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Keck Garrett & Associates, Inc. v. Nextel Communications

January 24, 2007

KECK GARRETT & ASSOCIATES, INC. PLAINTIFF,
v.
NEXTEL COMMUNICATIONS, INC., DEFENDANT.



The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER

Plaintiff Keck Garrett & Associates, Inc. ("KGA") is an Illinois corporation in the business of marketing communications and providing branding strategies to businesses. From 1997 to 2003, KGA provided product packaging and related services to Defendant, Nextel Communications, Inc. ("Nextel"). Nextel is a Delaware Corporation that, through its wholly-owned subsidiaries, provides fully integrated wireless communication services. In January of 2003, Nextel issued a Blanket Purchase Order ("2003 BPO") to KGA in the amount of $1 million dollars for packaging work Nextel anticipated that KGA would perform in 2003. In this same year, Nextel began working with an advertising agency that offered to perform its packaging work, and Nextel terminated its relationship with KGA. KGA characterizes this termination as a breach of contract and now sues Nextel to recover money that KGA claims it is owed under the 2003 BPO.*fn1 Both parties have moved for summary judgment on KGA's breach of contract claim. For reasons explained below, the court grants Nextel's motion for summary judgment and denies KGA's motion for summary judgment.

FACTUAL BACKGROUND*fn2

A. Initial Communications Regarding The Falcon Project

In 2002, KGA worked on the packaging for what Nextel referred to internally as the "Condor project." (KGA LR 56.1 Stmt. ¶ 5; Nextel LR 56.1 Stmt. ¶ 31.) The focus of the Condor project was to develop an industrial design and a creative design to support the launch of a new platform of wireless devices developed by Motorola. (Nextel LR 56.1 Stmt. ¶ 32.)*fn3 In the fall of 2002, Nextel began working on the Falcon project. (Id. ¶ 54.) It is work that KGA claims to have done on the Falcon project that gives rise to this dispute.

In 2002 and 2003, Brian Lausch was the Manager of Product Packaging for Nextel and was principally responsible for managing Nextel's relationship with KGA. (Id. ¶ 19.) In late 2002, Lausch met with Cheryl Garrett, a principal and founder of KGA, (id. ¶ 8), Brandi Bialas, then the account executive at KGA assigned to the Nextel account, (id. ¶ 10),*fn4 Lynn Kupczyk, then the primary designer at KGA responsible for working with Nextel, (id. ¶ 15), and a representative of Motorola, the company that designs and manufactures phones that utilize Nextel's wireless communication services. (Id. ¶ 57; Nextel LR 56.1 Resp. ¶ 6.) This meeting was a "press check"*fn5 related to the Condor project. (Nextel LR 56.1 Stmt. ¶ 58.) KGA and Nextel agree that there was a conversation at the press check about "potential upcoming projects," (KGA LR 56.1 Resp. ¶ 60), and that KGA first learned of the forthcoming Falcon project at the press check. (KGA LR 56.1 Stmt. ¶ 6; Nextel LR 56.1 Resp. ¶ 51.)

According to Garrett's account, Lausch told KGA that the Falcon project would be big and that KGA would have to "gear up for it and get ready . . . to do it." (KGA LR 56.1 Stmt. ¶¶ 51-52; Garrett Dep. at 70, Ex A. to Nextel LR 56.1 Stmt.)*fn6 As a result, Garrett felt that she needed to have staff available for the project, it is undisputed, however, that Lausch herself did not tell Garrett to hire additional staff. (Nextel LR 56.1 Resp. ¶ 55.) Garrett also testified that Lausch told her that the Falcon project would be similar to KGA's past work for Nextel in that it would be a new packaging initiative and would involve many phones, but that none of the graphics used for prior phone lines would be used, and KGA would instead be starting anew. (KGA LR 56.1 Stmt. ¶ 60.) Based on the amount that KGA had billed Nextel for its work in previous years, Garrett expected that KGA would bill Nextel approximately $1 million for the Falcon project. (Id. ¶ 53; Garrett Dep. at 80-81.). The parties agree, however, that there was no discussion at the press check of the scope of work on the Falcon project, how much money KGA would be paid for work, or the terms of payment. (KGA LR 56.1 Stmt. ¶ 51; Nextel LR 56.1 Stmt. ¶ 61.)

