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The Frain Group, Inc. v. Steve's Frozen Chillers, Inc.

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

September 14, 2017

THE FRAIN GROUP, INC., Plaintiff/Counterclaim-Defendant,
v.
STEVE'S FROZEN CHILLERS, INC., Defendant/Counterclaim-Plaintiff.

          MEMORANDUM OPINION AND ORDER

          Hon, Virginia M. Kendall, United States District Court Judge

         The Frain Group, Inc. (“Frain”) filed suit against Steve's Frozen Chillers, Inc. (“Steve's”) seeking a declaratory judgment that the contract entered into by the parties for the purchase and maintenance of a liquid packaging machine was valid and enforceable. Frain also alleged common law claims of defamation and tortious interference with business. (Dkt. 1, ¶¶ 30-35, 36-38.)[1] Steve's responded by filing a Counterclaim against Frain alleging a number of violations of which only the breach of contract (Count I) and the violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”) (Count II) remain. (Dkt. 14, ¶¶ 27-39.)[2] Both parties move for summary judgment on the remaining counterclaims: Frain for the breach of contract and the ICFA claims (Dkt. 86, 1-3) and Steve's on the ICFA claim (Dkt. 89, 1-3).

         For the reasons set forth below, the Court denies both parties' motions for summary judgment. (Dkt. 86; Dkt. 89.)

         FACTS

         The following facts are undisputed unless otherwise indicated.

         Steve's, a Florida corporation, produces frozen beverage mixes. (Pl. SOF ¶5.)[3] Frain, an Illinois corporation, “retool[s], sell[s], and service[s] pre-owned packaging equipment throughout the United States.” (Pl. SOF ¶¶ 1-2.)

         In March 2014, Frain presented Steve's with a “Proposal for Engineered Services” (“Proposal”) providing that Frain would sell Steve's a quality “Prodo-Pak Form & Fill” packaging machine (“Machine”).[4] (Def. SOF ¶ 7.) The Proposal also provided that Frain would service the Machine. (Id.) Specifically, the Proposal stated:

         With every Engineered Services product, the Frain Group sets your machine to size and places your machine in Good Working Condition by:

a. Thoroughly inspecting your equipment mechanically, electronically and pneumatically;
b. Repairing and replacing worn, damaged, or missing components;
c. Improving appearance by cleaning, painting and repolishing;
d. Engineering, designing and fabricating the appropriate change parts to run your specific product;
e. Adjust [sic] our machine to your specific requirements . . .

(Id. ¶ 10.) The Proposal also informed Steve's that Frain would provide training for operators at Steve's facility. (Pl. SOAF ¶ 2.) Additionally, the Proposal provided specifications regarding the Machine's components (without specifying that they are “Prodo-Pak components”) (see Dkt. 93-1 at 5), [5] and indicated that the Machine will fill and seal 180 to 210 pouches with 3.6 ounces of fruit juice per minute. (Id. at 6.)

         Between March and May 2014, the parties negotiated the purchase of the Machine (id. ¶ 11) and, on May 23, 2014, Steve Schoenberg from Steve's signed a contract (“the Agreement”) to purchase the Machine. (Dkt. 93-2.) Steve's purchased the Machine for $254, 204, which included an expediting fee of $20, 000. (Id. ¶ 12; Dkt. 91 at 11.) The Agreement indicated that the Machine is a “Prodo Pak [] Form & Fill” and that Frain would conduct a “reconditioning and retooling project” on the Machine before delivery. (Dkt. 93-2 at 2.) The Agreement also included a warranty, which stated in part:

Seller hereby warrants any components refurbished by Seller will be free from material defects for a period of 180 days from the date of machine acceptance at the Seller's facility (the “Warranty Period”). In the event of a valid warranty claim, Seller shall have the option either to repair the defective component or provide Buyer with a replacement component as Seller's expense.

(Dkt. 93-2 at 9.) The Agreement in bold print disclaimed all other warranties (id.) and declared that any descriptions made “pertaining to machine capabilities contained on [Frain's] invoice, website or in any other manner except as contained in Seller's Project Acceptance Letter are descriptive only and are not a warranty or guaranty of performance by [Frain.]”[6] (Id.) The Agreement also included a 14-day unconditional right of return (id.) and declared that Frain “shall not be liable for, and [Steve's] waives any claim for, incidental or consequential damages...” (Id. at 10.) Similar to the Proposal, the Agreement stipulated that the Machine “will be set up to automatically form 6 pouches, fill 3.6 oz. of fruit juice per pouch and seal at 30 cycles per minute.” (Id. at 3.)

