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S & F Corp. v. American Express Co.





APPEAL from the Circuit Court of Cook County; the Hon. NATHAN M. COHEN, Judge, presiding.


Rehearing denied June 2, 1978.

This is an interlocutory appeal taken from certain orders of the circuit court of Cook County which entered and continued in effect a preliminary injunction preventing defendant, American Express Company (American Express), from terminating a written restaurant agreement with plaintiff, S & F Corporation (S & F). On appeal, defendants, American Express and Joyce B. Clegg, an employee of American Express, contend that: (1) there were insufficient allegations in the complaint of S & F to sustain the granting of a preliminary injunction; (2) the circuit court erred in denying the oral motion of American Express to dissolve the preliminary injunction; (3) the injunction orders entered by the circuit court were procedurally inadequate; and, (4) the preliminary injunction wrongfully enforces a totally new contractual relationship between S & F and American Express.

We find the complaint filed by S & F was legally insufficient to justify the granting of preliminary injunctive relief. Accordingly, we reverse the orders which entered and continued in effect the preliminary injunction.

On May 28, 1976, S & F and American Express entered into a restaurant agreement pertaining to an establishment called "The Basement" at 874 N. Wabash Avenue, Chicago, Illinois. "The Basement" also does business as the "Candy Store," a nude dancing parlor which serves only soda pop and near beer.

The contract provided that S & F agreed "to permit Cardmembers to charge purchases of restaurant services at your establishment(s)" subject to enumerated conditions. It further stated: "In case that you [S & F] own and operate two or more establishments, American Express shall assign to each establishment a unique service establishment number. You [S & F] shall submit all Charges from each such establishment according to its respective service establishment number." Under the heading "Term of this Agreement" the contract provided:

"This Agreement shall supersede any previous Agreement between us concerning the same subject and shall become effective when the enclosed copy of this letter, signed on your behalf, is received at our New York office. This Agreement may be terminated by either of us at any time by written notice. Unless we advise you of an earlier termination date, no such termination shall become effective until the distribution of the next Card Directory listings or any other promotional material listing service establishments from which your establishment can be deleted, or six months from the time the notice of termination is given, whichever is earlier, and you agree to honor Cards until such termination becomes effective." (Emphasis added.)

On May 4, 1977, Joyce B. Clegg, an employee of American Express and a defendant herein, sent a written notice of termination which was admittedly received by S & F, indicating that the restaurant agreement would terminate on May 13, 1977.

On May 17, 1977, the circuit court, based on S & F's emergency petition and verified complaint against American Express for injunctive relief and related damages, entered an ex parte temporary restraining order enjoining American Express from terminating S & F's credit card privileges. On May 25, 1977, the restraining order was continued in effect. American Express then removed the action to the Federal district court. Thereafter S & F amended its complaint, adding Illinois residents Joyce B. Clegg, Harris Trust and Savings Bank and Cosmopolitan National Bank as defendants. *fn1 On June 24, 1977, the case was remanded from the Federal district court to the circuit court of Cook County.

Count I of the amended complaint, seeking injunctive relief, alleged, inter alia, that defendants had created a demand for credit card services; that S & F required these services in order to compete in its industry; that defendants had encouraged S & F to use credit card services and had a duty to treat S & F equally and fairly; that in violation of this duty, defendants had conspired to terminate credit card services to S & F; and, that the termination of S & F's credit card privileges would put S & F out of business. In count II S & F again set forth the above allegations and further stated that by terminating its credit card services, American Express had slandered and defamed S & F's business reputation, and S & F requested appropriate injunctive relief. Count III sought related compensatory and punitive damages. A copy of the agreement was attached to the complaint.

• 1 After the case was remanded from the Federal district court, and in response to S & F's petition for a rule to show cause and request that the temporary restraining order previously entered be reinstated and continued in effect, the circuit court, on June 28, 1977, entered a preliminary injunction *fn2 requiring American Express "to honor and pay all charges submitted to it by [S & F] from May 13, 1977 until further order of court."

Defendant, American Express, thereafter answered the complaint denying all material allegations and affirmatively alleging that the restaurant agreement was terminable at will upon written notice and that the establishment operated by S & F offered no restaurant services.

A hearing was held on July 12, 1977, at which time American Express asked leave to present several witnesses out of the regular order of proof. Sidney Finzelber, president of S & F, was called as an adverse witness by American Express. He testified that S & F used the name "The Basement" as a trade name for its checking account in connection with the establishment covered by the restaurant agreement. However, the name "Candy Store" appeared on the marquee outside the building and in all advertising for the establishment. The "Candy Store['s]" bill of fare included only soft drinks and near beer.

Michael Kidd, district manager of American Express, explained the "negative float" procedure followed by American Express in processing charges. On cross-examination he stated that to his knowledge American Express had not sustained a loss due to charges processed through S & F, although several card members had contested bills from the "Candy Store." American Express had realized a substantial commission under its contract with S & F. Both Kidd and Joyce B. Clegg testified that they had no contact with ...

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