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BLY & Sons, Inc. v. Ethan Allen Interiors

September 1, 2006

BLY & SONS, INC., PLAINTIFF,
v.
ETHAN ALLEN INTERIORS, INC., ETHAN ALLEN RETAIL, INC., F/K/A ETHAN ALLEN, INC., ETHAN ALLEN GLOBAL, INC., AND M. FAROOQ KATHWARI, DEFENDANTS.



The opinion of the court was delivered by: Murphy, Chief District Judge

MEMORANDUM AND ORDER

This matter came before the Court on August 14, 2006, for a hearing on Defendants' motion for summary judgment and Plaintiff's motion to reconsider the Court's January 1, 2006, Memorandum and Order granting partial summary judgment. For the following reasons, Defendants' motion for summary judgment is granted in part and denied in part, and Plaintiff's motion to reconsider is denied.

This case involves a License Agreement signed in 1992 granting Plaintiff the right to sell Ethan Allen brand home furnishings and accessories at its three stores in the St. Louis metropolitan area.*fn1 The contract provides:

This Agreement and the attachments hereto, sets forth the entire agreement and understanding between the parties relating in any way to the use of the MARKS and supersedes all prior agreements or understandings respecting the same. LICENSOR makes no representations except those specifically set forth herein. This Agreement may not be amended or modified except by a written instrument which is signified by both parties. (Doc. 58, Ex. A, ¶ 9.) Plaintiff argues that this provision does not govern such things as pricing, store appearance, delivery, product returns, support staff, and store operation, and that these things are governed by other agreements, specifically a series of contracts, which Defendants have breached. Plaintiff argues that the parties' relationship is governed by two contracts: an oral contract based on the parties' course of dealing and longstanding business relationship and the License Agreement governing the use of marks, which only applies to tagging and displaying the Ethan Allen logo. Defendants contend that the above-quoted provision in the License Agreement encompasses all of the items raised by Plaintiff, as they all relate to Ethan Allen's trademark. Defendants propose that the only terms of their relationship with Plaintiff that are not governed by the License Agreement are the buyer-seller transactions that occur every day as Plaintiff buys inventory from Defendants. Both sides agree that the License Agreement is not ambiguous.

The basis of this action and procedural history thus far are set forth in the Court's January 19, 2006, Memorandum and Order. The parties make much of the facts of this case, going back many, many years. But this case currently is before the Court on a motion for summary judgment. If Defendants' are entitled to summary judgment, there can be no genuine issue as to any material fact. The standard applied to summary judgment motions filed under Federal Rule of Civil Procedure 56 is well-settled and has been succinctly stated as follows.

Summary judgment is proper when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In determining whether a genuine issue of material fact exists, [the court] must view the record in a light most favorable to the nonmoving party. Because the primary purpose of summary judgment is to isolate and dispose of factually unsupported claims, the non-movant may not rest on the pleadings but must respond, with affidavits or otherwise, setting forth specific facts showing that there is a genuine issue for trial. The evidence must create more than some metaphysical doubt as to the material facts. A mere scintilla of evidence in support of the non-movant's position is insufficient; a party will be successful in opposing summary judgment only when it presents definite, competent evidence to rebut the motion.

Albiero v. City of Kankakee, 246 F.3d 927, 931-32 (7th Cir. 2001) (internal citations and quotations omitted). Because the legal issues presented are relatively narrow, the Court will set forth further facts only as necessary in its analysis.

Plaintiff's Motion to Reconsider

Plaintiff asks the Court to reconsider its January 19th Order granting Defendants partial summary judgment on Plaintiff's Illinois Franchise Disclosure Act (IFDA) claim and limiting damages thereon, if any, to costs and attorney fees incurred from September 3, 2005, to September 29, 2005, the time between which the termination letter was sent and rescinded.*fn2 Plaintiff relies upon testimony given by newly-added Defendant M. Farooq Kathwari, Chairman of the Board, Chief Executive Officer, and President of Ethan Allen Interiors, Inc., and Ethan Allen Global, Inc. Plaintiff contends:

Ethan Allen has misled this Court in a cynical effort to defeat Bly & Sons' claims and deny Bly & Sons its day in court. It is clear that Ethan Allen has continued its efforts to terminate Bly & Sons' franchise and drive it out of business. In light of this evidence, Bly & Sons is entitled to bring its full IFDA claim before a jury and allow the jury to decide if its franchise has indeed been wrongfully terminated. The Court should, therefore, reconsider and reverse its earlier ruling limiting the scope of Bly & Sons' IFDA claim.

(Doc. 64, p. 3.) The Court has considered this argument twice before, and the simple answer is this. Having considered all of the evidence cited by Plaintiff, what difference does it make? As stated in the January 19th Order, if Plaintiff had a franchise before the termination letter was sent, a question which is answered below, it had one after the letter was rescinded. Eric Bly, President of Bly & Sons, Inc., testified that after September 29th, Ethan Allen did nothing to enforce the termination of the License Agreement (Doc. 70, Ex. A at 60:23 through 61:2). He further confirmed that there is "no dispute that Ethan Allen continued to ship [his] furniture, subject to the $200,000 credit limit, after September 29, and [he] continued to hold [himself] out as an Ethan Allen dealer" (Id. at 68:1-6). The parties agree that the issue of whether a claim for constructive termination exists under the IFDA is a matter of first impression in this Circuit, and this Court is unwilling to recognize such a claim when it is raised for the first time in a motion to reconsider.*fn3 See Rothwell Cotton Co. v. Rosenthal & Co., 827 F.2d 246, 251 (7th Cir. 1987) (a motion for reconsideration should not serve as the occasion to tender new legal theories for the first time). Plaintiff's motion to reconsider (Doc. 63) is DENIED.

Illinois Franchise Disclosure Act Claim

Plaintiff claims that Defendants violated the provision of the IFDA that provides that a franchisor may not terminate a franchise prior to the expiration of its term except for "good cause" as defined in the Act. See 815 ILCS 705/19. Plaintiff further claims that M. Farooq Kathwari, as the principal executive officer of the Ethan Allen entities, materially aided Defendants' violation of the IFDA and is, therefore, jointly and severally liable for such violation. See 815 ILCS 705/26.

Defendants seek summary judgment on this claim on the premise that Plaintiff cannot show all of the elements to establish a franchise such that the IFDA would apply.*fn4 Specifically, Defendants contend that Plaintiff never was required to pay anything that ...


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