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September 4, 1997


The opinion of the court was delivered by: SHADUR

 Time Warner Sports Merchandising ("Time Warner," a division of Time Warner Entertainment Company, L.P.), World Cup '94 Marketing ("World Cup Domestic") and World Cup '94 Marketing International, B.V. ("World Cup International") *fn1" brought this diversity action against Chicagoland Processing ("Chicagoland"). After a good deal of procedural skirmishing, a year later Chicagoland filed an Amended Counterclaim ("ACC"), naming those three plaintiffs and four other organizations as counter-defendants. Chicagoland and all of the counter defendants except Time Warner have since settled their differences, resulting in cross-dismissals of the claims and counterclaims involving those parties. Next this Court granted Chicagoland's motion for judgment on the pleadings against Time Warner's Complaint, so that Chicagoland's ACC against Time Warner states the only remaining claims in the action.

 Now Time Warner has moved for summary judgment against Chicagoland under Fed R. Civ. P. ("Rule") 56. Both sides have submitted the statements called for by this District Court's General Rule ("GR") 12(M) and 12(N), adopted to highlight the existence or nonexistence of any material fact disputes, together with their respective memoranda. At this point Time Warner's motion is fully briefed and ready for decision. For the reasons set out in this memorandum opinion and order, the motion is denied in part and granted in part.

 Summary Judgment Standard

 Under familiar Rule 56 principles, a party seeking summary judgment bears the burden of establishing the lack of a genuine issue of material fact ( Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)). For that purpose "the nonmovant is have all reasonable inferences drawn in its favor," but this Court "is not required to draw unreasonable inferences from the evidence" ( St. Louis N. Joint Venture v. P & L Enters., Inc., 116 F.3d 262, 265 n.2 (7th Cir. 1997)).

 What follows in the Background section is a factual statement drawn from the parties' submissions, with any differences between them resolved in Chicagoland's favor. Facts that fit better into the substantive legal discussion will be set out later.


 In the summer of 1994 the United States hosted the World Cup Soccer Tournament ("Tournament") (T.W. 12(M) P2). *fn2" In anticipation of that event, in 1992 sports merchandising company Time Warner entered into agreements with both World Cup Entities to act as their exclusive worldwide representative in the licensing of certain trademarks and tradenames of the Tournament (id.).

 Chicagoland, *fn3" one of the largest producers of officially licensed sports and entertainment medallions in the United States (id. P4), also became interested in the World Cup market during the same time frame (C. 12(N) P113). In February 1992 its President John Obie ("Obie") met several times with Time Warner's Director of Business and Legal Affairs Paul Epner ("Epner") to discuss obtaining a license to manufacture and sell medallions commemorating the Tournament (id. P116; T.W. 12(M) P10). Chicagoland says that during those meetings Epner made the following representations on behalf of Time Warner: *fn4"

1. Time Warner was the exclusive world-wide licensor for Tournament sponsorship and licenses (C. 12(N) P116).
2. Because Chicagoland would have an exclusive license, no other coins (including money issued by sovereign governments) or medallions would be manufactured using the World Cup words and logo (id. PP116-17).
3. During the previous Tournament in Italy in 1990, Cocepa--which had the comparable right to mint medallions commemorating the event there--did $ 20 million in sales (id. PP116, 119).
4. In addition to the merchandising license, Time Warner controlled the premium license, *fn5" and royalties from sales of premiums to sponsors would more than equal the $ 1 million that Chicagoland would have to guarantee to obtain the exclusive license (id. P116).

 Chicagoland also states that following those meetings, in May 1992 Obie met with Time Warner's Executive Vice President Ralph Irizarry ("Irizarry"), who further assured Obie that Chicagoland's medallion license would be exclusive and that Time Warner through its affiliate Warner Brothers would enforce the license both domestically and internationally (Obie Dep. 147-51).

 Chicagoland then entered into negotiations with Time Warner (representing both World Cup Entities) to manufacture and market medallions bearing the World Cup logo for the Tournament. On July 14, 1992 Chicagoland signed forms of exclusive licensing agreements with each of the World Cup Entities (T.W. 12(M) P20), *fn6" although those agreements had not yet been signed by the latter (C. 12(N) P20).

 In August 1992 Obie learned of plans of the United States Mint ("Mint") also to issue coins commemorating the Tournament (C. 12(N) P155). *fn7" When Obie raised concerns about that development to Time Warner, Epner assured him that the Mint coins would be marketed only domestically and thus would not significantly affect Chicagoland's target of a primarily international market (id. PP155-56). Obie further testified that "early on" he believed the Mint coins would be issued as circulating currency as opposed to commemorative non-circulating coins (id. P157; *fn8" Obie Dep. 575). Just a few months later Chicagoland also learned that several companies were marketing unlicensed medallions in Europe (C. 12(N) P 183). Chicagoland promptly asked Time Warner to write those distributors to enforce Chicagoland's exclusive license (id. PP 183-95).

 Chicagoland began to manufacture and sell Tournament medallions in November 1992 (C. 12(N) P47). Sometime between December 1992 and February 1993 *fn9" the Domestic Agreement was returned to Chicagoland with several alterations, bearing not the signature of World Cup Domestic, the named licensor, but rather those of its two general partners, World Cup USA 1994, Inc. and ISM (Soccer), Inc. (T.W. 12(M) P41). In February 1993 the International Agreement was returned to Chicagoland, again with several altered provisions but this time signed by World Cup International, the named licensor for that agreement (id. P43-46). Although Chicagoland never reexecuted the Domestic Agreement after the insertion of the unilateral changes, it did reexecute the International Agreement by signing on February 1, 1993 under the notation "Amendments to this Agreement agreed and accepted" and by returning the document to Time Warner on March 19, 1993 (id. P46; T.W. App. 425-26).

