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PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / WORK PRODUCT DOCTRINE

MEMORANDUM

FROM: Jeffrey Park, Associate, Calderwood & Harkness LLP

TO: Priya Anand, Responsible Partner; Simone Laroche, Lead Associate

DATE: October 15, 2022

RE: Analysis of Cardinal Peak Industries' Unjust Enrichment Claim — Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471, Circuit Court of Cook County, Illinois, County Department, Law Division

MATTER NO.: 1005-00005

This memorandum is a privileged and confidential attorney work product prepared in anticipation of litigation. It is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the attorneys and client representatives identified above. Do not distribute, copy, or disclose this memorandum or its contents without the prior written consent of Calderwood & Harkness LLP.

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 arise from a dispute over unpaid raw-material surcharges on hot-rolled coil ("HRC") and cold-rolled coil ("CRC") steel products supplied by Cardinal Peak to Nexford during the period from March 2021 through May 2022.

This memorandum analyzes the viability of Cardinal Peak's unjust enrichment claim (Count II) under Illinois law and identifies the procedural mechanisms available to Nexford to seek dismissal of that claim. The memorandum does not address the merits of the breach of contract or account stated claims except to the extent necessary to contextualize the unjust enrichment analysis.

Principal Conclusion: Cardinal Peak's unjust enrichment claim is barred as a matter of law because an express, written contract — the Master Supply Agreement dated January 15, 2020 (Contract No. MSA-NIH-CPI-2020-001) (the "MSA") — governs the precise subject matter at issue, namely the obligation (if any) to pay raw-material surcharges on HRC and CRC steel products supplied by Cardinal Peak to Nexford. Under well-settled Illinois law, a plaintiff may not pursue an unjust enrichment or quasi-contract theory of recovery where an express contract defines the rights and obligations of the parties with respect to the same subject matter. The unjust enrichment claim is entirely duplicative of the breach of contract claim: both counts seek identical damages ($4.73 million) based on the same operative facts (alleged nonpayment of surcharges governed by Section 7.4 of the MSA). No recognized exception to the express contract bar applies here, as neither party disputes the existence, validity, or enforceability of the MSA.

Recommendation: We recommend that Nexford file a motion for summary judgment on Count II at the appropriate procedural stage, or alternatively seek to narrow Cardinal Peak's claims through a motion to dismiss or a motion for judgment on the pleadings. The unjust enrichment claim could also be addressed in conjunction with dispositive motions on the breach of contract and account stated claims. Given the current procedural posture — Nexford's Answer and Affirmative Defenses were filed on September 19, 2022, the Counterclaim was filed on October 3, 2022, and Cardinal Peak's Motion to Dismiss the Counterclaim is pending with a hearing scheduled for November 14, 2022 — the timing for a separate dispositive motion on the unjust enrichment count should be carefully coordinated with the overall litigation strategy, including discovery scheduling and mediation preparation under MSA Section 14.3.

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 revenue for its fiscal year ending December 31, 2022. Nexford is a portfolio company of Marlowe Asset Management Bluff Capital Partners, LP, a private equity fund based in Chicago, Illinois. Marlowe Asset Management Bluff acquired Nexford in 2018 as part of a broader strategy in the specialty manufacturing sector. Nexford operates three fabrication facilities in northern Illinois and southeastern Wisconsin and employs approximately 1,200 individuals.

Cardinal Peak Industries is a Colorado limited liability company headquartered at 1580 Ridgeline Boulevard, Pueblo, Colorado 81001. Cardinal Peak is a regional steel producer and distributor, specializing in the production and sale of hot-rolled coil, cold-rolled coil, and related flat-rolled steel products. Cardinal Peak reported approximately $415 million in annual revenue for its fiscal year ending December 31, 2022. Cardinal Peak operates two integrated steel mills in Colorado and a distribution center in Kansas City, Missouri. It supplies steel products to industrial fabricators, automotive tier suppliers, and construction companies throughout the central and western United States.

The commercial relationship between Nexford and Cardinal Peak dates to approximately 2016, when Nexford first began purchasing HRC and CRC steel products from Cardinal Peak on a purchase-order basis. In January 2020, the parties formalized their relationship through the execution of the Master Supply Agreement at issue in this litigation.

B. The Master Supply Agreement

The MSA (Contract No. MSA-NIH-CPI-2020-001) was executed on January 15, 2020, by authorized representatives of both parties. The agreement establishes the framework for the sale and purchase of HRC and CRC steel products by Cardinal Peak (as "Seller") to Nexford (as "Buyer"). The material terms of the MSA are as follows:

Term. The MSA has an initial three-year term running from January 15, 2020 through January 14, 2023, with automatic renewal for successive one-year periods unless either party provides written notice of termination at least 180 calendar days prior to the expiration of the then-current term. As of the date of this memorandum, neither party has delivered a notice of termination, and the MSA remains in full force and effect.

Products and Volume. The MSA covers the supply of HRC and CRC steel products in accordance with specifications set forth in Exhibit A to the agreement. The estimated annual volume under the MSA is approximately 18,000 tons of HRC and 6,500 tons of CRC, for a combined total of approximately 24,500 tons per year. These volumes represent estimates rather than binding commitments, with actual purchase volumes subject to Nexford's rolling monthly forecasts and purchase orders issued under Section 4.1 of the MSA.

Base Pricing. Section 7.1 of the MSA establishes base pricing for the products: HRC at $620 per ton and CRC at $740 per ton. These base prices are subject to quarterly adjustment pursuant to the mechanism set forth in Section 7.2, which references published market indices and allows for periodic recalibration based on prevailing market conditions. At estimated annual volumes, the MSA represents an estimated annual spend of approximately $15.97 million.

Surcharge Provisions (Section 7.4). Section 7.4 of the MSA — the provision at the heart of this dispute — establishes a mechanism by which Cardinal Peak (as Seller) may pass through documented raw-material surcharges to Nexford (as Buyer). The surcharge mechanism is designed to allocate to the Buyer certain input cost increases beyond the base pricing levels established in the MSA. The key provisions of Section 7.4 are as follows:

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 in which the cost increase was incurred. The Surcharge Notice must identify the applicable cost category, the amount of the surcharge, and the calculation methodology used.

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. Exhibit C establishes baseline costs of $340 per ton for scrap and $48 per ton for energy. Surcharges are calculated as the difference between actual index-reported costs and the applicable baseline, applied on a per-ton basis to the products shipped during the applicable month.

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 of the MSA.

Governing Law and Dispute Resolution. Section 14.1 of the MSA provides that the agreement is governed by and construed in accordance with the laws of the State of Illinois, without regard to conflict-of-laws principles. Section 14.3 requires mandatory mediation in Chicago, Illinois as a precondition to litigation of any dispute arising under or in connection with the MSA.

C. The Surcharge Dispute

The dispute underlying this litigation concerns surcharge invoices issued by Cardinal Peak to Nexford over a fourteen-month period from March 2021 through May 2022. During this period, raw-material costs — particularly ferrous scrap prices — experienced significant volatility and, in many months, substantial increases attributable to pandemic-related supply chain disruptions, global demand recovery, and inflationary pressures in the commodities markets.

Cardinal Peak invoiced Nexford for surcharges totaling approximately $6.41 million during the disputed period. Nexford paid approximately $1.68 million of the invoiced amount. Cardinal Peak's Complaint alleges that Nexford improperly rejected or partially paid surcharge invoices and seeks recovery of the remaining unpaid balance of approximately $4.73 million, plus prejudgment interest.

It is notable that the surcharge for April 2021 was paid in full by Nexford and is not part of the disputed amount. The remaining thirteen months within the March 2021 through May 2022 period are in dispute, with the specific nature of the dispute varying by month as described in Section II.D below.

