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INNKEEPERS' TELEMANAGEMENT & EQUIP. CORP. v. HUMME

December 13, 1993

INNKEEPERS' TELEMANAGEMENT AND EQUIPMENT CORPORATION, Plaintiff,
v.
HUMMERT MANAGEMENT GROUP, INC, et al., Defendants.



The opinion of the court was delivered by: MARVIN E. ASPEN

 MARVIN E. ASPEN, District Judge:

 Plaintiff Innkeeper's Telemanagement and Equipment Corporation brings this five count complaint, asserting conversion, breach of contract, and the creation of a constructive trust, and seeking a declaratory judgment and an accounting. Presently before us is defendants' motion for partial summary judgment. For the reasons set forth below, defendants' motion is granted in part and denied in part.

 I. Summary Judgment Standard

 Under the Federal Rules of Civil Procedure, summary judgment is appropriate if "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(c). This standard places the initial burden on the moving party to identify "those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986) (quoting Rule 56(c)). Once the moving party has done this, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(c). In deciding a motion for summary judgment, the court must read all facts in the light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Griffin v. Thomas, 929 F.2d 1210, 1212 (7th Cir. 1991).

 II. Background

 A. Parties and Proceedings in the Current Lawsuit

 Plaintiff Innkeeper's Telemanagement and Equipment Corporation ("ITEC") is a Delaware corporation which provides telecommunications services to the hotel industry. Its principal place of business is located in Northbrook, Illinois. Defendants Hummert Management Group, Inc. and Midway Hospitality Corporation are Wisconsin corporations which provide management services for various hotels, including those involved in this action. The remaining defendants are partnerships and corporations which own hotels in Wisconsin or Michigan operating under the "Midway" or "Best Western" name. *fn1" Between November, 1987 and February, 1988, ITEC *fn2" entered into contracts with each of the defendant hotels, in which ITEC agreed to provide telecommunications services for the hotels. *fn3" Specifically, the agreements, which were essentially identical, stated that ITEC would lease telephone equipment to the hotel, provide local and long distance telephone service, and maintain and update the equipment. In return, the hotels each agreed to pay ITEC a fee based in part upon the revenues received by the hotel for guest use of the telephone services.

 In March, 1990, the parties amended their contracts. These so-called "0" Amendments provided that ITEC would install credit card processing equipment in the hotels. ITEC also agreed to pay the hotels a commission in the form of a monthly credit based upon the additional revenues ITEC received from credit card calls. In the "0 Amendments," ITEC reserved the right to "renegotiate or even eliminate these credits in the events these charges are reduced, changed, or deemed not in compliance with federal or state regulations."

 The parties disagreed from the start about virtually every element of their contracts, including the calculation of revenues the hotels owed ITEC, the life of the agreements, ITEC's maintenance and upgrade obligations, and the rebates owed under the "0" Amendments. Following fruitless negotiations, counsel for the hotels sent ITEC a letter asserting that ITEC was in default of its obligations under the agreements. Continued discussions aimed at resolving the parties' differences were unavailing. As a result, in May, 1992, hotels began to withhold the estimated amount of the "0" rebates from the revenues otherwise payable to ITEC. In response, in the fall of 1992, ITEC stopped paying local long distance carriers for service to the hotels. *fn4" In addition, on November 18, 1992, ITEC sent the management companies' attorney, who had been representing the interests of the hotels, a notice of termination of all its Midway contracts.

 B. Midway Motor Lodge-Elk Grove

 Like the defendant hotels in the present lawsuit, Midway Motor Lodge-Elk Grove ("Elk Grove") had a contract with ITEC, whereby ITEC provided Elk-Grove with telephone service. Unlike the other hotels, however, Elk Grove filed for Chapter 11 bankruptcy protection in April, 1992, and is therefore not a party to this action. Because the developments in the bankruptcy proceedings directly impact our consideration of the current summary judgment motion, we will relate them in some detail.

 ITEC filed its Notice of Claim in the United States Bankruptcy Court for the Eastern District of Wisconsin, where the Elk Grove bankruptcy was pending, on March 1, 1993. Two weeks later, the debtor-in-possession filed and served its objections to ITEC's claim. On March 31, 1993, the court held a pretrial conference, in which it scheduled a hearing for April 29, 1993. The day before the hearing, Elk Grove requested that the bankruptcy court abstain from estimating ITEC's claim and allow this Court to resolve ITEC's claims against the other Midway hotels. ITEC objected, asserting that it lacked information about Elk Grove's partners' ...


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