WHITE PEARL INVERSIONES S.A. v. CEMUSA, INC. (July 26, 2011)

Cemusa is a U.S. subsidiary of a Spanish company that places street furniture (bus shelters, trash bins, etc.) in the European market. Cemusa hired White Pearl Inversiones, a Uruguayan company, to help it break into the United States market. Cemusa and White Pearl collaborated informally in responding to opportunities in Miami and San Antonio. Cemusa was successful in both cities. They entered into a Letter Agreement in March of 2003 in anticipation of a similar opportunity in New York City. Cemusa agreed to pay $240,000 for White Pearl's guidance on strategy and professional introductions. The Letter Agreement also provided that the $240,000 would be deducted from any compensation owed under the anticipated Master Agreement. Cemusa and White Pearl did enter into a Master Agreement days later. The Master Agreement provided that the parties would enter into city-specific RFP Agreements for each project. It also provided that White Pearl would receive 3.75% of Cemusa's net revenue in any given project if an RFP Agreement did not provide otherwise. The right to the fee vested on the issuance of an RFP. The Master Agreement was terminable by either party on 30 days notice. Cemusa terminated the Master Agreement in February 2004, before any RFP had issued. New York City issued its RFP the following month. Cemusa was awarded contracts in each of the city's five boroughs. Cemusa refuses to pay White Pearl any more than the Letter Agreement's $240,000. White Pearl filed suit for breach of contract as well as numerous other state law claims. Judge Andersen (N.D. Ill.) dismissed the complaint. White Pearl appeals.

In their opinion, Seventh Circuit Chief Judge Easterbrook and Judges Bauer and Williams affirmed. The Court first addressed jurisdiction. The complaint states that White Pearl is a Uruguayan corporation -- but Uruguay does not have corporations like the U.S. It does have limited liability businesses, however. The Court ultimately found that it did not have to decide White Pearl's status. It would either be treated like a corporation or like a joint-stock company. Since its only equity investors are citizens of Brazil, complete diversity is established either way. The Court next addressed the source of applicable law. The Letter Agreement expressly provides that is it is to be governed by the laws of Spain. But neither party mentioned the law of Spain. They both cite Illinois and New York cases. As a result, the Court considered dismissing the appeal on forfeiture grounds. It decided not to do so, but warned that it could in a less straightforward case. It turned to the merits. White Pearl does not claim that it was not paid the $240,000 provided for in the Letter Agreement. Likewise, White Pearl does not contest Cemusa's termination of the Master Agreement. A court will not resort to quantum meruit or unjust enrichment to modify a contract's price term. White Pearl agreed to a set fee. Cemusa is not obligated to compensate it for effort that it voluntarily offered above anything required by the contract. The Court did briefly mention the Illinois remedy in quantum meruit when a party terminates a contract after most of the work has been completed. It gave as examples the attorney who is fired right before the jury's verdict or the real estate agent who is fired the day before closing. White Pearl's efforts are not analogous, however. It is more akin to the attorney or real estate agent who consults with a client and does some preliminary work but is not hired. White Pearl is entitled to the $240,000 – no more.