Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

SPECTRA MERCHANDISING INT'L v. EULER ACI COLLECTION SERV.

June 17, 2004.

SPECTRA MERCHANDISING INTERNATIONAL, INC., Plaintiff,
v.
EULER ACI COLLECTION SERVICES, INC., Defendant.



The opinion of the court was delivered by: CHARLES KOCORAS, District Judge

MEMORANDUM OPINION

This matter comes before the court on Defendant Euler American Credit Indemnity Company's ("Euler") motion for summary judgment and for judgment on the pleadings. For the reasons set forth below, the motions are granted.

BACKGROUND

  Plaintiff Spectra Merchandising International, Inc. ("Spectra") is an Illinois corporation that imports consumer electronics products from East Asia and distributes them to the retail market. Euler is a Maryland corporation that sells commercial credit insurance that protects seller-policyholders against the nonpayment of accounts receivable due to a buyer's bankruptcy or protracted default. Spectra purchased credit insurance from Euler, and Spectra's corporate vice president Davy Cheung ("Cheung") had responsibility for obtaining Spectra's credit insurance. Cheung was assisted by credit manager Beverly Metzger ("Metzger"), who was training to take over some of Cheung's duties. In dispute are two credit insurance policies that Spectra purchased from Euler, the first of which insured Spectra for shipments made from November 1, 2000, until October 31, 2001 (the "First Policy"). The First Policy insured Spectra for ninety-one of its buyers. It provided that the maximum term of sale (between Spectra and its buyers) was thirty days. This meant that the First Policy only covered buyers from whom Spectra required payment within thirty days of delivery.

  One company that was covered under the First Policy was Kmart, one of Spectra's most important customers. The First Policy insured Kmart as a "covered buyer" with a $500,000 limit, subject to 10% coinsurance (Spectra was responsible for 10% of any loss). In the midst of the First Policy's term, Spectra sought an increase in coverage for Kmart, which Euler refused to do. Euler also responded by raising Kmart's coinsurance to 20%, which was permitted under the First Policy. Moreover, Euler's policies allowed it to reduce or eliminate coverage for future shipments to covered buyers, upon giving the proper notice to the insured, according to changes in the covered buyer's credit risk. Also during the term of the First Policy, Euler sales agent Randy Gilbert ("Gilbert") assumed responsibility over the Spectra account. Including Spectra, Gilbert handled thirteen to fifteen accounts and he was compensated based on a combination of salary and sales commissions. Like all Euler sales agents, Gilbert was not authorized to make decisions concerning the parameters of a policy, including the amount and cost of coverage as well as the specific terms of each policy. Such decisions were made by Euler's underwriting department and sales agents would have to seek its approval on policies before they would be delivered to clients.

  As the First Policy was about to expire Gilbert obtained from Spectra information needed to quote a policy for the period from November 1, 2001, through October 31, 2002 (the "Second Policy"). Gilbert knew that Spectra was concerned with getting adequate coverage for Kmart, which would be covered for $500,000 under the Second Policy — as opposed to the increased coverage previously sought by Spectra. On October 23, 2001, Gilbert met with Cheung and Metzger in Chicago to discuss the terms of the Second Policy. As they were reviewing the Second Policy's terms, Gilbert pointed out the thirty-day maximum terms of sale provision. Cheung then realized that he had overlooked this provision and informed Gilbert that Spectra was selling to certain customers on sixty-day terms. In particular, Cheung told Gilbert that Spectra had previously changed the terms of sale of its biggest customer from thirty to sixty days. In response to Cheung's concerns over the Spectra accounts with greater than thirty-day terms, Gilbert told Cheung that he could not personally approve a change in the terms of coverage. Gilbert instructed Cheung to prepare a list of Spectra's buyers who were sold to on greater than thirty-day terms that Gilbert could submit for approval by the proper authorities at Euler.*fn1

  Following the meeting, Cheung instructed Metzger to review Spectra's records and compile a list of its buyers that were sold to on greater than thirty-day terms. On October 25, 2001, Metzger faxed to Gilbert a list of eighteen accounts that Spectra sold to on greater than thirty-day terms (the "List"). Kmart was not included on the List, which was noticed by Cheung when he received a copy of the List a few days later. Cheung then instructed Metzger to contact Gilbert about Kmart's absence from the List. On October 26, 2001, Gilbert forwarded the List to Euler's underwriting department. However, Gilbert did not review the List to determine if Kmart was included.

