2d 198, 204, 407 Ill.App.3d 183, 347 Ill.Dec. 908 (2011) (suggesting that "claims of common law fraud
Next, New Horizon argues that, by accepting and paying New Horizon's invoices, Richelieu modified the billing provisions of the agreement to conform to the manner in which New Horizon was calculating the storage charges. A valid modification requires offer, acceptance, and consideration. Schwinder v. Austin Bank of Chicago, 809 N.E.2d 180, 189, 348 Ill.App.3d 461, 284 Ill.Dec. 58 (2004). "A contract is validly modified if the party which did not propose the changes is shown to acquiesce in the modification through a course of conduct consistent with acceptance." Maher & Assocs., Inc. v. Quality Cabinets, 640 N.E.2d 1000, 1007, 267 Ill.App.3d 69, 203 Ill.Dec. 850 (1994). Whether a modification has occurred is a factual question. Id.
New Horizon maintains that, by paying invoices from the start of the agreement based on a billing method that may not have been set forth in the agreement, Richelieu acquiesced to a contract modification. But more facts are necessary before a trier of fact could conclude whether the agreement was validly modified. Any modification appears to have been inadvertent, as there is no evidence of a discussion of a deviation from the billing method set forth in the agreement or even an acknowledgment that the billing method that New Horizon used in fact deviated from that set forth in the agreement. Thus, there is at minimum, an argument that Richelieu did not ratify any new agreement and waive performance of the original agreement. Cf. Davison v. Bd. of Trs. of Carl Sandburg Coll., Dist. No. 518, 478 N.E.2d 3, 4-5, 132 Ill.App.3d 980, 87 Ill.Dec. 864 (1985) (plaintiff was aware of modified offer and thus by performing accepted the terms of the modified contract). Moreover, New Horizon has not suggested what consideration Richelieu provided for the purported modification or presented any case law to support an argument that no consideration was necessary. Because contract modification based on a course of conduct is typically not properly decided on a motion for summary judgment, and the argument is not well-developed by either party, the Court will not grant summary judgment for New Horizon on this basis. See Coventry Health Care Workers Comp., Inc. v. Medicor Managed Care, LLC, No. 10 C 7814, 2012 WL 787058, at *2-3 (N.D.Ill. Mar. 9, 2012) (finding that modification question raised issues of fact not appropriate for summary judgment); Household Fin. Servs., Inc. v. Coastal Mortg. Servs., Inc., 152 F.Supp.2d 1015, 1023 (N.D.Ill. 2001) ("[W]hether the Purchase Agreement was modified-and the extent of that modification (i.e., which provisions are modified and which remain enforceable)-are questions of fact which are not properly decided on a motion for summary judgment.").
To prevail on its fraud claim, Richelieu must establish that (1) New Horizon made a false statement or omission of material fact, (2) New Horizon knew of
New Horizon first argues that Richelieu's claim fails because Richelieu cannot establish that it justifiably relied on any alleged misrepresentations. Specifically, New Horizon contends that Richelieu possessed or had access to all information that would have allowed it to determine whether New Horizon's billing method complied with the terms of the agreement. Because Richelieu had this information, New Horizon argues, Richelieu's reliance on the invoices or any other statements that New Horizon made regarding its billing method was not justified. "To determine whether reliance was justified, the court considers the facts the party knew and those facts which it could have learned through ordinary prudence." JPMorgan Chase Bank, N.A. v. E.-W. Logistics, L.L.C., 9 N.E.3d 104, 121, 380 Ill.Dec. 854, 2014 IL App (1st) 121111 (2014). Richelieu may not claim that it was deceived by information provided to it by New Horizon if it had its "eyes closed." Siegel Dev., LLC v. Peak Constr. LLC, 373 Ill.Dec. 482, 993 N.E.2d 1041, 1060, 2013 IL App (1st) 111973 (2013). But, Richelieu need not have conducted an independent investigation if it did not have the same ability as New Horizon to discover the truth of the representations or if the facts were presumptively within New Horizon's knowledge and contained nothing so improbable as to cause doubt as to their truth. Schrager v. N. Cmty. Bank, 767 N.E.2d 376, 388, 328 Ill.App.3d 696, 262 Ill.Dec. 916 (2002). Whether reliance is justified is usually a question of fact, but where only one conclusion can be drawn from the undisputed facts, the issue may be determined on summary judgment. Siegel Dev., LLC, 373 Ill.Dec. 482, 993 N.E.2d at 1060.