Citing Garrett's testimony about KGA's conversation with Lausch at the 2002 press check, KGA also asserts that it was "told that it would definitely be getting the Falcon project," and that the parties entered into an oral agreement under which KGA "would do what was asked of it, and deliver the project on time." (KGA LR 56.1 Stmt. ¶¶ 50, 54; Garrett Dep. at 86.) According to KGA, this agreement was later supported by the 2003 BPO. (KGA LR 56.1 Stmt. ¶ 50.) Nextel denies that it promised KGA work on the Falcon project or that any such oral agreement existed and cites the testimony of former KGA employees who did not share Garrett's understanding. (Nextel LR 56.1 Resp. ¶¶ 50, 54.) For example, the affidavits of Kupczyk and Bialas, both of whom were present at the press check on behalf of KGA, state that they were not aware of Nextel promising KGA any work or a particular amount of work on the "Falcon project." (Bialas Aff. ¶ 12, Ex. C to Nextel LR 56.1 Stmt.; Kupczyk Aff. ¶ 12, Ex. D. to Nextel LR 56.1 Stmt.)*fn7

Nextel also denies that the Falcon project actually became the subject of an assignment to KGA in 2003. (Nextel LR 56.1 Resp. ¶ 5.) Both Nextel and KGA cite testimony of Brian Lausch, a Nextel employee, to support their positions on this issue. Lausch testified as to what the Falcon project was and the fact that the project was discussed with KGA, but did not testify that the Falcon project was the subject of an assignment to KGA in 2003. (Lausch Dep. at 26.) KGA also cites to a document entitled "Falcon Packaging Requirements," a document setting forth details about the Falcon project, sent to KGA in confidence. (Exs. to KGA LR 56.1 Stmt. at 94.) That document does not mention an assignment to KGA, however, nor does the e-mail message to which it was attached reflect an assignment to KGA of work on the Falcon project. (See Nextel LR 56.1 Resp. ¶¶ 8-9; 1/9/03 E-mail, Ex. H to Nextel LR 56.1 Resp.) ("It will be several weeks before an industrial design direction is formulated with Motorola. Until then, we will not know the scope of our creative design needs. At that time, we will prepare a creative brief to share with KGA.") The evidence does not support KGA's claim that Nextel assigned KGA to work on the Falcon project in 2003.

On January 8, 2003, Bialas sent Lausch an e-mail requesting further information about "the branding initiative" and asking if there was room in the budget for KGA to contribute ideas regarding structural packaging for "the new phones"; the e-mail message acknowledges that Nextel was already working with Frog Design on the structural packaging. (KGA LR 56.1 Stmt. ¶ 7; Nextel LR 56.1 Stmt. ¶ 68; 1/8/03 E-mail, Ex. H to Nextel LR 56.1 Resp.)*fn8 Lausch responded on January 9, 2003, suggesting a conference call to "walk [KGA] through" Nextel's 2003 brand strategy. (1/9/03 E-mail.) In this e-mail, Lausch also attached the "Falcon Packaging Requirements" document, informed KGA that Nextel did not yet know of its creative design needs and would prepare a creative brief to share with KGA "at that time," and stated that "since Motorola engaged Frog Design[,] Nextel did not set aside any industrial development funds for 2003." (Nextel LR 56.1 Resp. ¶ 7; 1/9/03 E-mail.) Nextel nevertheless admits that Lausch anticipated that KGA would do packaging work on the Falcon project "absent any significant change in events," and that, as a result, Nextel planned to prepare a "creative brief" that KGA could review and advise Nextel of what work would be required and what it would cost. (Nextel LR 56.1 Resp. ¶ 10; Lausch Dep. at 45-46.)

