Missing “Course Of Dealing” Evidence Dooms Wedding Dress Seller on Summary Judgment – IL ND

In a Memorandum Opinion and Order that quotes Neil Sedaka and Taylor Swift in its footnotes, the District Court in House of Brides, Inc. v. Angelo, 2016 WL 698093 (N.D.Ill. 2016), examines the quantity and quality of evidence required to win a summary judgment motion. 

The plaintiff sold wedding clothes on-line and in retail stores and the defendant was the plaintiff’s main supplier.  The plaintiff sued the dress maker in state court for breach of contract claiming many of the dresses were defective or shipped later than promised. 

After it removed the case to Federal court, the defendant counter-sued the plaintiff for unpaid invoices. The defendant moved for summary judgment on its counterclaims as well as on plaintiff’s claims.

Partly siding with the defendant, the court discussed some common Uniform Commercial Code (UCC) claims and defenses and the required elements of a summary judgment affidavit.

The UCC governs contracts for the sale of goods and wedding dresses constitute goods under the UCC.  A seller who delivers accepted goods to a buyer can sue the buyer for the price of the goods accepted along with incidental damages where a buyer fails to pay for the goods.  810 ILCS 5/2-709.

In a goods contract, written contract terms can be explained or supplemented by a “course of performance, course of dealing, or usage of trade.” However, written terms cannot be contradicted by evidence of a prior agreement or an oral agreement made at the same time as the written one by the parties.

Here, the plaintiff argued that the course of dealing showed that defendant routinely accepted late payments and so defendant’s “net 30” invoice language was excused.

The court rejected this argument.  It held that avoiding the 30-day payment deadline was a material change that would have to be in writing since the Statute of Frauds governs contracts for the sale of goods exceeding $500 and the dresses involved in this suit easily eclipsed that value.

The court also rejected the plaintiff’s set-off defense against the defendant’s breach of contract counterclaim since a set-off must relate to the same contract being sued on (the court’s example: a seafood buyer can’t set off the price of frogs’ legs because the seller previously sent bad fish in a previous order)

Next, the court struck the plaintiff’s affidavit in support of its breach of implied warranty of merchantability claim on the basis of hearsay. 

In Federal court, an affidavit in support of or opposing summary judgment must be based on personal knowledge, show the witness’s competence and constitute admissible evidence.  Conclusory statements or affidavit testimony based on hearsay is inadmissible on summary judgment.  

The plaintiff’s affidavit testimony that there were dress defects that required refunds was too vague to survive defendant’s summary judgment motion.  This was because no employee stated that he/she personally issued any refunds or had first-hand knowledge of any dress defects that warranted a refund. 

What’s more, the seller failed to offer any authenticated business records that showed either the claimed dress defects or the refund amounts.  Without admissible evidence, the plaintiff seller failed to challenge the defendant’s breach of contract claim and the court awarded summary judgment to the defendant.

Afterwords:

1/ This case shows importance of furnishing admissible evidence when challenging summary judgment;

2/ Hearsay evidence in a summary judgment affidavit will be rejected;

3/ Course of performance or course of dealing can augment or explain written contract terms but cannot contradict them;

4/ A set-off defense must pertain to contract being sued on instead of a separate agreement;

 

 

 

‘Winning’ Failure To Mitigate Defense Doesn’t Confer ‘Prevailing Party’ Status On Restaurant Tenant In Lease Dispute Att’y Fee Hearing Dispute

Alecta v. BAB Operations, Inc., 2015 IL App (1st) 132916-U, a case I spotlighted earlier for its analysis of lease assignment liability rules, also provides a valuable discussion of contractual attorneys’ fees provisions basics. (See case’s bullet-points on lease assignment issues here: http://paulporvaznik.com/bagel-shop-successor-tenant-hit-for-rent-damages-and-attorneys-fees-in-commercial-lease-case-il-first-dist/8491)

The court affirmed a $70k-plus fee award for the landlord even though its damages were reduced by $20k for failing to mitigate damages. Code Section 9-213.1 (of the Illinois eviction or forcible statute) obligates a suing lessor to mitigate  its damages.  This means the landlord can’t sit back while rent payments become due and pile up without making measurable efforts to re-rent the premises.

On the attorneys’ fees issue, the law in Illinois is that the unsuccessful party usually has to pay his own fees unless there is a contract provision regarding attorneys’ fees or an applicable statute allows for fees.  In addition, a clearly worded fee-shifting clause should be enforced as written in favor of the prevailing party.

Q1: Who Is A Prevailing Party?

A: The one who is successful on a significant issue and achieves some benefit in bringing suit.  But, a litigant doesn’t have to succeed on all claims to be considered a prevailing party.

Where a case involves multiple claims and both parties win and lose on different claims, it may be that neither side is the prevailing party.

Q2: What Does Fee Petitioner Have To Show?

A:  The party petitioning for attorneys’ fees has the burden of presenting sufficient evidence to the trial court and a fee petition must specify (i) services performed, (ii) who performed them, (iii) time expended on the services, and (iv) the hourly rate charged by counsel;

Other fees factors for the trial court to consider include (a) skill and standing of attorneys, (b) nature of the case, (c) complexity of the issues, (d) importance of the case, and (e) degree of responsibility required to prosecute or defend a case.

A court considering a fee petition can also rely on its own experience.

¶¶ 72-74.

Here, the defendant lease assignee only prevailed on part of its failure to mitigate defense and didn’t file or win any counterclaims.  An affirmative defense differs from a counterclaim in that the former seeks to defeat a plaintiff’s claim while the latter (counterclaim) seeks affirmative relief from the plaintiff.  See ,e.g. Nadhir v. Salomon, 2011 IL App (1st) 110851, ¶¶34 – 38 (A “set-off” is a counterclaim; not an affirmative defense since the set-off defendant/counter-plaintiff seeks affirmative monetary relief against the plaintiff/counter-defendant.)

The court held that a $20,000 reduction off an over $80k  money damage verdict isn’t enough of a damages cut to make the defendant a prevailing party on the mitigation issue.  As a result, the trial court was within its discretion in awarding 80% of the plaintiff’s claimed fees.  Since the trial court found that the plaintiff prevailed on approximately 80% of its case (based on the partial reduction for failure to mitigate), the court’s fee award of over $70K was upheld.

Afterwords:

The case gives a good refresher on fee-shifting factors an Illinois court considers as well as further refinement of who is/who isn’t a prevailing party in litigation.

An interesting question is what would have happened if the tenant filed a counterclaim (as opposed to affirmative defense) and was able to obtain a $20K damages reduction on a set-off theory.  I don’t know if it would have made a difference here since $20K off a $80K money award likely isn’t big enough to merit “prevailing party” status.