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APS Express, Inc. v. Sears Holdings Corp.

United States District Court, N.D. Illinois

May 22, 2018

APS EXPRESS, INC., Plaintiff,



         Plaintiff, APS Express, Inc. (“APS”) filed its Third Amended Complaint against Sears Holding Corporation, Sears Holding Management Corporation, and Innovel Solutions (collectively, “Sears”), to recover the value of the used appliance processing services APS rendered to Sears from 2011 through April 14, 2015, and to recover for damages suffered when it detrimentally relied upon Sears' allegedly false representations in bidding for a new haul-away contract. Sears now moves for summary judgment pursuant to Federal Rule of Civil Procedure 56 for all claims in Sears' Third Amended Complaint and for its counter claim against APS. Sears filed a cross-motion for partial summary judgment on two of its claims, Counts I and IV. After reviewing the parties' submissions and the evidence before it, Sears' Motion is granted in part and denied in part. APS' Motion is denied.


         The following facts are undisputed unless noted. Defendants, Sears Holding Corporation, Sears Holding Management Corporation, and Innovel Solutions (collectively, “Sears”) are Delaware corporations whose primary place of business is in Illinois. Plaintiff, APS Express, Inc. (“APS”) is a Florida corporation that operates out of Florida. It formerly performed haul-away services for Sears from 2001 through April 15, 2015, when Sears terminated the contract. Sears was APS' only haulaway customer during that time period.

         APS and Sears' business arrangement worked as follows. Sears offered customers that purchased large items, like appliances, the option of paying a fee to have their old items removed and recycled. Sears used third-party carriers to deliver the new items and haul-away the old or broken ones to the APS trailers at the Sears' distribution centers. After picking up a used appliance from a customer's home, the third-party drivers were supposed to bring the item back to a Sears Distribution Center to be placed in the on-site APS trailer for processing. There were instances where the third-party drivers stole the hauled away items, or replaced them with appliances from junkyards before putting them in the APS trailers. Parties dispute whether the third-party carriers or Sears were responsible for preventing the drivers from taking or swapping out “haul away” items. Once a trailer was full of used appliances and other haul-away materials, APS transported the trailer to its facilities where the items were classified as resalable, recyclable, or trash. Since there was a secondary market for the used appliances, APS agreed to pay a per-appliance fee for certain types of used appliances it hauled away, in exchange for the right to resell those appliances or recycle the components for sale as scraps.

         March 18 Meeting

         On March 18, 2011, APS Executives, Basil Beck and Wendy Beck, attended a meeting at Sears Headquarters in Hoffman Estates, IL with the Sears Management. The Sears team included Gary Fenske, Troy Kohler, David Torma, and David Acquaviva, and the loss prevention manager, Paul Jankowski, via phone, to discuss their potential business agreement. Fenske was APS' main point of contact with Sears. Basil Beck testified that members of the Sears team made the following representations to APS during that meeting: 1) Sears had better anti-theft measures than tamper-proof stickers; 2) Sears already implemented anti-theft processes with the haul-away that are like the new product; 3) Sears had a zero tolerance for driver theft; 4) Sears did not have a theft problem and if it did, the loss prevention person would “nip it in the bud”; 5) drivers were terminated if they stole; 6) Sears knew and believed that any problem with driver theft or “switching out” was under control; 7) Sears' loss prevention department was capable of addressing haul-away theft issues; 8) no other vendors would service APS' areas; and 9) Sears wanted APS to bid full, premium pricing because Sears was committed, and would continue to be committed to not tolerating theft. Basil Beck Dep. 144-404, Nov. 17, 2016. Wendy Beck's testimony was substantially similar. Wendy Beck Depo. 88-112, Nov. 22, 2016. Sears offered Fenske's deposition to dispute that these statements were made during the meeting and refute that the statements were properly characterized by Basil and Wendy Beck.

         In addition to the meeting on March 18, 2011, Fenske sent several internal email correspondences suggesting that he and Sears were aware that appliance theft occurred and affected the volume of haul-away material. In 2010, he sent an email detaining the opportunity for Sears to accrue over $1.3 million if it could recover all of the haul-away appliances that are sold, traded out, or taken by drivers. Fenske also sent several internal emails in 2013 and 2014 suggesting that the discrepancies between the number of delivered appliances and the haul-away volumes in Sears' internal reports were caused by driver theft of the hauled-away appliances. Sears disputes that theft is the reason for the missing items and attributes that rationale to rumors from other vendors and Fenske's opinions, as the company as a whole was not aware of any theft problem. Finally, Fenske also sent an email where he expressed that the haul away vendors expected Sears to remedy the problem of drivers swapping out the used appliances prior to delivering the items to the vendor because they were paying premium prices for reasonably used items but receiving junk instead. Sears argues that these emails were mischaracterized and irrelevant because Fenske's emails were directed at other vendors in different territories.

