United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Technology Group LLC alleges in this diversity suit that
Walgreen Co. breached in various ways contracts under which
LifeWorks provided goods for sale at Walgreen's retail
stores. Doc. 26. Walgreen moves to dismiss in part the
operative complaint under Federal Rule of Civil Procedure
12(b)(6). Doc. 27. The motion is granted.
resolving a Rule 12(b)(6) motion, the court assumes the truth
of the operative complaint's well-pleaded factual
allegations, though not its legal conclusions. See Zahn
v. N. Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th
Cir. 2016). The court must also consider "documents
attached to the complaint, documents that are critical to the
complaint and referred to in it, and information that is
subject to proper judicial notice, " along with
additional facts set forth in LifeWorks's brief opposing
dismissal, so long as those additional facts "are
consistent with the pleadings." Phillips v.
Prudential Ins. Co. of Am., 714 F.3d 1017, 1019-20 (7th
Cir. 2013). The facts are set forth as favorably to LifeWorks
as those materials allow. See Pierce v. Zoetis,
Inc., 818 F.3d 274, 277 (7th Cir. 2016). In setting
forth those facts at the pleading stage, the court does not
vouch for their accuracy. See Jay E. Hayden Found, v.
First Neighbor Bank, N.A., 610 F.3d 382, 384 (7th Cir.
is an electronics and fitness accessory importer and
wholesaler. Doc. 26 at ¶ 11. Between 2012 and 2016,
Walgreen-which operates a large pharmacy store chain- ordered
goods from LifeWorks to be sold at Walgreen's stores.
Id. at ¶¶ 12-15. The terms governing the
transactions were set forth in two contracts: the General
Trade and Electronic Data Interchange Agreement
("GTA"), and the Business Terms Agreement
("BTA"). Id. at ¶ 15; Doc. 26-1 at
2-15; Doc. 35 at 1, 4, 7.
provides that its terms, "together with all attachments
and exhibits attached hereto, by and between Walgreen and
Vendor [LifeWorks] sets forth the terms and conditions under
which the parties agree to facilitate their purchase and sale
transactions." Doc. 26-1 at 3. The GTA further provides
that, with certain exceptions not relevant here, "[t]he
terms and conditions contained [in the GTA] shall apply to
all merchandise ... sold by Vendor [LifeWorks] ... to
Walgreen." Ibid. The BTA sets forth several
supplementary terms, including insurance requirements,
limitations on the use of Walgreen's trademarks, and-as
relevant here-an agreement that "all products sold to
Walgreens" would be made on a "guaranteed
sale" basis, which, under the GTA, enabled Walgreen to
pay LifeWorks only after selling the goods to its retail
customers. Id. at 3, 14. Additional terms of both
contracts are referenced below in the Discussion section.
Neither the GTA nor the BTA specifies a quantity of goods
that Walgreen would or was required to order from LifeWorks.
performed its obligations under the contracts, timely
producing the ordered goods pursuant to certain forecasts
made by Walgreen. Doc. 26 at ¶ 19. Walgreen provided
those forecasts to LifeWorks long in advance of the required
delivery date, and LifeWorks, in turn, relied on the
forecasts to conform to Walgreen's requirements for
timely production and delivery. Id. at ¶¶
20, 25, 27.
2016, however, Walgreen cancelled its remaining orders,
leaving LifeWorks with approximately 228, 045 unsold units
worth approximately $534, 674. Id. at ¶¶
49-50. In addition, Walgreen's cancellation meant that it
would not pay for an as-yet-undetermined quantity of goods
that LifeWorks expected to produce and import for sale at
Walgreen's stores during the remainder of 2016.
Id. at ¶¶ 45-50. LifeWorks estimates that
those goods would have been valued at approximately $2
million. Id. at ¶ 50.
after Walgreen's cancellation of its remaining orders,
LifeWorks filed this suit. Doc. 1. After Walgreen moved for
partial dismissal of the complaint, Doc. 18, LifeWorks filed
an amended complaint, Doc. 26. The amended complaint has
three counts. Count I alleges that Walgreen breached the
parties' contracts by underpaying LifeWorks in the amount
of $1, 285, 432.27 (plus interest), in part by taking $471,
685.18 in "unauthorized chargebacks and
deductions." Id. at ¶¶ 51-55. Counts
II and III allege that Walgreen breached the parties'
contracts by canceling orders for goods that LifeWorks had
either already produced or planned to produce in 2016.
Id. at ¶¶ 56-66. Walgreen seeks dismissal
only of Counts II and III.
GTA's choice of law provision points to Illinois law,
Doc. 26-1 at 5, and, in any event, the parties agree that
Illinois law governs, Doc. 28 at 3; Doc. 35 at 11, 13. The
court therefore applies Illinois law. See Thomas v.
Guardsmark, Inc., 381 F.3d 701, 704-05 (7th Cir. 2004)
(noting that, "[i]n a diversity case, the federal court
must apply the choice of law rules of the forum state to
determine applicable substantive law, " and that
"Illinois respects a contract's choice-of-law clause
so long as the contract is valid and the law chosen is not
contrary to Illinois's fundamental public policy").
basic rules of contract interpretation under Illinois law are
well settled. In construing a contract, the primary objective
is to give effect to the intention of the parties."
Right Field Rooftops, LLC v. Chi. Cubs Baseball Club,
LLC, 870 F.3d 682, 689-90 (7th Cir. 2017). "A court
must initially look to the language of a contract alone, as
the language, given its plain and ordinary meaning, is the
best indication of the parties' intent."
Id. at 690 (quoting Gallagher v. Lenart,
874 N.E.2d 43, 58 (111. 2007)). "Moreover, because words
derive their meaning from the context in which they are used,
a contract must be construed as a whole, viewing each part in
light of the others." Gallagher, 874 N.E.2d at
58. "If the words in the contract are clear and
unambiguous, they must be given their plain, ordinary and
popular meaning." Right Field Rooftops, 870
F.3d at 690 (quoting Cent. III. Light Co. v. Home Ins.
Co., 821 N.E.2d 206, 213 (111. 2004)). By contrast,
"[i]f the language of the contract is susceptible to
more than one meaning, it is ambiguous, " and in that
event "a court may consider extrinsic evidence to
ascertain the parties' intent." Gallagher,
874 N.E.2d at 58.
C(2) of the GTA states:
Walgreen may return, at Vendor's expense, cancel a
purchase order and receive a full refund for all merchandise
in excess of that ordered or which is defective or tainted or
which varies from the sample from which or specifications for
which the purchase order was placed, or for Vendor's
failure to comply with Walgreen's shipping or billing
directions or with these terms including, without limitation,
the representations and warranties contained herein. In
addition to Walgreen's rights at law or in equity,
Walgreen reserves the right to return at Vendor's expense
any merchandise, cancel the purchase order and receive a full
refund, where a claim is made that the use or resale of the
merchandise by Walgreen infringes any alleged patent,
trademark or copyright rights. In addition, if a
purchase order is designated as a "Guaranteed Sale,
" "Sale and Return, " "Sale or Return,
" "Consignment, " "Pay on Scan, " or
"Vendor Returnable" transaction, Walgreen shall not
be obligated to pay for any merchandise until after it is
sold by Walgreen in accordance with terms agreed upon by the
parties. For purposes of this Agreement, the term "Pay
on Scan" shall mean that Vendor shall retain title to
the merchandise until Walgreen has sold such merchandise, and
payment for such merchandise shall not be due ...