The opinion of the court was delivered by: ARLANDER KEYS, Magistrate Judge
MEMORANDUM OPINION AND ORDER
NSB Technologies, Inc. engages in the bank account retention
business, and it does so under the name HHC Direct. As part of
its business, NSB developed trade secret information and
marketing and advertising materials, which it provided to
Specialty Direct Marketing ("SDM") under the terms of a letter
agreement signed June 18, 1990 by Peter Higgins, President of HHC
Direct, and C. David Wallace, President of SDM (hereinafter, "the
Agreement").
In the Agreement, HHC agreed to provide SDM with its "Term
Deposit Account Maturity Notice/Retention Program," plus "copy
for the program's letters, telemarketing cards and branch
implementation guides; plus proposal information, reports
concerning the program, details for the computer program that
drives the output, and printed samples for existing programs." Agreement, ¶¶ 2-3.*fn1 HHC also agreed to keep SDM current
on its marketing efforts and to provide ongoing program updates.
Id., ¶ 4. In exchange, SDM agreed to pay HHC $3,000 up front,
$3,000 when it signed its first client, and $.10 per account for
the first five years of the Agreement; thereafter, SDM agreed to
pay a "mutually agreeable" royalty. Id., ¶ 7. Further, under
the Agreement, HHC and SDM agreed to share marketing and program
information "for as long as it is mutually useful and agreeable,"
and they agreed to split the country in terms of business
opportunities; HHC agreed that, for a period of fifty years, it
would not market the program east of the Mississippi River, and
SDM agreed that, during the same period, it would not market the
program west of the Mississippi River. Id., ¶¶ 5-6. The
Agreement provided that, if either party did business in
violation of the territory clause, "all revenue goes to the
company in whose territory the client is." Id., ¶ 5. It also
provided that "[u]pon payment of the fee, the east coast program
is the property of SDM to handle as SDM chooses while, of course,
honoring the royalty and territory agreements." Id., ¶ 7. On April 4, 2003, NSB sued SDM for copyright infringement,
alleging that SDM had taken HHC's intellectual property and
evolved it into works "used for SDM's sole and exclusive benefit,
in contravention of the law." Complaint, ¶ 20. HHC also sued for
concealment, for violation of the Illinois Trade Secrets Act, for
an injunction and for a declaratory judgment that HHC is no
longer bound by the territory provision in the Agreement. On May
14, 2004, NSB filed a motion seeking "declaratory relief via
partial summary judgment" on this last claim; NSB asks the Court
to declare that, because SDM failed to pay royalties in
accordance with the Agreement, NSB is no longer contractually
obligated to limit its business operations to the area west of
the Mississippi River.
Along with its motion, NSB submitted what it purports to be a
statement of undisputed facts. The statement consists of a chart,
listing eleven "facts," most of which are really legal
conclusions. For example, NSB lists as "facts" that "[t]he
Agreement . . . was a license agreement and NSB performed,"
Statement of Undisputed Facts, ¶ 1; that "[t]he license was
breached by [SDM's] failure to pay royalites to NSB," id., ¶ 2;
that "[t]he breach by [SDM] was material and terminated NSB's
return obligations, including maintaining the boundary," id., ¶
3; that SDM "expressly and voluntarily agreed that NSB owed no
further obligations to [SDM] under the license," id., ¶ 5; and that SDM "expressly and voluntarily waived any obligations owed
by NSB under the license," id., ¶ 6. All of these are legal
conclusions, not statements of fact. And none is properly
considered under Local Rule 56.1.
Additionally, some of the statements of fact are not supported
in the record. For example, NSB states that SDM "has admitted
that the boundary is of no force or effect." Statement of
Undisputed Facts, ¶ 8. And to support this statement, it cites
SDM's Answer to the Complaint, and NSB's responses to a set of
requests for admission served by SDM. But, in fact, SDM's answer
does not admit that the territory provision is void; rather,
because of the way the allegation in the Complaint is written,
the answer merely admits that NSB asserts that this was the
case. See Complaint, ¶ 43 ("HHC asserts that the subject matter
agreement is null and void, and of no force or effect as to
boundaries, based, inter alia, on the fact that SDM has not
complied with the provisions of the agreement, namely payment of
royalties due in a sum or sums to HHC potentially exceeding
$2,000,000.00."); Answer, ¶ 43 ("Defendant upon information [and]
belief represents that the allegations of paragraph 43 are
true."). Similarly, the requests to admit and NSB's responses
thereto establish only that NSB believes the Agreement to have
been terminated; they say nothing explicit about SDM's position
on the issue. Similarly, contrary to NSB's assertion, the exchange of letters
between the parties' attorneys (attached as Exhibits 2 and 3 to
Gillaspey's Declaration) are insufficient to establish the
termination of all rights and duties. Although that is one
possible interpretation of the letters, the letter purportedly
stating SDM's position is unsigned and conveys only an attorney's
understanding that "my client accepts HHC's position set forth in
your letter of September 11 regarding that agreement"; the letter
does not say that SDM (which is not even mentioned by name)
agrees that NSB is no longer obliged to abide by the territory
provision. This is hardly the smoking gun NSB makes it out to be,
and it is hardly the type of document on which the Court should
base a summary judgment.
Along similar lines, some of NSB's statement of facts are
supported only with conclusory representations by NSB's
witnesses. Donn Harms, a registered patent attorney, makes
various assertions concerning the nature and scope of the
Agreement, seemingly without any personal knowledge about the
parties' understanding or interpretation of the various
provisions; and Donald Yager, a former HHC employee, makes
various representations about the Agreement, while at the same
time admitting that he "was not made privy to the details"
thereof. Declaration of Donald G. Yager, ¶ 7. None of this is proper under Local Rule 56.1.*fn2
"The interpretation or legal effect of a contract is a question
of law to be determined by the court." Cromees, Holloman,
Sibert, Inc. v. AB Volvo, 349 F.3d 376, 394 (7th Cir. 2003)
(citing Bowers Manufacturing Co., Inc. v. Chicago Machine Tool
Co., 117 Ill. App. 3d 226, 453 N.E.2d 61, 66 (1983)). So too the
determination of whether a contract is ambiguous. Id. NSB
cannot short circuit the process of resolving its claims by
submitting conclusory declarations from witnesses testifying to
what the Court must determine after a thorough review of the
record. And, on the record now before it, the Court simply cannot
agree with the conclusions NSB provides. At a minimum, issues
remain concerning the interplay between the 5-year royalty
provision and the 50-year territory provision in particular,
whether the Agreement required SDM to pay royalties after 1995,
whether SDM breached its obligations under the Agreement's
royalty provisions, and whether, if it did, that breach would
have freed NSB from its obligation to honor the territory
provision.
For the reasons explained above, the Court denies NSB's motion
for declaratory judgment via partial summary judgment on the issue of the disputed boundary ...