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Export Development Canada v. Globalone Forest Products

September 22, 2008

EXPORT DEVELOPMENT CANADA AS SUBROGEE OF NORTHCOAST TRADING LTD., AND NORTHCOAST TRADING, LTD., PLAINTIFFS,
v.
GLOBALONE FOREST PRODUCTS, INC., DEFENDANT.



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

MEMORANDUM OPINION AND ORDER

Plaintiffs in this case are Northcoast Trading Ltd. ("Northcoast"), a Canadian based company involved in the buying and selling of lumber and lumber products, and Export Development Canada, Northcoast's subrogee. Defendant Global One Forest Products, Inc. ("Global One") is a Chicago-based company also in the business of buying and selling lumber and lumber products. Plaintiffs filed this action for payment for certain lumber products it shipped to Defendant pursuant to a purchase order. They now move for summary judgment on their claims of breach of contract and account stated. For reasons set forth here, the motion is denied.

FACTS*fn1

Northcoast is a Canadian corporation in the business of buying and selling lumber and lumber products. (Pltf. 56.1(b) ¶¶ 6-7.) Alfred Loewen is the president of Northcoast. (Pltf. 56.1(b) ¶ 8). Global One is incorporated in Illinois and has its principal place of business in Chicago. (Lehtman Dep. at 33-35; Pltf. 56.1(b) ¶¶ 3, 56.) Simon Lehtman is the president of Global One. (Lehtman Aff. ¶ 1.) Although, as discussed below, Defendant contends that certain earlier transactions are relevant here, it is undisputed that the transaction at issue in this case was the first business contact between the corporate parties to this lawsuit, and that it was brokered by Lenny Popok. (Pltf. 56.1(b) ¶19; Loewen Dep. at 27-31; Lehtman Dep. at 45-48.) Popok, whom Loewen had known for ten to twelve years (Loewen Dep. at 31), was an independent sales agent who represented Northcoast, though he had no authority to negotiate independently on Northcoast's behalf. (Plaintiff's Amended Answers to Defendant's First Set of Interrogatories, Ex. 4 to Defendant's Memorandum; Pltf. 56.1(b) ¶ 18.) Popok approached Loewen in 2005 to discuss the possibility of selling Northcoast's products. (Pltf. 56.1(b) ¶¶ 14-18.) Northcoast asserts that Popok brought several proposals to Northcoast, but the transaction with Global One was the only business that Mr. Popok successfully negotiated. (Loewen Dep. at 29; Pl. L.R 56.1(b) ¶¶ 16-17).

Loewen testified that he first received a fax from Global One requesting a proposal of profiles and prices for products in Northcoast's inventory, and that Northcoast submitted a response to Global One. At his deposition, Loewen was unable to recognize the date of the fax but guessed that Northcoast had received it in November 2005. (Loewen Dep. at 34-35.) According to Loewen, Global One corresponded through Popok that Northcoast's proposed prices were too high, and Loewen directed Popok to ask Global One for a counteroffer. (Id. at 36-37.) At some point subsequent to this exchange, Loewen recalls that the parties reached an agreement on price, and Loewen directed Popok to ask Global One for a purchase order. (Id. at 38-40.) Upon receiving what he characterizes as the purchase order, Loewen testified, he made a phone call to Global One, using the phone number listed on the purchase order, and spoke with a gentleman named Mohammed, who confirmed that Global One had issued the purchase order and that the prices and products listed were correct. (Id. at 41-42.) Although Loewen does not recall obtaining Mohammed's last name, he does recall that Mohammed confirmed that he was the person negotiating the business for Global One. (Id. at 44-45.) Loewen did not speak to anyone else at Global One. (Id. at 48.) Loewen testified that he had two subsequent phone conversations with Mohammed in order to settle on terms of payment, and finally confirmed the business with Global One in the third phone conversation, after he had checked Global One's credit. (Id. at 45-48.) Northcoast then shipped the goods requested in the purchase order in three separate truckloads and sent invoices for each of the three shipments. (Id. at 49, 52; Loewen Aff. ¶ 14.) Loewen claims that after receiving the invoices, someone at Global One--Loewen did not know who--contacted Northcoast's controller to request an extension as the payments were coming due. (Loewen Dep. at 53-54.)

Northcoast has not received payment for the goods identified in the invoices, and Plaintiffs (Northcoast and its subrogee, Export Development, who insured the account receivable) claim that the principal balance owing to them for the goods shipped is $95,780.25 plus accrued interest (Loewen Aff. ¶¶ 17, 19, 21-23.)

