Wesdem v. Illinois Tool Works

70 F.4th 285
CourtCourt of Appeals for the Fifth Circuit
DecidedJune 9, 2023
Docket22-50769
StatusPublished
Cited by9 cases

This text of 70 F.4th 285 (Wesdem v. Illinois Tool Works) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wesdem v. Illinois Tool Works, 70 F.4th 285 (5th Cir. 2023).

Opinion

Case: 22-50769 Document: 00516781026 Page: 1 Date Filed: 06/09/2023

United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit ____________ FILED June 9, 2023 No. 22-50769 Lyle W. Cayce ____________ Clerk

Wesdem, L.L.C.,

Plaintiff—Appellant,

versus

Illinois Tool Works, Incorporated, doing business as ITW Evercoat,

Defendant—Appellee. ______________________________

Appeal from the United States District Court for the Western District of Texas USDC No. 5:20-CV-987 ______________________________

Before Smith, Higginson, and Willett, Circuit Judges. Stephen A. Higginson, Circuit Judge: This case involves a contract dispute between an automobile-product manufacturer and one of its distributors. The distributor, plaintiff-appellant Wesden, LLC,1 appeals the district court’s Rule 12(b)(6) dismissal of its

_____________________ 1 There is some degree of confusion about plaintiff’s name. Plaintiff filed suit in state court as “Wesdem, LLC” and maintained that spelling once in federal court. The case caption in the district court therefore said “Wesdem.” At some point in the litigation, plaintiff started referring to itself as “Wesden.” The district court noted that the parties were using both “Wesdem” and “Wesden,” but that it “appear[ed] that ‘Wesden’ [wa]s Case: 22-50769 Document: 00516781026 Page: 2 Date Filed: 06/09/2023

No. 22-50769

fraud claim and summary-judgment dismissal of its breach-of-contract claim against the manufacturer, defendant-appellee Illinois Tool Works, Inc. d/b/a ITW Evercoat (“ITW”). For the following reasons, we AFFIRM.

I. Wesden alleges as follows in its first amended complaint and its attachments. ITW manufactures a line of automobile products called “Auto Magic.” On September 5, 2018, ITW’s “Zone Manager,” Skip Wier, met with Troy Breeden, the owner of Wesden, to discuss the possibility of Wesden’s becoming a distributor of Auto Magic products by purchasing an existing distributor, Texas Auto Products (“TAP”). At the time, TAP had been selling Auto Magic products through Amazon. Wesden alleges that, at the meeting, Wier “gave Mr. Breeden assurances” that, if Wesden purchased TAP and began distributing ITW’s products, Wesden “could continue to sell [ITW]’s products through Amazon and other similar companies for as long as it wanted.” Wesden further alleges that Wier told Breeden that ITW “would never stop [Wesden] from developing its markets to sell [ITW]’s products, and that [Wesden] could sell to any customer, including Amazon.” Wier allegedly “promised” that ITW would “never steal [Wesden]’s markets and/or clients, nor would it hamper [Wesden]’s future growth through e-commerce marketplaces such as Amazon, if [Wesden] sold to customers through third party e-commerce marketplaces” like Amazon.

_____________________ the Plaintiff’s legal name.” The district court thereafter used “Wesden.” But then, plaintiff filed its notice of appeal as “Wesdem.” The case caption in this court therefore says “Wesdem.” But both parties tell us in their briefs that plaintiff’s name is Wesden. We therefore use “Wesden.”

2 Case: 22-50769 Document: 00516781026 Page: 3 Date Filed: 06/09/2023

Wesden purchased TAP for $250,000 and became a distributor for ITW. On October 24, 2018, Wier sent Breeden an email, which, according to Wesden, “stated in writing the substance of the [p]arties’ [a]greement.” Wier’s email to Breeden said: Troy, It finally happened, we got approval. Your account number is 101140. Our credit manager is on the conservative side. He has given you a credit limit of $10K until he sees a credit history pattern. Your terms are net 30 days. . . . Thank you for joining the Auto Magic family and I apologize for taking so long to get this done. For almost two years after this approval, Wesden sold Auto Magic products, including through online marketplaces like Amazon. The parties’ dispute began in the summer of 2020, when ITW sent a notice to its distributors “announcing and implementing” an “Authorized Distributor Program,” as described in an attached policy. In the notice, ITW told its distributors that the policy “prohibits sales of Auto Magic products [on] any online marketplace, such as Amazon, eBay or Walmart, without [ITW’s] prior written consent.”2 Wesden immediately requested permission to continue to sell through online marketplaces but was denied. On July 14, 2020, Wier emailed Breeden the “response” from ITW’s home office. ITW explained: The management team believes the value of the distributors is to train, educate and sell product to end-users in their _____________________ 2 The attached policy included this prohibition in bold letters, telling distributors: “You shall not offer for sale or sell Products on or through any website, online marketplace (including, but not limited to, Amazon, eBay, or Walmart Marketplace), mobile application, or other online forum other than a Permissible Website without the prior written consent of ITW Evercoat.”

3 Case: 22-50769 Document: 00516781026 Page: 4 Date Filed: 06/09/2023

geographic area. The intent is not for a distributor to compete on a national basis through an internet platform. . . . This agreement will impact a few of our distributors but will protect the majority of the distribution base. It is with this background an exception will not be granted. After relaying this correspondence from ITW, Wier said to Breeden, “I have some thoughts on how we might get around some of this. I’ll give you a call in the morning to discuss.” Wier and Breeden were not able to “get around” the prohibition. On July 29, 2020, Wesden sued ITW in Texas state court, alleging breach of contract and other related claims. On August 21, 2020, ITW removed the case to federal court, invoking diversity jurisdiction under 28 U.S.C. § 1332.3 ITW then moved to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure, and Wesden filed an amended complaint, adding a claim for fraud on the basis of Wier’s alleged representations at the initial September 2018 meeting. ITW moved again for 12(b)(6) dismissal of all claims.

_____________________ 3 In the district court, both parties made the common mistake of alleging Wesden’s citizenship based on its principal place of business. But Wesden is an LLC, whose citizenship is determined not by its business operations but instead by the citizenship of all of its members. Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008). On appeal, the parties were instructed to address whether complete diversity exists. Defective jurisdictional pleadings may be amended, even on appeal. 28 U.S.C. § 1653; Burdett v. Remington Arms Co., 854 F.3d 733, 734 n.1 (5th Cir. 2017); Warren v. Bank of Am., N.A., 717 F. App’x 474, 475 n.4 (5th Cir. 2018). In its brief, ITW directs us to record evidence that Wesden’s sole member is Troy Breeden, and that Breeden is a citizen of Texas. ITW properly alleged in the district court that it is a citizen of Delaware and Illinois. Wesden does not contest ITW’s allegations on appeal or otherwise dispute that Breeden is a citizen of Texas. We are therefore satisfied that the parties are completely diverse. See id.

4 Case: 22-50769 Document: 00516781026 Page: 5 Date Filed: 06/09/2023

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Daughtry v. Silver Fern Chemical
138 F.4th 210 (Fifth Circuit, 2025)
SEC v. Jarkesy
603 U.S. 109 (Supreme Court, 2024)
SEC v. Jarkesy Revisions: 6/27/24
603 U.S. 109 (Supreme Court, 2024)

Cite This Page — Counsel Stack

Bluebook (online)
70 F.4th 285, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wesdem-v-illinois-tool-works-ca5-2023.