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Tas Distributing Company, Inc v. Cummins

September 1, 2011

TAS DISTRIBUTING COMPANY, INC., PLAINTIFF,
v.
CUMMINS, INC., DEFENDANT.



The opinion of the court was delivered by: Joe Billy Mcdade United States Senior District Judge

E-FILED Thursday, 01 September, 2011 11:07:39 AM

Clerk, U.S. District Court, ILCD

OPINION and ORDER

Before the Court is the Motion for Clarification (Doc. 279) filed by Defendant, Cummins Inc., on December 29, 2010.*fn1 The Motion is GRANTED.

INTRODUCTION

In May 5, 2010 (Doc. 253) and May 19, 2010 (Doc. 254) Orders, this Court considered Plaintiff's claims (in Counts I and III) that Defendant breached the parties' License Agreement by failing to pay royalties on the sale of Original ECM Products. In Count I, Plaintiff alleges that it is owed a royalty on the sale of engines equipped with TAS technology in the forms of ICON and the ISF Plus System. Plaintiff alternatively argues in Count III that, assuming that the ISF Plus System does not contain TAS technology, it directly competes with TAS technology and Cummins therefore violated a "reasonable efforts" clause in the License Agreement.

This Court found that the claim in Count I, that related to whether Cummins owed royalties on Original ECM Products in the form of ICON, was barred by res judicata. First, "Original ECM Product" was defined as every engine that contained an ECM that contained ICON programming. The practical effect of this ruling was that, pursuant to the License Agreement, Cummins would have owed TAS a royalty on each ISX and ISM engine that contained the CM 570 ECM. Second, this Court found that any such claim was barred by res judicata because TAS knew or should have known about this claim during the pendency of TAS I. The Court pointed out that during TAS I, there was deposition testimony and other evidence that should have made TAS aware that its technology was still housed in the ECM of engines produced by Cummins. The Court stated that "[b]ecause TAS was aware in TAS I that its technology was located in Cummins' engines, it should have and could have sought royalties at that time." (Doc. 253, at p. 26).

In Count I and the alternative Count III, TAS also made the claim that the development and use of Cummins' ISF Plus System violated the License Agreement. TAS alleged that the ISF Plus System either contained TAS technology, sales of which Cummins would therefore owe a royalty on, or that the ISF Plus System did not contain TAS technology and was instead a competing technology, which would violate the "reasonable efforts" clause of the License Agreement. Of particular relevance to TAS' claim was evidence that the ISF Plus System had an accessory shutdown feature that was also a key feature of its TempA-Stop technology. This Court found that these claims were also barred by res judicata because TAS should have known in TAS I that Cummins' ISF Plus System contained an accessory shutdown feature. Of particular relevance to the present motion, this Court also stated that:

Finally, Cummins argues that res judicata bars TAS from seeking damages on engines sold after the conclusion of TAS I. Res Judicata "bars further claims by parties or their privies based on the same cause of action." Car Carriers, Inc. v. Ford Motor Co., 789 F.2d 589, 593 (7th Cir. 1986) (quotation marks and citations omitted). The doctrine bars TAS from bringing the current suit, and any future suit related to matters that could have been raised in TAS I. TAS had one bite at the apple and failed to take it. It cannot now seek damages that it should have sought in TAS I under some sort of continuing violation theory. Such actions would turn res judicata on its head and make the doctrine meaningless. TAS is simply barred from asserting any claim, now and in the future, with respect to Cummins' ISF Plus system vis-a-vis the contracts at issue. (Doc. 254, at pp. 20-21).

TAS argued in a Motion for Clarification and Reconsideration (Doc. 255) that this Court erred in finding that it is barred from filing suit, in the future, regarding the claims made in Counts I and III and that it should be able to recover damages on Counts I and III after the date of judgment in TAS I. That is, TAS asserts that it should not be prevented from pursuing a claim for breach of contract, on the same grounds that are barred by res judicata, for breaches that occurred after entry of judgment in TAS I. This Court agreed with TAS by the Order dated December 17, 2010 (Doc. 273). In particular, the Court stated:

Any judgment that would have been rendered in TAS I necessarily would only apply to actions by Cummins prior to judgment in that case. Judgment in TAS I was rendered on January 24, 2005 (and amended judgment relating to costs was entered on March 17, 2005). Prior to that date, TAS could not have sought damages for breach of contract based on conduct that may occur in the future.

The doctrine of res judicata does not extend that far: Cummins' future conduct could not have been decided in TAS I. Therefore, TAS is able to file a new suit after any such breach occurred -- presumably after each month that Cummins (allegedly) failed to pay royalties due and owing pursuant to the contracts. See RESTATEMENT (SECOND) JUDGMENT § 26(1)(e), and comment g. To hold any differently would be fundamentally unfair and unjust: it would grant Cummins the judicially sanctioned ability to breach the contracts, in this respect, at whim. (Doc. 273, p. 4).

In Cummins' Motion, which is in fact a motion to reconsider, it argues that this Court's holding is contrary to Seventh Circuit case authority ...


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