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ROBOSERVE, INC. v. KATO KAGAKU CO.

January 10, 1995

ROBOSERVE, INC., Plaintiff,
v.
KATO KAGAKU CO., LTD., Defendant.



The opinion of the court was delivered by: BRIAN BARNETT DUFF

 On August 4, 1992, Plaintiff Roboserve, Inc. ("Roboserve"), sued Defendant Kato Kagaku Co., Ltd. ("Kato"), claiming breach of contract, wrongful termination, and fraud. The parties went to trial on October 18, 1993, and the jury returned a verdict in Roboserve's favor on all counts, awarding it compensatory and punitive damages totalling $ 9,950,000. Subsequently, Kato filed a motion for judgment as a matter of law, or, in the alternative, for a new trial or a remittitur. We grant in part the motions for judgment as a matter of law and remittitur, and we deny the motion for new trial.

 I. Background

 Roboserve is a company that leases and services hotel minibars, and Kato owns the Hyatt Regency Chicago ("HRC"), a hotel in Chicago. On June 23, 1986, Roboserve and Hyatt Corporation ("Hyatt"), the HRC's manager, signed a Concession Agreement ("CA"). The CA provided, among other things, that Roboserve would install 1000 of its minibars, called RoboBars, in the HRC rooms and that the HRC would use reasonable endeavors to place guests who are the most likely to use minibars in the RoboBar rooms and, further, to encourage those guests to make purchases from the minibars. *fn1" On October 2, 1986, Roboserve and Hyatt negotiated an Amended CA. The amended version altered the CA's duration, making it last five years from "the date when all the RoboBar units have been commissioned," meaning installed. A Roboserve representative signed the amended CA, but a Hyatt representative did not.

 Four issues arose during the implementation phase of the CA. First, between February and April 1987, Roboserve installed in the HRC's west tower only 900 of the called-for 1000 units. Second, Hyatt contracted with ServiSystems, a Roboserve competitor, to install in the east tower a number of ServiBars, the ServiSystems minibars. Third, as a result of having the second minibar system in the hotel, the HRC may not have used reasonable endeavors to ensure that it placed the "correct" people in the RoboBar rooms. Fourth, the HRC also may not have used reasonable endeavors to encourage guests to make purchases from the RoboBars.

 Of the four issues, the one surrounding Hyatt's relationship with ServiSystems was the most complex. In late 1987, Roboserve learned of Hyatt's intention to contract with Servisystems, and on April 22, 1988, Roboserve received a letter from Hyatt confirming its intention to proceed with the ServiBar installation into the west tower." *fn2" Pl. Ex. 2. Unbeknownst to Roboserve, on May 1, 1988, Hyatt signed a contract with Servisystems to provide ServiBars for the HRC "for a term commencing on May 15, 1988 and expiring on May 14, 1995." Pl. Ex. 12. On November 11, 1988, however, after Kato acquired the HRC and confirmed Hyatt as the hotel's manager, *fn3" Mr. Zadikoff, one of Hyatt's vice presidents, wrote to Roboserve the following:

 
As we discussed, our objective at the Hyatt Regency Chicago was to evaluate the two Honor Bar systems that are presently being utilized in our hotels -- RoboBar and ServiBar. The agreement was that ServiBar would be installed in one tower of the Hyatt Regency Chicago for a one-year test period only, so that we could evaluate both sales potential and operational costs.

 Pl. Ex. 3. According to Roboserve, Hyatt also communicated to it orally that the winner of the test would become the preferred minibar provider for Hyatt hotels and would "get the Hyatt business."

 After Roboserve won the one-year test, Hyatt negotiated with Roboserve about replacing the ServiBars with RoboBars, despite Hyatt's contract to maintain the ServiBars at the hotel through 1995. Much later, on February 26, 1992, Hyatt announced that it had "complications of another contractual arrangement" and would be unable to replace the ServiBars with RoboBars. Pl. Ex. 32. On December 14, 1992, Mr. Keeshin, Hyatt's Associate General Counsel, informed Roboserve that, as of March 1, 1993, Hyatt would terminate the amended CA. Pl. Ex. 196.

 II. Discussion

 A. Standard of Review

 Kato moves for a judgment as a matter of law, or, in the alternative, for a new trial. *fn4" Kato's motion is a remedy for a party who lost the verdict. He . . . contends that he is entitled to judgment as a matter of law. By the alternative motion, he asks the court to grant him a new trial if he is wrong in his contention that he is entitled to judgment." 9 Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure, § 2539 (1971).