D. Nexford's Defenses

Nexford's Answer and Affirmative Defenses, filed on September 19, 2022, and its Counterclaim, filed on October 3, 2022, set forth three principal categories of defense to Cardinal Peak's surcharge claims, all grounded in the express provisions of MSA Section 7.4:

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 for the applicable month invalid and unenforceable. The relevant notices were delivered between three and twenty-seven business days late.

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 appears to incorporate proprietary production cost data not contemplated by Exhibit C, resulting in surcharge calculations that are higher than those that would result from strict application of the contractually mandated methodology.

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 some overlap among these three categories; certain months are affected by more than one deficiency. After accounting for the interplay among the three defenses, Nexford's position is that its maximum additional obligation beyond the $1.68 million already paid is approximately $0.21 million — and that even this residual amount may be subject to offset based on Cardinal Peak's noncompliance with the MSA's procedural requirements.

Nexford's Counterclaim, filed on October 3, 2022, asserts two counts: (1) breach of contract, alleging that Cardinal Peak's noncompliance with the Exhibit C methodology and the Section 7.4(a) notice requirements constitutes a material breach of the MSA, and (2) declaratory relief, seeking a judicial declaration of the parties' respective rights and obligations under Section 7.4 of the MSA. The Counterclaim also seeks a refund of approximately $0.21 million, which Nexford contends represents an overpayment resulting from surcharges that were paid by Nexford but subsequently determined to have been calculated in deviation from Exhibit C.

Cardinal Peak has filed a Motion to Dismiss the Counterclaim, which is currently set for hearing on November 14, 2022.

E. Cardinal Peak's Unjust Enrichment Claim (Count II)

Count II of Cardinal Peak's Complaint asserts a claim for unjust enrichment. The material allegations of Count II may be summarized as follows:

Cardinal Peak alleges that it conferred a benefit on Nexford by delivering HRC and CRC steel products during the period from March 2021 through May 2022 at prices that did not include the full raw-material surcharges to which Cardinal Peak was entitled. Cardinal Peak contends that the actual cost of the raw materials used in the production of those steel products exceeded the base pricing levels reflected in the invoiced amounts, and that Nexford received the benefit of those products — and the benefit of the reduced pricing — without paying the full surcharge amounts.

Cardinal Peak further alleges that Nexford had knowledge of the benefit conferred, as Nexford received and used the steel products, was aware of the surcharge invoices, and understood that the products were delivered at prices below the full surcharge-adjusted cost.

Finally, Cardinal Peak alleges that it would be inequitable and unjust for Nexford to retain the benefit of the steel products without paying the full surcharge amounts, and that Nexford has been "unjustly enriched" in the amount of $4.73 million — the same amount sought under the breach of contract claim in Count I.

The unjust enrichment claim does not identify any benefit conferred outside the scope of the MSA, nor does it assert any theory of recovery independent of the surcharge obligations established by Section 7.4 of the MSA. The claim is, on its face, entirely coextensive with Count I.

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 defendant has "unjustly retained a benefit to the plaintiff's detriment, and that defendant's retention of the benefit violates the fundamental principles of justice, equity, and good conscience." HPI Health Care Servs., 131 Ill. 2d at 160.

It is important to note at the outset that unjust enrichment under Illinois law is properly understood as an equitable remedy, not a standalone cause of action in the strict sense. The Illinois Supreme Court has observed that unjust enrichment is a condition that may be brought about by unlawful or improper conduct as defined by law, and that a claim based on unjust enrichment is "not a separate cause of action" independent of an underlying wrong. Cleary, 656 F.3d at 517; Martis v. Grinnell Mut. Reinsurance Co., 388 Ill. App. 3d 1017, 1024 (3d Dist. 2009). In practice, Illinois courts routinely analyze unjust enrichment claims as quasi-contractual theories of recovery — that is, theories premised on the implication of a contract-like obligation by operation of law in the absence of an actual agreement. This characterization is central to the analysis that follows, because the availability of a quasi-contractual remedy is inherently limited by the existence of an actual contract.

B. The Express Contract Bar — Illinois Law Prohibits Unjust Enrichment Where an Express Contract Governs

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 sitting in Illinois.

The rationale underlying the express contract bar is straightforward: where the parties have entered into an express agreement that defines their respective rights and obligations with respect to a particular subject matter, there is no occasion for equity to imply a different or additional obligation. The contract itself is the measure of the parties' rights, and the remedy for a breach of that contract lies in an action at law for damages, not in an equitable claim for unjust enrichment. To permit a plaintiff to pursue an unjust enrichment theory where an express contract already addresses the disputed obligation would effectively allow the plaintiff to circumvent the terms of the bargain the parties struck, including any conditions, limitations, or defenses that the contract establishes.

The Illinois Supreme Court recognized this principle in People ex rel. Hartigan v. E&E Hauling, Inc., 153 Ill. 2d 473 (1992), where the court held that "where there is a specific contract which governs the relationship of the parties, the doctrine of unjust enrichment has no application." Id. at 497. The court explained that the doctrine of unjust enrichment is based on an implied contract theory, and that "recovery on the basis of an implied contract cannot stand in the face of an express contract between the parties." Id.

The Illinois Appellate Court has consistently followed this holding. In Guinn v. Hoskins Chevrolet, 361 Ill. App. 3d 575 (1st Dist. 2005), the court affirmed dismissal of an unjust enrichment claim where the parties' express agreement governed the subject matter of the dispute, reasoning that "the very existence of the contract precludes recovery for unjust enrichment." Id. at 604. Similarly, in Gagnon v. Schickel, 2012 IL App (1st) 120645, the court held that an unjust enrichment claim was properly dismissed where the parties had entered into a written agreement that "specifically address[ed] the compensation at issue," and the plaintiff's unjust enrichment theory was "entirely subsumed" by the express contractual provisions. See also Utility Audit, Inc. v. Horace Mann Serv. Corp., 383 F.3d 683, 689 (7th Cir. 2004) (applying Illinois law: "a plaintiff cannot state a claim for unjust enrichment where an express contract governs"); Industrial Lift Truck Serv. Corp. v. Mitsubishi Int'l Corp., 104 Ill. App. 3d 357, 361 (1st Dist. 1982) ("Where there is an express contract between parties, a contract will not be implied since the very existence of the contract negates the elements of a quasi-contractual claim.").

Federal courts applying Illinois law have reached the same conclusion with equal consistency. In Cohen v. American Securities Insurance Co., 735 F.3d 601, 615 (7th Cir. 2013), the Seventh Circuit affirmed dismissal of an unjust enrichment claim where the plaintiff's theory of recovery was "governed by the insurance policies at issue," observing that "Illinois law does not permit a plaintiff to pursue a quasi-contractual claim where the parties' rights are defined by an express agreement." See also Crescent Purchasing, LLC v. Valspar Corp., 2018 WL 1898753, at 6 (N.D. Ill. Apr. 20, 2018) (dismissing unjust enrichment claim under Illinois law where the "express terms of the [agreement] govern the very subject matter at issue"); Shaw v. Hyatt Int'l Corp.*, 461 F.3d 899, 902 (7th Cir. 2006) ("Under Illinois law, a party cannot state a claim for unjust enrichment when an express contract governs.").

The principle applies regardless of the plaintiff's characterization of the claim. A plaintiff cannot avoid the express contract bar by recasting a breach of contract theory in the language of equity. Where the substance of the claim is that the defendant failed to perform an obligation defined by an express agreement, the plaintiff's remedy lies in contract, not in unjust enrichment. See Guinn, 361 Ill. App. 3d at 604; Prodromos v. Everen Securities, Inc., 389 F.3d 772, 775 (7th Cir. 2004).

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. There is no dispute as to the MSA's existence, execution, or authenticity. Both parties acknowledge the MSA in their respective pleadings, and both parties rely on the MSA's terms as the basis for their affirmative claims and defenses.

