NATIONAL INSPECTION & REPAIRS v. GEORGE S. MAY

• Decision Date: 09 April 2010
• Docket Number: No. 09-1051.,09-1051.
• Citation: 600 F.3d 878
• Parties: NATIONAL INSPECTION & REPAIRS, INC., Plaintiff-Appellant, v. GEORGE S. MAY INTERNATIONAL CO., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

600 F.3d 878

NATIONAL INSPECTION & REPAIRS, INC., Plaintiff-Appellant, v. GEORGE S. MAY INTERNATIONAL CO.,¹ Defendant-Appellee.

No. 09-1051.

United States Court of Appeals, Seventh Circuit.

Argued September 25, 2009.

Decided April 9, 2010.

COPYRIGHT MATERIAL OMITTED

Michael Steigmann (argued), Chicago, IL, for Plaintiff-Appellant.

Jason P. Stiehl, Daniel F. Lanciloti (argued), Seyfarth Shaw LLP, Chicago, IL, William C. Hopkins, II, Kansas City, MO, for Defendant-Appellee.

Before EASTERBROOK, Chief Judge, and KANNE and SYKES, Circuit Judges.

KANNE, Circuit Judge.

The central issue in this case is breach of contract. The plaintiff-appellant, National Inspection & Repairs, Inc. ("NIR"), is appealing the district court's decision to grant summary judgment to the defendant-appellee, rejecting NIR's claims for breach of contract, fraudulent misrepresentation, negligent misrepresentation, breach of fiduciary duty, and constructive fraud. A breach of contract claim is a double-edged sword to be advanced by a party at its own risk. Such a claim necessarily calls into question not only whether a breach occurred, but also, which party committed it. Because we find that it was NIR alone that breached the contract, we agree that summary judgment was appropriate.

I. BACKGROUND

NIR is a heavy equipment and machinery inspection company based in Topeka, Kansas; NIR defines itself as a "trucking company" in its brief. An employee of NIR inadvertently rendered the company's accounting system, Quickbooks, inoperable, causing NIR to seek outside assistance to develop new systems for accounting and inventory controls. To that end, NIR's President, David Price, contacted George S. May International Company ("May"), a business consulting services company headquartered in Park Ridge, Illinois.

At Price's request, and in accordance with May's standard sales methodology, May provided NIR with a Survey Analyst to perform an initial assessment of the business and to recommend potential service engagements. After Price reviewed and analyzed the assessment and recommendations, NIR and May executed a consulting services contract (the "agreement") on May 4, 1999. The agreement is formally referred to as "Authorization for Management Service and Method Payment."

The agreement provides that May will, "by discussions, recommendations and progress reports, keep the client informed as to its progress." (App. at 204.) It further provides:

In order that there may be a continual meeting of the minds between the client and May and, particularly, in order that the continuation of May's services is at all times within the client's control, acceptance or rejection of all, or any part, of matters covered in discussions, recommendations and progress reports shall be by client's signature to Progress Reports of May under "Examined, Accepted and Approved," specifically excluding by designation any statement not approved.

(Id.)

The agreement also contains a restrictive covenant prohibiting NIR from hiring any of May's employees for one year from the date the agreement was executed. The Project Director² expressly reviewed this provision with Price.

Additionally, the agreement provides that all Staff Members are under contract with May and are bonded to $500,000 for protection of clients.

After they executed the agreement, May's Project Director collaborated with NIR to provide a comprehensive list of mutually conceived and agreed-on programs. Two of the principal programs that Price agreed to were Managerial Control Accounting ("MCAP") and Profit and Expense Control ("PECP"). These two programs included forty-two sub-projects. Two of the sub-projects under MCAP are at issue in this litigation. Specifically, the goal of Project 2.3 required May to "identify critical process points and establish mechanisms for control over accuracy of the process," the primary objective of which was "to ensure accuracy of record keeping systems and to eliminate the possibility of fraud." (Id. at 236.) Project 2.8 provided that May would "assist in interviewing candidates for the position of NIR Controller." (Id.)

