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Unilever United States Inc. v. Johnson Controls Inc.

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

February 15, 2017

UNILEVER UNITED STATES, INC., Plaintiff,
v.
JOHNSON CONTROLS, INC. Defendant.

          MEMORANDUM OPINION AND ORDER

          Joan B. Gottschall, United States District Judge

         Unilever United States, Inc. (“Unilever”) intended to sell a large, industrial facility as a “turnkey operation.” (Compl. 1, ECF No. 1.) It contracted with Johnson Controls, Inc. (“JCI”) to provide security at the facility, but according to its complaint, JCI did not prevent thefts of expensive electronic controls and other items from the facility. Unilever filed a one-count complaint for breach of contract. It seeks approximately $4 million in damages, which it estimates to be the difference between the price at which it would have sold the facility if the thefts had not occurred and the actual sale price. JCI moves to dismiss the complaint for failure to state a claim upon which relief can be granted, Fed.R.Civ.P. 12(b)(6), contending primarily that Unilever cannot recover the decrease in the facility's market value as general contract damages.

         I. BACKGROUND

         A. General Factual Allegations

         For purposes of deciding the pending motion to dismiss, the court assumes the following facts alleged in the complaint are true and draws all reasonable inferences in Unilever's favor. See, e.g., Manistee Apts., LLC v. City of Chi., 844 F.3d 630, 633 (7th Cir. 2016). JCI and Unilever executed a Master Services Agreement (“MSA”) on May 1, 2007. Under the MSA, JCI provides various services at Unilever-owned facilities; “[t]he specific Services to be provided to each applicable facility of [Unilever] shall be detailed on separate Statements of Work to be executed by [JCI] and [Unilever] for each such facility.” (Compl. ¶ 10 (quoting MSA) (alterations in original)).

         Unilever bought the Alberto Culver Company in May 2010. The acquisition included an 18.7-acre campus and 534, 000-square-foot manufacturing facility and offices in Melrose Park, Illinois (“the facility”). (Compl. ¶ 6.) Unilever stopped production at the facility on April 15, 2013, and closed it on May 31, 2013. (Id. ¶ 7.) It intended to sell the facility as a “turnkey manufacturing operation.” (Id. ¶ 8.) On June 1, 2013, Unilever and JCI signed a Statement of Work (“SOW”) to be performed at the facility. (Id. ¶ 11 & Ex. 2.)

         A potential buyer visited the facility in August 2013 and returned for a second visit in February 2014. The potential buyer noticed during his second visit that “a significant amount of the electronic controls and other equipment had gone missing since” his first visit. (Compl. ¶ 22.) Unilever alleges that sometime between those two visits, approximately 175 items were stolen, “rendering some equipment worthless and others significantly devalued.” (Id. ¶ 23). “Since thieves stole so many of the electronic controls . . . the 2014 theft precluded Unilever from selling the facility as a turnkey operation. According to one appraisal, the 2014 theft reduced the value of the facility by nearly $3.5 million.” (Id. ¶ 25.) Because of the thefts, Unilever sold the facility to an industrial auctioneer specializing in distressed assets. (Id. ¶¶ 26-27.) In 2015, Unilever contracted to sell the facility to Reich Brothers. (Id. ¶ 27.)

         Two additional thefts occurred on May 27 and 29, 2015, while the facility was under contract for sale. (See id. ¶¶ 28-30.) In the first incident, electronic controls were taken from a brand-new machine worth approximately $250, 000, rendering it useless. (Id. ¶ 29.) “Because of the May 2015 thefts, Reich Brothers demanded and received, after negotiation, a $400, 000 reduction in the purchase price” of the facility. (Id. ¶ 31.)

         Unilever alleges that “JCI knew and understood that Unilever intended to sell the facility as a turnkey operation.” (Id. ¶ 35.) The complaint seeks as damages the “approximately $4 million on the sale of the facility” Unilever estimates it lost because JCI did not prevent the thefts. (Id. ¶ 32; accord. id. ¶ 40.)

         B. The Master Services Agreement and Statement of Work

         The parties highlight several provisions of the MSA. The first, § 6.2(d), reads:

Further, other than pursuant to the Liability Cap Exceptions, neither party shall be liable to the other party, or any [of] its
subsidiaries and affiliates, or their respective officers, directors, employees, agents and representatives for punitive, special, exemplary, incidental or consequential damages in connection with or arising out of the Agreement regardless of whether such claim may be based on contract, warranty, tort (including negligence), or strict liability.

         (ECF No. 1 Ex. 1 § 6.2(d), p. 8 [hereinafter “MSA”].) The second, § 7.2, contains a merger ...


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