The MSA explicitly governs the sale and purchase of HRC and CRC steel products between Cardinal Peak and Nexford. It establishes the base pricing, volume commitments, delivery terms, quality specifications, and payment obligations applicable to the commercial relationship between the parties. It is the comprehensive governing instrument for the transactions at issue.

Most critically, Section 7.4 of the MSA specifically and in considerable detail addresses the surcharge pass-through mechanism — the precise subject matter of Cardinal Peak's unjust enrichment claim. Section 7.4 defines when surcharges may be imposed (upon documented raw-material cost increases in specified categories), how surcharges must be calculated (by reference to the Exhibit C Surcharge Methodology and published indices), what notice must be provided (written Surcharge Notice with supporting documentation within fifteen business days after the end of the applicable month), what cap applies (twelve percent of the applicable Base Price without Buyer's prior written consent), and how disputes are to be resolved (written notice, escalation to senior officers, and mandatory mediation). The surcharge mechanism is not a gap or ambiguity in the MSA; it is one of the most thoroughly detailed provisions in the entire agreement.

Cardinal Peak's unjust enrichment claim seeks recovery of $4.73 million — the identical dollar amount sought under the breach of contract claim in Count I. The basis for the claimed recovery is the same in both counts: Cardinal Peak's allegation that Nexford failed to pay surcharges on HRC and CRC steel products delivered during the period from March 2021 through May 2022. The "benefit" that Cardinal Peak alleges Nexford received is the delivery of steel products at prices that did not include the full surcharges — that is, the benefit of receiving products at prices below what Cardinal Peak contends it was owed under the MSA's surcharge provisions. The "inequity" that Cardinal Peak alleges is Nexford's refusal to pay the surcharges — the same refusal that forms the basis of the breach of contract claim.

In short, the unjust enrichment claim does not allege any benefit conferred outside the scope of the MSA. It does not identify any obligation that is not addressed by the contract. There is no extra-contractual theory of recovery; no allegation that Nexford received something of value from Cardinal Peak that falls outside the MSA's framework. The unjust enrichment claim is entirely duplicative of Count I — it is, in substance, a breach of contract claim dressed in the language of equity.

Under the authorities cited above, this claim is barred as a matter of law. The MSA governs the surcharge obligations, and the existence of the MSA precludes recovery on an implied-contract or unjust enrichment theory for those same obligations. Cardinal Peak's remedy, if any, lies in its breach of contract claim under Count I, subject to the conditions, limitations, and defenses established by the MSA itself.

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 agreement to displace the quasi-contractual remedy. See Bernstein & Grazian, P.C. v. Grazian & Volpe, P.C., 402 Ill. App. 3d 961, 979 (1st Dist. 2010); Prodromos, 389 F.3d at 775 (noting that unjust enrichment may be available "if the plaintiff shows that the express contract is somehow unenforceable or void"). This exception has no application here. Neither party contends that the MSA is void, voidable, or unenforceable. To the contrary, Cardinal Peak itself sues for breach of the MSA in Count I, necessarily treating the MSA as a valid and enforceable contract. Nexford, in its Answer and Counterclaim, likewise relies on the MSA as a binding agreement that gives rise to enforceable obligations. Both parties' pleadings confirm that the MSA is the operative, enforceable agreement governing the transactions at issue.

Exception for Benefits Conferred Outside the Contract's Scope. An unjust enrichment claim may survive where the plaintiff alleges that the defendant received a benefit that falls outside the scope of the express contract — i.e., a benefit not addressed or contemplated by the parties' agreement. See Utility Audit, 383 F.3d at 689 (recognizing that unjust enrichment may be available for benefits "that go beyond, or are not covered by, the contract"). This exception is inapplicable because all of the benefits alleged in Count II fall squarely within the MSA's subject matter. The "benefit" at issue is the receipt of HRC and CRC steel products at prices that did not include the full surcharges — a matter explicitly governed by Sections 7.1, 7.2, and 7.4 of the MSA and Exhibit C thereto. Cardinal Peak does not allege that it conferred any benefit on Nexford outside the MSA framework — no extra services, no products not covered by the MSA, no consideration beyond what the agreement addresses. The unjust enrichment claim is entirely bounded by the MSA's subject matter.

Alternative Pleading. Illinois courts have, in some circumstances, permitted unjust enrichment to be pleaded in the alternative to a breach of contract claim, particularly where the existence or enforceability of the contract is genuinely in dispute. See Guinn, 361 Ill. App. 3d at 604 (acknowledging alternative pleading doctrine); Crescent Purchasing, 2018 WL 1898753, at 6 (permitting alternative pleading where the validity of the contract was contested). The alternative pleading doctrine is codified in 735 ILCS 5/2-613(b), which permits a party to plead "as many causes of action . . . as he or she may have, regardless of consistency." However, this procedural rule does not override the substantive limitations on unjust enrichment claims. Where both parties affirmatively acknowledge the existence and enforceability of the contract, alternative pleading of an unjust enrichment theory becomes untenable, because the factual predicate for the quasi-contractual remedy — the absence of an enforceable agreement — is conclusively negated by the parties' own positions. See Gagnon*, 2012 IL App (1st) 120645, ¶ 22 (dismissing unjust enrichment claim despite alternative pleading where "no party dispute[d] the existence or enforceability of the contract").

Here, the alternative pleading doctrine provides Cardinal Peak no refuge. Cardinal Peak itself sues for breach of the MSA in Count I. By asserting a breach of contract claim, Cardinal Peak necessarily and unequivocally acknowledges that the MSA is a valid, binding, and enforceable contract. Nexford's Answer and Counterclaim likewise treat the MSA as the operative agreement. There is no dispute between the parties as to whether a contract exists or whether it is enforceable. Cardinal Peak cannot simultaneously maintain that the MSA governs (as the predicate for Count I) and that recovery should be permitted in the absence of a contractual framework (as the predicate for Count II). The two positions are fundamentally irreconcilable, and the alternative pleading doctrine does not rescue Count II under these circumstances.

C. Cardinal Peak's Unjust Enrichment Claim Is Duplicative of Its Breach of Contract Claim

Independent of the express contract bar, Cardinal Peak's unjust enrichment claim fails because it is entirely duplicative of the breach of contract claim and adds no independent theory of recovery. Illinois courts routinely dismiss unjust enrichment claims that are duplicative of accompanying breach of contract claims where the same express contract governs the same subject matter.

The duplication in this case is complete and undeniable:

The unjust enrichment claim is, in substance, nothing more than a restatement of the breach of contract claim in equitable language. The "benefit" alleged is the benefit of receiving steel under the MSA; the "inequity" alleged is the nonpayment of surcharges owed under the MSA; the damages sought are the unpaid surcharges calculated under the MSA. Strip away the equitable veneer, and the claim is indistinguishable from Count I.

Illinois courts have consistently held that this type of duplicative pleading is impermissible. In Melnick v. Glenrock National Bank, 2013 WL 5462252, at 4 (N.D. Ill. Sept. 30, 2013), the court dismissed an unjust enrichment claim as duplicative of a breach of contract claim where both counts arose from the same contractual relationship and sought the same relief. The court observed that "a plaintiff may not repackage a breach of contract claim as an unjust enrichment claim simply by omitting the contractual language." See also Benson v. Stafford, 407 Ill. App. 3d 902, 919 (1st Dist. 2010) (affirming dismissal of unjust enrichment claim that was "based on the same allegations" as the breach of contract claim and sought "the same damages"); Ekl v. Knecht*, 223 Ill. App. 3d 234, 244 (2d Dist. 1991) ("Where the unjust enrichment claim rests on the same operative facts as the breach of contract claim, and the express contract covers the subject matter at issue, the unjust enrichment claim must be dismissed.").

