Contract analysis

I. EXECUTIVE SUMMARY On August 8, 2022, Cardinal Peak Industries ("Cardinal Peak" or "Plaintiff") filed its Complaint in the Circuit Court of Cook County, Illinois, County Department, Law Division, asserting three causes of action against Nexford Industrial Holdings Inc. ("Nexford" or "Defendant"): (1) Breach of Contract (Count I), (2) Unjust Enrichment (Count II), and (3) Account Stated (Count III). All three counts

II. FACTUAL BACKGROUND A. The Parties Nexford Industrial Holdings Inc. is a Delaware corporation headquartered at 4200 West Lakeshore Industrial Parkway, Suite 300, Waukegan, Illinois 60085. Nexford is engaged in precision metal fabrication and the manufacture of engineered components for the automotive, agricultural equipment, and industrial machinery sectors. Nexford reported approximately $287 million in annual re

Section 7.4(a) — Surcharge Notice Requirement: The Seller is permitted to impose surcharges for documented increases in three categories of raw-material costs: (i) ferrous scrap, (ii) energy, and (iii) alloy. To impose a surcharge, the Seller must deliver a written Surcharge Notice to the Buyer, accompanied by supporting documentation, within fifteen (15) business days after the end of the applicable calendar month i

Section 7.4(b) — Calculation Methodology (Exhibit C): All surcharges must be calculated in accordance with the Surcharge Methodology set forth in Exhibit C to the MSA. Exhibit C specifies that surcharges are to be determined by reference to published industry indices: the Ferrous Scrap Index as reported by Drayton Partners LLC Iron and Steel (SPI) for scrap costs, and the Industrial Energy Cost Index for energy costs

Section 7.4(c) — Cap Provision: The monthly surcharge imposed by the Seller may not exceed twelve percent (12%) of the applicable Base Price for the relevant product without the prior written consent of the Buyer. For HRC at a Base Price of $620 per ton, the maximum surcharge without Buyer consent is $74.40 per ton; for CRC at a Base Price of $740 per ton, the maximum surcharge without Buyer consent is $88.80 per ton

Section 7.4(d) — Dispute Procedure: If the Buyer disputes any surcharge, the Buyer must deliver written notice of the dispute to the Seller within thirty (30) calendar days of receipt of the applicable Surcharge Notice. Disputed surcharges are subject to escalation to the senior officers of both parties, and if not resolved within thirty (30) days of escalation, to mandatory mediation in accordance with Section 14.3

1. Late Surcharge Notices (Section 7.4(a)). For seven of the fourteen months in the disputed period (representing approximately $2.18 million of the claimed surcharges), Nexford contends that Cardinal Peak failed to deliver the required Surcharge Notice within the fifteen (15) business day deadline established by Section 7.4(a). Nexford's position is that late delivery of the Surcharge Notice renders the surcharge fo

2. Deviation from Exhibit C Methodology (Section 7.4(b)). For surcharges totaling approximately $1.47 million, Nexford contends that Cardinal Peak deviated from the Surcharge Methodology prescribed in Exhibit C by employing an internal "blended cost" metric rather than the published indices (Platts/SPI Ferrous Scrap Index and Industrial Energy Cost Index) required by the MSA. Cardinal Peak's blended cost metric appea

3. Surcharges Exceeding the 12% Cap (Section 7.4(c)). For four months within the disputed period (representing approximately $1.08 million of the claimed surcharges), Nexford contends that the surcharges invoiced by Cardinal Peak exceeded the twelve percent (12%) cap established by Section 7.4(c) and that Cardinal Peak did not obtain Nexford's prior written consent to exceed the cap as required by the MSA. There is s

III. LEGAL ANALYSIS A. Elements of Unjust Enrichment Under Illinois Law Under Illinois law, a claim for unjust enrichment requires the plaintiff to establish three elements:

1. The defendant received a benefit from the plaintiff;

2. The defendant appreciated or had knowledge of the benefit; and

3. The defendant accepted and retained the benefit under circumstances that would make it inequitable for the defendant to retain the benefit without paying for it. See HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 131 Ill. 2d 145, 160 (1989); Cleary v. Philip Morris Inc., 656 F.3d 511, 516 (7th Cir. 2011) (applying Illinois law). Courts have described these elements as requiring a showing that the defendan

1. The Governing Principle. It is a foundational principle of Illinois law that a plaintiff cannot recover under a theory of unjust enrichment or quasi-contract where an express contract governs the subject matter of the dispute between the parties. This principle is firmly established in the decisions of the Illinois Supreme Court and the Illinois Appellate Court and has been consistently applied by federal courts s

2. Application to the Facts. Application of the express contract bar to the facts of this case yields a straightforward conclusion: Cardinal Peak's unjust enrichment claim is barred because the MSA expressly governs the subject matter of the dispute. The MSA (Contract No. MSA-NIH-CPI-2020-001) is an express, written contract executed on January 15, 2020 by authorized representatives of both Cardinal Peak and Nexford.

