Opinion
IP 99-0069-C-T/G.
September 29, 2000.
ENTRY ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
Defendant, Arrowhead Plastic Engineering, Inc. ("Arrowhead") moved for summary judgment on all four counts of Plaintiffs', Revealed Water Products, Inc. ("Revealed Water") and Adventure Technology, Inc. ("Adventure Technology") (collectively "Plaintiffs"), Complaint. Count I of Plaintiffs' Complaint alleges breach of contract, Count II breach of warranty, Count III promissory estoppel, and Count IV breach of contract as third party beneficiary.
Facts
Derek Steinhour, president of Adventure Technology, designed a certain kayak paddle. Adventure Technology desired to mass produce the paddle, but did not have the production capabilities or the mold, which would enable large-scale production, to do so. In September, 1996, Steinhour contacted Jeff Burgess of Specialty Composites, Inc. ("Specialty") regarding manufacturing the paddles and an aluminum mold. Steinhour provided Burgess with a sample paddle that was to serve as a model regarding weight and aesthetics, "masters" that were to serve as a model for the paddle's shape, and an instruction manual concerning how to produce the paddles, including the paddles' aesthetic and weight requirements. Burgess represented that Specialty could produce paddles that satisfied the design criteria, and Adventure Technology chose Burgess and Specialty to produce at least the mold.
It is disputed whether the 11/12/96 Agreement also called for Specialty to produce 1200 paddles within a defined time period.
On November 12, 1996, an Agreement ("11/12/96 Agreement") was entered into whereby Specialty agreed to manufacture at least the mold. The Agreement was signed by Jeff Burgess, for Specialty, and Drew Hicken, an investor whose purpose was to provide the necessary capital that Adventure Technology lacked to fund production of the mold. Pursuant to the 11/12/96 Agreement, Specialty received a $16,625 deposit.
Neither Arrowhead nor Revealed Water were parties to the 11/12/96 Agreement. Revealed Water was incorporated on January 30, 1997. It was formed for the sole purpose of serving as the exclusive distributor of Adventure Technology's paddles. Shortly after the 11/12/96 Agreement was signed, Nomad Sports Distributing, LC ("Nomad Sports") transferred whatever interest it had in the 11/12/96 Agreement to Revealed Water.
On December 16, 1996, Burgess became employed by Arrowhead, and as such became part of the "Arrowhead management team." Nobody at Arrowhead informed Plaintiffs that Burgess's authority was limited.
On January 30, 1997, Specialty entered into a lease agreement ("Lease") with Arrowhead whereby Specialty leased certain office and shop equipment and "custom orders and/or proprietary products" owned by Specialty for a one year period beginning February 1, 1997, in consideration for the payment by Arrowhead on certain debts of Specialty and Burgess. Exhibit A of the Lease listed "ATX Kayak paddle — Purchase order" as a property interest that Specialty leased to Arrowhead. As part of the Lease, Arrowhead agreed that if it had not purchased a leased property by January 31, 1998, it would honor existing orders which were in production on that date for a reasonable period of time until Specialty could arrange for an alternate production source.
Sometime prior to the Lease, Specialty had engaged North Tool and Manufacturing Co., Inc. ("North Tool") for the purpose of developing an aluminum mold. In April, 1997, North Tool's efforts to develop a mold ended in failure.
On April 20, 1997, Steinhour visited Arrowhead's facility in Muncie, Indiana, and met with Kishel and Burgess. Sometime thereafter, Arrowhead initiated an effort to develop a mold and with it the capability of manufacturing the paddles. Kishel's understanding was that Arrowhead was to produce the paddles.
On April 21, 1997, Hicken sent Burgess a proposal ("4/21/97 Proposal") to modify the 11/12/96 Agreement in a number of particulars. A facsimile response to the 4/21/97 Proposal was sent by Burgess on April 26, 1997 ("4/26/97 Response"), which contained changes to the 4/21/97 Proposal, including the following: "First of all Arrowhead Plastics [sic] has nothing to do with the past, they will not sign anything that ties them to refunds, etc., that is between Specialty and ATI, do you not agree?" The changes were never accepted by Plaintiffs.
