Havoco of America, Ltd. v. Sumitomo Corp. of America

• Decision Date: 09 September 1992
• Docket Number: Nos. 91-1195,91-1196 and 91-1279,s. 91-1195
• Citation: 971 F.2d 1332
• Parties: HAVOCO OF AMERICA, LTD., a Delaware Corporation, Plaintiff-Appellant, Cross-Appellee, v. SUMITOMO CORPORATION OF AMERICA, Defendant-Appellee, and Elmer C. Hill, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1332

971 F.2d 1332

HAVOCO OF AMERICA, LTD., a Delaware Corporation Plaintiff-Appellant, Cross-Appellee, v. SUMITOMO CORPORATION OF AMERICA, Defendant-Appellee and Elmer C. Hill, Defendant-Appellant, Cross-Appellee.

Nos. 91-1195, 91-1196 and 91-1279.

United States Court of Appeals Seventh Circuit.

Argued Oct. 16, 1991.

Decided Aug. 7, 1992.

Rehearing Denied Sept. 9, 1992.

Paul B. Episcope, John Erb; Richard P. Campbell, Anthony S. DiVincenzo (argued), Campbell & DiVincenzo; and Susan B. Padove, Coleman & Associates, Chicago, Ill., for plaintiff.

Kathleen M. O'Laughlin, Richard L. Horn, Barbara J. Mulvanny, Keck, Mahin & Cate; Howard Joseph; Sheldon Karon (argued); and Michael A. Stick (argued), Ronald Butler, Kevin J. O'Brien, and Ellen M. Babbitt, Butler, Rubin, Newcomer, Saltarelli Boyd & Krasnow, Chicago, Ill., for defendants.

Before COFFEY, MANION and KANNE, Circuit Judges.

MANION, Circuit Judge.

The dispute in this diversity suit (governed, the parties agree, by Illinois law) centers around a long-term coal supply contract which plaintiff Havoco of America, Ltd. ("Havoco") entered into with the Tennessee Valley Authority ("TVA") in 1975. Havoco agreed to supply the TVA with 2.4 million tons of coal per year for 10 years at $23.85 per ton--a total contract price of $572,000,000. To fulfill its obligations under that contract, Havoco also entered into several related contracts. The R & F Coal Company ("R & F Coal") agreed to sell Havoco the coal for $18.50 per ton, and defendant Sumitomo Shoji America, Inc. ("Sumitomo") agreed to supply the financing for the deal. Defendant Elmer C. Hill ("Hill"), who owned Hilco, Inc. ("Hilco"), a coal brokerage business, first negotiated with Havoco on behalf of Sumitomo. After the contracts were signed, Hill became an officer and director of Havoco and administered the contracts.

Havoco's coal supply contract with the TVA provided that either party had the right to demand renegotiation of the contract price of the coal six months after execution of the contract. The TVA exercised this right in August 1975. Hill represented Havoco during the renegotiations but was unable to reach an agreement with the TVA. On March 3, 1976, coal shipments to the TVA were suspended. On March 19, 1976, as a result of this stalemate and other events, Havoco assigned the TVA contract to R & F Coal. After the assignment, Hill represented R & F Coal in continued negotiations with the TVA; R & F Coal eventually reached an agreement with the TVA, and Hill received a commission on the agreement from R & F Coal.

In January 1981, Havoco filed suit against Hill and Hilco alleging that, through fraud, conspiracy to defraud, tortious interference with contractual relations and breach of fiduciary duty, Hill coerced Havoco into assigning the TVA contract to R & F Coal. In November 1981, Havoco amended its complaint to add Sumitomo as a defendant on the fraud claims; the amended complaint also contained an additional count against Sumitomo for breach of the financing agreement. This case is making its third appearance in this court. The first two times we reversed grants of summary judgment in favor of the defendants. Havoco of America v. Hilco, Inc., 799 F.2d 349 (7th Cir.1986); Havoco of America v. Hilco, Inc., 731 F.2d 1282 (7th Cir.1984). After the last remand, Sumitomo filed another motion for summary judgment. The district court found that all the counts against Sumitomo, except breach of contract, were barred by the statute of limitations and entered judgment in favor of Sumitomo on those counts. 750 F.S. 946 (N.D.Ill.1990). Havoco appeals the district court's grant of summary judgment on its breach of fiduciary duty count against Sumitomo. Also, after a four-week trial, a jury found that Havoco had waived its breach of contract claim against Sumitomo but found for Havoco on all of its claims against Hill, awarding compensatory damages of $14,250,000 and punitive damages of $750,000. Both Havoco and Hill appeal the jury's verdict. ¹

I. Havoco's Appeal

In No. 91-1195, Havoco appeals the judgment entered in favor of Sumitomo, raising two issues. First, Havoco challenges the district court's grant of summary judgment in favor of Sumitomo on the breach of fiduciary duty claim. Havoco maintains that the breach of fiduciary duty claim was not barred by the applicable Illinois statute of limitations. Second, Havoco argues that it did not waive its breach of contract claim against Sumitomo. We reject both arguments and affirm the judgment in favor of Sumitomo.

