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Peerless Industries, Inc v. Crimson Av

June 10, 2011

PEERLESS INDUSTRIES, INC., PLAINTIFF,
v.
CRIMSON AV, LLC; VLADIMIRI GLEYZER, DEFENDANTS.



The opinion of the court was delivered by: Judge Joan H. Lefkow

OPINION AND ORDER

Peerless Industries, Inc. filed a complaint against Crimson AV, LLC and Vladimiri Gleyzer alleging, among other claims, tortious interference with contract entered into by Peerless and one of its suppliers.*fn1 Peerless has filed a motion for a preliminary injunction to enjoin defendants from selling or offering to sell products received in breach of the supply agreement. A hearing was held on the preliminary injunction on June 7, 2011. For the following reasons, Peerless's motion for a preliminary injunction [# 23] will be denied.

BACKGROUND

Peerless is one of the leading manufacturers of audio-visual mount equipment in the world. It sells premium audio-visual mounts primarily to distributors and dealers who then install the mounts in buildings such as stadiums, schools, and airports. On May 23, 2007, Peerless entered into a supply agreement with Sycamore Manufacturing Co., Ltd., a Chinese manufacturer. The supply agreement includes a non-competition provision that provides that Sycamore shall not sell or otherwise provide any "Peerless Products" to Peerless's competitors:

Buyer's Exclusivity. A "Peerless Product" is one which is designed by Peerless or which is normally sold by Peerless under any Peerless Trademark or one which Supplier sells or has sold to Buyer. Supplier shall not make any Peerless Products except those to be sold to Buyer hereunder, or sell or otherwise provide any Peerless Products to anyone other than Buyer, during the term of this Agreement or at any time thereafter.

Sycamore Supply Agreement § 2. The non-competition provision further provides that Sycamore shall not sell or otherwise provide any products that are similar to "Peerless Products" during the term of the supply agreement and for one year after termination:

"Similar Products" means any mounts for any audiovisual equipment or monitors which, in Buyer's reasonable judgment, has substantially the same appearance as or reflects or contains any part of the design of any Peerless Product. During the term of this Agreement and for one (1) year thereafter, Supplier shall not sell or otherwise provide any Similar Products to anyone other than Buyer in the "Territory" consisting of North America (including Mexico) and Hawaii, nor shall Supplier sell or otherwise provide any Similar Products to anyone anywhere in the world if Supplier has reason to know that such Similar Products are intended for use in the Territory or are reasonably likely to be used in the Territory, or are reasonably likely to be used in the Territory, or previously have actually come into use in the Territory other than in insignificant quantities.

Id. The supply agreement also provides that, upon termination, Sycamore will immediately return to Peerless any confidential information and equipment that Peerless had shared with Sycamore. Id. §§ 7, 10, 12.

Sycamore manufactured and shipped products to Peerless pursuant to the Supply Agreement until March 2010. The parties do not agree upon the date of termination of the supply agreement, but the record is clear that as of March 29, 2010 at the latest, Peerless had terminated the supply agreement. Thus, under the terms of the supply agreement, Sycamore was no longer permitted to manufacture Peerless Products and was prohibited from manufacturing and shipping any Similar Products to North America for one year.

On May 20, 2010, Crimson was incorporated as an LLC with the Illinois Secretary of State. Crimson's sole member is a Hong Kong company called Modern Century Development Ltd. The salaries of its officers and office expenses, however, are paid by Sycamore. Vladimir Gleyzer is Crimson's managing director. He started working for Crimson on August 1, 2010, after Sycamore's president, Baohua "Tony" Jin, asked him if he would be interested in starting a company in the United States.

Jin and Gleyzer had worked together previously because Gleyzer, a former senior vice president at Peerless, had helped establish Peerless's manufacture and supply system in China. When they started working together at Crimson, both Gleyzer and Jin were aware of the supply agreement between Sycamore and Peerless. Jin had signed the agreement on behalf of Sycamore, and Gleyzer was listed as the contact person for notices to Peerless. Gleyzer had also received drafts of the Sycamore supply agreement from Peerless's counsel during the agreement negotiation process. In addition, in September of 2006, Gleyzer and Jin had signed a nearly identical supply agreement on behalf of Peerless and Kunashan North Bay AV Equipment Co. Ltd., Jin's former company.

Beginning in July 2010, Sycamore began to ship audio-visual equipment to Crimson from China. Sycamore's invoices and packing slips reflect that it sent shipments on July 8 and November 25, 2010 and on January 19, 28, and February 14, 2011. Crimson began to display products on its website and sold its products to three customers, one of whom was previously a customer of Peerless. Sycamore is Crimson's primary, but not its only, supplier.

In January 2011, Peerless received an email from an individual who purported to be the senior vice president of its largest customer. The emails stated that Crimson was selling Peerless products in the marketplace at a significant discount and that this was extremely detrimental to Peerless's business. Peerless soon determined that the emails had not, in fact, been sent by its customer. Peerless also reviewed the products offered for sale on Crimson's website. Peerless concluded that many of the products being advertised Crimson are Similar Products as defined ...


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