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Karum Holdings LLC v. Lowe's Companies, Inc.

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

March 28, 2017

KARUM HOLDINGS LLC, KARUM GROUP LLC, and KARUM CARD SERVICES S.A. DE C.V., SOFOM, E.N.R., Plaintiffs,
v.
LOWE'S COMPANIES, INC., and LOWE'S COMPANIES MEXICO, S. DE R.L. DE C.V., Defendants.

          MEMORANDUM OPINION AND ORDER

          John Z. Lee United States District Judge.

         Lowe's Companies, Inc. (“Lowe's Inc.”) is a corporation that operates home improvement stores in North America. Around 2007, Lowe's Inc. announced plans to expand into Mexico. It also decided to create a Private Label Credit Program through which consumers could obtain private label credit cards usable only at its Mexico locations. To that end, Lowe's Companies Mexico, S. de R.L. de C.V. (“Lowe's Mexico”) entered into two agreements with Karum Holdings LLC (“Karum Holdings”), Karum Group LLC (“Karum Group”), and Karum Card Services S.A. de C.V., SOFOM, E.N.R. (“KCS”) for the provision of private label credit services.

         In 2015, Karum Holdings, Karum Group, and KCS (“Plaintiffs”) sued Lowe's Inc. and Lowe's Mexico (“Defendants”) for breaching the parties' agreements. Defendants have filed a motion for partial summary judgment. For the reasons stated herein, their motion is granted in part and denied in part.

         Background[1]

         Karum Holdings and Karum Group are Delaware limited liability companies. Defs.' LR 56.1(a)(3) Stmt. ¶¶ 1-2, ECF No. 87. Their principal places of business are in California, and their members reside in California and Texas. Id.; Am. Compl. ¶¶ 1-5, ECF No. 50. KCS is a subsidiary of Karum Group. Defs.' LR 56.1(a)(3) Stmt. ¶ 3. It is a special-purpose bank organized under the laws of Mexico, and it is a citizen of Mexico. Id. Lowe's Inc. is incorporated in North Carolina and has its principal place of business in North Carolina. Id. ¶ 4. Lowe's Mexico is a corporation organized under the laws of Mexico. Id. ¶ 5. It operates stores in Mexico and is a citizen of Mexico. Id.[2]

         On February 10, 2010, Lowe's Mexico entered into a Private Label Credit Card Program Agreement (“the Program Agreement”) with Karum Holdings and KCS for the provision of private label credit cards for Lowe's Mexico's customers. Id. ¶ 9; id., Ex. 1 (“Program Agreement”), at 1. On April 4, 2014, Lowe's Mexico also entered into a Profit Sharing and Funding Agreement (“the Funding Agreement”) with Karum Group, Karum Holdings, and KCS, which governed funding and profit percentages with respect to KCS's operations. See Id. ¶ 11; id., Ex. 2 (“Funding Agreement”), at 2. Plaintiffs assert that Lowe's Inc. acted as the alter ego of Lowe's Mexico for purposes of both the Program Agreement and the Funding Agreement (together, “the Agreements”). Am. Compl. ¶ 13.

         On August 21, 2014, Lowe's Inc.'s Senior Vice-President of International Operations, Doug Robinson, spoke on the phone with Plaintiffs' CEO, Peter Johnson. Defs.' LR 56.1(a)(3) Stmt. ¶ 13. The parties dispute what Robinson said to Johnson during this phone call. According to Defendants, Robinson merely told Johnson that Defendants “desire[d] to end [their] relationship” with Plaintiffs. Id. But according to Plaintiffs, Robinson told Johnson more definitively that Defendants “had determined to terminate the Agreements.” Pls.' LR 56.1(b)(3) Stmt. ¶ 13.

         On October 2, 2014, Plaintiffs served Defendants with a demand for mediation, as required under both Agreements as a condition precedent to litigation. Defs.' LR 56.1(a)(3) Stmt. ¶ 19. The mediation was conducted on December 10, 2014, but it was unsuccessful. Id. ¶ 20. Accordingly, Plaintiffs filed this lawsuit in January 2015, alleging breach of the Agreements. In particular, they claim that Defendants breached the Agreements by (1) terminating the Agreements, (2) awarding contracts to third parties for services related to the Agreements, (3) refusing to work cooperatively with Plaintiffs on day-to-day business issues, and (4) refusing to cure deficiencies in the performance of their duties under the Agreements. Am. Compl. ¶¶ 32-36. Defendants have moved for partial summary judgment as to these claims.

         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); see also Shell v. Smith, 789 F.3d 715, 717 (7th Cir. 2015). 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).

         Analysis

         I. Anticipatory Repudiation

         First, Defendants move for summary judgment on Plaintiffs' breach of contract claims to the extent they rest on allegations that Defendants prematurely terminated the Agreements. According to Defendants, even assuming as true that Robinson attempted to orally terminate the Agreements in his phone call with Johnson on August 21, 2014, his attempted termination cannot form the basis of Plaintiffs' breach of contract claim as a matter of law, because the Agreements' express terms required any notice of termination to be in writing. Defs.' Mem. Supp. at 7-10, ECF No. 88. In response, Plaintiffs argue that Robinson's statement to Johnson gave rise to a breach because it was an anticipatory repudiation. Pls.' Mem. Opp. at 8-9, ECF No. 99.

         Under New York law, [3] an anticipatory repudiation occurs when a party declares a positive, unequivocal intention not to fulfill a contractual duty before the time for performance begins. DiFolco v. MSNBC Cable LLC, 622 F.3d 104, 112 (2d Cir. 2010); Lucente v. Int'l Bus. Machines Corp., 310 F.3d 243, 258 (2d Cir. 2002). A party can repudiate a contract either in a statement, written or oral, or through its conduct. See, e.g., Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp., 705 N.E.2d 656, 659 (N.Y. 1998) (holding that repudiation may occur through a statement or conduct); Tenavision, Inc. v. Neuman, 379 N.E.2d 1166, 1168 (N.Y. 1978) (holding that oral statements along with one piece of related correspondence were sufficient evidence of an anticipatory repudiation); see also DiFolco, 622 F.3d at 112. ...


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