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Midwest Renewable Energy, LLC v. Marquis Energy-Wisconsin, LLC

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

October 20, 2014

MIDWEST RENEWABLE ENERGY, LLC, a Nebraska limited liability company, Plaintiff,
v.
MARQUIS ENERGY — WISCONSIN, LLC, a Delaware limited liability company, and GATX CORPORATION, a New York corporation, Defendants. GATX CORPORATION, a New York corporation, Counterclaimant,
v.
MIDWEST RENEWABLE ENERGY, LLC, a Nebraska limited liability company, Counter-Defendant.

MEMORANDUM OPINION AND ORDER

SHARON JOHNSON COLEMAN, District Judge.

On May 10, 2013, plaintiff Midwest Renewable Energy LLC ("MRE") filed a First Amended Complaint [53] alleging breach of a lease agreement and tortious interference with a business relationship against defendant GATX Corporation ("GATX"), and tortious interference with a contract and promissory estoppel against defendant Marquis Energy - Wisconsin LLC ("Marquis"). In an Order on December 18, 2013, this Court converted defendants' motions to dismiss to motions for summary judgment pursuant to Federal Rule of Civil Procedure 12(d) and allowed the parties time to conduct discovery and comply with Local Rule 56.1.[1] GATX therefore seeks summary judgment on Counts I and II of the First Amended Complaint. For the reasons set forth below, the motion is granted.[2]

Background

The following facts are undisputed. MRE is an ethanol producer. GATX leases railcars for transport. GATX and MRE entered a Rail Car Service Contract ("Lease") on January 1, 2005, that incorporated two riders, leasing railcars to MRE to transport ethanol. Paragraph 2 of the Lease requires MRE to pay GATX "the service charges set forth on the Riders attached to this Agreement." Paragraph 2 also mandates that service charges accrue monthly and the customer will receive monthly invoices, which must be made within fifteen days of the invoice. Paragraph 12 of the Lease prohibits MRE from assigning or subleasing the railcars without GATX's prior written consent. Paragraph 13 of the Lease provides "Remedies" and allows GATX, in the event that MRE failed to perform any of its obligations under the Agreement, to:

(a) without notice or demand immediately terminate this Agreement with respect to any or all of the cars covered hereunder and thereafter take possession of any or all such cars; or...
(c) permit [MRE] to retain possession of any or all cars under this agreement as the same may continue in force provided [MRE] shall, within five (5) days after written notice from GATX cure any and all defaults under this Agreement.

Non-payment on Lease

MRE stopped making monthly payments on the Lease in January 2012. GATX continued invoicing MRE each month for charges owed under the Lease.[3] GATX contacted MRE on January 13, 2012, regarding its then outstanding balance of $14, 287.41. In response, MRE assured GATX that it would catch up on its outstanding balance by March, and thereafter pay every invoice in full each month. MRE did not make the payment at the end of January. On February 3, 2012, GATX emailed MRE again and requested an update, and also inquired whether MRE's next payment would be double in light of the missed payment in January. MRE did not pay GATX in February. On March 1, 2012, GATX emailed MRE again, notified MRE that it was in default, and demanded payment of MRE's then outstanding balance of $18, 993.88. MRE did not respond or remit payment. On March 6th, 13th, 15th, 2012, GATX again emailed MRE with notice of the past due amount. MRE did not respond to any of those emails. On March 16, 2012, GATX sent MRE an account statement reflecting a past due balance of $30, 093.88. On March 23, 2012, GATX again emailed MRE, requesting payment status on the past due account. GATX also asked whether MRE was having cash flow problems and offered to work out a payment plan in order to get its account current. On March 28, 2012, Joan Kovacevich, an account representative at GATX, emailed Troy Gavin of MRE, stating: "I didn't receive a written update as we discussed yesterday. Will you please have someone write this up for me? Accounts Rec is contacting me daily to determine how to proceed. I can work with you now and would like to do so." (Dkt. 93-8). Troy Gavin responded that MRE was currently working on a restructuring and that MRE expected to resume making payments on its past due invoices.

Sublease to Marquis

Troy Gavin did not inform Joan Kovacevich that MRE had subleased GATX's railcars to Marquis Energy - Wisconsin LLC around March 3, 2012. MRE did not obtain GATX's written consent prior to subleasing the railcars to Marquis. The sublease was for two months at $1, 200 per car per month, for a total of $48, 000 for all 20 railcars. Marquis paid the entire $48, 000 balance to MRE on or about March 12, 2012. MRE never informed GATX that it received a payment from Marquis nor did MRE pay any of the outstanding service charges under the Lease.

On April 12, 2012, Joan Kovacevich emailed Troy Gavin to request an update. Gavin informed her that MRE was still in a holding pattern. Kovacevich responded, stating that she was glad to hear MRE was preparing to restart the plant and that "banks work at their own pace. SLOW." At the time, MRE and Marquis were negotiating an extension of MRE's sublease to Marquis, which they executed on April 30, 2012. The Amendment to the Sublease extended Marquis' sublease for an additional six months at a rate of $1, 900 per car per month payable in a single, lump sum payment of $228, 000 due on or before May 4, 2012. MRE did not obtain GATX's prior written consent before entering into the Amendment to Sublease with Marquis nor did MRE inform GATX of the Amendment to the Sublease. MRE also never informed GATX of the $228, 000 payment that Marquis tendered to MRE. MRE did not make any payments on its Lease Agreement with GATX. By May 2012, MRE had received a total of $276, 000 from Marquis for subleasing GATX's railcars.

On July 11, 2012, Joan Kovacevich emailed Troy Gavin regarding MRE's outstanding balance, stating: "This is the balance that is due GATX. I didn't realize it was this high, please send me an email so I can begin to negotiate a resolution for you." (Dkt. 93-12). Gavin responded stating that MRE "would like to sublease these cars." Id. He did not mention that MRE had already subleased the cars to Marquis. On July 16, 2012, Kovacevich emailed Gavin stating: "Don't sublease the cars. I'm dealing with the internal group at GATX on the past due amounts." (Dkt. 93-13). In response, Gavin informed Kovacevich that "we don't have the means to pay for these cars... even a few of them." Id. On July 24, 2012, Kovacevich emailed Gavin, stating: "We will have a meeting on Friday [July 27, 2012] morning to discuss the sublease and the past due balance that is on the account. We will be in touch with you immediately upon the conclusion of the meeting with the final decision [regarding the sublease or assignment of the Lease Agreement to Marquis]."

Termination of Lease

On July 27, 2012, GATX sent MRE a ...


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