         Bidding Auctions

         Sears notified APS and other prospective bidders that Sears would conduct its first online auction in August 2011 to award haul-away business to various vendors over the next three years. Prior to the auction, on June 22, 2011, Sears' Facility Services Procurement Manager emailed APS and other prospective vendors to acquire their haul-away volume information from the month of April 2011, and compile the data into one sheet.

         On August 4, 2011, Sears' Facility Services Procurement Manager sent APS an email describing how the online auction would be used to award the haul-away service contracts from September 2, 2011 until August 31, 2014. Sears also sent all prospective vendors, including APS, a spreadsheet (“2011 Bid Proposal”) labeled “Monthly Total Number of Units, ” which contained volume numbers for various haul-away items by location. The 2011 Bid Proposal did not specify that the volume numbers were taken from the month of April 2011 only. APS saw the 2011 Bid Proposal in advance of the auction. APS now challenges the 2011 Bid Proposal contending that such a document should have represented the volume average across time, not a single month. Additionally, while APS acknowledges the veracity of the numbers it submitted for April 2011, but it disputes the accuracy of the numbers submitted by other vendors. The auction took place on August 22, 2011. APS was the incumbent provider in 16 locations, which permitted it access to those historical volume numbers. APS, however, did not examine those previous volumes, but instead relied on the “Monthly Total Number of Units” provided in the bid sheet when setting its prices. Based on APS' competitive bidding, it was selected as the haul-away vendor for 27 Sears locations.

         On August 30, 2011, Sears and APS signed a Materials Processing Master Services Agreement (“MSA”) and accompanying Statement of Work (“SOW”). The MSA contained the terms for the service relationship between Sears and APS. (Dkt. 143-21). It made “no representations as to the amount of business [APS could] expect under this Agreement.” (Id.). It determined that “compensation for all Services [would] be set forth in the applicable SOW and [would] remain in effect for the term thereof and [would] not be changed except by an amendment to the SOW signed by both parties.” (Id. at 5.1). Under the MSA, Sears would “not be liable to [APS] for any capital expenditures or expenses incurred for additional personnel, supplies, facilities, or equipment in reliance upon or in anticipation of providing services to” Sears and APS “release[d] and discharge[d Sears] . . . from any and all claims in law or equity for expenses or damages incurred during the term of this Agreement or after its termination arising out of [APS'] investment in such equipment, materials, personnel and facilities.” (Id. at 5.3-5.44). Both parties also signed the 2011 SOW, which was incorporated as part of the 2011 MSA and included additional terms for the haulaway and appliance processing services. (Dkt. 143-21). The services statement in the SOW indicated that Sears retained APS “for handling, recycling and disposing of Materials . . . [and a]ll Services shall be at [APS'] own expense.” (Id.). Under the 2011 SOW, APS agreed to pay Sears for the services outlined under the agreement and was responsible for “all costs of administering, operating and performing the Services.” (Id.).

         When the initial haul-away contracts reached their expiration, Sears conducted a second haul-away auction on July 2, 2014. It differed from the 2011 auction because vendors were expected to bid by state and not by the geographic groupings of the Sears' facilities. Sears also included nine outlet stores in the auction as potential haul-away assignments. These locations, however, were operated by a separate entity, which had sole discretion over awarding contracts for its outlet stores. Parties dispute whether Sears clearly articulated that it could not guarantee the contracts for the outlets. Similar to the first auction, Sears distributed a bid and pricing proposal sheet (“2014 Bid Proposal”) to the vendors on June 30, 2014 that contained the exact same haul-away volume information used in the 2011 Bid Proposal. APS saw the 2014 Bid Proposal at least one time prior to the auction; however, it did not ask about the source of the volume figures or do any independent investigating into the numbers.

         After the 2014 auction, APS was selected as the haul-away vendor in six states and was the incumbent supplier in many of the Sears facilities it was awarded. Some of the territories APS won housed outlets. The 2014 MSA and SOW contained substantially similar terms and provisions as the 2011 versions. APS signed the MSA on May 14, 2014 and the SOW on June 11, 2014, but Sears never did. (Dkt. 9 and 27). On September 1, 2014, APS continued to haul-away materials from the facilities consistent with the terms of the 2014 MSA and SOW. Sears sent ...

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