Pac. Cycle, Inc. v. Powergroup Int'l, LLC
| Decision Date | 30 August 2013 |
| Docket Number | No. 12–cv–529–slc.,12–cv–529–slc. |
| Citation | 969 F.Supp.2d 1098 |
| Parties | PACIFIC CYCLE, INC., Plaintiff, v. POWERGROUP INTERNATIONAL, LLC, (a/k/a Powergroup International, Inc.), Tomberlin Automotive Group, Inc. and Michael Tomberlin, Defendants. |
| Court | U.S. District Court — Western District of Wisconsin |
OPINION TEXT STARTS HERE
Dustin Brett Brown, James Donald Peterson, Jennifer Lynn Gregor, Godfrey & Kahn S.C., Madison, WI, for Plaintiff.
Catherine M. Rottier, Boardman & Clark LLP, Madison, WI, Richard L. Braun, II, Casey A. Fry, Lauren E. Crummel, The Miller Law Firm PC, Rochester, MI, Tasha R. Roberts, Roberts & Bishop, Latasha Rebecca Roberts, Indianapolis, IN, for Defendants.
This lawsuit presents a contract dispute arising out of an April 2009 license agreement between plaintiff Pacific Cycle and defendant PowerGroup International, LLC. The agreement licensed PowerGroup to sell Schwinn-branded motor scooters. Pacific Cycle terminated the agreement in April 2012 due to PowerGroup's failure to satisfy its payment and reporting obligations, then commenced this action for contract damages and injunctive relief in the Circuit Court for Dane County on June 28, 2012. PowerGroup removed the lawsuit to this court on July 27, 2012 and filed counterclaims for breach of contract, fraudulent inducement and rescission, asserting that during contract negotiations, Pacific Cycle had misrepresented facts upon which PowerGroup had relied to its detriment when deciding to enter into the agreement. This court has jurisdiction under the diversity statute, 28 U.S.C. §§ 1332 and 1441(a).
Before the court is Pacific Cycle's motion for partial summary judgment on its claim that PowerGroup breached the license agreement, and on PowerGroup's counterclaims. Essentially, Pacific Cycle is seeking a determination from this court that PowerGroup is liable for breach of contract in a specified amount of $1.56 million (plus costs and fees), while leaving for trial questions as to whether the codefendants share this liability.
Summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. F.R.Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party has the initial burden of demonstrating that it is entitled to summary judgment. Id. 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 the cause of action, showing that there is a genuine issue for trial. Id. at 322–24, 106 S.Ct. 2548;Fed.R.Civ.P. 56(e).
Whether seeking or opposing summary judgment, the parties must present admissible evidence to show either that the movant is entitled to judgment as a matter of law, or conversely, that disputed issues of fact remain such that a jury may return a verdict for the non-moving party. Berry v. Chicago Transit Authority, 618 F.3d 688, 691 (7th Cir.2010). Although a nonmoving party's affidavit can constitute affirmative evidence to defeat a summary judgment motion, conclusory allegations, unsupported by specific facts, will not suffice to meet this burden. Payne v. Pauley, 337 F.3d 767, 773–74 (7th Cir.2003) (citing Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990)).
As discussed below, Pacific Cycle has presented admissible evidence establishing all elements of its breach of contract claim and showing that PowerGroup cannot meet its burden on its counterclaims. PowerGroup, however, has failed to meet its evidentiary burden, either in opposition to Pacific Cycle's contract claim or in support of its own counterclaims. Although PowerGroup purports to dispute many of Pacific Cycle's proposed facts, many of these disputes are not “genuine” because they rest upon inadmissible evidence or conclusory allegations not founded on personal knowledge or supported by specific facts. Gunville v. Walker, 583 F.3d 979, 985 (7th Cir.2009) (). When the court considers only those of PowerGroup's proposed facts that are properly supported by admissible evidence, then construes in PowerGroup's favor that which remains, this evidence fails to establish that any genuine disputes of material fact remain for a jury to resolve. Accordingly, I am granting Pacific Cycle's motion for summary judgment.
Solely for the purpose of deciding Pacific Cycle's motion for summary judgment. I find these facts to be material and undisputed:
FACTS
I. The Parties
Plaintiff and counterclaim defendant Pacific Cycle, Inc. is a Delaware Corporation with its principal office located in Madison, Wisconsin. Pacific Cycle is in the business of designing, marketing and distributing bicycles and recreational products in the United States and around the world using its portfolio of well-known brands, including the Schwinn brand.
