Emirat AG v. High Point Printing LLC, Case No. 12-C-0789.

• Decision Date: 29 March 2017
• Docket Number: Case No. 12-C-0789.
• Parties: EMIRAT AG, Plaintiff, v. HIGH POINT PRINTING LLC, WS Packaging Group, Inc., Defendants, Cincinnati Insurance Co., Intervening Plaintiff, v. Emirat AG and WS Packaging Group, Inc., Defendants in Intervention.
• Court: U.S. District Court — Eastern District of Wisconsin

248 F.Supp.3d 911

EMIRAT AG, Plaintiff,

v.HIGH POINT PRINTING LLC, WS Packaging Group, Inc., Defendants,Cincinnati Insurance Co., Intervening Plaintiff,

v.Emirat AG and WS Packaging Group, Inc., Defendants in Intervention.

Case No. 12-C-0789.

United States District Court, E.D. Wisconsin.

Signed March 29, 2017

Daniel J. O'Brien, Stacie H. Rosenzweig, Sean M. Sweeney, Halling & Cayo SC, Milwaukee, WI, for Plaintiff/Defendants in Intervention.

John L. Pollock, Litchfield Cavo LLP, Brookfield, WI, for Intervening Plaintiff.

David O. Krier, Guy R. Temple, Jennifer L. Naeger, Thomas M. Burnett, Reinhart Boerner Van Deuren SC, Milwaukee, WI, for Defendants/Defendants in Intervention.

DECISION AND ORDER DENYING EMIRAT'S MOTION FOR PARTIAL SUMMARY JUDGMENT (DOC. 71) AND GRANTING WS PACKAGING'S MOTION FOR SUMMARY JUDGMENT (DOC. 68)

C. N. CLEVERT, JR., U. S. DISTRICT JUDGE

In this diversity action, Emirat AG sues WS Packaging Group, Inc. and High Point Printing LLC over the allegedly defective printing of combination game and telephone-use scratch-off cards. Emirat and WS Packaging have filed cross-motions for summary judgment.

Summary judgment is proper if the depositions, documents or electronically stored information, affidavits or declarations, stipulations, admissions, interrogatory answers or other materials show that there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a), (c) ; Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the initial burden of demonstrating it is entitled to summary judgment. Celotex , 477 U.S. at 323, 106 S.Ct. 2548. Once this burden is met, the nonmoving party must designate specific facts to support or defend each element of its cause of action, showing that there is a genuine issue for trial. Id. at 322–24, 106 S.Ct. 2548. In analyzing whether a question of fact exists, the court construes the evidence in the light most favorable to the party opposing the motion. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The mere existence of a factual dispute does not defeat a summary judgment motion; there must be a genuine issue of material fact for the case to survive. Id. at 247–48, 106 S.Ct. 2505. "Material" means that the factual dispute must be outcome-determinative under governing law. Contreras v. City of Chicago , 119 F.3d 1286, 1291 (7th Cir. 1997). Failure to support any essential element of a claim renders all other facts immaterial. Celotex , 477 U.S. at 323, 106 S.Ct. 2548. To establish that a question of fact is "genuine," the nonmoving party must present specific and sufficient evidence that, if believed by a jury, would support a verdict in its favor. Fed. R. Civ. P. 56(e) ; Anderson , 477 U.S. at 249, 106 S.Ct. 2505.

FACTS¹

Emirat AG is a foreign corporation registered in Germany, with its principal place of business in Munich, Germany. Emirat's business is risk management and related promotional aspects, which include commercial promotions and sweepstakes.

Defendant High Point Printing LLC was an Ohio limited liability company with its principal place of business in Aurora, Ohio. High Point's two members were citizens of Ohio and Pennsylvania. (Doc. 18 at 1–2.) However, High Point has not appeared in this action and has filed a Certificate of Dissolution with the Ohio Secretary of State on April 19, 2013. Prior to its dissolution, High Point was a commercial printer and print broker. Doug Szygenda was an owner and its principal agent.

Defendant WS Packaging Group, Inc., is a Wisconsin corporation with its principal place of business in Green Bay, Wisconsin. It manufactures printing and packaging products, including labels, tags, coupons, decals and game and sweepstakes printed products.

In the summer of 2007, a Dubai-based company introduced Emirat to Sabafon, a telephone services company based in Yemen, which led to a contract between Emirat and Sabafon for the printing of 25 million scratch-off phone cards. The scratch-off phone cards were intended to be purchased by consumers so they could get a prepaid activation code (a "PIN ") for their telephones. The PIN on each card was to be covered by an opaque scratch-off coating.

The scratch-off phone cards would also include a promotional scratch-and-win game, which consisted of twenty-four boxes with a range of prizes also covered by scratch-off coating. According to the rules of the promotional game, if a player scratched six boxes that revealed the same prize, the player would win that prize. If the six boxes scratched off showed more than one prize or more than six boxes were scratched off, the player would get nothing. Every card had six boxes containing the same prize, and the remaining boxes had various other prizes; thus, each card was a potential winner.

