The Avon Company v. Fareva Morton Grove, Inc.

Background

The Avon Company, formerly known as New Avon LLC, and LG H&H Company, Ltd. (together, Avon) sued Fareva Morton Grove, Inc. and Fareva S.A. (together, Fareva). Avon sought declaratory and injunctive relief and damages based on an alleged breach of a long-term Manufacturing and Supply Agreement. Under that agreement, Fareva was to manufacture, test, and supply most of Avon’s beauty products for 10 years, with an option for an additional five years.

The agreement included a force-majeure provision. It excused a party’s failure or delay in performing to the extent directly caused by specified events beyond that party’s reasonable control, including shortages, epidemics, quarantines, strikes, and government actions. The agreement required prompt written notice identifying the event, its expected duration, and steps being taken to avoid or reduce its effects. It also required notices to be sent to specified Avon personnel.

Fareva notified Avon on April 9, 2020, that the coronavirus pandemic and Illinois stay-at-home measures had disrupted its workforce and supply chain. On May 4, 2020, Fareva stated that its facility was operating nearly normally, that it was no longer experiencing a force-majeure situation, and that it was terminating the force-majeure event.

In 2022, Fareva gave Avon notice that it was terminating the agreement early based on Avon’s alleged failure to pay a November 2021 invoice. Avon sued and sought an order requiring Fareva to continue performing. During proceedings concerning Avon’s request for an injunction and later contempt motions, Fareva did not assert that a force-majeure event excused its performance. At a December 5, 2022 hearing, Fareva’s lawyer explained that Fareva had chosen not to invoke force majeure because doing so could have prevented it from allocating production capacity to other customers.

On December 17, 2022, Fareva sent a new force-majeure notice based on supply-chain shortages. Fareva attempted to preserve its ability to argue that force majeure had existed before the date of that notice. The earlier letters Fareva cited were not addressed to the people specified by the agreement and did not provide all the information required by the notice provision.

Motion and analysis

Avon moved for partial summary judgment, asking the court to bar Fareva from relying on force majeure for any breach after May 4, 2020. In the alternative, Avon asked the court to require Fareva to answer discovery requests about its force-majeure defense.

Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment under the law. The court found no genuine dispute that Fareva expressly ended its April 9, 2020 force-majeure notice on May 4. It also found no genuine dispute that Fareva did not properly invoke the force-majeure provision between May 4, 2020, and December 17, 2022.

The court explained that force-majeure clauses are narrowly construed and that, when a contract requires notice, proper notice is necessary to excuse performance. Fareva’s sporadic references to force majeure were insufficient because they were not sent to the required recipients and did not identify the event’s nature or scope, expected duration, or steps to avoid or minimize its effects. The court also treated Fareva’s statements during the litigation that it had not invoked force majeure and that no force-majeure event had occurred as binding judicial admissions.

Ruling and current status

The court granted Avon’s motion for partial summary judgment to the extent that Fareva is barred from invoking a force-majeure defense to excuse any failure to perform its obligations under the agreement between May 4, 2020, and December 17, 2022.

The court reminded the parties of the schedule for supplemental briefing about damages and entitlement to additional discovery. It directed the parties to identify any discovery needed to assess the adequacy of Fareva’s December 17, 2022 force-majeure notice. The Clerk was directed to terminate the open motion at ECF No. 134.