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Experian Information Solutions, Inc. v. Carfax, Inc.

United States District Court, N.D. Illinois, Eastern Division

May 29, 2014

CARFAX, INC., Defendant.


SARA L. ELLIS, District Judge.

Experian Information Solutions, Inc. ("Experian"), which markets and sells vehicle history reports ("VHRs") under the trademark "AutoCheck, " filed suit against its competitor, Carfax, Inc. ("Carfax"), alleging that Carfax made false and disparaging statements about AutoCheck in order to retain a contract with Subaru of America, Inc. ("Subaru"). Experian pursues claims of tortious interference with business expectancy (Count I), trade libel/false light/business disparagement (Count II), defamation per se (Count III), and defamation per quod (Count IV). Carfax filed counterclaims against Experian, alleging false advertising in violation of the Lanham Act, 15 U.S.C. ยง 1125(a), and deceptive trade practices in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/2 et seq., and the Illinois Uniform Deceptive Trade Practices Act, 815 Ill. Comp. Stat. 510/2 et seq. Before the Court is Carfax's motion for summary judgment on Experian's claims [62], which is limited to causation and harm. Because there is a genuine issue of fact as to whether Carfax's statements caused Subaru to forego its planned contract with Experian in favor of renewing its contract with Carfax, Carfax's motion is denied.


Experian and Carfax are competitors in the VHR industry. In February 2005, Carfax contracted with Subaru to provide VHRs for Subaru's Certified Pre-Owned ("CPO") program. Under the contract, Subaru dealerships were required to use Carfax reports when certifying a vehicle as part of the CPO program. The Subaru-Carfax contract ran through February 2012, at which point it was to automatically renew for additional one-year periods unless either party provided written notice of termination ninety days before the contract's anniversary date.

In 2010, Subaru discussed the possibility of using AutoCheck for its CPO program, but nothing came of those discussions. In summer 2011, as the Subaru-Carfax contract renewal date approached, Subaru's National Dealer Advisory Board ("NDAB") requested that Subaru "A. Either allow choice of either Autocheck and Carfax reports for Subaru CPO or B. Negotiate on their behalf a special unlimited VHR monthly offering [from Carfax] that is priced well under current market pricing (and similar to Autocheck)." Pl.'s Ex. 7 at SOA000038. Jim Sarchese, Subaru's National Product Manager for CPO, then reinitiated contact with Experian. Experian offered to provide Subaru a flat-fee VHR rate for Subaru dealers in addition to between $140, 000 and $150, 000 per year in marketing dollars if Subaru signed a contract with Experian. Subaru also conducted due diligence on AutoCheck. Patti Mickel, Subaru's Insurance Product Marketing Manager, ran thirteen VINs through AutoCheck's website to compare the results with those from Carfax. On September 23, 2011, Sarchese, Mickel, and someone from Carfax's IT department visited Experian's office in Schaumburg, Illinois. They met with John Sidman, Experian's Director of Business Development, and Rob Bayus, Experian's Senior Business Development Specialist.[2] The next day, Sarchese emailed members of the NDAB to report that the meeting went well and that Subaru was seriously considering terminating its contract with Carfax and exclusively using AutoCheck for the CPO program, in response to the NDAB's request for a better and more affordable VHR solution.

After further discussions, Subaru decided to provide Carfax with notice of non-renewal of their agreement. Thus, on October 14, 2011, Sarchese emailed Justin Johnson, Carfax's Partner Development Director for CPO, a copy of Subaru's notice of non-renewal. That notice was also sent to Carfax's CEO by certified mail.[3] Concurrently, Subaru was working with Experian to finalize an agreement for AutoCheck. The parties discussed marketing materials and Subaru's intention to remove Carfax from its promotional materials. Experian sent Subaru a draft AutoCheck contract for review and comment on October 17th. However, Subaru never signed a CPO contract with Experian.

