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YCB Intern., Inc. v. UCF Trading Co. Ltd.

United States District Court, N.D. Illinois, Eastern Division

November 13, 2012

YCB INTERNATIONAL, INC., Plaintiff/Counter-Defendant,
v.
UCF TRADING COMPANY LIMITED, Defendant/Counter-Plaintiff. UCF Trading Company Limited, Third-Party Plaintiff,
v.
Yantai CMC Bearing Co., Ltd., Third-Party Defendant.

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Gregory John Bueche, Law Offices of Gregory J. Bueche, Warrenville, IL, for Plaintiff/Counter-Defendant and Third-Party Defendant.

Arthur J. Howe, Anand C. Mathew, Schopf & Weiss LLP, Chicago, IL, for Defendant/Counter-Plaintiff and Third-Party Plaintiff.

MEMORANDUM OPINION AND ORDER

JAMES F. HOLDERMAN, Chief Judge:

Plaintiff YCB International, Inc. (" YCB" ) alleges that defendant UCF Trading Company Limited (" UCF" ) failed to pay for $1,181,352.08 worth of bearings that UCF ordered and received from YCB. (Dkt. No. 70.) YCB filed a complaint seeking payment of that amount on three bases: the Uniform Commercial Code (" UCC" ) (Count I); common law breach of contract (Count II); and wrongful rejection (Count III). In response, UCF filed its answer, counterclaim, and third-party complaint, alleging that YCB and its parent company, Yantai CMC Bearing Co., Ltd. (" CMC" ) are liable to UCF on eight bases: breach of contract (Count I); breach of express warranty (Count II); breach of the implied warranty of merchantability (Count III); breach of the implied warranty of fitness for a particular purpose (Count IV); unjust enrichment (Count V); common law fraud (Count VI); a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (Count VII); and civil conspiracy (Count VIII). (Dkt. No. 33.) Currently pending before the court is YCB's motion for summary judgment on Count I, its UCC claim, against UCF. (Dkt. No. 257.) Also pending before the court are motions by YCB (Dkt. No. 252) and CMC (Dkt. No. 245) seeking summary judgment on all eight counts of UCF's claims against them. For the reasons explained below, YCB's motion for summary judgment on its UCC claim against UCF (Dkt. No. 257) is granted. The motions by YCB (Dkt. No. 252) and CMC (Dkt. No. 245) seeking summary judgment on UCF's claims against them are granted as to UCF's claims in Counts I, II, III, IV, and VII, and denied as to UCF's claims in counts V, VI, and VIII, for the reasons explained below.

BACKGROUND

UCF is a corporation of the Bahamas that purchases bearings on the open market and resells them to its customers, who use the bearings in various manufacturing processes. (Dkt. No. 263 [1] ¶¶ 1-1A.) CMC is a manufacturer of bearings located in Yantai, China. (Dkt. No. 273 ¶ 1.) YCB is an Illinois corporation and a wholly-owned subsidiary of CMC that sells CMC's bearings in the United States, but does not manufacture bearings itself. (Dkt. No. 263 ¶ 1A; Dkt. No. 273 ¶¶ 2-3.)

When UCF's customers place purchase orders for bearings with UCF, UCF in turn places an order for the bearings with a bearing supplier like YCB. (Dkt. No. 273 ¶ 4.) In 2008, UCF sent YCB thirteen separate purchase orders on behalf of various customers for bearings with a total purchase

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price of $1,181,352.08. (Dkt. No. 263 ¶ 2.) The purchase orders at issue were placed by UCF with YCB between April 4 and June 5, 2008, and they required delivery on dates ranging from June 1 to September 15, 2008. (Dkt. No. 258, Ex. A, Ex. 1.) Each of the purchase orders included on the reverse side a list of " Terms, Provisions, and Conditions." (Dkt. No. 273 ¶ 7.) The parties agree that all of the bearings were delivered to UCF or directly to its customers, and that to this day UCF has not paid for any of the bearings. (Dkt. No. 263 ¶¶ 2, 6.)

