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TRUSERV CORPORATION v. FLEGLES INC.

September 28, 2004.

TRUSERV CORPORATION f/k/a COTTER & COMPANY, Plaintiff,
v.
FLEGLES INC, d/b/a FLEGLES TRUE VALUE HOME CENTER and ALICE MAE FLEGLE, Defendants.



The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge

MEMORANDUM OPINION

This matter is before the court on Plaintiff TruServ Corporation's ("TruServ") request for damages from defendants Flegles, Inc. and Ms. Alice Mae Flegles (collectively "Defendants"). For the reasons stated below, we rule in favor of TruServ against Defendants and award $77,149.27 in damages, $5,143.28 in prejudgment interest, $50,374.50 in attorney's fees, and $10,879.72 in costs, totaling $143,546.77.

BACKGROUND

  On or about January 20, 2000, TruServ, as a company, and Flegles, Inc. ("Flegles"), as a retail member, entered into a written agreement entitled "Retail Member Agreement with TruServ Corporation an Independent Retailer Cooperative" ("Member Agreement"). The Member Agreement governed the relationship between TruServ and Flegles and allowed Flegles, as a retail member, to purchase merchandise and services from TruServ for amounts stated in the member's statements of accounts ("Members Statements") for Flegles. According to the terms of the Member Agreement, it was agreed to by TruServ and Flegles that Illinois law would govern the Member Agreement. On February 18, 2003, pursuant to the Member Agreement TruServ terminated Flegles as a member for nonpayment of outstanding debt owed to TruServ.

  On May 16, 2003, TruServ filed a three count complaint against Defendants in this court. In Count I, TruServ contended that Flegles breached the Member Agreement. In Count II, TruServ contended that Flegles was liable pursuant to the Member Agreement for an account stated claim. In Count III, TruServ contended that Ms. Alice Mae Flegle ("Ms. Flegle") breached three separate guaranty agreements ("Guaranty Agreements") that she executed which guaranteed to TruServ the payment "of any indebtedness or balance of any past, present, or future indebtedness. . . ." that Flegles owed to TruServ. TruServ moved for summary judgment on all counts. On July 21, 2004, in a memorandum opinion, we granted TruServ's motion for summary judgment on Counts I and III. In addition, we denied TruServ's motion for summary judgment as to Count II and dismissed Count II as moot. Because at summary judgment the parties had not sufficiently briefed the damages issue, including any applicable set-offs, attorney's fees, and costs, we ordered the parties to submit briefing on damages.

  DISCUSSION

  I. Contract Damages

  On May 16, 2003, TruServ requested damages from Defendants for breach of contract in the amount of $78,627.04, exclusive of interest, costs, and attorney's fees. The $78,627.04 amount was based on a May 1, 2003 TruServ Members Statement for Flegles. Pl.'s Ex. A. Since that time, TruServ, in accordance with the Member Agreement, has applied amounts owed to Flegles. These amounts include credits for merchandise applied to Flegles' account balance and services, as well as notes payable by TruServ to Flegles which have now become due since Flegles' termination as a member. On March 1, 2004, TruServ issued a new Members Statement for Flegles that reflected these new amounts applied, with a reduced balance of $78,174.81 owed to TruServ. Pl.'s Ex. A. Additionally, the Members Statement dated March 1, 2004 contained a detailed list of the transactions between TruServ and Flegles, along with a clearly itemized account of the amount owed to TruServ by Flegles for any and all of the merchandise, advances, and services that TruServ provided or caused to be provided for Flegles.

  Defendants argue that the $78,174.81 stated in the March 1, 2004 Members Statement should also credit Flegles with a $1,025.54 patronage dividend check ("Dividend Check") that TruServ sent to Flegles, but that Flegles returned to TruServ without cashing. There is no dispute that the $1,025.54 reflected in the Dividend Check belongs to Flegles. The court notes that TruServ has already applied other amounts and credits owed to Flegles which have become due since Flegles termination as a member. TruServ did not exercise its right under the Member Agreement to place a lien on the patronage dividend, but instead mailed the dividend check to Flegles which was then returned to TruServ. Under these facts, there is no reason whatsoever that the $1,025.54 should not also be applied as a credit. Therefore, we find that as a result of Flegles' breach of the Member Agreement, TruServ has been damaged in the amount of $77,149.27.

  II. Prejudgment Interest, Attorney's Fees, and Costs

  TruServ maintains that pursuant to the Member Agreement, it is entitled to prejudgment interest, attorney's fees, and costs. We agree. The Member Agreement provides:
"In the event that the Company initiates proceedings to recover amounts due it by Member or for any breach of this agreement to seek equitable or injunctive relief against the Member, the Company shall be entitled to the recovery of all associated costs, interest, and reasonable attorney's fees." (emphasis added)
Pl.'s Ex. A.

  A. Prejudgment Interest

  TruServ and Flegles agree that under Illinois law, prejudgment interest applies at the rate of 5% per annum as prescribed by the Illinois Interest Act. 815 ILCS 205/2. Specifically, 815 ILCS 205/2 provides:
Creditors shall be allowed to receive at the rate of five (5) per centum per annum for all moneys after they become due on any bond, bill, promissory note, or other instrument of writing; on money lent or advanced for the use of another; on money due on the settlement of account from the day of liquidating accounts between the parties and ascertaining the balance; on money received to the use of another and retained without the owner's knowledge; and on money withheld by an unreasonable and vexatious delay of payment. In the absence of an agreement between the creditor and debtor governing interest charges, upon 30 days' written notice to the debtor, an assignee or agent of the creditor may charge and collect interest as provided in this Section on behalf of a creditor.
815 ILCS 205/2.

  Further, under Illinois law, in order for a court to award prejudgment interest, the actual amount due must be a "liquidated amount or subject to easy computation." Ameritech Information Systems, Inc. v. Bar ...


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