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Sunny Handicraft (H.K.) Ltd. v. Envision This! LLC

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

March 24, 2017

ENVISION THIS!, LLC, Defendant/Counter-Plaintiff, and WALGREEN CO., Defendant.


          JOHN Z. LEE, United States District Judge

         Plaintiffs Sunny Handicraft (H.K.) Ltd. (“Sunny”) and Bin Teh Handicraft (Shenzhen) Co. Ltd. (“Bin Teh”) are foreign corporations in the business of manufacturing and exporting holiday decorations and other seasonal merchandise. Around 2006 or 2007, Plaintiffs began working with Defendant Envision This!, LLC (“Envision”), a Florida-based company that sources goods from overseas factories for sale to U.S. retailers. For several years, Plaintiffs and Envision worked together to arrange regular shipments of merchandise to various U.S. retailers, including to Defendant Walgreen Co. (“Walgreens”).

         In 2013, however, the parties' business relations soured. For their part, Plaintiffs assert that Envision and Walgreens have wrongfully withheld payment of over $3 million owed to Plaintiffs for goods shipped during that year. Plaintiffs have accordingly brought claims against Envision and Walgreens for breach of contract and unjust enrichment, as well as additional claims against Envision for defamation, fraud, and breach of fiduciary duty. In response, Envision has filed counterclaims against Plaintiffs for defamation, breach of contract, unjust enrichment, tortious interference with economic advantage, and breach of implied warranty of merchantability.

         Each party has filed a motion for summary judgment. For the reasons provided herein, Plaintiffs' motion for partial summary judgment [151] is granted in part and denied in part. Envision's motion for partial summary judgment [161] is also granted in part and denied in part. Walgreens's motion for summary judgment [164] is denied in its entirety.


         Sunny is a Hong Kong corporation with its principal place of business in Hong Kong. Pls.' LR 56.1(a)(3) Stmt. ¶ 1, ECF No. 153. Bin Teh is a Chinese corporation with its principal place of business in Shenzhen, China. Id. ¶ 2. Bin Teh manufactures goods that Sunny then ships to retailers. Envision's LR 56.1(a)(3) Stmt. ¶ 3, ECF No. 163. Although Sunny and Bin Teh are separate companies, they are operated by the same general manager, Daniel Huang. Id. ¶¶ 4-5. Envision is a Florida limited liability company with its principal place of business in Miami Beach, Florida. Pls.' LR 56.1(a)(3) Stmt. ¶ 3. Its sole members, Beth Edwards and Robert Hetzler, are both Florida residents. Id. Walgreens is an Illinois corporation with its principal place of business in Deerfield, Illinois. Id. ¶ 4.

         Plaintiffs are in the business of manufacturing and shipping seasonal merchandise for U.S. retailers. Id. ¶ 7. Around 2006 or 2007, Plaintiffs began working with Envision to facilitate sales of their merchandise. Id. The parties dispute which services Envision provided in connection with these sales. According to Plaintiffs, Envision's role was to set up appointments with retailers on Plaintiffs' behalf, communicate with buyers regarding price quotes and samples, and collaborate with Plaintiffs in designing samples and artwork for the packaging of some of Plaintiffs' goods. Id. ¶ 8. Envision rejects this characterization of the services it performed. Envision's LR 56.1(b)(3) Stmt. ¶ 8, ECF No. 171. Rather, according to Envision, it provided Plaintiffs with product development, trend tracking, database management, and invoice management services in the course of sourcing goods on retailers' behalf. Id.

         From 2007 to 2013, Walgreens was one of the U.S. retailers who purchased Plaintiffs' merchandise. Id. ¶ 16. Envision played a role in facilitating these purchases, but the parties dispute how Envision's role is best characterized. According to Plaintiffs, Envision “worked for, and was compensated by, Plaintiffs for serving as Plaintiffs' sales representative” in these transactions. Pls.' LR 56.1(b)(3) Stmt. Resp. Envision ¶ 8, ECF No. 176. For its part, Envision asserts that it worked not for Plaintiffs but instead for Walgreens as Walgreens's vendor, contracting with Walgreens for the sale of merchandise and in turn subcontracting with Plaintiffs for the manufacture of this merchandise. Envision's LR 56.1(b)(3) Stmt. ¶ 16.

