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Toll Processing Services, LLC v. Kastalon, Inc.

United States Court of Appeals, Seventh Circuit

January 23, 2018

Toll Processing Services, Llc, Plaintiff-Appellant,
Kastalon, Inc., and Kastalon Polyurethane Products, Defendants-Appellees.

          Argued March 31, 2016

         Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 12-cv-10058 - Sharon Johnson Coleman, Judge.

          Before Manion and Kanne, Circuit Judges, and Pepper, District Judge [*]

          Pepper, District Judge.

         Toll Processing Services, LLC ("Toll Processing") appeals from the district court's order granting summary judgment in favor of Kastalon, Inc. and Kastalon Polyurethane Products (collectively, "Kastalon") on Toll Processing's conversion and negligence claims. We reverse the district court's order as to those claims, and remand the case for further proceedings.

         I. Background

         This is a diversity case, governed by Illinois law, involving state law contract and tort claims. Appellant Toll Processing is a subsidiary of International Steel Services, Inc.; it was formed in 2006 for the purpose of owning and operating a pickle line.[1] Appellee Kastalon provides equipment and repairs for the steel industry. In 2006, Toll Processing purchased a used pickle line from Joseph T. Ryerson & Sons, Inc.; the line included fifty-seven pickle line rolls, some of which were in need of repair. Kastalon had serviced the rolls during the time Ryerson owned the line.

         Toll Processing planned to reinstall the Ryerson pickle line somewhere else, but as of the spring of 2007, did not have a facility in which to put it, or anywhere to store the rolls. In April 2007, Toll Processing began to disassemble the used pickle line at Ryerson's facility in Chicago. Early in 2008, Kastalon agreed that it would move the rolls to its facility and store them, at no cost, until Toll Processing could issue a purchase order to Kastalon to recondition the rolls. In January of that year, Paula Dent-a former Ryerson employee, and a plant and project manager for Toll Processing- orally contacted Kastalon's vice president and half owner Michael DeMent to make the arrangements. Dent was Kastalon's main contact regarding the pickle line.

         Both parties initially believed that Toll Processing would complete its plan to re-install the pickle line within months, but they did not discuss a specific timeframe during which Kastalon would store the rolls. Kastalon appears to have assumed that it would be storing the rolls for a few months only; both parties expected Toll Processing to find a new facility shortly. Regardless of timing, the parties agree that Kastalon was storing the rolls while it waited for Toll Processing to issue it a purchase order for the repair and reconditioning of those rolls that needed it.

         Malvin Sander, vice president and general counsel for Toll Processing, represented Toll Processing in negotiating its purchase of the pickle line. Later, at his deposition, Sander testified that he agreed it would not have been reasonable for Toll Processing to expect Kastalon to store the rolls forever. Gus Schempp, a consultant hired to assist in disassembling the line and reinstalling it at its new location, testified at his deposition that he did not know what Kastalon's storage obligation would be if Toll Processing never issued the expected reconditioning purchase order.

         Kastalon moved fifty-seven pickle rolls to its facility in Alsip, Illinois, over the first three months of 2008. After March 2008, however, Dent had no further contact with Kastalon about the rolls. In fact, Toll Processing laid Dent off in April 2008, but did not inform Kastalon that Dent had been let go. In October 2008, DeMent called Gus Schempp at Toll Processing regarding the disassembling/reinstallation project. Schempp did not tell DeMent that the project to reinstall the line had been delayed (although it appears that it had been). DeMent also sent Schempp an email asking to be kept informed as to the progress of the reinstallation project; Schempp did not respond.

         Over the next two years, Toll Processing negotiated with various companies, either to set up and run the pickle line, or to sell it. It was not in communication with Kastalon about the line during that period. Kastalon stored the rolls indoors for about two years. At some point, though, Kastalon used a crane to move the rolls from their original location inside the facility to another location inside the facility, which took four to five hours of labor. Later, Kastalon greased and wrapped the rolls before moving them to be stored outside under tarps, which took about ten hours of labor. Kastalon's plant manager testified at his deposition that the condition of the rolls did not change while they were in Kastalon's possession.

         In November or December 2010-some two years after the last contact between the two companies-DeMent contacted Dent and Carlos Monzon (a former Ryerson employee, who was hired by Toll Processing and later laid off). Dent and Monzon informed DeMent that they were unemployed. DeMent did not specifically enquire into the status of the rolls, or inform Dent or Monzon that Kastalon planned to dispose of the rolls. He testified at his deposition that after this conversation, he thought that Toll Processing had gone out of business. He also indicated that he believed that the pickle rolls were in poor condition and had little value.

          Subsequent to the conversation between DeMent, Dent and Monzon, Kastalon concluded that the rolls had been abandoned, had them scrapped by a local recyler and received $6, 380.80. Before scrapping the rolls, Kastalon did not inspect them to determine their condition.

         In June 2011, Toll Processing believed that it was close to finalizing arrangements to reinstall the pickle line, which would call for repair and refurbishment of the rolls. Schempp called DeMent to request a price quote for reconditioning the rolls so they could be put into service. DeMent informed Schempp that the rolls had been scrapped. Toll Processing obtained quotes for replacement rolls, the lowest of which was $311, 750, plus $104, 905 for roll covers (apparently a quote from Kastalon), for a total replacement cost of $416, 695. Toll Processing never issued a purchase order to Kastalon to refurbish the rolls.

         Toll Processing filed a three-count complaint pleading claims for conversion, negligence and breach of contract. The parties each moved for summary judgment. The district court granted summary judgment in favor of Kastalon and against Toll Processing as to each of Toll Processing's claims.

         II. Analysis

         We review the district court's grant of summary judgment de novo. Boss v. Castro, 816 F.3d 910, 916 (7th Cir. 2016). Summary judgment is appropriate "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, Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The parties agree that Illinois substantive law applies to the state law claims.

          A ...

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