United States District Court, N.D. Illinois
March 15, 2004.
INTERNATIONAL STRATEGIC MARKETING, INC., an Illinois corporation, Plaintiff;
ZENITH INTERNATIONAL, S.A., a foreign corporation, Defendant
The opinion of the court was delivered by: JOHN GRADY, Senior District Judge
The court has under advisement the motion of the defendant for
summary judgment on this single count complaint. The motion will
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
its sales activity at that time because of the objection of Zenith
Electronics Corporation ("ZEC"), which asserted ownership of the Zenith
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
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
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
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
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 to decide whether Illinois law permits an independent cause
of action based on equitable estoppel because we agree with defendant
that, whether it does or not, the necessary elements of equitable
estoppel are not present in this case.
The Elements of Equitable Estoppel
It will not be necessary to list all of the necessary elements of
equitable estoppel, since this case turns on the absence of the very
first element: "[w]ords or conduct by the party against whom the estoppel
is alleged, amounting to a misrepresentation or concealment of material
facts." Lowenberg v. Booth, 162 N.E. 191, 195 (Ill. 1928). The
"material facts" must be existing facts, not promises of future action.
We cannot find a misrepresentation or concealment
of material facts by the defendant. Promises as to
future action are not misrepresentations of
existing facts. Action taken in reliance on such
promises, as distinguished from action taken in
reliance on a misrepresentation of existing facts,
cannot raise an estoppel.
Ozier v. Haines, 99 N.E.2d 395, 396 (Ill.App. Ct. 1951),
aff'd., 103 N.E.2d 485 (1952).*fn1
An analysis of the alleged misrepresentations that ISMI relies on
occurred during the initial telephone conversation and as a part of the
follow up letter. ZISA argues that these statements were not
material misrepresentations but were, at most, representations as to
future action. ISMI does not attempt to explain how the statements in
question were misrepresentations of material fact, and seems to believe
that it would be sufficient to prove that ZISA made promises of future
action knowing that they would not be fulfilled.
Our analysis of the statements is that they are not representations as
to existing fact and, further, that there is no evidence that they were
false or misleading. Still less is there any evidence that ZISA knew they
were false or misleading or intended them to be so.
We will begin with the telephone conversation. In its Memorandum in
Opposition to the Motion for Summary Judgment, ISMI states:
It is undisputed that in their initial telephone
conversation, Avenaim told Manfredini that he
wanted the distributorship Manfredini
himself testified that Avenaim told him he would
approach ZEC "in order to obtain the
distribution of Zenith watches in the United
States." SMF 147 Avenaim testified that Manfredini
told him if he accomplished this, he would
be chosen. for the distribution. SMF ¶
(Memorandum in Opposition to the Motion for Summary Judgment, at 9)
(emphasis added). ISMI has taken considerable liberty with the actual
testimony of Avenaim. Referring to the record reference SMF ¶ 55, we
find the following: "[A]ccording to Avenaim, when he told Manfredini that
he wanted the North American distributorship if he were successful in his
negotiations with ZEC, Manfredini replied, "I don't see why not.' Avenaim
Dep. p. 68-69, 71." Looking at the actual deposition of Avenaim, we see
still less resemblance between his actual testimony and what ISMI's
memorandum contends his testimony was:
Q. And did Mr. Manfredini tell you that you would
be the distributor?
Q. What did he say to suggest that you would be
A. He said, I don't see why not. Let's give it a
try. Something to that extent.
Q. Are those his words? "I don't see why not."
"Let's give it a try."
A. Something to that extent. Not exactly in those
Q. And when he said, I don't see why not. Let's
give it a try. Did you understand him to mean
that that meant that you would be the
Q. or just that he meant that you should
initiate some efforts with Zenith Electronics?
A. I think what he meant is, if you can do what
you promise you can do, he'll give me the
A. What did I say?
* * * *
A. I said, I would like to be your North American
distributor for Zenith brand.
Q. What did he say?
A. He said, I don't see why not.
(Avenaim Dep. at 68-69, 71.)
If Avenaim actually had said ISMI "would be chosen for the
distribution," that could have amounted to a promise. But we do not see
how "I don't see why not" was a promise, nor does ISMI make a serious
attempt to argue that it was. Instead, the argument seems to be that it
was a statement upon which ZISA had a right to rely, even though it was
not a promise. Clearly, though, it was not a representation as to an
Turning now to the letter, Avenaim drafted it for Manfredini's
signature. Manfredini signed and sent it back with some revisions. It
contained the following statement (admittedly authored by Avenaim
himself): "[B]ased 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
If when Manfredini signed and returned the letter he did not believe
ISMI was a "likely candidate" for the distribution, that would have been
a misrepresentation of his then existing state of mind, and
therefore a misrepresentation of an existing fact. Because ISMI was about
to embark upon a substantial marketing effort in the hope of winning a
distributorship, we think such a misrepresentation by Manfredini would
have been material. The question is whether ISMI has offered evidence
that Manfredini did not in fact regard ISMI as a "likely candidate."*fn2
ISMI argues that Manfredini already knew ZISA was going to be acquired by
LVMH, which necessarily excluded ISMI as a possible distributor. But
there is no evidence to support that conclusion. The telephone
conversation and the letter were in June of 1999. LVMH did not submit a
letter of intent to ZISA until the end of September, and the acquisition
closed on November 10, 1999. There is no evidence from which the fact
finder could conclude that ZISA misrepresented or concealed anything in
regard to the acquisition. Basically, the gravamen of the complaint, that
ZISA knew of an impending acquisition and kept silent about it in order
to benefit from ISMI's efforts with ZEC, is without evidence to support
ISMI argues that ZISA failed to cooperate with ISMI in the
presentations to ZEC. For its part, ZISA explains any lack of enthusiasm
as due to a disappointing performance by ISMI. Whatever the explanation
may be for the Alienation that occurred between the parties, it would not
provide a factual basis for concluding that Manfredini had misrepresented
his view of ISMI's prospects back in September of 1999.
We conclude that there is no genuine issue as to whether defendant
misrepresented or concealed a material fact or as to whether plaintiff
reasonably relied upon such a misrepresentation or concealment to its
detriment. Accordingly, summary judgment will be entered for the