Between August 15 and November 3, 1997, on at least eleven separate occasions, Arrowhead, through Burgess, represented that it would send Adventure Technology paddles the next day but failed to do so. On three occasions Adventure Technology received paddles from Arrowhead that were deficient. On each occasion, Arrowhead indicated that it intended to cure the deficiencies. Arrowhead was ultimately unsuccessful in its attempt to produce suitable paddles, and on December 10, 1997, Steinhour advised Burgess that he was "terminating [their] agreement." In the end, Arrowhead had expanded approximately $160,000 and 8000 labor hours in its attempt to produce a mold and paddles.
Discussion
Summary judgment is appropriate only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See e.g., King v. National Human Resource Comm., Inc., 218 F.3d 719, 723 (7th Cir. 2000); Fed.R.Civ.P. 56(c). "The burden is on the party moving for summary judgment to demonstrate the absence of a `genuine issue as to any material fact.'" Filipovic v. K R Express Sys., Inc., 176 F.3d 390, 395 (7th Cir. 1999) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). The evidence must be considered in light most favorable to the non-moving party, and all doubts regarding the existence of material facts are to be resolved in favor of the nonmovant. See Ransom, 217 F.3d at 468; Doe v. R.R. Donnelley Sons Co., 42 F.3d 439, 443 (7th Cir. 1994). "If there is any doubt as to whether such an issue of fact exists, the summary judgment motion must fail." Casey v. Uddeholm Corp., 32 F.3d 1094, 1096 (7th Cir. 1994) (citation omitted); see also Devex Corp. v. Houdaille Indus., Inc., 382 F.2d 17, 21 (7th Cir. 1967) ("A long line of cases have held that summary judgment should not be granted if there is the `slightest doubt' as to the facts. . . . The fact that it may be surmised that the party against whom the motion is made is unlikely to prevail at trial is not sufficient to authorize summary judgment against him.") (quotation omitted). "To defeat a motion for summary judgment, the nonmoving party cannot rest on the mere allegations or denials contained in his pleadings, but must present sufficient evidence to show the existence of each element of its case on which it will bear the burden at trial." Filipovic, 176 F.3d at 395 (quotation omitted).
Breach Of Contract Claim
Arrowhead argues that it is entitled to summary judgment on Count I because a contract never existed between it and Plaintiffs. Arrowhead maintains that the 11/12/96 Agreement was entered into by Burgess, for Specialty, and Hicken, individually and on behalf of his investment partner Richard Varga; Adventure Technology and Nomad Sports, and consequently Revealed Water, were not parties to that agreement. Arrowhead contends that 11/12/96 Agreement was merely an agreement between Specialty and Hicken for the production of a mold and an agreement to agree on the production of paddles. Moreover, Arrowhead contends that it was not a party to the 11/12/96 Agreement and did not assume responsibility for its terms. Arrowhead further contends that the April, 1997, exchange of documents did not create a contract; the 4/21/97 Proposal was not an offer, Burgess was not acting as an agent of Arrowhead when he issued the 4/26/97 Response, and Burgess's 4/26/97 Response was not a definite expression of acceptance and unequivocally rejected any concept that a contract was formed.
Arrowhead also maintains that the Statute of Frauds, specifically section 26-1-2-201(1) of the Indiana Code, precludes Plaintiffs' breach of contract claim. Section 26-1-2-201(1) provides:
There is no dispute that Indiana's version of Article 2 of the Uniform Commercial Code applies in this case.
Except as otherwise provided in this section, a contract for the sale of goods for the price of five hundred dollars ($500) or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon, but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
Ind. Code § 26-1-2-201(1) (Michie 1992). Arrowhead contends that any contract that may have existed between Arrowhead and Plaintiffs was not in writing and is therefore unenforceable.
