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American Hardware Manufacturers Association v. Reed Elsevier

January 4, 2010

AMERICAN HARDWARE MANUFACTURERS ASSOCIATION, PLAINTIFF,
v.
REED ELSEVIER, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Judge Blanche Manning

MEMORANDUM AND ORDER

For about 25 years, plaintiff American Hardware Manufacturers Association and defendant Reed Elsevier, Inc. put on the premiere hardware trade show in the country, held each year in Chicago. But American Hardware came to suspect that Reed was scheming behind its back to procure kickbacks from its contractors, driving up costs and alienating exhibitors. American Hardware and Reed eventually decided to part ways and run competing shows. In the end, only Reed's show survived.

American Hardware has now sued Reed and two of its divisions (collectively "Reed"), as well as its general contractors, Freeman Decorating Co. and Freeman Decorating Services, Inc. (collectively "Freeman), for violating various agreements. Reed and Freeman responded with a variety of counterclaims against American Hardware and its former and current presidents, counter-defendants William and Timothy Farrell.

The parties have filed numerous motions for summary judgment. This order addresses two of those motions for summary judgment: one filed by former president William Farrell on Reed's counterclaim for defamation (Count XI) and Freeman's counterclaim for defamation (Count I); and the other filed by American Hardware and its current president, Timothy Farrell, on Reed's counterclaim for defamation (Count I) and Freeman's counterclaim for defamation (Count I). For the reasons that follow, the motions are granted in part and denied in part.

BACKGROUND

In 1977, American Hardware entered into a written Show Agreement with Reed under which American Hardware sponsored and Reed managed an annual hardware show. American Hardware alleges that the Show Agreement entitled it to "control and oversight of all decisions necessary for the success of the Show," including the ability to select the location of the hardware show and the right to share in the revenue from it. See Second Amended Complaint ("SAC") at ¶ 18.

In 1998, Reed awarded a contract to Freeman to act as a general contractor, and help run the hardware and other trade shows. According to American Hardware, Freeman agreed to pay Reed undisclosed kickbacks and barter exchanges to secure its contract. In addition, Reed's contract with Freeman also allegedly required Freeman to provide Reed with free goods and services and to recoup its costs from show exhibitors.

The hardware show enjoyed increasing success until 2000, when demand for exhibit space began decreasing. The parties dispute the reasons for the decline. According to American Hardware, the decline was the result of the high costs to exhibitors of attending the hardware show. According to the defendants, the show suffered from a combination of factors, including industry consolidation, the economic downturn, and reduced travel after the September 11, 2001, terrorist attacks.

In 2002, the parties discussed ending their relationship and, on February 26, 2003, entered into a separation agreement. Under the separation agreement, the parties terminated their show agreement after the 2003 hardware show and agreed to begin conducting their own separate hardware shows. However, their split proved to be less than harmonious and, on December 30, 2003, American Hardware sued Reed and Freeman for a variety of claims, including breach of contract, civil conspiracy, and fraud.

Reed and Freeman responded in kind by filing various counterclaims for, among other things, defamation. Specifically, in Count I of its counterclaim, Reed alleges that American Hardware and Timothy Farrell are liable for defamation based on:

1. American Hardware's January 16, 2004, press release which reported that Reed had (a) engaged in cost-shifting and kickbacks, (b) illegally used American Hardware's trademarks, (c) made false claims about registrants, (d) had not denied any of these allegations, and stated that (e) "Reed simply cannot compete at this level so it has resorted to illegal and unethical activity;"

2. Timothy Farrell's statements on January 18, 2004, to attendees of American Hardware's Executive Conference, in which he (a) repeated the allegations made in the complaint regarding kickbacks and conspiracy to defraud, and (b) stated that no one wants to work with a company that lies and cheats their partners and exhibitors;

3. An article in a special edition of American Hardware's publication The Eagle published in January 2004 which repeated Timothy Farrell's January 18, 2004, statements to the Executive Conference;

4. An article in the regular January/February 2004 edition of American Hardware's publication The Eagle which repeated the complaint's allegations of kickbacks and a conspiracy to defraud, as well as American Hardware's allegation that Freeman admitted to cost-shifting;

5. Timothy Farrell's May 28, 2004, e-mail to industry leaders to which Farrell attached a copy of the complaint which alleged kickbacks and conspiracy to defraud;

Reed's Amended & Supplemental Counterclaim [171-1] at ¶¶115-129. As for William Farrell, Reed alleges in Count XI that he is liable for defamation based on statements:

1. His January 8, 2004, letter to Meeting News reporter Donna Arioldi to which he attached a copy of the plaintiffs' complaint which alleged kickbacks and conspiracy to defraud;

2. His January 12, 2004, letter to General Tools chief executive officer Joe Ennis to which he attached a copy of the complaint which alleged kickbacks and conspiracy to defraud;

3. American Hardware's January 16, 2004, press release which reported that Reed had (a) engaged in cost-shifting and kickbacks, (b) illegally used American Hardware's trademarks, (c) made false claims about registrants, (d) had not denied any of these allegations, and stated that (e) "Reed simply cannot compete at this level so it has resorted to illegal and unethical activity;"

4. Timothy Farrell's statements on January 18, 2004, to attendees of American Hardware's Executive Conference, in which he (a) repeated the allegations made in the complaint regarding kickbacks and conspiracy to defraud, and (b) stated that no one wants to work with a company that lies and cheats their partners and exhibitors;

5. An article in special edition of American Hardware's publication The Eagle published in January 2004 which repeated Timothy Farrell's January 18, 2004, statements to the Executive Conference;

6. An article in the regular January/February 2004 edition of American Hardware's publication The Eagle which repeated the complaint's allegations regarding kickbacks and a conspiracy to defraud, as well as American Hardware's allegation that Freeman admitted to cost-shifting;

7. Timothy Farrell's May 28, 2004, e-mail to industry leaders to which Farrell attached a copy of the complaint which alleged kickbacks and conspiracy to defraud;

8. American Hardware's January 6, 2005, press release which repeated the complaint's allegations of kickbacks and conspiracy to defraud.

Reed's Amended & Supplemental Counterclaim [171-1] at ¶¶ 246-265.

Meanwhile, Freeman alleges in Count I of its counterclaim that American Hardware, William Farrell and Timothy Farrell are liable for defamation based on:

1. William Farrell's January 8, 2004, letter to Meeting News reporter Donna Arioldi to which Farrell attached a copy of the plaintiffs' complaint which alleged kickbacks and conspiracy to defraud;

2. William Farrell's January 12, 2004, letter to General Tools chief executive officer Joe Ennis to which Farrell attached a copy of the complaint which alleged kickbacks and conspiracy to defraud;

3. Timothy Farrell's statements on January 18, 2004, to attendees of American Hardware's Executive Conference, in which he (a) repeated the allegations made in the complaint regarding kickbacks and conspiracy to defraud, and (b) stated that no one wants to work with a company that lies and cheats their partners and exhibitors;

4. An article in the January/February 2004 edition of American Hardware's publication The Eagle which repeated the complaint's allegations regarding kickbacks and a conspiracy to defraud, as well as American Hardware's allegation that Freeman admitted to cost-shifting;

5. Timothy Farrell's May 28, 2004, e-mail to industry leaders to which Farrell attached a copy of the complaint which alleged kickbacks and conspiracy to defraud;

6. Timothy Farrell's October 5, 2004, descriptions to a reporter for the Chicago Sun-Times of the allegations of the plaintiff's complaint, which were repeated in the article along with a quote attributed to Farrell in which he ...


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