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ADVERTISING SPECIALTY INSTITUTE v. HALL-ERICKSON

United States District Court, N.D. Illinois, Eastern Division


September 21, 2004.

ADVERTISING SPECIALTY INSTITUTE, Plaintiff,
v.
HALL-ERICKSON, INC., d/b/a THE MOTIVATION SHOW, Defendant.

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

MEMORANDUM OPINION

Before the court is defendant's motion to dismiss for failure to state a claim. For the reasons that follow, the motion is granted in part and denied in part.

BACKGROUND

  The following facts are drawn from the complaint and taken as true for purposes of this motion. Advertising Specialty Institute ("ASI"), the plaintiff, is a Pennsylvania corporation that is involved in the promotional products industry. ASI, in its own words, "acts as a meeting place where suppliers of promotional products can interact with distributors of promotional products." (Compl., ¶ 4.) Promotional products are articles of merchandise that are marked with a company's name or logo and used in corporate marketing and communications programs. Defendant Hall-Erickson is in the business of producing and managing trade shows. One of its shows, the "Motivation Show," is held annually in Chicago, Illinois and is dubbed by Hall-Erickson as "The World's Largest Collection of Incentive Merchandise, Travel and Meeting Destinations, Recognition Awards, Promotional Products and Business Gifts." (Compl., ¶ 6.)

  On February 6, 2001, ASI and Hall-Erickson entered into a written contract ("the Agreement") concerning ASI's participation in the Motivation Show over a three-year period from November 1, 2000 through October 31, 2003. According to the complaint, both parties stood to benefit from the arrangement:

ASI would be better able to serve its distributor members by exposing them to Motivation Show exhibitors, and its supplier members by exposing them to Motivation Show attendees, who then would purchase their incentives through ASI-listed distributors. ASI's participation in the Motivation Show also would assist in creating a positive reputation for ASI in the incentive market. The Motivation Show would gain additional exhibitors and booths representing distributors and suppliers that were dedicated to using the ASI network and provide the Motivation Show with exposure to the ASI network. This would help the Motivation Show distinguish itself as one of the few sanctioned end-buyer shows dedicated to involving the ASI distributors as exhibitors or as representatives of the ASI network suppliers.
(Compl., ¶ 9.)

  In exchange for ASI's endorsement of and participation in the Motivation Show, Hall-Erickson agreed, among other things, that the Agreement would "not be extended to any other promotional products association, trade show, or conference (i.e.: PPAI)." (Compl., ¶ 13; Agreement, p. 2, ¶ 8, attached to Compl. as Ex. A.) Hall-Erickson also agreed to grant ASI the "right of first refusal concerning any activity, alliance, or opportunity concerning the promotional product/advertising specialty industry." (Compl., ¶ 13; Agreement, p. 2, ¶ 9.) Finally, the Agreement provided the following cancellation provision:

This Agreement may be cancelled by either party, upon written notice to the other party, within the first 60 days of each program year (program year, for the purposes of this Agreement, will be defined as November 1 to October 31). [Hall-Erickson] agrees that it shall not enter into similar agreements with any other entity, for example, national trade associations such as the Promotional Products Association International, regional trade associations, trade shows or conferences that are involved in the promotional products/advertising specialty industry during the term of this Agreement and for a period of twelve (12) months following any termination.
(Compl., ¶ 14; Agreement, p. 3.)

  In the summer of 2002, ASI learned that Hall-Erickson was coordinating with Promotional Products Association International ("PPAI"), an ASI competitor, to "co-locate" PPAI's annual trade show with the Motivation Show at the same exhibition venue in Chicago, and at the same time, September 16 through September 18, 2003.*fn1 Given that PPAI was a competitor, ASI repeatedly requested Hall-Erickson to inform the Chicago Convention and Tourism Board ("CCTB") that the PPAI show and the Motivation Show were competitive events.*fn2 Notwithstanding these requests, Hall-Erickson, on September 25, 2002, sent a letter to the CCTB advising it that the PPAI show and the Motivation Show were not competitive events.