The unjust enrichment claim here is entirely parasitic on the breach of contract claim. It contributes nothing to Cardinal Peak's litigation posture that is not already encompassed by Count I. Its continued presence in the case would serve only to create confusion, complicate discovery, and potentially confuse the factfinder at trial.

D. The Account Stated Claim (Count III) — Brief Note on Interaction

While the account stated claim (Count III) is not the primary focus of this memorandum, it is worth noting that Count III also overlaps with and depends on the MSA framework. The account stated theory rests on the premise that Nexford received surcharge invoices and, by failing to object within a reasonable time, impliedly assented to the stated balances. However, the MSA's express dispute provisions — including the thirty-day objection period under Section 7.4(d) and the escalation and mediation procedures — govern the manner in which surcharge disputes are to be raised and resolved. Nexford's position is that it timely disputed the surcharges in accordance with the MSA's procedures, negating the assent element of the account stated claim.

The account stated claim is somewhat differently situated from the unjust enrichment claim because the doctrine of account stated has somewhat distinct elements, including the requirement of assent to a stated balance. Nevertheless, the account stated claim is also vulnerable to the argument that the MSA's express surcharge provisions govern and that any obligation to pay surcharges (and any defense to such obligation) must be evaluated under the contract's terms. The primary recommendation for Count III is to address it in conjunction with the broader defense of Counts I and II, rather than to pursue a separate dispositive motion at this time.

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 pending and set for hearing on November 14, 2022.

• Written discovery is expected to commence in December 2022 and is anticipated to continue through the first quarter of 2023.

Given this posture, there are several procedural vehicles available to Nexford for challenging Count II:

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 approach is that it could be filed relatively early in the case, potentially before the parties incur significant discovery costs. The disadvantage is that the motion is limited to the pleadings and any documents properly incorporated by reference; the court would not consider extrinsic evidence, which could limit the factual record available to support the motion. However, because both parties' pleadings acknowledge the existence and enforceability of the MSA, and because Cardinal Peak's own Complaint attaches and relies on the MSA, the pleadings alone may be sufficient to establish the express contract bar.

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 to the applicability of the express contract bar. The advantage of this approach is that the court would have the benefit of the full evidentiary record, reducing the risk that the motion would be denied on the ground that factual issues remain. The disadvantage is the additional time and expense required to develop the record through discovery.

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 judgment on Count II after written discovery is substantially complete, which is anticipated to occur in the first or second quarter of 2023. By that point, the record will include the MSA, the surcharge invoices, the Surcharge Notices (including documentation of timing and methodology), the parties' interrogatory responses and document productions, and deposition testimony from key witnesses on both sides — all of which will confirm that the MSA is the governing instrument and that Cardinal Peak's unjust enrichment claim falls entirely within the MSA's scope. The evidentiary record at the summary judgment stage will foreclose any argument by Cardinal Peak that the existence or enforceability of the MSA is genuinely in dispute.

In the alternative, a motion for judgment on the pleadings could be filed at an earlier stage if the litigation calendar permits and if strategic considerations favor an earlier resolution of Count II. This may be appropriate if, for example, the court's scheduling order establishes a deadline for dispositive motions that falls before discovery is complete, or if eliminating Count II early in the case would provide meaningful leverage in mediation discussions.

Regardless of the specific timing, the unjust enrichment defense should be integrated into the overall defense strategy and mediation preparation. Eliminating Count II narrows Cardinal Peak's litigation posture and reinforces the principle that any recovery by Cardinal Peak is limited to what the MSA permits — and the MSA, properly construed and applied, provides Nexford with robust defenses (late Surcharge Notices, deviation from Exhibit C methodology, and surcharges exceeding the 12% cap) that directly reduce or eliminate the claimed damages. If the unjust enrichment claim is dismissed, Cardinal Peak can recover only under the contract — and under the contract, Nexford's defenses substantially limit the potential recovery.

The defense against the unjust enrichment claim also strengthens Nexford's negotiating position in any mediation conducted under MSA Section 14.3. By demonstrating that Cardinal Peak's theory of recovery is confined to the contract, Nexford can frame the settlement discussion around the specific contractual defenses and the quantified impact of those defenses on the claimed damages, rather than allowing Cardinal Peak to invoke broad equitable principles to support a recovery beyond what the MSA authorizes.

C. Risk Assessment

The risk that Cardinal Peak's unjust enrichment claim will survive a dispositive motion is low. Illinois law is well-settled that unjust enrichment is unavailable where an express contract governs the subject matter of the dispute. The facts here present a textbook application of the express contract bar: the MSA specifically and in detail addresses the surcharge obligations at issue, and neither party disputes the MSA's existence or enforceability. The weight of authority in both the Illinois state courts and the federal courts applying Illinois law strongly favors dismissal of Count II.

There is some residual risk that the court could permit alternative pleading of the unjust enrichment claim to proceed through the discovery phase, notwithstanding the absence of any genuine dispute as to the MSA's enforceability. Some courts have been reluctant to dismiss alternative theories at the pleading stage, preferring instead to allow the claims to survive until the factual record is fully developed. However, this risk diminishes as the case progresses and both parties' conduct — through their pleadings, discovery responses, and deposition testimony — confirms that the MSA is the operative, enforceable agreement. By the time a summary judgment motion is filed, the alternative pleading argument will be effectively foreclosed.

Even in the unlikely event that the unjust enrichment claim survives dispositive motion and proceeds to trial, the practical impact would be limited. The measure of any unjust enrichment recovery would, as a matter of law, be the reasonable value of the benefit conferred — and in this case, the only measure of that benefit is the surcharge amount as determined under the MSA's methodology. This means that the same defenses Nexford asserts against the breach of contract claim (late notices, methodology deviation, and cap exceedance) would apply with equal force to limit or defeat the unjust enrichment recovery. The unjust enrichment claim does not offer Cardinal Peak a path to a larger or different recovery than what the contract provides.

In sum, the unjust enrichment claim is legally untenable, and its dismissal is highly likely under any of the available procedural vehicles. The primary strategic question is not whether to seek dismissal, but when to do so — a question that should be resolved in coordination with the broader litigation and settlement strategy.

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 applied by federal courts sitting in Illinois.

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 eliminate the claimed damages.

We are prepared to discuss this analysis and the recommended strategy at your convenience. Please advise if you would like us to begin drafting the motion or if further research on any of the issues addressed herein is needed.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Jeffrey Park Associate 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606 Telephone: (312) 555-7200

Email: j.park@calderwoodharkness.com

Matter No. 1005-00005

PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / WORK PRODUCT DOCTRINE This memorandum constitutes attorney work product prepared in anticipation of litigation and is protected from disclosure by the attorney-client privilege and the work product doctrine. Distribution of this memorandum is strictly limited to the named recipients and authorized representatives of the client. Any unauthorized distribution, copying, or disclosure is prohibited.