         On June 27, 2014, Steve's president, David Schoenberg, completed and signed a “Packaging Equipment Check-Out Sheet” on which he indicated that the Machine ran to his satisfaction at the Factory Acceptance Test, that he would like a service technician to assist with start-up and training, and that he accepted the Machine and released it for shipment. (Pl. SOF ¶ 25; Dkt. 87-7 at 1.) On June 30, the Machine arrived, as designated, at the Lancaster Fine Foods (“LFF”) facility in Lancaster, Pennsylvania.[7] (Def. SOF ¶ 18.)

         Upon the Machine's arrival at the LFF facility, agents or employees of Steve's and LFF unpacked and set up most of the Machine. (Def. Resp. ¶ 28.) Then, a Frain technician, Jadran Radujkovic (“Radujkovic”), arrived to complete the installation and set-up, and to train LFF employees on how to use the Machine. (Id. ¶ 29.) When the employees at LFF began using the Machine independently, they could not get it to run consistently for “long periods of time.” (Dkt. 90-4 at 20:22-24.) The Machine ran for various lengths of time. The service report from Radujkovic's July 10 visit to the LFF facility indicated that the Machine only ran for a few minutes in the morning before the hopper overflowed. (Dkt. 93-11 at 21.) Later that day, it ran for about an hour until the facility ran out of product. (Id.) The same day, the Machine had a “massive overflow” after running for a short period while Radujkovic was on a break. (Id.) On Dale Hammersmith's (“Hammersmith”) service visit, he arrived to find “signs of hopper overflow” and “product film everywhere.” (Id. at 23.) His service report indicated that he needed to instruct the day shift mechanic at the site because the mechanic “did not know how to put film thru [sic] Machine.” (Id.) The report also indicated, however, that Hammersmith needed to replace “bad” parts, including “O-rings” and “slitter knives.” (Id.) “O-rings, ” however, need replacing frequently (Dkt. 93-9 at 51: 2-13), so the fact that those parts went bad is not necessarily indicative of a poorly made Machine.

         At Steve's request, Frain sent three different technicians on several occasions in July 2014 to inspect and service the Machine.[8] (Pl. Resp. ¶ 21.) The Machine was never consistently operational. (Def. SOF ¶ 21.) Frain claims, however, that the Machine was always capable of operating properly, but that operator error on the part of Steve's and LFF's employees caused the Machine to stop functioning. (Id. ¶ 23.) Affidavits, service reports, and deposition testimony from Frain technicians support the notion that the Machine's problems were at least partly due to operator error and inexperience. (See Dkt. 93-8; Dkt. 93-9 at 32-47; Dkt. 93-11.)[9] The CEO of Steve's stated in his deposition that the Machine repeatedly overflowed and that Frain's technicians consistently blamed that problem on inexperienced operators. (Dkt. 87-14 at 38:13- 21.)

         After the last Frain technician left on July 17, 2014, Frain refused to send further technicians free of charge because it determined that there was nothing wrong with the Machine. (Pl. Resp. ¶ 22.) Instead, Frain offered to send a technician to do additional training for a fee. (Id.) On July 30, Steve's threatened legal action, leading Frain to file this lawsuit. (Dkt. 93-13 at 2-4.)

         Steve's has since hired third parties, including technicians from Prodo-Pak, to examine and repair the Machine. (Pl. SOF ¶ 46.) Prior to that examination, Steve's CEO believed his company purchased a “used refurbished working, Prodo Pak machine.” (Dkt. 87-14 at 19:18- 19.) Steve's later learned from the Prodo-Pak technicians and the President of Prodo-Pak, who inspected the Machine, that Frain did not use original Prodo-Pak parts for several component parts of the Machine. (Def. SOF ¶ 27.) Frain, itself, fashioned at least some of the components. (Pl. Resp. ¶ 27.) According to Steve's and the President of Prodo-Pak, Frain manufactured low-quality components, which caused the Machine to malfunction. (Def. SOF ¶ 29; Dkt. 90-1, Ex. A.) According to Frain and its shop manager, all Frain-manufactured components functioned as intended and were of equal or better quality than any Prodo-Pak component. (Pl. Resp. ¶ 29.) Before the Factory Acceptance Test, Frain placed a Prodo-Pak sticker on ...


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