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A.T.N., Inc. v. McAirlaid's Vliesstoffe GmbH & Co. KG

March 11, 2008


The opinion of the court was delivered by: John F. Grady, United States District Judge


Before the court are two motions: (1) defendants' motion for summary judgment pursuant to Federal Rule of Civil Procedure 56; and (2) defendants' motion to strike. For the reasons explained below, the motion for summary judgment is granted, and the motion to strike is denied.


This case concerns the binding effect of a letter of intent executed by plaintiff A.T.N., Inc. ("ATN"), defendant McAirlaid's Vliesstoffe GmbH & Co. KG ("McAirlaid's") and certain of McAirlaid's affiliates. McAirlaid's is a German entity that manufactures "absorbent cores" used in various medical devices. (Def. Stmt. of Undisputed Facts in Support of Their Mot. for Summ. J. (hereinafter "Def. SOF"), ¶ 2.) Defendant Newco Absorbents GmbH & Co. KG ("Newco"), a McAirlaid's affiliate, uses McAirlaid's absorbent cores to manufacture finished hygiene products, such as absorbent underpads used in hospitals. (Id. at ¶ 4; Maksimow Decl. at ¶ 4.) Airlaid Alliance Sp.z.o.o. ("AA"), also a McAirlaid's affiliate, supplies the machines used to manufacture both the absorbent cores and the finished products. (Id. at ¶ 6; Maksimow Decl. ¶ 5.) Plaintiff A.T.N., Inc. ("ATN") is an Illinois-based company that provides "finance and marketing services to businesses." (Azaraf Aff. ¶ 3.) ATN's sole shareholder is Yossi Azaraf. (Id. at ¶ 2.)

A. The Letter of Intent

Azaraf and McAirlaid's CEO Alex Maksimow met in 2004 to discuss marketing McAirlaid's products in the United States. (Pl.'s L.R. 56.1(a) Resp. and Aff. Stmt. of Facts in Opp'n to Def.'s Summ. J. Mot. (hereinafter "Pl. SOF"), ¶ 38.)*fn1 In connection with these discussions, Azaraf enlisted a potential investor, Robert Shapiro, the CEO of Illinois-based Emlin Company ("Emlin"). (Id. at ¶ 39; Def. SOF ¶ 10.) Azaraf and Shapiro traveled to Germany in early September 2004 to meet with McAirlaid's representatives, including Maksimow. (Pl. SOF ¶ 39.) This meeting culminated in a three-page "Letter of Intent," signed by ATN, AA, McAirlaid's and Newco (but not Emlin). (See Def. SOF, Ex. C.) The "Preamble" to the Letter of Intent (the "LOI") states that (a) ATN "wishes to develop sales of hygiene products in the North American market based on finished products manufactured by Newco," and (b) "Newco will supply and invoice ATN Inc. for the products. ATN will distribute the products and invoice the final customer." (Id.) Under the heading "Agreement," the parties set forth a series of "steps" intended to "support the development of this business [i.e., the business described in the Preamble] in North America." (Id.) These steps include the following:

* ATN "will" use its "best efforts to rapidly develop sales of finished products made by Newco." Newco, for its part, agrees to "support these sales efforts with joint customer visits when requested." (Id. at ¶ 1.)

* Newco "will" grant ATN the exclusive right to market Newco's products in North America for a one-year period beginning on the date of the LOI. (Id. at ¶ 3.)

* ATN "intends" to install "converting equipment" in North America.*fn2 An "initial decision on this investment will take place 4-6 months after commencement of this agreement based upon market acceptance of these products." (Id. at ¶ 2.)

* ATN "intends" to install a "turnkey airlaid non-woven manufacturing line supplied by AA.*fn3 A decision on the timing of this investment will follow the order for the converting machines." (Id. at ¶ 4.)

* AA "will offer ATN the right of first refusal for the first North American manufacturing license." (Id. at ¶ 5.) If ATN exercises the license option, McAirlaids agrees to "transfer its North American hygiene customers to ATN when the airlaid line has been commissioned . . . ." (Id. at ¶ 6.)

* Finally, the LOI states that "[c]ustomers of ATN who purchase the products will remain exclusive to ATN for as long as they continue to purchase the products from ATN and ATN purchases the products from Newco in the agreed quantities." (Id. at ¶ 7.)

B. Post-LOI Negotations and Product Marketing

In November 2004, Azaraf, Shapiro and Maksimow toured Emlin's facility to determine, according to ATN, whether it would be a suitable location to install a converting line. (Pl. SOF ¶ 41.) Shortly afterwards, Emlin's attorney sent defendants a "Proposed Term Sheet" that would have given Emlin extensive rights to market the defendants' products without any firm commitment to purchase a converting machine or a manufacturing line. (Id. at ¶ 42; Proposed Term Sheet, attached as Ex. B to Azaraf Dep.) The parties dispute ATN's role in Emlin's proposal,*fn4 but it is undisputed that defendants did not agree to it. ATN, meanwhile, began purchasing finished "underpads" from Newco and reselling them to Medline Industries, Inc. ("Medline"), an Illinois-based ...

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