Count I — Breach of Contract	Count II — Unjust Enrichment
Parties	Cardinal Peak v. Nexford	Cardinal Peak v. Nexford
Underlying Facts	Nexford's alleged failure to pay surcharges on HRC/CRC steel products under the MSA, March 2021 – May 2022	Nexford's alleged retention of the benefit of steel products without paying full surcharges, March 2021 – May 2022
Contractual Basis	MSA Section 7.4	MSA Section 7.4 (implicitly — all "benefits" derive from MSA transactions)
Damages Sought	$4.73 million	$4.73 million
Theory of Recovery	Nexford breached its contractual obligation to pay surcharges	Nexford was unjustly enriched by receiving products without paying surcharges

PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / WORK PRODUCT DOCTRINE
MEMORANDUM
FROM: Jeffrey Park, Associate, Calderwood & Harkness LLP
TO: Priya Anand, Responsible Partner; Simone Laroche, Lead Associate
DATE: October 15, 2022
RE: Analysis of Cardinal Peak Industries' Unjust Enrichment Claim — Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471, Circuit Court of Cook County, Illinois, County Department, Law Division
MATTER NO.: 1005-00005
This memorandum is a privileged and confidential attorney work product prepared in anticipation of litigation. It is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the attorneys and client representatives identified above. Do not distribute, copy, or disclose this memorandum or its contents without the prior written consent of Calderwood & Harkness LLP.
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 arise from a dispute over unpaid raw-material surcharges on hot-rolled coil ("HRC") and cold-rolled coil ("CRC") steel products supplied by Cardinal Peak to Nexford during the period from March 2021 through May 2022.
This memorandum analyzes the viability of Cardinal Peak's unjust enrichment claim (Count II) under Illinois law and identifies the procedural mechanisms available to Nexford to seek dismissal of that claim. The memorandum does not address the merits of the breach of contract or account stated claims except to the extent necessary to contextualize the unjust enrichment analysis.
Principal Conclusion: Cardinal Peak's unjust enrichment claim is barred as a matter of law because an express, written contract — the Master Supply Agreement dated January 15, 2020 (Contract No. MSA-NIH-CPI-2020-001) (the "MSA") — governs the precise subject matter at issue, namely the obligation (if any) to pay raw-material surcharges on HRC and CRC steel products supplied by Cardinal Peak to Nexford. Under well-settled Illinois law, a plaintiff may not pursue an unjust enrichment or quasi-contract theory of recovery where an express contract defines the rights and obligations of the parties with respect to the same subject matter. The unjust enrichment claim is entirely duplicative of the breach of contract claim: both counts seek identical damages ($4.73 million) based on the same operative facts (alleged nonpayment of surcharges governed by Section 7.4 of the MSA). No recognized exception to the express contract bar applies here, as neither party disputes the existence, validity, or enforceability of the MSA.
Recommendation: We recommend that Nexford file a motion for summary judgment on Count II at the appropriate procedural stage, or alternatively seek to narrow Cardinal Peak's claims through a motion to dismiss or a motion for judgment on the pleadings. The unjust enrichment claim could also be addressed in conjunction with dispositive motions on the breach of contract and account stated claims. Given the current procedural posture — Nexford's Answer and Affirmative Defenses were filed on September 19, 2022, the Counterclaim was filed on October 3, 2022, and Cardinal Peak's Motion to Dismiss the Counterclaim is pending with a hearing scheduled for November 14, 2022 — the timing for a separate dispositive motion on the unjust enrichment count should be carefully coordinated with the overall litigation strategy, including discovery scheduling and mediation preparation under MSA Section 14.3.
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 revenue for its fiscal year ending December 31, 2022. Nexford is a portfolio company of Marlowe Asset Management Bluff Capital Partners, LP, a private equity fund based in Chicago, Illinois. Marlowe Asset Management Bluff acquired Nexford in 2018 as part of a broader strategy in the specialty manufacturing sector. Nexford operates three fabrication facilities in northern Illinois and southeastern Wisconsin and employs approximately 1,200 individuals.
Cardinal Peak Industries is a Colorado limited liability company headquartered at 1580 Ridgeline Boulevard, Pueblo, Colorado 81001. Cardinal Peak is a regional steel producer and distributor, specializing in the production and sale of hot-rolled coil, cold-rolled coil, and related flat-rolled steel products. Cardinal Peak reported approximately $415 million in annual revenue for its fiscal year ending December 31, 2022. Cardinal Peak operates two integrated steel mills in Colorado and a distribution center in Kansas City, Missouri. It supplies steel products to industrial fabricators, automotive tier suppliers, and construction companies throughout the central and western United States.
The commercial relationship between Nexford and Cardinal Peak dates to approximately 2016, when Nexford first began purchasing HRC and CRC steel products from Cardinal Peak on a purchase-order basis. In January 2020, the parties formalized their relationship through the execution of the Master Supply Agreement at issue in this litigation.
B. The Master Supply Agreement
The MSA (Contract No. MSA-NIH-CPI-2020-001) was executed on January 15, 2020, by authorized representatives of both parties. The agreement establishes the framework for the sale and purchase of HRC and CRC steel products by Cardinal Peak (as "Seller") to Nexford (as "Buyer"). The material terms of the MSA are as follows:
Term. The MSA has an initial three-year term running from January 15, 2020 through January 14, 2023, with automatic renewal for successive one-year periods unless either party provides written notice of termination at least 180 calendar days prior to the expiration of the then-current term. As of the date of this memorandum, neither party has delivered a notice of termination, and the MSA remains in full force and effect.
Products and Volume. The MSA covers the supply of HRC and CRC steel products in accordance with specifications set forth in Exhibit A to the agreement. The estimated annual volume under the MSA is approximately 18,000 tons of HRC and 6,500 tons of CRC, for a combined total of approximately 24,500 tons per year. These volumes represent estimates rather than binding commitments, with actual purchase volumes subject to Nexford's rolling monthly forecasts and purchase orders issued under Section 4.1 of the MSA.
Base Pricing. Section 7.1 of the MSA establishes base pricing for the products: HRC at $620 per ton and CRC at $740 per ton. These base prices are subject to quarterly adjustment pursuant to the mechanism set forth in Section 7.2, which references published market indices and allows for periodic recalibration based on prevailing market conditions. At estimated annual volumes, the MSA represents an estimated annual spend of approximately $15.97 million.
Surcharge Provisions (Section 7.4). Section 7.4 of the MSA — the provision at the heart of this dispute — establishes a mechanism by which Cardinal Peak (as Seller) may pass through documented raw-material surcharges to Nexford (as Buyer). The surcharge mechanism is designed to allocate to the Buyer certain input cost increases beyond the base pricing levels established in the MSA. The key provisions of Section 7.4 are as follows:
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 in which the cost increase was incurred. The Surcharge Notice must identify the applicable cost category, the amount of the surcharge, and the calculation methodology used.
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. Exhibit C establishes baseline costs of $340 per ton for scrap and $48 per ton for energy. Surcharges are calculated as the difference between actual index-reported costs and the applicable baseline, applied on a per-ton basis to the products shipped during the applicable month.
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 of the MSA.
Governing Law and Dispute Resolution. Section 14.1 of the MSA provides that the agreement is governed by and construed in accordance with the laws of the State of Illinois, without regard to conflict-of-laws principles. Section 14.3 requires mandatory mediation in Chicago, Illinois as a precondition to litigation of any dispute arising under or in connection with the MSA.
C. The Surcharge Dispute
The dispute underlying this litigation concerns surcharge invoices issued by Cardinal Peak to Nexford over a fourteen-month period from March 2021 through May 2022. During this period, raw-material costs — particularly ferrous scrap prices — experienced significant volatility and, in many months, substantial increases attributable to pandemic-related supply chain disruptions, global demand recovery, and inflationary pressures in the commodities markets.
Cardinal Peak invoiced Nexford for surcharges totaling approximately $6.41 million during the disputed period. Nexford paid approximately $1.68 million of the invoiced amount. Cardinal Peak's Complaint alleges that Nexford improperly rejected or partially paid surcharge invoices and seeks recovery of the remaining unpaid balance of approximately $4.73 million, plus prejudgment interest.
