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Loggerhead Tools, LLC v. Sears Holding Corporation

May 1, 2013


The opinion of the court was delivered by: Judge John W. Darrah


Plaintiff LoggerHead Tools, LLC ("LoggerHead") filed suit against Sears Holding Corporation ("Sears") on November 9, 2012, alleging eight separate counts against Sears.*fn1 Sears filed a Motion to Dismiss Counts II, III, and VIII of the Complaint, which state claims of common law fraud, tortious interference with business relations and prospective advantage, and unjust enrichment, respectively.


The following facts are based on LoggerHead's Complaint and attached exhibits and are accepted as true for purposes of the Motion to Dismiss. See Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 763 (7th Cir. 2010). LoggerHead is a corporation based in Palos Park, Illinois. (Compl. ¶ 1.) Sears is a corporation based in Hoffman Estates, Illinois. (Id. ¶ 2.) LoggerHead was founded by Dan Brown, Sr. ("Brown") and sells a tool invented by Brown called the Bionic Wrench. (Id. ¶¶ 5, 10.) LoggerHead owns United States Patent No. 6,889,579, which covers the Bionic Wrench. (Id. ¶ 5.) LoggerHead has sold the tool to retailers, including Sears, Canadian Tire, QVC, Costco, Amazon, Ace Hardware, True Value, and Menards, and others. (Id. ¶ 17.) Sears purchased 15,000 Bionic Wrenches from LoggerHead in 2009, 75,000 in 2010, and over 300,000 in 2011. (Id. ¶¶ 21-23.)

In December 2011, Sears's hand-tool buyer Amanda Campana, ("Campana"), and Brown began discussing a Supply Agreement for 2012, including a Father's Day Direct Response TV ("DRTV") program and a Christmas DRTV program. (Id. ¶ 24.) Campana represented that Sears and LoggerHead had developed a "strategic partnership" and concurred that if LoggerHead did not sell to Home Depot or Lowes, Sears's two largest national competitors, and did not increase the price for 2012, Sears could sell 600,000 Bionic Wrenches. (Id. ¶¶ 23-24.) On December 21, 2011, Campana wrote to Brown, "We are very excited about the success of the Bionic wrench and we are looking forward to another successful year. As I am working through my forecast though I wanted to know if there is any chance the Bionic wrench will be in any of our competitors next year. This is something that I will need to factor in if it will be." (Id. ¶ 25.) Brown responded that he would work with Sears and not sell to Sears's direct competitors as long as Sears committed to a sufficient quantity. (Id. ¶ 26.)

In January 2012, Campana was replaced by Stephanie Kaleta ("Kaleta"). (Id. ¶ 27.) On February 8, 2012, Kaleta provided a Father's Day forecast of 73,000 units at LoggerHead's 2011 pricing and agreed to a Christmas DRTV Program commitment. (Id. ¶ 30.) Brown responded that day, requesting a 300,000 unit commitment from Sears for 2012. (Id. ¶ 31.) Kaleta did not confirm a 300,000 unit commitment for 2012, but confirmed a 73,000 unit Father's Day commitment. (Id. ¶ 32.) The following day, Brown sent Kaleta a new pricing for 2012 with a 5 percent increase over the 2011 pricing. (Id. ¶ 33.)

Beginning on February 10, 2012, LoggerHead began receiving order transmittals for 73,000 units at 2011 prices. (Id. ¶ 34.) On February 16, 2012, Brown responded that an order commitment for 73,000 units would be at 2012 prices and that without a commitment for all of 2012, LoggerHead would go to other retailers, such as Home Depot and Lowes. (Id. ¶ 35.) In response, Kaleta and her boss, Adam Whitney, continued negotiations with LoggerHead for the 2012 Supply Agreement, which included Christmas forecasts and a Sears DRTV program. (Id. ¶ 36.) Whitney and Kaleta wanted to be assured that LoggerHead had not signed an agreement with any Sears competitors, and Brown assured LoggerHead had not. (Id.) LoggerHead did not sell to Home Depot or Lowes in 2012. (Id. ¶ 38.)

On March 6, 2012, LoggerHead sent Kaleta a draft 2012 Supply Agreement, requesting a commitment of 300,000 units and standard lead times for order fulfillment. (Id. ¶ 39.) After receiving requested changes from Kaleta, Brown sent a revised 2012 Supply Agreement with the requested changes; this First Agreement Revision included a forecast of Sears to purchase and receive a minimum of 300,000 units in 2012. (Id. ¶ 40.) A week later, on March 13, 2012, Brown inquired as to the status of the 2012 Supply Agreement. (Id. ¶ 41.) The next day, Kaleta responded that she was waiting for the signoff, and, in a separate email, Sears communicated with LoggerHead about the DRTV program for the Bionic Wrench. (Id.) On March 19, 2012, Brown again inquired into the status of the 2012 Supply Agreement. (Id. ¶ 42.) Kaleta responded the next day with additional revisions, and Brown incorporated these changes and sent Kaleta a revised 2012 Supply Agreement. (Id.) None of the changes requested related to price, quantity, or lead times. (Id.) By April 18, Brown sent Kaleta a further revised 2012 Supply Agreement, with minor, insignificant changes incorporated at the request of Sears. (Id. ¶ 44.)

On April 25, 2012, Kaleta informed Brown that the 2012 Supply Agreement was being reviewed by Sears's "legal team." (Id. ¶ 45.)

On April 27, 2012, Kaleta sent Brown a further revised 2012 Supply Agreement (the Fourth Agreement Revision), which stated that, except for QVC and Ace Hardware, Sears would have exclusivity over the Bionic Wrench for the period Sears was running the 2012 Christmas DRTV promotion. (Id. ¶ 47.) The Fourth Agreement Revision also proposed a shortened lead time for production of the Bionic Wrench, from 90 days to 30 days. (Id.) These last minute changes were significant and not acceptable to LoggerHead. (Id.)

On May 15, 2012, Sears sent LoggerHead Sears's Christmas 2012 forecast of 213,519 units. (Id. ¶ 49.) Sears sold the Bionic Wrenches during the Father's Day season, and LoggerHead began preparing the Christmas forecast. (Id. ¶ 50.) On June 20, 2012, Sears sent LoggerHead a revised Christmas forecast of 2,971 units. (Id. ¶ 51.) LoggerHead sent several letters to Kaleta and others at Sears regarding the forecast reduction, explaining that Brown was "blindsided, astonished, and at a complete loss as to why the Christmas forecasts decreased from more than 200,000 units to less than 3,000 units." (Id. ¶ 52.) On July 17, 2012, Sam Solomon, Senior Vice-President of Sears, acknowledged he was aware that LoggerHead and Sears were negotiating and said he would follow up further, but Solomon did not. (Id. ¶ 53.)

In September 2012, Sears, through its Craftsman brand, introduced its "Max Axess Locking Wrench," which LoggerHead alleges is a "virtual copy" of its Bionic Wrench. (Id. ¶ 55.)

LoggerHead filed its eight-count Complaint on November 9, 2012, alleging: (I) patent infringement, (II) common law fraud, (III) tortious interference with business relations and prospective advantage, (IV) federal trademark infringement, (V) false designation of origin and unfair competition under the Lanham Act, (VI) violations of the Illinois Deceptive Trade Practices Act, (VII) Illinois common law trademark violations, (VIII) unjust ...

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