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10/05/87 Midland Hotel Corporation, v. the Reuben H. Donnelley

October 5, 1987





515 N.E.2d 61, 118 Ill. 2d 306, 113 Ill. Dec. 252 1987.IL.1489

Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. James S. Quinlan, Jr., Judge, presiding.

Rehearing Denied December 1, 1987.


JUSTICE MORAN delivered the opinion of the court. JUSTICE CUNNINGHAM took no part in the consideration or decision of this case.


Plaintiff, Midland Hotel Corporation, brought suit in the circuit court of Cook County against defendant, The Reuben H. Donnelley Corporation, seeking lost profits arising from the breach of an oral contract to include plaintiff in the first issue of a newly published telephone directory. Following a jury trial, the plaintiff was awarded damages of $500,000. Defendant appealed and the appellate court affirmed as to liability but remanded on the issue of damages, finding that a jury instruction, tendered by the defendant as to damages, was improperly refused. (149 Ill. App. 3d 53.) Appeal is taken to this court pursuant to Rule 315. 107 Ill. 2d R. 315.

The plaintiff raises a number of issues on appeal which from our review of the record we find to be without merit; it is therefore necessary to consider only the following issues: (1) whether there was an enforceable contract to list the plaintiff under the "Hotels" heading in the new directory; (2) whether plaintiff's proof of lost profits was speculative; and (3) whether the trial court properly refused a jury instruction that lost profits must have been within the reasonable contemplation of the defendant when the contract was formed.

The defendant publishes telephone directories which list telephone numbers and display advertisements of businesses under descriptive headings. In July of 1981, defendant issued its first Chicago Visitors Guide and Downtown Directory (the Guide). The 1981 edition of the Guide ran until July of 1982, when a new edition was released. The Guide was intended to serve as a reference material for tourists and business travelers as well as a directory for downtown businesses. It was divided into two sections, the first section contained numerous maps and photos of points of interest in the city of Chicago while the second section consisted of an ordinary Yellow Pages directory for the downtown area. All downtown businesses were to receive one free regular listing in the Yellow Pages section of the Guide. Defendant earned revenue by selling bold-faced listings and display advertisements with rates proportional to the breadth of distribution. Distribution was accomplished by delivering copies to downtown businesses and residents, providing copies to the Chicago Convention and Tourism Bureau and entering into contracts with downtown hotels for lobby distribution and in-room placement by their maid services. Defendant estimated that a total of 160,000 copies of the 1981 Guide had been distributed, with hotel distribution accounting for about half of the total.

In February of 1981, Myron Levy, the plaintiff's general manager, met with Earl Polisky, a representative of the defendant, to discuss distribution of the Guide at the Midland. Levy testified that he agreed to defendant's distribution program and in return Polisky promised that the hotel would receive an outside back-cover ad on all of the Guides which were distributed in the hotel in addition to the "appropriate listings" under the "appropriate" headings in the Guide. Polisky, however, testified that he only offered an outside back-cover ad on all Guides distributed in the hotel in exchange for the distribution service; he denied promising Levy any listings in exchange for distribution. Robert Hughes, defendant's vice-president of sales and marketing, testified that it was defendant's corporate policy to offer only a free back-page ad in exchange for hotel distribution.

When the 1981 Guide was released, the plaintiff was not listed under the "Hotels" heading in the Yellow Pages section; instead, it was listed under "Banquet Rooms." The plaintiff also received the back-page advertisement for the Guides to be distributed in the hotel. In the 1982 and 1983 editions of the Guide, the plaintiff was listed under the "Hotels" heading, "Banquet Rooms" heading and had two listings under the "Restaurant" heading.

The plaintiff sought $1,359,857 in lost net profits from July of 1981 to July of 1984. Net profits from July of 1982 to July of 1984 were sought as the consequence of the residual effect of being omitted from the 1981 Guide. John Jaeger, an accountant and plaintiff's expert witness, testified that the damages figure was arrived at by measuring the variance between the plaintiff's occupancy percentage and the average occupancy percentage of other downtown Chicago hotels as derived from a trade publication entitled, Trends In The Hotel Industry (Trends). Jaeger's calculation of lost occupancy assumed that plaintiff's occupancy percentage would have equaled the downtown Trends average for the three-year period. Jaeger then added the lost revenue from food and beverage sales as well as lost telephone revenue and deducted from this the plaintiff's variable expenses to arrive at the total lost net profits. Defendant's expert witness, James Adler, an accountant, testified that Jaeger's calculation of damages was invalid since it incorrectly assumed that plaintiff's occupancy percentage would have otherwise equaled the downtown Trends average. Adler noted that for numerous months prior to July of 1981, plaintiff's occupancy percentage was trailing the Trends average and that therefore there was no basis for the assumption that the plaintiff would have otherwise equalled the Trends average after July of 1981.

Defendant argues that there was no enforceable contract to list the plaintiff as a hotel. In support of this argument, defendant asserts that there was no credible evidence that defendant promised "appropriate listings," that there was no meeting of the minds between the parties and that the contract was too ambiguous to be enforced.

Defendant argues that there was no credible evidence as to the existence of a contract for "appropriate listings" since the only evidence of such a contract was Levy's testimony and Levy testified that he never discussed the number or placement of the listings in his meeting with Polisky. Defendant reasons that "[i]f the Midland had been offered Yellow Pages listings worth more than $1 million to the Midland, then Mr. Levy certainly would have discussed with Mr. Polisky the Midland's business, services and the available headings and reached an agreement on the number of listings and headings under which the Midland's telephone number would be listed." Moreover, defendant notes Levy's poor recall of the meeting with Polisky and ...

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