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C&K NuCo, LLC v. Expedited Freightways, LLC

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

July 31, 2017

C&K NUCO, LLC, Plaintiff


          REBECCA R. PALLMEYER United States District Judge

         After Expedited Freightways, LLC (“Expedited”) sold its trucking business to C&K NuCo, LLC (“C&K”) in 2013, disputes arose about certain post-closing payments and credits. This lawsuit resulted. Most of the parties' claims were resolved by way of summary judgment, but the court conducted a bench trial on one limited issue: whether the profit earned by C&K after the purchase supported an adjustment to the purchase price as provided in the parties' agreement, and specifically whether that determination should be based on the amount of revenue the parties had billed, or only the amounts they had actually collected. The court found in favor of Expedited on that issue and entered a judgment, after offsetting the revenues that each party owed the other for the post-closing period, but failed to pay. Both parties have moved to amend the judgment. For the reasons stated below, the motions are denied.


         The facts of this case are set out in detail in the court's two prior opinions, C&K NuCo, LLC v. Expedited Freightways, LLC, No. 13 CV 04006, 2016 WL 3364766 (N.D. Ill. June 17, 2016), and C&K NuCo, LLC v. Expedited Freightways, LLC, No. 13 C 4006, 2014 WL 4913446 (N.D. Ill. Sept. 30, 2014), but are summarized again here. On January 25, 2013, C&K purchased substantially all of Expedited's assets. C&K NuCo, 2016 WL 3364766, at *1. Before the sale, Expedited was engaged in trucking services and transportation of goods through various states. Id. The asset purchase agreement (“APA”) between C&K, C&K's parent company (C&K Trucking, LLC), Expedited, and Chad Rosenburg (a principal of Expedited) provided for a purchase price of $825, 000, plus an additional amount (the “Purchase Price Adjustment”) payable to Expedited if C&K achieved a profit in excess of $400, 000 during the first 100 days after the closing date (“Aggregate Direct Profit”). Id. at *2. The parties also agreed that Expedited would be entitled to revenues generated by loads transported before the closing date, while C&K would be entitled to revenues generated after the closing date (with each party responsible for the corresponding expenses) (“load revenue”). Id. at *3. Section 5.03 of the APA requires the parties to “work in good faith to timely account for and properly direct payments owing to the other” and directs that “any funds collected on behalf of the other party shall be held in trust in the interim until remitted to the other party.”[1] Id. at *3 (quoting APA § 5.03).

         On May 20, 2013, C&K filed this lawsuit against Expedited and Rosenburg, alleging breach of contract and fraud. C&K sought rescission of the contract and indemnification for costs arising from litigation involving a truck driver who transported a load post-closing.[2] C&K NuCo, 2014 WL 4913446, at *5. Relevant for this opinion, C&K alleged that Expedited breached the APA by failing to give C&K revenue that Expedited collected for loads transported after the closing. C&K NuCo, 2016 WL 3364766, at *5. Expedited counterclaimed, alleging that C&K itself breached the APA by (1) failing to remit to Expedited revenue associated with pre-closing loads, and (2) failing to give Expedited a Purchase Price Adjustment. Id.

         On September 30, 2014, the court dismissed C&K's claims against Rosenburg with prejudice and most of those against Expedited without prejudice. C&K NuCo, 2014 WL 4913446, at *1. C&K then filed another amended complaint, alleging many of the same causes of action. C&K NuCo, 2016 WL 3364766, at *6. Among those is a claim that Expedited owes C&K $433, 560.10 in revenue that was generated after closing. Id. at *2. The parties filed cross-motions for summary judgment on breach of contract claims arising out of post-closing revenue; Expedited also moved for summary judgment on its claim that C&K breached the APA by failing to pay a Purchase Price Adjustment, and moved to dismiss the other claims. Id. at *6.

         C&K's claim for post-closing revenue was contested, but only in part: Expedited admitted that it collected $356, 839.50 in revenue from loads transported after the closing date, id. at *3, but it “dispute[d] $64, 466.60, and [wa]s uncertain about $12, 254.” (Def.'s Resp. to Pl.'s Statement of Material Facts [129] ¶ 19.) C&K did not withdraw its claim for the full amount, but its motion for summary judgment requested only the $356, 839.50 that Expedited acknowledged that it had received, post-closing. (Pl.'s Mot. for Summ. J. [121] at 2; Pl.'s Mem. in Supp. of Mot. for Summ. J. [122] at 2 n.3.)

         Expedited's counterclaim sought recovery, first, of $128, 602.28 in revenue that C&K admitted it had collected for loads transported before the closing date. C&K NuCo, 2016 WL 3364766, at *3, 5. In addition, Expedited claimed it is entitled to the Purchase Price Adjustment referred to in the parties' agreement. Id. at *5. In support of this claim, Expedited relied on C&K's own records showing that C&K had earnings of $464, 622.15 in the 100 days following the closing. Id. at *2. In response to this claim, C&K took the position that because it had not yet recovered the $433, 560.10 that Expedited owed it, C&K's actual profit did not exceed the $400, 000 trigger for a Purchase Price Adjustment. (Pl.'s Br. in Opp. to Def.'s Mot. for Summ. J. [111] at 3.)