Defendant and counterclaim plaintiff PowerGroup International, LLC is a limited liability company organized under the laws of the State of Georgia with its principal office located in Augusta, Georgia. Defendant Michael Tomberlin is the sole member, President and CEO of PowerGroup.1 He is a citizen of Georgia. See Def.s' Answer, dkt. 5, ¶ 12.
Defendant Tomberlin Automotive Group, Inc. is a corporation organized under the laws of the State of Georgia with its principal office located in Augusta. Tomberlin Automotive Group designs and engineers a wide range of on-road national highway Transportation and Safety Administration compliant electric vehicles sold throughout the world with international distributors in over 40 countries. Michael Tomberlin is the majority shareholder of Tomberlin Automotive Group.
II. The License AgreementA. Pacific Cycle Decides to Exit the Motor Sports Business
In 2004, Pacific Cycle created its Schwinn Motor Sports Division dedicated to the sale of Schwinn-branded motor scooters. The Motor Sports division was founded by George Simone, who held the position of Vice President Motor Sports and had overall responsibility for the division. By 2007, Schwinn had captured 9% of the United States scooter market; by 2008, the division was selling more than 5,000 scooters each year and generating annual revenue above $6 million. Even so, Motor Sports was a small-volume business outside of Pacific Cycle's core business of bicycles and bike accessories.
Sometime in 2008, Pacific Cycle's president, Alice Tillett, asked Simone to prepare a business plan evaluating the costs and benefits of continuing the division. Simone submitted his plan on September 5, 2008. Simone reported the Motor Sports Division's difficulties with its Chinese supplier, FYM, noting that “over the past 9 months FYM has faced a number of challenges in its business and they have directly affected Schwinn Motor Sports.” Dec. of George Simone, dkt. 21, exh. A. Simone reported that FYM had been having cash flow problems that had led to increased lead times and a drop in quality. Id. Simone indicated that “the common belief is that FYM is using new suppliers which may have lower quality standards than previous ones,” and one goal of the Motor Sports Division was to broaden its supplier base. Id.
Simone presented three options to Pacific Cycle: 1) keep and continue the Motor Sports Division, then invest in infrastructure and more personnel to focus on product issues; 2) license the Schwinn brand to someone else; or 3) form a joint venture with a Chinese manufacturer. Simone warned that no matter which course Pacific Cycle chose, it could not continue with its current business model and it would have to focus on improving quality, observing that “[i]f we cannot provide the necessary replacement part then that's when we start losing dealers in droves.” Id.
Tillett decided that the best option was for Pacific Cycle to get out of the motor scooter business and to begin licensing the Schwinn brand to a company that had more experience in the motor sports arena, so that Pacific Cycle could focus on its core businesses.
B. Pacific Cycle Meets PowerGroup
Enter Michael Tomberlin. In 2008 Simone had met Tomberlin by chance when they both were in China visiting FYM's facility. Tomberlin was there because FYM manufactured electric vehicles for Tomberlin Automotive Group. Another Tomberlin company, PowerGroup, sold and distributed its own line of products, including combustion-powered motorsports products such as Tomberlin Outdoor branded off-road ATVs and motor scooters. PowerGroup used a dealer direct business-to-business network of community-based motor sports retailers to sell its products. Simone and Tomberlin began discussing the possibility of Pacific Cycle entering a licensing agreement with PowerGroup.
In January 2009, Tomberlin met with Tillett, Simone and Robert Silvis, Pacific Cycle's general counsel. (It is unclear from the record if this meeting took place at Pacific Cycle's offices in Madison or PowerGroup's offices in Augusta, but everyone agrees that the meeting occurred.) Either during this meeting or at the end of 2008,2 Simone gave a PowerPoint presentation that included information about Pacific Cycle's dealer network and the Motor Sports Division's 2009 pre-season orders, inventory and other information. Among the points Simone made were:
• “Schwinn has placement in 471 dealerships, from Top 100 dealers to boutique shops.”
• 2,486 pre-season orders had been placed for 2009, which translated to $3,838,440.
• Schwinn's motor sports division was a “turn key operation.”
In this presentation and in subsequent discussions, Pacific Cycle's representatives characterized the Motor Sports Division as a growing, profitable business but explained that it did not fit...
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