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Bouchet & Company, Inc. v. Commercial Vehicle Group, Inc.

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

October 24, 2016

BOUCHET & COMPANY, INC., Plaintiff,
v.
COMMERICAL VEHICLE GROUP, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          Harry D. Leinenweber, Judge United States District Court

         I. BACKGROUND

         The Plaintiff, Bouchet & Company (“BC”), is a consulting firm headquartered in Evanston, Illinois. BC provides management consulting services. The Defendant, Commercial Vehicle Group, Inc. (“CVG”) is an Ohio-based commercial vehicle parts manufacturer and offers a variety of products for the commercial vehicle market. Many of its products rely on external purchases, including materials, components, and maintenance, repair, and overhaul services. On October 3, 2014, BC and CVG entered into an Agreement for BC to conduct a Global Stampings Strategic Sourcing Initiative (“GSSSI”) for CVG. The objective of the initiative was to achieve external cost reduction by obtaining significant reductions in the cost of goods purchased in the short term and to ensure sustainable cost reductions in the future.

         The GSSSI Agreement obligated CVG to pay BC a consulting fee on a sliding scale based on savings for CVG that BC was able to identify. From October 14, 2014 to November 12, 2015, BC undertook the GSSSI on CVG's behalf. In November 2015, a dispute arose as to the calculation of BC's consultant fee. The GSSSI Agreement contained a fee arrangement that consisted of certain fixed fees and certain contingent fees that depended on results of the cost savings initiatives. The term used in the GSSSI Agreement upon which the contingent fees were to be based was “identified annual savings.” The fixed fees were to be refundable if the savings were below 1% of the sourceable spend. They were to be nonrefundable if the savings were between 1% and 4.75%. If the savings were above 4.75%, BC would receive a fee based on a 1-to-1 percentage of savings, e.g., if the savings constituted 5% of the purchase spend or more, then the fee would be 5% of the savings, up to 10%. If the savings were higher than 10%, the fees would increase on a further sliding scale but less than 1 to 1.

         The dispute in this case centers on the definition of the phrase Identified Annual Savings. DC contends that they are the savings that are identified at the time CVG obtains its cost commitments. CVG, on the other hand, contends that the phrase means “actual savings” that are identified at the time the actual savings are realized. In other words, no savings calculations until the actual savings are realized. BC has sued for breach of contract (Count I) and for Promissory Fraud (Count II)

         II. DISCUSSION

         A. Count I - Breach of Contract

         BC has moved for summary judgment contending that there is no issue of fact as to the interpretation of the fee provision in the GSSSI. CVG argues strenuously that the savings provision is ambiguous and there is no evidence that shows the parties had a mutual understanding of the meaning of the phrase at the time of the execution of the Agreement.

         BC makes a multi-faceted argument on behalf of its Motion. First, it argues that a party to a contract, particularly, one experienced in business such as CVG, has a duty to learn about and know the contents of a written contract before it executes it, and there is no duty on the part of a contracting party to advise the other party of the contents of the agreement. All American Roofing, Inc. v. Zurich American Ins. Co., 404 Ill.App.3d 438, 448 (1st Dist. 2010); Nilsson v. NBD Bank of Illinois, 313 Ill.App.3d 751, 763 (1st Dist. 1999). BC points out that CVG did not even bother to send the contract to its legal counsel for review prior to its execution. Second, BC points out that the CVG executives had more than 100 years of parts procurement experience between them and certainly knew the difference between “identified” and “actual” savings. Third, CVG's CEO, Richard Lavin, testified that he had instructed CVG's Chief Administrative Officer, Ulf Lindqwister, to negotiate on CVG's behalf for fees based on realized savings rather than identified savings. However he failed to review the proposed contract to see if that provision had been included. Fourth, BC argues that the phrase “identified savings” is not susceptible to being confused with “realized savings.” In support of this argument BC had suggested that the parties check the internet for the meaning of the phrase. The internet showed the meaning of “identified savings” and “realized savings” were well known. In other words, there is no ambiguity and the Court should decide the case based on the clear meaning of the terms. Finally, BC argues that Lindqwister prepared, well after he executed the GSSSI on CVG's behalf, a document entitled “key amendments we are proposing to the Bouchet & Company contract.” His point no. 3 stated:

“CVG proposes that Bouchet & Company be compensated for the actual annualized savings on a phased-in approach. After the negotiations are finalized with the individual suppliers and agreements are in place, and both parties achieve agreement on the amount of actual annualized savings for the specific wave, Bouchet & Company would invoice per the terms of the ‘commercial arrangements and obligations' section of the agreement dated October 2, 2014.”

         Therefore it is obvious that Lindqwister understood the difference or he would not have sought an amendment to achieve “actual savings” as the measuring stick for BP's fees.

         Against this impressive array of arguments CVG is left with its sole argument that it did not understand the difference between “identified” and “realized” savings because the phrase was not defined in the contract. It further argues that it is not in the consulting business and would not necessarily know what the term meant, even though the phrases are well known in the procurement business.

         The threshold inquiry when interpreting a contract is whether the contract is facially ambiguous, i.e., is it susceptible to more than one meaning. Bourke v. Dun & Bradstreet Corp., 159 F.3d 1032, 1036 (7th Cir. 1998).

“An instrument is ambiguous only if the language used is reasonably or fairly susceptible to having more than one meaning, but it is not ambiguous if a court can discover its meaning simply through knowledge of those facts which give it meaning as gleaned from the general language of the contract. A contract is not rendered ...

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