The opinion of the court was delivered by: Robert M. Dow, Jr. United States District Judge
MEMORANDUM OPINION AND ORDER
This dispute centers on a membership agreement between Plaintiff/Counter-Defendant Ace Hardware Corporation ("Ace" or "Plaintiff") and Defendant/Counter-Plaintiff Marn, Inc. ("Marn"). The relationship went sour and ultimately ended in termination of the membership agreement. Plaintiff initiated this action by filing a three-count complaint against Marn and its president, Defendant Michael Arnold ("Arnold") (collectively "Defendants") on October 6, 2006 alleging two separate counts for breach of contract and seeking declaratory judgment regarding its rights under the agreement at issue.*fn1 See . Defendants Marn and Arnold filed an amended counterclaim, the operative pleading for the countersuit in this matter, alleging two counts: (1) breach of contract and (2) fraudulent misrepresentation. See . Ace filed an amended complaint, adding a fourth count for unfair competition in violation of the Lanham Act, but that count has since been voluntarily dismissed. See [50, 63]. Judge St. Eve, to whom this matter initially was assigned, dismissed Count II of Defendants' counterclaim, leaving only a counterclaim for breach of contract. See . Therefore, the three original counts brought by Ace remain against Marn and Arnold, and the breach of contract claim remains in Defendants' countersuit against Ace.
Currently before the Court is Ace's motion for summary judgment on all of the remaining claims except for Ace's count for declaratory judgment. For the reasons set forth below, Ace's motion for summary judgment is granted with respect to Count I for breach of contract and Count II for breach of the guaranty of credit of Ace's complaint and on Count I of Marn's counterclaim. In view of Ace's representation that it would consider voluntary dismissal of Count III if the relief that it sought on the other counts was granted, the Court offers no opinion on Count III for declaratory relief, but requests that Ace inform both the Court and Defendants in writing within seven days of this decision whether it intends to voluntarily withdraw that claim. Also before the Court is Ace's Motion for Rule 11 Sanctions. For the reasons set forth below, Ace's motion for sanctions is denied.
The Court takes the relevant facts from the parties' respective Local Rule 56.1 ("L.R. 56.1") statements.*fn2 The Court resolves all genuine factual ambiguities in Defendants' favor (see Foley v. City of Lafayette, Ind., 359 F.3d 925, 928 (7th Cir. 2004)), and takes no position on whose version of disputed factual matters is correct.
L.R. 56.1 requires that statements of facts contain allegations of material fact and that factual allegations be supported by admissible record evidence. See L.R. 56.1; Malec v. Sanford, 191 F.R.D. 581, 583-85 (N.D. Ill. 2000). The Seventh Circuit repeatedly has confirmed that a district court has broad discretion to require strict compliance with L.R. 56.1. See, e.g., Koszola v. Bd. of Educ. of the City of Chicago, 385 F.3d 1104, 1109 (7th Cir. 2004); Curran v. Kwon, 153 F.3d 481, 486 (7th Cir. 1998) (citing Midwest Imports, Ltd. v. Coval, 71 F.3d 1311, 1317 (7th Cir. 1995) (collecting cases)). Where a party has offered a legal conclusion or a statement of fact without offering proper evidentiary support, the Court will not consider that statement. See, e.g., Malec, 191 F.R.D. at 583. Additionally, where a party improperly denies a statement of fact by failing to provide adequate or proper record support for the denial, the Court deems that statement of fact to be admitted. See L.R. 56.1(a), 56.1(b)(3)(B); see also Malec, 191 F.R.D. at 584. The requirements for a response under Local Rule 56.1 are "not satisfied by evasive denials that do not fairly meet the substance of the material facts asserted." Bordelon v. Chicago Sch. Reform Bd. of Trs., 233 F.3d 524, 528 (7th Cir. 2000). Finally, the Court disregards any additional statements of fact contained in a party's response brief rather than in its statement of additional facts. See, e.g., Malec, 191 F.R.D. at 584 (citing Midwest Imports, 71 F.3d at l317).
Ace is a Delaware corporation with its principal place of business in Oak Brook, Illinois. Ace SOF ¶ 1. Ace is a retailer-owned cooperative in the hardware industry that is wholly owned by its independently operated member stores. Id. It purchases merchandise from suppliers in large quantities and resells that merchandise in smaller quantities at favorable prices to its member stores. Id. Marn is a New York corporation with its principal place of business in Cortland, New York. Ace SOF ¶ 2. Prior to October, 2006, Marn did business under the name of "Arnold's Ace Hardware."*fn3 Id.; Defs. Resp. SOF ¶ 2, Ex. A (Dep. of Michael Arnold at 131:3-20).
