United States District Court, N.D. Illinois, Eastern Division
OFFICEMAX, INC. Plaintiff,
NHS HUMAN SERVICES, INC., Defendant.
MEMORANDUM OPINION AND ORDER
W. Gettleman United States District Judge.
Officemax, Inc. (“Officemax”) has filed a two
count complaint against defendant NHS Human Services, Inc.,
(“NHS”) alleging anticipatory repudiation and
breach of contract. Defendant has moved to dismiss pursuant
to Fed.R.Civ.P. 12(b)(6). For the reasons described below,
the court grants defendant's motion to dismiss.
10, 2011, Officemax and NHS entered into a sales agreement,
effective as of July 1, 2011. The Sales Agreement provides
that “Officemax shall be the primary supplier of all
[NHS]-owned entities for copy paper, furniture, office
supplies and toner, ” through June 30, 2016. The
parties also agreed that NHS would purchase at least $1, 350,
000 of products per year from Officemax through 2016.
complaint alleges that the parties intended to agree in
advance to settlement of damages that might arise from
defendant's breach of the Sales Agreement by failing to
have Officemax be the primary supplier of products to NHS.
Section 15 of the Sales Agreement provides for liquidated
damages “if Officemax terminates this Agreement due to
a material breach by [NHS] which is not cured within ten (10)
days of Officemax providing written notice of such breach to
[NHS].” Section 15 of the Sales Agreement also provides
a chart listing the amount of liquidated damages due to
Officemax, depending on the date of termination. From 2011 to
2013, Officemax supplied millions of dollars of office
supplies to NHS under the Sales Agreement.
later than November 2013, Officemax and NHS entered the First
Amendment to Sales Agreement (“First Amendment”).
The First Amendment extended the term of the Sales Agreement
to June 30, 2021, and increased NHS's minimum purchase
amount. Section 2 of the Sales Agreement remained in effect,
requiring that “Officemax shall be the primary supplier
of all [NHS]-owned entities for copy paper, furniture, office
supplies and toner.” The First Amendment removed the
language from section 15 regarding Officemax terminating
“due to a material breach” by NHS, instead
providing that Officemax is entitled to liquidated damages
“if Officemax terminates this Agreement.” The
First Amendment also provides a new chart listing the amount
of liquidated damages due to Officemax, depending on the date
Sales Agreement and First Amendment (collectively, the
“Contract”) were signed by Officemax's Vice
President of Sales, Anthony Nucera, and NHS's Chief
Financial Officer (“CFO”), Kevin McClure. Mr.
McClure was later replaced by Derrick Yacovelli as NHS's
CFO. On October 1, 2015, Mr. Yacovelli communicated to Mr.
Nucera that NHS may seek bids from other suppliers of copy
paper, furniture, officer supplies, and toner, despite the
Contract with Officemax. Mr. Yacovelli stated that he had no
involvement in the negotiation of the Contract, and he was
skeptical of the present benefits of the Contract. Mr.
Yacovelli stated that he knew NHS would owe more than $1,
000, 000 if the Contract terminated and/or if NHS breached
the Contract. Mr. Yacovelli stated that, in doing
“simple math, ” if NHS would save $200, 000 over
five years with a new supplier then it would be “worth
it” to terminate and/or breach the Contract.
February 9, 2016, NHS sent multiple request for proposal
(“RFP”) e-mails to Officemax titled
“consumable/janitorial RFP” and “Office
Supply RFP.” One of the e-mails read “you are
receiving this letter because you have been selected as
potential supplier for office supplies for NHS.” The
RFP e-mails also stated that “[NHS] is soliciting bids
for a three year period for the procurement and distribution
of office supplies for its entire enterprise, ” and
“the intention of NHS is to award an agreement for
office supplies, cut paper and toner cartridges at ¶
100% level of business where the levels of service and cost
meet the needs of NHS.” The complaint alleges that
“pursuant to the clear and unambiguous terms of the
Contract, Officemax was not a ‘potential supplier'
to NHS for a ‘three-year period' but rather
Officemax must be the ‘primary supplier' to NHS
through 2021, [and] therefore NHS could not seek business
from other companies to be the primary supplier of
the February 9 RFP e-mails, NHS e-mailed Officemax stating
that “NHS has already issued and received responses
from Officemax's competitors for products to be sent to
all of NHS's facilities.” On March 14, 2016,
Officemax notified NHS of the termination of the Contract and
demanded that NHS pay Officemax the sum of $1, 050, 000,
pursuant to section 15 of the Contract. On April 4, 2016,
Officemax e-mailed NHS following up on the March 14, 2016,
notification of termination. On April 15, 2016, Officemax
e-mailed NHS, providing notice that more than 30 days had
passed since NHS's receipt of the termination letter and
inquiring as to the status of payment to plaintiff of the $1,
050, 000. Thereafter, NHS acknowledged receipt of the March
14 termination letter, but NHS has refused to pay the $1,
050, 000 demanded by Officemax.
evaluating a motion to dismiss, the court accepts the
complaint's well-pleaded factual allegations as true and
draws all reasonable inferences in the plaintiff's favor.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56
(2007). A motion to dismiss for failure to state a claim
tests the sufficiency of the complaint, not its merits.
Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th
Cir.1990). To survive such a motion, the complaint must
allege sufficient facts which, if true, would raise a right
to relief above the speculative level, showing that the claim
is plausible on its face. Twombly, 550 U.S. at 555.
To be plausible on its face, the complaint must plead facts
sufficient for the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Defendant's Motion to Dismiss
Count I - ...