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Jada Toys, Inc. v. Chicago Import

September 18, 2009


The opinion of the court was delivered by: Magistrate Judge Geraldine Soat Brown


Plaintiff/Counter-Defendant Jada Toys, Inc. brought this action alleging seven breach of contract claims against Defendant/Counter-Plaintiff Chicago Import, Inc. (Second Am. Compl. ¶¶ 5-69.) [Dkt 143.] Chicago Import filed a counterclaim alleging that Jada breached a modified contract between the parties. (Third Am. Countercl. ¶¶ 12, 13.) [Dkt 145.] Federal jurisdiction in this case is premised on diversity of citizenship. 28 U.S.C. § 1332. Jada moves for summary judgment on all seven of its breach of contract claims [dkt 152], and Chicago Import moves for partial summary judgment on the issue of whether Jada waived its right to collect interest and attorneys' fees [dkt 157]. Chicago Import's motion for partial summary judgment is essentially a motion for summary judgment on its affirmative defense of waiver.

The parties have consented to the exercise of jurisdiction by a Magistrate Judge pursuant to 28 U.S.C. § 636(c). [Dkt 32.] For the reasons set out below, Jada's motion for summary judgment on Counts I through VII is granted on the issue of liability, and Chicago Import's cross-motion for partial summary judgment is denied. Certain findings of fact are also made pursuant to Fed. R. Civ. P. 56(d)(1).


This is a breach of contract case. The parties in this case had a business relationship over the course of eight years, entering into hundreds of contracts during that time for the sale and purchase of toy cars, ultimately amounting to more than $4,000,000 in sales. In 2006, Chicago Import refused to pay for the last several orders it had placed. Jada filed suit for breach of contract, claiming damages in the amount of the unpaid invoices as well as contractual interest and attorneys' fees. Chicago Import counterclaimed, contending that Jada owes it a credit based on a past agreement between the parties which would more than offset the amount due on the unpaid invoices. Chicago Import also asserted an affirmative defense of waiver, contending that Jada waived its right to collect interest and attorneys' fees.

A. The Parties' Business Dealings

Jada is a California corporation with a principal place of business in City of Industry, California, and is in the business of designing, manufacturing and selling toy products, including toy cars. (Def.'s LR Resp. ¶ 1, p. 1; Pl.'s LR Resp. ¶ 2.) Chicago Import is an Illinois corporation with its principal place of business in Chicago, and is engaged in domestic importing and wholesale distribution of general merchandise, including toy cars. (Def.'s LR Resp. ¶ 2, p. 1; Pl.'s LR Resp. ¶ 1.) The parties' references to "Jada" include Jada's predecessor, a company called "BesToys, Inc." or "Best Toys, Inc." (Pl.'s LR Resp. ¶ 3.)

The parties agree that the Illinois Uniform Commercial Code (810 Ill. Comp. Stat. § 5/1-101 et seq.), which governs transactions involving the sale of goods, applies to the transactions at issue here. (Pl.'s Mem. at 3, 4; Def.'s Resp. at 5 [dkt 158]; Pl.'s Reply at 1, 5-6.)*fn2 The parties are merchants within the meaning of U.C.C. § 2-207 (810 Ill. Comp. Stat. § 5/2-207). (Answer to Second Am. Compl. ¶ 5.) [Dkt 146.]

The parties began doing business with each other in late 1998, and their relationship grew over time as Chicago Import continued to purchase more toy cars from Jada, ultimately becoming Jada's largest purchaser in the Midwest. (Pl.'s LR Resp. ¶¶ 3, 4.) Between 1999 and 2006, Chicago Import placed hundreds of orders with Jada, most of which were placed by telephone. (Pl.'s LR Ex. 2, Decl. of May Li ¶¶ 4, 14; Def.'s LR Ex. B, Dep. of Ashokkumar Punjabi at 96.) Chicago Import paid more than $4,000,000 to Jada in sales of toy cars during this time. (Pl.'s LR Resp. ¶ 12.)