It is notable that the surcharge for April 2021 was paid in full by Nexford and is not part of the disputed amount. The remaining thirteen months within the March 2021 through May 2022 period are in dispute, with the specific nature of the dispute varying by month as described in Section II.D below.
D. Nexford's Defenses
Nexford's Answer and Affirmative Defenses, filed on September 19, 2022, and its Counterclaim, filed on October 3, 2022, set forth three principal categories of defense to Cardinal Peak's surcharge claims, all grounded in the express provisions of MSA Section 7.4:
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 for the applicable month invalid and unenforceable. The relevant notices were delivered between three and twenty-seven business days late.
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 appears to incorporate proprietary production cost data not contemplated by Exhibit C, resulting in surcharge calculations that are higher than those that would result from strict application of the contractually mandated methodology.
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 some overlap among these three categories; certain months are affected by more than one deficiency. After accounting for the interplay among the three defenses, Nexford's position is that its maximum additional obligation beyond the $1.68 million already paid is approximately $0.21 million — and that even this residual amount may be subject to offset based on Cardinal Peak's noncompliance with the MSA's procedural requirements.
Nexford's Counterclaim, filed on October 3, 2022, asserts two counts: (1) breach of contract, alleging that Cardinal Peak's noncompliance with the Exhibit C methodology and the Section 7.4(a) notice requirements constitutes a material breach of the MSA, and (2) declaratory relief, seeking a judicial declaration of the parties' respective rights and obligations under Section 7.4 of the MSA. The Counterclaim also seeks a refund of approximately $0.21 million, which Nexford contends represents an overpayment resulting from surcharges that were paid by Nexford but subsequently determined to have been calculated in deviation from Exhibit C.
Cardinal Peak has filed a Motion to Dismiss the Counterclaim, which is currently set for hearing on November 14, 2022.
E. Cardinal Peak's Unjust Enrichment Claim (Count II)
Count II of Cardinal Peak's Complaint asserts a claim for unjust enrichment. The material allegations of Count II may be summarized as follows:
Cardinal Peak alleges that it conferred a benefit on Nexford by delivering HRC and CRC steel products during the period from March 2021 through May 2022 at prices that did not include the full raw-material surcharges to which Cardinal Peak was entitled. Cardinal Peak contends that the actual cost of the raw materials used in the production of those steel products exceeded the base pricing levels reflected in the invoiced amounts, and that Nexford received the benefit of those products — and the benefit of the reduced pricing — without paying the full surcharge amounts.
Cardinal Peak further alleges that Nexford had knowledge of the benefit conferred, as Nexford received and used the steel products, was aware of the surcharge invoices, and understood that the products were delivered at prices below the full surcharge-adjusted cost.
Finally, Cardinal Peak alleges that it would be inequitable and unjust for Nexford to retain the benefit of the steel products without paying the full surcharge amounts, and that Nexford has been "unjustly enriched" in the amount of $4.73 million — the same amount sought under the breach of contract claim in Count I.
The unjust enrichment claim does not identify any benefit conferred outside the scope of the MSA, nor does it assert any theory of recovery independent of the surcharge obligations established by Section 7.4 of the MSA. The claim is, on its face, entirely coextensive with Count I.
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 defendant has "unjustly retained a benefit to the plaintiff's detriment, and that defendant's retention of the benefit violates the fundamental principles of justice, equity, and good conscience." HPI Health Care Servs., 131 Ill. 2d at 160.
It is important to note at the outset that unjust enrichment under Illinois law is properly understood as an equitable remedy, not a standalone cause of action in the strict sense. The Illinois Supreme Court has observed that unjust enrichment is a condition that may be brought about by unlawful or improper conduct as defined by law, and that a claim based on unjust enrichment is "not a separate cause of action" independent of an underlying wrong. Cleary, 656 F.3d at 517; Martis v. Grinnell Mut. Reinsurance Co., 388 Ill. App. 3d 1017, 1024 (3d Dist. 2009). In practice, Illinois courts routinely analyze unjust enrichment claims as quasi-contractual theories of recovery — that is, theories premised on the implication of a contract-like obligation by operation of law in the absence of an actual agreement. This characterization is central to the analysis that follows, because the availability of a quasi-contractual remedy is inherently limited by the existence of an actual contract.
B. The Express Contract Bar — Illinois Law Prohibits Unjust Enrichment Where an Express Contract Governs
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 sitting in Illinois.
The rationale underlying the express contract bar is straightforward: where the parties have entered into an express agreement that defines their respective rights and obligations with respect to a particular subject matter, there is no occasion for equity to imply a different or additional obligation. The contract itself is the measure of the parties' rights, and the remedy for a breach of that contract lies in an action at law for damages, not in an equitable claim for unjust enrichment. To permit a plaintiff to pursue an unjust enrichment theory where an express contract already addresses the disputed obligation would effectively allow the plaintiff to circumvent the terms of the bargain the parties struck, including any conditions, limitations, or defenses that the contract establishes.
The Illinois Supreme Court recognized this principle in People ex rel. Hartigan v. E&E Hauling, Inc., 153 Ill. 2d 473 (1992), where the court held that "where there is a specific contract which governs the relationship of the parties, the doctrine of unjust enrichment has no application." Id. at 497. The court explained that the doctrine of unjust enrichment is based on an implied contract theory, and that "recovery on the basis of an implied contract cannot stand in the face of an express contract between the parties." Id.
The Illinois Appellate Court has consistently followed this holding. In Guinn v. Hoskins Chevrolet, 361 Ill. App. 3d 575 (1st Dist. 2005), the court affirmed dismissal of an unjust enrichment claim where the parties' express agreement governed the subject matter of the dispute, reasoning that "the very existence of the contract precludes recovery for unjust enrichment." Id. at 604. Similarly, in Gagnon v. Schickel, 2012 IL App (1st) 120645, the court held that an unjust enrichment claim was properly dismissed where the parties had entered into a written agreement that "specifically address[ed] the compensation at issue," and the plaintiff's unjust enrichment theory was "entirely subsumed" by the express contractual provisions. See also Utility Audit, Inc. v. Horace Mann Serv. Corp., 383 F.3d 683, 689 (7th Cir. 2004) (applying Illinois law: "a plaintiff cannot state a claim for unjust enrichment where an express contract governs"); Industrial Lift Truck Serv. Corp. v. Mitsubishi Int'l Corp., 104 Ill. App. 3d 357, 361 (1st Dist. 1982) ("Where there is an express contract between parties, a contract will not be implied since the very existence of the contract negates the elements of a quasi-contractual claim.").
Federal courts applying Illinois law have reached the same conclusion with equal consistency. In Cohen v. American Securities Insurance Co., 735 F.3d 601, 615 (7th Cir. 2013), the Seventh Circuit affirmed dismissal of an unjust enrichment claim where the plaintiff's theory of recovery was "governed by the insurance policies at issue," observing that "Illinois law does not permit a plaintiff to pursue a quasi-contractual claim where the parties' rights are defined by an express agreement." See also Crescent Purchasing, LLC v. Valspar Corp., 2018 WL 1898753, at 6 (N.D. Ill. Apr. 20, 2018) (dismissing unjust enrichment claim under Illinois law where the "express terms of the [agreement] govern the very subject matter at issue"); Shaw v. Hyatt Int'l Corp.*, 461 F.3d 899, 902 (7th Cir. 2006) ("Under Illinois law, a party cannot state a claim for unjust enrichment when an express contract governs.").
The principle applies regardless of the plaintiff's characterization of the claim. A plaintiff cannot avoid the express contract bar by recasting a breach of contract theory in the language of equity. Where the substance of the claim is that the defendant failed to perform an obligation defined by an express agreement, the plaintiff's remedy lies in contract, not in unjust enrichment. See Guinn, 361 Ill. App. 3d at 604; Prodromos v. Everen Securities, Inc., 389 F.3d 772, 775 (7th Cir. 2004).
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. There is no dispute as to the MSA's existence, execution, or authenticity. Both parties acknowledge the MSA in their respective pleadings, and both parties rely on the MSA's terms as the basis for their affirmative claims and defenses.
