The opinion of the court was delivered by: Honorable Joan B. Gottschall
MEMORANDUM OPINION AND ORDER
Tecnitoys Juguetes, S.A. ("Tecnitoys"), a toy car manufacturer, filed this breach of contract suit against its distributor, Distributoys.com, Inc. ("Distributoys"), and its distributor's president, Ronnie Goldfinger (collectively, the "defendants"), alleging that the defendants failed to pay for toy cars Distributoys sold on Tecnitoys' behalf and refused to return toy cars Tecnitoys entrusted to Distributoys. Tecnitoys also includes counts alleging conversion and requesting injunctive relief. Before the court is Tecnitoys' motion for a temporary restraining order that would: (1) enjoin the defendants from (a) soliciting sales of the toy cars, or (b) disposing of the toy cars or any proceeds from the sale or other disposition of the toy cars, and
(2) direct the defendants to return the toy cars to Tecnitoys. For the reasons that follow, the motion is granted in part and denied in part.
"The standards for issuing temporary restraining orders are identical to the standards for preliminary injunctions." Long v. Bd. of Educ., Dist. 128, 167 F. Supp. 2d 988, 990 (N.D. Ill. 2001) (citing Bernina of Am., Inc. v. Fashion Fabrics Int'l, Inc., No. 01 C 585, 2001 WL 128164, at *1 (N.D. Ill. Feb. 9, 2001)). Thus, to obtain the temporary restraining order it has proposed, Tecnitoys must show that: (1) it is likely to succeed on the merits, (2) it is likely to suffer irreparable harm without the temporary restraining order, (3) the harm it would suffer is greater than the harm that the temporary restraining order would inflict on the defendants, and (4) the temporary restraining order is in the public interest. Judge v. Quinn, 612 F.3d 537, 546 (7th Cir. 2010) (setting forth the requirements for a preliminary injunction) (citing Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 129 S. Ct. 365, 374 (2008); St. John's United Church of Christ v. City of Chi., 502 F.3d 616, 625 (7th Cir. 2007)). "How strong a claim on the merits is enough depends on the balance of harms: the more net harm an injunction can prevent, the weaker the plaintiff's claim on the merits can be while still supporting some preliminary relief." Hoosier Energy Rural Elec. Coop., Inc. v. John Hancock Life Ins. Co., 582 F.3d 721, 725 (7th Cir. 2009) (citing Cavel Int'l, Inc. v. Madigan, 500 F.3d 544 (7th Cir. 2007), and Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the U.S., Inc., 549 F.3d 1079 (7th Cir. 2008)).
As an initial matter, Tecnitoys has failed to show that it is reasonably likely to succeed on the merits against Goldfinger. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) ("'It frequently is observed that a preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion.'" (quoting 11A C. Wright, A. Miller, & M. Kane, FED. PRACTICE & PROCEDURE § 2948 (2d ed. 1995) (emphasis added; footnotes omitted))). Tecnitoys names Goldfinger as a defendant only in its conversion and injunctive relief counts. In Illinois, "[t]o prove the tort of conversion, a plaintiff must establish that he or she: (1) had a right to the converted property; (2) had an absolute and unconditional right to its immediate possession; (3) demanded its possession from the defendant; and (4) the defendant wrongfully and without authorization assumed control, dominion, or ownership over the property." Meyer v. Dep't of Pub. Aid, 392 Ill. App. 3d 31, 36 (Ill. App. Ct. 2009) (citing Cruthis v. Firstar Bank, N.A., 354 Ill. App. 3d 1122 (Ill. App. Ct. 2004)). Even assuming that Tecnitoys can satisfy the first three prongs of the test, Tecnitoys fails to offer any evidence that Goldfinger assumed control, dominion, or ownership of the property as an individual and not merely as an officer of Distributoys.*fn1 In addition, Tecnitoys fails to offer any evidence that would allow this court to pierce the corporate veil to reach Goldfinger.*fn2 Since Tecnitoys cannot show that it is likely to succeed against Goldfinger on the conversion count, it cannot show that it is likely to succeed against Goldfinger on the injunctive relief count since success on the merits is an element of injunctive relief. See Old Republic Ins. Co. v. Employers Reinsurance Corp., 144 F.3d 1077, 1081 (7th Cir. 1998) ("Before a court may award permanent injunctive relief, a party must demonstrate (1) it has succeeded on the merits;
(2) no adequate remedy at law exists; (3) the moving party will suffer irreparable harm without injunctive relief; (4) the irreparable harm suffered without injunctive relief outweighs the irreparable harm the non-prevailing party will suffer if the injunction is granted; and (5) the injunction will not harm the public interest." (citing Amoco Prod. Co. v. Vill. of Gambell, 480 U.S. 531, 546 n.12 (1987), NLRB v. Electro-Voice, Inc., 83 F.3d 1559, 1567 (7th Cir. 1996), and Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 386-88 (7th Cir. 1984)). As a result, Tecnitoys' motion for a temporary restraining order is denied insofar as Tecnitoys seeks to enjoin Goldfinger.