Defendant Global One acknowledges it received the goods identified in the invoices (Def. 56.1(b) Resp. ¶ 32), but its account of the events resulting in that shipment bears no resemblance to Plaintiffs' version. According to Global One, the document to which Plaintiffs refer as a purchase order was no more than a list prepared by Global One's president, Simon Lehtman, who claims he did not send the document to Northcoast. (Def. 56.1(b) Resp. ¶¶ 21, 23.) Global One contends the goods that Northcoast delivered were replacement goods -- shipped to fulfill a previous contract in which Global One's predecessor, P.L. Porcelain Laboratories, paid money but never received the products it ordered. Simon Lehtman's father, Philip Lehtman, was the owner and president of Porcelain; Simon Lehtman acted as the company's general manager. (Lehtman Dep. at 11-12.) Porcelain had been formed as a dental laboratory, but according to Lehtman, an individual named Dmitri Belokopytov approached the Lehtmans in 2002 and persuaded them to enter the lumber products market. Through Belokopytov, the Lehtmans placed an order for various wood products with a company called Maher Forest Products, Ltd. ("Maher"). (Lehtman Dep. at 13-15, 25.) The Lehtmans understood that Belokopytov was soliciting business on behalf of Maher, and that Belokopytov would sell the raw materials to Maher, who would then send the finished goods to the Lehtmans for them to sell. (Lehtman Dep. at pp.15, 18, 91.) Belokopytov proposed a deal in which there would be three shipments of goods; Belokopytov would accept payment for the goods and would, in turn, transmit the funds to Maher. (Lehtman Aff. ¶¶ 4-6.) The Lehtmans received the first shipment from Maher, but Maher claimed it had not received payment for any of the goods and refused to deliver the second and third shipments. (Id. at ¶ 7.) Phillip Lehtman made an additional payment directly to Maher, but Maher nevertheless insisted that additional payments were still due, and the Lehtmans never received the second and third shipments. (Id. at ¶ 8.) The matter was never resolved. (Lehtman Dep. at 27-28.) Within the next year, Philip Lehtman helped found Global One, and upon its founding, named Simon Lehtman its president. (Lehtman Dep. at 8.)

According to Defendant, what connects this prior transaction to the transaction at issue in this case is the fact that Popok and Loewen were involved in both transactions. Lehtman testified that Popok was the Lehtmans' intermediary with Terry Maher and Belokopytov. (Lehtman Dep. at 21-22). Defendant notes that the original invoices from Maher identify Loewen as a salesman, and e-mail correspondence between Terry Maher and the Lehtmans also reflect Loewen's involvement in the transactions. (Def. 56.1(b)Additional Facts ¶ 2.) According to Lehtman, Global One had no direct contact with either Northcoast or Loewen. (Lehtman Dep. at 44-45.) In fact, Lehtman insists, he had never heard of Northcoast until Global One received invoices from Northcoast. (Id.) Lehtman claims Popok approached him (the court presumes this was prior to December 2005) and told him that he could make arrangements to provide Global One with the products it had purchased but never received. (Lehtman Dep. at 47-48.) Aware that Popok was involved in the earlier transactions, Lehtman accepted Popok's proposal in the belief that Global One would be receiving the product for which it had already paid. (Lehtman Dep. at 83). Lehtman recalls Popok telling him that Loewen (whom Lehtman recalled from his earlier dealings with Maher) was in possession of the inventory. (Lehtman Dep. at 45, 6.) Thus, Lehtman explained, "[Popok] knew the money [Lehtman] had provided and what they were supposed to receive, and [Lehtman] assumed that [Popok] knew the goods were laying in Al Loewen's possession, and somehow they put this plan together in order to get rid of them." (Lehtman Dep. at 84.)

Lehtman complied with Popok's instructions: Lehtman first provided Popok with an initial written request with attention to Loewen, and later provided a formal request, listing the goods he expected to receive. At Popok's direction, Lehtman set a price for the goods, but kept the total below $100,000, purportedly in order to permit Loewen to "write off" the transaction as a loss. (Lehtman Dep.at 45, 64, 50-51.) The deal made sense, Lehtman testified, because Loewen had had some involvement in the earlier transaction, and therefore knew that Lehtman had already paid for the materials. Moreover, Lehtman observed, by the time the parties negotiated this second deal, the materials at issue had little value in the marketplace and Loewen was likely unable to dispose of them. (Lehtman Dep. at 81-82.) Lehtman says he gave the document that Plaintiffs characterize as a purchase order to Popok and no one else. (Id. at 56.) The document is not addressed to any recipient, and Lehtman did not know what Popok intended to do with it. (Lehtman Dep. at 64.) Lehtman testified that he never spoke to Loewen and that he (Lehtman) "is the company" -- that is, there are no other sales personnel, no directors, and no other staff, and Lehtman himself deals directly with others on Global One's behalf. (Lehtman Dep. at 37-39.) In his affidavit, Lehtman stated that no person named Mohammed or calling himself by that name has ever been employed by Global One. (Lehtman Aff. ¶ 15.)

Lehtman acknowledges that Global One received the goods and did not pay Northcoast. He testified that when he received Northcoast's invoices, Lehtman assumed the invoices were a formality required to enable Loewen to write off the shipment as a loss. (Lehtman Dep. at 74.)

Lehtman testified that the products Global One received from Northcoast in 2006 are the same products identified in the invoices that Maher issued to Porcelain in 2003. (Lehtman Dep. at 78.) Lehtman had never heard of Northcoast before he received the Northcoast invoices; his first contact with Northcoast was a phone call from an individual whose first name was Peter [presumably, Peter Loewen], who inquired about payment. (Lehtman Dep. at 46, 75.) Lehtman responded that there would be no payment because the goods were covered by past consideration. (Id.) Lehtman testified that he received no other correspondence after the initial contact from Peter Loewen, and only realized that Northcoast was actually expecting payment when this lawsuit was filed. (Lehtman Dep. at 76.) When he asked Popok why Northcoast had filed the lawsuit, Lehtman recalls, Popak answered by telling him that "basically the insurance company [presumably Plaintiff Export Development Canada] was forcing Al to do it." (Lehtman Dep. at 79-80.)

Neither party has offered any testimony or affidavit from Popok or from Belokopytov.

DISCUSSION

I. Summary Judgment ...


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