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ILLINOIS BELL TEL. v. REUBEN H. DONNELLEY CORP.

July 10, 1984

ILLINOIS BELL TELEPHONE CO.
v.
THE REUBEN H. DONNELLEY CORP.



The opinion of the court was delivered by: Nordberg, District Judge.

  MEMORANDUM OPINION AND ORDER

This case involves the potential business "divorce" of the long standing marriage of Illinois Bell Telephone ("IBT") and the Reuben H. Donnelley Corporation ("RHD"). For over 60 years these companies have jointly produced telephone directories in Illinois. The instant dispute revolves around two current contracts governing publication of telephone directories: (1) an August 26, 1975 agreement, entitled "Publishing Agreement" ("Directory Agreement"), as amended, which provides that RHD is to publish

  Yellow Pages in telephone directories of the
  Telephone Company . . . certain types of
  advertising in the alphabetical sections of such
  telephone directories of the Classified Telephone
  Directories and . . . neighborhood directories
  comprised of groupings of areas and districts
  within Chicago ["The Directories"] and in formats
  agreed to between the parties hereto. . . .
  Street Address Directories for Chicago and for
  such cities and towns or groups of such cities
  and towns outside of Chicago served by the
  Telephone Company ["ATD Directories"]. . . .

These directories are used frequently by many residents of the Northern District of Illinois. The Yellow Pages have become an invaluable tool to many businesses and consumers.

IBT Action — 83 C 8449

On November 22, 1983 in the midst of negotiations to renew the contracts governing production of these directories, IBT notified RHD by letter that IBT was cancelling both agreements pursuant to their terms. In accordance with its interpretation of the contracts, IBT also made certain demands upon RHD which are set forth in general summary form as follows: IBT demanded that RHD (A) immediately turn over to IBT all records pertaining to the Directories and the ATD Directories, (B) deliver these records organized in the form and manner in which they are currently filed or maintained, (C) refrain from making or retaining copies of any records pertaining to The Directories and the ATD Directories except copies used in publication of a particular directory that RHD is obligated to publish prior to November 22, 1984, the effective date of termination, (D) immediately assign to IBT all unexpired contracts for advertising beginning with the December, 1984 Directories, the January, 1985 Chicago Directories, and all Directories to be published thereafter, (E) immediately allow IBT to assume any and all RHD leases used in the publication of The Directories and/or the ATD Directories, except assignment of leases needed by RHD in publishing directories prior to November 22, 1984, the effective date of termination, (F) immediately begin negotiations for the sale to IBT of any or all equipment or fixtures used in connection with publishing The Directories or the ATD Directories for which RHD has no further need, (G) after November 22, 1984 discontinue publishing The Directories and refrain from publishing directories similar to The Directories or the ATD Directories, (H) immediately reproduce and deliver to IBT a copy of any or all programs, etc., which are part of the computer software developed by IBT and/or RHD for the purpose of compiling and/or composing The Directories, (I) avoid interfering with any offer of employment by IBT to any RHD employee engaged in the publication of The Directories or the ATD Directories, (J) immediately assign to IBT any and all expired leases for the ATD's on hand at the date of termination of the ATD Agreement, (K) deliver to IBT the equipment to which IBT is entitled under Clause 19 of the ATD Agreement, and (L) award IBT reasonable attorneys' fees and costs.

Anticipating that RHD would not agree with its interpretation of the contracts, IBT filed suit against RHD seeking specific performance of its demands and moving for summary judgment on its complaint. RHD moved to dismiss.

For the reasons hereinafter stated, this Court finds that IBT is not entitled to specific performance of its demands. Therefore, its motion for summary judgment is denied. This Court also concludes that even taking the allegations of the complaint as true and construing the complaint in the light most favorable to IBT, it can prove no set of facts entitling it to the relief it seeks. Therefore, RHD's motion to dismiss is granted. Plaintiff is granted leave to file an amended complaint within 28 days. While the Court has thoroughly considered all of the arguments of both parties in reaching its determination, it will discuss only those arguments necessary to explain its present decision, which will not be dispositive of this case.

Clause

21 — Termination — Directory Agreement

Clause 21, last amended in 1979, provides:

CLAUSE 21 — TERMINATION

    The Telephone Company shall notify Donnelley in
  writing not less than ninety (90) days prior to
  the effective date of any such termination,
  whether it intends to have an assignment of such
  existing agreements or to enter into new
  agreements as aforesaid.
    Upon termination of this agreement, at any time
  and for any reason, Donnelley shall upon request
  turn over all records pertaining to The
  Directories and assign to The Telephone Company
  any and all unexpired contracts for advertising
  in said directories effective for the issue
  following the termination date, and The Telephone
  Company shall have the right (1) to offer
  employment to any Donnelley employees engaged in
  publication of The Directories, (2) to assume any
  or all leases covering floor space, and (3) to
  purchase from Donnelley at a price mutually
  agreed upon at the termination date, any or all
  equipment and fixtures used in connection with
  publishing said directories and for which
  Donnelley has no further need.
    Upon termination of this agreement, Donnelley
  shall discontinue publishing The Directories and
  The Telephone Company shall pay and Donnelley
  hereby agrees to accept as payment therefor all
  reasonable expenses incurred in such
  discontinuance, including but not limited to
  expenses incurred in termination of any and all
  leases, disposition or sales of fixed assets, and
  termination of employees. In addition to the
  foregoing, The Telephone Company shall pay the
  total costs provided in Clause 6 item (2) of this
  agreement, in connection with publication of the
  issues which terminate this agreement, and in
  consideration thereof, Donnelley waives all
  rights to receive the revenues from advertising
  sold in such issues.
    Upon termination of this agreement, all
  reserves provided for in this agreement shall be
  terminated and (1) any credits in such reserves
  shall be paid by Donnelley to The Telephone
  Company, and (2) any debits in such reserves
  shall be paid by The Telephone Company to
  Donnelley.

Clause 19 and Clause 1 of the ATD Agreement contain language similar to Clause 21 and Clause 1 of the Directory Agreement. These clauses similarly provide that either party may cancel by giving prior written notice one year in advance of the effective date and that IBT ...


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