For each order placed by Chicago Import, Jada sent Chicago Import a written confirmation in the form of an invoice, and then promptly shipped the goods ordered, which Chicago Import accepted. (See generally Def.'s LR Resp. ¶¶ 2-61.) The invoices sent by Jada contained the following information: item ordered (e.g., '63 Corvette Stingray), quantity ordered (e.g., 160), quantity shipped (e.g., 160), price per unit (e.g., $5.50), total amount billed for that particular line item (e.g., $880.00), and total amount of the invoice, which consisted of the sum of each total line item amount (e.g., $50,128.00). (Li Decl. Ex. A.) The invoices also listed the date of each invoice and date of order. (Id.) The invoices were clear as to the price being charged for each item ordered. (See id; Def.'s LR Resp. ¶¶ 13, 22, 31, 40, 49, 58.) In addition, the invoices contained the following provision on the front: "Delinquent accounts are subject to a service charge of 11/2 % per month. If it becomes necessary to file suit for the collection of any account, costs including reasonable attorneys' fees shall be paid by the buyer." (Def.'s LR Resp. ¶ 5; Pl.'s LR Exs. 2a-g.) That provision was included on each of the hundreds of invoices sent to Chicago Import during the course of their relationship. (Def.'s LR Resp. ¶ 6; Punjabi Dep. at 96; Li Decl. ¶¶ 4, 14; Def.'s LR Resp. ¶¶ 14, 23, 32, 41, 50, 59.)

B. Chicago Import's Payments to Jada

As evidence on the motion, Chicago Import submitted two "ledgers," documents that it used internally in its business, reflecting various aspects of its account with BesToys and Jada between December 2002 and April 2006. (Def.'s LR Ex. J; Suppl. Aff. of Ashokkumar Punjabi Exs. A, B [dkt 169].)*fn3 The ledgers show, in columns, the date and amount of each invoice (e.g., from the previous example, $50,128.00), amounts paid by Chicago Import and dates of such payments, and running balances owed by Chicago Import after each invoice was received or payment was made. (Id.) The ledgers indicate that Chicago Import's payments to Jada were "on account" rather than invoice basis. For instance, between March 25, 2003 and May 2, 2003, Jada sent Chicago Import nine separate invoices for amounts ranging from $1,251.00 to $18,657.60, yet Chicago Import made only one payment during that time (as opposed to nine separate payments), on May 20, 2003, for $50,000. (Punjabi Suppl. Aff. Ex. B.) In that example, the ledger reflects that Chicago Import's balance before submitting that payment was $63,448, and after making that payment was $13,448. (Id.) The ledgers reflect that Chicago Import made continual payments on its orders against the total sum amounts stated in the invoices throughout its relationship with Jada. (Id.; see also Def.'s LR Ex. A, Aff. of Ashokkumar Punjabi ¶ 23; Punjabi Suppl. Aff. ¶¶ 10-14; Def.'s LR Stmt. ¶ 22 [dkt 157].) According to the ledgers, Chicago Import made its last payment to BesToys on October 29, 2004 and to Jada on April 17, 2006. (Punjabi Suppl. Aff. Ex. A at 3, Ex. B at 7.)

Chicago Import also submitted copies of what appear to be Jada's records of Chicago Import's payment history, which reflected the same information contained in Chicago Import's ledger (i.e., invoice date, invoice amount, amounts paid by Chicago Import, and running balances), as well as a handwritten request that Chicago Import send some money. (Def.'s LR Ex. K; Punjabi Suppl. Aff. Ex. C.)

