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BALDWIN PIANO, INC. v. DEUTSCHE WURLITZER GMBH

August 4, 2003

BALDWIN PIANO, INC., PLAINTIFF,
v.
DEUTSCHE WURLITZER GMBH D/B/A WURLITZER JUKEBOX COMPANY, DEFENDANTS



The opinion of the court was delivered by: James Zagel, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff and counter-defendant Baldwin Piano, Inc. ("Baldwin") is the owner of several federally registered "Wurlitzer" trademarks. For several years, defendant and counter-plaintiff Deutsche Wurlitzer GMBH ("DW") has manufactured, advertised, marketed, and sold various products bearing the Wurlitzer trademarks pursuant to a 1985 License Agreement. On March 24, 2003, Baldwin notified DW that the Agreement was being terminated immediately, that further use of the Wurlitzer trademarks by DW would be unauthorized, and that a complaint would be filed that day and served to protect its rights, which Baldwin subsequently did. In response, DW filed its Answer, Affirmative Defenses and Counterclaim, in it which asserts three claims against DW for breach of contract and implied covenant of good faith and fair dealing (Count I), unjust enrichment (Count II), and abuse of process under Illinois law (Count III).*fn1 Baldwin now moves to dismiss the Counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6). In considering a motion to dismiss, all well-pleaded allegations are taken as true, with the facts viewed in the light most favorable to the pleader. Wolfolk v. Rivera, 729 F.2d 1114, 1116 (7th Cir. 1984). [ Page 2]

Dismissal is proper if "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spaulding, 467 U.S. 69, 73 (1984).

Count I: Breach of Contract and Implied Covenant of Good Faith and Fair Dealing

In Count I, DW alleges that by attempting to terminate the License Agreement for reasons other than material breach, Baldwin breached the contract and the implied covenant of good faith and fair dealing In response, Baldwin argues that the Agreement was terminable at will because it was of infinite duration and that its termination of the license could thus not constitute a breach of contract.*fn2 Under Illinois law, "contracts of indefinite duration are terminable at the will of either party." Jespersen v. Minnesota Mining and Mfg. Co., 700 N.E.2d 1014, 1016 (Ill. 1998). "An agreement without a fixed duration but which provides that it is terminable only for cause or upon the occurrence of a specific event is . . . terminable only upon the occurrence of the specified event and not at will." Id (emphasis in original).

The Agreement here addresses termination as follows:

13. Except as herein provided, and as provided in Article 14 hereof, this Agreement shall continue in force without limit of period but may be cancelled by the Licensor for material breach. In the event of Licensee's material breach of this Agreement, Licensor shall notify Licensee of the breach and Licensee shall have ninety (90) days to cure the breach or to request arbitration by a single arbitrator in accordance with the then current rules of the American Arbitration Association. If (i) the decision of the arbitrators is in favor of Licensor or (ii) the material breach has not been cured with the ninety (90) [ Page 3]
day period and the Licensee has not requested arbitration, the Agreement shall terminate upon thirty (30) days notice by Licensor. Licensor shall be entitled to withdraw any notice of breach hereunder.
(emphasis added). As in Jespersen:
This termination provision is not sufficient to take this agreement of indefinite duration out of the general rule of at-will termination for two reasons. First, the language of the termination provision is permissive and equivocal; a party "may" terminate for the stated grounds — the clear inference being that those grounds are not the sole or exclusive basis for termination. This is in stark contrast to a case in which the parties included an exclusive and specific right to terminate for cause in a contract otherwise of indefinite duration. . . . Second, the termination [event is itself an instance] of material breach, and any contract is terminable upon the occurrence of a material breach. . . . Where a contract is indefinite in duration, the delineation of instances of material breach in the context of permissible and nonexclusive termination provision will not create a contract terminable for cause.
Id. (emphasis in original). Therefore, the Agreement was terminable at will, and Baldwin's decision to exercise that right cannot, as a matter of law, constitute a breach. Accordingly, I dismiss Count I

Count II: Unjust Enrichment

An unjust enrichment claim exists when one party benefits from services provided by another where, under equity and good conscience, the first party should not retain the benefits. Louis Glunz Beer, Inc. v. Martlet Importing Co., Inc., 864 F. Supp. 810, 818 (quoting Bd. of Dirs. of Carriage Way Prop. Owners Assoc. v. W. Nat'l Bank, 487 N.E.2d 974, 978 (Ill.App. Ct. 1985)). The claim "is based on a contract implied in law and, therefore, does not apply where there is a specific contract that governs the relationship of the parties." Perez v. Citicorp Mortgage, Inc., 703 N.E.2d 518, 526 (Ill. App. Ct. 1998) (unjust enrichment claim properly dismissed where an express contract existed). However, "[t]he existence of an express contract [ Page 4]

will bar a claim under an implied contract theory only where the two alleged contracts cover the same thing." Louis Glum Beer, Inc., 864 F. Supp. at 818 (emphasis added). Similarly put, "no quasi-contractual claim can arise when a contract exists between the parties concerning the same subject matter on which the quasi-contractual claim rests." Industrial Lift Truck Service Corp. v. Mitsubishi Int'l Corp., 432 N.E.2d 999, 1002 (Ill.App. Ct. 1982) (emphasis added). The Court explained:

When parties enter into a contract they assume certain risks with an expectation of return. Sometimes, their expectations are not realized, but they discover that under the contract they have assumed the risk of having those expectations defeated. As a result, they have no remedy under the contract for restoring their expectations. In desperation, they turn to quasi-contract for recovery. This the law will not allow. Quasi-contract is not a means for shifting a risk one has assumed under contract.
Id.

In Count II, DW alleges that DW engaged in numerous activities over the last eighteen years that enhanced the reputation and goodwill of the Wurlitzer trademarks, such as working with the U.S. Postal Service on the issuance of stamps displaying Wurlitzer jukeboxes, donating Wurlitzer jukeboxes to the Patent and Trademark Office Museum for use in a special exhibit, and entering into arrangements with the owners of world-famous brands to manufacture and sell special co-branded goods. DW argues that Baldwin would be unjustly enriched if it were allowed to retain the benefits of these activities without compensating DW. Baldwin responds that this claim is barred because DW was a party to the License Agreement, which covered the "same thing" that is at issue in DW's unjust enrichment claim — DW's use, for whatever purpose, of the Wurlitzer trademarks and the compensation it was paid. Louis Glum Beer, Inc., 864 F. Supp. at 818. DW counters by saying that the Agreement does not cover the "same thing" at [ Page 5]

issue in the unjust enrichment claim; rather, the unjust enrichment claim "exists entirely apart from" any claims ...


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