Whether Tecnitoys has made a sufficient showing that it is likely to succeed on the merits of its claims against Distributoys is a closer question. The court has already set forth the elements of a conversion claim in Illinois. "The elements of a breach of contract claim under Illinois law are: (1) the existence of a contract, (2) the performance of its conditions by the plaintiff, (3) a breach by the defendant, and (4) damages as a result of the breach." Am. Safety Cas. Ins. Co. v. City of Waukegan, --- F. Supp. 2d ----, 2011 WL 830763, at *30 (N.D. Ill. Mar. 3, 2011) (citing Roberts v. Adkins, 397 Ill. App. 3d 858, 866-67 (Ill. App. Ct. 2010)). "A party's 'failure to comply with a duty imposed by the contract gives rise to the breach.'" Id. (quoting Gallagher Corp. v. Russ, 309 Ill. App. 3d 192, 199 (Ill. App. Ct. 1999)).
It is undisputed that: (a) Distributoys accepted delivery of the toy cars even though Distributoys did not place an order for toy cars, (b) Distributoys asked Tecnitoys to pay for the cost of handling and storing the toy cars*fn3 , (c) Distributoys fulfilled orders of toy cars for various retailers and end-users, and (d) Distributoys refused Tecnitoys' request that Distributoys return the toy cars. (Decl. of Ronald E. Goldfinger ¶¶ 4, 13, 19, 21.) Notably, Distributoys does not contest Tecnitoys' assertion that Tecnitoys always retained control over how Distributoys disposed of the toy cars -- whether by distributing the toy cars through channels approved by Tecnitoys (e.g. by fulfilling orders made with online retailers) or by fulfilling orders arranged by Tecnitoys itself. (Decl. of Charles A. Ehredt ¶¶ 6, 14-15.) Distributoys also represented in open court that it is in financial distress (in the midst of a controlled liquidation at the direction of its bank, the Community Bank of Oak Park River Forest (the "Bank"); indeed, the Bank has a lien on all of Distributoys' assets. See Decl. of Goldfinger ¶ 20). In addition, it is undisputed that Distributoys has not paid for the toy cars.
Tecnitoys argues that these undisputed facts suggest that the arrangement it had with Distributoys is a bailment. In Illinois, "'[a] bailment is the delivery of property for some purpose upon a contract, express or implied, that after the purpose has been fulfilled, the property shall be redelivered to the bailor, or otherwise dealt with according to his directions, or kept until he reclaims it.'" Robledo v. City of Chi., --- F. Supp. 2d ----, 2011 WL 1303384, at *11 (N.D. Ill. Apr. 6, 2011) (quoting Am. Ambassador Cas. Co. v. City of Chi., 205 Ill. App. 3d 879, 884 (Ill. App. Ct. 1990)). Distributoys, on the other hand, contends that their arrangement was a "sale or return", which the Uniform Commercial Code ("UCC") (which Illinois has adopted) defines as an arrangement in which "delivered goods may be returned by the buyer even though they conform to the contract" and "the goods are delivered primarily for resale." 810 Ill. Comp. Stat. 5/2-326(1) (2001). Importantly, "goods held on sale or return are subject to [the claims of the buyer's creditors] while in the buyer's possession." 810 Ill. Comp. Stat. 5/2-326(2) (2001). Distributoys argues that its creditor, the Bank, has a lien on the toy cars that takes precedence over any interest Tecnitoys may have over either the toy cars or any proceeds from the sale of the toy cars. Alternatively, Distributoys argues that the arrangement was a consignment, which the UCC (as effective in 2008) defined as certain transactions "in which a person delivers goods to a merchant for the purpose of sale" and where the merchant "is not generally known by its creditors to be substantially engaged in selling the goods of others." 810 Ill. Comp. Stat. 5/9-102(a)(20) (2002). However, it seems unlikely that the arrangement fits the description of a consignment where Distributoys acknowledges that it is a distributor in the habit of selling the goods of others. (Decl. of Ronald E. Goldfinger ¶¶ 3-4.)
Unfortunately, some of the facts the parties point to are not helpful since they are consistent with either position. For example, the fact that Distributoys accepted delivery of the toy cars could be a bailment or a "sale or return". Only two facts weigh in favor of one side over the other: first of all, if Tecnitoys had sold the toy cars to Distributoys, then Tecnitoys likely would have relinquished control over the toy cars and would not have had the ability (for years after the purported sale) to direct Distributoys to fulfill orders Tecnitoys had arranged using toy cars in Distibutoys' possession. Secondly, the fact that Distributoys asked Tecnitoys to bear the cost of handling and storing the toy cars for years after the toy cars were delivered is not consistent with what happens in the typical sale. As stated above, it is undisputed that, for years after Distributoys accepted delivery of the toy cars, Tecnitoys continued to direct the sale of the toy cars and provide services for Tecnitoys in connection with the sale of the toy cars, while Distributoys charged Tecnitoys for these services. These facts compel the court to find that Tecnitoys has shown that it is reasonably likely to prevail ...