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BENSDORF & JOHNSON, INC. v. NORTHERN TELECOM LTD.

July 13, 1999

BENSDORF & JOHNSON, INC., PLAINTIFFS,
v.
NORTHERN TELECOM LIMITED, DEFENDANT.



The opinion of the court was delivered by: Moran, Senior District Judge.

MEMORANDUM AND ORDER

Plaintiff, Bensdorf & Johnson, Inc., brings this three-count claim against defendant, Northern Telecom Limited, claiming that it suffered damage as a result of defendant's breach of an alleged distributorship agreement. Plaintiff alleges that defendant is liable for breach of contract (Count I); that defendant is liable in quantum meruit (Count II); and that defendant is liable for fraud (Count III). Defendant has moved to dismiss all three counts for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, defendant's motion is denied.

BACKGROUND

Plaintiff Bensdorf & Johnson, Inc. (B & J), an Illinois corporation, is a manufacturers' representative and distributor of electrical, fiber optic wire, cable and related products. B & J distributes its products to contractors and other users in the industrial, contracting, manufacturing and electrical utility sectors. Northern Telecom Limited (Nortel), a Canadian corporation, is a manufacturer of fiber optic switching and multiplexing equipment. In March 1994 Robert Bensdorf (Bensdorf), a principal of B & J, met Lee Lockwood (Lockwood), a regional sales representative of one of Nortel's subsidiaries, Prism Systems, at the Transmission and Distribution Show in Chicago. At the show, Lockwood introduced Bensdorf to a product being marketed by Nortel called "JungleMUX," a switch that multiplexes highspeed data transmission over fiber optic networks. Lockwood told Bensdorf that Nortel was interested in expanding the market for the switch into the local industrial and transportation businesses, a market with which Bensdorf had twenty years of experience. At that time Nortel had no presence in that local market.

Lockwood and Bensdorf agreed that B & J would work to create a market for JungleMUX, and in exchange B & J would be Nortel and Prism's exclusive distributor of JungleMUX to the anticipated CTA and Metra development projects. Lockwood agreed that when the CTA and Metra projects were put out for tender, B & J would be the only distributor quoted a price, the exclusive chain of supply would be honored and all contractors would be quoted a price for Nortel products from B & J. Lockwood also insisted, and Bensdorf agreed, that B & J would not seek to introduce or distribute to the CTA or Metra projects similar products by other manufacturers.

Shortly after the March trade show Bensdorf set up a meeting to introduce Lockwood to Marco Popovic, a representative of Knight and Associates Architects and Engineers, and Chris Kraker, a Metra representative. Bensdorf arranged for Lockwood to present Nortel's JungleMUX at that event. At some point after the meeting Michael Krumm, a Nortel employee, replaced Lockwood. Krumm met with Bensdorf at a meeting also attended by Walter Bensdorf, another B & J principal, and John Palmer, another Nortel employee. At that meeting Krumm represented that he would continue to honor the exclusive distribution agreement Bensdorf negotiated with Lockwood. On April 17, 1995, B & J confirmed the terms of the exclusive distribution agreement between B & J and Nortel in a letter sent to Michael Krumm (Cplt, Exh. A). The letter stated that B & J was acting as Nortel's exclusive distributor and listed projects that were underway, including the Metropolitan Rail public opening (the Metra project).

During the next year Bensdorf spent hundreds of hours working with personnel from Nortel and Metra in order to achieve product specification and eventually write an order. To this effect, Bensdorf introduced Krumm to Divane Brothers Electric, and electrical contractor that was planning on bidding for the electrical work on the Metra Project. In addition, during the development stage of the Metra project a Metra engineer proposed another manufacturer's solution for the project and B & J prepared an exhaustive study comparing the proposed solution with Nortel's JungleMUX. B & J also prepared a budget detailing the installed cost of using the product. While working on the Metra project B & J did not pursue opportunities on behalf of other manufacturers for similar work.

ANALYSIS

The purpose of a motion to dismiss is to test the sufficiency of a complaint, not the merits of the action. Triad Associates, Inc. v. Chicago Housing Authority, 892 F.2d 583, 586 (7th Cir. 1989), cert denied, 498 U.S. 845, 111 S.Ct. 129, 112 L.Ed.2d 97 (1990). Thus a complaint should not be dismissed for failure to state a claim "unless it appears beyond a reasonable doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). On the other hand, in order to withstand a motion to dismiss the complaint must allege facts sufficiently setting forth the essential elements of the cause of action. Gray v. Dane County, 854 F.2d 179, 182 (7th Cir. 1988). Generally, "mere vagueness or lack of detail does not constitute sufficient grounds for a motion to dismiss." Strauss v. City of Chicago, 760 F.2d 765, 767 (7th Cir. 1985).

Essential Contract Terms

In order to survive a motion to dismiss, a complaint based upon breach of contract must allege 1) the existence of a contract between plaintiff and defendant; 2) performance by the plaintiff of the conditions imposed on him by the contract; 3) breach of the contract by the defendant; and 4) damages resulting from the breach. Payne v. Mill Race Inn, 152 Ill. App.3d 269, 105 Ill.Dec. 324, 504 N.E.2d 193, 196 (2d Dist. 1987). To allege the existence of the contract plaintiff must present facts indicating an offer, acceptance, and consideration. Id. In addition, for the contract to be binding and enforceable, the terms must be sufficiently definite and certain so that a court can determine what the agreement was and what conduct constituted a breach. Kraftco Corp. v. Kolbus, 1 Ill. App.3d 635, 274 N.E.2d 153 (4th Dist. 1971).

Nortel first argues that the terms of the exclusive distributorship agreement alleged by B & J are too vague and uncertain to give rise to an enforceable contract. Nortel relies on Academy Chicago Publishers v. Cheever, where the Illinois Supreme Court found that an alleged contract between a publisher and an author was unenforceable for vagueness due to lack of terms regarding parameters of work to be published, date of delivery, criteria for satisfactory performance by author, date of publication, type of publication to be used, or price at which book will be sold. 144 Ill.2d 24, 161 Ill.Dec. 335, 578 N.E.2d 981, 983 (1991). The Academy court ruled that a contract "is sufficiently definite and certain to be enforceable if the court is enabled from the terms and provisions thereof, under proper rules of construction and applicable principles of equity, to ascertain what the parties have agreed to do." Id. Nortel also relies on Magid Mfg. Co., Inc. v. U.S.D. Corp., 654 F. Supp. 325 (N.D.Ill. 1987), where the court refused to ...


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