When approached by Ace in 2003, Marn showed interest in becoming an Ace member store after having problems with another hardware cooperative, Tru-Value Company. Ace SOF ¶ 3; Defs. SOAF ¶ 27. Marn and Ace negotiated and entered into an Ace Membership Agreement (the "Agreement") in Illinois in early 2004. Ace SOF ¶¶ 4, 5; Ace SOF, Ex. 1. Ace initially extended Marn a $35,000 credit limit (Ace SOF ¶ 5), which it subsequently increased to $40,000.00. Defs. Resp. SOF ¶ 5, Ex. B ((December 9, 2004 Letter from Hampton to Arnold) ("As discussed your credit limit has been set at $40,000")).*fn4
At all times relevant to this dispute, Ace used a merchandise order monitoring system referred to as "ADSO" -- Automatic Deletion of Stock Orders -- that deleted merchandise orders when a customer exceeded its credit limit with Ace. Ace SOF ¶ 8. Ace and Marn agree that the ADSO applied when a member, such as Marn, exceeded its credit limit by more than 50%. Ace SOF ¶ 8; Defs. Resp. SOF ¶ 8. ADSO was applied to Marn's orders multiple times over the course the two and a half year relationship. Ace SOF ¶ 8. Although delays in receiving stock orders for merchandise as a result of the application of ADSO to Marn's account occurred over the course of the relationship, Ace always ultimately released the order to Marn, and Marn received the stock that it ordered.*fn5 Ace SOF ¶ 17; Ace Resp. Defs. SOAF ¶ 24, Ex. 5 (Arnold Dep.) at 157.
According to Ace's records, Marn's credit balance increased substantially over the course of 2006.*fn6 Ace SOF ¶ 10, Ex. 4 ¶ 10. In April, 2006, Marn's outstanding balance was $37,561.00. Id. By early September, 2006, Marn reached a balance in excess of $59,510.00. Id. By mid-September, 2006, Ace's records reflect that Marn's outstanding balance reached more than $75,000.00. Id. That balance reflected a stopped payment of $11,697.34 from Marn to Ace. Id.; Defs. Resp. SOF ¶ 10, Ex. E at 3 ((September 11, 2006 Letter from Arnold to Hampton) (Arnold stated that "I stopped payment on the most recent transfer of $11,697.34 in order to recoup some of the funds you have reneged on together with the overdue credits that Ace has continually ignored.")). As of October, 2006, Ace's records reflected that Marn's outstanding balance reached $77,624.00. Ace SOF ¶ 10. The Agreement obligated Marn "[t]o pay all amounts shown as currently due on the Company's [Ace's] billing statement for purchases of merchandise, supplies, and services made by Member." Ace SOF ¶ 21, Ex. 1. The outstanding balance on Marn's statement as of August, 2007, the amount used for purposes of the motion before the Court, was $81,298.03. Ace SOF ¶ 7, Ex. 6. Ace now seeks payment of $71,598.03, reflecting a credit of $9,700 for Marn's Ace stock subtracted from the current outstanding balance due to Ace according to an August, 2007 statement in the amount of $81,298.03. Ace SOF ¶ 7, Ex. 6.*fn7 Any patronage dividends owed to Marn should have been applied to Marn's account as part of an automated process post-termination. Ace Resp. Defs. SOAF ¶ 29; Defs. SOAF, Ex. G (Hampton Dep.) at 69:20-22.
On October 2, 2006, Ace terminated Marn's Ace membership, giving notice that the termination would be effective as of October 5, 2006, and maintaining that the terms of Article III, Section 2 of the Agreement had triggered the termination. Ace SOF ¶ 11, Ex. 9 (Termination Notice, bates-labeled 00193), Ex. 1 (Agreement) at 5; Defs. Resp. SOF ¶ 11. Article III, Section 2 of the Agreement states "upon three (3) days advance written notice to the Member, the Company may terminate this Agreement in the event of a delinquency on the part of the Member in making payment for merchandise or services supplied by the Company to the licensed location in time for receipt thereof by the Company not more than fifteen (15) days after the date on which such payment is due." Ace SOF, Ex. 1 at 5. In addition, the termination notice informed Marn that it must remove "all ACE identification from Store 12220-E and discontinue use of the Ace name and trademarks in connection with Marn's business." Ace SOF, Ex. 10 (Termination Notice), bates-label 00193.
