S&C Electric Company v. Earthshine Corp.

CourtDistrict Court, N.D. Illinois
DecidedMarch 31, 2025
Docket1:21-cv-02872
StatusUnknown

This text of S&C Electric Company v. Earthshine Corp. (S&C Electric Company v. Earthshine Corp.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
S&C Electric Company v. Earthshine Corp., (N.D. Ill. 2025).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

S&C ELECTRIC COMPANY,

Plaintiff, No. 21-cv-02872

v. Judge John F. Kness

EARTHSHINE CORP.,

Defendant.

MEMORANDUM OPINION AND ORDER This case concerns a contract dispute between Plaintiff S&C Electric Co., a manufacturer of electrical equipment headquartered in Chicago, and Defendant Earthshine Corp., S&C’s (now-former) Puerto Rico sales representative. In 2013, Plaintiff S&C hired Earthshine to push its sales on the island, but in 2021, the relationship between the two deteriorated. S&C terminated their contract, believing Earthshine was not living up to its end of the bargain because it had not secured significant Puerto Rico sales. Earthshine, however, believes a lucrative opportunity was just on the horizon and that S&C decided to cut it loose to avoid paying commissions otherwise provided for by the contract. Both sides now seek summary judgment on a discrete issue: whether Illinois or Puerto Rico law applies to the parties’ contract governing their business relationship. This choice of law issue is foundational because Puerto Rico law, but not Illinois law, severely limits the ability of principals like S&C from terminating sales representative contracts except for “just cause.” But Illinois has its own comparable law, which is more permissive as to termination. S&C argues Illinois law should apply because the contract has an Illinois choice-of-law provision.

Recognizing this contractual hurdle, and that both statutes purport to be nonwaivable, Earthshine suggests that the Court adopt an approach under the Restatement (Second) of Conflict of Laws that permits the invalidation of a contractual choice-of-law provision if the other jurisdiction has “a materially greater interest than the chosen state in the determination of the particular issue.” Earthshine argues that Puerto Rico has a materially greater interest than Illinois, requiring nullification of the choice-of-law provision.

As discussed below, Earthshine is correct that the Restatement test must apply under binding Seventh Circuit precedent. But even under the Restatement test, Earthshine fails to show that Puerto Rico has a materially greater interest in this dispute than Illinois. Illinois law therefore applies. As such, Plaintiff S&C’s motion for summary judgment is granted, and Defendant Earthshine’s motion for summary judgment is denied.

I. BACKGROUND S&C is a manufacturer of electrical equipment headquartered in Chicago, Illinois, where more than half of its workforce is located. (Dkt. 127 ¶ 1.) Earthshine is a Puerto Rico corporation that provides marketing, product support, consulting, and other services related to Puerto Rico’s energy supply. (See Dkt. 125 ¶¶ 2–3.) Its operations, assets, and employees are all located in Puerto Rico. (Id. ¶ 4) In 2013, S&C hired Earthshine to be its exclusive sales representative in Puerto Rico to push S&C sales on the island. (Dkt. 127 ¶¶ 2–8.) On May 29, 2013, the parties signed their first contract (the “2013 Contract”), which included an Illinois choice-of-law provision.

(Id. ¶ 8.) The 2013 Contract was negotiated in both Puerto Rico and Chicago. (Dkt. 128-1 ¶ 5.) In 2014, the parties entered into a second contract (the “2014 Contract”), which is the operative contract at issue in this dispute. (Dkt. 127 ¶ 9.) The 2014 Contract, which is materially similar to the 2013 contract, was both initiated and terminated by S&C from Illinois. (See id. ¶¶ 9–12, 23.) The 2014 Contract also included a choice-of-law provision, which states that “[t]his Agreement shall be governed by and construed in accordance with the laws of

the State of Illinois.” (Dkt. 20-1 at 14.) Under Article 10 of the 2014 Contract, either party could terminate the contract without cause by giving at least sixty days of notice, and either party could terminate the 2014 Contract effective immediately if the other party breached any material provisions. (Dkt. 127 ¶ 14; Dkt. 20-1 at 11.) Between 2013 and 2021, S&C, not Earthshine, was responsible for the majority of the sales it made to Puerto Rico, including: (a) preparing all customers quotes,

(b) accepting and assembling all orders, (c) handling all deliveries, (d) processing all payments, (e) providing all technical support (except for on-site support, none of which Earthshine participated in), and (f) managing all inventory. (Dkt. 127 ¶ 19.) During its tenure as S&C’s sales representative, Earthshine did not successfully develop any new customers that produced sales; the only partial exception to this was its development of a relationship with a company that Earthshine’s former CEO joined after leaving Earthshine (resulting in only minor sales). (Id. ¶ 22.) S&C says that Earthshine failed to perform under the contract; this resulted

in S&C’s decision, communicated via formal letter from Chicago, to terminate the agreement. (Id. ¶ 23.) Earthshine disputes that it failed to perform and argues that it continued to help S&C develop a relationship with the Puerto Rico Electric Power Authority (“PREPA”), S&C’s most important customer in Puerto Rico. (Id.) This dispute arises out of S&C’s decision to terminate the agreement, which Earthshine says runs afoul of the Puerto Rico Sales Representatives Act, 10 L.P.R.A. § 279 et seq., (“Act 21”). Act 21 governs the relations between sales representatives

and their principals and prohibits a principal from terminating the contract “except for just cause.” Id. § 279a. Earthshine’s position is that it agreed to S&C’s Illinois choice-of-law clause over its objection that the clause was not compliant with Act 21. (See, e.g., Dkt. 125 ¶¶ 26–29; Dkt. 116 at 8–9.) S&C nonetheless terminated the contract. Both parties contest the reason for termination. S&C casts Earthshine as

securing only minor sales and says the termination was for failure to perform. (Dkt. 127 ¶¶ 22–23.) Earthshine, however, says that S&C was on the verge of securing a lucrative opportunity in Puerto Rico and terminated Earthshine to reduce millions in commissions Earthshine says it would have otherwise been entitled to receive from those future sales. (See Dkt. 125 ¶¶ 30–43.) On the same day as S&C’s decision to terminate the Agreement, S&C filed the present lawsuit seeking a declaratory judgment that the 2014 Contract was lawfully terminated and that the Illinois choice-of-law provision is valid and enforceable. (Dkt.

1 ¶¶ 30–33.) In response to S&C’s amended complaint (Dkt. 20), Earthshine counterclaimed for breach of contract, claiming that S&C’s termination was made without cause in violation of Puerto Rico law. (Dkt. 49 at 22–23.) Before the Court are cross motions for summary judgment. S&C asks the Court to grant it summary judgment on Earthshine’s breach of contract counterclaim by finding that Illinois law, not Puerto Rico law, governs the contract. (Dkt. 101.) Earthshine, in turn, seeks partial summary judgment that Puerto Rico law applies

to S&C’s declaratory judgment claim. (Dkt. 112.) II. STANDARD OF REVIEW Summary judgment is warranted only if “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Jewett v. Anders, 521 F.3d 818, 821 (7th

Cir. 2008) (quoting Magin v. Monsanto Co., 420 F.3d 679, 686 (7th Cir. 2005)); see also Fed. R. Civ. P. 56(c); Celotex Corp. v.

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