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Highway Equipment Co. v. Ermak USA Inc.

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

March 22, 2017

HIGHWAY EQUIPMENT COMPANY, Plaintiff/Counter-Defendant,
v.
ERMAK USA, INC., Defendant/Counter-Plaintiff, and ERMAKSAN TURKEY, Defendant.

          MEMORANDUM OPINION AND ORDER

          John Z. Lee United States District Judge.

         In September 2012, Plaintiff Highway Equipment Company (“Plaintiff”) sent Defendant Ermak USA, Inc. (“Ermak USA”) a purchase order for a Fibermak Laser Cutting Machine, an expensive piece of equipment that is used to cut sheet metal. It was to be manufactured and shipped by Defendant Ermaksan Turkey (“Ermaksan”). Dissatisfied with the final product, Plaintiff brought suit against Ermak USA and Ermaksan (together, “Defendants”), alleging various contractual claims under Illinois statutory and common law. In response, Ermak USA brought contract-based counterclaims of its own against Plaintiff. Defendants have now moved for summary judgment with regard to all of Plaintiff's claims and Ermak USA's counterclaims. For the reasons provided herein, their motion for summary judgment [48] is denied.

         Factual Background[1]

         Plaintiff is an Iowa corporation that manufactures large-scale farm and municipal equipment. Pl.'s LR 56.1(b)(3)(C) Stmt. ¶ 1, ECF No. 52-2. Its principal place of business is in Linn County, Iowa. Defs.' LR 56.1(a)(3) Stmt. ¶ 1, ECF No. 48-1. Ermak USA is an Illinois corporation with its principal place of business in Elk Grove Village, Illinois. Id. ¶ 2. Ermaksan is a Turkish corporation with its principal place of business in Turkey. Id. ¶ 3.

         Around July 2012, Plaintiff and Ermak USA began negotiations regarding Plaintiff's purchase of a fiber laser cutter. Id. ¶ 7. In connection with these negotiations, Ermak USA provided Plaintiff with a quote for a Fibermak Laser Cutting Machine (“the Fibermak”). Id. ¶ 13. Shortly thereafter, Plaintiff sent Ermak USA a purchase order for the Fibermak. Id. ¶ 14. On September 6, 2012, Ermak USA acknowledged the purchase order by sending an order acknowledgment, which included the final “Special Terms and Conditions” governing the Fibermak's sale. Id. ¶ 15.

         Under the Special Terms and Conditions, Plaintiff agreed to pay Ermak USA a total of $777, 500 on an installment basis in exchange for the manufacture and shipment of the Fibermak. Id., Ex. 12, at 1, 6-7. For its part, Ermak USA agreed that the Fibermak would be shipped to Norfolk, Virginia, at which point it would be loaded onto Plaintiff's truck and shipped to Plaintiff's facility in Cedar Rapids, Iowa. See id., Ex. 12, at 1.[2] Ermak USA further agreed that the Fibermak would be covered by Ermak USA's two-year “Manufacturer's Limited Warranty” and that “English speaking service technicians based in the Chicago area” would be available to provide free service support. Id., Ex. 12, at 2, 9.

         The Special Terms and Conditions also set forth criteria for Plaintiff's acceptance of the Fibermak. See Defs.' LR 56.1 Stmt. ¶ 18; Pl.'s LR 56.1(b)(3)(B) Stmt. ¶ 13, ECF No. 52-1. In pertinent part, these criteria read as follows:

Acceptance of the [Fibermak] is a three step process based on the satisfactory completion of test cutting at Ermaksan in Bursa, Turkey on the specific machine purchased by [Plaintiff] and then the satisfactory replication of the same test cutting following installation and startup of the machine at [Plaintiff's facility] in Cedar Rapids, IA. Final acceptance occurs when the operator and maintenance training is complete in Cedar Rapids, IA.

         Defs.' LR 56.1 Stmt., Ex. 12, at 7-8.

         In February 2013, Plaintiff's employees traveled to Bursa, Turkey, to observe test cutting on the Fibermak at Ermaksan's facilities. Defs.' LR 56.1 Stmt. ¶ 20.