Plaintiffs respond by contending that section 26-1-2-201(1) was satisfied. Plaintiffs argue that Hicken entered into the 11/12/96 Agreement individually and as the agent of Adventure Technology and Nomad Sports; Specialty assigned its interest in the 11/12/96 Agreement to Arrowhead pursuant to the Lease; and the 4/21/97 Proposal amended the 11/12/96 Agreement to reflect the manufacturing delays that the parties had experienced. Therefore, Plaintiffs' contend, an enforceable, written contract does exist between them and Arrowhead.
The terms of the 11/12/96 Agreement are not ambiguous and therefore construction of the agreement is a matter of law. See e.g., Rogier v. American Testing and Eng'g Corp., No. 49A02-9910-CV-707, 2000 WL 1211300, at *4 (Ind.Ct.App. Aug. 28, 2000) (citation omitted) (holding that when the terms of a written contract are unambiguous "construction of a written contract is a question of law for the trial court for which summary judgment is particularly appropriate"). The 11/12/96 Agreement provides in part:
This letter is to serve as a conformation to the paddle manufacturing, mold costing, and pricing. This letter will also serve as a temporary agreement until a final manufacturing agreement is signed. Drew Hicken and Richard Varga (Varkin) are the investing party and will be the owner of stated molds etc. upon completion of payments and approval of molds, etc.
* * *
By the time the second phase is completed a manufacturing agreement will be in place, but here is a short review of some of those topics. Our production run will be approximately 1200 units, to be delivered between February and May, with a possibility for a second run to be determined at that time. . . . The payments and receiving schedule will be determined soon after first phase.
(11/12/96 Agreement). From this plain, unambiguous language, it is clear that what exists is (1) an agreement to produce a mold, for which consideration in the form of a deposit was given, and (2) an agreement to agree on the production of paddles. Agreements to agree are not enforceable contracts. See, e.g., Epperly v. Johnson, No. 49A05-9908-CV-351, 2000 WL 1225468, at *2 (Ind.Ct.App. Aug. 30, 2000) (citing Wolvos v. Meyer, 668 N.E.2d 671, 674 (Ind. 1996)). Therefore, the obligation that was created by the 11/12/96 Agreement was for Specialty to create a mold. No contract was entered into regarding the production of paddles.
Note that the Indiana Supreme Court has recognized "that parties may make an enforceable contract that binds them to prepare and execute a final subsequent agreement." Epperly, 2000 WL 1225468, at *2 (citing Wolvos, 668 N.E.2d at 674). Here, however, there is no evidence that the parties intended to be bound by the 11/12/96 Agreement to produce a certain quantity of paddles, but rather, from the clear language of the agreement, it is evident that the parties intended to be bound "only after executing a subsequent written document[.]" Id. (holding that if the parties did not intend to be bound by the agreement, but rather intended to be bound "only after executing a subsequent written document[,]" there exists "no enforceable contract until the subsequent document is executed") (citing Wolvos, 668 N.E.2d at 675).
Arrowhead did not assume Specialty's obligation under the 11/12/96 Agreement as a result of the Lease. Paragraph 1 of the Lease provides:
1. Leased Property. In consideration of the rents herein reserved and other covenants and agreements of Lessee, Lessor hereby leases and rents unto Lessee the personal property described on Exhibit A, together with all intellectual property rights . . . customer goodwill, purchase orders, and design and/or engineering drawings associated therewith. . . .
(Lease). Exhibit A lists "ATX Kayak paddles — Purchase order." Arrowhead recognizes that the Lease "provided for the assignment of certain items, including one identified as `ATX Kayak Paddles — Purchase Order' [sic]." (Def.'s Br. in Supp.). However, Arrowhead argues that under the 11/12/96 Agreement no such purchase orders for Specialty to assign and Arrowhead to assume were in existence when the Lease was executed. This court has found that the terms of the 11/12/96 Agreement called for only the development of a mold and not for the production of paddles. Therefore, no purchase orders were in existence for Arrowhead to assume. Further, no evidence exists that Arrowhead, under the Lease, assumed Specialty's obligation in regards to the mold.
