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Li Gear, Inc. v. Kerr Machine Co.

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

February 1, 2017

LI GEAR, INC., Plaintiff,
KERR MACHINE CO., Defendant.


          MARY M. ROWLAND United States Magistrate Judge.

         Plaintiff Li Gear, Inc., filed a single-count complaint for breach of contract against Defendant Kerr Machine Co. Li Gear seeks $630, 000 in damages for goods ordered by Kerr for which it has failed and refused to pay. The parties have consented to the jurisdiction of the United States Magistrate Judge pursuant to 28 U.S.C. § 636(c).

         On August 30, 2016, Defendant moved for Summary Judgment based on lack of personal jurisdiction. For the reasons set forth below, the Motion is denied.

         I. BACKGROUND

         Li Gear is an Illinois corporation with its principal place of business in Illinois. (Compl. ¶ 1). It manufactures and sells gears and gearboxes. (Id.). Kerr is an Oklahoma corporation with its principal place of business in Oklahoma. (Dkt. 19, Ex. 1 (Nowell Decl.) ¶¶ 3, 6). Kerr manufactures, sells, and services various pumps and pump parts. (Id. ¶ 4). Li Gear's personnel have reached out to Kerr in Oklahoma and in other states to solicit sales of Li Gear's products to Kerr. (Id. ¶ 16). Kerr's personnel have not been to Li Gear's place of business in Illinois. (Id. ¶ 14).

         The parties first became aware of each other during oil-and-gas industry trade shows attended by both companies, typically in Texas, from 2012 through 2014. (Dkt. 32-1 (Li Decl.) ¶ 6). On January 10, 2014, Mike May, Kerr's Vice President of Engineering, sent an email to Li Gear, requesting that Li Gear submit a quote for the sale of industrial gears: “Our primary Gear supplier has let us down so this would be an excellent opportinity [sic] to help us make quick Delivery if your Price is good. Attached are the drawing PDF files [for] your records.” (Id. ¶ 7 & Ex. A). On January 13, Kerr sent a follow-up email to Li Gear asking, “What can you do to help us on this? Please contact me or Jake at your earliest convenience.” (Id. ¶¶ 7-10 & Ex. A). Over the next few weeks, the vice presidents of both companies participated in phone conferences discussing the gears to be built and the price ranges for those products, culminating in a February 7 email from Li Gear to Kerr, which included a sales quote for the requested gears. (Id. ¶¶ 11-13 & Ex. A). The sales quote also states:

All sales and sales quotes, including this quote, as well as all other estimates, proposals, and/or offers to sell, including samples, are subject to Li Gear's standard Terms and Conditions of Sale, and it's Standard Warranty, which can be found at our company website or by requesting a copy from the Company. All acceptances of quotes and/or purchase orders are deemed to have included, by reference to this quote, Li Gear's Standard Terms and Conditions.

(Id. ¶¶ 12-13 & Ex. B). Paragraph 13(e) of the Li Gear Terms and Conditions of Sale states:

This agreement and any sale of products to Purchaser shall be deemed to have been made in and governed by the substantive laws of the State of Illinois, without regard to the choice of law provisions. Seller and Purchaser irrevocably consent to the exclusive jurisdiction of the Court of the State of Illinois (and the Federal Courts having jurisdiction in the State of Illinois) for purposes of any judicial proceedings that may be instituted in connection with any matter arising out of or relating to these terms or any sales pursuant hereto.

(Id. ¶ 16 & Ex. C). The quote was valid for 15 days. (Id. Ex. B). Kerr did not issue a purchase order for the gears offered in this sales quote. (Id. ¶ 18 & Ex. C).

         The parties next met at a May 2014 trade show in Texas. (Li Dec. ¶ 21). While they dispute who initiated the request to submit a quote for gearboxes, several days later Li Gear sent Kerr a second sales quote for the requested items. (Id. ¶ 21 & Ex. D). The quote, which was valid for 15 days, again referenced Li Gear's standard Terms and Conditions. (Id. ¶ 21 & Ex. D). On May 23, Kerr issued a purchase order for the gearboxes quoted by Li Gear the day before. (Id. ¶ 21 & Ex. E). The gearboxes were subsequently delivered to Kerr's facilities in Oklahoma, and Kerr paid Li Gear's invoice. (Id. ¶¶ 23-24 & Ex. F).

         On September 18, 2014, after oral communications between the parties, Kerr issued a second purchase order to Li Gear for 45 gearboxes at a total price of $630, 000, which included the same Order Terms and Conditions as its May 23 purchase order. (Compl. Ex. A; Nowell Decl. ¶ 18). The parties disagree as to the substance of the surrounding oral communications. Li Gear asserts that Kerr inquired whether it could purchase a large quantity of the same gearboxes and at the same price it had purchased in May. (Li Decl. ¶ 26). Li Gear responded that its prior quote, which included Li Gear's standard Terms and Conditions, was still effective. (Id.). Kerr contends, on the other hand, that the September 2014 purchase order was issued only after Li Gear “pleaded” with Kerr “to provide projections of the number of gearboxes that Kerr expected to need in the future.” (Nowell Decl. ¶ 19). In any event, Kerr argues that the May 2014 quote expired by its own terms in June 2014 and does not apply to the September 2014 stand-alone transaction. (Id. ¶¶ 20-21 & Ex. 2; Compl. Ex. A).

         The September purchase order gave rise to the lawsuit-Li Gear alleges that Kerr refused to take delivery of these gearboxes and has not paid for them. (Compl. ¶¶ 5-7). Kerr contends that it timely modified and later cancelled the purchase order before Li Gear delivered any of the gearboxes. (Answer ¶ 6).

         II. ...

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