The MSA explicitly governs the sale and purchase of HRC and CRC steel products between Cardinal Peak and Nexford. It establishes the base pricing, volume commitments, delivery terms, quality specifications, and payment obligations applicable to the commercial relationship between the parties. It is the comprehensive governing instrument for the transactions at issue.
Most critically, Section 7.4 of the MSA specifically and in considerable detail addresses the surcharge pass-through mechanism — the precise subject matter of Cardinal Peak's unjust enrichment claim. Section 7.4 defines when surcharges may be imposed (upon documented raw-material cost increases in specified categories), how surcharges must be calculated (by reference to the Exhibit C Surcharge Methodology and published indices), what notice must be provided (written Surcharge Notice with supporting documentation within fifteen business days after the end of the applicable month), what cap applies (twelve percent of the applicable Base Price without Buyer's prior written consent), and how disputes are to be resolved (written notice, escalation to senior officers, and mandatory mediation). The surcharge mechanism is not a gap or ambiguity in the MSA; it is one of the most thoroughly detailed provisions in the entire agreement.
Cardinal Peak's unjust enrichment claim seeks recovery of $4.73 million — the identical dollar amount sought under the breach of contract claim in Count I. The basis for the claimed recovery is the same in both counts: Cardinal Peak's allegation that Nexford failed to pay surcharges on HRC and CRC steel products delivered during the period from March 2021 through May 2022. The "benefit" that Cardinal Peak alleges Nexford received is the delivery of steel products at prices that did not include the full surcharges — that is, the benefit of receiving products at prices below what Cardinal Peak contends it was owed under the MSA's surcharge provisions. The "inequity" that Cardinal Peak alleges is Nexford's refusal to pay the surcharges — the same refusal that forms the basis of the breach of contract claim.
In short, the unjust enrichment claim does not allege any benefit conferred outside the scope of the MSA. It does not identify any obligation that is not addressed by the contract. There is no extra-contractual theory of recovery; no allegation that Nexford received something of value from Cardinal Peak that falls outside the MSA's framework. The unjust enrichment claim is entirely duplicative of Count I — it is, in substance, a breach of contract claim dressed in the language of equity.
Under the authorities cited above, this claim is barred as a matter of law. The MSA governs the surcharge obligations, and the existence of the MSA precludes recovery on an implied-contract or unjust enrichment theory for those same obligations. Cardinal Peak's remedy, if any, lies in its breach of contract claim under Count I, subject to the conditions, limitations, and defenses established by the MSA itself.
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 agreement to displace the quasi-contractual remedy. See Bernstein & Grazian, P.C. v. Grazian & Volpe, P.C., 402 Ill. App. 3d 961, 979 (1st Dist. 2010); Prodromos, 389 F.3d at 775 (noting that unjust enrichment may be available "if the plaintiff shows that the express contract is somehow unenforceable or void"). This exception has no application here. Neither party contends that the MSA is void, voidable, or unenforceable. To the contrary, Cardinal Peak itself sues for breach of the MSA in Count I, necessarily treating the MSA as a valid and enforceable contract. Nexford, in its Answer and Counterclaim, likewise relies on the MSA as a binding agreement that gives rise to enforceable obligations. Both parties' pleadings confirm that the MSA is the operative, enforceable agreement governing the transactions at issue.
Exception for Benefits Conferred Outside the Contract's Scope. An unjust enrichment claim may survive where the plaintiff alleges that the defendant received a benefit that falls outside the scope of the express contract — i.e., a benefit not addressed or contemplated by the parties' agreement. See Utility Audit, 383 F.3d at 689 (recognizing that unjust enrichment may be available for benefits "that go beyond, or are not covered by, the contract"). This exception is inapplicable because all of the benefits alleged in Count II fall squarely within the MSA's subject matter. The "benefit" at issue is the receipt of HRC and CRC steel products at prices that did not include the full surcharges — a matter explicitly governed by Sections 7.1, 7.2, and 7.4 of the MSA and Exhibit C thereto. Cardinal Peak does not allege that it conferred any benefit on Nexford outside the MSA framework — no extra services, no products not covered by the MSA, no consideration beyond what the agreement addresses. The unjust enrichment claim is entirely bounded by the MSA's subject matter.
Alternative Pleading. Illinois courts have, in some circumstances, permitted unjust enrichment to be pleaded in the alternative to a breach of contract claim, particularly where the existence or enforceability of the contract is genuinely in dispute. See Guinn, 361 Ill. App. 3d at 604 (acknowledging alternative pleading doctrine); Crescent Purchasing, 2018 WL 1898753, at 6 (permitting alternative pleading where the validity of the contract was contested). The alternative pleading doctrine is codified in 735 ILCS 5/2-613(b), which permits a party to plead "as many causes of action . . . as he or she may have, regardless of consistency." However, this procedural rule does not override the substantive limitations on unjust enrichment claims. Where both parties affirmatively acknowledge the existence and enforceability of the contract, alternative pleading of an unjust enrichment theory becomes untenable, because the factual predicate for the quasi-contractual remedy — the absence of an enforceable agreement — is conclusively negated by the parties' own positions. See Gagnon*, 2012 IL App (1st) 120645, ¶ 22 (dismissing unjust enrichment claim despite alternative pleading where "no party dispute[d] the existence or enforceability of the contract").
Here, the alternative pleading doctrine provides Cardinal Peak no refuge. Cardinal Peak itself sues for breach of the MSA in Count I. By asserting a breach of contract claim, Cardinal Peak necessarily and unequivocally acknowledges that the MSA is a valid, binding, and enforceable contract. Nexford's Answer and Counterclaim likewise treat the MSA as the operative agreement. There is no dispute between the parties as to whether a contract exists or whether it is enforceable. Cardinal Peak cannot simultaneously maintain that the MSA governs (as the predicate for Count I) and that recovery should be permitted in the absence of a contractual framework (as the predicate for Count II). The two positions are fundamentally irreconcilable, and the alternative pleading doctrine does not rescue Count II under these circumstances.
C. Cardinal Peak's Unjust Enrichment Claim Is Duplicative of Its Breach of Contract Claim
Independent of the express contract bar, Cardinal Peak's unjust enrichment claim fails because it is entirely duplicative of the breach of contract claim and adds no independent theory of recovery. Illinois courts routinely dismiss unjust enrichment claims that are duplicative of accompanying breach of contract claims where the same express contract governs the same subject matter.
The duplication in this case is complete and undeniable:
The unjust enrichment claim is, in substance, nothing more than a restatement of the breach of contract claim in equitable language. The "benefit" alleged is the benefit of receiving steel under the MSA; the "inequity" alleged is the nonpayment of surcharges owed under the MSA; the damages sought are the unpaid surcharges calculated under the MSA. Strip away the equitable veneer, and the claim is indistinguishable from Count I.
Illinois courts have consistently held that this type of duplicative pleading is impermissible. In Melnick v. Glenrock National Bank, 2013 WL 5462252, at 4 (N.D. Ill. Sept. 30, 2013), the court dismissed an unjust enrichment claim as duplicative of a breach of contract claim where both counts arose from the same contractual relationship and sought the same relief. The court observed that "a plaintiff may not repackage a breach of contract claim as an unjust enrichment claim simply by omitting the contractual language." See also Benson v. Stafford, 407 Ill. App. 3d 902, 919 (1st Dist. 2010) (affirming dismissal of unjust enrichment claim that was "based on the same allegations" as the breach of contract claim and sought "the same damages"); Ekl v. Knecht*, 223 Ill. App. 3d 234, 244 (2d Dist. 1991) ("Where the unjust enrichment claim rests on the same operative facts as the breach of contract claim, and the express contract covers the subject matter at issue, the unjust enrichment claim must be dismissed.").
The unjust enrichment claim here is entirely parasitic on the breach of contract claim. It contributes nothing to Cardinal Peak's litigation posture that is not already encompassed by Count I. Its continued presence in the case would serve only to create confusion, complicate discovery, and potentially confuse the factfinder at trial.
D. The Account Stated Claim (Count III) — Brief Note on Interaction