Richelieu argues in its response that New Horizon's "fraudulent invoicing method was not easily discernable, and could not have been discovered based on a review of documents or information in its possession." Doc. 84 at 23. But it is undisputed that the allegedly fraudulent invoicing method was indeed discovered by Richelieu's consultant, Klein, based on information that was in Richelieu's possession or readily available to it. See E.-W. Logistics, 9 N.E.3d at 121 (estate failed to state fraud claim where it did not allege that decedent made any effort to obtain information about the status of the loans at issue). Thus, the evidence establishes that Richelieu had the ability to determine the allegedly improper nature of New Horizon's billing on its own. But this is not the end of the road for Richelieu's fraud claim, for it need not have conducted any investigation if the alleged misrepresentations were presumptively within New Horizon's knowledge and contained nothing so improbable as to cause Richelieu to doubt their truth. Sims v. Tezak, 694 N.E.2d 1015, 1020-21, 296 Ill.App.3d 503, 230 Ill.Dec. 737 (1998) ("Illinois law has long held that, where the representation is made as to a fact actually or presumptively within
Additionally, New Horizon argues that Richelieu's fraud claim fails because New Horizon's invoices clearly set forth the overflow storage charges, it did not misrepresent the number of pallets it stored over certain periods of time, and its invoices were not vague. New Horizon only presents one invoice as an example to demonstrate that the number of pallets it had on hand was accurately stated on the invoice and that the invoice cannot be considered vague. The Court, however, does not understand Richelieu's argument to be that New Horizon inflated the number of pallets but rather that it misrepresented the number of pallets that should be charged at certain rates. The alleged fraud, as far as the Court understands it, was furthered by New Horizon's failure to provide detailed information on the invoices about how exactly it was calculating each storage charge. The Court has difficulty concluding whether the evidence would support these arguments where only one invoice has been submitted. Because New Horizon's argument is undeveloped and the Court is left guessing at both sides' positions on the issues, summary judgment will not be granted on these bases. Richelieu is reminded, however, of the high evidentiary burden it must meet to prevail on its fraud claim.
Finally, New Horizon argues that Richelieu's fraud claim is defeated by Richelieu's representatives' admissions that New Horizon had no intent to defraud. Specifically, Windt and Klein testified that they did not believe New Horizon acted maliciously or that it intentionally deviated from Section 2.6 of the agreement. Initially, Richelieu representatives' beliefs about New Horizon's motives are not relevant to establishing New Horizon's motives. And even so, New Horizon is demanding too much of Richelieu on this element of its fraud claim. All Richelieu must establish is that New Horizon intended that Richelieu act in reliance on the representations, i.e. that the alleged billing misrepresentations were made with the intent to induce Richelieu to pay the charges set forth in the invoices. See Weidner, 342 Ill.Dec. 475, 932 N.E.2d at 605. Windt's and Klein's statements do not undermine this element. After Dickerson assured Windt that the invoices he questioned in 2010 and 2011 were billed according to the agreement, the record reflects that those invoices were paid. This suggests that the alleged misrepresentations were made to induce Richelieu to pay — and indeed had the intended effect. See McCarthy v. Ameritech Publ'g, Inc., 763 F.3d 469, 481, 2014 WL 3930572, at *8 (6th Cir. Aug. 13, 2014) (finding that "the significant benefit
Richelieu's breach of contract and fraud claims both rely on the contention that New Horizon agreed to maintain invoicing accuracy at a 99.5% standard. But the agreement only provides that New Horizon would maintain 99.5% inventory accuracy and does not include a KPI for invoicing accuracy. Although invoicing accuracy may be tied to inventory accuracy in some unspecified way, Richelieu has not provided any evidence to dispute New Horizon's evidence that it made no representations regarding invoicing accuracy. Thus, Richelieu cannot base its breach of contract or fraud claims on an agreement that New Horizon maintain invoicing accuracy at a 99.5% standard.
For the foregoing reasons, New Horizon's motion for summary judgment is granted in part and denied in part. Richelieu cannot pursue its breach of contract and fraud claims based on New Horizon's alleged breach of an agreement to maintain invoicing accuracy at a 99.5% standard. New Horizon's other grounds for summary judgment are denied.