The opinion of the court was delivered by: MARVIN E. ASPEN
MARVIN E. ASPEN, District Judge:
Plaintiff Interlake Packaging Corporation brings this three count complaint alleging breach of contract, tortious interference with contract, and unjust enrichment. Defendant Strapex Corporation has filed a counterclaim in which it alleges breach of contract and seeks a declaratory judgment that it rightfully terminated the parties' agreement. Presently before this court is Interlake's Motion for Partial Summary Judgment on Count I (Breach of Contract) of Strapex's counterclaim. For the reasons set forth below, we deny Interlake's motion.
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).
Plaintiff Interlake Packaging Corporation is a Delaware Corporation with its principal place of business in Illinois. Defendant Strapex Corporation is a North Carolina corporation with its principal place of business in North Carolina. Both companies manufacture and sell plastic strapping material for use in packaging, and are business competitors. The present dispute involves a contract between the parties (the "Agreement").
Beginning in late 1989, Strapex and Interlake began discussing possible ways to share their distribution channels and production capabilities. These negotiations continued into March of 1991, when the parties met to consider a joint venture. Although the parties were unable to agree upon a joint venture, they began considering a supply agreement for plastic strapping. Soon thereafter, the parties reached an accord involving five different categories of polyester and polypropylene plastic strapping. Under the Agreement, Strapex was to manufacture the strapping, and, subject to price, delivery, and warranty, Interlake was to purchase specified amounts.
The Agreement also considered the possibility that Interlake might not be able to purchase the minimum specified annual amounts of each type of material. Paragraph 2.4 of the Agreement provided for retroactive price increases in the event that Interlake failed to purchase the guaranteed quantities. This provision further stated:
The above price increases will be invoiced on a semi annual basis. They will only apply following [Strapex]'s ability to perform as to delivery and warranty as set out below. Such surcharges shall be the only remedy which [Strapex] shall have in respect of the failure of [Interlake] to buy the specified annualized volumes for any reason.
In the purchases that followed the signing of the agreement, Interlake fell far short of the minimum promised annual amounts. Considering the entire nineteen month period from the signing of the agreement on May 10, 1991, to December 31, 1992, Interlake's purchases were as follows: less than 8.81% of the promised 1600 tons of PET, less than .378% of the promised 600 tons of 700 Contrax, less than 30% of the promised 100 tons of Jumbo coils, and less than 15.91% of the promised tons of AMS embossed machine quality strap. In January, 1993, Interlake filed this lawsuit against Strapex, asserting, among other things, that Strapex failed to supply the amounts and varieties of strapping material covered under the Agreement. Strapex counterclaimed, alleging in Count I that Interlake failed to order the minimum annual amounts of each variety, and seeking approximately $ 2.5 million in damages.
Interlake moved for summary judgment on Count I of the counterclaim, asserting that Strapex's remedy is proscribed in Paragraph 2.4, and that under that provision, Strapex must send Interlake an order shortfall notice before it becomes entitled to damages. Even then, Interlake asserts, Strapex may only recover damages as calculated under Paragraph 2.4.
In responding to Interlake's motion for summary judgment, Strapex's core assertion is that the remedy provided for in Paragraph 2.4 should not apply in the circumstances present here. Strapex's primary argument arises out of Section 2-719 of the Uniform Commercial Code ("U.C.C."), which generally permits parties to limit or modify remedies otherwise available under the U.C.C. 810 ILCS 5/2-719(1).
However, that section further provides that "where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this Act." 810 ILCS 5/2-719(2). As a result, where a limited remedy "fail[s] of its essential purpose," the aggrieved party may look to the traditional remedies included in the U.C.C. in calculating damages. Claiming that Paragraph 2.4 fails of its essential purpose in the present situation, Strapex asserts that it should not apply, and that traditional U.C.C. remedies should be available on its counterclaim.
Although "failure of essential purpose" is not defined in the U.C.C., the Official Comment to § 2-719 provides ...