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SMK Associates, LLC v. Sutherland Global Services, Inc

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

September 29, 2016

SMK ASSOCIATES, LLC, Plaintiff,
v.
SUTHERLAND GLOBAL SERVICES, INC., and MICHAEL BARTUSEK, Defendants.

          MEMORANDUM OPINION AND ORDER

          John Z. Lee United States District Judge

         Plaintiff SMK Associates, LLC, filed suit against Sutherland Global Services, Inc., alleging that Sutherland breached two contracts agreeing to sell SMK $84 million worth of tobacco products. SMK also sued Sutherland's former Chief Financial Officer, Michael Bartusek, the person with whom it had negotiated the contracts, asserting claims of breach of contract and fraud against him individually. Sutherland filed a motion for summary judgment, arguing that Bartusek acted of his own accord and not as its agent when agreeing to these contracts. For the reasons stated herein, the Court denies Sutherland's motion.

         Factual Background

         SMK Associates is an Illinois limited liability company whose sole member is Martin Borg. See Def.'s LR 56.1 Stmt. ¶ 1, ECF No. 101. Sutherland is a New York corporation that acts as a business outsourcing company for multinational corporations. See Id. ¶¶ 2, 8. Michael Bartusek was the Chief Financial Officer of Sutherland from June 2007 to September 30, 2014. See Id. ¶ 3.

         In this particular case, SMK was contacted via email by Bartusek in February 2012 with an offer to sell SMK a large quantity of cigarettes. See Id. ¶ 13. The parties initially signed a “Non-Circumvention Agreement” that Bartusek signed under the name “Kikki Distributors, ” an entity not associated with Sutherland. See Id. ¶¶ 14, 16. Borg contends that Bartusek told him that Kikki Distributors was a subsidiary of Sutherland. See Id. ¶ 15. Bartusek, on the other hand, denies ever making that representation and testified that it was a company that he made up to buy and sell cigarettes. See Id. ¶ 16. Bartusek also personally signed a nondisclosure and non-compete agreement sent to him by SMK. See Id. ¶ 17.

         By May 2012, Borg and Bartusek were working on a big sale of cigarettes. See Pl.'s LR 56.1 Addt'l Stmt. ¶ 46, ECF No. 116. SMK subsequently sent two Purchase Orders, totaling $84, 000, 000, to Bartusek at his Sutherland office, in June and July 2012. See Def.'s LR 56.1 Stmt. ¶¶ 20-21, 31. Both Purchase Orders contained a clause asserting a ten percent penalty to be paid if the Purchase Orders were not fulfilled in a timely manner. See Id. ¶¶ 21, 31. Upon receipt of the July 2012 Purchase Order, which was for $2, 880, 000, Bartusek's executive assistant Kelley Flanegan noted that it was the largest invoice or Purchase Order she had ever seen. See Id. ¶ 32.

         SMK asserts that it was under the impression that the agreements had been made with Sutherland as opposed to with Bartusek in his individual capacity. Bartusek had initially corresponded with SMK using his Sutherland email address and phone number. See Id. ¶ 13. Furthermore, in addition to communicating with SMK about procuring tobacco, Bartusek had similarly contacted other entities regarding the possible procurement of cigarettes. See Pl.'s LR 56.1 Addt'l Stmt. ¶ 56. In his interactions with these other entities, Bartusek used the Sutherland name and even caused Sutherland to make payments for warehouse inspections of tobacco. See Id. ¶ 60.

         Bartusek, in his role as CFO, was an authorized signatory for the company, which permitted him to sign various agreements on the company's behalf. See Def.'s LR 56.1 Stmt. ¶ 11. The Board minutes establish that this signatory authority could bind Sutherland only if the signed document was “in furtherance of its ordinary business purposes.” See Id. As of 2013, Bartusek was authorized by Sutherland to execute various routine contracts such as nondisclosure agreements, technology-related purchases, and leases. See Pl.'s LR 56.1 Ex. E, ECF No. 118.

         In May 2012, when Sutherland's CEO discovered that Bartusek had been engaging in the procurement of cigarettes and was using Sutherland's facilities to do so, he asked Bartusek to stop using the company's offices and telecommunication systems to conduct this side business. See Id. ¶ 18. Sutherland has never been in the business of buying or selling tobacco, nor is it in the business of buying or selling any goods. See Id. ¶ 8.[1]

         Legal Standard

         The Court shall grant summary judgment “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.” Fed.R.Civ.P. 56(a). The Court gives “the non-moving party the benefit of conflicts in the evidence and reasonable inferences that could be drawn from it.” Grochocinski v. Mayer Brown Rowe & Maw, LLP, 719 F.3d 785, 794 (7th Cir. 2013). In order to survive summary judgment, the nonmoving party must “do more than simply show that there is some metaphysical doubt as to the material facts, ” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986), and “must establish some genuine issue for trial such that a reasonable jury could return a verdict in her favor, ” Gordon v. FedEx Freight, Inc., 674 F.3d 769, 772-73 (7th Cir. 2012).

         Analysis

         I. Bartusek's Authority

         In order for SMK to prevail on its breach of contract claim against Sutherland, it must prove that Bartusek had the necessary authority to bind Sutherland to the agreements with SMK. For an agent's actions to bind the principal, the agent must have either actual authority, apparent authority, or the principal must ratify the agent's actions. See Anetsberger v. Metro. Life Ins. Co., 14 F.3d 1226, 1234 (7th Cir. 1994). Sutherland argues in its motion for summary judgment that Bartusek did not have any authority to bind Sutherland to the contract with SMK. SMK argues the opposite. The burden of proving the existence and scope of an agency relationship is on SMK as the party seeking ...


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