936 F.3d 576
7th Cir.2019Background
- Driveline (successor to Valley Drive Systems) supplied specially manufactured parts to Arctic Cat under a January 2006 Supply Contract and a long-standing "just-in-time" course of dealing. Axles/half-shafts were 60–90% of sales.
- From 2007 Arctic Cat sought price reductions and solicited a foreign bid to make half-shafts; Arctic Cat communicated that Driveline would not retain the half-shaft business, a fact Driveline disputes as to timing.
- Payment disputes arose: Driveline stopped shipments in Jan–Feb 2008 over unpaid receivables; Arctic Cat paid some sums but later terminated the relationship on Feb 15, 2008 and sought freight damages for missed deliveries.
- Driveline sued for breach of contract; Arctic Cat counterclaimed. District court granted summary judgment to Arctic Cat on several counts (Counts II–V) and later adjudicated remaining claims on the papers, entering a net judgment for Arctic Cat.
- Driveline appealed the district court’s grant of summary judgment on Count II, arguing genuine issues of material fact existed about contract terms, timeliness of payment, and which party breached first.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether genuine disputes of material fact existed to preclude summary judgment on who breached first | Driveline: disputed terms and factual issues (timing of Arctic Cat’s notice, reasonable time for payment, which party breached first) required factfinder | Arctic Cat: district court correctly found no material factual dispute and that any payment delays were slight and not excusing Driveline | Vacated summary judgment; genuine disputes of material fact exist and remand required |
| Whether prompt payment was a material term of the contract | Driveline: course of dealing supports an expectation of prompt payment | Arctic Cat: no contract term made prompt payment material; invoices and POs conflicted and gap-filler UCC rules apply | Court: prompt payment was not a proven material term; UCC gap-filler (reasonable time) governs, so reasonableness must be determined by facts |
| Whether the parties formed a contract under UCC §2-207 or the contract is defined by conduct and gap-fillers | Driveline: disputes over forms and course of performance create factual issues | Arctic Cat: district court found no contract under §2-207 and applied non-conflicting terms plus UCC provisions | Court: agreed that §2-207(3) applies (contract defined by non-conflicting terms, UCC supplemental terms, and conduct) and factual inquiry into course of dealing is required |
| Whether Arctic Cat adequately notified Driveline of termination/phase-out of half-shaft business | Driveline: disputed when it knew Arctic Cat would end half-shaft business and whether a phase-out/notice was required | Arctic Cat: communicated decision and proceeded; argued Driveline’s suspension breached first | Court: factual ambiguity about notice/phase-out exists; UCC §2-309 (reasonable notification) may control and requires factual resolution |
Key Cases Cited
- JCW Investments, Inc. v. Novelty, Inc., 482 F.3d 910 (7th Cir. 2007) (applied de novo review to issues decided at summary judgment in similar posture)
- Valenti v. Lawson, 889 F.3d 427 (7th Cir. 2018) (describing standard of review for summary judgment)
- Dunderdale v. United Airlines, Inc., 807 F.3d 849 (7th Cir. 2015) (summary judgment standard under Rule 56)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (shift of burden on summary judgment motions)
- Aregood v. Givaudan Flavors Corp., 904 F.3d 475 (7th Cir. 2018) (definition of genuine issue of material fact)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (sufficiency standard for evidence at summary judgment)
- Stokes v. Bd. of Educ. of the City of Chi., 599 F.3d 617 (7th Cir. 2010) (courts must not weigh credibility on summary judgment)
- InsureOne Indep. Ins. Agency, LLC v. Hallberg, 976 N.E.2d 1014 (Ill. App. 2012) (material breach can justify nonperformance)
- Mulliken v. Lewis, 615 N.E.2d 25 (Ill. App. 1993) (existence, terms, and intent of contract are factual questions)
- Johnson v. Cambridge Indus., Inc., 325 F.3d 892 (7th Cir. 2003) (affidavits insufficient at summary judgment without supporting evidence)