Instead, Carfax redoubled its attempts to save its relationship with Subaru, with the end result being that Subaru opted to sign a new contract with Carfax in 2012. On October 18th, at Johnson's request, Sarchese and Mickel met with Johnson and Joe Koenig, Carfax's Vice President of Business Development, at a Cheesecake Factory in Cherry Hill, New Jersey, near Subaru's offices. At that meeting, Johnson and Koenig offered that Carfax could conduct a survey of Subaru dealers to determine if they supported a switch to AutoCheck. Sarchese declined the offer, stating that Subaru could conduct such a survey on its own if it wanted to know what its dealers thought about AutoCheck. Sarchese also informed Johnson and Koenig that Subaru planned to sign with Experian and that Carfax should act quickly if it had anything to offer. The meeting alone did not change Subaru's decision to go forward with Experian, however; Mickel and Sarchese continued conversations with Experian, even asking for AutoCheck's logo to begin designing marketing materials.

After the October 18th meeting, Johnson worked with his Carfax team to come up with a way to save the Subaru business. Johnson spoke and emailed regularly with Mickel after the meeting, although neither recalled what was specifically discussed. Johnson also attempted to find a way to obtain additional marketing dollars to allot to Subaru but initially encountered resistance. Others worked to obtain a comparative analysis of the two companies' results that could be presented to Subaru.

Carfax's efforts culminated in a fourteen-page letter from Johnson to Sarchese and Mickel, sent on October 21st. The letter began and ended with a personal appeal to Sarchese that Subaru renew with Carfax and not sign with Experian. Alternatively, Johnson suggested a short-term extension of the Carfax contract to allow the parties to work out the details. The letter proceeded to list "numerous compelling reasons why changing vehicle history report (VHR) providers for the Subaru CPO program would be a damaging choice for Subaru and would ultimately hurt sales of Subaru CPO vehicles and the growth of the Subaru CPO program." Def.'s Ex. 13 at EXP-Cx002494. The letter stated that the majority of Subaru dealers preferred Carfax and would continue to run Carfax reports even with a switch to AutoCheck, which would only increase costs. Johnson again repeated the suggestion of conducting a survey of Subaru dealers to verify his claims. Additionally, the letter highlighted Carfax's brand awareness as compared to that of AutoCheck and the fact that Carfax had access to more data and did a better job of interpreting the data it had. Specifically, Johnson stated that Carfax's "data is vastly superior and that using Autocheck will allow a significant number of problem vehicles into [the CPO] program." Id. at EXP-CX002495. As substantiation, the letter pointed out that, by using Carfax, 384 vehicles had not been certified through Subaru's CPO program between October 2010 and September 2011. The letter claimed that, if AutoCheck had been used, 96 of these same vehicles would have been certified.[4] Carfax pledged to help the Subaru CPO program grow through various measures including a CPO alert, an inventory report, additional training, and field team reinforcements. Additional marketing support was also pledged, including a $25, 000 marketing budget and more prominent Subaru CPO placement on Carfax's products.

Although Sarchese testified that he only skimmed the October 21 letter and viewed it as marketing fluff, he sent the letter to Bayus at Experian. Bayus then disseminated it to Sidman and David Nemtuda, Experian's Vice President of Sales, noting that the $25, 000 marketing subsidy that Carfax was offering and the allegation that Experian was offering AutoCheck for as low as $199 per month for unlimited plans had caught Sarchese's attention and deserved a response. Mickel testified that she skimmed the letter when it came in but did not read it word for word. Both later denied recalling any specific statements contained in the letter.

The same day Sarchese and Mickel received Carfax's letter, Mickel suggested to Sarchese that they survey top CPO dealers to make sure they were comfortable with switching from Carfax to AutoCheck. Sarchese agreed with the suggestion. Mickel testified she thought a survey would be a good idea after noticing there was no resolution on the issue from the NDAB on Subaru's dealer portal. Sarchese and Mickel both testified that Johnson's letter did not motivate their decision to undertake the survey, but it is undisputed that the decision was made after the letter was received. In recounting the chronology of events in July 2012, Sarchese described the decision to survey Subaru dealers as follows:

On Oct 21st, Carfax reached out to us with the attached letter and came up to meet with us. Their contention was that despite our NDAB recommendation that the vast majority of dealers know the benefit of the Carfax brand and that we would do harm to our CPO product and to the general population of dealers wanting Carfax if we switched to lesser known Autocheck. We considered their contentions and decided that it would be prudent to poll our top CPO dealers directly to see firsthand their thoughts.

Pl.'s Ex. 50.

Sarchese and Mickel first contacted only a few dealers but then expanded the reach of the survey to seventy-seven dealerships-those that had sold at least fifty or more CPO vehicles in that year to date. As ...

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