The opinion of the court was delivered by: RUBEN CASTILLO
Plaintiffs Celex Group, Inc. and Celebrating Excellence, Inc. (collectively "plaintiffs" or "Celex")
sue The Executive Gallery, Inc. ("Executive Gallery"), alleging federal and common law trademark infringement (counts III and VII, respectively), Lanham Act and common law trade dress infringement (counts I, IV, V [Lanham Act] and VII [common law]), common law unfair competition (count VI), copyright infringement (count II), violation of Illinois' Deceptive Trade Practices Act, 815 ILCS § 510/1 et seq. (count VIII), violation of Illinois' Consumer Fraud and Deceptive Business Practices Act, 815 ILCS § 505/1 et seq. (count VIII), breach of contract (count IX), account stated (count X), and unjust enrichment (count XI). Executive Gallery answered the complaint raising approximately eighteen "defenses"
and counterclaiming against plaintiffs - alleging "tortious interference with business opportunity" (counterclaim count I) and violation of Illinois' Consumer Fraud and Deceptive Business Practices Act (counterclaim count II). Presently before the court are the following motions by Celex: (1) Motion for Preliminary Injunction; (2) Motion to Dismiss [Counterclaims] or Alternatively for Summary Judgment; and (3) Motion for Summary Judgment on Counts IX, X, and XI.
This lawsuit represents the unfortunate but somewhat inevitable fallout from the break-up of what appears to have once been a fairly close - if not, in some ways, symbiotic - commercial relationship between Celex and Executive Gallery. Celex Group, Inc. is an Illinois corporation with its executive offices in Lombard, Illinois. Celebrating Excellence, Inc. is also an Illinois corporation and is a wholly-owned subsidiary of Celex Group, Inc. Executive Gallery is an Ohio corporation with its principal place of business in Columbus, Ohio.
Celex sells motivational wall and desk products, business-oriented motivational books, desk accessories, stationary and clothing. Celex sells its products through retail stores, direct mail catalogs and magazine advertisements for telephone or mail order. In 1988, Celex released its first Celebrating Excellence catalog and distributed it by mail; Celex now mass mails its catalogs. In 1991, Celex opened its first retail SUCCESSORIES store.
present there are more than sixty company owned and franchised stores and outlets. The stores sell Celex's proprietary product lines as well as an assortment of self-improvement products purchased wholesale from other vendors. Executive Gallery was one of the vendors that sold products to Celex's retail stores.
Executive Gallery's first business transaction with Celex was to purchase Celex wall plaques at wholesale and then resell them through direct mail advertisements in airline magazines. Thereafter, from 1990 through 1993, Celex and Executive Gallery continued to purchase each other's products and advertise them in their respective catalogs and other marketing channels - generally without attribution as to source.
Additionally, Executive Gallery included Celex products in its airline magazine advertisements. Executive Gallery's president Dwayne Williams characterized the relationship between Executive Gallery and Celex as "a close, mutually beneficial and sharing relationship," D. Williams 7/8/94 Aff. P 9, and Celex executives similarly characterized the relationship as "cooperative" and a "relationship of trust," Sexton Dep. at 59, 190, and a "sharing relationship," McKee Dep. at 101. However, despite these suggestive references, there was no partnership agreement (or other type of enterprise agreement) governing the relationship between these parties who were simultaneously competitors and wholesale vendors and customers of each other.
In addition to buying and reselling each other's products, Celex and Executive Gallery entered into a number of agreements whereby they shared advertising mailing costs and, on some occasions, shared advertising space.
For instance, on several occasions Executive Gallery sold advertising space in its on-board airline magazine inserts to Celex. Celex controlled the content of the advertising space which it purchased from Executive Gallery and Celex's order forms accompanying its advertisements identified the source of its products as either "SUCCESSORIES" or "CELEBRATING EXCELLENCE." In such instances, customers purchased products directly from Celex. On at least one occasion in which the parties shared advertising space (viz., November 1990 Success Magazine), the cover page of the parties' shared advertising space advertised both parties' products under the "Successories" name.