Plaintiffs contend that under section 26-1-2-207 of the Indiana Code, the April, 1997, exchange of documents amended the 11/12/96 Agreement to reflect the delays that the parties had experienced. The relevant portion of that section provides:
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
Ind. Code § 26-1-2-207(1) (Michie 1992). "2-207 permits enforcement despite discrepancies between offer and acceptance if enforcement could be required without either party being bound to a material term to which he has not agreed." Continental Grain Co. v. Followell, 475 N.E.2d 318, 322 (Ind.Ct.App. 1985) (citation omitted). However, "where confirmation differs materially, no contract is formed. Not all return documents are 2-207(1) acceptances." Id.
Plaintiffs maintain that the 4/26/97 Response was a written confirmation of the 4/21/97 Proposal, and by the 4/26/97 Response Arrowhead accepted the 4/21/97 Proposal. The 4/21/97 Proposal provided in part,"The remaining balance of $15,475.00 due on the mold will be paid back to Arrowhead on an increase of $10.00 per paddle. This is based on a one year initial Purchase Order of 1500 paddles to be delivered between May 1 1997 and May 1 1998." (4/21/97 Proposal). The 4/26/97 Response provided in part:
I will respond to each item that I feel we need to change or talk about.
(1) Arrowhead does not need a contract. A blanket purchase order is all that is required. If we cannot produce ATI can cancel the order and walk away leaving us with a mold and equipment that has no value to Arrowhead.
* * *
(4) We will need a blanket purchase order for 1500 paddles in order to fund the mold. Unit pricing has never been fully finalized. Pricing that was given was a labor range of between 50.00 — 75.00 per paddle (left right).
(5) With a blanket purchase order you can cancel if Arrowhead cannot perform by such such a date. As far as refunds that is between Specialty and ATI.
(4/26/97 Response). This clear, unambiguous language unequivocally rejects the 4/21/97 Proposal; it is clearly not "[a] definite and seasonable expression of acceptance or a written confirmation[.]" Ind. Code § 26-1-2-207(1) (Michie 1992). Arrowhead did not agree to produce 1500 paddles between May 1, 1997, and May 1, 1998, as Plaintiffs contend. In fact, it is entirely clear from the language in the 4/26/97 Response that Burgess recognized that Arrowhead may not be able to produce paddles by the dates that Plaintiffs required them. This is further evidence that Arrowhead did not agree to Plaintiffs' production proposal.
Plaintiffs further contend that an enforceable contract exists under sections 26-1-2-204(1) and 26-1-2-201(3). Section 26-1-2-204(1) provides:
A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognize the existence of such a contract.
Ind. Code § 26-1-2-204(1) (Michie 1992). Arrowhead, in response to Plaintiffs' argument, maintains its contention that a contract for the sale of goods must be in writing to be enforceable. However, under Indiana law, where the writings do not create a contract for the sale of goods, conduct of the parties may be "sufficient to establish a contract." Uniroyal, Inc. v. Chambers Gasket Manufacturing Co., 380 N.E.2d 571, 578 (Ind.Ct.App. 1978) (quotation and citations omitted). Because Arrowhead did not assume responsibility for Specialty's obligation under the 11/12/96 Agreement, the only possible contract which could exist based on the conduct of the parties is derived from the April, 1997, exchange of documents.
The conduct of the parties in this case does not evidence the existence of a contract. "That Arrowhead devoted significant efforts to attain the capability of manufacturing the plaintiffs' kayak paddles is uncontested, as is the fact that it took a number of steps to be ready to initiate production if and when that occurred." (Def.'s Reply Brief at 7-8). However, the language of the 4/26/97 Response made clear that Arrowhead anticipated that it might not be able to produce the paddles requested by Plaintiffs. Arrowhead made clear its intentions that it was not interested in entering into a contract that would bind it to produce a certain number of paddles by a certain date. Therefore, it is evident that Arrowhead's conduct was undertaken in an effort to develop the manufacturing capabilities that would enable it to produce the paddle for future financial reward, and not because it believed itself bound by a contract to produce paddles.
