The opinion of the court was delivered by: Shadur, Senior District Judge.
MEMORANDUM OPINION AND ORDER
Although the procedural history of this case is somewhat
tortured, it essentially poses a standard contract dispute that
arrived in this District Court via removal from the Circuit Court
of Cook County on diversity jurisdiction grounds. Each of
Hollymatic Corp. ("Hollymatic") and Daniels Food Equipment, Inc.
("Daniels Food"), in its initial pleadings, alleged that the
other breached the contracts that provided for a
distributor-manufacturer relationship between the companies.
Daniels Food then filed an Amended Counterclaim ("A.Cc.") to add
a Count III that claimed defamation per se by Hollymatic, based
on a sales bulletin that Hollymatic had sent to its dealers about
the conflict between the two companies.
Hollymatic now moves for summary judgment under Fed.R.Civ.P. 56
("Rule 56") on Daniels Food's A. Cc. Count III — the defamation
claim. Both parties have briefed their positions fully, and the
issue is ready for decision. For the reasons set out in this
memorandum opinion and order, Hollymatic's partial summary
judgment motion is denied.
Summary Judgment Standards
Familiar Rule 56 principles impose on a party seeking summary
judgment the burden of establishing the lack of a genuine issue
of material fact (Celotex Corp. v. Catrett, 477 U.S. 317,
322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). For that purpose
this Court must "read the record in the light most favorable to
the nonmoving party," although it "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)). That stance is reflected in the ensuing Facts section.
As for the applicable law, this opinion follows the parties'
treatment that looks to Illinois common law in this diversity
Beginning in early 1996 the relationship between the two
companies soured. Daniels Food president Ed Daniels ("Daniels")
sent a letter to Hollymatic on March 7, 1996 providing the
requisite six-months' notice of his intent to terminate the
agreements (D.Ex. 2*fn2). Following an April 4, 1996 meeting
among Daniels, Hollymatic CEO Jim Azzar ("Azzar") and others
including Hollymatic attorney Peter Tolley ("Tolley"), Tolley
wrote Daniels a letter stating that he was confirming that
Daniels Food had withdrawn its termination notice at that meeting
(D.Ex. 5). Although Daniels testified during his deposition that
he did not agree to withdraw the notice (Daniels Dep. 272-73), he
never responded to Tolley's letter. Instead he asserted in a
post-deposition January 22, 1999 affidavit that he was waiting to
clear things up at a planned June meeting that Azzar later
canceled (Daniels 1999 Aff. ¶¶ 4-6). According to Daniels 1999
Aff. ¶ 7, he kept telling Hollymatic people other than Azzar
(whom he did not want to antagonize) that the exclusive
arrangement would not exist once the six-month notice period ran
For the next year (well past the end of the six-month period)
business between the companies appeared to continue smoothly,
with Daniels Food (as before) continuing to provide all of its
line of products to Hollymatic, although Daniels tried
unsuccessfully to arrange a meeting with Azzar. Then on April 21,
1997 Daniels sent Hollymatic a letter stating that Hollymatic did
not have exclusive rights over Daniels Food's products, as
originally set forth in the March 7, 1996 termination notice
letter (H.Ex. 2). That led to a May 28, 1997 meeting between
Daniels Food and Hollymatic representatives, including both
Daniels and Azzar, which ended shortly after it began because of
contentious disagreements about whether the original contracts
were still in effect.
Immediately after that May meeting Azzar stopped payment on all
Daniels Food invoices. Daniels then told Hollymatic employees
that he would be willing to ship equipment to Hollymatic only if
it was paid for C.O.D. Daniels also started referring all
customers calling with technical questions to Hollymatic, which
had previously preferred to provide the first line of defense on
service issues anyway. In the meantime Hollymatic was having
difficulty with dealers whose orders it could not fill because of
the conflict with Daniels Food.
On August 11, 1997 Hollymatic sent a sales bulletin to its
roughly 60 to 70 exclusive dealers that contained the allegedly
defamatory statement. That letter stated in part (A.Cc.Ex. 2):
Daniels Food Equipment and Hollymatic Corporation are
currently engaged in litigation regarding Daniels
Food Equipment's breach of its manufacturing and
distribution agreements with Hollymatic. As many of
you know, Daniels Food Equipment has refused to honor
technical support, warranty claims and open purchase
orders for Hollymatic, notwithstanding its
It then went on to assure the dealers that Hollymatic was
replacing the Daniels Food line and to remind them of their
exclusivity agreements with Hollymatic, which required them to
get express written consent
from Hollymatic before selling competitive products.
Contract litigation between Hollymatic and Daniels Food had
commenced that summer of 1997, before Hollymatic distributed the
just-quoted sales bulletin. After Daniels Food amended its
previously filed counterclaim on August 6, 1998 to add the Count
III defamation count based on the statement in that bulletin,
Hollymatic responded with three defenses in its motion for
partial summary judgment: (1) the statement in the bulletin was
substantially true and thus cannot be defamatory; (2) ...