Executive Gallery and Celex also frequently shared advertising photography and copy; and, Executive Gallery developed advertising for Celex. For example, Celex uses the following slogan, written by Executive Gallery to promote its "Corporate Impressions" posters: "First Class Imagery For Your Company Walls."
Celex and Executive Gallery made several attempts to reach agreements governing various aspects of their relationship - including the "sensitive" issue of exclusive advertising rights for Executive Gallery. On June 26, 1991, Dwayne Williams sent Mac Anderson a proposed distributorship agreement covering a five year term. In pertinent part, the letter provides:
This letter will confirm our understanding regarding Executive Gallery, Inc. ("EGI") continuing to serve as a distributor for Celebrating Excellence ("CE").
During the term of this continuing relationship, EGI will serve as a distributor for CE with the right to advertise, market and sell through EGI's marketing channels all of the products advertised, marketed or sold by CE ("CE Products"). This right shall be exclusive to EGI, and thus CE shall not, and shall not authorize others, to advertise, market or sell CE Products in the following markets:
2. Airline magazines, magazine inserts and other materials distributed through the airline companies and designed for marketing goods to airline travelers.
Celex's Facts I, Ex. 10.
The letter ends with a request that Anderson confirm his agreement to the terms by signing and returning a copy of the letter. Anderson never signed the letter. Notwithstanding Executive Gallery's admission that Anderson never signed the letter, see Ex. Gallery's Facts I P 21, Dwayne Williams maintains that Anderson told him that he agreed with the terms of the letter, see D. Williams 4/11/94 Dep. at 72; D. Williams 7/8/94 Aff. P 17, and he further maintains that "On numerous occasions during the period from 1991 through 1993," Neil Sexton and Peter Walts - Celex's Senior Vice President of Direct Marketing and Celex's Senior Vice President of Business Development, respectively - as well as Anderson "each reaffirmed to me that as between the two companies, Executive Gallery had exclusive rights to advertise in the airlines." D. Williams 7/8/94 Aff. P 17. Anderson denies ever telling Dwayne Williams that Executive Gallery could have exclusive airline advertising rights relative to Celex. Anderson Dep. at 448.
Subsequently, on October 26, 1992, Anderson sent Dwayne Williams a copy of an agreement setting out the terms governing the parties' relationship for the period October 1, 1992 to December 31, 1993. Celex's Facts I, Ex. 11. Anderson's proposed agreement, which contained no provisions granting Executive Gallery exclusive advertising rights, was not signed by Williams. See Anderson Dep. at 452. Additionally, Anderson testified during his deposition that shortly after sending Williams the agreement in October of 1992, he explained to Williams that Celex wished to retain flexibility with respect to its ability to advertise in airlines and for that reason Celex would not agree to exclusive advertising rights for Executive Gallery.
Meanwhile, the parties were increasingly becoming competitors both for the sale of the same Celex products and because Executive Gallery was beginning to offer its own line of wall decor and other motivational products which competed with Celex's motivational products. In February of 1992, Executive Gallery created its "Productivity" series of posters and throughout 1992 and 1993 it created seven additional lines of motivational posters that competed with Celex's Corporate Impressions (R) line of motivational lithographs.
The Corporate Impressions(R) line is sold by Celex through its SUCCESSORIES catalog and the SUCCESSORIES retail stores. From its introduction in 1992 to the end of 1993 the Corporate Impressions (R) line was also sold at wholesale to Executive Gallery and others. Executive Gallery advertised the line through the Executive Gallery catalog and through Executive Gallery airline and other magazine advertisements. Throughout 1993, and perhaps earlier, Celex had expressed concern about the fact that both parties' catalogs carried some of the same products.
Another area of discord between the parties was Executive Gallery's refusal, despite Celex's repeated requests, to put references to SUCCESSORIES in Executive Gallery advertisements for Celex products. Indeed, the October 1992 agreement sent by Anderson to Dwayne Williams - and rejected by Williams - contained provisions requiring Executive Gallery to include references to SUCCESSORIES stores in its airline advertisements and catalogs.
