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10/12/88 Jerome S. Wald, As Trustee v. Chicago Shippers

October 12, 1988

FORWARDING COMPANY, ET AL., PLAINTIFFS-APPELLANTS

v.

CHICAGO SHIPPERS ASSOCIATION ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, THIRD DIVISION

JEROME S. WALD, as Trustee of the Estate of Chicago

529 N.E.2d 1138, 175 Ill. App. 3d 607, 125 Ill. Dec. 62 1988.IL.1522

Appeal from the Circuit Court of Cook County; the Hon. Odas Nicholson, Judge, presiding.

APPELLATE Judges:

JUSTICE FREEMAN delivered the opinion of the court. WHITE, P.J., and RIZZI, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE FREEMAN

Plaintiffs, Jerome S. Wald (Wald), as trustee of the estate of Chicago Forwarding Company , and Edcons, Inc., appeal the trial court's granting of a motion for summary judgment in favor of defendants, Chicago Shippers Association and other companies who are current or former members of CSA. Plaintiffs sued defendants for breach of a contract pursuant to which plaintiffs agreed to perform pooling and consolidating services for defendants. In granting the motion for summary judgment, the trial court held that plaintiffs' claims are barred by the doctrines of waiver and estoppel; the specific contract provision at issue is too vague to be enforceable; and the individual defendants are not personally liable under the contract since they were not signatories to the contract.

For the reasons stated below, we affirm the judgment of the circuit court.

Plaintiffs' single-count amended complaint sounds in breach of contract and is drawn in 64 paragraphs. We will review the pertinent allegations in some detail. Since the allegations and arguments important to this appeal pertain mainly to plaintiff CFC, rather than plaintiffs Edcons and Wald, the term "plaintiff," appearing in the remainder of this opinion, refers to CFC, unless otherwise indicated. The complaint alleges that plaintiff provided transportation services for its customers and consolidated and forwarded its customers' freight. The function of plaintiff's consolidation services was "to take maximum advantage of the freight rate structure used by certain railroads." The railroads charged a flat fee for each 80,000-pound shipment. If the shipment weighed less than 80,000 pounds, the same flat fee was charged nevertheless. Plaintiff worked to combine freight from various shipper/customers to form carload shipments, resulting in an apportionment of the total shipping price among the shippers who had freight in the carload. Thus, the complaint asserts, "[the] greater the volume of freight supplied to plaintiff by its shipper/customers the greater were the number of potential combinations of freight available to plaintiff to make up the 80,000-pound carload shipments and the faster those shipments could be put together, moved out of Chicago and transported to their destination."

The complaint further alleges that defendant CSA is a not-for-profit corporation created to pool and consolidate merchandise for its members, including the individual defendants, at carload or other volume rates. Each member of CSA designates in writing a representative to act as its agent in CSA affairs. CSA's board of directors is elected from its members. CSA's officers are elected from the board of directors. Since the date of its incorporation, plaintiff handled only freight belonging to CSA members and was able to charge for its services only at those rates approved by CSA. Plaintiff was free to act as a freight consolidator for non-CSA members, but chose not to do so.

On March 12, 1975, at the request of CSA, CSA and its members entered into a written contract with plaintiff "which memorialized the previously existing, ongoing contractual relationship among CSA, its members, . . . and CFC." The complaint alleges that CSA engaged the freight consolidating and forwarding services of plaintiff for years prior to the execution of the written contract. The purpose of the written contract allegedly was to insure for CSA the continuing availability and benefit of plaintiff's consolidating activities.

Further, the intention of the parties in executing the contract allegedly was that CSA's members would continue to provide freight to CSA at volumes at least equal to precontract levels. Paragraph 2(a) (the meaning of which is disputed in the instant appeal) allegedly provided that CSA and its members would route additional freight to plaintiff over and above the precontract amounts whenever possible. This agreement by CSA and its members, to use plaintiff to the fullest extent possible, allegedly constituted the major consideration for CFC's agreement to enter into the contract.

Defendants allegedly breached the contract by wrongfully diverting freight from plaintiff to other freight consolidators. CSA failed to ensure that its members, including the individual defendants, performed their obligations under the contract when they acted as members of CSA. Rather, the members shipped a portion of their freight through plaintiff, thereby accepting the benefits of low rates accorded to CSA members under the contract, while they wrongfully diverted the remainder of their freight to other freight consolidators.

Further, CSA allegedly wrongfully imposed, over the objections of plaintiff, an additional charge on "runthrough" cars handled by plaintiff, the total amount of the charge being remitted to CSA. As a result of the additional charge being imposed, plaintiff's rates for handling "runthrough" cars became too high to be competitive in the freight consolidation industry. Thereafter, CSA members made additional wrongful diversions of freight from plaintiff.

The complaint asserts that as a result of the large and increasing volume of freight shipped through plaintiff by CSA members prior to the contract, the rates charged by plaintiff to CSA members always were much lower than rates charged to the general public by plaintiff's sister corporation (Chicago Furniture Forwarding Company). After execution of the contract, plaintiff continued to charge CSA a "much lower" rate than plaintiff's sister corporation charged the general public. For example, as of June 17, 1978, plaintiff charged CSA members 62 cents per hundredweight per line entry. As of the same date, CFFC charged the general public $2.95 per hundredweight for the same services.

Plaintiff alleges that from the date of execution of the contract, March 12, 1975, to May 1, 1981, it fully performed under the contract. Further, during that time, CSA members shipped freight to plaintiff for consolidation, thereby enjoying the benefits of the contract. Some time after the execution of the contract, on dates unknown or unspecified by plaintiffs in the complaint, CSA and certain of its members began to breach their obligations under the contract, including paragraph 2(a), by wrongfully diverting freight from plaintiff to various freight terminals owned and/or operated on behalf of individual CSA members and various other transportation agents.

As a result of the financial losses suffered by plaintiff in consequence of the repeated breaches by CSA and its members, plaintiff filed on December 22, 1980, a voluntary petition for reorganization. Plaintiff continued to operate the business as a debtor in possession until May 1, 1981, when the cause was transferred to a chapter 7 liquidation and Wald was appointed as trustee.

The parties presented the following deposition testimony. Norcross Putnam, executive secretary of CSA, stated in his deposition that CSA would contract with a consolidator by first asking CSA members how much freight they could ship to a particular location during a given time period. Putnam then negotiated with consolidators for charges to CSA members for the consolidators' services at rates lower than the consolidator was charging the general public. After agreement was reached on the rates, the agreement was memorialized in a "memorandum of understanding." These memoranda of understanding were form contracts drafted by defendants. The names and addresses of the consolidators and the agreed-upon rates were filled in by the parties to the agreement. Each CSA member received copies of the memoranda executed. Thereafter, the consolidator's rates for CSA members could not be changed without the approval of CSA's board of directors.

Contrary to defendants' usual procedure for establishing a pooling operation, plaintiff's relationship with CSA was not immediately memorialized in a memorandum of understanding. However, the relationship operated in a manner similar to that of defendants' relationships with other consolidators. Plaintiff eventually became one of CSA's top three pool car operations in terms of volume of freight handled. In 1974, CSA sent a new ...


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