         Plaintiffs and Envision had an agreement governing the compensation structure by which Plaintiffs paid Envision for its services in facilitating sales of Plaintiffs' goods. Pls.' LR 56.1(a)(3) Stmt. ¶ 9. This agreement governed all sales of Plaintiffs' goods to U.S. retailers, including sales to Walgreens. See Id. ¶¶ 9, 16. Under the terms of the agreement, Plaintiffs paid Envision (1) an annual fee of $10, 000, (2) a commission consisting of a percentage of the price of each item Envision helped Plaintiffs to sell, and (3) “certain expenses, including the amounts Envision paid for samples, courier charges, hotel fees in Asia, and third-party translation services.” Id. ¶ 10. When one party owed money to the other at the end of the year, Plaintiffs and Envision settled their accounts through a “truing up” process, either paying the other party any outstanding amount owed or carrying any outstanding balance as a credit into the following year. Id. ¶ 14.

         Although Plaintiffs and Envision do not dispute these basic terms of their agreement, they dispute whether the agreement contained certain additional terms. For example, Envision claims (and Plaintiffs deny) that Plaintiffs agreed to separately compensate Envision for the cost of its product development, trend tracking, and database management services, as well as for artwork that Envision developed to market Plaintiffs' goods. See Envision's LR 56.1(b)(3) Stmt. ¶¶ 10, 12; Pls.' Reply Envision's LR 56.1(b)(3) Stmt. ¶¶ 89-92, ECF No. 188. In addition, Plaintiffs claim (and Envision denies) that Envision was responsible for coordinating with Walgreens to ensure that Sunny received payment for the merchandise that Plaintiffs manufactured and shipped. Envision's LR 56.1(b)(3) Stmt. ¶ 18.

         From 2007 to 2012, in order to coordinate shipments of Plaintiffs' goods for sale to Walgreens, Envision regularly submitted Import Buying Confirmation Forms to Walgreens. Pls.' LR 56.1(a)(3) Stmt. ¶ 18. Walgreens paid for the goods corresponding to each Confirmation Form by issuing letters of credit. Id. ¶¶ 18-19. From 2007 to 2012, the Confirmation Forms that Envision submitted to Walgreens regarding Plaintiffs' goods always listed Sunny as the entity to be named as the beneficiary for the letters of credit. Id. ¶ 18. Accordingly, for each shipment of goods sold to Walgreens from 2007 to 2012, Plaintiffs received payment in the form of letters of credit issued by Walgreens. Id. ¶¶ 18-19.

         Business did not go as usual in 2013. That year, Walgreens initiated a transaction (“the 2013 Transaction”) for the purchase of Christmas decorations manufactured by Plaintiffs. Id. ¶ 22. The purchased merchandise had a face value of just under $3.5 million. Id. When Envision sent the Confirmation Forms to Walgreens for the 2013 Transaction, however, the forms listed Envision-not Sunny-as the entity to be named as the beneficiary of Walgreens's letters of credit. Id. ¶ 23. According to Plaintiffs, their general manager, Daniel Huang, had previously e-mailed Envision copies of Confirmation Forms listing Sunny as the beneficiary for the 2013 Transaction, but Envision later altered the forms to list itself as the beneficiary without Plaintiffs' knowledge. Id. Envision denies this accusation, maintaining instead that Plaintiffs agreed to designate Envision as the beneficiary for the 2013 Transaction and that Plaintiffs were aware of this arrangement no later than December 2012. Envision's LR 56.1(b)(3) Stmt. ¶¶ 23, 96.

         Based on the information provided in the Confirmation Forms for the 2013 Transaction, Walgreens issued three transferable letters of credit listing Envision as the beneficiary. Pls.' LR 56.1(a)(3) Stmt. ¶ 24. On August 8, 2013, Envision notified Plaintiffs that these letters of credit had been issued. Id. ¶ 25. According to Plaintiffs, this was the first time they learned that the letters of credit listed Envision rather than Sunny as the beneficiary. Id. Plaintiffs requested that Envision transfer the letters of credit to Sunny, but Envision did not do so. Id. Envision later drew down about $3.069 million from the letters of credit and deposited the money into its bank account. Id. ¶ 30.

         On August 20, 2013, Huang called Walgreens's buying representative, Hadieh Hasan, to request that Walgreens issue a new letter of credit listing Sunny as the beneficiary. Id. ¶ 35. Envision and Walgreens assert (while Plaintiffs deny) that Huang told Hasan during this conversation that Sunny would not ship the merchandise for the 2013 Transaction unless Walgreens issued a new letter of credit. Pls.' LR 56.1(b)(3) Stmt. Resp. Envision ¶ 24; Pls.' LR 56.1(b)(3) Stmt. Resp. Walgreens LR 56.1 Stmt. ¶ 30, ECF No. 179. Envision further asserts that Plaintiffs defamed Envision during this conversation by telling Hasan that Envision was refusing to make a payment to Plaintiffs. Envision's LR 56.1(b)(3) ¶ 68.

