Ameritech Info Syst v. Bar Code Resources ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-3642
AMERITECH INFORMATION SYSTEMS,
INC., a Delaware corporation,
Plaintiff-Appellee,
v.
BAR CODE RESOURCES, a division of
ALLEN MANAGEMENT, INC., a Wisconsin
corporation,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99-C-8255—John F. Grady, Judge.
____________
ARGUED APRIL 17, 2003—DECIDED JUNE 5, 2003
____________
Before BAUER, MANION, and EVANS, Circuit Judges.
EVANS, Circuit Judge. After a 2-week bench trial on its
breach-of-contract claim, Ameritech Information Systems,
Inc. was awarded $515,124 plus interest for Bar Code
Resources’ (BCR) failure to install a fully functioning
warehouse management system. BCR appeals.
Ameritech provides telephone systems to commercial
business customers. It operates five warehouses, one each
in Illinois, Indiana, Michigan, Ohio, and Wisconsin. The
warehouses handle approximately 50,000 parts, and the
Illinois warehouse alone handles up to 800 orders a day.
2 No. 02-3642
Prior to the events relevant to the contract involved in
this case, Ameritech managed its warehouse operations
with a computer system referred to as AIMS (Ameritech in-
ventory management system). Ameritech entered orders in-
to the AIMS computer. AIMS then sent the orders to the
various warehouses where they were printed, picked up,
and filled by Ameritech employees. The final step in the
process was “inputting” information back into AIMS to rec-
ord the actions the employees had taken. The system was
inefficient.
BCR is a Wisconsin company which uses bar codes, bar
code scanners, and computers to automate warehouses.
Ameritech’s warehouse manager attended a presentation by
James Allen of BCR that led to a contract between
Ameritech and BCR under which BCR was to provide a “full
functioning warehouse management system” (WMS). A goal
was to provide a system to transmit data electronically. The
WMS system was to “interface to AIMS using two methods
of data transfer.” Information coming from AIMS would
“travel through” the print system. This meant that WMS
would gather information from AIMS by intercepting the
signals that AIMS had been sending to the printers. After
the data had been received and interpreted by WMS, it
would be transmitted back to the AIMS system. The link
from WMS back to AIMS was known to the parties as the
HLAPPI (human language applications interface).
BCR says that the HLAPPI portion of the project was not
its responsibility. Rather, Ameritech contracted separately
with SHL Systemhouse to create the computer interface
back to AIMS. Ameritech paid SHL $137,500 for creation of
HLAPPI. But Ameritech says that BCR was responsible
solely or jointly with SHL for development of the HLAPPI
and that the HLAPPI itself was worthless without other
systems working as they should.
The contract contained a detailed schedule for the com-
pletion of the system. BCR was to provide a “full-function-
ing” WMS to Ameritech no later than December 1, 1995.
No. 02-3642 3
That did not happen. The parties, of course, do not agree on
why there were delays and who was at fault. BCR claims
that data from AIMS was not consistent and that led to
many problems in designing a computer program that
would capture the data. Under this interpretation of events,
the delays would have been Ameritech’s fault. Ameritech
does not deny that the data was in more than one format
but says that BCR should have been able to deal with the
formats that it had to read. Its inability to do so led to prob-
lems trying to design computer programs that would cap-
ture the data. In any event, the parties continued to work
on the system for months after the completion date set out
in the contract.
After giving Ameritech notice and an opportunity to cure
an alleged failure to pay for services rendered, BCR sued
Ameritech in a Wisconsin state court. BCR obtained a de-
fault judgment, but that judgment was set aside on appeal
because of improper service of process. Ameritech then filed
the present suit in an Illinois state court. Based on diversity
of citizenship, BCR removed the case to the District Court
for the Northern District of Illinois.
The district court determined that BCR was the party
which breached the contract by not finishing the project by
the completion date. The award was for $515,124, appar-
ently with two components, though it is not entirely
clear: $377,624 was the amount Ameritech had paid for the
non-HLAPPI portion of the WMS and $137,500 was appar-
ently for the HLAPPI portion of the WMS. On the latter,
the reasoning seems to be that the HLAPPI module was
functional, but because the rest of the system was nonfunc-
tional the HLAPPI was worthless. The district court also
awarded $165,268.95 in prejudgment interest, thus pushing
the final judgment to slightly more than $680,000.
BCR raises three issues. It contends that the contract re-
quired notice and an opportunity to cure the breach prior to
the filing of a lawsuit for breach. In BCR’s view, Ameritech
failed to give notice of the breach and thus is precluded
4 No. 02-3642
from recovering damages. Secondly, BCR contends that it
is not responsible for damages for the HLAPPI portion of
the WMS. Finally, BCR objects to the award of prejudgment
interest. The first two issues involve the interpretation of a
contract on which our review is de novo. GNB Battery
Techs., Inc. v. Gould, Inc., 65 F.3d 615 (7th Cir. 1995).
Several provisions of the contract touch on the issue of
notice. First, paragraph 3.2 states in part:
In the event either party shall at any time neglect, fail,
refuse to perform hereunder, or otherwise breach a
material provision of this Agreement and such breach or
default shall continue for a period of fifteen (15) days
after the giving of written notice to the party in breach
or default by the other then, upon written notice to the
defaulting party, the aggrieved party may cancel this
Agreement . . . .
