The opinion of the court was delivered by: J. Phil Gilbert District Judge
This matter comes before the Court on the second motion for summary judgment filed by plaintiffs/counterdefendants William R. Cunningham ("Cunningham") and Cunningham Electronics Corporation ("CEC") (Doc. 68) seeking to dispose of defendant/counterplaintiff POSnet Services, LLC's ("POSnet") counterclaims. POSnet has responded to the motion (Doc. 80), and Cunningham and CEC have replied to that response (Doc. 84).
I. Summary Judgment Standard
Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Spath v. Hayes Wheels Int'l-Ind., Inc., 211 F.3d 392, 396 (7th Cir. 2000). The reviewing court must construe the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Spath, 211 F.3d at 396.Where the moving party fails to meet its strict burden of proof, a court cannot enter summary judgment for the moving party even if the opposing party fails to present relevant evidence in response to the motion. Cooper v. Lane, 969 F.2d 368, 371 (7th Cir. 1992).
In responding to a summary judgment motion, the nonmoving party may not simply rest upon the allegations contained in the pleadings but must present specific facts to show that a genuine issue of material fact exists. Fed. R. Civ. P. 56(e); Celotex, 477 U.S. at 322-26; Johnson v. City of Fort Wayne, 91 F.3d 922, 931 (7th Cir. 1996). A genuine issue of material fact is not demonstrated by the mere existence of "some alleged factual dispute between the parties," Anderson, 477 U.S. at 247, or by "some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); Michas v. Health Cost Controls of Ill., Inc., 209 F.3d 687, 692 (7th Cir. 2000). Rather, a genuine issue of material fact exists only if "a fair-minded jury could return a verdict for the [nonmoving party] on the evidence presented." Anderson, 477 U.S. at 252; accord Michas, 209 F.3d at 692.
Viewing all the evidence and drawing all reasonable inferences in favor of POSnet, the Court finds the following facts for the purposes of this motion.
A. The Joint Venture Agreement
On December 23, 2002, CEC, Cunningham and POSnet entered into a joint venture memorialized by the Joint Venture Agreement ("JVA"). The joint venture was established with the purpose of facilitating retail merchants' clearing of paper coupons and electronic discount offers redeemed at their establishments by their customers. CEC was becoming involved in the business of clearing paper coupons and POSnet was becoming involved in the business of clearing electronic discount offers. The joint venture aimed to jointly develop and operate a hardware and software system ("the System") that would allow retail merchants to process both paper coupons and electronic discount offers at terminals located in their stores and receive payment for those coupons the following day.
The JVA provided that Cunningham would personally loan POSnet up to $6 million to develop and operate the System and that POSnet would make interest payments every month and would make principal payments for any month POSnet has a net profit. See JVA ¶¶ 3 & 4.
The JVA also obligated CEC to perform several duties. First, CEC promised to provide prompt "settlement services," that is, to pay retail merchants one day after the merchants processed the paper coupon and electronic discounts at the in-store terminals. The payment amount was to be based on a daily summary of the terminal activity provided by POSnet. See JVA ¶¶ 5(a) & 7(1)(b). CEC also agreed to provide POSnet a copy of an operating agreement between CEC and a financial institution "sufficient to enable CEC to perform the Settlement Services hereunder." See JVA ¶ 5(c). The JVA contained no explicit promise from CEC that the settlement services it would provide would be acceptable in the industry.
CEC also assumed responsibility for certain aspects of the development and operation of the System, namely, to maintain a coupon offer registry cataloging all discount offers by manufacturers and to furnish, install and maintain a terminal at each retail store and customer identification keypads as required. See JVA ¶ 7(1)(a), (c) & (d). Other than the obligation to settle with retail stores within a day, the JVA contained no time limit for CEC to perform its promises.
For its part, POSnet promised to send a weekly invoice to manufacturers summarizing the clearing activity for their products and the fees assessed during the previous week. See JVA ¶ 5(b). It also promised to furnish, install and maintain the hardware and software for the central control function of the System as well as the software used by retail merchants to redeem paper coupons and electronic discount offers and the software used in the in-store terminals and customer identification keypads. Essentially, POSnet was responsible for making sure all of the computer programs worked together. See JVA ¶ 7(2)(a) & (b). Finally, POSnet promised to market the System to potential users and to provide staff to operate the System. See JVA ¶ 7(2)(c) & (d).
The JVA also includes an agreement not to disclose confidential or proprietary information of any other party to the JV, see JVA ¶¶ 11 & 12, and an integration clause providing that the JVA is the entire agreement among the parties and supersedes all prior agreements and understandings, see JVA ¶ 17.
In November 2004, the parties amended the JVA ("AJVA") to allow CEC to pay retail merchants weekly when POSnet issued invoices to the manufacturers instead of daily, as set forth in the JVA. See AJVA ¶ 2. The AJVA further committed CEC to loaning POSnet the balance of the $6 million. See AJVA ¶ 1.
Cunningham performed his obligation under the JVA; he loaned POSnet $6 million. Tim Halfman ("Halfman"), one of POSnet's managers, contests that Cunningham made a loan and instead insists that the transfer of $6 million was an investment. However, in light of the JVA's express contemplation of a $6 million loan, the only reasonable interpretation of the transaction is that it was a loan pursuant to the JVA.
As for CEC's performance, on March 16, 2005, CEC gave POSnet a copy of an unexecuted copy of a guarantee agreement and a secured promissory note with Bank of America, a "Manufacturer Master Agreement" and a "Retailer Master Agreement" relating to paper coupon offers CEC planned to have product manufacturers and retailers, respectively, sign. The guarantee agreement and the note contemplated that Bank of America would provide the financing for the settlement process. Halfman, who had over twenty years of experience in the settlement industry, reviewed the documents for POSnet and determined ...