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INTERNATIONAL STRATEGIC MARKETING v. ZENITH INTL.

March 15, 2004.

INTERNATIONAL STRATEGIC MARKETING, INC., an Illinois corporation, Plaintiff;
v.
ZENITH INTERNATIONAL, S.A., a foreign corporation, Defendant



The opinion of the court was delivered by: JOHN GRADY, Senior District Judge

MEMORANDUM OPINION

The court has under advisement the motion of the defendant for summary judgment on this single — count complaint. The motion will be granted.

Background

  The plaintiff, International Strategic Marketing, Inc. "(ISMI"), is an Illinois corporation with its principal place of business in Cook County, Illinois. Plaintiff is in the business of marketing and distributing luxury Swiss watches throughout the United States.

  The defendant, Zenith International, S.A. ("ZISA") is a foreign corporation headquartered in Le Lode, Switzerland. Defendant is in the business of manufacturing luxury watches. ZISA sold its watches in the United States prior to 1983, but it ceased Page 2 its sales activity at that time because of the objection of Zenith Electronics Corporation ("ZEC"), which asserted ownership of the Zenith brand name.

  ZISA approached ZEC in 1996 about a possible license agreement for use of the Zenith name in the United States and Canada. However, no agreement was reached.

  In 1999, ISMI, through an intermediary, approached ZISA about the possibility of attempting to negotiate an agreement with ZEC which would allow ZISA to sell its watches in the United States and Canada under the Zenith name, with ISMI acting as the distributor of the watches. A telephone conversation was held in September 1999 between Maurice Avenaim, one of the owners of ISMI, and Francois Manfredini, the President of ZISA, to discuss the subject. Following this telephone conversation, Avenaim prepared a letter for Manfredini's signature concerning their conversation. Thereafter, contact was made with ZEC by ISMI, with participation by ZISA, and eventually an agreement was reached between ZISA and ZEC allowing ZISA to sell its watches under the Zenith brand name in the United States and Canada. By that time, however, ZISA had been acquired by still another corporation, LVMH Moet Hennessy Louis Vuitton, Inc. ("LVMH"). LVMH had its own distribution system and began distributing ZISA watches through that system. ISMI was not hired as a distributor. Page 3

  The Complaint

  The law of Illinois applies to this diversity case, and the complaint purports to state a claim based on the doctrine of equitable estoppel. The complaint refers to the telephone conversation between Avenaim of ISMI and Manfredini of ZISA and attaches the letter signed by Manfredini. The letter includes the statement that "Zenith SA agrees to grant you permission to initiate negotiations for finding a solution to the current situation" (with ZEC) and states that "[biased on your extensive marketing experience in North America as well as your experience as a luxury Swiss watch distributor, we feel that you are a likely candidate for this distribution [of ZISA watches in North America]." The letter further states that ZISA extends ISMI its "complete support in the task at hand. . . ."

  The complaint goes on to allege that, in reliance on these representations, ISMI spent considerable time and effort in attempting to obtain a license agreement with ZEC, believing that if such an agreement were obtained, ISMI would be named the distributor. However, the complaint continues, during the time ISMI was acting on ZISA's behalf, ZISA knew that ISMI would not be given distribution rights because it knew that it was going to be acquired by LVMH, which had its own distribution capacity. The complaint alleges that ZISA encouraged ISMI to spend time and effort cultivating ZEC, although it knew those efforts would not Page 4 result in a distributorship for ISMI. The complaint concludes by alleging that because ZISA misled ISMI into a fruitless expenditure of time and effort, ISMI should be granted a judgment of approximately $75 million, which would have been the amount it would have earned as a ZISA distributor for a period of three years.

  The Summary Judgment: Motion

  ZISA moves for summary judgment on two grounds. First, it argues that under the law of Illinois, the doctrine of equitable estoppel cannot be the basis of a claim but can only be used as a means of preventing the assertion of a defense by the opposing party, The other ground is that, even if the doctrine could support a cause of action, ISMI has not established the elements of equitable estoppel in this case.

  Whether the Doctrine Applies

  The cases are divided on whether Illinois allows equitable estoppel to be used as a "sword" or only as a "shield." As sometimes happens, there are probably more federal cases than Illinois cases on the point. For cases holding that there is no cause of action based on equitable estoppel, see Nibeel v. McDonald's Corp., No. 97 C 7203, 1998 WL 547286, at *12 (N.D. Ill. Aug. 27, 1998) (Kocoras, J.), and our own opinion in Center Ice of DuPage, Inc. v. Burley's Rink Supply Inc., No. 96 C 5537, 1997 WL 534256, at *4 (N.D. Ill. Aug. 20, 1997), where we refer to the Page 5 doctrine as "not really a `claim' at all, but rather a defense to a defense." For the opposite view, see Time Warner Sports, Merchan. v. Chicagoland Processing Corp. 974 F. Supp. 1163, 1172-74 (N.D. 111. 1997) (Shadur, J.). We have enough doubt about the matter that we decline to grant defendant summary judgment on this ground. It is unnecessary ...


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