  Then, on or around December 19, 2002, following several communications with ASI regarding ASI's dissatisfaction with Hall-Erickson's plans to "co-locate" with PPAI, Hall-Erickson sent a letter to ASI in which it stated it was cancelling the Agreement. In the same letter, Hall-Erickson proposed a new contract between the two parties that was materially indistinguishable from the Agreement, except it changed the term of the agreement from 2000 though 2003 to 2002 through 2005, and it omitted the clauses granting ASI a "right of first refusal" and forbidding Hall-Erickson from entering into "similar agreements" within twelve months of the agreement's termination. Despite its purported termination of the Agreement, Hall-Erickson continued to solicit ASI's participation in the 2003 Motivation Show. ASI responded that it would participate in the show and that it intended to comply with its obligations under the Agreement.*fn3

  ASI has brought a three-count complaint, the gravamen of which is that Hall-Erickson breached various provisions of the Agreement by entering into a business relationship with PPAI.*fn4 Count I seeks a declaratory judgment that Hall-Erickson breached the Agreement when it failed to notify the CCTB that the PPAI show and the Motivation Show were competitive events. Count II, also a breach of contract claim, alleges that Hall-Erickson breached the Agreement by: (i) allowing PPAI to exhibit contemporaneously with the Motivation Show; (ii) failing to grant ASI the right of first refusal "concerning any activity, alliance or opportunity concerning the promotional product/advertising specialty industry"; (iii) failing to grant ASI the ability to approve exhibitors "to ensure that no exhibitor competes with ASI"; (iv) failing to preclude PPAI from co-locating its show with the Motivation Show; (v) failing to advise the CCTB that the PPAI show and the Motivation Show were competitors; and (vi) advising the CCTB that the PPAI show and the Motivation Show were not competitive events. Count III, titled "equitable estoppel," alleges that Hall-Erickson represented to ASI that it would not cancel the Agreement prior to the September 2003 show, and therefore it was estopped from doing so. Hall-Erickson has moved to dismiss for failure to state a claim.

  DISCUSSION

  The purpose of a 12(b)(6) motion to dismiss is to test the sufficiency of the complaint, not to resolve the case on the merits. See 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1356, at 354 (3d ed. 2004). When evaluating such a motion, the court must accept as true all factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor. See Hentosh v. Herman M. Finch Univ. of Health Sciences, 167 F.3d 1170, 1173 (7th Cir. 1999); Jang v. A.M. Miller & Assocs., 122 F.3d 480, 483 (7th Cir. 1997). Dismissal is appropriate only if "`it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Ledford v. Sullivan, 105 F.3d 354, 356 (7th Cir. 1997) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)); Jones v. General Elec. Co., 87 F.3d 209, 211 (7th Cir.), cert. denied, 519 U.S. 1008 (1996).*fn5 Our first task, as in all diversity cases, is to determine which state's substantive applies to the dispute. Both parties submit that Pennsylvania law governs pursuant to a choice-of-law provision in the Agreement. (See Agreement, p. 4 ("This Agreement shall be governed and interpreted in accordance with the laws of the Commonwealth of Pennsylvania without regard to principles of conflict of laws.").) We agree. See Kohler v. Leslie Hindman, Inc., 80 F.3d 1181, 1184-85 (7th Cir. 1996) (In a dispute arising from a contract, a choice-of-law provision controls as long as the contract is valid).

  Counts I and II — Breach of Contract

  In Counts I and II, ASI alleges that Hall-Erickson breached various provisions of the Agreement by entering into a business relationship with PPAI. The elements of a breach of contract claim under Pennsylvania law are: (i) the existence of a contract, including its essential terms, (ii) a breach of a duty imposed by the contract, and (iii) resultant damages. See J.F. Walker Co., Inc. v. Excalibur Oil Group, Inc., 792 A.2d 1269, 1272 (Pa.Super. 2002).

