Ryan v. Wersi Electronics GmbH & Co.

3 F.3d 174, 1993 WL 306168
CourtCourt of Appeals for the Seventh Circuit
DecidedAugust 11, 1993
DocketNo. 91-3710
StatusPublished
Cited by11 cases

This text of 3 F.3d 174 (Ryan v. Wersi Electronics GmbH & Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ryan v. Wersi Electronics GmbH & Co., 3 F.3d 174, 1993 WL 306168 (7th Cir. 1993).

Opinion

RIPPLE, Circuit Judge.

This is an appeal from an order of summary judgment entered in favor of the defendant in a suit alleging breach of contract and fraudulent misrepresentation. For the reasons that follow, we affirm in part and reverse and remand in part.

I

BACKGROUND

The appellant, Mr. L.R.J. Ryan, is an independent business consultant and the sole owner of Ryan Organization International, Inc. (ROI). The current dispute began to evolve at a trade show in 1984, when Mr. Ryan first observed a line of electronic musical instruments manufactured by a German company, Wersi GmbH & Co. (Wersi-Germany). Wersi-Germany is run by two German brothers, Wilhelm and Reinhard Franz, and owns a subsidiary company, Wersi Electronics, Inc. (WEI), in the United States. Frank Gross, also a German citizen, is the president of the Pennsylvania-based WEI. WEI imports and distributes Wersi-Germany’s musical instruments as kits that purchasers must assemble themselves. After viewing these kits, Mr. Ryan believed that there was a substantial potential market for a pre-assembled version of the instruments. Pursuant to this belief, in late 1984, Mr. Ryan began negotiating with the Franz brothers and Wersi-Germany to become a United States distributor of pre-assembled Wersi instruments. At that time, no pre-assembled Wersi instruments were being marketed in the United States, and Mr. Ryan hoped to obtain an exclusive United States distributorship agreement.

When Mr. Ryan initially approached the Franz brothers about the possibility of his distributing the Wersi instruments, they expressed a tentative interest in selling the entire company. Both parties acknowledge that, from late 1984 to sometime in 1987, multiple detailed letters and draft purchase proposals were exchanged between Mr. Ryan and the Franz brothers. Additionally, Mr. Ryan made several trips to Germany to meet with the Franz brothers. Ultimately, however, Mr. Ryan was unable to secure financing to complete the purchase of the entire Wer-si-Germany enterprise. It is undisputed that these negotiations continued for several years and that both Mr. Ryan and Wersi-Germany had the aid of counsel. The current dispute centers on whether Mr. Ryan and the Franz brothers entered into any enforceable contract at all.

According to Mr. Ryan, in 1984, when he began negotiating with the Franz brothers to purchase Wersi-Germany, he and the Franz brothers had already entered an oral contract that entitled him to the exclusive United States distributorship rights of the pre-assembled Wersi instruments. Mr. Ryan argues that, although the parties continued to negotiate for a more extensive business relationship, the oral agreement was at all times an independent and fully enforceable contract. In contrast, the Franz brothers contend that, although both the possibility of a distributorship agreement and the possibility of a company purchase were discussed extensively with Mr. Ryan, no final agreement was reached on either possibility. Sometime in 1986 it became known to Mr. Ryan that Wersi-Germany and a Canadian company had attempted to enter into a worldwide distributorship agreement that Mr. Ryan believed infringed upon his rights. However, Mr. Ryan took no legal action at that time and his negotiations with Wersi-Germany continued.

On June 20, 1986, during the same time period that Mr. Ryan and Wersi-Germany were negotiating for a distributorship or purchase agreement, Mr. Ryan entered into a written and fully executed agreement with [177]*177WEI (Wersi-Germany’s Pennsylvania subsidiary) to purchase twenty percent of WEI’s stock for $500,000. According to Mr. Ryan, this stock purchase was proposed by Wersi-Germany as the only way that he could “retain” the exclusive distributorship rights to which he maintains he was already contractually entitled. He also contends that the stock purchase was accompanied by an oral agreement. Mr. Ryan also contends that this oral agreement provided that the $500,-000 purchase price would entitle him to a $500,000 open account to purchase component parts from WEI.

At the time of Mr. Ryan’s stock purchase, WEI was faltering financially and was named as a defendant in several pending lawsuits. According to Mr. Ryan, Wersi-Germany fraudulently represented to him that WEI was in sound financial condition and was a solid investment. In fact, submits Mr. Ryan, Wersi-Germany represented to him that the stock purchase was so risk-free that Wersi-Germany would back up the financing with a letter of credit from its bank. Before the final stock purchase, Mr. Ryan was provided with WEI’s annual financial reports. However, the first page of the financial documents, which indicated that the company was being sued, had been detached. Nonetheless, the information provided to Mr. Ryan did reflect that WEI was in financial difficulty. Mr. Ryan further submits that, at the time of the stock purchase, Wersi-Germany again acknowledged that he had the exclusive rights to distribute pre-assembled Wersi instruments in the United States. In contrast, Wersi-Germany contends that the stock purchase was between WEI and Mr. Ryan and did not involve Wersi-Germany. Finally, submits Wersi-Germany, WEI is not a party to the current lawsuit and the stock purchase is thus irrelevant.

In June 1987, at a trade show for retail music dealers, Gross and WEI presented themselves as the exclusive wholesale distributor of Wersi products in the United States and distributed literature showing the instruments pre-assembled. Subsequently, in 1990, Mr. Ryan brought this five-count suit against Wersi-Germany, the Franz brothers, and Gross. Specifically, Mr. Ryan alleged one breach of contract count and four fraud-based counts. Mr. Ryan’s central contention is that in 1984 he entered a binding, oral contract with Wersi-Germany. He claims that this contract granted him the exclusive right to distribute pre-assembled Wersi instruments in the United States and that Wersi-Germany breached the agreement by allowing Gross and WEI to distribute pre-assembled Wersi products in the United States. He further contends that, in reliance upon this alleged 1984 agreement, he set up two new corporations, “Wersi Chicago, Inc.” and “The Muxical Corporation” (which he wholly owns); hired five executive employees; had a variety of marketing materials designed and printed; and ceased his other business dealings to work full-time on the project with Wersi-Germany. The district court granted summary judgment for Wersi-Germany and this appeal follows.

II

DISTRICT COURT PROCEEDINGS

A. Breach of Contract

The district court concluded that, as a matter of law, taking the evidence and all reasonable inferences from that evidence in the light most favorable to Mr. Ryan, no enforceable contract existed. Specifically, the district court determined that, even taking all of Mr. Ryan’s pleadings as true, the alleged oral contract lacked durational and sales quota terms, which are essential for a contract between a manufacturer and distributor to be enforceable under Illinois law. The court also rejected Mr. Ryan’s promissory estoppel argument; it found that the alleged promise for exclusive rights was “ambiguous as to its scope, duration, and sales requirements” and thus unenforceable under Illinois common law. Mem. Op. at 13, 1991 WL 233330.

Additionally, the district court noted that the alleged contract was not in writing and was not performable within a one-year period and thus was unenforceable under the Illinois Statute of Frauds. See Ill.Rev.Stat. ch. 59, ¶ 1.

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Bluebook (online)
3 F.3d 174, 1993 WL 306168, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ryan-v-wersi-electronics-gmbh-co-ca7-1993.