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SOUTHWEST WHEY, INC. v. NUTRITION 101

January 2, 2001

SOUTHWEST WHEY, INC., A CORPORATION, PLAINTIFF/COUNTER-DEFENDANT,
v.
NUTRITION 101, INC., AN ILLINOIS CORPORATION, DEFENDANT/COUNTER-PLAINTIFF.



The opinion of the court was delivered by: Richard Mills, District Judge.

OPINION

Southwest Whey vs. Nutrition 101, revisited. (See Southwest Whey, Inc. v. Nutrition 101, Inc., 117 F. Supp.2d 770 (C.D.Ill. 2000)).

This cause now comes before the Court on the motion for summary judgment on Count IV of its counterclaim filed by Nutrition 101, Inc.

I. BACKGROUND

This case was originally filed on September 11, 1998. Defendant/Counter-Plaintiff Nutrition 101, Inc. ("Nutrition 101") filed its amended counterclaim against Plaintiff/Counter-Defendant Southwest Whey, Inc. ("Southwest Whey") on May 9, 2000. Count IV of the amended counterclaim alleges that Southwest Whey has failed to account for the benefits which it has received pursuant to a joint venture entered into by the parties. Nutrition 101 therefore asserts that it is entitled to an accounting for the revenue and profits received by Southwest Whey pursuant to the joint venture and its further pro-rata share of such revenues and profits after the joint venture was terminated. On August 4, 2000, Nutrition 101 filed a motion for summary judgment with respect to Count IV of its amended counterclaim. Nutrition 101 has submitted the report of its expert, Jay Buck ("Buck"), in support of its motion for summary judgment on Count IV of its counterclaim.

Nutrition 101 entered into a joint venture with Southwest Whey on May 30, 1989. Southwest Whey agreed to obtain whey from dairies and Nutrition 101 agreed to market whey to hog farmers in the region east of the Mississippi River and in other areas by mutual agreement. Southwest Whey dissolved the joint venture on September 16, 1993. There was no winding up or accounting following the dissolution.

On March 30, 2000, a judgment was entered in the Circuit Court of St. Louis County, Missouri, sustaining a Motion to Enforce Settlement concerning the amount of $450,000.00 to be paid by Raskas Foods, Inc., pursuant to a contract entered into by Southwest Whey on behalf of the joint venture between the parties. This is at issue in the instant motion. The Raskas litigation has been terminated as to all substantive issues. However, the settlement agreement has not yet been reduced to writing. Moreover, no money has been paid by or on behalf of Raskas Foods, Inc., pursuant to the settlement. Other assets and benefits of the joint venture include various contracts and agreements with dairies for the supply of whey.

Nutrition 101 therefore moves for summary judgement against Southwest Whey as to Count IV of its amended counterclaim for its pro-rata share of revenue and profits received by Southwest Whey after the termination of the joint venture and the value of the various contracts and agreements with dairies, prejudgment interest, costs, and any other relief that the Court deems proper.

Nutrition 101 first asserts that the conduct of Southwest Whey of September 16, 1993, constituted a dissolution of the joint venture pursuant to Illinois law. See 805 ILCS 205/29 (1998). The proper way to end a joint venture is the following: 1) Dissolution; 2) Winding up; and 3) Termination. See State House Inn Corporation v. Polikoff, 86 Ill. App.2d 97, 230 N.E.2d 283 (1st Dist. 1967). Moreover, when some of the business continues, the parties are obliged to provide an accounting of the financial transactions of the business and to account to the remaining members of the joint venture after dissolution. See Thanos v. Thanos, 313 Ill. 499, 145 N.E. 250 (1924).

Nutrition 101 alleges that there has been no winding up in the instant case. Moreover, Southwest Whey has failed to account to Nutrition 101 for the benefits it has received. Nutrition 101 refers specifically to profits from joint venture assets and settlement proceeds of $450,000.00 it alleges were paid to Southwest Whey by Raskas Foods, Inc., pursuant to a judgment entered in the circuit court of St. Louis County, Missouri. Nutrition 101 seeks an accounting on this basis.

Nutrition 101 relies on Buck's report to support its motion for summary judgment. Buck is a certified public accountant accredited in business valuation. He has attempted to determine the final accounting and division of assets for the interests owned by each party in the joint venture. Buck has valued the margins earned by Southwest Whey and Nutrition 101 since the joint venture was terminated. He has done this by valuing the margins from farm customers and dairies that the joint venture served from October 1993 through September 2000. Buck then added each company's margin and divided the figure in half pursuant to the joint venture. After taking into account the amount actually received by Nutrition 101 from the plants and customers of the joint venture, Buck concluded that Nutrition 101 is owed $593,523.00 by Southwest Whey.

Nutrition 101 also relies on Buck's report regarding the division of the joint venture assets. Each company would receive one half of the assets in the final accounting for the joint venture. Because there was no earlier division, Buck attempted to equitably divide the assets as they currently exist for each company. He concluded that the present value of Nutrition 101's shortfall in expected margins is $324,277.00

Finally, Nutrition 101 relies on Buck's report with regard to settlement proceeds allegedly received by Southwest Whey. This involved a lawsuit which arose out of a contract entered into by Southwest Whey on behalf of the joint venture. The cause of action was not resolved at the time of dissolution. Nutrition 101 alleges that Southwest Whey received a settlement in the amount of $450,000.00 pursuant to the dispute. Buck's report indicates that each company should receive one half of the settlement proceeds. Nutrition 101 is therefore entitled to $225,000.00.

Pursuant to Buck's report, Nutrition 101 asks this Court to enter judgment in its favor on Count IV in ...


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