On June 7, 2007, Emirat issued a quote to Sabafon for "25,000,000 high level EMIRAT Security Cards." The name "high level EMIRAT Security Cards" was a marketing term used by Emirat in the quote. The quote provided no further description of the level of security necessary for the cards, however it did indicate that "[t]he scratch cards have to be printed through EMIRAT." It is undisputed that Sabafon accepted the quote.

On each card, the chances that a player would pick the correct six boxes to scratch were small. The contract between Emirat and Sabafon detailed what percentage of cards would have the possibility of winning each level of prizes. Additionally, there were to be ten "guaranteed" grand prize winners on which all twenty-four boxes had the same prize of a car—thus a guaranteed win.

Emirat is not a printing company, and prior to its contract with Sabafon it had been involved with only one project involving the printing of scratch-off cards. Under the contract between the two companies, Emirat agreed to arrange for the printing of the 25 million scratch-off cards as requested. Initially, Sabafon agreed to pay Emirat an amount that included the cost of printing the cards and the cost of the prizes. Emirat assumed all responsibility for the prizes and agreed to obtain insurance for the prizes.

At some point representatives of Emirat contacted High Point regarding obtaining the scratch-off cards. Then, on or about March 28, 2008, Andrea Bargholz and Stephanie Sohr of Emirat and Doug Szygenda of High Point visited WS Packaging's Neenah, Wisconsin, plant and discussed WS Packaging's ability to print the cards. According to Bargholz, at this initial meeting, a WS Packaging employee represented that WS Packaging could print the cards securely. (Doc. 57, ¶ 1.² ) According to Szygenda, at some point Susan Rohde of WS Packaging assured Szygenda that WS Packaging "was up to the job." (Doc. 57, ¶ 2; Doc. 59 Ex. 3 at 28.)

On May 6, 2008, Emirat obtained a quote from High Point regarding the printing of the 25 million scratch-off cards (also called "scratch-and-reveal cards" or "scratch-n-reveal cards" or "game cards" in the evidence and this opinion) with overwrap. On May 9, 2008, Emirat accepted the quote, entering a contract with High Point. (Doc. 61 Ex. 2.) Nothing in the quote or acceptance of the quote referenced WS Packaging in any way. (Doc. 61 Ex. 2.)

The High Point quote as accepted by Emirat contained no reference to card security or "high-level EMIRAT Security Cards." (Doc. 79 Ex. L at 46–47; Doc. 75, additional ¶ 1; Doc. 87, ¶ 1.) According to Emirat's Ralph Martin, "we all assumed that everybody understands the same talking about secure prepaid phone cards, so there was—to us there was no need to specify, I mean, any written—down written standards." (Doc. 79 Ex. A at 70.)

Martin of Emirat and Szygenda of High Point visited WS Packaging's plant in Neenah on May 20, 2008, to "address and see revisions made to graphics from original 2nd press proof." WS Packaging's Sue Rohde listed both High Point Printing's Szygenda and Emirat's Martin on a "Customer Visit Form." (Doc. 61, Ex. 3; see Doc. 57, ¶ 3.) The form is a standard frm to document visits by any outside parties. (Doc. 76, ¶ 3.)

On May 23, 2008, High Point and WS Packaging entered a Letter of Indemnification agreement, stating among other things, that WS Packaging "assumes responsibility only for the accuracy of the printing" and states that WS Packaging does not "guarantee that a game construction cannot be tampered with, counterfeited or foiled." By its terms, the May 23, 2008 Letter of Indemnification covered game orders submitted by High Point to WS Packaging from May 2008 to June 2009. (Doc. 63, ¶ 3; Doc. 61 Ex. 4 at 1.) (The letter's contents are further discussed below.) WS Packaging says that the Letter of Indemnification was required to allow WS Packaging to properly price and perform the work requested by High Point and that WS Packaging would not have been willing or able to perform the contemplated work without the Letter of Indemnification. (Doc. 63, ¶ 4.)

Emirat's Martin and High Point's Szygenda again visited WS Packaging's Neenah plant on June 6, 2008, to "address and see revisions made to graphics from original 3rd press proof." WS Packaging's Rohde again listed Martin and Szygenda on a "Customer Visit Form" (Doc. 61, Ex. 6; see Doc. 57, ¶ 3.)

Thereafter, High Point subcontracted with WS Packaging to print the cards. WS Packaging provided a quotation to High Point on September 16, 2008, for printing 25 million scratch-n-reveal cards. (Doc. 61 Ex. 7.) High Point then submitted a purchase order on September 23, 2008, to WS Packaging for 25 million "Scratch–N–Reveal" cards to be delivered to Yemen. Under the High Point/Emirat and WS Packaging/High Point contracts, the cards were to be folded in half and sealed individually in a clear plastic overwrap. On September 23, 2008, Emirat's Martin signed off on proofs and provided minor changes and suggestions for the cards to be printed by WS Packaging.

In preparation for another plant visit by Martin...