Lausch and his supervisor, Jim Obermeyer, who was then the Director of Brand Advertising and Marketing for Nextel and responsible for product packaging, (Nextel LR 56.1 Stmt. ¶ 21; KGA LR 56.1 Stmt. ¶ 34), had a conference call with individuals from KGA (unidentified in the record) on January 23, 2003. In that call, Lausch and Obermeyer shared with KGA a PowerPoint presentation created by Mullen, Nextel's national advertising agency, to keep KGA informed of Nextel's plans for its brand. (Nextel LR 56.1 Stmt. ¶ 71; Nextel LR 56.1 Resp. ¶ 13.) Lausch acknowledged that he did not make a similar presentation to any other advertising agency, but Lausch's primary agency contact was with KGA; he noted that others at Nextel may have conducted presentations to other agency partners. (Nextel LR 56.1 Resp. ¶ 13; Lausch Dep. at 58, 133-34.) Indeed, it was not unusual for Nextel to make sure that its marketing partners were well-informed about its brand strategy, regardless of whether Nextel and the vendor were engaged in ongoing or upcoming projects. (Nextel LR 56.1 Stmt. ¶ 76.)

C. Purchase Orders

1. Nextel's Use of Purchase Orders Generally

According to Obermeyer, Nextel issues written purchase orders to all of the agencies that provide services for Nextel. (KGA LR 56.1 Stmt. ¶ 35.)*fn9 In 2002 and prior years, Nextel issued purchase orders to KGA; each purchase order incorporated Nextel's Purchase Order Terms and Conditions. (Nextel LR 56.1 Stmt. ¶¶ 33, 35.) Some of the purchase orders issued to KGA were blanket purchase orders while others were orders for particular projects. (Id. ¶ 34, Purchase Orders, Ex. G to Nextel LR 56.1 Stmt.) Nextel issues blanket purchase orders, based on budgeted amounts, to expedite payment to vendors by eliminating the need to issue a separate purchase order for every project a vendor is asked to complete or each time an estimate for work is submitted and approved. (Nextel LR 56.1 Stmt. ¶¶ 37, 39-40.)*fn10 Blanket purchase orders do not describe any particular work or project but document the agreement between the parties regarding the terms and conditions governing any work that the vendor is asked to complete under the order. (Id. ¶ 38.)*fn11

Under Nextel's policy, in order for a vendor's invoice to be approved, the vendor's work must "be authorized by a pre-approved estimate of cost." (Id. ¶ 41.)Citing Bialas's affidavit, Nextel claims that KGA was, generally speaking, aware of Nextel's policy requiring a pre-approved estimate of cost, (id. ¶ 42; Bialas Aff.¶¶ 8, 13),*fn12 and usually began work only after Nextel approved of the estimate. (Nextel LR 56.1 Stmt. ¶ 51.) "KGA understood that Nextel would only pay for work that Nextel had approved, based on a signed estimate, in accordance with the procedure requested and explained to KGA by Nextel." (Id. ¶¶ 53, 95.)*fn13 When KGA was in the midst of a hectic project, however, KGA might continue to do certain work for Nextel even though it had not received the signed estimate from Lausch. (Id. ¶ 52.)

2. January 23, 2003 Purchase Order

The parties agree that on January 23, 2003, Nextel issued the 2003 BPO to KGA for $1 million dollars. (1/23/03 BPO, Ex. L. to Nextel LR 56.1 Stmt.) The 2003 BPO stated that it was a "Blanket Order for 2003 Phone & Accessory Packaging" and listed Vicki Hall, a financial analyst in Nextel's finance department, and Lausch as the Nextel employees authorized to release funds against the 2003 BPO. (Id.; Nextel LR 56.1 Stmt. ¶¶ 24-26.) Hall forwarded the 2003 BPO to Bialas via e-mail, informing KGA of its purchase order number for 2003. (Nextel LR 56.1 Stmt. ¶ 84.) The 2003 BPO listed December 31, 2003, as the "delivery date" for "2003 Blanket for Phone & Accessory Packaging"; phone and accessory packaging is the work that KGA had performed for Nextel in the past. (1/23/03 BPO; KGA LR 56.1 Stmt. ¶ 56.) According to Garrett, KGA's understanding of the purchase order was that KGA was entitled to the $1 million balance of the 2003 BPO, regardless of whether KGA submitted $1 million worth of invoices to Nextel. (KGA LR 56.1 Stmt. ¶ 59; Garret Dep. at 109, 114-15.)