 "As to the motion for [judgment as a matter of law], . . . we apply the Illinois rule that such a motion should be granted only if 'all of the evidence, when viewed in its aspect most favorable to the opponent [of the motion] so overwhelmingly favors the movant that no contrary verdict based on that evidence could ever stand.'" Hardin, Rodriguez & Boivin Anesthesiologists, Ltd. v. Paradigm Ins. Co., 962 F.2d 628, 640 (7th Cir. 1992) (quoting Schultz v. Amer. Airlines, Inc., 901 F.2d 621, 623 (7th Cir. 1990) (quoting an Illinois Supreme Court case)).

 "On motions for a new trial the federal standard applies, even in diversity cases. [citation omitted]. Under the standard, 'a new trial can be granted only when the jury's verdict is against the clear weight of the evidence.'" Id. (quoting Davlan v. Otis Elevator Co., 816 F.2d 287, 289 (7th Cir. 1987)).

 B. Breach of Contract Claim

 1. Kato's Denial of Breach

 First, Kato denies that it breached the CA by allowing the installation of only 900 of the called-for 1000 RoboBars. It claims that Roboserve installed only 900 units because Roboserve never asserted its right to install the additional 100. Kato argues that it should not now be forced to pay damages for Roboserve's failure to maximize the CA.

 Roboserve maintains that Kato breached the CA. For support, it points to the testimony of Mr. Fattal, a Roboserve executive. At trial, Mr. Fattal referred to his February 20, 1987, letter to Mr. Connolly, Hyatt's Senior Vice President and General Counsel, in which he wrote: "As regards installations, the position is as follows: - . . . (iv) [the HRC]: Being installed starting 9 February, with approximately 900 bars. Should be completed during March." Pl. Ex. 41; Tr. at 93. Mr. Fattal testified that, through this letter, he informed Hyatt of the intentions of Roboserve to install the additional 100 units. Tr. at 93. Mr. Fattal claimed that Hyatt understood Roboserve's intentions and wanted to frustrate them. As evidence, he pointed to an internal memo that Mr. Connolly wrote and attached to the February 20 letter. The memo states: "Before proceeding with any further installations, I believe we should review the success (or lack thereof) of the Robobar program to date." Pl Ex. 41.

 Mr. Fattal also testified that Mr. Wood, another Roboserve employee, informed Hyatt of the intentions of Roboserve with regard to the 100 units. When Roboserve's counsel asked Mr. Fattal if he "knew if [Mr. Wood] ever discussed the hundred bars [with Mr. Connolly]", Mr. Fattal responded: "I believe so, yes, sir." Tr. at 97.

 Roboserve's evidence of its intentions about the 100 minibars is unclear. Does Mr. Fattal's February 20 letter imply that Roboserve would "start[]" the installation process with the 900 units and "complete[]" it with the remaining 100? Does the letter imply that Roboserve would start the installation process with the 900 units in "February" and complete it with the remaining 100 in "March"? Does Mr. Fattal's testimony about Mr. Wood imply that Mr. Wood told Mr. Connolly about Roboserve's intention to install the additional minibars?

 Although Roboserve's evidence is unclear, for the purposes of Kato's motion we view the evidence "in its aspect most favorable to the opponent." Hardin, 962 F.2d at 640. Viewed in that aspect, we cannot say that the evidence "so overwhelmingly favors the movant that no contrary verdict based on [it] could ever stand." Id. Therefore, on this point, Kato is entitled to neither a judgment as a matter of law nor a new trial.

 Second, Kato denies that it breached the CA by failing to use reasonable endeavors to place the "correct" people in the RoboBar rooms or to encourage those people to make purchases from the minibars. It claims that Roboserve produced insufficient evidence to prove that Kato breached and that, in any event, such evidence would be difficult to produce given that Hyatt could not know which hotel guest would want to use a minibar on any given night.

 Roboserve maintains that it produced sufficient evidence. For example, it points to the evidence that, although Hyatt knew guests who stayed in its Gold Passport rooms would, on average, purchase more items from minibars, it allowed only ServiBars in those rooms. Tr. at 125, 569. Also, Roboserve points to the evidence that Hyatt's standard procedure for welcoming guests excluded informing them that their room contained a RoboBar. Tr. at 603-4.