While the account stated claim (Count III) is not the primary focus of this memorandum, it is worth noting that Count III also overlaps with and depends on the MSA framework. The account stated theory rests on the premise that Nexford received surcharge invoices and, by failing to object within a reasonable time, impliedly assented to the stated balances. However, the MSA's express dispute provisions — including the thirty-day objection period under Section 7.4(d) and the escalation and mediation procedures — govern the manner in which surcharge disputes are to be raised and resolved. Nexford's position is that it timely disputed the surcharges in accordance with the MSA's procedures, negating the assent element of the account stated claim.
The account stated claim is somewhat differently situated from the unjust enrichment claim because the doctrine of account stated has somewhat distinct elements, including the requirement of assent to a stated balance. Nevertheless, the account stated claim is also vulnerable to the argument that the MSA's express surcharge provisions govern and that any obligation to pay surcharges (and any defense to such obligation) must be evaluated under the contract's terms. The primary recommendation for Count III is to address it in conjunction with the broader defense of Counts I and II, rather than to pursue a separate dispositive motion at this time.
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 pending and set for hearing on November 14, 2022.
• Written discovery is expected to commence in December 2022 and is anticipated to continue through the first quarter of 2023.
Given this posture, there are several procedural vehicles available to Nexford for challenging Count II:
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 approach is that it could be filed relatively early in the case, potentially before the parties incur significant discovery costs. The disadvantage is that the motion is limited to the pleadings and any documents properly incorporated by reference; the court would not consider extrinsic evidence, which could limit the factual record available to support the motion. However, because both parties' pleadings acknowledge the existence and enforceability of the MSA, and because Cardinal Peak's own Complaint attaches and relies on the MSA, the pleadings alone may be sufficient to establish the express contract bar.
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 to the applicability of the express contract bar. The advantage of this approach is that the court would have the benefit of the full evidentiary record, reducing the risk that the motion would be denied on the ground that factual issues remain. The disadvantage is the additional time and expense required to develop the record through discovery.
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 judgment on Count II after written discovery is substantially complete, which is anticipated to occur in the first or second quarter of 2023. By that point, the record will include the MSA, the surcharge invoices, the Surcharge Notices (including documentation of timing and methodology), the parties' interrogatory responses and document productions, and deposition testimony from key witnesses on both sides — all of which will confirm that the MSA is the governing instrument and that Cardinal Peak's unjust enrichment claim falls entirely within the MSA's scope. The evidentiary record at the summary judgment stage will foreclose any argument by Cardinal Peak that the existence or enforceability of the MSA is genuinely in dispute.
In the alternative, a motion for judgment on the pleadings could be filed at an earlier stage if the litigation calendar permits and if strategic considerations favor an earlier resolution of Count II. This may be appropriate if, for example, the court's scheduling order establishes a deadline for dispositive motions that falls before discovery is complete, or if eliminating Count II early in the case would provide meaningful leverage in mediation discussions.
Regardless of the specific timing, the unjust enrichment defense should be integrated into the overall defense strategy and mediation preparation. Eliminating Count II narrows Cardinal Peak's litigation posture and reinforces the principle that any recovery by Cardinal Peak is limited to what the MSA permits — and the MSA, properly construed and applied, provides Nexford with robust defenses (late Surcharge Notices, deviation from Exhibit C methodology, and surcharges exceeding the 12% cap) that directly reduce or eliminate the claimed damages. If the unjust enrichment claim is dismissed, Cardinal Peak can recover only under the contract — and under the contract, Nexford's defenses substantially limit the potential recovery.
The defense against the unjust enrichment claim also strengthens Nexford's negotiating position in any mediation conducted under MSA Section 14.3. By demonstrating that Cardinal Peak's theory of recovery is confined to the contract, Nexford can frame the settlement discussion around the specific contractual defenses and the quantified impact of those defenses on the claimed damages, rather than allowing Cardinal Peak to invoke broad equitable principles to support a recovery beyond what the MSA authorizes.
C. Risk Assessment
The risk that Cardinal Peak's unjust enrichment claim will survive a dispositive motion is low. Illinois law is well-settled that unjust enrichment is unavailable where an express contract governs the subject matter of the dispute. The facts here present a textbook application of the express contract bar: the MSA specifically and in detail addresses the surcharge obligations at issue, and neither party disputes the MSA's existence or enforceability. The weight of authority in both the Illinois state courts and the federal courts applying Illinois law strongly favors dismissal of Count II.
There is some residual risk that the court could permit alternative pleading of the unjust enrichment claim to proceed through the discovery phase, notwithstanding the absence of any genuine dispute as to the MSA's enforceability. Some courts have been reluctant to dismiss alternative theories at the pleading stage, preferring instead to allow the claims to survive until the factual record is fully developed. However, this risk diminishes as the case progresses and both parties' conduct — through their pleadings, discovery responses, and deposition testimony — confirms that the MSA is the operative, enforceable agreement. By the time a summary judgment motion is filed, the alternative pleading argument will be effectively foreclosed.
Even in the unlikely event that the unjust enrichment claim survives dispositive motion and proceeds to trial, the practical impact would be limited. The measure of any unjust enrichment recovery would, as a matter of law, be the reasonable value of the benefit conferred — and in this case, the only measure of that benefit is the surcharge amount as determined under the MSA's methodology. This means that the same defenses Nexford asserts against the breach of contract claim (late notices, methodology deviation, and cap exceedance) would apply with equal force to limit or defeat the unjust enrichment recovery. The unjust enrichment claim does not offer Cardinal Peak a path to a larger or different recovery than what the contract provides.
In sum, the unjust enrichment claim is legally untenable, and its dismissal is highly likely under any of the available procedural vehicles. The primary strategic question is not whether to seek dismissal, but when to do so — a question that should be resolved in coordination with the broader litigation and settlement strategy.
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 applied by federal courts sitting in Illinois.
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 eliminate the claimed damages.
We are prepared to discuss this analysis and the recommended strategy at your convenience. Please advise if you would like us to begin drafting the motion or if further research on any of the issues addressed herein is needed.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Jeffrey Park Associate 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606 Telephone: (312) 555-7200
Email: j.park@calderwoodharkness.com
Matter No. 1005-00005
PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / WORK PRODUCT DOCTRINE This memorandum constitutes attorney work product prepared in anticipation of litigation and is protected from disclosure by the attorney-client privilege and the work product doctrine. Distribution of this memorandum is strictly limited to the named recipients and authorized representatives of the client. Any unauthorized distribution, copying, or disclosure is prohibited.
Count I — Breach of Contract | Count II — Unjust Enrichment
Parties | Cardinal Peak v. Nexford | Cardinal Peak v. Nexford
Underlying Facts | Nexford's alleged failure to pay surcharges on HRC/CRC steel products under the MSA, March 2021 – May 2022 | Nexford's alleged retention of the benefit of steel products without paying full surcharges, March 2021 – May 2022
Contractual Basis | MSA Section 7.4 | MSA Section 7.4 (implicitly — all "benefits" derive from MSA transactions)
Damages Sought | $4.73 million | $4.73 million
Theory of Recovery | Nexford breached its contractual obligation to pay surcharges | Nexford was unjustly enriched by receiving products without paying surcharges

PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / WORK PRODUCT DOCTRINE

MEMORANDUM

MATTER NO.: 1005-00005

I. EXECUTIVE SUMMARY

II. FACTUAL BACKGROUND

III. LEGAL ANALYSIS

IV. PROCEDURAL CONSIDERATIONS AND RECOMMENDED APPROACH

V. CONCLUSION

CALDERWOOD & HARKNESS LLP

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