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Chicago Litho Plate Graining Co. v. Allstate Can Co.

decided: January 28, 1988.

CHICAGO LITHO PLATE GRAINING COMPANY, LTD., PLAINTIFF-APPELLEE,
v.
ALLSTATE CAN COMPANY, DEFENDANT-APPELLANT



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 86 C 1561 -- Elaine E. Bucklo, Magistrate.

Cummings, Flaum and Ripple, Circuit Judges.

Author: Cummings

CUMMINGS, Circuit Judge.

By applying basic principles of contract formation and assignment, the magistrate found that the preponderance of the evidence mandated that defendant Allstate Can Company (Allstate) owed plaintiff Chicago Litho Plate Graining Company (Chicago Litho) $30,625.00 plus interest for failing to perform its side of a bargain. We agree, and affirm for the reasons that follow.

We begin by reciting both the stipulated and contested facts from the record on appeal. Chicago Litho, an Illinois corporation with its principal place of business in Chicago, sued Allstate, a foreign corporation with its principal place of business in Clifton, New Jersey, to recover charges for color separation services performed for Apollo Container Corporation (Apollo). Apollo, a brokerage firm in the packaging business, had assigned the product of these services with the concomitant duty to pay for them to Allstate, which now denies such assignment. These services were for six designs, five related to Christmas and one which depicted Halley's Comet.

Keith Armato, then a salesman for Apollo, contacted a company called Wyandot in 1984. Under an oral agreement, confirmed later by a purchase order, Wyandot purchased decorated tin cans from Apollo which they filled with popcorn and sold. In 1985, Armato obtained a new order from Wyandot for additional decorated tin cans. This order again was by verbal agreement, although a salesman from Wyandot gave Armato a purchase order number. Wyandot never sent the purchase order and subsequently backed out of the agreement after the cans were manufactured.

Armato received Wyandot's verbal agreement in August 1985. Apollo then provided Chicago Litho the order to make color separations and film designs which then were sent to a metal-decorating company for the fabrication of plates later given to Allstate for use in making the cans. Apollo earlier had hired Allstate to manufacture the tin cans. This work was completed by September 1985.

The president of Apollo, Shel Newberger, learned around September 3, 1985, that Armato either had gone to work for Allstate or that he had formed his own company, Unilith, Inc. Allstate requires its salespersons to work as "independents," yet as found by the magistrate, (1) Armato answers his business telephone by saying "Allstate," (2) Armato's business cards and stationery all state "Allstate," and (3) Allstate sets the prices on all orders that Armato takes.

Armato took the Apollo business he controlled with him when he left in early September. Two months later, when Newberger decided that his company could not survive financially, Apollo was liquidated for the benefit of creditors in November 1985.

Right after Armato left, Newberger began negotiating with Richard Papera at Allstate regarding Armato's accounts. They conversed frequently, and by September 30, 1985, Newberger believed that Apollo and Allstate had reached an agreement regarding the Apollo accounts involving Allstate. This understanding was reflected in a letter from Newberger to James Quigley, president of Chicago Litho, dated September 30, 1985, in which he stated that Allstate had agreed to assume responsibility for the Chicago Litho bill on the Christmas design cans.*fn1 A copy of this letter was also sent to Papera at Allstate. Newberger then sent a second letter bearing that same date to Kranzten Studio, which had done the actual artwork for the films made by Chicago Litho, also informing Kranzten that Allstate would pay the Apollo bill for the matter in question. In both letters, Newberger enclosed the invoices previously sent to Apollo by Chicago Litho and Kranzten, respectively, and told them to rebill the amounts owed to Allstate. Allstate paid the Kranzten bill of $10,200.00, and Papera did not contact either Chicago Litho or Kranzten to say either that they should not bill Allstate or that Newberger had misstated the agreement with Allstate. Chicago Litho subsequently rebilled Allstate for $30,625.00.

Newberger sent an additional letter dated September 30, 1985, to Papera which discussed various orders. Regarding the Wyandot order, this letter said that:

The Apollo orders for Wyandot, Inc. will be taken over by Allstate. Allstate has agreed to pay all artwork, separations and plate costs and Apollo is to advise Chicago Litho and Krantzten [sic] Studios of this and see to it that these costs previously invoiced to Apollo, are transferred to Allstate.

(Pl. Ex. 4). The letter further stated that Apollo would receive the difference between the cost and selling price and that Allstate would make cans using the same designs for resale to its other customers, which included Apollo. Newberger concluded his letter by asking Papera to let him know if he had "any additions, corrections, or other thoughts, etc."

The telephone calls between Newberger and Papera continued after this letter was sent. On October 17, 1985, Papera wrote Newberger "in reply to your letter of September 30 * * * we are in agreement on most of the points in your letter, but I will restate some and try ...


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