Paragraph 19 sets out the manner in which notice must be
given; it must be in writing and delivered to a particular
person either by express delivery service or by certified
mail.
Paragraph 5 states that a provisioning schedule for the
WMS is set out in Attachment D. It then says that “Sup-
plier shall develop and provision the modules in accordance
with the schedule. Further, in the event that any date in
the provisioning schedule slips by more than ten (10) busi-
ness days, Supplier shall be deemed to be in default.”
Finally, paragraph 23 provides that the “rights and reme-
dies provided herein shall be cumulative and in addition to
any other remedies available at law or in equity.”
BCR argues that Ameritech did not provide written notice
of the right to cure as required by paragraph 3.2 and did
not comply with the method of providing notice set out in
paragraph 19 of the contract. Because, in BCR’s view,
Ameritech has not complied with the contract, it cannot en-
force it. For its part, Ameritech claims that notice is not a
No. 02-3642 5
prerequisite to its right to sue for breach of contract. It says
paragraph 3.2 is a termination provision which does not
abridge the right to sue for breach, which Ameritech derives
from paragraph 23. In Ameritech’s view, paragraph 3.2
simply gives either party the right to cancel or terminate
the contract if a breach that is the subject of written notice
continues for 15 days after the notice is given. And in any
case, Ameritech says it did, in fact, give notice in the form
of a fax transmission sent on July 18, 1996. BCR walked off
the job in October.
We agree that paragraphs 3.2 and 5 do not set out con-
ditions precedent to filing a suit for breach of contract.
Paragraph 5 is a provision covering default on the schedule.
Paragraph 3.2 is a provision for terminating the contract in
the event of default or breach of the contract. It is undis-
puted that BCR did not meet the scheduling deadlines.
Ameritech had also apparently paid for systems which did
not work. Under paragraph 3.2, if Ameritech wanted to ter-
minate the contract, it had to pay only for services properly
performed. However, there is nothing in these provisions
which prevents a suit for breach. That is especially true,
given the retention of remedies specifically set out in para-
graph 23.
In any case, required or not, there was notice, which sub-
stantially complied with the termination provision. The fax
Ameritech sent BCR stated:
Please be advised, Ameritech considers BCR to be in
default on this agreement due to failure to meet the
provisioning schedule.
In truth, BCR had months, not 15 days as the contract re-
quired, in which to correct the problems.
Turning to BCR’s objection to the award of damages for
the HLAPPI interface, we note that the issue has been
raised for the first time in this court. As an explanation for
its failure to raise the issue in the trial court, BCR says
6 No. 02-3642
that at trial it was trying to assert a claim for damages
against Ameritech, not to limit Ameritech’s damages. For
that reason, it says it should not be faulted for not raising
the issue at trial. Even were we to credit that explanation,
it does not explain why the issue was not raised in post-
trial motions. Because it is clearly established that a party
may not raise an argument for the first time on appeal,
NutraSweet Co. v. X-L Eng’g Co., 227 F.3d 776 (7th Cir.
2000), and Consolidated Bearings Co. v. Ehret-Krohn Corp.,
913 F.2d 1224 (7th Cir. 1990), we hold that this issue has
been waived.
BCR also argues that it was error to award prejudgment
interest. We review this issue only for an abuse of discre-
tion. See SNA Nut Co. v. Haagen-Dazs Co., 302 F.3d 725(7th Cir. 2002).
815 ILCS 205/2 provides:
§ 2. Creditors shall be allowed to receive at the rate of
five (5) per centum per annum for all moneys after they
become due on any bond, bill, promissory note, or other
instrument of writing; on money lent or advanced for the
use of another; on money due on the settlement of
account from the day of liquidating accounts between the
parties and ascertaining the balance; on money received
to the use of another and retained without the owner’s
knowledge; and on money withheld by an unreasonable
and vexatious delay of payment. In the absence of an
agreement between the creditor and debtor governing
interest charges, upon 30 days’ written notice to the
debtor, an assignee or agent of the creditor may charge
and collect interest as provided in this Section on behalf
of a creditor.
BCR argues that the statute applies only to creditor-debtor
relationships, primarily with lending institutions.
Under Illinois law, statutory interest can be recovered at
the discretion of the court. Bank of Chicago v. Park Nat’l
No. 02-3642 7
Bank, 660 N.E.2d 19 (Ill. App. 1995). The statute is applied
on “instruments of writing,” such as construction contracts.
See Transportation & Transit Assoc., Inc. v. Morrison
Knudsen Corp., 255 F.3d 397 (7th Cir. 1993); E.R. Stone v.
City of Arcola, 536 N.E.2d 1329 (Ill. App. 1989). The
creditor must, however, prove that the money due was a liq-
uidated amount or subject to easy computation. Kansas
Quality Constr., Inc. v. Chiasson, 250 N.E.2d 785 (Ill. App.
1969). In the present case, the damages were what
Ameritech paid and are thus easily ascertainable. The
award of prejudgment interest was not an abuse of discre-
tion.
The decision of the district court is AFFIRMED.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-5-03