C. The Parties' Meeting in October 2002

In October 2002, Eddie Punjabi, Chicago Import's President, met with Jack Li, Jada's President, and Eddie Chen, Jada's Sales Manager, at Chicago Import's warehouse in Chicago. (Pl.'s LR Resp. ¶¶ 5, 6.) At the meeting, Mr. Punjabi informed Mr. Li and Mr. Chen that he had discovered that Jada was selling toy cars to M & J Toys ("M & J"), a distributor in California, at a lower price than it was selling to Chicago Import. (Pl.'s LR Resp. ¶¶ 5, 7.) According to Mr. Punjabi, Mr. Li promised at the meeting to modify the parties' current pricing arrangement to sell toy cars to Chicago Import at the same or lower price as that being charged to M & J. (Punjabi Aff. ¶ 10; Punjabi Dep. at 87-88, 91-92, 94.) Jada disputes that testimony (Pl.'s LR Resp. ¶¶ 6, 8), although Mr. Chen (Jada's Sales Manager) testified that Mr. Li did make a promise at the meeting to give Chicago Import "the best price... the lowest price." (Pl.'s LR Resp. ¶ 9; Def.'s LR Ex. D, Dep. of Eddie Chen at 46, 58.) Mr. Chen further testified, though, that by "best" or "lowest" price, Mr. Li meant the best price that Jada could give the Chicago Import account, which was not necessarily the same price it could give to the M & J account. (Chen Dep. at 52-53.) Mr. Chen conceded the latter distinction was not conveyed to Mr. Punjabi. (Chen Dep. at 53; Def.'s LR Ex. C, Dep. of Jack Li at 55.)*fn4 Mr. Punjabi testified that, in addition to agreeing to modify the parties' pricing arrangement going forward, Mr. Li promised to give a credit to Chicago Import for the difference in prices charged to M & J and Chicago Import for past transactions of toy cars. (Punjabi Aff. ¶ 11; Punjabi Dep. at 87-88, 92.) According to Mr. Punjabi, Mr. Li promised that "by the end of 2002, he would take a look at all of the invoices and would give Chicago Import a credit for the difference in price between the Toy Cars sold to M & J Toys and the Toy Cars sold to Chicago Import." (Punjabi Aff. ¶ 11.) Jada disputes that testimony as well. (Li Dep. at 45, 49, 55; Chen Dep. at 48-49.)

Although Jada disputes that Mr. Li made either of the promises claimed by Mr. Punjabi, the court will construe the facts regarding that dispute in favor of the non-movant, Chicago Import, for purposes of Jada's motion only, and assume that those promises were made. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (the court must construe all facts and draw all reasonable inferences in favor of the non-moving party in determining whether a genuine issue of material fact exists).

D. Subsequent Communications Between Parties Regarding The Price-Credit Dispute

After the parties' discussion in October 2002, Jada never issued a credit to Chicago Import for its past purchases of toy cars. (Pl.'s LR Resp. ¶¶ 13, 21; Punjabi Aff. ¶ 22.) Jada also never lowered Chicago Import's prices to match M & J's prices. (Pl.'s LR Resp. ¶ 12.) Over the next three and a half years, Chicago Import continued to purchase toy cars from Jada at a higher price than M & J was paying, but contends that it was unaware it was continuing to pay more for toy cars than M & J was paying. (Punjabi Aff. ¶ 13.) Jada disputes that contention, pointing to Mr. Punjabi's testimony that he reviewed the invoices received from Jada. (Punjabi Dep. at 96-97.) However, while Mr. Punjabi admitted that he had reviewed the invoices, he said he was unaware of what price Jada was charging M & J. (Id.)

Mr. Punjabi complained to Mr. Chen on a regular basis and left several unanswered messages for Mr. Li regarding the credit for past invoices. (Pl.'s LR Resp. ¶ 13; Punjabi Aff. ¶ 14.) In addition, Mr. Punjabi sent letters to various Jada representatives on that topic. On July 1, 2005, Mr. Punjabi sent a letter to Mr. Li requesting that he review Chicago Import's past invoices "in order to match the price on line with M & J" and provide a credit. (Def.'s LR Ex. E.) Finally, Harvey Luong, Jada's CFO, responded on September 15, 2005, stating that Jada had reviewed Chicago Import's account and concluded that the price being charged to Chicago Import was the "best price" based on Jada's policy and company's guideline. (Pl.'s LR Ex. 2h.) Mr. Luong further stated that Jada did not have a "price protection" policy that would allow customers to obtain a credit for prior invoices. (Id.) Mr. Luong concluded that he would be happy to discuss the "pricing issue for future shipments." (Id.)

