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Recycled Paper Greetings, Inc. v. Davis

February 1, 2008

RECYCLED PAPER GREETINGS, INC., PLAINTIFF,
v.
KATHY DAVIS, DEFENDANT.



The opinion of the court was delivered by: Elaine E. Bucklo United States District Judge

MEMORANDUM OPINION AND ORDER

On January 10, 2008, plaintiff Recycled Paper Greetings, Inc. ("RPG") filed a Verified Complaint for Injunctive and Other Relief against defendant Kathy Davis ("Davis"). The six-count complaint alleges claims for: (1) breach of contract; (2) intentional and/or negligent misrepresentation; (3) breach of fiduciary duty; (4) promissory estoppel; (5) violation of the Illinois Trade Secrets Act ("ITSA"), 765 ILL. COMP. STAT. 1065/1 et seq.; and (6) preliminary and permanent injunctive relief. Pursuant to FED. R. CIV. P. 65, RPG moved for an order entering a preliminary injunction: (1) precluding Davis from using, disclosing, or transmitting its trade secret and proprietary information; (2) precluding Davis from offering, marketing, selling, licensing, transferring, or otherwise bestowing any economic or financial interest in the Signature Collection to anyone without RPG's express written consent; (3) precluding Davis from interfering with or disrupting RPG's production, distribution, introduction, and/or presentation of the Signature Collection for retail sale; and (4) compelling Davis to complete her obligations, responsibilities, and commitments to RPG regarding the Signature Collection by providing to RPG every three months for a one-year period at least three new greeting card designs to refresh the Signature Collection.*fn1 RPG also seeks a temporary restraining order. For the following reasons, RPG's motion for temporary restraining order is denied, and RPG's motion for a preliminary injunction is entered and continued pending the completion of expedited discovery.

I.

The facts set forth below are taken from plaintiff's verified complaint, Davis' declaration opposing the motion for preliminary injunction and documents attached thereto, and the supporting declarations submitted by RPG and documents attached thereto.

RPG has been in the business of selling greeting cards since 1971. Davis is an artist who designs and creates greeting cards. She is the Chief Executive Officer ("CEO") of Kathy Davis Designs, Inc. ("KDI"). RPG and Davis entered into a license agreement dated November 20, 1990, pursuant to which Davis agreed, for an initial period of five years from the date of the signed agreement,*fn2 to provide designs, drawings, and artwork for greeting cards to be sold and manufactured by RPG. The parties subsequently renewed the license agreement on October 17, 1995, December 1, 2000, and March 22, 2006.*fn3

The March 2006 renewal was retroactive to January 1, 2006. Pursuant to the March 2006 renewal, KDS could terminate the license agreement as of January 1, 2008. The March 2006 renewal is silent, however, as to how to terminate the agreement. The March 2006 renewal also contains terms that (1) provide for the creation of a permanent branded collection of Davis' cards to be maintained by RPG for the duration of the parties' license agreement, and (2) allow KDS to participate in the design, development, and presentation of new products and introductions to RPG's key accounts.

In the summer of 2007, RPG and Davis engaged in discussions with one of RPG's largest customers (the "Customer") regarding a "Signature Collection" of greeting cards. RPG alleges that, in the course of developing the strategy to convince the Customer to commit to the Signature Collection, Davis was made privy to highly confidential and proprietary information pertaining to the Signature Collection and RPG's relationship with the Customer. RPG further alleges that, pursuant to Davis' request, she was given access to highly confidential information regarding RPG's overall corporate efforts and results, including market research, strategies, sales goals, market studies, and pricing analysis. Davis states that KDI did not receive, and was not privy to, proprietary or confidential RPG information in connection with marketing to the Customer.