  Hall-Erickson presents several arguments as to why Counts I and II fail to state a claim. First, it contends that its December 2002 cancellation of the Agreement extinguished all of its contractual duties owed to ASI. Assuming for present purposes the validity of the cancellation, it is true that it would have relieved Hall-Erickson of some of its obligations under the Agreement. For example, it would not have been bound by the Agreement's provisions related to show logistics (see, e.g., Agreement, p. 1-2, "[Hall-Erickson] will provide . . . 600 sq. ft. complimentary booth space. . . .") because those duties would not have accrued until shortly before the show. Other duties, however, were enforceable, and therefore could be breached, from the date of the Agreement's inception, November 1, 2000. These include, for example, the duties to provide "ASI with the right of first refusal concerning any activity, alliance, or opportunity concerning the promotional product/advertising specialty industry," and to not extend the Agreement "to any other promotional products association, trade show, or conference (i.e.: PPAI)." (See Agreement, p. 2, ¶¶ 8, 9). And it is these on-going obligations that ASI alleges were breached in Summer 2002, months before the alleged cancellation, when Hall-Erickson engaged PPAI regarding the "co-locating" of the Motivation Show and the PPAI show. Therefore, Hall-Erickson's cancellation does not foreclose ASI's claim for breach of contract.

  Next, Hall-Erickson argues that ASI fails to state a claim because the Motivation Show and the PPAI show were not competitive events. In support, Hall-Erickson submits an August 21, 2002 letter it sent to the CCTB saying just that. Hall-Erickson misapprehends the court's role in deciding a motion to dismiss. ASI alleges that the Motivation Show and the PPAI show are competitive events, and at least at this juncture, we take that assertion at face value. Hall-Erickson will have ample opportunity to present evidence to contradict ASI's allegations; its job on a motion to dismiss is to demonstrate that even if those allegations are true, they do not make out a claim for relief. See Hishon, 467 U.S. at 73.*fn6

  Hall-Erickson's remaining arguments do not warrant discussion. Suffice it to say, Hall-Erickson has not shown that ASI will not be able to prove any set of facts consistent with the complaint's allegations that would constitute a breach of the Agreement. If ASI and PPAI are competitors, and Hall-Erickson and PPAI entered into a business relationship prior to the September 2003 Motivation Show, all of which ASI alleges, it is certainly possible that such relationship violated one or more of the Agreement's provisions. ASI has stated a claim for breach of the Agreement.

  Count III — Equitable Estoppel

  Count III is labeled as an "equitable estoppel" claim and seeks a judgment that Hall-Erickson was estopped from cancelling the Agreement. Equitable estoppel is defined by the Pennsylvania Supreme Court as a doctrine sounding in equity "that prevents one from doing an act differently than the manner in which another was induced by word or deed to expect." Novelty Knitting Mills, Inc. v. Siskind, 457 A.2d 502, 503 (Pa. 1983). However, under Pennsylvania law, equitable estoppel is not recognized as a separate cause of action. See, e.g., Carlson v. Arnot-Ogden Mem. Hosp., 918 F.2d 411, 416 (3d Cir. 1990) (noting that under Pennsylvania law, "[e]quitable estoppel is not a separate cause of action."); Graham v. Pennsylvania State Police, 634 A.2d 849, 850 (Pa. Commw. Ct. 1993) ("[E]quitable estoppel . . . has only been recognized as a defense and not as a cause of action in itself."); Weiland v. DeFrancisis, 28 Pa. D&C 4th 129, 133 (Pa. Com. Pl. 1996) ("[E]quitable estoppel is not an independent cause of action. . . ."). That is not to say that ASI may not pursue an equitable estoppel argument, but only that it must be raised, if at all, "either as an affirmative defense" or here, "as grounds to prevent the defendant from raising a particular defense." See Carlson, 918 F.2d at 416. Count III is therefore dismissed for failure to state a claim.

  CONCLUSION

  For the foregoing reasons, Hall-Erickson's motion to dismiss is granted in part and denied in part. Count III is hereby dismissed with prejudice. Discovery on Counts I and II shall proceed forthwith. A status hearing is set for December 1, 2004 at 10:30, at which time the court will set a discovery cut-off.


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