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Echo, Incorporated v. Timberland Machines &Irrigation

January 18, 2011

ECHO, INCORPORATED, PLAINTIFF/COUNTER-DEFENDANT,
v.
TIMBERLAND MACHINES &IRRIGATION, INC., DEFENDANT/COUNTER-PLAINTIFF.
TIMBERLAND MACHINES & IRRIGATION, INC.,
PLAINTIFF,
v.
LAWN EQUIPMENT PARTS COMPANY, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Charles P. Kocoras, District Judge:

MEMORANDUM OPINION

This case comes before the court on three motions. First, Plaintiff/Counter-Defendant Echo, Incorporated moves for summary judgment on Count III of its Complaint and Count I of the Counterclaim filed by Defendant/Counter-Plaintiff Timberland Machines & Irrigation, Inc. Second, Echo, Incorporated also moves to strike certain portions of the affidavits and exhibits submitted by Timberland Machines & Irrigation, Inc. in opposition to the motion for summary judgment. Finally, Third-Party Defendant Lawn Equipment Parts Company asks that we grant its motion for summary judgment on Counts V, VI, and VII of Timberland's complaint. For the reasons set forth below, Echo's motion for summary judgment is granted and its motion to strike is granted in part and denied in part. LEPCO's motion for summary judgment is granted.

BACKGROUND

Defendant/Counter-Plaintiff Timberland Machines & Irrigation, Inc. ("TMI") is a Delaware corporation whose principal place of business was located in Enfield, Connecticut. Mark Zeytoonjian served as President and Secretary of the company. TMI operated as two divisions: the Timberland Machines division acted as a distributor of outdoor power equipment while the Sprinkler House division was principally involved in the distribution of irrigation equipment.

On August 1, 2004, TMI entered into a Distributor Agreement with Plaintiff/Counter-Defendant Echo, Incorporated ("Echo"). Echo is an Illinois-based supplier of outdoor power equipment products. Under the Distributor Agreement, TMI acted as a distributor of Echo equipment within a defined territory that included Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont, and portions of New York. The mechanics of the distributorship remained the same from the time the Distributor Agreement was signed in August 2004 until its termination in October 2008. Each month, TMI submitted purchase orders to Echo for Echo-brand products. Echo accepted the orders and subsequently issued invoices to TMI for payment. Echo had a practice of charging interest as late charges on all past due balances owed from TMI to Echo; the rate charged consisted of the prime rate of interest plus 4%.

Though connected to Echo by nature of their agreement, TMI maintained its own identity apart from its relationship with Echo. TMI did not use the Echo name or Echo trademarks as part of its company or trade name. Nor did TMI employ Echo's name on its stationery or when answering the telephone. TMI's personnel generally did not carry business cards containing the Echo name, trademarks, or logo when dealing with dealers and customers.*fn1 TMI also acted as a distributor for a number of other suppliers including Exmark, Billy Goat, MTD/White Outdoor, Columbia, Snow Ex, Kipor Generators, Yamaha Generators, Brown, and Oregon Forestry. As a distributor with many suppliers, TMI promoted Echo products in much the same way as it promoted goods from other manufacturers. TMI exhibited Echo displays in its facilities but also exhibited similar materials from other manufacturers such as Exmark and Billy Goat and did not feature one supplier's display at the expense of others. Though TMI staff would occasionally wear clothing bearing Echo's name, they also dressed in apparel containing the brand of TMI's other suppliers just as often. TMI sent out Echo product literature but also circulated other manufacturers' literature with the same relative frequency.*fn2

TMI's financial statements also speak to the character of the relationship between the two companies. From 2004 to 2008, TMI's total gross sales of Echo products were continually outpaced by its sales of goods from another manufacturer, Exmark. Echo product sales only comprised 30 to 35 percent of TMI's total business during the relevant time period. An analysis of TMI's gross profits reveals a similar pattern. Gross profits derived from Exmark goods exceeded the portion of gross profits attributable to sales of Echo products each year from 2004 to 2008. The percentage of TMI's total gross profits coming from Echo sales ranged from 29.69% in 2006 to 34.54% in 2008.

Although the relationship between TMI and Echo proceeded smoothly initially, by August 2008 Echo decided to terminate the Distributorship Agreement with TMI because of issues with the distributor's business model and its debt burden. Echo provided TMI with written notice of the Distributor Agreement's termination on October 21, 2008; the termination became effective on December 21, 2008. After receiving notice of termination from Echo, TMI failed to pay Echo any of the invoices due by November 25, 2008.

After making the decision to terminate TMI, Echo contacted Jeff Clark, the President of Third-Party Defendant Lawn Equipment Parts Company ("LEPCO"), to ask whether he would be interested in assuming the sales responsibilities in TMI's sales territory. At Echo's request, LEPCO met with Echo representatives on September 30, 2008, to discuss LEPCO's ability to assume responsibility for the additional territory. As a result of those discussions, Echo decided to transfer responsibilities for distribution of its products in TMI's former sales territory to LEPCO.

On December 11, 2008, Echo filed suit against TMI asserting causes of action for breach of contract, goods sold and delivered, and an account stated claim. Echo seeks damages in the amount of an unpaid sum owed to Echo by TMI plus interest. On December 31, 2008, TMI filed its answer and asserted a number of counterclaims against Echo. Count I of the Counterclaim asserts that Echo terminated the Distributor Agreement with TMI in violation of the Connecticut Franchise Act, Conn. Gen. Stat. § 42-133f. On December 23, 2008, eight days before filing its Answer to Echo's Complaint, TMI filed suit against LEPCO. In its Complaint against LEPCO, TMI asserts claims for tortious interference with contract, unjust enrichment, and a cause of action under the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110b.

Echo now moves for summary judgment on Count III of its Complaint as well as Count I of TMI's Counterclaim. Echo also moves to strike various affidavits, exhibits, and statements of fact submitted by TMI. LEPCO moves for summary judgment on Counts V, VI, and VII of TMI's Complaint against it.

LEGAL STANDARD

Summary judgment is appropriate when "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 summary judgment as a matter of law." Fed. R. Civ. P. 56(c). A genuine issue of material fact exists when the evidence is such that a reasonable jury could find for the non-movant. Buscaglia v. United States, 25 F.3d 530, 534 (7th Cir. 1994). The movant in a motion for summary judgment bears the burden of demonstrating the absence of a genuine issue of material fact by specific citation to the record; if the party succeeds in doing so, the burden shifts to the non-movant to set forth specific facts showing that there is a genuine issue of fact for trial. Fed. R. Civ. P. 56(e); Celotex Corp. v. Catrett, 477 U.S. 317, 325 ...


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