A. Breach of Fiduciary Duty

In March 1975, Havoco and Sumitomo entered into a sales agency agreement. This contract required Sumitomo to provide Havoco financing for the TVA contract in the form of a $ 5.5 million, irrevocable, thirty-day revolving letter of credit. As consideration, Havoco designated Sumitomo as its agent for the sale of coal to the TVA and authorized the TVA to make payments for coal directly to Sumitomo. Havoco also agreed to pay Sumitomo $ 0.85 for each ton of coal sold to the TVA. It is undisputed that this contract created an agency relationship between Havoco and Sumitomo. Under Illinois law, Sumitomo, as Havoco's agent, owed Havoco a fiduciary duty as a matter of law. Ray v. Winter, 67 Ill.2d 296, 10 Ill.Dec. 225, 229, 367 N.E.2d 678, 682 (1977).

In November 1981, Havoco amended its complaint to add Sumitomo as a defendant. The amended complaint alleges that Sumitomo breached its fiduciary duty to Havoco by conspiring with Hill and R & F Coal to fraudulently induce Havoco to assign the TVA contract to R & F Coal. In Havoco of America, Inc. v. Hilco, Inc., 799 F.2d 349, 352 (7th Cir.1986) ("Havoco II "), we held that Havoco had at least partial knowledge of the alleged fraud when it assigned the TVA contract to R & F Coal on March 19, 1976. Accordingly, on remand from Havoco II, the district court granted summary judgment against Havoco on the breach of fiduciary duty count holding that it was barred by the five-year statute of limitations in section 13-205 of the Illinois Code of Civil Procedure, Ill.Rev.Stat. ch. 110, p 13-205. ² Since Havoco had at least some knowledge of the alleged fraud in March 1976, the district court found, its breach of fiduciary duty claim--filed in November 1981, over five years later--was time-barred. Havoco appeals this decision; we review the district court's grant of summary judgment de novo. LaScola v. US Sprint Communications, 946 F.2d 559, 563 (7th Cir.1991).

Havoco, citing Kinzer v. City of Chicago, 128 Ill.2d 437, 132 Ill.Dec. 410, 539 N.E.2d 1216 (1989), argues that breach of fiduciary duty claims arise from the principles of contract, not tort, and are therefore governed by the ten-year statute of limitations in section 13-206 of the Illinois Code of Civil Procedure. Ill.Rev.Stat. ch. 110, p 13-206. ³ As an initial matter, we agree with Sumitomo that Havoco has waived this argument by failing to present the issue in a timely fashion in the district court. Havoco did not attempt to assert the Illinois ten-year statute of limitations during the briefing on Sumitomo's motion for summary judgment or when that motion was pending. Rather, Havoco first made this argument after the four-week jury trial in a Rule 59(e) motion to alter or amend the judgment. But such motions cannot be used to raise new arguments which could and should have been raised before judgment was entered. Weihaupt v. American Medical Ass'n, 874 F.2d 419, 425 (7th Cir.1989). Havoco contends that it could not have raised this argument sooner because the Kinzer case was decided after it filed its response to Sumitomo's motion for summary judgment. But, Kinzer was decided in April 1989, and the district court did not grant summary judgment until October 1990--18 months later. Havoco does not explain why it failed to advise the district court of the Kinzer decision during these 18 months.

In any case, Havoco is wrong on the merits. Kinzer was about the applicability of the Illinois Tort Immunity Act, Ill.Rev.Stat. ch. 85, §§ 1-101 et seq., to actions for breach of fiduciary duty. Kinzer, 132 Ill.Dec. at 414, 539 N.E.2d at 1220. The Illinois Supreme Court held that the Tort Immunity Act did not bar the plaintiff's suit because actions for breach of fiduciary duty are "controlled by the substantive laws of agency, contract and equity." Id. (citations omitted). The court rejected the Restatement (Second) of Torts' view that breach of fiduciary duty is a tort. Id. The court in Kinzer, however, had nothing to say about the proper statute of limitations for breach of fiduciary duty claims, and its holding is not dispositive of this issue. Rather, a plain reading of the two statutes of limitations demonstrates that the district court correctly applied the five-year limitations period. The ten-year limitations period in section 13-206 applies only to actions on written contracts or other written evidence of indebtedness; a breach of fiduciary duty claim is not such an action. Section 13-205 applies to all torts, actions on oral contracts, and "all civil actions not otherwise provided for." A breach of fiduciary duty claim is an action "not otherwise provided for" in the Illinois statutes of limitations. Also, Illinois and federal courts have applied the five-year statute of limitations to breach of fiduciary duty claims both before and after Kinzer. See, e.g., Hernandez v. Childers, 736 F.Supp. 903, 910 (N.D.Ill.1990); Pucci v. Santi, 711 F.Supp. 916, 927 (N.D.Ill.1989); Luminall Paints, Inc. v. La Salle Nat'l Bank, 220 Ill.App.3d 796, 163 Ill.Dec. 240, 244, 581 N.E.2d 191, 195 (1991); Mitchell v. Simms, 79 Ill.App.3d 215, 34 Ill.Dec. 536, 540, 398 N.E.2d 211, 215 (1979).

B. Breach of Contract

In the sales agency agreement, Sumitomo agreed to provide Havoco with a $5.5 million, thirty-day revolving letter of credit. Havoco would draw on this credit to pay for the coal it purchased from R & F Coal. A "re...