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Clutch Auto Ltd. v. Navistar, Inc.

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

March 19, 2015

Clutch Auto Ltd., Plaintiff,
Navistar, Inc., Defendant.



This is a breach of contract action arising from a November 11, 2011 release signed by the parties. The parties dispute whether Defendant Navistar, Inc. fulfilled its contractual obligations to "work with" Plaintiff Clutch Auto Ltd. to sell certain clutches that Plaintiff already had manufactured.

The parties have filed cross-motions for summary judgment. For the following reasons, Defendant's motion [148] is granted and Plaintiff's motion [152] is denied.

I. Legal Standard

Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Spurling v. C & M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir. 2014). A genuine dispute as to any material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In determining whether a genuine issue of material fact exists, this Court must construe all facts and reasonable inferences in the light most favorable to the nonmoving party. See CTL ex rel. Trebatoski v. Ashland School District, 743 F.3d 524, 528 (7th Cir. 2014).

II. Facts[1]

A. 2006 to June 2011: Initial Supply Agreement

The relationship between the parties began in 2006. DSOF ¶ 12; PSOF ¶ 1. Defendant is a manufacturer of commercial trucks and a distributer of clutches used as service (replacement) parts. DSOF ¶ 5. Defendant sources clutches from approximately 1, 400 suppliers globally. DSOF ¶ 7

Around 2006, Defendant was looking for a new supplier to compete with Eaton Corporation ("Eaton"). DSOF ¶ 11; PSOF ¶ 6. Eaton was the dominant North American clutch supplier and manufactured a popular self-adjusting clutch. DSOF ¶ 10. Self-adjusting clutches, unlike manual adjusting clutches, automatically tighten as they wear down, thereby decreasing the frequency of repairs and extending the clutch's lifespan. DSOF ¶ 13. It was at this time that Defendant was introduced to Plaintiff, an Indian company founded in 1971 that manufactures clutches. DSOF ¶¶ 1, 12; PSOAF ¶ 32.

On June 18, 2008, the parties entered into a three-year supply agreement (the "2008 Supply Agreement") with two automatic one-year extensions unless a party gave 90 days' notice of its intention not to renew the Agreement. DSOF ¶¶ 19-20; PSOF ¶ 9. Under the 2008 Supply Agreement, Plaintiff agreed to develop and manufacture manual and self-adjusting clutches. DSOF ¶¶ 14, 19; Mehta Fifth Aff. [169-1] ¶ 7. Defendant sold the self-adjusting clutches under its brand name: MaxxPower. DSOF ¶ 23.

Over the initial three-year term of the 2008 Supply Agreement, Defendant did purchase and install some clutches. E.g., DSOF ¶ 28. However, there were disputes between the parties, namely, purported quality problems with the clutches Plaintiff manufactured. See, e.g., DSOF ¶¶ 29-31. In February 2011, Defendant gave Plaintiff the requisite contractual notice that it was not renewing the 2008 Supply Agreement beyond the initial term. DSOF ¶ 33.

B. July 2011 to November 2012: Dispute Resolution and Promotion Efforts

1. Dispute Resolution

Plaintiff objected to Defendant's decision not to renew the 2008 Supply Agreement. In a July 12, 2011 letter, Plaintiff, among other things, demanded compensation for clutches it had manufactured, allegedly at Defendant's direction, but Defendant had not purchased. DSOF ¶ 34.

After months of negotiations, the parties reached a settlement resolving the disputes raised by Plaintiff's July 12, 2011 letter. DSOF ¶¶ 35-37. They memorialized their agreement in a letter dated November 9, 2011 (the "2011 Letter Agreement"). DSOF ¶ 37. Defendant agreed to pay $575, 545 for and accept delivery of certain clutches that were already built (Sections 1 and 3); to sell these clutches under the Clutch Auto brand name, not the MaxxPower brand name (Section 2); and "[to] engage in good faith negotiations for a new Service Parts supply agreement with Clutch Auto on terms that are agreeable to both parties" (Section 4). DSOF ¶¶ 37-41. In exchange, in Section 5 of the 2011 Letter Agreement, Plaintiff agreed to execute a complete written release of its claims, including those identified in the July 12, 2011 letter. DSOF ¶ 41; see 2011 Release [151-31].

On November 11, 2011, the parties executed the "Release of Claims by Clutch Auto" (the "2011 Release") contemplated by Section 5 of the 2011 Letter Agreement. DSOF ¶ 41; PSOF ¶ 18. Beyond just releasing Plaintiff's claims, the 2011 Release further obligated Defendant to "work with" Plaintiff to sell the remaining inventory of clutches. DSOF ¶ 42. It states in relevant part:

... Navistar agrees to work with Clutch Auto to sell as Service Parts the clutch products already built by Clutch Auto and identified in the July 12, 2011 Letter as inventory from EDI visibility and forecasts, and, except as otherwise set forth in this Agreement, Navistar shall have no obligation to order or pay for any clutch products (including such inventory) from Clutch Auto until such inventory has been sold by Clutch Auto[.]

DSOF ¶ 42; 2011 Release [151-31]. Plaintiff has valued the "inventory from EDI visibility and forecasts, " which is the subject matter of this lawsuit, at $4, 543, 000. PSOAF ¶ 30. That inventory included both manual and self-adjusting clutches (although the record does not show how many of each). Mehta Fifth Aff. [169-1] ¶ 60; see also 3/19/15 Hr'g.

Beginning in December 2011, the parties began negotiating a new service parts supply agreement, as contemplated by the 2011 Letter Agreement. DSOF ¶ 49. The parties finalized a new service parts supply agreement in May 2012 (the "2012 Supply Agreement"). DSOF ¶ 49. The Agreement also imposed a "work with" obligation on Defendant:

Buyer [Defendant] will work with Seller [Plaintiff] to assist in the promoting of the Seller's products in the market place. Buyer's ability to provide assistance in marketing will be limited without marketing funds from Seller. Seller will have the primary responsibility to provide marketing materials and services with Buyer's approval for such materials necessary.

2012 Supply Agreement [151-24] § 17B. Plaintiff does not claim in this litigation that Defendant breached the 2012 Supply Agreement.

2. Promotion Efforts

The parties dispute whether Defendant fulfilled its obligations to "work with" Plaintiff under the 2011 Release to sell the "inventory from EDI visibility and forecasts." 2011 Release [151-31]. This Court limits its discussion to the promotion efforts taken (or not) after November 11, 2011, when the parties entered into the 2011 Release.

Dealership network. Defendant promoted the clutches to its dealer network-including its largest customers, Rush Enterprises Inc. ("Rush") and Chicago International Trucks, LLC. DSOF ¶¶ 58-60. Dealers are intermediaries who sell the clutches to end users. Defendant: (1) supplied the dealers with marketing materials; (2) advised them how to market Plaintiff's clutches; (3) offered rebates; and (4) offered free shipping. DSOF ¶¶ 58-61. The marketing materials compared the Clutch Auto brand clutches favorably to their counterpart clutches from Eaton. DSOF ¶ 59.

Plaintiff responds by questioning the sufficiency of Defendant's efforts in two ways. It first asserts that Navistar disparaged the clutches in communications with customers. PSOAF ¶ 21. However, Plaintiff has failed to cite or attach any disparaging email or other communication. See PSOAF ¶ 21. Plaintiff instead relies principally on conclusory statements from Vijay Mehta, its Chairman and Managing Director. E.g., Mehta Fourth Aff. [154-1] ¶¶ 1, 42. Second, Plaintiff argues, again through the testimony of its Chairman, ...

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