RPG alleges that it devoted time and resources to the Signature Collection for the remainder of 2007. RPG further alleges that Davis completed the final artwork for the initial greeting cards comprising the Signature Collection in November 2007. A test product launch in 300 of the Customer's locations is scheduled for March 2008. RPG contends that the Signature Collection was a joint venture between it and Davis, and that RPG cannot proceed with the Signature Collection without Davis' involvement and participation.

Jude Rake ("Rake"), CEO of RPG, attests that when the efforts surrounding the Signature Collection were in their earliest stages and throughout the following months when the project was ongoing, RPG knew that Davis had the right to terminate her written contract on January 1, 2008. Rake further attests that, given RPG's plans "to roll out a very high profile change in marketing strategy with one of its most important customers, it was critical for RPG to be certain that Davis was not going to terminate the contract." Beginning in November 2007, the parties discussed their business relationship. The parties dispute the nature and the substance of these conversations.

Davis attests that, on November 8, 2007, KDI and RPG met in Chicago to address KDI's concerns in light of the approaching January 1, 2008 termination date. Rake attests that he met with Davis in Chicago in early November 2007, at which time he offered her the opportunity to terminate the contract in another year -- at the end of 2008. Additionally, Michael Keiser ("Keiser"), a member of RPG's board of directors, attests that he spoke to Davis by telephone sometime in late November or early December 2007, at which time Davis told him her intention was to remain with RPG for at least another year. Davis attests that, as a result of the November 8 meeting, RPG prepared a proposed mutual agreement on or around November 30, 2007 "as a roadmap to attempt to preserve the parties' business relationship."

Davis attests that KDI responded to the November 30 proposal on December 14, 2007. The December 14 letter, on Centropy letterhead signed by Peter Walts ("Walts") as CEO, stated that further clarification of various issues was required before KDS could consider continuing the current agreement. In particular, the December 14 letter asserted that KDS' "opportunity for potential revenue growth was greatly inhibited due to the fact that RPG did not introduce and build the dedicated Kathy Davis branded collection that was a negotiated condition of the current Agreeement[,]" and contended that as a result RPG had breached its obligation under the parties' contract. The December 14 letter also stated that, "[a]s Kathy alluded to . . . KDS has been approached by potential partners to market the KDS greeting card and licensed product categories in the future, and we are actively considering these options." Finally, the December 14 letter stated, "We know that your team is aware the KDS termination option in the Agreement expires on December 31, 2007, so please address the above issues in detail, and respond in writing on or before Thursday, December 20, 2007."

RPG replied to KDS' inquiries with a document dated December 27, 2007. With regard to the March 2008 Signature Collection test, the December 27 reply stated that RPG "[r]ecently" got permission from the Customer to support the Signature Collection with certain signage. The December 27 reply also acknowledged that RPG had not been successful in delivering the Davis branded collection showcase as quickly as it hoped, which "has been a partnering effort as demonstrated by [the parties'] joint effort to call and sell [the Customer] on the new showcase." The December 27 reply further stated that RPG would accelerate the Davis branded collection initiative in 2008 after it has successfully proven itself in the test launch with the Customer.

Rake attests that the December 14 and 27 communications were not related to the immediate termination of the license agreement, but rather to reaching an agreement on certain terms so that Davis would remain with RPG for the additional year beyond the January 1, 2008 termination date. Ultimately, in a letter to Rake dated December 28, 2007, Davis terminated the parties' relationship. Davis also sent a letter to "Jude, Mark, Mike, Phil, and Mary" dated January 4, 2008 "to follow up on [her] notice letter."

RPG contends that Davis and American Greetings, RPG's competitor, plan to market the Signature Collection to the Customer. RPG also alleges that it is inevitable, or it soon will be inevitable, that in the course of Davis' dealings with American Greetings she has disclosed, or will disclose, RPG confidential and trade secret information. Specifically, RPG asserts that neither American Greetings nor any competitor is allowed to know, among other things: the fact that RPG has entered into the Signature Collection arrangement with the Customer; the terms of RPG's arrangement with the Customer, including marketing, ...


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