The opinion of the court was delivered by: SUZANNE CONLON, District Judge
MEMORANDUM OPINION AND ORDER
In this diversity action, Jolly Group, Ltd. ("Jolly") sued
Medline Industries, Inc. ("Medline") for breach of contract.
Jolly moves for reconsideration of the court's order dismissing
its amended complaint with prejudice and for leave to file a
second amended complaint. In separate motions, Medline moves for
sanctions pursuant to Fed.R.Civ.P. 11 and 28 U.S.C. § 1927.
In February 2003, Jolly and Medline representatives met to
discuss Medline's possible licensing and marketing of Jolly's
patented bandages. Compl. at ¶ 6; Am. Compl. at ¶ 6; 2nd Am.
Compl. at ¶ 6. On March 4, Medline proposed that it market and
manufacture the bandages in exchange for a royalty of $.20 per
box sold. Id. at ¶ 6-7. Medline's proposal stated it had "no
legal bearing until we draw up a contract." Id. During the next
three months, the parties discussed contractual terms. Id. at ¶
8. Medline maintains the parties' negotiations ultimately failed
and no contract resulted. See, e.g., Def. Mot. Dismiss Compl.
at 1. Conversely, Jolly contends the parties entered into a
valid, binding and enforceable contract subsequently repudiated
by Medline. See, e.g., Compl. at ¶¶ 13, 17. Over the course of these proceedings, Jolly
has proffered no less than four different versions of the
so-called final contract to which the parties allegedly agreed.
In the original complaint, Jolly alleged Medline forwarded a
contract on May 7 (hereinafter, "May 7th contract") that
"reflected the essential terms of the parties' agreement," but
that a revised contract followed the next day (hereinafter, "May
8th contract"). Compl. at ¶¶ 9-10. The May 7th and May
8th contracts substantially differed in numerous respects.
Compare Compl. Ex. B with Ex. C. In response, Medline
purportedly sent Jolly a red-lined version of the May 8th
contract (hereinafter, "July red-lined contract"); the parties
orally agreed on the terms. Id. at ¶¶ 12-13. Jolly then
re-typed the July red-lined contract and sent the final contract
(hereinafter, "final contract") to Medline for signature. Id.
at ¶ 13. Among other things, the final contract differs from the
July red-lined contract insofar as it required Medline to pay an
annual minimum royalty payment of $250,000 and to purchase $5
million in products liability insurance. Id. Ex. E. Jolly did
not allege that Medline signed either the July red-lined contract
or the final contract. Id.
Upon receipt of Jolly's complaint, Medline moved to dismiss.
Medline argued Jolly's complaint failed to allege the existence
of a valid contract and the statute of frauds barred enforcement
of the purported oral contract. Jolly did not respond. Instead,
Jolly filed the amended complaint.
II. Amended Complaint and Rule 11
Jolly changed its tack in the amended complaint. Jolly again
alleged that Medline sent it the May 7th contract
"reflect[ing] the essential elements of the parties' oral
agreement." Am. Compl. at 9. However, Jolly eliminated reference
to the May 8th contract. Compare Compl. at ¶ 10 with Am. Compl. at ¶¶ 9-10. Jolly simply alleged that Medline's vice
president Don Malin signed the May 7th contract on May 18
(hereinafter, "May 18th signed contract"). Am. Compl. at ¶ 9.
According to Jolly, the May 18th signed contract constituted
a valid, binding and enforceable contract. Id. at ¶ 17. Jolly
also proffered the July red-lined contract as a valid, binding,
enforceable modified contract to which the parties' thereafter
agreed. Id. at ¶¶ 12, 17. The amended complaint contained no
reference to the final contract identified in Jolly's original
complaint. Id. at 13. Instead, Jolly merely alleged that it
requested, but Medline rejected, additional modifications to the
July red-lined contract. Id. at ¶ 13.
Upon receipt of the amended complaint, Medline's counsel sent a
letter to Jolly's counsel Michael J. Rovell ("Rovell") on March
25. Def. Rule 11 Mot. Ex. H. Medline's counsel pointed out
factual inconsistencies between Jolly's original and amended
complaints and warned that a Rule 11 motion would be served in
the event Jolly did not withdraw the amended complaint within
seven days. Id. Medline's counsel challenged the "sequence of
events" laid out in the amended complaint, noting that Jolly
sought "to enforce an entirely different contract than the `final
contract' attached to its original complaint." Id. Medline's
counsel pointed out that the May 18th signed contract that
Jolly relied on as a valid, binding and enforceable contract was
actually signed on August 18th, obviously after the parties
exchanged the July red-lined contract. Id. Additionally,
Medline's counsel argued that Jolly's amended complaint was
legally defective under Illinois' "mirror image rule" governing
contract actions because Jolly repeatedly requested modifications
to the proposed contracts, including the May 7th and the July
red-lined contracts. Id.
On March 26, Medline filed a motion to dismiss. While this
court considered the motion, Medline served a Rule 11 Motion on
Jolly on April 15. Two weeks later, the court dismissed the amended complaint with prejudice. Minute Order, 4/30/04, Docket
No. 17-1. In so doing, the court found the amended complaint
legally defective because it alleged the existence of an
unfulfilled condition precedent to the formation of a binding
contract, i.e., the parties' failure to draw up a complete
contract. Id. The court further determined that the writings on
which Jolly relied for purposes of satisfying the statute of
frauds insufficiently evidenced the existence of a contract or
its terms. Id. ("Indeed, the writings reveal an obvious
disagreement about the contract's essential terms and
conditions"). Medline filed its Rule 11 motion with the court on
May 13, 2004, after dismissal of the amended complaint.
III. Second Amended Complaint and Motion for Sanctions
The day after Medline filed its Rule 11 motion, Jolly sought
leave to file a second amended complaint. Jolly now seeks to
change course yet again. Not surprisingly, Jolly no longer
alleges that the May 18th signed contract constitutes a
valid, binding and enforceable contract between the parties.
Instead, Jolly alleges that the May 7th contract constitutes
a valid, binding and enforceable contract between the parties.
2nd Am. Compl. at ¶ 17. In addition, Jolly submits an entirely
new contract dated August 25 as the parties' valid, binding and
enforceable modified contract (hereinafter, "August 25th
contract"). Jolly does not entirely abandon the July red-lined
contract. Instead, Jolly alternatively alleges that the ...