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DAROVEC MARKETING GROUP, INC. v. BIO-GENICS

March 16, 1999

DAROVEC MARKETING GROUP, INC., AN ILLINOIS CORPORATION, JOSEPH M. DAROVEC, AND HEATHER L. HARRINGTON, PLAINTIFFS,
v.
BIO-GENICS, INC., A UTAH CORPORATION, D/B/A E'OLA INTERNATIONAL, AND FRED ROGERS, DEFENDANTS.



The opinion of the court was delivered by: Gettleman, District Judge.

    MEMORANDUM OPINION AND ORDER

Plaintiffs Darovec Marketing Group ("DMG"), Joseph Darovec ("Darovec") and Heather Harrington ("Harrington") (together, "plaintiffs") have filed a five count complaint against defendants Bio-Genics, Inc., d/b/a/ E'ola International ("E'ola") and Fred Rogers ("Rogers"), alleging that: (1) defendant E'ola is liable under the Illinois Sales Representative Act for failure to pay sales commissions owed to DMG under a distributorship agreement (Count I); and (2) defendants E'ola and Rogers are liable for libel per se and libel per quod for statements published in an "Official Memorandum" transmitted to other E'ola distributors (Counts II-V).*fn1 Defendants move to dismiss all counts under Fed.R.Civ.P. 12(b)(6), claiming that: (1) DMG is not a "sales representative" as defined by the Sales Representative Act, and therefore may not seek damages under the Act; (2) the Memorandum is not defamatory per se because it does not fit within the recognized actionable per se categories and is subject to an innocent construction; and (3) the Memorandum is not defamatory per quod because plaintiffs have not adequately alleged special damages. In addition, defendant Rogers moves to dismiss under Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction. As discussed below, the motion to dismiss the Sales Representative Act and defamation per quod counts is granted, and the motion to dismiss the defamation per se counts is denied. Rogers's motion to dismiss for lack of personal jurisdiction is denied.

FACTS

In August 1996, DMG became an authorized independent distributor of E'ola's products. The distributorship agreement entitled DMG to compensation under the E'ola Compensation Plan (the "Plan"). The Plan offers distributors several ways to earn compensation. A distributor may glean resale profits from its own personal purchases, and may sponsor other distributors and earn commissions from those distributors' personal purchases.

In December 1997, E'ola unilaterally terminated DMG as a distributor. Following the termination, defendant Rogers authored and transmitted an official memorandum (the "Memorandum") on behalf of E'ola to E'ola's other independent distributors. The Memorandum, dated December 12, 1997, and signed by Rogers, begins as follows:

OFFICIAL MEMORANDUM TO E'OLA INDEPENDENT DISTRIBUTORS

  E'OLA's commitment to honesty, integrity and
  excellent service, have and continue to be the core
  of our Corporate Office values. In this regard, it
  has become necessary to inform you that on December
  2, 1997, E'OLA terminated the distributorship of Mike
  Darovec and Heather Harrington, dba Darovec Marketing
  Group, Inc. of Bloomingdale, Illinois. E'OLA's action
  stems, in part, from numerous E'OLA policy violations
  and blatant disregard for the welfare of their fellow
  Distributors.
  Accordingly, Darovec Marketing Group, Inc. is no
  longer authorized to sell, promote, endorse, in any
  way be affiliated with, or have access to E'OLA and
  its products.

On January 6, 1998, DMG filed an action against E'ola in the Circuit Court of DuPage County, Illinois. Plaintiffs then filed their First Amended Complaint, adding Darovec and Harrington as plaintiffs and Rogers as a defendant. Defendants subsequently removed the action to this court pursuant to 28 U.S.C. § 1441. *fn2

DISCUSSION

I. STANDARDS FOR A MOTION TO DISMISS

In ruling on a motion to dismiss, the court considers "whether relief is possible under any set of facts that could be established consistent with the allegations." Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992). A claim may be dismissed only if it is beyond doubt that under no set of facts would the plaintiff's allegations entitle him to relief. See Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1429-30 (7th Cir. 1996). The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide its merits. See Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). For purposes of a motion to dismiss, the court accepts the factual allegations of the complaint as true and draws all reasonable inferences in favor of the plaintiff. See Travel All Over the World, 73 F.3d at 1428.

II. SALES REPRESENTATIVE ACT CLAIM

In Count I, DMG seeks compensation under the Illinois Sales Representative Act (the "Act") for E'ola's alleged failure to pay commissions, bonuses, and over-rides owed to DMG under the Compensation Plan. The Act provides for exemplary damages not to exceed three times the amount of damages found to be owed to a "sales representative" from a "principal." 820 ILCS 120/3. The Act defines a sales representative as follows:


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