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Business Systems Engineering, Inc. v. International Business Machines Corp.

October 11, 2007

BUSINESS SYSTEMS ENGINEERING, INC., PLAINTIFF,
v.
INTERNATIONAL BUSINESS MACHINES CORPORATION ("IBM"), DEFENDANT.



The opinion of the court was delivered by: Elaine E. Bucklo United States District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Business Systems Engineering, Inc. ("Business Systems") and defendant International Business Machines Corporation ("IBM") have a business dispute about a project with the Chicago Transit Authority ("CTA") to perform work on the CTA's computer system. Business Systems believes that IBM shorted it money due under a contract and otherwise interfered with its contractual and business relations, and has brought breach of contract and other tort claims against IBM. IBM has moved for summary judgment on all of Business Systems's claims against it.*fn1 For the following reasons, I grant IBM's motion.

I.

Summary judgment is appropriate where the record and affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Steen v. Myers, 486 F.3d 1017, 1021 (7th Cir. 2007) (citing FED. R. CIV. P. 56(c)). If the moving party meets this burden, the non-moving party must go beyond the pleadings and set forth specific facts showing that there is a genuine issue for trial. Ptasznik v. St. Joseph Hosp., 464 F.3d 691, 694 (7th Cir. 2006) (citing FED. R. CIV. P. 56(e); Becker v. Tenenbaum-Hill Assocs., Inc., 914 F.2d 107, 110 (7th Cir. 1990)). The existence of merely a scintilla of evidence in support of the non-moving party's position is insufficient; there must be evidence on which the jury could reasonably find for the non-moving party. Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). I must construe all facts in the light most favorable to Business Systems and draw all reasonable and justifiable inferences in its favor. Anderson, 477 U.S. at 255.

Taking the facts in the light most favorable to Business Systems, the following are the undisputed facts:*fn2 Business Systems is a Delaware corporation with its principal place of business in Chicago, Illinois. It formerly provided application consulting, systems integration, and other computer consulting to various entities. Nathan Paige is a resident of Illinois and was at all relevant times Business Systems's Chief Executive Officer and/or Chief Financial Officer. IBM is a New York corporation with its principal place of business in New York. It provides computer hardware and systems consulting.

On December 28, 2001, IBM and the CTA entered into an "Information Technology Services Agreement" ("ITSA"). Section 3 of the ITSA provides that IBM agrees to perform certain services for the CTA in exchange for compensation. These services pertain to the "installation, modification, implementation, conversion, integration, and configuration of the ERP System," defined in the ITSA as the Enterprise Resource Planning System Described in Exhibit A, Exhibit D, and the Documentation. The ERP System includes the Pl. Resp. to Def. Motion for S.J." or otherwise do not comply with the local rules. This is an insufficient denial. Under Local Rule 56.1, disagreements must include "specific references to the affidavits, parts of the record, and other supporting materials relied upon." Many of IBM's statements of material fact contain legal conclusions or purport to state Business Systems's position on certain issues, and are therefore inappropriate or irrelevant themselves. I will consider admitted any appropriate statements of material fact to which Business Systems has not appropriately replied. I also agree with IBM that Business Systems may not incorporate its memorandum in opposition to summary judgment into its own additional statement of facts under Local Rule ERP Software, Third-Party Software specified in Exhibit E, modifications, configurations, and any customer programming specified in Exhibit A, as well as all revisions and customizations to any or all of the above software which may be required and is provided for in Exhibit A hereto. (Ex. 6 to IBM's Mot., ITSA §§ 2.14, 3.1.) Section 5.3 of the ITSA also provides that IBM agrees to "abide by all CTA policies that reasonably pertain" to it. One of those policies, originally attached as an exhibit to the ITSA, is a policy entitled "Special Conditions: Disadvantaged Business Enterprise Commitment" ("DBE Commitment").*fn3 Under the terms of the DEB Commitment, bidders for contract work with the CTA agree to "expend not less than" 30 percent "of the total contract price (inclusive of any and all modifications and amendments), if awarded, for contract participation" by Disadvantaged Business Enterprises ("DBEs"). Business Systems was certified by the CTA as a DBE.