In Article II, Section 7, the Agreement specifies that "[i]f the Member continues, following such termination, to display at or have affixed to the location any such identification signs bearing the marks of the company [Ace], then the Member [Marn] agrees to pay the Company [Ace] a fee in the amount of Ten Thousand Dollars ($10,000.00) per month, payable on the first day of each and every month during which any such identification sign continues to be affixed to or displayed at the licensed location for one or more days." As of June 18, 2007, Marn had not removed Ace signage from its storefront, but promised to do so by June 22, 2007. Ace SOF, Ex. 10 (e-mails between counsel for Ace, David Fish, and counsel for Defendants, Kenneth Runes); Ace SOF, Ex. 5 (June 13, 2007 Arnold Dep. at 127:1-128:25). Article II, Section 7 also specifies that "the Member [Marn] further agrees that it will pay promptly, upon demand, any and all of the Company's [Ace's] costs and expenses, including reasonable attorney's fees, incurred by the Company in exercising any of the aforesaid rights and remedies [in Article II, Section 7.]." Ace SOF, Ex. 1 at 3.
In addition to Marn's contractual obligations to Ace under the Agreement, Arnold individually guaranteed Marn's performance under the Agreement pursuant to a Guaranty of Credit executed in favor of Ace. Defs. Ans.  ¶¶ 19, 22; Ace SOF, Ex. 11 (Guaranty of Credit). Under the Guaranty of Credit, Arnold "unconditionally guaranteed" to Ace and its successors and assigns that Marn would "fully, promptly and faithfully perform, pay when due, and discharge the full amount of all of [Marn's] present obligations" to Ace, as well as "all future obligations to [Ace] hereafter incurred by [Marn] in connection with the purchase of merchandise or supplies from [Ace], or in connection with services render by [Ace] for [Marn]."
Ace SOF, Ex. 11 at 1. Arnold also agreed to pay Ace "all costs and reasonable attorney's fees or expenses incurred as a result of Marn's non-payment." Defs. Ans. ¶ 23.
Marn and Arnold assert in Count I of their counterclaim that Ace breached the terms of the Agreement. See Defs. Am. Counterclaim  ¶ 13. In their pleadings, Defendants did not identify the specific sections of the Agreement that they contend Ace violated. Nor were they required to do so under the notice pleading standard of the Federal Rules of Civil Procedure. See Fed. R. Civ. P. 8(a)(2) ("A pleading that states a claim for relief must contain * * * a short and plain statement of the claim showing that the pleader is entitled to relief."). However, in their interrogatory responses, Defendants identified five provisions of the Agreement that they contend Ace breached. Ace SOF ¶ 14, Ex. 2 at 2. In particular, Defendants alleged that Ace: (i) breached the right to purchase provision set forth at Article I, Section 2 of the Agreement; (ii) misapplied ADSO to Marn's orders resulting in the denial of merchandise contrary to Article I, Section 2; (iii) advertised the Ace Internet site with advertising materials in violation of Article II, Section 3; (iv) refused to issue credits for late payment charges applied against Marn that were the result of a misapplication of ADSO in violation of Article II, Section 11; and (v) failed to deliver "retail support" as promised pursuant to Article I, Section 3. Ace SOF, Ex. 2 at 2.
Summary judgment is proper 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). In determining whether there is a genuine issue of fact, the Court "must construe the facts and draw all reasonable inferences in the light most favorable to the nonmoving party." Foley v. City of Lafayette, Ind., 359 F.3d 925, 928 (7th Cir. 2004). To avoid summary judgment, the opposing party must go beyond the pleadings and "set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (internal quotation marks and citation omitted). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248. The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment is proper against "a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322. The non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "The mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-movant]." Anderson, 477 U.S. at 252.
A. Ace's Breach of Contract Claim against Marn, Inc. under the Agreement
Ace moves for summary judgment on its breach of contract claim on two grounds. First, Ace contends that summary judgment is appropriate on its claim for unpaid merchandise and services under the Agreement in the amount of $71,598.04, plus prejudgment interest pursuant to 815 ILCS § 205/2, because Marn breached its obligations under the Agreement. Second, Ace submits that it is entitled to summary judgment on its claim for signage violation under the terms of the Agreement in the amount of $90,000 for nine months of unlawful use of the Ace name and/or logo at Marn's store.
The Agreement specifies that "all provisions of this Agreement shall be interpreted and construed in accordance with the laws of Illinois." Ace SOF, Ex. 1 (Agreement) at 6, Article V, Section 1(a). Under Illinois law, the elements of a cause of action for breach of contract are "(1) the existence of a valid and enforceable contract; (2) the performance of the contract by plaintiff; (3) the breach of the contract by defendant; and (4) a resulting injury to plaintiff." Priebe v. Autobarn, Ltd., 240 F.3d 584, 587 (7th Cir. 2001) (quoting Hickox v. Bell, 195 Ill. App. 3d 976, 992 (5th Dist. 1990)). Ace and Marn entered into the Agreement at issue in early 2004. Ace SOF ¶ 5. The briefing on summary judgment for Ace's breach of contract claims (Count I) reflects the absence of any dispute between the parties as to the validity and enforceability of the Agreement as a whole.*fn8 The Court's analysis therefore will focus on the last three elements.