Also at issue are the actions taken by William Doane, a Staff Executive assigned to manage and implement the NIR project. Doane was the only May employee at NIR for 21 days of the 25-day consulting engagement, and this case turns primarily on factual issues regarding his role and performance. In addition to other duties, Doane interviewed a number of candidates for the position of Controller pursuant to the provisions of Project 2.8. Although NIR disputes that Doane legitimately conducted these interviews, there is considerable evidence to support the contention that he did. Such evidence includes (1) Price's deposition stating that Doane was interviewing people and that the candidates' names were recorded in the personnel records (Id. at 66); (2) Price's deposition stating that Doane interviewed "nine or ten people" for the position of Controller (Id. at 68); (3) Doane's deposition stating that Price and another NIR employee attended some of the interviews (Id. at 326-27); and (4) a list of completed items in the final Progress Report, "examined, accepted, and approved" by Price, which included a line-item for project 2.8 noting interviews for the Controller position were completed on May 18, 19 and 24 (Id. at 281-82). Over the three-week engagement, May submitted five Progress Reports to NIR. Each report contained a list of all the defined projects, with status updates for each. Price "examined, accepted, and approved" every report. Upon the completion of the engagement, Price authored a letter to May in which he stated:

I am satisfied with the work. My employees are trained in concepts established by your consultants and they are beginning to implement them. I believe that the various recommendations presented regarding savings for my company are realistic and several have been instituted.

(Id. at 283.)

Simultaneous with the termination of the engagement with May and in contravention of the agreement, Price hired Doane for the Controller position. (Id. at 231, 286, 287.) Price testified that Doane, in Price's presence but unbeknownst to Price at that time, conducted a fictitious one-way phone call, supposedly with high-level decision makers at May. Doane allegedly told Price during this telephone conversation that May officials orally released NIR from its contractual agreement not to hire May employees. Price never spoke directly with anyone at May other than Doane, and Price did not otherwise make any attempts to verify such a release. Further, Doane never told May that Price had hired him to work at NIR. When May eventually learned of Doane's resignation, it issued a termination letter dated July 21, 1999. The letter stated that Doane's employment was "considered terminated effective on Doane's last working date June 10, 1999." (Id. at 29.)

After the consulting engagement ended and while Doane was employed by NIR as NIR's Controller, NIR alleges that Doane stole money from the company. NIR asserts that Doane somehow laid the foundation while working for May to perpetrate his purported crimes at NIR. Because of Doane's actions, NIR claims to have lost hundreds of thousands of dollars; however, the district court noted that NIR did not specify how much was stolen and did not provide any credible evidence of its claim.

NIR asserts, among other claims, that May breached the contract by failing to "implement" its duties under the agreement, and for negligently hiring and supervising Doane. In other words, the crux of NIR's argument is that May was required to take steps to ensure that Doane would be a suitable employee for NIR, even though NIR promised not to hire him.

May argues that it did not violate any provision of the agreement and is entitled to the district court's award of summary judgment in its favor.³ We will address these arguments in turn.

II. ANALYSIS

NIR argues on appeal that the district court erred in granting summary judgment for May. We review the grant of summary judgment de novo. Trade Fin. Partners, LLC, v. AAR Corp., 573 F.3d 401, 406 (7th Cir.2009). We draw all inferences in the light most favorable to NIR, the nonmoving party. Lucero v. Nettle Creek Sch. Corp., 566 F.3d 720, 728 (7th Cir.2009). We will affirm only if we find that there is no genuine issue as to any material fact and May is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Trade Fin. Partners, 573 F.3d at 406. However, NIR must present something more than a mere scintilla of evidence, see Delta Consulting Group, Inc. v. R. Randle Constr., Inc., 554 F.3d 1133, 1137 (7th Cir.2009), or "some metaphysical doubt as to the material facts" to survive summary judgment, Springer v. Durflinger, 518 F.3d 479, 484 (7th Cir.2008) (quoting Waukesha Foundry, Inc. v. Indus. Eng'g, Inc., 91 F.3d 1002, 1007 (7th Cir. 1996)). Although NIR raises a number of issues on appeal, the success or failure of these arguments ultimately hinges on which party breached the contract.

Initially, we address NIR's assertion that the district court misstated the standard of review for summary judgment, thereby leading to an outcome that would otherwise have been in NIR's favor. In doing so, we take notice of the fact that NIR took a portion of a quotation used by the district court out of context, and did not include the second half of the district court's sentence. This omission could have misled this court with respect to the summary judgment standard applied by the district court.

NIR referenced the district court's use of Butts v. Aurora Health Care, Inc., 387 F.3d 921, 924 (7th Cir.2004), and quoted, "The existence of a factual dispute is not sufficient to defeat a summary judgment motion." (Pl.'s Br. at 10.) However, the full quotation from the district court opinion goes on to state, "instead the non-moving party must present definite, competent evidence to...