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Dual-Temp of Illinois, Inc. v. Hench Control Corporation

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

September 30, 2014

DUAL-TEMP OF ILLINOIS, INC., an Illinois Corporation Plaintiff,
v.
HENCH CONTROL CORPORATION, a California Corporation, HENCH CONTROL, INC., a California Corporation, CAESAR-VERONA, INC., a Washington Corporation, and JOHN HENCH, an Individual, Defendants.

MEMORANDUM OPINION AND ORDER

SHARON JOHNSON COLEMAN, District Judge.

Plaintiff, Dual-Temp of Illinois, Inc. ("Dual Temp"), filed this action against defendants Hench Control Corporation, Hench Control, Inc., and Caesar-Verona, Inc. asserting a claim for breach of contract against each.[1] This Court held a bench trial from January 7-10, 2014. Following the bench trial, each party submitted deposition designations and filed post-trial briefs with proposed findings of facts and conclusions of law. The following constitutes the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.

BACKGROUND & BENCH TRIAL PROCEEDINGS

Dual Temp is a refrigeration contractor that designs, installs and repairs low temperature ammonia refrigeration systems. In 1992, Dual Temp designed and built the refrigeration system for Home Run Inn's pizza manufacturing facility in Woodridge, Illinois. In 2006, Home Run Inn began an expansion project and hired Milord Company ("Milord") as general contractor. Milord subcontracted with Dual Temp to modify and install a refrigeration system. Dual Temp subsequently solicited bids from several companies, including Hench Control Corporation ("Hench I"), to design a refrigeration control system to be integrated into the refrigeration system at the Home Run Inn facility. At the time, Hench I was a California corporation owned and operated by John Hench.

In response to Dual Temp soliciting bids for the Home Run Inn project, Hench I's Chicago area agent, Ron Ariano, faxed a 14 page questionnaire to John Hench on October 11, 2006, stating:

"Dual Temp is looking for a new control system for a project called Home Run Inn Pizza here in the Chicago area. There are three existing M&M compressors, they want to get rid of the panels from these compressors and install a whole new system. I am also quoting them one new high stage Mycom compressor and a new booster to go along with the three M&M Machines. I am attaching all the information from Dual Temp." (Pl.'s Tr. Ex. 155, p. 1.)

Ariano was allegedly told the new Hench system was to "mimic the [old] M&M system with the addition of the new refrigeration evaporators and compressors." (Tr. 68: 5-11.) Ariano testified that when he offered to provide an M&M manual, John Hench said he did not need it. (Ariano Dep. 40:6-41:6.) The parties dispute whether the faxed questionnaire constitutes a "spec sheet" but agree that John Hench based his proposal on the information provided.

On October 11 and 17, Ariano submitted proposals to supply a control system to Dual Temp for $45, 078.00, guaranteeing the system would be "completely tested in our facility before shipment." (Pl.'s Tr. Ex. 152, p. 1, 154, p.1.) Dual Temp subsequently issued a purchase order on October 20, which included "General Terms and Conditions" on the backside. (Pl.'s Tr. Ex. 247.) Hench I subsequently issued a kick-off letter on October 23, 2006. (Pl.'s Tr. Ex. 153.)

On February 28, 2007, Caesar-Verona, Inc. ("Caesar Verona"), which is owned and operated by Alex Daneman, acquired Hench I through a sale of assets. (CV's Tr. Ex. 6.) Casear Verona, doing business as Hench Control, Inc. ("Hench II"), continued to operate under the Hench name. Pursuant to the purchase agreement, John Hench provided training and general support for two years at varying hourly minimums and wages. ( Id. at ΒΆ17.) Daneman testified that Hench II is a holding company for the Hench name. (Daneman Dep. 133: 21-134:6.) Hench I was voluntarily dissolved on July 9, 2007. (Dkt. #266, Pl.'s Tr. Br., Ex. A.) No evidence was presented to dispute that Dual Temp no notice or knowledge of the acquisition or later dissolution of Hench I.

The Hench system was shipped to Dual Temp beginning in January 2007 and later installed by Dual Temp's subsidiary, Spur Electric, Inc. Dual Temp made two payments in December 2006 and March 2007, totaling $40, 570.00. Dual Temp alleges the system was shipped without being factory tested. Defendants dispute this fact but admit, however, that the system was shipped with the wrong software and wiring diagrams and that corrected software and diagrams were promptly furnished to Dual Temp.

Dual Temp asserts problems arose with the Hench system immediately upon installation, continued past start-up and that the system never properly worked at the Home Run Inn facility. ( See e.g. Halverson Dep. 59:17-66:6, 70:9-73:8, 85:18-93:7; Milord Dep. 56:15-59:24, 88:1-19; Bures Dep. 55:12-57:16.) The Hench system experienced communication losses that would occur, at times, several times per day. ( Id.; Dkt. #266, Ex. B.) This problem persisted for more than nine months. Throughout this time, Daneman, John Hench, defendants' programmers and technicians, Dual Temp technicians and Spur Electric's electricians visited the site in order to diagnose and fix the problem. Several individuals monitored the Hench system, including Wayne Sorenson (a Dual Temp service technician), Rich Gordon (vice president of Spur Electric), and defendants' employees. Daneman ultimately issued several invoices to Dual Temp for troubleshooting costs, which he also sent to Milord directly. (Pl.'s Tr. Ex. 19; 183.)

In December 2007, Caesar Verona hired Jayson Deslauriers and Sean Farren, two independent technicians, to determine the cause of the continuing communication loss at Home Run Inn and prepare a report. Deslauriers' report suggested a faulty humidistat, not the Hench system, was at fault. ( See Pl.'s Tr. Ex. 183.) Milord also independent contracted with AMS Mechanical Systems, Inc. to review, troubleshoot and provide a report of its findings and recommendations. (Pl.'s Tr. Ex. 28.) AMS concluded that "the communication failures has something to do with Color Master. It is either a problem with the software itself or a problem with receiving the data from controller #1 to Color Master." ( Id. at D-T000431). Color Master is a component of the Hench system.

In May 2008, Home Run Inn instructed Dual Temp to remove the Hench system. Dual Temp was then required to, and did, retain another subcontractor, Select Technologies, Inc. to remove and replace the system for $113, 500.00. Eric Staley, president of Select Technologies was designated as Dual Temp's expert at trial but ultimately not tendered as an expert. Staley testified he removed the Hench system in order to replace it with his own, but other than being generally aware of the fact that it experienced communication losses he had no contact with the Hench system. (Tr. 160:11-18; 162:13-163:3.) Dual Temp asserts the new Select Technologies system has been operating without communication failures since installation.

At trial, defendants tendered Ron Vallort as an expert in the area of refrigeration control. (Tr. 441:20-23.) In advance of trial, Vallort prepared a written report which states that the communication failures "could have been caused by factors other than a defect in the system itself, " such as power surges and voltage drops, a short within the control system caused by a faulty ammonia or humidity sensor, design flaws in the refrigeration system, faulty wiring, improper installation, and continual additions and modifications. (Pl's Tr. Ex. 250, pp. 1-7.) Vallort opined that "the cause or causes of the communication failures cannot be determined within a reasonable degree of certainty. ( Id. at p. 7.) Vallort testified to the above conclusions and that he reviewed ...


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