         Throughout September and early October of 2013, Plaintiffs withheld freight forwarder documents that were necessary for some of the merchandise in the 2013 Transaction to clear customs. Pls.' LR 56.1(a)(3) Stmt. ¶ 40. Plaintiffs claim that they withheld these documents to obtain a written guarantee of payment for the merchandise from either Envision or Walgreens. Id. By contrast, Envision claims that Plaintiffs' purpose in withholding these documents was to obtain a new letter of credit listing Sunny as the beneficiary. Envision's LR 56.1(b)(3) Stmt. ¶ 40.

         On October 11, 2013, Envision sent an e-mail to Teresa Chu, a Walgreens employee. Envision's LR 56.1(a)(3) Stmt. ¶¶ 46-47. Chu had inquired about the status of the delayed shipments for the 2013 Transaction. Id., Ex. AA at 1-2. In responding to Chu's inquiry, Envision wrote:

[T]he bookings were done by the factory. They changed our passwords [on the freight forwarding system] and . . . we are blind with the facts, hence the reason we were working on trying to gather the information collectively to help put a stop to the nonsense. . . . Again, all our facts were all documents were submitted. So there is a litany of misrepresentations by Sunny Handicraft. Such to the fact that legal action has transpired.

Id. at 2.

         On October 13, 2013, Envision sent a separate e-mail to Hasan. Envision's LR 56.1(a)(3) Stmt. ¶ 48. In this e-mail, Envision wrote:

As for Daniel [Huang] at this point this is just pure Chinese thievery, gangsters. We have written confirmation all docs were submitted. It is one continual lie upon lie on their end. Their actions are completely unethical and our lawyers are handling.

Envision's LR 56.1(a)(3) Stmt., Ex. AB at 1.

         On October 15, 2013, Plaintiffs finally provided the freight forwarder documents needed for the merchandise in the 2013 Transaction to clear customs. Pls.' LR 56.1(a)(3) Stmt. ¶ 41. By November 20, 2013, all of the merchandise had arrived at Walgreens's distribution centers. Walgreens's LR 56.1(a)(3) Stmt. ¶ 35, ECF No. 166. Neither Envision nor Walgreens has ever paid Plaintiffs for manufacturing and shipping the merchandise. Pls.' LR 56.1(a)(3) Stmt. ¶¶ 27, 32.

         Legal Standard

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). To survive summary judgment, the nonmoving party must “do more than simply show that there is some metaphysical doubt as to the material facts, ” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986), and instead must “establish some genuine issue for trial such that a reasonable jury could return a verdict in her favor.” Gordon v. FedEx Freight, Inc., 674 F.3d 769, 772-73 (7th Cir. 2012). In reviewing a motion for summary judgment, the Court gives the nonmoving party “the benefit of conflicts in the evidence and reasonable inferences that could be drawn from it.” Grochocinski v. Mayer Brown Rowe & Maw, LLP, 719 F.3d 785, 794 (7th Cir. 2013). The Court must not make credibility determinations or weigh conflicting evidence. McCann v. Iroquois Mem'l Hosp., 622 F.3d 745, 752 (7th Cir. 2010).


         I. Plaintiffs' Breach of Contract Claim Against Walgreens

         In their Third Amended Complaint, Plaintiffs allege a claim for breach of contract against Walgreens based upon Walgreens's failure to pay Plaintiffs for the merchandise that was manufactured and shipped as part of the 2013 Transaction. 3d Am. Compl. ¶¶ 42-51, ECF No. 124. Although the parties never memorialized the 2013 Transaction in a formal writing, Plaintiffs argue that they had a contract implied in fact for the sale of the merchandise. Walgreens denies that any such contract ever existed and seeks summary judgment as to this claim.

         The Uniform Commercial Code (UCC) governs contracts for the sale of goods in Illinois.[2] 810 Ill. Comp. Stat. 5/1-101 et seq.; Razor v. Hyundai Motor Am., 854 N.E.2d 607, 615 (Ill. 2006). Under the UCC, a contract for the sale of goods may be implied in fact. 805 Ill. Comp. Stat. 5/2-204. A contract implied in fact may arise “under circumstances which, according to the ordinary course of dealing and the common understanding of men, show a mutual intention to contract.” Dynegy Mktg. & Trade v. Multiut Corp., 648 F.3d 506, 517 (7th Cir. 2011) (quoting Mowatt v. City of Chi., 127 N.E. 176, 177 (Ill. 1920)).