By the summer of 1993, the number of Celex's retail stores greatly increased and Executive Gallery had definitively communicated to Celex that it would not include references to SUCCESSORIES stores in its airline advertisements which included Celex products. Accordingly, Celex determined that, after a suitable period of time related to the life of outstanding catalogs and advertisements, Celex would no longer sell its existing product lines to Executive Gallery or any other competitive catalog retailer unless that competitor agreed to include the SUCCESSORIES mark and logo. Celex also determined that in addition to its retail stores, catalog sales, and magazine advertising, it would sell wholesale to, and advertise in, SkyMall - an airline advertising catalog distributed in the seat back pockets of airplanes.
On July 15, 1993, Dwayne Williams met with Anderson for lunch in Chicago. At that time, Anderson proposed acquiring a partial or total ownership interest in Executive Gallery. The two also discussed differentiating their catalog products no later than January 1, 1994. Later that day, Anderson confirmed his discussion with Williams in a letter indicating that as of January 1, 1994, Celex would "keep [its] existing product line (i.e., wall decor, books) for the Successories catalog" but that Celex would "create new lines to sell exclusively to The Executive Gallery and [Celex's] retail stores only." Five days later, Celex confirmed with SkyMall its intention to advertise in the Fall 1993 SkyMall publications. SkyMall agreed to purchase Celex products at wholesale and to advertise those products with the SUCCESSORIES mark.
On July 28, 1993, Dwayne Williams and Neil Sexton, Celex's Senior Vice President of Direct Marketing, met at Williams' cabin. During that visit, Sexton brought to Williams' attention the fact that Peter Walts and Mac Anderson were exploring the idea of advertising in SkyMall; however, Sexton also indicated that he was not involved in that process and was not sure how far Walts and Anderson would go with it.
At some time prior to August 2, 1993, Dwayne Williams conveyed to his father Marvin - Executive Gallery's chief executive officer - the substance of his conversations with Anderson and Sexton; specifically, Williams told his father of Anderson's merger proposal; Anderson's proposal to differentiate Celex and Executive Gallery's products by January 1, 1994; and that Sexton had communicated, in confidence, that Celex was considering advertising in SkyMall. On August 2, 1993, Marvin Williams sent Anderson a response to Anderson's letter of July 15, 1993, expressing his agreement that the two parties should work toward the January 1, 1994 timetable proposed by Anderson but requesting Anderson's commitment to continue furnishing Executive Gallery with product in the early part of 1994 so as to enable Executive Gallery to fill orders resulting from catalog and airline advertising already scheduled for late 1993.
Marvin Williams met with Anderson in early August of 1993, at which time they discussed the possibility of a merger and differentiation of the two companies' products. In his deposition testimony, Marvin Williams stated that although Celex's advertising in SkyMall would have a "very serious" material impact on Executive Gallery, he did not raise the issue with Anderson during the August meeting because he believed it to be a rumor passed by Sexton in confidence and he did not want to jeopardize Sexton. M. Williams Dep. at 102, 105, 107. Williams also stated that he did not raise the issue because it was a very good, open, detailed meeting in which Anderson was "sharing . . . all sorts of things that would be considered very detailed and confidential . . . and I did not feel it was appropriate, in view of the progress of the meeting, to get into that subject, because it was obviously not true, because he would have said something about it if it were." Id. at 102-03. Anderson did not raise the issue.
In mid-August 1993, Executive Gallery, through Dwayne Williams, placed a series of purchase orders with Celex for a variety of Celex products in the total amount of $ 695,706.25
at wholesale prices of 75% of the retail price and with a 120-day payment term. The order - the largest order Executive Gallery had ever placed with Celex - was made with the knowledge and consent of Marvin Williams.
In his deposition testimony, Dwayne Williams testified that Sexton's disclosure relating to Celex's exploration of advertising in SkyMall was not material to his decision to issue the order. D. Williams Dep. at 151-52. In his subsequent affidavit, Dwayne Williams explained that it was not material because his father, Marvin, had met with Anderson in early August "and was convinced that the rumor was just that, a rumor, and that Anderson did not truly intend to advertise in the airlines against us." D. Williams 7/8/93 Aff. P 30.