Robert Gagnon, the president of UCF, met with Mark Liu of YCB and Junbin Tao of CMC sometime in April of 2009 to discuss payment for the bearings. (Dkt. No. 263 ¶ 7.) According to Liu, Gagnon admitted at the meeting that UCF owed YCB payment for the bearings, but said that it could not pay because of a lack of funds. (Dkt. No. 258, Ex. A. (" Liu Decl." ) ¶¶ 8-9.) By contrast, Gagnon testified that at the meeting he confronted Liu and Tao with the accusation that the bearings YCB delivered in response to the purchase orders had been manufactured by Taizhou Ruili Bearing Company (" Ruili" ), and not by CMC as UCF had expected. (Dkt. No. 268, Ex. G (" Gagnon Dep." ) 128:22-129:9.) According to Gagnon, Liu and Tao responded by stating that " one hundred percent" CMC made the bearings. ( Id. ) Gagnon did not recall if he told Liu and Tao that UCF was not going to pay, but he thought they understood from the exchange that UCF was not going to pay because Ruili had manufactured the bearings. Tao testified that they did not discuss who manufactured the bearings at the April 2009 meeting. (Dkt. No. 268, Ex. F (" Tao Dep." ) 44:10-14.)

The manufacturer of the bearings was significant to UCF because many of its customers have strict quality control procedures, and refuse to accept bearings from a manufacturer without first testing the bearings that manufacturer produces to ensure that they are of the appropriate quality. (Dkt. No. 273 ¶ 5.) CMC had submitted sample bearings to UCF's customers and had been approved as a supplier ( Id. ¶ 6), but there is no evidence in the record as to whether Ruili's bearings were approved.

YCB and CMC admit that, in fact, some of the bearings that YCB sent to fill UCF's orders were manufactured by Ruili. (Dkt. No. 273 ¶¶ 20, 22.) CMC repackaged the bearings that it received from Ruili and shipped them to UCF and its customers in CMC packaging materials with CMC packing slips, including an invoice from YCB stating that it is the " Sales Office of Yantai CMC Bearing Company." ( Id. ¶ 22.) Moreover, YCB and CMC did not tell UCF that any of the bearings had been made by Ruili. ( Id. ¶ 20.) Robert Gagnon had traveled periodically to visit CMC's factories beginning in about 2001. ( Id. ¶ 14; see also Tao Dep. 32:21-33:2.) Gagnon stated that the visits occurred about three times each year. (Dkt. No. 268, Ex. C ¶ 10.) Gagnon testified that during each of those visits, Tao told him that CMC manufactured all of its own bearings, although Tao denies ever making any such comment. [2] (Dkt. No. 273 ¶ 14.)

On April 27, 2009, following the meeting with Liu and Tao, Gagnon sent a letter on

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UCF letterhead to Liu at the YCB headquarters in Bolingbrook, Illinois. (Dkt. No. 263 ¶ 9.) The letter stated: " Further to today's meeting at UCF America Pennsauken New Jersey, please find listed the $1,181,352.08 invoices outstanding." After listing the invoices, the letter continued:

Beginning July 15, 2009, we will make monthly payments in the amount of $100,000.00, and continue until the total invoices outstanding are paid[.]
In the event that our business recovers sooner than anticipated, we will increase the amount of our monthly payment[.]

(Dkt. No. 70, Ex. A.)

Gagnon testified that when he wrote the letter, UCF had no intention of paying the invoices. (Dkt. No. 263 ¶ 11.) Instead, Gagnon explained that Liu told him that Tao would lose his job if he did not return to China with a letter indicating that he had asked for payment of the invoices. ( Id. ) Gagnon stated that he decided to write the letter to CMC to prevent Tao from losing his job before he could qualify to collect his pension the following year. ( Id. )

UCF failed to make any payments to YCB on the outstanding invoices, and YCB filed suit in Illinois state court on October 5, 2009, to collect the outstanding payments. (Dkt. No. 1, Ex. A.) Following removal to federal court, but before answering the complaint, UCF contested the court's personal jurisdiction over it. (Dkt. No. 11.) In support of UCF's motion to dismiss for lack of jurisdiction, Gagnon submitted a declaration stating that " in or around June, 2009" UCF discovered that YCB had sent it bearings that had not been manufactured by CMC, and that the " counterfeit bearings" were the cause of the dispute between the parties. (Dkt. No. ...


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