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Control Building Services, Inc. v. Kmart Corp.

January 18, 2007


The opinion of the court was delivered by: The Honorable Patrick J. Duggan U.S. District Court Judge


At a session of said Court, held in the U.S. District Courthouse, Eastern District of Michigan, on January 18, 2007.

This action, which was transferred to this district from the United States District Court for the District of New Jersey, arises from a Services Agreement for Janitorial Services ("Services Agreement") between Plaintiff Control Building Services, Inc. ("Control") and Defendant Kmart Corporation ("Kmart"). In its complaint, Control alleges that Kmart has failed to pay $2,406,729.70 for services Control rendered to Kmart under the Services Agreement. Presently before the Court is Kmart's motion for [partial] summary judgment pursuant to Federal Rule of Civil Procedure 56(c) with respect to $1,738,147 of the total amount claimed by Control. The Court held a hearing on Kmart's motion on January 16, 2007.

I. Factual Background

In March 2003, Kmart and Control entered into a Services Agreement pursuant to which Control agreed to provide specified janitorial services at certain Kmart stores in the southeastern United States, beginning April 1, 2003. See Kmart's Mot. Ex. D. The Services Agreement listed a weekly price per store that Kmart would pay Control for the specified services. One of the services required under the contract was one annual "strip out" at each of the Kmart stores covered by the Services Agreement. See id. A strip out is a service whereby a store's old floor wax is removed and a new coat of wax is set down. Under the Services Agreement, the cost of the strip out ($2,500-$2,800) was spread out over the year by allocating a portion of it into each store's weekly invoice.

In April 2004, representatives of the parties discussed changes to the Services Agreement. See Kmart's Mot. Ex. B at 14-16. These discussions were between Tommy Gray and Jeff Gray on behalf of Control and Rod Brumley on behalf of Kmart. See id. One of the changes was to reduce the weekly invoice price per store by eliminating the amount built in for the annual strip out. See id. at 18-19. In lieu of the annual strip outs, Control would perform a strip out at a particular store only when requested by Kmart and then would invoice Kmart separately for the strip out. See id. Ex. E. Control also agreed to provide twenty free strip outs at certain Kmart stores. See id. The parties further discussed reducing from two to one the number of individuals performing daily cleaning at Kmart's stores in all but two individuals' districts within the region. See id. Ex. E.

Thereafter, Control submitted weekly invoices at the reduced prices to the Kmart stores receiving routine cleaning. Control also invoiced Kmart separately for any required strip outs and provided twenty free strip outs to Kmart. In the Spring of 2005, however, an issue arose as to whether the parties in fact had amended the Services Agreement the previous April. By that time, the individuals involved in the April 2004 discussions no longer worked for their respective companies. Rick Pittsonberger was Kmart's replacement for Rod Brumley.

In the Spring of 2005, store managers from some of Kmart's stores sent inquiries to Pittsonberger about separate invoices they had received from Control for strip outs. See Control's Resp. Ex. H. Pittsonberger advised the stores to return the invoices to Control unpaid, accompanied with a letter advising that the annual strip out is included in the current weekly contract price. See id. Pittsonberger wrote: "Unless Control Building Services can provide written documentation in the form of a Contract Amendment or confirmation from Mr. Brumley [Pittsonberger's predecessor] that annual strip-outs were removed from the contract; [sic] the Contract language stands." See id.

On August 2, 2005, Control sent Kmart a series of e-mails which had been exchanged between the parties' representatives in April 2004, regarding modifications to the Services Agreement. In a letter dated August 10, 2005, Pittsonberger informed Control that Kmart found that the e-mails provided insufficient evidence of an amendment to the Services Agreement:

We are in receipt of the E-Mail history you forwarded on August 2, 2005. In review of the E-Mails and attachments we find that the majority are confirming meetings or [are] information[al] in content. We find no expressed approval from Mr. Brumley authorizing or amending the contexts [sic] of the current Services Agreement.

With the above in mind we remain with the position that there were no changes authorized or amendments made to the Services Agreement.

Kmart's Mot. Ex. G. In light of Kmart's position, Control sent Kmart "Revised Invoices" totaling $1,738,147 on September 30, 2005, reflecting the difference between the weekly pricing under the Services Agreement that included the cost of the annual strip outs and the reduced weekly pricing discussed in April 2004 that excluded the strip outs. In-house counsel for Kmart*fn1, Lori Miller, responded via e-mail on November 11, 2005, informing Control that "[t]he revised invoices sent to Kmart . . . have no validity based upon the amended contract and will not be paid." See id. Ex. H.

In the meantime, in late September 2005, Kmart notified Control that Kmart believed Control was in breach of the parties' agreement in that Control had failed to pay several subcontractors and had not provided adequate janitorial services to several Kmart locations. See id. Ex. I. On October 4 and 7, 2005, Kmart informed Control that it was terminating the Services Agreement for certain Kmart locations due to Control's substandard performance of janitorial services at those facilities. See id. at Ex. J & Ex. K. Kmart further informed Control that it was withholding any payments due until the resolution ...

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