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HYTEL GROUP INC. v. W.L. GORE & ASSOCIATES

February 18, 2004.

HYTEL GROUP, INC., Plaintiff
v.
W.L. GORE & ASSOCIATES, INC., Defendant



The opinion of the court was delivered by: HARRY LEINENWEBER, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Hytel Group, Inc. (hereinafter, "Hytel") brings suit against Defendant W.L. Gore & Associates, Inc. (hereinafter, "Gore"). Count I alleges that Gore breached its contract with Hytel by failing to pay for a three-months supply of parts used by Hytel in constructing subassemblies for Gore. Count II, pled in the alternative, makes the same allegations under a promissory estoppel theory. Although not pled in the complaint, Hytel also apparently seeks damages for Gore's failure to pay other costs, such as labor and equipment, associated with Hytel's production of subassemblies. Pursuant to Federal Rule of Civil Procedure 56(c), Gore moves for summary judgment.

I. INTRODUCTION

  A. The Complaint

  Hytel's complaint, never amended, narrowly specifies its allegations against Gore. The complaint states that "this is a case in which plaintiff . . . seeks payment of over $250,000 for Page 2 parts purchased by plaintiff to manufacture items for defendant pursuant to an agreement that defendant would buy the parts or subassemblies incorporating the parts." In defining damages, the complaint lists "8,666 boards of the RESA [Receiver Electrical Subassembly] and 11,543 TESA [Transmitter Electrical Subassembly], Hytel purchased for Gore pursuant to the August 23, 2001 Forecast." As such, Hytel's complaint never alleges damages stemming from lost profits and assorted costs (i.e., overhead, labor and equipment) under either a breach of contract or a promissory estoppel theory. Indeed, Hytel's complaint does not even include the near-universal prayer for other relief that the Court deems appropriate.

  Nevertheless, beginning with Hytel's interrogatory answers and continuing through deposition and motion practice, Hytel has consistently argued that it suffered those damages. In doing so, Hytel gave Gore notice of its intent to seek recovery for damages beyond the allegedly unpaid-for parts. As Gore has not argued that Hytel's complaint pleads itself out of this extra relief, the Court finds that Hytel's complaint has been constructively amended to include any additional claims for damages made by Hytel during the course of discovery.

  B. Local Rule 56.1 Responses

  Local Rule 56.1 of the United States District Court for the Northern District of Illinois ("Local Rule 56.1") establishes procedures that both moving and opposing parties must follow in filing and responding to a motion for summary judgment. Under Page 3 Local Rule 56.1, the moving party must submit a statement of material facts with "references to the affidavits, parts of the record, and other supporting materials relied upon." Local Rule 56.1(a)(3). In turn, the opposing party must file "a response to each numbered paragraph in the moving party's statement," and, in the case of disagreement, provide specific references to supporting evidentiary material. Local Rule 56.l(b)(3)(A). If the opposing party does not respond and controvert the moving party's statement of material facts, those facts are deemed admitted for the purposes of the motion. Local Rule 56.l(b)(3)(B); Smith v. Lamz, 321 F.3d 680, 683 (7th Cir. 2003).

  In this case, Gore's paragraph 8 of its Local Rule 56.1 statement states that:
Gore was under no obligation to issue forecasts. Gore was also under no obligation to purchase finished boards at any time. Gore's obligation was limited to paying Hytel for material and supplies Hytel purchased in reliance on Gore's three-month forecasts. Anything Hytel did beyond that insofar as ordering parts for subassemblies was concerned was at Hytel's sole risk (internal citations omitted).
Hytel's response to paragraph eight states that it "disputes the allegations contained in paragraph 8." However, Hytel does not specifically refute with "specific references to supporting evidentiary material" that "Gore was also under no obligation to purchase finished boards at any time." Consequently, the Court deems this portion of paragraph eight admitted. Page 4

  Similarly, Hytel's responds to Gore's paragraph 22 by stating "Hytel does not dispute the facts set forth in paragraph 22." Therefore, the Court admits Gore's paragraph twenty-two statement that "profit was built into the purchase price for finished goods."