         On June 17, 2016, the court granted summary judgment on both Expedited's and C&K's claims that each party had breached the APA by withholding revenue owed to the other. C&K NuCo, 2016 WL 3364766, at *11-12. The court held that Expedited was entitled to the $128, 602.28 that C&K had collected, and that C&K was entitled to the $356, 839.50 that Expedited admitted to collecting; the court did not address the disputed $76, 720.60. Id. The court denied Expedited's request for summary judgment on the claim that C&K breached the APA by failing to pay a Purchase Price Adjustment. Id. at *12. The court noted that if Expedited collected $433, 560.10 in post-closing revenue, as C&K itself contended, those funds would be payable to C&K, and C&K would owe a Purchase Price Adjustment. Id. On the other hand, if Expedited had collected only $356, 839.50 post-closing, C&K's profits would not reach the $400, 000 threshold.[3] Id. The court also granted Expedited's motion to dismiss the other breach of contract, fraud, and equitable rescission claims. Id. at *15.

         On September 12, 2016, C&K moved for summary judgment a second time, asking the court to find that it did not owe a Purchase Price Adjustment. C&K argued “Expedited has no quantitative evidence to contradict the Court's calculation of C&K's Aggregate Direct Profit”- that is, the court's finding that C&K's profit in the first 100 days was less than $400, 000, which was premised on the assumption that Expedited had only collected $356, 839.50 that was due to C&K. (Mem. in Supp. of Pl.'s Mot. for Summ. J. on Count I of Def.'s Counterclaim (“Pl.'s Second Summ. J. Mem.”) [147] at 8.) C&K added “[t]he record in this case is complete, and the Court has already analyzed that complete record in arriving at the findings in its Order. There are no new financial figures in the case.” (Id.) C&K accordingly conceded that the $76, 720.60 should not be included in the calculation of profits for the first 100 days:

The difference between $433, 560.10 ([C&K's] postclosing receivables calculation) and $356, 839.50 (amount of post-closing receivables acknowledged by Expedited), or $76, 720.60, must then be subtracted from [C&K's] calculation of 100-day revenues, $2, 162, 826.37, to arrive at revenues totaling $2, 086, 105.77 for the 100-day period following the Closing Date. (Order at p. 23 and n. 10). After subtracting [C&K's] costs of $1, 698, 204.22, [C&K's] Aggregate Direct Profit totaled $387, 901.55[.]

(Id. at 9 (emphasis added).) In essence, by arguing that C&K's profits fell below the $400, 000 threshold, C&K effectively abandoned its contention that Expedited had recovered an additional $76, 720.60 payable to C&K. Expedited responded by arguing that C&K had underreported its profit by deducting uncollected revenue from the profit calculation. (See Def.'s Mem. in Op.. to Pl.'s Mot. for Summ. J. and in Supp. of Def.'s Cross Mot. for Summ. J. [150] at 7.) This was improper, Expedited argued; it contended that profit should be calculated on the basis of billed revenue, regardless of whether it had been collected. (Id. at 7-9.) If all billed revenue were included, C&K earned Aggregate Direct Profit of $464, 622.15, and therefore owed a Purchase Price Adjustment.

         The court thus distilled the remaining issue as follows: whether Aggregate Direct Profit should be calculated using billed revenue or collected revenue. (Minute Entry [152], Sept. 22, 2016.) The court noted that this could not be resolved on summary judgment, and set the issue for trial. (Id.) The parties submitted a joint proposed pretrial order, in which C&K contended that there were two issues for trial: “whether the term ‘net revenue' in the Asset Purchase Agreement refers to ‘billed revenue' or ‘collected revenue'; and whether Plaintiff diverted revenue pursuant to the Asset Purchase Agreement.” (Joint Proposed Pretrial Order [153].) The parties' stipulation of uncontested facts stated that “Expedited admitted owing C&K $356, 839.50 in post-closing receivables, but represents that it disputes owing $64, 466.60, and does not know about $12, 254.00.” (Sch. A to Joint Proposed Pretrial Order [153] ¶ 20.)

         At trial, the parties jointly offered in evidence C&K's initial calculation of the Aggregate Direct Profit, which shows an Aggregate Direct Profit of $464, 622.15, and a corresponding Purchase Price Adjustment of $329, 107.36. (Trial Joint Ex. 2; see Ex. D to Pl.'s Br. in Opp. to Def.'s Mot. for Summ. J. [111-4].) But consistent with C&K's argument in its second summary judgment motion, Michael Burton, the president of C&K's parent company, testified that this calculation of C&K's Aggregate Direct Profit was inflated because it included amounts of post- closing revenue that Expedited denied having received. (Trial Tr. vol. 1, 123:24-124:8, 125:23- 126:2, 139:13-140:4.) At closing argument, C&K argued that “Expedited found that it could not determine the collectability of $76, 720.60 of those post-closing receivables. And that's what this Court found also in its June 17th, 2016 opinion and order. That's what the parties have stipulated to for this trial.” (Trial Tr. vol. 2, 251:11-15.) C&K did not present evidence that Expedited had actually received this disputed revenue.

         After hearing evidence, the court rejected C&K's contention, and concluded that whether the Aggregate Direct Profit payable to C&K exceeded $400, 000 must be calculated on the basis of billed revenue, not collected revenue. Resting this determination on collected revenue would, in the court's determination, be (1) “inconsistent with reasonable business judgment, as it would permit unilateral manipulation” by the parties and (2) “inconsistent with the parties' course of dealing, ” given that C&K made no mention of collection in its initial calculation of the Purchase Price Adjustment. (Order [165] at 1-2, Dec. 15, 2016.) As a result, the court concluded that “(a) Expedited proved by a preponderance of the evidence its claim for Breach of Contract against C&K; and, as a result (b) Expedited is entitled to a purchase price adjustment from C&K . . . in the amount of $329, 107.36.” (Id. at 2.) The court added the additional $128, 608.28 in load revenue that C&K owed Expedited, for a total recovery to Expedited of $457, 715.64. (Id.) But, the ...

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