         Whether parties have formed a contract implied in fact “depends on the facts, circumstances, and expressions by [the] parties demonstrating an intent to be bound.” Trapani Constr. Co. v. Elliot Grp., Inc., 64 N.E.3d 132, 141 (Ill.App.Ct. 2016). In cases where the parties dispute whether the facts and circumstances demonstrate their intent to be bound, the existence of a contract implied in fact is a question of fact that must be decided by a jury. Id. (citing Quinlan v. Stouffe, 823 N.E.2d 597, 602 (Ill.App.Ct. 2005)). A jury may infer the existence of an implied-in-fact contract from the parties' general course of dealing. Dallis v. Don Cunningham & Assocs., 11 F.3d 713, 716 (7th Cir. 1993) (citing In re Estate of Brumshagen, 169 N.E.2d 112, 117 (Ill.App.Ct. 1960)).

         Plaintiffs and Walgreens do not dispute that, from 2007 to 2012, Walgreens routinely paid for Plaintiffs' goods by issuing letters of credit listing Sunny as the sole beneficiary. Pls.' Stmt. Add. Facts Opp. Walgreens ¶¶ 12-13, ECF No. 180. At trial, Plaintiffs is entitled to argue to the jury that this course of dealing evinces the existence of an implied-in-fact contract with Walgreens for the sale of merchandise in the 2013 Transaction. See Trapani, 64 N.E.3d at 141; Dallis, 11 F.3d at 716. Plaintiffs have therefore raised a genuine issue of material fact as to whether the parties had an implied-in-fact contract. This issue precludes summary judgment in Walgreens's favor on Plaintiffs' breach of contract claim. See, e.g., Beacon Textile Unit-2 v. JK Grp., Ltd., No. 09 CV 3301, 2010 WL 4338477, at *4 (N.D. Ill. Oct. 25, 2010) (denying summary judgment on breach of contract claim involving an implied contract for the sale of goods where parties disputed the contract's existence).

         Walgreens contends that Plaintiffs have waived their ability to rely upon the parties' course of dealing in support of their breach of contract claim. Walgreens's Mem. Supp. Mot. Summ. J. at 12-13, ECF No. 165. In reviewing Walgreens's motion for summary judgment, it remains unclear to the Court whether Walgreens intends to argue that this alleged waiver precludes Plaintiffs from proving the existence of an implied-in-fact contract, or whether Walgreens instead intends to argue that waiver precludes Plaintiffs from enforcing the purported contract's terms. In any event, neither argument is availing, because Plaintiffs have not made any type of waiver in relation to this claim.

         Under the UCC, the parties' course of performance may “give rise to waiver of express contractual terms if those terms are not strictly adhered to.” Midwest Builder Distrib., Inc. v. Lord & Essex, Inc., 891 N.E.2d 1, 28 (Ill.App.Ct. 2007). Although waiver can be implied by the parties' conduct, courts will find an implied waiver only if the waiver is clearly inferable from the circumstances. Id.; Lavelle v. Dominick's Finer Foods, Inc. of Ill., 592 N.E.2d 287, 291 (Ill.App.Ct. 1992).

         As evidence of Plaintiffs' alleged waiver, Walgreens points only to the fact that Plaintiffs shipped the merchandise for the 2013 Transaction after they had already learned that Sunny was not listed as the beneficiary on Walgreens's letters of credit. Walgreens LR 56.1(a)(3) ¶¶ 36-37. It is by no means clearly inferable, however, that Plaintiffs intended this shipment to serve as an implied waiver of Walgreens's obligation to pay for the shipped goods. Rather, by finalizing the shipment, Plaintiffs appear to have been simply performing their end of the contract they claim to have had with Walgreens. Cf. Emerald Investments Ltd. P'ship v. Allmerica Fin. Life Ins. & Annuity Co., 516 F.3d 612, 618 (7th Cir. 2008) (“If a party to a contract breaks it, the other party . . . can continue with the contract and sue for damages.”). At trial, Walgreens may note the timing of Plaintiffs' shipment in arguing to the jury that Plaintiffs lacked an intent to be bound by an implied-in-fact-contract. See Trapani, 64 N.E.3d at 142-44. But Walgreens has not persuaded the Court that Plaintiffs' shipment amounted to a waiver that precludes Plaintiffs as a matter of law from proceeding with their breach of contract claim. Walgreens's motion for summary judgment as to Plaintiffs' breach of contract claim is thus denied.

         II. Plaintiffs' Unjust Enrichment Claim ...

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