  C. Factual Background

  Between 2000 and 2002, Gore engaged in the manufacture and sale of fiber optic connectors comprising, in part, a RESA and a TESA. In early 2000, Gore selected Hytel as its supplier of these subassemblies. In pitching the deal to Hytel, Gore representatives indicated that Gore's demand for subassemblies would resemble a hockey stick. By this, Gore meant that demand would start out low but rapidly shoot upward. Because Hytel required a large lead-time to manufacture subassemblies (a process that necessitated securing the necessary parts, labor and equipment), Gore agreed to provide Hytel with six-month forecasts of its expected demand.

  Although Gore never promised to purchase specific quantities of subassemblies, it admits agreeing to reimburse Hytel for up to a three-month supply of parts, if Hytel bought in reliance on Gore's demand forecasts and the forecasts exceeded the actual demand. Gore claims its agreement with Hytel was a written contract memorialized in a series of February 15, 2001 e-mails between Gore and Hytel officers. Under this agreement, Gore acknowledges it owes Hytel for 505 RESA parts and 2,900 TESA parts. However, Gore claims that its contract obligations are limited only to paying for these parts, and denies ever agreeing to pay for Page 5 other costs such as overhead and labor. Similarly, Gore denies ever making Hytel any unambiguous promises concerning future orders. As such, Gore contends that any money Hytel expended beyond the three-month parts supply was at Hytel's own risk — and not in obligation of any contract or in reliance upon any promise.

  Conversely, Hytel denies that the February 15, 2001 e-mails accurately describe the contract in its entirety, and alleges that a preceding oral agreement with Gore entitles it to more than just payment for a three-month supply of parts. In addition to parts, Hytel contends that Gore orally agreed to pay costs such as labor and overhead expended in reliance on Gore's forecast. Although Hytel concedes that the contract called for it to factor profit into the purchase price for the finished boards, Hytel also asks the Court to award lost profits damages.

  Additionally, Hytel challenges the methodology Gore uses to calculate its parts-cost liability. By Hytel's reckoning, the contract required it to purchase parts beyond the three-month forecast, to ensure a constant one-month "safety stock" was always available to Gore. Hytel also spars with Gore regarding whether "backlog" should be factored into Gore's parts-debt to it. The result is that, in their interrogatory answers, Hytel claims contract damages of $480,962.40. This includes $183,347.28 worth of lost profits, $258,856.12 in material costs, $14,520 in labor costs, and $24, 239 in incidental damages such as unemployment taxes paid as a result of breach-induced layoffs. Page 6

  Lastly, Hytel claims that Gore made numerous unambiguous promises regarding the size and value of future orders. In reliance, Hytel contends that it expended $483,646.03 purchasing new equipment, and $125,000.00 in unbilled engineering services that it expected to recoup over through sales of completed subassemblies. Accordingly, Hytel also seeks $606,646.00 in reliance damages.

  II. DISCUSSION

  A. Summary Judgment Standard

  Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). A fact is "material" if it could affect the outcome of the suit under the governing law; a dispute is "genuine" where the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

  The burden is initially upon the movant to demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In assessing the movant's claim, the court must view all the evidence and any reasonable inferences that may be drawn from that evidence in the light most favorable to the nonmovant. Miller v. Am. Family Mut. Ins. Co., 203 F.3d 997, 1003 (7th Cir. 2000). Once the moving party has met Page 7 its burden, the nonmoving party "may not rest upon the mere allegations" contained in its pleading, but rather "must set forth specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e); Becker v. Tenenbaum-Hill Assoc., Inc., 914 F.2d 107, 110 (7th Cir. 1990); Schroeder v. Lufthansa German Airlines, 875 F.2d 613, 620 (7th Cir. 1989). It "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus, Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Accordingly, summary judgment is mandatory "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party ...


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