United States District Court, N.D. Illinois, Eastern Division
SCHOLLE IPN PACKAGING, INC., and LIBERTY SURPLUS INSURANCE CORPORATION, as Subrogee of Scholle IPN Packaging, Inc., Plaintiff,
VALFILM, LLC, Defendant.
MEMORANDUM OPINION AND ORDER
HONORABLE MARVIN E. ASPEN UNITED STATES DISTRICT JUDGE
February 2016, Plaintiff Scholle IPN Packaging, Inc.
(“Scholle”) entered into an agreement with
Defendant Valfilm, LLC (“Valfilm”) to purchase
plastic film. (Pls.' Statement of Material Facts
(“Pls.' Facts”) (Dkt. No. 21-1) ¶ 10;
Answer (Dkt. No. 14) ¶ 10.) The film was used by Scholle
to manufacture plastic bags that were sold to Coca-Cola
Company (“Coke”) to hold soft drink syrup.
(Pls.' Facts ¶¶ 8-10, 37.) The bags sold to
Coke eventually began to leak. (Id. ¶¶
37.) Scholle investigated the cause of the leaking and
concluded that it was caused by out-of-specification film
received from Valfilm. (Id. ¶¶ 37-42.)
Scholle paid Coke $1.51 million to cover losses allegedly
caused by the leaking bags. (Id. ¶ 52.) To
recover this payment and other losses, Scholle and its
insurer, Liberty Surplus Insurance Corporation
“Plaintiffs”), sued Valfilm for breach of
contract, breach of express warranty, breach of implied
warranties of merchantability and fitness for a particular
purpose, breach of indemnity, negligence, and strict
liability. (Compl. (Dkt. No. 1).) Presently before us
is Plaintiffs' motion for summary judgment on all counts
(Dkt. No. 21) and Valfilm's cross-motion for summary
judgment that seeks to dismiss a large portion of
Plaintiffs' claimed damages. (Dkt. No. 22.) For the
reasons set forth below, we grant in part and deny in part
Plaintiffs' and Valfilm's motions.
manufactures plastic packaging and sealing products including
plastic bags, pouches, and spouts. (Pls.' Facts ¶ 8;
Dep. of David Bellmore (“Bellmore Dep.”) (Dkt.
No. 28-4) at 4).) Scholle also manufactures five-gallon
plastic bags for Coke that it uses to package soft drink
syrup. (Pls.' Facts ¶¶ 8-9.) The bags are
constructed of four main components: an inner and outer layer
(i.e., plies) of plastic film, a spout, and a “dip
strip” that helps extract liquid from the bags.
(Bellmore Dep. at 13.) In February 2016, Scholl contracted
with Valfilm to purchase film for use as the inner ply
component of bags for Coke. (Pls.' Facts ¶¶
10-11; Purchase Order Agreement (“Contract”)
(Dkt. 21-4) at 2-3; Answer ¶ 10; Bellmore Dep. at 13.)
FILM SPECIFICATIONS AND TESTING
contract required Valfilm to manufacture the film to certain
specifications. (Pls.' Facts ¶¶ 12-13; Raw
Material Specifications (“Specs.”) (Dkt. No.
21-6).) One specification was that the film was not to be
“corona treated.” (Pls.' Facts ¶ 13;
Specs. At 2.) Corona treatment is a process that changes the
surface properties of plastic films, making it easier to
print text or images onto the film. (See Bellmore
Dep. at 15.) Contrary to specifications, Valfilm corona
treated one side of the film. (Pls.' Facts ¶¶
19-22, 25-26; Def.'s Answer to Pls.' Req.'s for
Ad. (“Def.'s Answer to Req.'s”) (Dkt. No.
21-5) ¶¶ 4-6.)
contract also included an “Inspection and
Acceptance” provision. (Contract at 3, § 10.) That
Inspection and Acceptance. All goods ordered [under the
contract] shall be subject to inspection and test by
[Scholle] to the extent practicable at all times and places,
including the place of manufacture and in any event prior to
(Id.) Scholle did not test the film it received to
determine if it was corona treated. (Def.'s Statement of
Additional facts (“Def.'s Add. Facts”) (Dkt.
