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09/16/88 Jon L. Nordhem Et Al., v. Harry's Cafe

September 16, 1988

JON L. NORDHEM ET AL., PLAINTIFFS-APPELLEES

v.

HARRY'S CAFE, INC., ET AL., DEFENDANTS-APPELLANTS



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION

529 N.E.2d 988, 175 Ill. App. 3d 392, 124 Ill. Dec. 871 1988.IL.1386

Appeal from the Circuit Court of Cook County; the Hon. Thomas E. Hoffman, Judge, presiding.

APPELLATE Judges:

JUSTICE PINCHAM delivered the opinion of the court. LORENZ, P.J., and SULLIVAN, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE PINCHAM

Plaintiffs, Jon Nordhem and William Nordhem, were awarded judgments, by confession, against defendants, Harry's Cafe, Inc., and its board of directors. Thereafter, an order was entered granting plaintiffs' motion to confirm the judgments but denying a motion of defendants to open the judgments and for leave to file a proposed counterclaim. On defendants' appeal therefrom, this court found an abuse of discretion in denying leave to file the counterclaim and remanded with instructions to permit its filing. Nordhem v. Harry's Cafe, Inc. (1983), 116 Ill. App. 3d 933, 452 N.E.2d 626.

The counterclaim subsequently filed alleged, inter alia, that in 1979 plaintiffs opened a booth at a food, beverage and entertainment festival entitled ChicagoFest in the name of Harry's Cafe without the authority of Harry's Cafe and that plaintiffs breached their contract with ChicagoFest, because of which Harry's Cafe was not allowed to participate in ChicagoFest in subsequent years. Following a trial on Harry's Cafe's counterclaim the trial court granted judgment to plaintiffs, Jon and William Nordhem. The trial court concluded, however, that William Nordhem breached his fiduciary duty to Harry's Cafe and assessed damages against the Nordhems in the amount of any net profits earned by the Nordhems at the 1979 ChicagoFest. We affirm.

The sole issue raised on appeal is whether the trial court correctly assessed damages. The facts adduced at trial follow.

Plaintiffs, Jon Nordhem and William Nordhem, were employees and members of the board of directors of the defendant, Harry's Cafe, a combination restaurant and bar in Chicago. In the fall of 1978 the Nordhems, doing business as a partnership entitled The Nordhem Company, applied to the City of Chicago to participate in the 1979 ChicagoFest.

Defendant, Thomas DuBois, the president and a member of the board of directors of Harry's Cafe, testified that at a meeting on August 1, 1979, the board of directors of Harry's Cafe discussed the possibility of operating a booth at the 1979 ChicagoFest. DuBois testified that plaintiff, William Nordhem, advised the board that there was not sufficient time for Harry's Cafe to obtain the approval of the City of Chicago to operate a booth at the 1979 ChicagoFest. The Nordhems further advised the board that the Nordhems were going to operate their own booth at the 1979 ChicagoFest. DuBois informed the board that Harry's Cafe was not to be connected with the Nordhems' booth at the 1979 ChicagoFest. DuBois testified that in 1980 he applied on behalf of Harry's Cafe to participate in the 1980 ChicagoFest and was rejected. DuBois conceded that Harry's Cafe did not apply to participate in ChicagoFest in subsequent years.

Harry's Cafe offered the expert opinion of a certified public accountant, Harvey Gorden, to show that Harry's Cafe would have realized a profit of approximately $73,000 if it had participated in ChicagoFest from 1979 through 1982. Gorden testified that he estimated the costs of operating a booth at ChicagoFest by using factors which were consistent with a "well-operated restaurant." Gorden further testified that his opinion was also based on an analysis of a sample of 19 of the 59 vendors who participated in ChicagoFest from 1979 through 1982. On cross-examination, however, Gorden conceded that he did not know what products these 19 vendors sold and that only 5 of the 19 operations he analyzed were comparable to the Nordhems' operation.

William Drillias, coordinator of the 1979 ChicagoFest, testified on behalf of the defendants, Harry's Cafe. Drillias testified that in 1978 he received a letter of intent from the Nordhems to participate in the 1979 ChicagoFest. In the letter of intent the Nordhems claimed to "have been involved in six food and beverage operations in Chicago during the past eight years the latest of which is Harry's Cafe." Drillias explained to the trial court that he therefore assumed that he was dealing with Harry's Cafe. Drillias testified that all applicants to ChicagoFest were asked to include information in their applications about the restaurants with which they were associated and that any applicant not associated with a restaurant would probably be rejected by the ChicagoFest committee. Drillias testified that the Nordhems' booth was well run and that the only major problem associated with the Nordhems' participation in the 1979 ChicagoFest was that they refused to use the name of Harry's Cafe, but instead used the name "Wisconsin Bratwurst and Foot Long Hot Dogs" initially and thereafter no name was on the Nordhems' booth. Drillias stated that he recommended to the 1980 ChicagoFest committee that the Nordhems' application for the 1980 ChicagoFest be rejected because the Nordhems had not used the name of Harry's Cafe on their booth in 1979 and because the Nordhems were no longer affiliated with Harry's Cafe after 1979., Plaintiff and counterdefendant Jon Nordhem testified that due to excessive costs the Nordhems lost $1,439 at the 1979 ChicagoFest.

The trial court concluded that defendants and counterplaintiffs Harry's Cafe et al., did not substantiate their allegations that the Nordhems had damaged the name and reputation of Harry's Cafe by not keeping complete books and records and by not selling the product they agreed to sell at ChicagoFest. The trial court further noted that since Drillias' only complaint about the Nordhems' participation in ChicagoFest was that the Nordhems refused to use the name of Harry's Cafe in connection with their booth, the Nordhems could not be said to have held themselves out to be Harry's Cafe at the 1979 ChicagoFest as alleged by Harry's Cafe. The trial court stated that the Nordhems may have traded on the name of Harry's Cafe in order to gain admission to ChicagoFest, thus confusing the coordinator, Drillias, but the contracts between the Nordhems and ChicagoFest were between The Nordhem Company, not Harry's Cafe, and the City of Chicago. The trial court concluded also that William Nordhem deceived the board of directors and breached his fiduciary duty to Harry's Cafe by informing the board that there was insufficient time for Harry's Cafe to apply for a booth at the 1979 ChicagoFest while knowing that he had already filed an application with the 1979 ChicagoFest Committee for The Nordhem Company. The damages to Harry's Cafe for such a usurpation of a corporate opportunity, the court concluded, were the net profits earned by the Nordhems, and thus lost by Harry's Cafe, at the 1979 ChicagoFest.

The court ruled that Harry's Cafe failed to meet its burden of proving the net profits of the Nordhems. The trial court found the testimony of Harry's Cafe's accountant, Gorden, incompetent because Gorden merely estimated the costs of operating a booth at ChicagoFest, and while the booth at ChicagoFest was tantamount to operating a hot dog stand for 10 days, Gorden testified that he based his projections on his knowledge of the costs of a "well-operated restaurant." The court also considered Gorden's opinion incompetent because Gorden's projections for the future income of Harry's Cafe at ChicagoFest were "based on a totally fallacious premise," that "merely because 19 companies [only five of which were at all ...


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