Finally, Plaintiffs' reliance on section 26-1-2-201(3)(a) is improper. That section provides:
(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable:
(a) If the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement;
Ind. Code § 26-1-2-201(3)(a) (Michie 1992). Plaintiffs maintain that this section is applicable because the paddles were specifically manufactured for them; Arrowhead utilized a new technology in producing the paddles; Arrowhead, in its ordinary course of business, manufactures truck, bus and boat parts; and Arrowhead expanded a substantial commitment both in terms of time and money for procurement of the paddles. However, this statute is not a buyer's remedy. The clear purpose of this statute is to benefit sellers who have manufactured specific goods for a particular buyer. If those goods are unsuitable for sale to others and the buyer repudiates after the seller "has made either a substantial beginning of their manufacture or commitments for their procurement[,]" the seller is left holding goods that are of no value to it. This statute was thus created to give such a seller a remedy, not to protect buyers such as Plaintiffs.
Weighing the evidence in light most favorable to Plaintiffs, as it must, this court concludes that no genuine issue of material fact exists and summary judgment as a matter of law on Count I is appropriate.
Breach of Warranty Claim
Arrowhead argues that under Indiana Code section 26-1-2-313, a representation, in order to constitute an actionable warranty, must form part of the "basis of the bargain." Therefore, Arrowhead argues that without a contract, i.e., a bargain, there cannot exist an actionable express warranty. Section 26-1-2-313 provides:
(1) Express warranties by the seller are created as follows:
(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
(2) It is not necessary to the creation of an express warranty that the seller use formal words such as `warrant' or `guarantee' or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.
Ind. Code § 26-1-2-313 (Michie 1992).
Indiana law does require that, "in order for the seller's assurances to constitute an express warranty under the statute, the assurance must constitute a promise which was part of the basis of the purchase agreement." Carpetland U.S.A. v. Payne, 536 N.E.2d 306, 308 (Ind.Ct.App. 1989) (citation omitted); see also Prairie Prod., Inc. v. Agchem Div.-Pennwalt Corp., 514 N.E.2d 1299, 1303 (Ind.Ct.App. 1987) ("Under Indiana law, the seller's representation rises to the level of an express warranty only if it becomes part of the basis of the bargain.") (citation omitted). Because the court has determined as a matter of law that no contract ever existed between Plaintiffs and Arrowhead, there can be no actionable express warranties. Therefore, summary judgment is appropriate on Count II.
Promissory Estoppel Claim
Arrowhead presents a number of arguments as to why summary judgment should be granted on Plaintiffs' promissory estoppel claim. Most importantly, Arrowhead contends that the Statute of Frauds precludes recovery. Arrowhead argues that "a claim of estoppel will not operate to remove a case from the Statute of Frauds where the promise relied upon is the very promise that the Statute declares unenforceable if not in writing." Wabash Grain, Inc. v. Bank One, Crawfordsville, NA, 713 N.E.2d 323, 326 (Ind.Ct.App. 1999) (quoting Ohio Valley Plastics, Inc., v. National City Bank, 687 N.E.2d 260, 264 (Ind.Ct.App. 1997)). As the court reasoned in Ohio Valley:
This court has concluded above that if a contract existed here, the Statute of Frauds would apply. As discussed above, no exceptions to the Statute exist that would remove such a contract from the Statute.
Were this not the rule the statute would be rendered virtually meaningless because the frustrated claimant would always assert an oral promise/agreement to defeat by means of estoppel the statute's requirement for a written one. The contest would then concern the credibility of the evidence of an oral promise of agreement. That of course, is precisely what the statute seeks to avoid.Ohio Valley, 687 N.E.2d at 264 (quoting Whitco Indus., Inc. v. Kopani, 514 N.E.2d 840, 844 (Ind.Ct.App. 1987). Plaintiffs do not respond to Arrowhead's argument and in no way address the effect of the Statute of Frauds on their promissory estoppel claim.
