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AFD FUND v. LUNAN CORPORATION

January 9, 2003

AFD FUND (AS THE POST-CONFIRMATION ESTATE OF AMERISERVE FOOD DISTRIBUTION, INC., AND ITS DEBTOR AFFILIATES), PLAINTIFF,
v.
LUNAN CORPORATION, DEFENDANT.



The opinion of the court was delivered by: John W. Darrah, United States District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff, AFD Fund ("AFD"), as the post-confirmation estate of AmeriServe Food Distribution, Incorporated ("AmeriServe"), filed suit against Defendant, Lunan Corporation ("Lunan"), alleging breach of contract. Lunan filed a counterclaim, also alleging breach of contract. Presently before the Court is AFD's Motion for Partial Summary Judgment.

Summary judgment is proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). All the evidence and the reasonable inferences that may be drawn from the evidence are viewed in the light most favorable to the nonmovant. Miller v. American Family Mut. Ins. Co., 203 F.3d 997, 1003 (7th Cir. 2000). Summary judgment may be granted when no "reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

BACKGROUND

AFD is the post-confirmation estate of AmeriServe and its debtor affiliates. AFD's headquarters are located in Addison, Texas. (Def.'s 56.1(a)(3) Statement ¶ 1). AmeriServe was a food distributor that supplied products to fast food restaurants throughout the United States. (Id., at ¶ 6). Lunan is an Illinois corporation that operates Arby's restaurants in Illinois, California, and Nevada. (Id., at ¶¶ 2, 7).

In 1999 and 2000, Lunan was a member of Arcop, a purchasing cooperative serving numerous Arby's restaurant owners. (Def.'s 56.1(a)(3) Statement ¶ 8). Lunan and other Arcop members paid Arcop a membership fee. In return, Arcop negotiated with suppliers and distributors and entered into contracts with those suppliers and distributors on behalf of Arcop's members. (Id., at ¶ 9). Effective January 1, 1999, AmeriServe entered into a Distributor Agreement with Arcop. (Id., at ¶ 10).

The Distributor Agreement set forth the terms and conditions under which AmeriServe would provide distribution services to Arcop's members, including sanitation requirements, pricing, payment requirements, and delivery performance requirements. (Def.'s 56.1(a)(3) Statement ¶ 12). The Distributor Agreement had a term of five years, until January 1, 2004. However, it could be terminated by mutual consent of Arcop and AmeriServe:

In the event that Agreement is terminated by the mutual consent of the parties . . . any supply by Distributor of the Products to the Members shall be on a month to month basis under the terms of this Agreement, and any such supply may be terminated by either party upon thirty (30) days' written notice to the other party.
(Id., at ¶ 13). Under the "standard payment and credit terms" of the Distributor Agreement, Arcop members were required to pay for deliveries within thirty days. Id., at ¶ 15). The Distributor Agreement also permitted AmeriServe to charge monthly interest at the rate of one and one-half percent per month on invoices that were unpaid after thirty days. (Id., at ¶ 16). AmeriServe and Arcop agreed to cooperate to obtain participation agreements from each of Arcop's members. (Id., at ¶ 18).

Lunan and AmeriServe entered into a Participation Agreement effective January 1, 1999. (Def.'s 56.1(a)(3) Statement ¶ 19), The Participation Agreement provided:

Seller is an authorized distributor of restaurant food, packaging and supplies ("Products") to approved Arby's restaurants ("Restaurants") which are members of Arcop, Inc. ("Arcop"). Arcop and Seller are parties to a Distributor Agreement effective as of January 1, 1999 (the "Distributor Agreement").
(Id., at ¶ 21).

In the Participation Agreement, Lunan "agreed to purchase substantially all of its Products from [AmeriServe]." (Def.'s 56.1(a)(3) Statement ¶ 22). The Participation Agreement had a term of five years but could be terminated earlier upon termination of the Arcop/AmeriServe Distributor Agreement: "This Agreement shall be for a term . . . subject to earlier termination if and when the Distributor Agreement is terminated by Arcop." (Id., at ¶ 24). The Participation Agreement did not state the specific terms and conditions under which AmeriServe would sell and Lunan would buy food products, i.e., pricing, product specifications, payment obligations. (Id., at ¶ 23).

Between January 1, 1999 and March 4, 2000, AmeriServe delivered millions of dollars of food and supplies to Lunan's restaurants. During this time, the parties were operating under the terms of the Distributor Agreement and the Participation Agreement. (Def.'s 56.1(a)(3) Statement ¶ 25). Initially, AmeriServe provided distribution services only to Lunan's Illinois restaurants. The Participation Agreement required Lunan to transfer its remaining restaurants to AmeriServe by April 1, 2000. (Id., at ¶¶ 26-27).

In November 1999, Lunan transferred its Nevada and California restaurants to AmeriServe. (Id., at ¶ 28). Sharon Schwarz ("Schwarz") was the Arby's account manager in the California distribution center. (Plaint.'s 56.1(a)(3) Statement ¶ 13). The California distribution center distributed products to Lunan's Nevada restaurant. Id., at ¶ 14).

AmeriServe invoiced Lunan with payment terms. AmeriServe's invoices stated that payment terms were "Net 30 Days" and that "[A]n interest charge of 01.50 per month (18.00% annum) will be charged on all past due invoices." Def.'s 56.1(a)(3) Statement ¶ 29).

On January 31, 2000, AmeriServe filed a Chapter 11 petition in the United States Bankruptcy Court for the District of Delaware ("Bankruptcy Court"). AmeriServe continued to provide distribution services to Lunan's restaurants as a debtor-in-possession. (Def.'s 56.1(a)(3) Statement ¶ 30). Prior to filing bankruptcy, some vendors refused to provide credit to AmeriServe. (Plaint.'s 56.1(a)(3) Statement ¶ 5). Some of these vendors supplied products that Arby's franchisees were using to provide products on credit to AmeriServe. (Id., at ¶ 7). In November 1999, AmeriServe, hired a financial consulting firm to help manage its cash and to put together a plan to restructure the finances of the company. (Id., at ¶ 10). At or around the time of filing bankruptcy, AmeriServe had run out of cash to pay its bills. (Id., at ¶ 9).

On February 16, 2000, Arcop filed a motion in the Bankruptcy Court seeking that court's leave to lift the automatic stay and allow it to terminate the Distributor Agreement. (Def.'s 56.1(a)(3) Statement ΒΆ 31). Arcop and AmeriServe ultimately executed a Stipulation and Order that terminated the Distributor Agreement by mutual ...


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