3. No Exception Applies. Illinois courts have recognized a limited number of circumstances in which an unjust enrichment claim may survive the express contract bar. None of these exceptions applies here. Exception for Void or Unenforceable Contracts. The express contract bar does not apply where the contract at issue is void, voidable, or otherwise unenforceable, because in such circumstances there is no operative ag

IV. PROCEDURAL CONSIDERATIONS AND RECOMMENDED APPROACH A. Timing of Dispositive Motion The procedural posture of the case as of the date of this memorandum is as follows: • Cardinal Peak filed its Complaint on August 8, 2022. • Nexford's Answer and Affirmative Defenses were filed on September 19, 2022. • Nexford's Counterclaim was filed on October 3, 2022. • Cardinal Peak's Motion to Dismiss the Counterclaim is pendi

1. Motion for Judgment on the Pleadings (735 ILCS 5/2-615(e)). A motion for judgment on the pleadings could be filed after Cardinal Peak has filed its responsive pleading to Nexford's Counterclaim. This motion would rely solely on the face of the pleadings to demonstrate that the unjust enrichment claim is barred as a matter of law because the MSA governs the subject matter of the dispute. The advantage of this appro

2. Motion for Summary Judgment (735 ILCS 5/2-1005). A motion for summary judgment could be filed after the close of discovery or at an appropriate point during the discovery process when the factual record is sufficiently developed. This motion would rely on the MSA itself, the surcharge invoices, the parties' discovery responses, and deposition testimony to establish that no genuine issue of material fact exists as

3. Motions in Limine / Trial. If the case proceeds to trial, Nexford could move in limine to exclude the unjust enrichment claim from the trial or seek a directed verdict on Count II at the close of Cardinal Peak's evidence. This approach would be a last resort and should be pursued only if the earlier dispositive motions are not filed or are denied. B. Recommended Strategy The preferred approach is to seek summary j

V. CONCLUSION Based on the foregoing analysis, we conclude as follows:

1. Cardinal Peak's unjust enrichment claim (Count II) is barred under Illinois law because the MSA (Contract No. MSA-NIH-CPI-2020-001) expressly governs the subject matter of the dispute — the obligation to pay raw-material surcharges on HRC and CRC steel products delivered under the MSA. The express contract bar is well-established under Illinois Supreme Court and Appellate Court precedent and has been consistently

2. The unjust enrichment claim is duplicative of the breach of contract claim (Count I) in all material respects: same parties, same underlying facts, same contractual framework, and same damages ($4.73 million in allegedly unpaid surcharges for the period March 2021 through May 2022). The claim adds no independent theory of recovery.

3. No exception to the express contract bar applies. Neither party disputes the existence or enforceability of the MSA. All benefits alleged in Count II fall within the MSA's subject matter. Alternative pleading is unavailable where both parties affirmatively treat the MSA as binding and enforceable.

4. We recommend seeking dismissal of Count II through a motion for summary judgment, to be filed after written discovery is substantially complete, or alternatively through a motion for judgment on the pleadings at an earlier stage if warranted by the litigation calendar and overall strategy.

5. The timing of any dispositive motion on Count II should be coordinated with the overall litigation strategy, including: (a) the pending motion to dismiss the Counterclaim (hearing scheduled for November 14, 2022); (b) the discovery schedule (written discovery expected to commence in December 2022); (c) the potential for mediation under MSA Section 14.3; and (d) the defense of Counts I and III.

6. Eliminating the unjust enrichment claim will narrow Cardinal Peak's litigation posture, reinforce that any recovery is confined to the contractual framework established by the MSA, and enhance Nexford's leverage in settlement negotiations — where the MSA's procedural and substantive defenses (late Surcharge Notices, deviation from Exhibit C methodology, and surcharges exceeding the 12% cap) substantially reduce or