 Throughout the first half of 1993 Chicagoland received more information about other competing medallions being marketed. It learned that additional European distributors were entering the market and that the Mint would market its coins internationally (C. 12(N) PP188-89). Madison also informed Chicagoland that the words "World Cup" were considered part of the public domain in some places (T.W. 12(M) P81) and that Cocepa's 1990 sales were considerably less than the $ 20 million figure that Time Warner had originally conveyed (Obie Dep. 80-81). Chicagoland asserts that it repeatedly raised those matters with Time Warner, which continued to reassure Chicagoland as to each new problem either with promises of enforcement of the exclusive license or with denials of the reported information (see, e.g., C. 12(N) PP188-89, 194).

 In May 1993 Madison expressed serious concerns about the terms of the Distribution Agreement in light of (1) the emerging picture of apparent nonexclusivity of the license granted to Chicagoland and (2) the inaccurate information regarding Cocepa's 1990 performance (T.W. 12(M) P93). Then in August 1993 Madison and Chicagoland terminated the Distribution Agreement, with Chicagoland being allowed to keep the $ 500,000 deposit (id. PP 94-95).

 Meanwhile, in May 1993 Time Warner granted Chicagoland an extended schedule for making royalty payments under the International Agreement, which extension included a provision stating that "in all other respects license agreement WC-4001 [the International Agreement] shall remain in full force and effect" and was signed by Obie (id. P96; T.W. App. 494). Later, in its efforts to find a replacement for Madison in late 1993 and 1994, Chicagoland exhibited the International Agreement to potential distributors to verify its exclusive license from World Cup International (id. PP97-98). Although Chicagoland did eventually sell a number of medallions for the Tournament (id. 101; Lihota Aff. Table 8), it claims that "the competing medallions and coins, both from the U.S. Mint and various infringers, destroyed Chicagoland's marketing strategy based on limited editions of medallions" (C. Mem. 7).

 Fraudulent Inducement Claim

 ACC Count V is entitled "Common Law Fraud" and alleges that Time Warner made false statements of material fact to Chicagoland upon which Chicagoland relied when it entered the Licensing Agreements, thereby suffering economic losses (ACC PP72-75). Time Warner contends that even if it had made material misrepresentations--a contention that it posits only for purposes of making its waiver argument here--Chicagoland waived its claim of fraudulent inducement by not repudiating the Licensing Agreements after it learned of the assertedly false statements (T.W. Mem. 2-3).

 Before this opinion turns to the merits of the parties' respective positions, it pauses briefly to identify the applicable substantive law. For cases sounding in diversity, the Erie v. Tompkins mandate to look to state law for the substantive rules of decision includes the application of the forum's choice of law doctrines ( Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941) and its numerous progeny). Neither Time Warner nor Chicagoland speaks to that subject--instead each side's memoranda simply cite Illinois internal law. In that situation Wood v. Mid-Valley Inc., 942 F.2d 425, 426 (7th Cir. 1991) instructs district courts to apply the substantive law of the forum. This opinion therefore applies Illinois law to the claims at hand.

 Nearly 35 years ago Eisenberg v. Goldstein, 29 Ill. 2d 617, 622, 195 N.E.2d 184, 186-87 (1963) addressed the issue of waiver in this way:

A person who has been misled by fraud or misrepre-sentation is required, as soon as he learns of the truth, to disaffirm or abandon the transaction with all reasonable diligence, so as to afford both parties an opportunity to be restored to their original position. If, after discovering the untruth of the representations, he conducts himself with reference to the transaction as though it were still subsisting and binding, he thereby waives all benefit of relief from the misrepresentations.

 Time Warner seeks to rely on that language to assert that Chicagoland waived its fraud claim by not disaffirming the Licensing Agreements. But Eisenberg's broadly-stated proposition has been narrowed considerably in the intervening decades, as courts applying the rule have fleshed out the appropriate considerations for determining when a litigant has waived its right to bring a fraud claim.

 Thus the waiver doctrine was described in these terms in Kaiser v. Olson, 105 Ill. App. 3d 1008, 1014, 435 N.E.2d 113, 118, 61 Ill. Dec. 624 (1st Dist. 1981) (citations omitted):

It is a well-established principle that a person defrauded in a transaction may, by conduct inconsistent with an intention to sue for damages for fraud, waive the right to sue. Specifically, waiver will apply if a party, after discovering the alleged fraud and with full knowledge of its material aspects, engages in conduct which is inconsistent with an intention to sue. This is particularly true when the conduct engaged in affords the defrauded party an advantage or misleads or prejudices the opposite party. One is not permitted to lie back and speculate as to whether avoidance or affirmance of a contract will ultimately prove more profitable.

 Lee v. Heights Bank, 112 Ill. App. 3d 987, 995, 446 N.E.2d 248, 254, 68 Ill. Dec. 514 (3d Dist. 1983)(emphasis in original) has added this critical factor to the Kaiser framework:

An additional and essential element is that the injured party intend to affirm the contract and intend to abandon his right to recover damages for the loss resulting from the fraud. The added element of intent places a heavier burden upon the party asserting waiver. The mere passage of time or delay in bringing suit, without more, does not result in waiver. Without proof of intent, a party who relies on the statute of limitations and files his action within that time could unwittingly relinquish his right to sue through no fault of his own. Before we will permit such a result, the party who raises ...

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