Sunny Handicraft (H.K.) Ltd. v. Envision This!, LLC
| Decision Date | 24 March 2017 |
| Docket Number | 14 C 1512 |
| Parties | SUNNY HANDICRAFT (H.K.) LTD. and BIN TEH HANDICRAFT (SHENZHEN) CO. LTD., Plaintiffs/Counter-Defendants, v. ENVISION THIS!, LLC, Defendant/Counter-Plaintiff, and WALGREEN CO., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Plaintiffs Sunny Handicraft (H.K.) Ltd. ("Sunny") and Bin Teh Handicraft (Shenzhen) Co. Ltd. ("Bin Teh") are foreign corporations in the business of manufacturing and exporting holiday decorations and other seasonal merchandise. Around 2006 or 2007, Plaintiffs began working with Defendant Envision This!, LLC ("Envision"), a Florida-based company that sources goods from overseas factories for sale to U.S. retailers. For several years, Plaintiffs and Envision worked together to arrange regular shipments of merchandise to various U.S. retailers, including to Defendant Walgreen Co. ("Walgreens").
In 2013, however, the parties' business relations soured. For their part, Plaintiffs assert that Envision and Walgreens have wrongfully withheld payment of over $3 million owed to Plaintiffs for goods shipped during that year. Plaintiffs have accordingly brought claims against Envision and Walgreens for breach of contract and unjust enrichment, as well as additional claims against Envision for defamation, fraud, and breach of fiduciary duty. In response, Envision has filed counterclaims against Plaintiffs for defamation, breach of contract, unjust enrichment, tortious interference with economic advantage, and breach of implied warranty of merchantability.
Each party has filed a motion for summary judgment. For the reasons provided herein, Plaintiffs' motion for partial summary judgment [151] is granted in part and denied in part. Envision's motion for partial summary judgment [161] is also granted in part and denied in part. Walgreens's motion for summary judgment [164] is denied in its entirety.
Sunny is a Hong Kong corporation with its principal place of business in Hong Kong. Pls.' LR 56.1(a)(3) Stmt. ¶ 1, ECF No. 153. Bin Teh is a Chinese corporation with its principal place of business in Shenzhen, China. Id. ¶ 2. Bin Teh manufactures goods that Sunny then ships to retailers. Envision's LR 56.1(a)(3) Stmt. ¶ 3, ECF No. 163. Although Sunny and Bin Teh are separate companies, they are operated by the same general manager, Daniel Huang. Id. ¶¶ 4-5. Envision is a Florida limited liability company with its principal place of business in Miami Beach, Florida. Pls.' LR 56.1(a)(3) Stmt. ¶ 3. Its sole members, Beth Edwards and Robert Hetzler, are both Florida residents. Id. Walgreens is an Illinois corporation with its principal place of business in Deerfield, Illinois. Id. ¶ 4.
Plaintiffs are in the business of manufacturing and shipping seasonal merchandise for U.S. retailers. Id. ¶ 7. Around 2006 or 2007, Plaintiffs began working with Envision to facilitate sales of their merchandise. Id. The parties dispute which services Envision provided in connection with these sales. According to Plaintiffs, Envision's role was to set up appointments with retailers on Plaintiffs' behalf, communicate with buyers regarding price quotes and samples,and collaborate with Plaintiffs in designing samples and artwork for the packaging of some of Plaintiffs' goods. Id. ¶ 8. Envision rejects this characterization of the services it performed. Envision's LR 56.1(b)(3) Stmt. ¶ 8, ECF No. 171. Rather, according to Envision, it provided Plaintiffs with product development, trend tracking, database management, and invoice management services in the course of sourcing goods on retailers' behalf. Id.
From 2007 to 2013, Walgreens was one of the U.S. retailers who purchased Plaintiffs' merchandise. Id. ¶ 16. Envision played a role in facilitating these purchases, but the parties dispute how Envision's role is best characterized. According to Plaintiffs, Envision "worked for, and was compensated by, Plaintiffs for serving as Plaintiffs' sales representative" in these transactions. Pls.' LR 56.1(b)(3) Stmt. Resp. Envision ¶ 8, ECF No. 176. For its part, Envision asserts that it worked not for Plaintiffs but instead for Walgreens as Walgreens's vendor, contracting with Walgreens for the sale of merchandise and in turn subcontracting with Plaintiffs for the manufacture of this merchandise. Envision's LR 56.1(b)(3) Stmt. ¶ 16.
Plaintiffs and Envision had an agreement governing the compensation structure by which Plaintiffs paid Envision for its services in facilitating sales of Plaintiffs' goods. Pls.' LR 56.1(a)(3) Stmt. ¶ 9. This agreement governed all sales of Plaintiffs' goods to U.S. retailers, including sales to Walgreens. See id. ¶¶ 9, 16. Under the terms of the agreement, Plaintiffs paid Envision (1) an annual fee of $10,000, (2) a commission consisting of a percentage of the price of each item Envision helped Plaintiffs to sell, and (3) "certain expenses, including the amounts Envision paid for samples, courier charges, hotel fees in Asia, and third-party translation services." Id. ¶ 10. When one party owed money to the other at the end of the year, Plaintiffs and Envision settled their accounts through a "truing up" process, either paying the other partyany outstanding amount owed or carrying any outstanding balance as a credit into the following year. Id. ¶ 14.