No. 28) ¶ 11; Bellmore Dep. at 62.) Scholle did,
however, test the bags it ultimately manufactured for Coke to
make sure they met Coke's specifications. (Def.'s
Add. Facts ¶¶ 16-18; Bellmore Dep. at 7-9, 17-19.)
These tests did not reveal any issues with the bags or their
seals. (Bellmore Dep. at 18.)
BAG LEAKAGE AND SCHOLLE'S INVESTIGATION
Scholle delivered numerous bags to Coke, it was notified that
the bags were leaking soft drink syrup. (Pls.' Facts
¶ 37.) Scholle investigated and found that the leaking
was caused by the corona treated film it received from
Valfilm. (Pls.' Facts ¶¶ 39-42; Bellmore Dep.
at 16; Global Materials Sci. Lab Report (“Lab
Report”) (Dkt. No. 21-19) at 4.) Scholle's
conclusion was based, in part, on testing seals manufactured
with both corona and non-corona treated film. (Lab Report at
3-4; Bellmore Dep. at 22.) The tests revealed that seals made
with corona treated film were significantly weaker than seals
made with non-corona treated film and would eventually leak.
(Lab Report at 3-4.)
COKE'S AND SCHOLLE'S CLAIMED DAMAGES
eventually made a claim to Scholle for $1, 511, 522 for
damages allegedly caused by the leaking bags. (Pls.'
Facts ¶¶ 38, 52.) Scholle's insurer, Liberty,
retained RGL Forensics (“RGL”) to verify the
damages alleged by Coke. (Def.'s Statement of Facts
(“Def.'s Facts”) (Dkt. No. 22-1) ¶ 10.)
Robbye Mohn, a forensic accountant, from RGL investigated and
analyzed Coke's claimed damages. (Id.; Mohn
Damages Report (“Pls.' Damages Report” (Dkt.
No. 36-4) at 8.) Mohn concluded that $503, 833 of Coke's
claimed damages were not supported meaning they were not
substantiated by reliable underlying documentation.
(Pls.' Damages Report at 13, 21, 29.) Nonetheless,
Scholle paid Coke the full amount it was claiming. (Pls.'
Facts ¶ 52; see also (Dkt. No. 36-6) (copy of
the check made out to Coke.) Mohn was later retained by
Plaintiffs to serve as a damages expert. (Pls.' Damages
Report at 10; Dep. of Robbye Mohn (“Mohn Dep.”)
(Dkt. No. 28-6) at 2.)
category of Coke's claim that Mohn concluded was
supported was damages for “finished product
destroyed.” (Pls.' Damages Report at 22.) Finished
product destroyed represents the alleged loss of syrup-filled
bags packaged in cardboard boxes (“bag-in-box”).
(Id. at 12, 22-23.) Mohn relied on two main pieces
of evidence to verify these damages: a bill of materials
(“BOM”) from Coke that lists the claimed cost of
each bag-in-box component totaling $9.65,  and various
invoices demonstrating that 68, 897 bag-in-boxes were
destroyed. (Id. at 22-24; Mohn Dep. at 17-19;
see also BOM at 94.) Based on this evidence, Mohn
concluded that Coke's damages for finished product
destroyed totaled $664, 856. (Damages Report at 22-24.)
Valfilm retained its own damages expert, Joel Chenevey, who
disagreed with Mohn and concluded that none of Coke's
finished product destroyed damages were supported. (Dep. of
Joel Chenevey (“Chenevey Dep.”) (Dkt. No. 36-7)
at 3, 12-13.)
also claims that it suffered $253, 832 in direct damages.
(Pls.' Damages Report at 13.) Mohn opined that $237, 964
of this amount was supported (Id. at 17, 29) while
Chenevey testified that $252, 183 was supported. (Chenevey
Dep. at 11-12.)