While Arrowhead's argument is persuasive, it appears, at first glance, that there may be some contrary authority on this point. Some Indiana courts have held that oral promises that are within the Statute of Frauds may be enforced "where such promises would be enforceable under the doctrine of promissory estoppel." Tipton County Farm Bureau Coop. Assoc., Inc. v. Hoover, 475 N.E.2d 38, 41 (Ind.Ct.App. 1985); see also, e.g., Tincher v. Greencastle Fed. Sav. Bank, 580 N.E.2d 268, 272 (Ind.Ct.App. 1991) ("Indiana law permits the enforcement of oral promises that are within the Statute of Frauds where such promises would otherwise be enforceable under the doctrine of promissory estoppel.") (citing Tipton, 475 N.E.2d at 41). However, as pointed out in Ohio Valley, 687 N.E.2d at 264 (citation omitted), "this exception has been limited to oral employment agreements subject to the Statute of Frauds found at I.C. 32-2-1-1." See also Consolidation Servs., Inc. v. Keybank Nat'l Assoc., 185 F.3d 817, 822 (7th Cir. 1999) ("The court in Ohio Valley added that the only exception it had ever recognized to applying the statute of frauds to oral promises sought to be enforced on a theory of promissory estoppel involved employment contracts."). In Ohio Valley the Indiana Court of Appeals "declined to extend such an exception to the Statute of Frauds . . . which covers credit agreements, due to our concern that such an exception would inappropriately erode the protections to be afforded by the Statute." Id. (citations omitted). Although this court was not able to find an Indiana case that addresses this exception in the context of Indiana Code 26-1-2-201(1), this court is confident that an Indiana court would decline to extend this exception to section 26-1-2-201(1) for the same reasons that the Ohio Valley court declined to extend the exception to the Statute of Frauds covering credit agreements. Therefore, summary judgment on Count III is appropriate.
Note that if a plaintiff is able to show "that the other party's refusal to carry out the terms of the agreement has resulted not merely in a denial of the rights which the agreement was intended to confer, but the infliction of an unjust and unconscionable injury and loss[,]" the plaintiff may be able "to establish an estoppel to remove a case from the operation of the Statute of Frauds." Ohio Valley, 687 N.E.2d at 264 (quotation omitted). However, Plaintiffs failed to raise such an argument. Therefore, such an argument will not be considered by the court and is deemed waived. Moreover, "[i]n some cases reliance on an oral promise may take a form that . . . provides compelling evidence of the existence and terms of a contract, and then, once more, the statute of frauds is relaxed." Consolidated Servs., 185 F.3d at 822 (citing, e.g., Mehling v. Dubois County Farm Bureau Coop. Ass'n, Inc., 601 N.E.2d 6, 7 (Ind.Ct.App. 1992)). However, Plaintiffs failed to make such an argument and it, too, is therefore waived.
Breach of Contract as Third Party Beneficiary Claim
"To constitute a third party beneficiary contract, the following requirements must be clear: (1) the intent to benefit the third party must be clear; (2) the contract must impose a duty on one of the contracting parties in favor of the third party; and (3) the performance of the terms must necessarily render to the third party a direct benefit intended by the parties to the contract." Emmons v. Brown, 600 N.E.2d 133, 134 (Ind.Ct.App. 1992) (citation omitted). Plaintiffs allege that Arrowhead and Specialty intended to benefit Plaintiffs through paragraph 2(b) of the Lease. That paragraph provides:
2. Lease Term. The term of this Lease shall commence on February 1, 1997, and continue until Lessee notifies Lessor of its decision to purchase, or not purchase the Leased Property, which decision must be made on or before January 31, 1998. If Lessee does NOT elect to purchase the Leased Property then: (a) Lessee will turn all customers over to Lessor; (b) Lessee will continue to honor existing orders which are then in production for a reasonable period of time until Lessor can arrange for an alternate production source; and (c) Lessee agrees that it will not compete with Lessor with respect to then existing (or Prior) customers of Lessor for items fabricated from the Leased Property.