The ITSA provides that the parties agree that the "formation, interpretation, and performance" of the ITSA "shall be governed by the laws of the State of Illinois." (Ex. 6, ITSA § 19.10.) The ITSA also contains a provision stating that IBM's obligations to the CTA under the ITSA "shall be, in the aggregate, as set forth" in the ITSA and that the ITSA "is an agreement between the parties, and, except for the provisions of the preceding sentence, confers no rights upon any of the parties' employees, agent, or contractor's or upon any other Person." (Id. at ¶ 19.11.)

According to Business System's CEO Paige, Business Systems worked on various projects for the CTA starting in at least 1996. Its last project as "prime contractor" with the CTA ended in 2002. Paige testified that Business Systems became interested in the CTA's ERP implementation project, to take the CTA's ERP system and move it to a server-based system like SAP or Oracle (the "ERP project"). Paige also testified that Business Systems did not bid for the ERP project because it was not large enough to handle a project of that size and had certain other constraints; Business Systems knew that it "would need to have a very large partner to pursue this deal." Business Systems spoke with potential larger partners including IBM.

Business Systems and IBM eventually entered into a "Customer Solutions Agreement" ("CSA"). That agreement is dated July 20, 2000, before the date the CTA and IBM entered into the ITSA. The opening paragraph of the CSA provides:

This Agreement dated as of 07/20/2000 ("Effective Date"), between International Business Machines Corporation ("Buyer")and Business Systems Engineering ("Supplier"), establishes the basis for a multinational procurement relationship under which [BSE] will provide [IBM] the Deliverables and Services described in [Statements of Work] issued under this Agreement.

(Ex. 10, CSA at 1.) The terms of the CSA do not specify what deliverables and work BSE will provide IBM, only that BSE "will provide Deliverables and Services as specified in the relevant [Statement of Work] only when specified in a [Work Authorization]." (Ex. 10, CSA at § 2.0.) The CSA defines "Work Authorization" as IBM's "authorization in either electronic or tangible form for [Business Systems] to conduct transactions under this Agreement (i.e., a purchase order, bill of lading, or other [IBM] designated document). A [Statement of Work] is a [Work Authorization] only if designated as such in writing" by IBM. (Id. at § 1.0.) The CSA defines "Statement of Work" as "any document attached to or including in this Agreement which describes the Deliverables and Services, including any requirements, specifications or schedules." (Id.) The CSA also contains a choice of law provision that specifies that "the laws of the State of New York applicable to contracts executed in and performed entirely within that State will apply if any part of the transaction is performed within the United States." (Id. at § 14.3.)

The parties agree that BSE's work on the ERP project was governed in part by Statements of Work. They also agree that IBM timely paid Business Systems for all work on the ERP project pursuant to the Statements of Work and Purchase Orders. These Statements of Work and Purchase Orders expressly reference the CSA. The explicit terms of the CSA and the Statements of Work do not reference IBM providing Business Systems with $3.6 million worth of work on the ERP project. The Statements of Work define resources, tasks and deliverables that BSE was to provide to IBM, set forth hourly rates and estimated hours of work, and authorize work in an amount of roughly $2.2 million.

According to the affidavit of James Lautenbach, who during the relevant time period was a client executive at IBM responsible for the relationship with the CTA, as part of IBM's response to the CTA's request for a proposal for the ERP project IBM had to submit two completed CTA forms to the CTA: a "Schedule C, Letter of Intent From DBE to Perform as Subcontractor, Supplier and/or Consultant" ("Schedule C") signed by each DBE that would work as IBM's subcontractor on the ERP project, and a "Schedule D, DBE Utilization Plan" ("Schedule D") signed only by IBM. As part of its response to CTA's request for a proposal, IBM submitted a Schedule C from BSE, attached as Exhibit 28 to its motion for summary judgment ("Original Schedule C"). The Schedule C states:

[BSE] is prepared to provide the following described services or supply the following described goods in connection with ...


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