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Echo, Incorporated v. Timberlandmachines& Irrigation

October 25, 2011

ECHO, INCORPORATED, PLAINTIFF/COUNTER-DEFENDANT-APPELLEE,
v.
TIMBERLANDMACHINES& IRRIGATION, INC., DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT,
v.
LAWN EQUIPMENT PARTS COMPANY, THIRD-PARTY DEFENDANT-APPELLEE.



Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 08 C 7123 & 09 C 2673-Charles P. Kocoras, Judge.

The opinion of the court was delivered by: Flaum, Circuit Judge.

Case type: civil

ARGUED SEPTEMBER 7, 2011

Before POSNER, FLAUMand HAMILTON, Circuit Judges.

This case involves two consolidated appeals, which arise out of the termination of the business relationship between appellant Timberland Machines & Irrigation, Inc. ("TMI"), a distributor, and appellee Echo, Inc. ("Echo"), a supplier. After terminating its distributor agreement with TMI, Echo turned TMI's former sales territory over to another distributor, appellee Lawn Equipment Parts Company ("LEPCO"). TMI claims Echo improperly terminated the distributor agreement, and that LEPCO improperly induced Echo to do so. Echo, in turn, seeks to recover from TMI on unpaid invoices. The district court granted summary judgment in favor of Echo and LEPCO (and against TMI) on all claims. We affirm the judgment of the district court.

I. Background

A. Factual Background

Echo is a supplier of commercial and retail outdoor power equipment, including power trimmers, chainsaws, and blowers. TMI is a distributer of such outdoor power equipment, as well as of irrigation equipment. TMI operated two divisions for purposes of distributing those products-the Timberland Machines division and the Sprinkler House division. Beginning in August 2004, TMI distributed products supplied by Echo pursuant to a Distributor Agreement. TMI's sales territory for Echo products covered several states in New England.

On October 21, 2008, Echo provided TMI with written notice that it was terminating the Distributor Agreement effective in sixty days. Echo then shifted sales responsibilities for the New England region to another distributor, LEPCO, which already handled sales for Echo in the Mid-Atlantic region. According to Echo, it made the decision to terminate TMI as a distributor in August 2008 in light of TMI's financial condition. In particular, TMI was in a significant amount of debt, its lenders had refused to loan it any more money, and one lender had threatened to recall all loans to TMI. TMI responds that Echo vastly overstates the financial difficulties it faced prior to the termination of the Distributor Agreement.

Having decided to end its relationship with TMI, Echo contacted LEPCO to determine whether it could assume responsibility for the New England region. LEPCO prepared a PowerPoint presentation dated September 30, 2008 demonstrating its ability to take over the additional territory, and met with Echo to discuss the possible transition. On December 22, 2008, New England was added by Echo to LEPCO's distribution territory.

During the time TMI acted as a distributor for Echo, it also distributed products for other suppliers and manufacturers, including Exmark, Billy Goat, MTD/White Outdoor, Columbia, Snow Ex, Kipor Generators, Yamaha Generators, Brown, and Oregon Forestry. According to TMI, however, none of the products it sold from other suppliers competed with its Echo products. The district court concluded that, between 2004 and 2008, TMI sold more Exmark products (in terms of total sales and gross profits) than it did products from any other supplier, including Echo, whose products accounted for between 30 and 35% of TMI's total sales and gross profits. However, TMI contends that a proper calculation of its sales of Echo products must include both (1) its sales of Bear Cat products (a company Echo acquired in 2006) and (2) sales of Echo products to Home Depot because, despite the fact that Home Depot purchased directly from Echo, TMI facilitated those sales and made a commission on the sales of Echo products made by Home Depot stores in its sales territory. TMI also maintains that sales made by its Sprinkler House division should be disregarded, as that division was not profitable. When the Bear Cat and Home Depot sales are accounted for, and the Sprinkler House is ignored, sales of Echo products account for over 50% of TMI's total sales and gross profits.

TMI closed its Sprinkler House division, which had been unprofitable since 2006, in 2008. In February 2009, TMI went out of business entirely.

B. Procedural Background

On December 11, 2008, Echo filed suit against TMI in the Northern District of Illinois, asserting a breach of contract claim, a goods sold and delivered claim, and an account stated claim. Echo alleged that TMI had failed to pay for products purchased from Echo; it sought damages in the amount of the unpaid sum owed to Echo by TMI plus interest. On December 23, 2008, TMI filed a separate suit, also in the Northern District of Illinois, against Echo and LEPCO. In its complaint, TMI asserted various claims against Echo, including one for violation of the Connecticut Franchise Act, Conn. Gen. Stat. § 42-133f (2011). It set forth claims against LEPCO for tortious interference with a contract, unjust enrichment, and for violation of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110b (2011). Shortly thereafter, on December 31, 2008, TMI filed an answer in the original case, and asserted counterclaims against Echo. The counterclaims were identical to the claims against Echo in the TMI-initiated suit. The two cases were consolidated in the district court.

On October 1, 2010, Echo filed a motion for partial summary judgment, seeking judgment in its favor on its account stated claim and on TMI's Connecticut Franchise Act claim. That same day, LEPCO sought summary *fn1 judgment on all of TMI's claims against it. In its response to Echo's motion for summary judgment, TMI relied on an affidavit from its President and Secretary, Mark Zeytoonjian. Echo filed a motion to strike significant portions of that affidavit on the ground that it offered undisclosed expert testimony.

In an opinion dated January 18, 2011, the district court granted Echo's motion to strike paragraphs 16 through 108 of Mark Zeytoonjian's affidavit. Echo, Inc. v. Timberland Machs. & Irrigation, Inc., Nos. 08 C 7123, 09 C 2673, 2011 WL 148396, at *3 (N.D. Ill. Jan. 18, 2011). In addition, the court granted Echo's motion for partial summary judgment and granted LEPCO's motion for summary judgment. On Echo's account stated claim, the court concluded that TMI owed Echo $1,607,092.77 in principal on unpaid invoices, and $215,152.30 in inter- est. Id. at 6. Following the summary judgment rulings, Echo and LEPCO filed a joint motion for entry of final judgment, in which Echo sought a judgment on the pleadings as to its remaining two claims. In response, TMI stated that the motion should be denied for the reasons stated in its briefs opposing Echo and LEPCO's motions ...


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