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August 3, 2004.

MOR-COR PACKAGING PRODUCTS, INC., an Illinois corporation, Plaintiff-Counterdefendant,
INNOVATIVE PACKAGING CORP., a Delaware corporation, Defendant-Counterplaintiff, v. MARTIN FIELD, Counterdefendant.

The opinion of the court was delivered by: ROBERT GETTLEMAN, District Judge


Plaintiff Mor-Cor Packaging Products, Inc. ("Mor-Cor") initiated the instant breach of contract suit against defendant Innovative Packaging Corp. ("IPC") arising from defendant's alleged failure to fulfill its obligations under the parties' sales agreement. Defendant counterclaimed, alleging that plaintiff had breached its obligations under the agreement. Following a bench trial before Judge Andersen and judgment in plaintiff's favor, defendant appealed to the Seventh Circuit (and plaintiff cross-appealed a discovery matter relating to the district court's refusal to award fees as a sanction for defendant's refusal to admit a fact).

On appeal, Mor-Cor Packaging Products, Inc. v. Innovative Packaging Corp., 328 F.3d 331 (7th Cir. 2003), the Seventh Circuit affirmed the district court's denial of sanctions, but remanded the case for further proceedings on the question of whether plaintiff breached his contract with defendant. Specifically, the court focused on the "cure" provision of the parties' agreement, which required thirty days notice and an opportunity to cure any breach of the contract prior to termination. The Seventh Circuit noted that, although the district court clearly thought that defendant violated the cure provision, the district court did not clearly articulate whether plaintiff had also breached certain provisions of the agreement, which would necessarily impact plaintiff's recovery of damages. The court of appeals remanded the instant case to this court for further proceedings on the latter issue in particular.

  The parties have agreed that this court should decide the issue of defendant's liability on the record developed before Judge Andersen through cross-motions for partial summary judgment. For the reasons stated herein, the court grants plaintiff's motion for summary judgment and denies defendant's motion.


  Plaintiff Mor-Cor is in the business of acting as a sales representative in the corrugated sheet paper industry. At all relevant times, Martin Field was the president and sole employee and shareholder for plaintiff. Defendant IPC manufactures and distributes corrugated sheet paper. On or about July 3, 1997, plaintiff and defendant entered into a Manufacturer-Agent Agreement (the "Agreement"), under which plaintiff agreed to act as defendant's exclusive sales representative to various customers in the Metropolitan Chicago area (which were listed on Exhibit A to the agreement).

  The Agreement, which is governed by Wisconsin law, provides that:
The Agent [plaintiff] agrees to act in the best interest of the Company [defendant] in respect of its duties as Company's exclusive sales representative in the sale of Corrugated Sheets within the Territory and to use its best efforts to promote the sale of such Corrugated Sheets. In that regard, Agent agrees to abide by and comply with all sales policies and operating regulations of Company as issued from time to time to all sales people of the Company and will not obligate or contract on behalf of Company without first having received authority to do so from an executive of Company. Agent further agrees not to represent any manufacturer of Corrugated Sheets in competition with Company or to otherwise sell Corrugated Sheets within the Territory. Agent will also assist in the collection of past due accounts owed to the Company from Customers located within the Territory.
  Section 2.2.1 provides that the Agreement may be terminated "by a party if the other party fails to perform any of its obligations herein and such failure is not remedied by the other party within thirty (30) days of the other party's receipts of a written notice describing said failure." The Agreement further states that it may be terminated by a party "without any delay or other formality" if the other party has its assets (or a substantial part thereof) levied upon or seized or managed by a third party, or if the other party: (i) makes or seeks to make any compromise, assignment or other arrangement with or for the benefit of its creditors; (ii) files a petition in bankruptcy; (iii) is adjudicated and declared bankrupt or is insolvent; (iv) has a third party appointed to manage or distribute its assets or to liquidate or wind up its business; (v) institutes or has instituted against it proceedings under any bankruptcy, liquidation, winding up or insolvency legislation; or (vi) authorizes or acquiesces to any of the foregoing. The Agreement also provided that defendant could terminate the Agreement "without any delay or other formality" if Mr. Field was convicted of an economic offense (such as fraud) or became incapacitated, or if defendant was unable to meet its obligations "by reason of force majeure" such as acts of God, fires, explosions, strikes, lockouts, among other things.