         The parties agree that this test cutting failed to meet several requirements. In particular, Ermaksan “never met the speed requirement of 4kw during the test cutting, did not meet the burr requirements for the 1/4" 304 steel, and did not have a completed [Fibermak] as the lift table and table stops were not complete.” Pl.'s LR 56.1(b)(3)(C) Stmt. ¶ 10. Nevertheless, on May 8, 2013, installation of the Fibermak began at Plaintiff's facility in Cedar Rapids, Iowa. Defs.' LR 56.1 Stmt. ¶ 23. Defendants acknowledge that the installation process began later than the agreed-upon date on which installation was supposed to begin. Id.

         The details of what happened after installation began remain the subject of much dispute. According to Defendants, installation of the Fibermak was completed soon thereafter on May 22, 2013, and test cutting on the Fibermak at Plaintiff's facility was completed on June 7, 2013. Id. ¶¶ 25-26. Defendants assert that the Fibermak was fully operational at the time of this test cutting. Id. ¶ 26. By contrast, Plaintiff denies these assertions, claiming that installation remained incomplete as of May 22, 2013, because the Fibermak's “cut loss sensor” had not yet been installed. Pl.'s LR 56.1(b)(3)(B) Stmt. ¶ 25. Plaintiff further claims that the Fibermak was not fully operational as of June 7, 2013, because key components of the Fibermak-namely, “loss of cut and opposite hand construction and the related reference point”-also had not been installed by that date. Id. ¶¶ 27-28.

         From May 2013 to March 2014, the Fibermak had difficulty maintaining cut quality and running in production mode. Pl.'s LR 56.1(b)(3)(C) Stmt. ¶ 13. These issues required seven or eight on-site service visits by Ermak USA's technicians. See Defs.' LR 56.1 Stmt. ¶ 33. Defendants claim-while Plaintiff denies-that “[a]ll material issues were resolved during these site visits.” Id. ¶ 34; Pl.'s LR 56.1(b)(3)(B) Stmt. ¶ 34.

         Defendants' final service visit to Plaintiff's facility took place from February 10 to March 7, 2014. Defs.' LR 56.1 Stmt. ¶ 36. During this visit, one of Defendants' technicians provided technical support, installed a new cutting head, installed loss-of-cut monitoring, and conducted further test cutting on the Fibermak. Id. Defendants claim that the Fibermak was functioning properly as of March 7, 2014, as a result of its technician's work. Id. ¶ 37. Plaintiff, however, maintains that the Fibermak continued to malfunction and still was not operating in full production mode. Pl.'s LR 56.1(b)(3)(B) Stmt. ¶ 37; Pl.'s LR. 56.1(b)(3)(C) Stmt. ¶¶ 33-36.

         More problems with the Fibermak arose after this final service visit. According to Defendants, on March 10, 2014, one of Plaintiff's employees damaged two components of the Fibermak's cutting head-namely, the “ceramic” and the “pin”-while operating the Fibermak. Defs.' LR 56.1 Stmt. ¶¶ 39-40. But according to Plaintiff, the pin fell out of the cutting head on its own on March 10, and its employee did not damage the ceramic until March 13. Pl.'s LR 56.1(b)(3)(B) Stmt. ¶¶ 39-40.

         On April 2, 2014, Plaintiff sent Defendants a letter asking them to remove the Fibermak and refund all of Plaintiff's payments. Defs.' LR 56.1 Stmt., Ex. 39. The letter also stated: “We are rejecting your machine since we have never accepted it due to Ermak's failure to perform. To the extent you claim we have accepted it, we hereby revoke our acceptance.” Defs.' LR 56.1 Stmt. ¶ 56. Defendants never responded to this letter. Pl.'s LR 56.1(b)(3)(C) Stmt. ¶ 37.

         From April to November 2014, Plaintiff attempted to resell the Fibermak to other companies. Defs.' LR 56.1 Stmt. ¶ 58. These attempts were unsuccessful, and Plaintiff subsequently filed this lawsuit. See Id. ¶ 60.

         Legal ...


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