  That same day, Metzger e-mailed Gilbert a chart containing reductions in coverage for sixteen accounts. It also contained the sentence: "We need to change our terms of sale to 60 days across the board." Gilbert claims that he discussed this request with Euler's underwriting department and was denied because the majority of Spectra's accounts were on thirty-day terms. Spectra alleges that no such conversation took place. In any event, on October 30, 2001, Gilbert sent Metzger a document outlining the revised terms and conditions of the Second Policy, which indicated that the maximum term of sale was thirty days. Metzger replied via e-mail that "the endorsement for 60 day accounts" was missing from the revision. Gilbert responded that coverage on sixty-day terms needed to be approved individually by the underwriting department and that he would inform Metzger when the sixty-day accounts were approved. On November 6, 2001, Gilbert informed Metzger that Euler was reducing the coverage on Kmart from $500,000 to $250,000, due to Kmart's deteriorating financial condition, and Gilbert endorsed the Second Policy accordingly.

  On December 3, 2001, Gilbert met with Metzger and a broker recently retained by Spectra to deliver the Second Policy. Spectra paid Euler $29,700 for the Second Policy, which covered Spectra's sales from November 1, 2001, through October 31, 2002. The Second Policy stated that the maximum terms of sale for covered buyers was thirty days. The Second Policy also identified seventeen buyers that Spectra had agreed to provide coverage for on sixty-day terms of sale. Kmart was included on the Second Policy, but not identified as covered under sixty-day terms of sale. At this meeting, Gilbert, Metzger, and the Spectra broker reviewed the Second Policy. Metzger claims that she pointed out to Gilbert that Kmart was not listed as covered subject to sixty-day terms of sale and that Gilbert promised her that it would be added to the policy on such terms — an allegation that is disputed by Euler, In any event, the Second Policy was never amended to cover Kmart on sixty-day terms.

  During the second week of January, 2002, Euler cancelled coverage for Kmart for all of its policyholders — Spectra included — due to Kmart's rapidly deteriorating financial condition. On January 22, 2002, Kmart filed for bankruptcy protection. That same day, Spectra submitted a claim to Euler under the First and Second Policies for outstanding Kmart receivables in the amount of $869,802.55. Six days later, Euler denied the claim because Kmart's sixty-day terms of sale were outside the thirty-day maximum terms provided for under the First and Second Policies.

  On November 15, 2002, Spectra filed suit against Euler in the Circuit Court of Cook County. The case was removed to this court on the basis of diversity jurisdiction. Count I of Spectra's Amended Complaint seeks a declaratory judgment that Spectra's losses from Kmart's nonpayment of receivables are covered under the Policies. Count II asks the court to reform the Policies to include an endorsement for sixty-day terms of sale for Kmart. Count III alleges bad faith under the Illinois Insurance Code. Count IV alleges common law fraud. Euler now moves for summary judgment on all counts and judgment on the pleadings as to count IV. LEGAL STANDARD

  Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, reveals that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law, Fed.R.Civ.P. 56(c). On summary judgment the moving party must identify "those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)). This initial burden may be satisfied by presenting specific evidence on a particular issue or by pointing out "an absence of evidence to support the nonmoving party's case." Id. at 325. Once the movant has met this burden, the non-moving party cannot simply rest on the allegations in the pleadings, but, "by affidavits or as otherwise provided for in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). A genuine issue of material fact exists when "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 court must consider the record as a whole in a light most favorable to the non-moving party and draw all reasonable inferences in favor of the non-moving party. Id. at 255; Bay v. Cassens Transport Corp., 212 F.3d 969, 972 (7th Cir. 2000).

  A party may also move for judgment on the pleadings following the close of pleadings. Fed R. Civ. P. 12(c). The appropriate standard for a judgment on the pleadings is "that applicable to summary judgment, except that the court may consider only the contents of the pleadings." Alexander v. City of Chicago, 994 F.2d 333, 336 (7th Cir. 1993). For this reason, judgment on the pleadings is warranted when there is no genuine issue as to any material fact and the moving ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.