DAMAGES PROVISIONS IN THE CONTRACT
contract provisions reference Valfilm's potential damages
responsibilities. First, the contract includes an indemnity
provision that states:
[Valfilm] agrees to indemnify and hold harmless [Scholle]
from and against all losses, liabilities, claims or demands,
including attorneys' fees and costs, for injuries to any
person (including death) or damage to property, directly or
indirectly arising out of [Valfilm's] performance
hereunder, or its acts or omissions, regardless of when such
losses occur and regardless of whether such articles or
services have been accepted.
at 3, § 12). The contract also includes a damages clause
within the warranty provision.
[Valfilm] agrees to save and keep [Scholle] and its customers
free and harmless from any loss, damage, injury, or expense
whatsoever in connection with this Purchase Order including,
without limitation, all claims whether in warranty,
negligence, product liability or otherwise, consequential and
incidental damages, and attorneys' fees.
§ 9.) Finally, the specifications also include a damages
If a change is made [to specifications] without Scholle
approval, [Valfilm] agrees to reimburse Scholle for 100% of
the resulting out-of specification film, as well as 100% of
all empty and filled bags made with this out-of specification
film, and 100% of all other quality issue expenses associated
judgment is proper only when “there is no genuine issue
as to any material fact and the moving party is entitled to a
judgment as a matter of law.” Fed.R.Civ.P. 56(c). A
genuine issue for trial exists when “the evidence is
such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 (1986).
This standard places the initial burden on the moving party
to identify “those portions of the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, which it believes
demonstrate the absence of a genuine issue of material
fact.” Celotex Corp. v. Catrett, 477 U.S. 317,
323, 106 S.Ct. 2548, 2553 (1986) (internal quotations
omitted). Once the moving party meets this burden of
production, the nonmoving party “may not rest upon the
mere allegations or denials of the adverse party's
pleading” but rather “must set forth specific
facts showing that there is a genuine issue [of material
fact] for trial.” Fed.R.Civ.P. 56(e). In deciding
whether summary judgment is appropriate, we must accept the
nonmoving party's evidence as true, and draw all
reasonable inferences in that party's favor. See
Anderson, 477 U.S. at 255, 106 S.Ct. at 2513. “On
cross-motions for summary judgment, the Court assesses
whether each movant has satisfied the requirements of Rule
56.” Portalatin v. Blatt, Hasenmiller, Leibsker
& Moore, LLC, 125 F.Supp.3d 810, 813 (N.D. Ill.
2015). As with any summary judgment motion, we consider
cross-motions for summary judgment “construing all
facts, and drawing all reasonable inferences from those
facts, in favor of the non-moving party.” Laskin v.
Siegel, 728 F.3d 731, 734 (7th Cir. 2013) (citing
Wis. Cent., Ltd. v. Shannon, 539 F.3d 751, 756 (7th
argue that summary judgment is appropriate because the
undisputed facts show Valfilm breached the contract and
express and implied warranties, was negligent, and
manufactured an unreasonably dangerous product. (Pls.'
Mem. of Law in Supp. of Mot. for Summ. J. (“Pls.'
SJ Mem.”) (Dkt. No. 21-18).) Plaintiffs also argue that
the undisputed facts demonstrate they are entitled to $1,
765, 354 in damages plus attorneys' fees. (Id.
at 20-21.)Valfilm argues that Plaintiffs' motion should
be denied because there are questions of fact regarding
Scholle's performance under the contract and the amount
of damages claimed by Plaintiffs. (Def.'s Resp. to
Pls.' Mem. of Law in Supp. of Mot. for Summ. J.
(“Def.'s Resp.”) (Dkt. No. 27) at 6-15.)
Valfilm separately moves for summary judgment, arguing that
$1, 171, 781 of Plaintiffs' claimed damages should be
dismissed because they are unsubstantiated. (Def.'s Mem.
of Law in Supp. of Mot. for Summ. J. (“Def.'s SJ
Mem.”) (Dkt. No. 22-12) at 1, 9).) We first address
Plaintiffs' claims regarding liability and then address
the parties competing damages arguments.
argue that the undisputed facts demonstrate Valfilm is liable
on all counts. (Pls.' SJ Mem.) Valfilm responds that
summary judgment cannot be granted as to liability because
questions of fact remain regarding Scholle's performance
under the contract and damages. (Def.'s SJ Mem.)
Breach of ...