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GRUEN MKTG. CORP. v. BENRUS WATCH CO.

February 27, 1997

GRUEN MARKETING CORPORATION, Plaintiff,
v.
THE BENRUS WATCH COMPANY, INC., HAMPDEN WATCH CO., INC., IRVING WEIN, JOSEPH WEIN, and JIM HERBERT, Defendants.



The opinion of the court was delivered by: HART

 Gruen Marketing Corporation ("Gruen") brings this action against defendants Benrus Watch Company, Inc. ("Benrus"), Hampden Watch Co., Inc. ("Hampden"), Irving Wein, Joseph Wein and Jim Herbert. Gruen alleges that defendants violated the Lanham Act, 15 U.S.C. §§ 1114, 1125(a), the Illinois Deceptive Trade Practices Act, 815 ILCS 510/2, the Illinois Consumer Fraud and Deceptive Practices Act, 815 ILCS 505/2 and Illinois common law. Defendants move to dismiss Gruen's complaint. *fn1"

 I. ALLEGED FACTUAL BACKGROUND

 Gruen, a Delaware corporation, is in the business of merchandising various products, such as watches, to major retailers and others. Benrus, a Delaware corporation, also sells watches and is the registrant for the trademark BENRUS. Hampden, a U.S. Virgin Islands corporation, assembles and sells watches for Benrus. Irving Wein controls Hampden and his son, Joseph Wein is a shareholder and officer of Benrus. Jim Herbert is a former Benrus employee.

 Until June 1995, Benrus had sold its watches both with and without the BENRUS trademark. The watches not bearing the BENRUS trademark were sold as either personalized watches or private label watches. Personalized watches are sold by retailers with custom changes to the watch dial. Private label watches bear trademarks or logos of third parties, such as retailers.

 Despite its contractual obligations, Benrus did not discontinue using the BENRUS mark. Benrus and Irving Wein continued to use the BENRUS mark on Benrus letterhead and in other written materials. Benrus has sold watches bearing the BENRUS mark after the effective date of the License Agreement. The inventory delivered to Gruen pursuant to the Purchase Agreement was not of merchantable quality or salable in the ordinary course of business, despite Benrus' express representations and warranties to the contrary in the Purchase Agreement.

 At a watch industry trade show in Hong Kong in September 1996, Joseph Wein stated to vendors and actual and potential customers of Gruen that Gruen is insolvent and unable to fulfill orders for BENRUS watches. Irving Wein has also made these representations, as well as has stated that, in the future, Benrus will continue to sell BENRUS watches. In fact, Gruen is not insolvent and has substantial financial backing. Gruen's representatives have spent considerable time and effort to correct Irving and Joseph Wein's representations. In October 1996, Benrus diverted a shipment of watch cases from Gruen to itself. Benrus was able accomplish the diversion by using information learned as a result of its position as licensor of the BENRUS mark.

 Irving Wein and Jim Herbert are former Benrus employees who became Gruen sales agents after the execution of the agreements between Benrus and Gruen. Benrus owed one of its customers a credit for returned BENRUS watches sold prior to the execution of the agreements. Joseph Wein directed the customer to apply the credit against invoices for watches purchased from Gruen. Jim Herbert persuaded certain Gruen customers to purchase Benrus's private label watches, although Herbert was working for Gruen at the time.

 On November 12, 1996, Gruen filed its seven-count complaint. Counts I, II, III, V and VI are brought against all defendants. Count IV is brought against Benrus. Count VII is brought against Joseph Wein and Jim Herbert. In Count I, Gruen alleges that defendants are liable for trademark infringement because they sold watches bearing the BENRUS trademark and otherwise used the BENRUS mark after the effective date of the License Agreement. 15 U.S.C. § 1114. In Count II, Gruen asserts that defendants' use of the BENRUS mark constitutes false designation of origin in violation of 15 U.S.C. § 1125(a) ("Section 43(a)"). In Count III, Gruen alleges that defendants have "passed off" their watches as Gruen's BENRUS watches in violation of the Illinois Deceptive Trade Practices Act, 815 ILCS 510/2. In Count IV, Gruen contends that Benrus breached the Purchase Agreement by misrepresenting the quality and nature of the goods Gruen purchased from Benrus. In Count V, Gruen contends that defendants are liable for tortious interference with contract because they induced Gruen's customers to cancel their purchase orders with Gruen. In Count VI, Gruen contends that defendants are liable under the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2, for misrepresenting the value of the BENRUS mark and Benrus's intent to assist Gruen in exploiting and developing the BENRUS mark during the negotiation of the License and Purchase Agreements. In addition, Gruen alleges that defendants are liable under Count VI for misrepresentations made regarding Gruen's financial condition and ability to fill orders. In Count VII, Gruen asserts that Jim Herbert and Joseph Wein breached their fiduciary duty to Gruen and misappropriated corporate opportunity while acting as Gruen's sales agents. Defendants move to dismiss Gruen's complaint.

 II. DISCUSSION

 On a motion to dismiss, plaintiff's well-pleaded allegations of fact are taken as true and all reasonable inferences must be drawn in plaintiff's favor. Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 164, 122 L. Ed. 2d 517, 113 S. Ct. 1160 (1993); Swofford v. Mandrell, 969 F.2d 547, 549 (7th Cir. 1992). A complaint need not set forth all relevant facts or recite the law, all that is required is a short and plain statement showing that the party is entitled to relief. Fed. R. Civ. P. 8(a); Doherty v. City of Chicago, 75 F.3d 318, 322 (7th Cir. 1996). A plaintiff in a suit in federal court need not plead facts; conclusions may be pled as long as the defendant has at least minimal notice of the claim. Fed. R. Civ. P. 8(a)(2); Jackson v. Marion County, 66 F.3d 151, 153-54 (7th Cir. 1995). The complaint need not specify the correct legal theory nor point to the right statute. Bartholet v. Reishauer A.G. (Zurich), 953 F.2d 1073, 1078 (7th Cir. 1992). Dismissal of the complaint is proper only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his or her claim that would entitle the plaintiff to relief. Doherty, 75 F.3d at 322; Roots Partnership v. Lands' End, Inc., 965 F.2d 1411, 1416 (7th Cir. 1992).

 A. Count I - Trademark Infringement

 In Count I, Gruen alleges that defendants are liable for trademark infringement because they used the BENRUS mark after the effective date of the License Agreement. Defendants argue that Gruen, as a licensee of Benrus, lacks standing to assert a claim under the Lanham Act. Gruen responds that it has standing because the ...


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