The next written communications in the record are letters from Mr. Punjabi to various personnel at Jada dated September 22, 2005, May 15, 2006, June 6, 2006, and June 12, 2006, in which Mr. Punjabi reiterated his concern regarding the "price-credit" dispute, and stated that he had tried to contact Mr. Li several times to resolve the issue but was unsuccessful. (Def.'s LR Exs. F, G, H, I; Pl.'s LR Resp. ¶¶ 15-20.) On June 15, 2006, Jada's attorney told Mr. Punjabi in a letter that Chicago Import's request for a credit on past invoices was declined. (Pl.'s LR Ex. 2i.)

E. The Contracts At Issue And Present Motions Before The Court

Although Chicago Import made continual payments on its account with Jada, with a final payment of $40,000 on April 17, 2006, the parties agree that Chicago Import failed to pay the amounts charged for Chicago Import's last six orders, which were placed on March 27, April 3, April 6 (two separate orders), April 12, and April 14, 2006, as well as the amount charged for an order placed prior to that, on August 18, 2004. (Def.'s LR Resp. ¶¶ 1, 10, 19, 28, 37, 46, 55.)*fn5 The contract prices for the orders placed on those dates were $16,999.84, $21,801.50, $33,960.60, $6,556, $1,760, $46,428, and $8,073.60, respectively. (Def.'s LR Resp. ¶¶ 9, 18, 27, 36, 45, 54, 63.)*fn6 Chicago Import failed to pay the amounts on each of those invoices, despite the fact that Jada sent written confirmations of those orders to Chicago Import and promptly shipped the goods ordered, just as it normally did when Chicago Import placed an order. (Def.'s LR Resp. ¶¶ 2, 3, 9, 11, 12, 18, 20, 21, 27, 29, 30, 36, 38, 39, 45, 47, 48, 54, 56, 57, 63.)

Viewing each unpaid invoice as a separate contract, Jada alleges that Chicago Import breached seven contracts, and Jada filed suit for breach of contract. Jada also claims that as of January 15, 2009, it has incurred $76,013.57 in attorneys' fees and costs in connection with this litigation, and $67,946.45 in contractual interest on the unpaid invoices. (Pl.'s LR Stmt. ¶¶ 65, 66; Pl.'s LR Ex. 3, Decl. of Dun Ren Tzeng ¶¶ 3, 4; id. Exs. 2a-g.)

Chicago Import filed a counterclaim, alleging that Jada owes it damages in excess of $500,000 for failing to charge Chicago Import the same prices that were charged to M & J or issue a credit as it contends was agreed by the parties in October 2002. (Def.'s LR Resp. ¶ 9; Punjabi Aff. ¶ 24; Third Am. Countercl. ¶¶ 12, 13, 14.) Chicago Import further claims that Jada waived its right to collect attorneys' fees or interest because Jada never attempted to collect interest or attorneys' fees from Chicago Import even though its account with Jada was delinquent on a continuous basis from 1999 to 2006. (Def.'s LR Stmt. ¶ 22; Punjabi Aff. ¶ 23.) Jada first asserted its claimed right to collect interest and attorneys' fees in 2006 when Chicago Import failed to pay for the contracts at issue. (Pl.'s LR Resp. ¶ 22; Pl.'s LR Exs. 2i, 2j.)


The court may properly grant summary judgment "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. ¶ 56(c). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248. In determining whether a genuine issue of material fact exists, the court must construe all facts and draw all reasonable and justifiable inferences in favor of the non-moving party. Id. at 255. The court may not make credibility determinations, "choose between competing inferences" or weigh the evidence. Abdullahi v. City of Madison, 423 F.3d 763, 773 (7th Cir. 2005). The moving party bears the initial burden to demonstrate the absence of a genuine issue of material fact and that judgment as a matter of law should be granted in the moving party's favor. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has met the initial burden, the non-moving party must designate specific facts showing that there is a genuine issue for trial. Id. at 324. The non-moving party may not rest upon the mere allegations in the pleadings or conclusory statements in affidavits. Id. The non-moving party must present evidence of "evidentiary quality" demonstrating the existence of a genuine issue of material fact. Winskunas v. Birnbaum, 23 F.3d 1264, 1267-68 (7th Cir. 1994).

On cross-motions for summary judgment, each party's motion is considered separately and all reasonable inferences are drawn against the party whose motion is under consideration. Mote v. Aetna ...

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