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G. BAUKNECHT GMBH v. ELECTRONIC RELAYS

July 15, 1983

G. BAUKNECHT GMBH, PLAINTIFF,
v.
ELECTRONIC RELAYS, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Shadur, District Judge.

MEMORANDUM OPINION AND ORDER

G. Bauknecht GmbH ("Bauknecht") sues Electronic Relays, Inc. and ERI-Energy, Inc. (collectively "ERI"), ERI President Joseph Pascente ("Pascente") and ERI employee Barbara Breibach ("Breibach"). Bauknecht's Complaint has two counts:

    1. Count I is a diversity*fn1 claim for
  conversion, challenging ERI's refusal to refund a
  very large overpayment Bauknecht mistakenly sent
  to ERI in connection with a purchase order for
  two samples of an ERI-manufactured electronic
  device.
    2. Count II asserts a claim against all
  defendants under the Racketeer Influenced and
  Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961-68.

In turn defendants filed a Counterclaim seeking damages for breach of contract. Both sides have filed various motions, three of which are fully briefed and thus ready for disposition:

    1. defendants' motion to strike the May 7 and
  July 1, 1982 affidavits ("Bormann Affidavits") of
  Gerrald Bormann ("Bormann"), an employee of
  Bauknecht's Legal Department;
    2. Bauknecht's Fed.R.Civ.P. ("Rule") 56 motion
  for summary judgment on Count I; and
    3. Bauknecht's motion to strike defendants'
  Counterclaim and jury demand.

For the reasons set forth in this memorandum opinion and order, this Court grants in part defendants' motion to strike the May 7 Bormann Affidavits, denies (albeit regretfully) Bauknecht's motion for summary judgment and grants its motion to strike the Counterclaim and the jury demand.

Facts*fn2

  PRICE FOR 2 UNITS OF PB2403-1 IS 34.95 EACH. AIR
  PARCEL POST CHARGES (WITH INSURANCE) IS 20.00USD.
  THEREFORE, ENTIRE ORDER IS 89.90USD.
  DELIVERY WILL BE 2-4 WKS AFTER RECEIPT OF
  PAYMENT. WE WILL ACCEPT EITHER CASH IN ADVANCE OR
  BANK TRANSFER.
  FOR BANK TRANSFER PLS ISSUE TO AMERICAN NTL BANK OF
  CHICAGO, OUR ACCOUNT NO IS 186384. PLS ADVISE WHICH
  METHOD OF PAYMENT U CHOOSE.

On July 3 a clerk in Bauknecht's accounting department caused Bauknecht's bank (inadvertently according to Bauknecht)*fn3 to wire $89,900 rather than the $89.90 to that ERI account. Bauknecht's banking transaction document (B. May 7 Aff.Ex. 3) contained the following entry:

  2 Units of P8 2433 — Power Factor Controller
  US $89.900, —

On that same day Pascente allegedly received a telephone call from Hoffmann, an assertion hotly contested by Bauknecht. According to P.Aff. ¶ 7:

  On July 3, 1981, I received a telephone call from
  Mr. Hoffmann of BAUKNECHT. Mr. Hoffmann
  identified himself by saying that he was calling
  for BAUKNECHT and that his company had just
  recently ordered two samples of Power Factor
  Controllers, and he said that he wanted to
  purchase another 2,500 units. I told Mr. Hoffmann
  that with our packaging for shipments there were
  134 units to each pallet and that was the best
  way to ship. Therefore, I said to Mr. Hoffmann
  that 19 pallets would come the closest to his
  2,500 figure, and that the total figure would
  then be 2,548 units. I told Mr. Hoffmann that the
  unit price was the same as for the sample, $33.95
  [sic], and that we should allow about $3,000.00
  for shipping. Mr. Hoffmann said that he wanted
  the units and was purchasing such units at that
  price and that he needed the units as soon as
  possible. I then told him that full payment in
  advance by letter or credit or cash was required
  by company policy in conformity with the prior
  letter and telex, and that no work or shipment
  would take place without such full payment. Mr.
  Hoffmann said that that was fine. Mr. Hoffmann
  then said that he wanted 12 sets of literature
  for a possible new German distributorship with a
  potential of 50,000 units annually. We then said
  goodbye to each other. Since I have a habit of
  taking notes of my telephone conversations, I
  made notes during my telephone conversation with
  Mr. Hoffmann, and a true and correct copy of such
  notes is attached hereto as Exhibit D.*fn4