The 2003 BPO incorporates by reference the terms and conditions attached to it. (KGA LR 56.1 Stmt. ¶ 32.) At the outset, the 2003 BPO states that the purchase order "together with any exhibits, schedules or other documents attached . . . integrates, merges, and supersedes all prior offers, negotiations, agreements, or understandings concerning the subject matter hereof and constitutes the entire agreement between the parties." (1/23/03 BPO.) Among the other incorporated terms and conditions is a provision governing "payments and invoices," which states that the "Supplier shall be paid upon the submission of proper invoices or vouchers, the prices stipulated herein for work completed and/or Articles delivered and accepted,*fn14 less any proper deductions or setoffs." (Id.)*fn15 The same provision also specifies that invoices submitted must contain the "Purchase Order number, item number, description of Articles or work, sizes, quantities, unit prices, and extended totals." (Id.) The 2003 BPO also states that "[t]he Purchasing Agent"*fn16 may at any time, by a written order, make changes, within the general scope of this Purchase Order, in any one or more of the following . . . [d]description of services to be performed . . . [t]ime of performance of services . . . ." (Id.) Changes that cause an increase or decrease in the cost or time required for performance of work under the BPO require an equitable adjustment to the price and/or delivery schedule and modification of the BPO. (Id.) The 2003 BPO includes a term stating that any "waiver, alteration, or modification of any of the provisions of the [the] Purchase Order" is not binding on Nextel "unless evidenced by a written notice or amendment signed by the Purchasing Agent. . . . " (Id.) The 2003 BPO further provides that no terms and conditions except those set forth in the 2003 BPO (and incorporated documents) bind Nextel unless accepted by Nextel in writing. (Id.) Finally, the 2003 BPO is explicit that it is governed by and subject to Delaware law, and that in the event that Nextel defends any action brought by the supplier and prevails in its defense, "the Supplier shall pay court costs and reasonable attorneys' fees incurred by Nextel." (Id.)

Lausch admitted that he had not read the terms and conditions of the 2003 BPO when it was issued on January 23, 2003. (Lausch Dep. at 66.)*fn17 Similarly, Obermeyer admitted that he was familiar with the 2003 BPO terms but had not read the terms and conditions in their entirety and that he did not believe that the 2003 BPO constituted a binding written contract. (KGA LR 56.1 Stmt. ¶¶ 37, 46; Obermeyer Dep. at 16, 51-52, Ex. E to Nextel LR 56.1 Stmt.) In 2003, Obermeyer only had the authority to approve purchase orders of $125,000 or less; a $1 million dollar agreement would have required approval by someone higher in rank than Obermeyer and his boss, Mary Matthews. (KGA LR 56.1 Stmt. ¶¶ 34, 36.) Garrett believes that Matthews is, in fact, the person that directed Nextel to issue the 2003 BPO to KGA. (Id. ¶ 49.)

Nextel asserts that the 2003 BPO controls the relationship between KGA and Nextel, and that Nextel created the 2003 BPO in connection with Nextel's budgeting process for 2003 based on Lausch's estimate that Nextel would spend $1 million on packaging with KGA in 2003. (Nextel LR 56.1 Stmt. ¶¶ 90-92; Nextel LR 56.1 Resp. ¶ 19.) The parties agree that when KGA received the 2003 BPO it did not know the structure of the package on which it would be placing its creative design or what phone would be in the structure, (Nextel LR 56.1 Resp ¶ 58); KGA contends, in addition, that KGA knew what it would be doing when it received the 2003 BPO. This fact is not disputed; testimony that the packaging ...


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