Although Plaintiffs and Envision do not dispute these basic terms of their agreement, they dispute whether the agreement contained certain additional terms. For example, Envision claims (and Plaintiffs deny) that Plaintiffs agreed to separately compensate Envision for the cost of its product development, trend tracking, and database management services, as well as for artwork that Envision developed to market Plaintiffs' goods. See Envision's LR 56.1(b)(3) Stmt. ¶¶ 10, 12; Pls.' Reply Envision's LR 56.1(b)(3) Stmt. ¶¶ 89-92, ECF No. 188. In addition, Plaintiffs claim (and Envision denies) that Envision was responsible for coordinating with Walgreens to ensure that Sunny received payment for the merchandise that Plaintiffs manufactured and shipped. Envision's LR 56.1(b)(3) Stmt. ¶ 18.
From 2007 to 2012, in order to coordinate shipments of Plaintiffs' goods for sale to Walgreens, Envision regularly submitted Import Buying Confirmation Forms to Walgreens. Pls.' LR 56.1(a)(3) Stmt. ¶ 18. Walgreens paid for the goods corresponding to each Confirmation Form by issuing letters of credit. Id. ¶¶ 18-19. From 2007 to 2012, the Confirmation Forms that Envision submitted to Walgreens regarding Plaintiffs' goods always listed Sunny as the entity to be named as the beneficiary for the letters of credit. Id. ¶ 18. Accordingly, for each shipment of goods sold to Walgreens from 2007 to 2012, Plaintiffs received payment in the form of letters of credit issued by Walgreens. Id. ¶¶ 18-19.
Business did not go as usual in 2013. That year, Walgreens initiated a transaction ("the 2013 Transaction") for the purchase of Christmas decorations manufactured by Plaintiffs. Id. ¶ 22. The purchased merchandise had a face value of just under $3.5 million. Id. When Envision sent the Confirmation Forms to Walgreens for the 2013 Transaction, however, theforms listed Envision—not Sunny—as the entity to be named as the beneficiary of Walgreens's letters of credit. Id. ¶ 23. According to Plaintiffs, their general manager, Daniel Huang, had previously e-mailed Envision copies of Confirmation Forms listing Sunny as the beneficiary for the 2013 Transaction, but Envision later altered the forms to list itself as the beneficiary without Plaintiffs' knowledge. Id. Envision denies this accusation, maintaining instead that Plaintiffs agreed to designate Envision as the beneficiary for the 2013 Transaction and that Plaintiffs were aware of this arrangement no later than December 2012. Envision's LR 56.1(b)(3) Stmt. ¶¶ 23, 96.
Based on the information provided in the Confirmation Forms for the 2013 Transaction, Walgreens issued three transferable letters of credit listing Envision as the beneficiary. Pls.' LR 56.1(a)(3) Stmt. ¶ 24. On August 8, 2013, Envision notified Plaintiffs that these letters of credit had been issued. Id. ¶ 25. According to Plaintiffs, this was the first time they learned that the letters of credit listed Envision rather than Sunny as the beneficiary. Id. Plaintiffs requested that Envision transfer the letters of credit to Sunny, but Envision did not do so. Id. Envision later drew down about $3.069 million from the letters of credit and deposited the money into its bank account. Id. ¶ 30.
On August 20, 2013, Huang called Walgreens's buying representative, Hadieh Hasan, to request that Walgreens issue a new letter of credit listing Sunny as the beneficiary. Id. ¶ 35. Envision and Walgreens assert (while Plaintiffs deny) that Huang told Hasan during this conversation that Sunny would not ship the merchandise for the 2013 Transaction unless Walgreens issued a new letter of credit. Pls.' LR 56.1(b)(3) Stmt. Resp. Envision ¶ 24; Pls.' LR 56.1(b)(3) Stmt. Resp. Walgreens LR 56.1 Stmt. ¶ 30, ECF No. 179. Envision further asserts that Plaintiffs defamed Envision during this conversation by telling Hasan that Envision was refusing to make a payment to Plaintiffs. Envision's LR 56.1(b)(3) ¶ 68.
Throughout September and early October of 2013, Plaintiffs withheld freight forwarder documents that were necessary for some of the merchandise in the 2013 Transaction to clear customs. Pls.' LR 56.1(a)(3) Stmt. ¶ 40. Plaintiffs claim that they withheld these documents to obtain a written guarantee of payment for the merchandise from either Envision or Walgreens. Id. By contrast, Envision claims that Plaintiffs' purpose in withholding these documents was to obtain a new letter of credit listing Sunny as the beneficiary. Envision's LR 56.1(b)(3) Stmt. ¶ 40.
On October 11, 2013, Envision sent an e-mail to Teresa Chu, a Walgreens employee. Envision's LR 56.1(a)(3) Stmt. ¶¶ 46-47. Chu had...
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