 2. Kato's Affirmative Defenses Kato argues that we erred when we disallowed its affirmative defenses of waiver, estoppel and mitigation. Specifically, it argues that the CA's non-waiver clause should not have precluded its raising the issue of waiver at trial. The non-waiver clause provides: "The rights and remedies of the parties shall not be diminished waived or extinguished by the granting by one party of any indulgence forbearance or extension of time to the other party nor by any failure or delay by a party in asserting or exercising such rights or remedies." CA § 19. Kato asserts that Roboserve's continuing failure to complain about the additional 100 minibars and the lack of reasonable endeavors should estop it from taking refuge behind the clause.

 Roboserve argues that we correctly upheld the integrity of the non-waiver clause. Roboserve made complaints about the 100 minibars and the lack of reasonable endeavors, but it was reluctant to pursue them. Kato "bullied" it into accepting the one-year test, making Roboserve fear that, if it pursued the complaints, it "would forever 'lose the Hyatt business.'" Pl. Br. at 14. Further, the point of the non-waiver clause was to avoid estoppel arguments such as that of Kato.

 Non-waiver "clauses are enforceable [in] Illinois," Monarch Coaches, Inc. v. ITT Industrial Credit, 818 F.2d 11, 13 (7th Cir. 1987), and operate as a matter of law. Transcraft Corp. v. Anna Indus. Dev. Corp., 223 Ill. App. 3d 100, 103, 584 N.E.2d 1033, 165 Ill. Dec. 599 (5th Dist. 1991).

 In Transcraft, the court gave "full force and effect" to a non-waiver clause when the plaintiff brought suit against a defendant who, for over twenty years, regularly and continuously breached the contract by failing to pay its portion of the local property taxes. Id. at 103. The court stated:

 
The NO WAIVER clause makes clear that any failure to demand strict performance or to take advantage of any terms, conditions, or rights was neither a waiver nor the relinquishment of the terms, conditions, or rights within the contract. Therefore, under the NO WAIVER clause, of the contract, [the defendant's] obligation to pay the excess taxes remains in full force and effect despite [the plaintiff's] failure to deduct the taxes it paid from rent.

 Id. at 103 (quotations removed). In fact, the appellate court believed that the clause remained in such "effect" that it reversed the lower court and remanded with directions to grant summary judgment on this issue in favor of the plaintiff. Id.

 In Gen. Grocer Co. v. Bachar, the court gave similar weight to a non-waiver clause when the plaintiff brought suit against the defendant who, on various occasions, breached the security agreement by failing to pay on a date certain. 51 Ill. App. 3d 907, 911-2, 365 N.E.2d 1106, 8 Ill. Dec. 720 (3rd Dist. 1977). The court reasoned that, "in the light of such 'non waiver' clause, which was agreed to by the defendants, we cannot interpret the plaintiff's conduct in accepting tardy payments (whether such instances be few or many) to constitute a suspension of the terms of an agreement to make payments on a date certain." Id. at 912; see Zinser v. Uptown Fed. Sav. and Loan, 185 Ill. App. 3d 979, 982-3, 542 N.E.2d 87, 134 Ill. Dec. 87 (4th Dist. 1989), appeal denied, 139 Ill. Dec. 524, 548 N.E.2d 1080 (1990) (following Gen. Grocer).

 On the other hand, in Whalen v. K-Mart Corp., 166 Ill. App. 3d 339, 345-6, 519 N.E.2d 991, 116 Ill. Dec. 776 (1st Dist.), appeal denied, 121 Ill. 2d 587, 122 Ill. Dec. 448, 526 N.E.2d 841 (1988), the court ruled that a "broad, general boilerplate [non-waiver clause] does not negate [the plaintiff's] waiver" by conduct. Id. at 346. In Whalen, the plaintiff sued a contractor, who, in turn, sued his subcontractors for contribution and indemnity based on their contractual responsibility to name him in their insurance policy, which they did not do. Despite the subcontractors' failure to properly insure, the contractor allowed them to work. By doing so, he waived the responsibility to insure requirement. The court considered whether the contractor could then deny the waiver based on the contract's non-waiver clause. The court ruled that the contractor could not.