  On July 1, 1999, defendant sent a letter to plaintiff, asserting that plaintiff had failed to perform its obligations under the Agreement. Specifically, defendant's letter stated that plaintiff: (1) had failed to devote its best efforts to promote the sale of defendant's products; (2) failed to service the value-added portion of the corrugated sheet market; (3) quoted prices and discounts without defendant's authorization and in contravention of prices given to plaintiff; (4) authorized non-payment of freight charges by customers without defendant's permission; and (5) failed to assist in the collection of past due accounts of defendant's customers and quoted payment terms that were not authorized by defendant.

  In a letter dated July 7, 1999, plaintiff responded that it had not breached the terms of the Agreement, and "[if] in any manner Mor-Cor did fail to perform (which would have been completely inadvertent), Mor-Cor assures you that it intends to continue to fully perform and honor the Agreement." In a July 29, 1999, reply letter, defendant reiterated its position that plaintiff had breached the Agreement, and further stated that, as a result of plaintiff's "unwillingness to perform," plaintiff "may anticipate the Agreement will terminate at the expiration of the 30 days."

  On August 9, 1999, plaintiff wrote to defendant, seeking confirmation as to whether Mor-Cor had been terminated effective July 1, 1999. On August 10, 1999, defendant sent a letter to plaintiff, terminating the Agreement "effective immediately." In addition to referencing the five grounds enumerated in defendant's July 1, 1999, letter, defendant further stated:
Agent has failed to act in the best interests of Company in respect of its duties as Company's exclusive sales representative within the Territory, by acquiring or attempting to acquire a business in competition with Company's customers. Agent's competitive activities are a violation of the Agreement, and are damaging to Company.
  At trial, John Lingle, defendant's president, testified that in mid-July, he heard a rumor that Field was attempting to purchase a corrugated sheet plant. In late July, Lingle contacted Field to ask him about the rumor, and Field basically responded, "It is none of your business." During that conversation, Lingle did not tell Field that he considered such a purchase to be a breach of contract or conflict of interest.

  Lingle further testified that during the first week of August, one of his customers, John Carman, informed him that Field had recruited one of Carman's employees to work for him at Jet Age Container, a corrugated box company in the Chicago area, confirming the rumor Lingle had heard. Lingle subsequently sent the August 10, 1999, letter terminating the Agreement. Lingle testified that, had the Jet Age incident never occurred, defendant "certainly" would not have terminated the Agreement in August.

  Carman testified that, as far as he was concerned, Field "couldn't be an effective salesman" for defendant because Jet Age Container was one of Carman's competitors, and "we certainly wouldn't want to deal with anybody that's — to help them in any way — to get more competitive against us." He further explained that he would not want competitors learning of special projects that he was running for his customers, even though that information was made available to sales representatives. Carman also testified that, at the time he learned Field was trying to recruit his employees, he was irritated, but that he does not hold it against Field personally any more.

  Two other witnesses, Christopher Woods and Bill Heymann, also testified as to whether they would be concerned if they had learned that Field or plaintiff acquired an interest in Jet Age. Woods, Vice President of InnerPac, testified that such a revelation would not have affected him continuing to use Mor-Cor as his sales representative. He added, however, that if Field had an ownership interest in, or was running, a company that competed directly with InnerPac, it would not be alright for Field to continue as InnerPac's sales representative. Heymann, President of United Container Corporation, testified that Field's attempts to acquire Jet Age Container would not bother him.

  Field testified that his original intention, prior to the July 1, 1999, letter, was to purchase Jet Age Container for his son and son-in-law, so that they could build equity in a business. After receiving the July 1 letter, however, and believing that he was about to be terminated, Field decided to become more involved in Jet Age Container. Field testified that the Jet Age Container deal had fallen apart as of the date of his August 10, 1999, termination from IPC, but was resurrected shortly ...

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