1. Ace's Performance under the Agreement
Although neither party directly addressed the issue in the summary judgment briefing, the Court must consider whether Ace performed its obligations under the Agreement, as it must have done to recover for a breach of contract under Illinois law. See Priebe, 240 F.2d at 587. In arguing that summary judgment should be entered in its favor on Defendants' counterclaim, Ace contends that it did not breach any terms of the Agreement, thus necessarily implying that it performed its obligations under the Agreement. Ace Mem. at 9. Ace argues that Defendants' allegations regarding breach are not, in fact, grounded in the terms of the contract itself but rather seek to impute "silent" obligations upon it contrary to Illinois law. Id. (citing Eichengreen v. Rollins, 325 Ill. App. 3d 517, 525 (1st Dist. 2001)). The Court agrees.
The closest that Defendants come to an argument that Ace failed to hold up its end of the bargain under the terms of the Agreement is their contention that Ace misapplied ADSO when Marn's account was current and then failed to credit Marn for late fees stemming from that misapplication under Article II. The same arguments apply to Defendants' claim for a "credit" against amounts owed by Marn for unpaid merchandise. See infra, Section III(A)(2). However, with respect to the former, Defendants concede that Marn received the merchandise that it ordered. Ace Resp. Defs. SOAF ¶ 24, Ex. 5 (Arnold Dep.) at 157. And with respect to the latter, Defendants fail to point to any late fees assessed against Marn in the record. In fact, Defendants do not appear to dispute that the terms of the Agreement itself were not breached. See Defs. Opp. at 7-8. Instead, they acknowledge that the terms favor Ace, but suggest that this case is appropriate for consideration of the "provisional admission approach to contract construction" because "[D]efendants have created multiple issues of fact as to whether ACE made multiple promises in inducing MARN to become an ACE member, then 'pulled the rug out' from MARN after it became a member." Id.
Defendants' response raises two issues. First, Defendants' argument that Ace failed to perform obligations to pursuant to "multiple promises inducing Marn to become an Ace member" is not at issue in this case. That argument suggests that Defendants were fraudulently induced into the agreement-and this Court already has ruled that no claim for fraudulent inducement exists.*fn9 See , Order dated July 19, 2007. The question for purposes of considering whether Ace is entitled to summary judgment on its breach of contract claim is whether Ace performed its obligations under the terms of the Agreement-and any failure to follow through on promises made prior to the agreement is irrelevant to that inquiry.
Second, Marn's suggestion that this Court follow the "provisional admission approach" and consider extrinsic evidence -- i.e. evidence outside of the four corners of the contract -- to determine whether Ace complied with the Agreement raises additional problems. The Illinois Supreme Court has not adopted the provisional admission approach in lieu of the more traditional "four corners rule" of contract interpretation where the contract is facially unambiguous. See River's Edge Homeowner's Ass'n v. City of Naperville, 353 Ill. App. 3d 874, 879 (2nd Dist. 2004) (citing Air Safety, Inc. v. Teachers Realty Corp., 185 Ill.2d 457 (1999)) (noting the Illinois Supreme Court had not "squarely addressed the validity of the provisional admission approach in Illinois" in Air Safety). In Air Safety, the Illinois Supreme Court forestalled a determination of whether the provisional admission approach should be adopted in Illinois because it found that approach was inapplicable where the parties' contract contained an explicit integration clause. Air Safety, 185 Ill.2d at 464. However, the Illinois Supreme Court aptly summarized the rule as follows:
Under the provisional admission approach, although the language of a contract is facially unambiguous, a party may still proffer parol evidence to the trial judge for the purpose of showing that an ambiguity exists which can be found only by looking beyond the clear language of the contract. [Citation.] Under this method, an extrinsic ambiguity exists 'when someone who knows the context of the contract would know if the contract means something other than what it seems to mean.' [Citation.]
Id. at 465. Here, Defendants acknowledge that the contract is facially unambiguous as a matter of law and fail to point to any specific extrinsic evidence for the Court to consider whether an ambiguity exists outside the plain meaning of the contract. Accordingly, even if the Court were to follow the provisional admissions approach, Defendants have not offered any evidence in support of their proposed construction. The Court is not required to "scour the record" to find such evidence; it is the burden of the party contesting summary judgment to point to information to show that a genuine issue of fact exists. Ruffin-Thompkins v. Experian Info. ...