 Whalen is distinguishable on three grounds from the other Illinois precedent and from our case. In Whalen, the contractor waived a condition precedent. The terms of the contract made clear that the subcontractors could not begin work until they had "obtained all insurances." Id. at 341. Further, the contractor reached back into a closed relationship. The suit arose after the subcontractors completed their work and received payment in full. Further still, the contractor included the non-waiver clause solely for his own benefit. Id. at 345. Reading Whalen, it appears that the court believed the contractor should not prevail, and, because it needed somehow to sidestep the non-waiver clause, it simply dismissed it as boilerplate and trotted out the "specific versus general" contract provision case law.

 Transcraft sits atop a unified group of cases, except for Whalen, each of them upholding the integrity of the non-waiver clause. On the basis of Whalen, Kato wants us read a split into Illinois law, but we decline to do so. We correctly ruled that the non-waiver clause precluded Kato's defense of waiver, particularly since "there [was] no possible injustice in enforcing [it]." Monarch Coaches, 818 F.2d at 13. Moreover, we correctly did not allow Kato to enter through the back door with its defenses of estoppel and mitigation.

 Therefore, once again, Kato is entitled to neither a judgment as a matter of law nor a new trial.

 C. Wrongful Termination Claim

 1. Background

 Kato argues that the parties never completed the amended CA. Because the CA, not the amended CA, was operative and because the CA ran its course before Kato terminated the agreement on March 1, 1993, the termination was not wrongful, meaning it was not premature.

 Roboserve argues that the parties did complete the amended CA and that the amended version was operative. Under the amended CA, the contract was not supposed to run its course until five years after Roboserve installed all 1000 minibars. The calendar, however, never began to run because Kato disallowed Roboserve's installation of all 1000. Consequently, when Kato terminated the contract it did so prematurely. *fn5"

 2. Kato's Denial of Wrongful Termination

 First, Kato argues that the amended agreement failed under § 26 of the CA, the contract's "waiver only in writing clause," which provides:

 
This Agreement and any other matters agreed in writing between the parties hereto in relation to the subject matter of this Agreement shall constitute the entire agreement between the Company and the Hotel in relation to such subject matter and no variation to the same shall be binding on the Company unless in writing and signed by both parties.

 Because neither Kato nor one of its representatives signed the amended CA, the parties did not satisfy § 26, and, consequently, the amendment should not have bound Kato.

 Roboserve responds that Kato satisfied § 26, and, if it did not, it waived the section. Kato satisfied § 26 with its signed December 14 letter in which it referenced the amendment and implied its binding authority. The letter states: "Pursuant to Section 4 of the June 23, 1986 Agreement between Roboserve, Inc. and Hyatt Corporation and the modification thereto dated October 2, 1986, be advised that Hyatt Corporation as agent for Kato Kagaku Company, Ltd., . . . hereby serves notice of termination of the Agreement on March 1, 1993." Alternatively, Kato waived § 26 through its words and deeds. The words included the December 14 letter and several letters from Kato's trial counsel, all of which indicated Kato's acceptance of the amended CA. Pl. Exs. 212-5. The deeds included terminating the agreement only after Kato believed the amended CA would soon run its course.

 Clearly, if the parties satisfied § 26, that would be sufficient, and the amended agreement would control. Otherwise, "the weight of authority in Illinois holds that Waiver Only in Writing provisions can be waived by words and deeds of the parties so long as the waiver is proved by clear and convincing evidence." Chicago College of Osteopathic Medicine v. Fuller Co., 776 F.2d 198, 202 (7th Cir. 1985).

 Based on our Statute of Frauds discussion, below, the parties satisfied § 26. In any event, given the December 14 letter, the several letters from Kato's trial counsel, and the timing of Kato's termination of the agreement, there is sufficient evidence to support jury's finding that Kato waived § 26. See Id. Therefore, on this point, Kato is entitled to neither a judgment as a matter of law nor a new trial.

 Second, Kato argues that, without its signature, the amended CA failed under the Statute of Frauds.

 Roboserve responds that Kato waived the Statute because it admitted being bound by the amended CA and, moreover, acted as if it were bound. Again, Roboserve points to the December 14 letter and the various letters from Kato's trial counsel.

 The Illinois Statute of Frauds provides, in relevant part:

 
No action shall be brought . . . to charge any person upon any agreement that is not to be performed with the space of one year from the making thereof, unless the promise or agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be ...

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