(Lease). Plaintiffs contend that Burgess intended to protect and benefit the customers whose orders were assigned to Arrowhead pursuant to the Lease by ensuring that Arrowhead would not cut-off Specialty's customers' supply of goods if Arrowhead ultimately decided not to purchase Specialty's property under the terms of the Lease.
Plaintiffs claim fails as a matter of law for two reasons. First, no clear evidence exists that indicates Specialty and Arrowhead intended to directly benefit Plaintiffs by entering into the Lease. In support of their argument, Plaintiffs point out that Burgess gave the following deposition testimony:
Q . . . . What was your intention behind [paragraph 2 of the Lease]?
A Was that if we were up and running in production with whatever I had brought in, and it just didn't work out, then I didn't want production just to stop unit I could find — and I needed some time to find a building or whatever I was going to do.
Q In that sense you didn't want to leave any of the customers that Specialty had in the air —
A That's correct.
Q — without a supply of goods?
A Yes.
(Burgess Deposition 122:8-123:6). Additionally, Plaintiffs point to Exhibit A attached to the Lease which listed "ATX Kayak paddles — Purchase order" as part of the property Specialty assigned to Arrowhead, and Plaintiffs contend that at the time the Lease was executed Burgess and Kishel discussed North Tool's production of a mold that Arrowhead could use to produce the paddles. No reasonable jury could conclude from this evidence that Arrowhead and Specialty, by entering into the Lease, had a clear intent to directly benefit Plaintiffs. The Lease language is unambiguous — Plaintiffs are not third party beneficiaries. If Plaintiffs were to at all benefit from paragraph 2(b), they would have benefitted indirectly when Arrowhead assumed what would otherwise be an obligation of Specialty. Therefore, Plaintiffs were at best incidental beneficiaries to the Lease. See NN Investors Life Ins. Co. v. Crossley, 580 N.E.2d 307, 309 (Ind.Ct.App. 1991) (holding that a third party's benefit from a contract was merely incidental when it did not receive an intended direct benefit from the contract).
Second, no breach of paragraph 2(b) occurred under which Plaintiffs would be entitled to recover. Plaintiffs claim that Arrowhead failed to perform its obligation under paragraph 2(b). However, under its unambiguous terms, paragraph 2(b) did not become operable until January 30, 1998. Paragraph 2(b) was not, nor had it been, operable on December 10, 1997, the date the alleged contract was terminated. Because paragraph 2(b) was not in effect during the period in which Plaintiffs are attempting to enforce it, Plaintiffs do not have a cause of action for breach of a third party beneficiary contract under which they are entitled to recover.
Objections to Plaintiffs' Additional Material Facts
Arrowhead has made objections to certain Plaintiffs' Additional Material Facts. Arrowhead's objections to the following Plaintiffs' Additional Material Facts on the grounds that they are not material, but instead are either background or contextual information, or are altogether irrelevant are overruled: 36-46, 48, 54, 57, 61-64, 66, 67, 69, 73, 76, 77, 79, 82, 83, 85, 86, 92-95, 97-106, 108-111, and 113. Those facts are material and are not irrelevant. Arrowhead's objections to Plaintiffs' Additional Material Facts numbered 51 and 71 are sustained as those facts are not material. Additionally, Arrowhead's objections to the following Plaintiffs' Additional Material Facts on the ground that they are factual inferences and not actually facts are likewise overruled: 38, 49, 57, 63, 68, 70, 72, 73, 75, 80, 84, 85, 87-89, 93, 96-99, 101, 102 and 112.
Arrowhead's objections to Plaintiffs' Additional Material Facts numbered 50, 65, 77, 78 and 95 are sustained on the ground that they are improper factual inferences.
For the foregoing reasons, summary judgment on all Counts is GRANTED.