P.Aff. ¶ 8 says ERI immediately proceeded to fill that 2,548 unit order (by making substantial purchases of needed supplies and initiating the manufacturing process itself) when it received the $89,900 on July 7.

On July 10 Hoffmann sent to Breibach confirmation of Bauknecht's order for two Controllers at the originally-quoted price of $34.95 per unit and $20.00 postage. According to P.Aff. ¶ 9, on July 24 an invoice (P.Aff.Ex.E) was purportedly sent to Bauknecht, confirming receipt of payment for the 2,546 additional units supposedly ordered by Hoffmann during the alleged July 3 conversation:

  Quantity   Description                      Unit                   Amount
  Ordered                                     Price
  2546       POWER FACTOR CONTROLLER
             Change order increase order as
             follows
             PB2403-1 240VAC 3HP
             Single Phase                     $33.95               $86,436.70
             Order paid in full — bank transfer of 89,810.10USD
             to American National Bank of Chicago
             Estimated Air Freight 4000 pounds                      $3,000.00
                                                                   ----------
             Credit Allowance                                       $373.40

That invoice promised delivery by September 28.

On August 5 Hoffmann sent a telex (B. July 1 Aff. ¶ 5, incorporating Cplt.Ex.CC) to Breibach. Bauknecht's copy of that telex again unequivocally confirmed its order of two Controllers:

RE OUR ORDER NBR. 043290 OF JULY 10TH

  WE ORDERED TWO POWER FACTOR CONTROLLERS TYPE PB
  2403-1 BUT DIDN'T RECEIVE THEM UNTIL NOW. YOU
  PLEASE MAY CONFIRM OUR ORDER AND DISPATCH THEM AS
  SOON AS POSSIBLE

As received by ERI the telex (P.Aff.Ex.G) was somewhat scrambled, though it expressly referred to Bauknecht's July 10 telex purchase order (which was for only two units):

  RE OUR ORDER NBR. 043290 OF JULY 10TH
  WE OR
       DERED TWO T
                  HO POWER FACTOR CONTROLLERS TYPE
                  PB 2403-1
  BUT DIDN'T RECEIVE THEM UNTIL NOW.
                      YOU PLEASE MAY CONFIRM OUR ORDER AN
  D DISPATCH AS SOON AS
  POSSIBLE

Later that same day Breibach sent a return telex (B. July 1 Aff. ¶ 6, incorporating Cplt.Ex. DD), which referred to Bauknecht's July 10 order and stated "SORRY FOR DELAY. UNITS ARE SHIPPING TODAY VIA A.P.P." ERI shipped two Controller units, not 2,000 or 2,548 units.

On August 12 ERI mailed an invoice (B. May 7 Aff.Ex. B) confirming shipment of two Controllers per Bauknecht's July 10 purchase order at a unit price of $34.95 for a total of $89.90 (including $20.00 in postal charges). Significantly that invoice states, "Paid in full — bank transfer of $89.90 USD to American National Bank of Chicago."

On September 3 Pascente sent the following telex (B. July 1 Aff. ¶ 7, incorporating Cplt.Ex. EE) to Bauknecht — according to Bauknecht, the first clue ERI had been sent $89,900 rather than $89.90:

  WE HAVE SHIPPED 2 UNITS AGAINST YR ORDER OUR W/O
  NO 11020 FOR 2546 UNITS. THE BALANCE OF YR ORDER
  WILL BE SHIPPED IN 10 WEEKS.
  EXCUSE, THERE IS A MISUNDERSTANDING. OUR
  BOOK-KEEPING DEPARTMENT REMITTED INSTEAD OF USD
  ...

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