On September 16, 1993, Anderson informed Dwayne Williams by letter that Celex would be advertising its products in SkyMall beginning in October 1993. Marvin Williams responded to Anderson's letter on October 11, 1993, stating that he was "surprised" by the decision and that he felt "deceived" and "betrayed."
After September 1993 and through December 1993, Executive Gallery made significant payments to Celex on the August 1993 purchase orders; there remains, however, a substantial unpaid balance. In a letter dated February 3, 1994, from Executive Gallery's counsel to Celex's corporate attorney - apparently in response to a letter of January 24, 1994, sent by Celex's corporate attorney to Dwayne Williams regarding alleged infringement of some of Celex's products by some of Executive Gallery's products - Executive Gallery's counsel conceded that Executive Gallery owes Celex money but was going to withhold payment:
Despite your statement that you do not wish to institute any legal proceedings, that threat is certainly implicit in your message and your past history on the litigation front in this area gives my client good cause for concern that you may choose to use the courts to bully my client into unwarranted submission. Any such legal battle could be damaging to my client, damages for which my client will hold you responsible. Accordingly, my client wishes to resolve this matter before continuing to make payments it owes to Celex, so that if Celex chooses to pursue this matter and cause my client damages my client will have the ability to easily offset those damages without protracted litigation to recover them. We therefore must have your commitment on this before further payments are made.
Celex's Facts I P 60, Ex. 28, 2/3/94 letter to T. Dillon from D. Maher (emphasis added). Celex brings this lawsuit, among other reasons discussed later in this opinion, to recover payment on Executive Gallery's outstanding balances. See Compl., counts IX (breach of contract), X (account stated), and XI (unjust enrichment). Celex's motion for summary judgment on these counts is one of the motions presently before the court.
In response to Celex's lawsuit, Executive Gallery has counterclaimed against Celex alleging tortious interference with business opportunity (counterclaim count I) and violation of Illinois' Consumer Fraud and Deceptive Business Practices Act (counterclaim count II). The core of Executive Gallery's tortious interference count relates to Celex's entry into the airline advertisement marketing channel. In particular, Executive Gallery contends that by "invading" Executive Gallery's allegedly exclusive airline advertising province, Celex intentionally interfered with Executive Gallery's business expectancies with its past and prospective customers. Executive Gallery's deceptive business practices count also relates to Celex's decision to advertise in the airline advertising channel. Specifically, Executive Gallery accuses Celex of accepting Executive Gallery's $ 700,000.00 order under false pretenses by deliberately concealing the fact that it had arranged to advertise the same products in airline pockets thereby capturing and reducing the sales contemplated by Executive Gallery. Celex moves for summary judgment on both of these counterclaims.
The court shall address the counterclaim counts in turn.
Summary Judgment Standards
Summary judgment is proper only if the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). A genuine issue for trial exists only when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The court must view all evidence in a light most favorable to the nonmoving party, Valley Liquors, Inc. v. Renfield Importers, Ltd., 822 F.2d 656, 659 (7th Cir.), cert. denied, 484 U.S. 977, 98 L. Ed. 2d 486, 108 S. Ct. 488 (1987), and draw all inferences in the nonmovant's favor. Santiago v. Lane, 894 F.2d 218, 221 (7th Cir. 1990). However, if the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. Liberty Lobby, 477 U.S. at 249-50; Flip Side Productions, Inc. v. Jam Productions, Ltd., 843 F.2d 1024, 1032 (7th Cir.), cert. denied, 488 U.S. 909, 102 L. Ed. 2d 249, 109 S. Ct. 261 (1988). In determining whether a genuine issue exists, the court "must view the evidence presented through the prism of the substantive evidentiary burden." Liberty Lobby, 477 U.S. at 254. In making its determination, the court's sole function is to determine whether sufficient evidence exists to support a verdict in the nonmovant's favor. Credibility determinations, weighing evidence, and drawing reasonable inferences are jury functions, not those of a judge when deciding a motion for summary judgment. Liberty Lobby, 477 U.S. at 255.
We begin our analysis of the merits of Celex's motions for summary judgment by considering Executive Gallery's counterclaims. Thereafter, we turn to Celex's motion for ...