Kreg Therapeutics, Inc. v. Vitalgo, Inc.
919 F.3d 405
7th Cir.2019Background
- Kreg Therapeutics and VitalGo entered a December 2009 distributorship contract granting Kreg exclusive rights in four "original" territories, with a paragraph (1.B) that would extend exclusivity for one year if Kreg made specified minimum purchases by January 31, 2011.
- An April 2010 amendment granted exclusivity in additional territories through May 2012 but did not clearly state whether that date applied to the original territories.
- VitalGo asserted in June 2011 that Kreg had failed to meet the minimum-purchase commitments and terminated exclusivity; Kreg disputed that it had not performed and later attempted to buy more beds in September 2011 but was refused.
- Kreg sued for breach of contract seeking injunctive relief; cross-motions for summary judgment followed. VitalGo repeatedly failed to comply with the district court’s Local Rule 56.1 filings, leading the court to treat many of Kreg’s factual statements as undisputed.
- The district court (applying New York law) held at summary judgment that the original agreement and the amendment were separate, found Kreg had performed (oral commitment) and VitalGo breached as to the original territories, left damages for later resolution, and ultimately after a bench trial awarded Kreg ~$642,610 in lost-asset damages plus prejudgment interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the contract required minimum-purchase commitments to be in writing under paragraph 23 | Kreg: Paragraph 23 should not be read to require every commitment to be by registered mail or in writing; the parties’ conduct shows other means were used. | VitalGo: Paragraph 23 unambiguously requires any communication under the contract to be in writing and sent by registered mail. | Court: Paragraph 23 is ambiguous and, given the record and commercial impracticality of an absolute reading, did not bar oral commitments. |
| Whether Kreg performed (made the minimum-purchase commitment) and whether VitalGo breached | Kreg: Poulos orally committed to $800,000 purchases in Dec 2010; undisputed under Local Rule 56.1. | VitalGo: Contended there were factual disputes and prior inconsistent positions; argued commitments were not in writing. | Court: Because VitalGo failed to comply with Local Rule 56.1, the performance fact was treated as undisputed and breach followed. |
| Whether the district court could treat undisputed facts as established under Rule 56(g) | Kreg: The court may enter a Rule 56(g) order stating material facts as established. | VitalGo: Rule 56(g) improper because Kreg failed on damages and burden never shifted; any ‘‘undisputed for motion’’ labels should expire. | Court: Rule 56(g) may be used; the court did not abuse discretion in treating performance and breach as established for the case. |
| Whether Kreg proved foreseeability and recoverable consequential (lost-asset) damages | Kreg: Testimony showed exclusivity was critical to Kreg’s investment and reputation; damages were foreseeable; expert valuation supported market value of lost asset. | VitalGo: Argued damages were not foreseeable, Kreg’s post-breach activity undercuts harm, damages theory was improper (lost profits vs. lost asset), and some valuation assumptions were wrong. | Court: Credited Kreg’s testimony and expert; damages were foreseeable and appropriately measured as the fair-market value of the lost distributorship (discounted future profits); assumptions (10-year life, discount rate) not clearly erroneous. |
Key Cases Cited
- Curtis v. Costco Wholesale Corp., 807 F.3d 215 (7th Cir. 2015) (district courts may enforce strict compliance with Local Rule 56.1)
- Flint v. City of Belvidere, 791 F.3d 764 (7th Cir. 2015) (upholding discretion to require strict Local Rule 56.1 compliance)
- Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 232 F.3d 153 (2d Cir. 2000) (ambiguities may be resolved as a matter of law only when the record is one-sided)
- Utica Mut. Ins. Co. v. Clearwater Ins. Co., 906 F.3d 12 (2d Cir. 2018) (contract terms ambiguous if reasonably susceptible to more than one meaning)
- Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund, 778 F.3d 593 (7th Cir. 2015) (cross-movant burden at summary judgment and consequences when a movant fails to meet its burden)
- Schonfeld v. Hilliard, 218 F.3d 164 (2d Cir. 2000) (measure of foreseeability under New York law and valuation approach for lost income-producing assets)
- Sharma v. Skaarup Ship Mgmt. Corp., 916 F.2d 820 (2d Cir. 1990) (discounting expected future profits to determine market value of lost asset)