United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
JEFFREY COLE, Magistrate Judge.
Native American Arts ("NAA") is suing Peter Stone Company ("Stone") under the Indian Arts and Crafts Act ("IACA"), 25 U.S.C. § 305, et seq., which forbids selling merchandise "in a manner that falsely suggests it is Indian produced, an Indian product, or the product of a particular Indian or Indian tribe or Indian arts and crafts organization" § 305e(a). See Native American Arts, Inc. v. Waldron Corp., 399 F.3d 871 (7th Cir. 2005). The purpose of the Act is to protect consumers and the makers of authentic Native American goods from false representations of a product's "origin or authenticity." See 68 Fed.Reg. 35164 (describing the Indian Arts and Crafts Act as "essentially a truth-in-marketing law designed to prevent, through both civil and criminal sanctions, marketing of products in a manner that falsely suggests such products are produced by Indians when the products are not, in fact, made by an Indian as defined by the 1990 Act."). See Native American Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729, 733 (7th Cir. 2006); Waldron Corp., supra .
The Act authorizes suit by an aggrieved Indian, Indian tribe, or Indian arts and crafts organization. §305e(b) and(d). A successful plaintiff may recover the greater of treble damages, including any and all gross profits accrued by the defendant as a result of its prohibited activities, or "in the case of each aggrieved individual Indian, Indian tribe, or Indian arts and crafts organization, not less than $1, 000 for each day on which the offer or display for sale or sale continues." §3053(b)(2)(A);(B). See generally Fern L. Kletter, Validity, Construction, and Application Indian Arts and Crafts Act of 1990, Indian Arts and Crafts Enforcement Act of 2000, and Indian Arts and Crafts Amendments Act of 2010, 62 A.L.R. F.2d 63 (2012).
In its initial Rule 26 disclosures, NAA sought $5, 000 in "estimated damages... based on competitive injuries, including Defendant's gross profits on violative products sold." [Dkt. 249-24 ¶3]. There was no further explanation for this figure, and no documents were offered to support it notwithstanding the specific strictures of Rule 26. $14, 235, 000 was sought in estimated statutory damages. Id. It was not until the summary judgment briefing that the claimed statutory damages escalated to $36, 144, 000. [Dkt. #295-2, ¶79]. These figures were based on the defendant's purportedly unlawful gross sales of $26, 000 in goods over a two year period.
Stone has filed a motion for summary judgment, arguing that NAA has not established that it has standing to sue under Article III of the Constitution.
BASIC SUMMARY JUDGMENT PRINCIPLES
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). In a summary judgment proceeding, a court may not weigh the evidence or decide which inferences should be drawn from the facts. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Still, "a factual dispute is genuine' only if a reasonable jury could find for either party." Rosario v. Brawn, 670 F.3d 816, 820 (7th Cir. 2012). To survive summary judgment, a non-moving party must "show through specific evidence that a triable issue of fact remains on issues for which the nonmovant bears the burden of proof at trial." Knight v. Wiseman, 590 F.3d 458, 463-64 (7th Cir. 2009). The evidence the nonmovant submits in support of his position must be "sufficiently strong" that a jury could reasonably find for the nonmovant. Id.
SUMMARY JUDGMENT UNDER LOCAL RULE 56.1
As always, the facts underlying this summary judgment proceeding are drawn from the parties' Local Rule 56.1 submissions. "For litigants appearing in the Northern District of Illinois, the Rule 56.1 statement is a critical and required component of a litigant's response to a motion for summary judgment." Sojka v. Bovis Lend Lease, Inc., 686 F.3d 394, 398 (7th Cir. 2012). Local Rule 56.1 requires a party seeking summary judgment to include with its motion "a statement of material facts as to which the... party contends there is no genuine issue and that entitle the... party to a judgment as a matter of law." Local Rule 56.1(a)(3); Ciomber v. Cooperative Plus, Inc., 527 F.3d 635, 643 (7th Cir. 2008). Each paragraph must refer to the "affidavits, parts of the record, and other supporting materials" that substantiate the asserted facts. Local Rule 56.1(a)(3); F.T.C. v. Bay Area Business Council, Inc., 423 F.3d 627, 633 (7th Cir. 2005).
The party opposing summary judgment must then respond to the movant's statement of proposed material facts; that response must contain both "a response to each numbered paragraph in the moving party's statement, " Local Rule 56.1(b)(3)(B), and a separate statement "consisting of short numbered paragraphs, of any additional facts that require the denial of summary judgment." Local Rule 56.1(b)(3)(C); Ciomber, 527 F.3d at 643. Again, each response, and each asserted fact, must be supported with a reference to the record. Local Rule 56.1(b)(3)(B); Cracco v. Vitran Exp., Inc., 559 F.3d 625, 632 (7th Cir. 2009); Bay Area Business Council, Inc., 423 F.3d at 633.
The district court is entitled to enforce strict compliance with its local rules regarding summary judgment motions. Townsend v. Alexian Bros. Medical Center, 589 Fed.Appx. 338, 339 (7th Cir.2015). The obligations set forth by a court's local rules are not mere formalities. Delapaz v. Richardson, 634 F.3d 895, 899 (7th Cir.2011)."If parties fail to comply with local rules, they must suffer the consequences, harsh or not.'" Petty v. City of Chicago, 754 F.3d 416, 420 (7th Cir.2014). The Seventh Circuit has "consistently and repeatedly upheld a district court's discretion to require strict compliance with its local rules governing summary judgment." Id. See also Zuppardi v. Wal-Mart Stores, Inc., 770 F.3d 644, 648-649 (7th Cir.2014); Yancick v. Hanna Steel Corp., 653 F.3d 532, 537 (7th Cir. 2011). Responses and facts that are not set out and appropriately supported in an opponent's Rule 56.1 response will not be considered. Shaffer v. American Medical Association, 662 F.3d 439, 442 (7th Cir. 2011); Bay Area Business Council, 423 F.3d at 633. Consequently, the movant's properly supported facts will be deemed admitted. Apex Digital, Inc. v. Sears, Roebuck & Co., 735 F.3d 962, 965 (7th Cir. 2013).
NAA is an "Indian Arts and Crafts Organization, " owned by Matthew and Mary Mullen, who are enrolled members of the Ho-Chunk Nation. The Mullens sell Indian craft items, ranging from dream catchers and pottery to jewelry to figurines and beyond. They operate a store in Tinley Park, Illinois, and also sell items through a website called "catchyourdreams.com." NAA has been in business for nearly 20 years [Dkt. #279-1, ¶90; #298-2, ¶¶ 4-7], and, in that time has, according to Mr. Mullen, garnered $1.25 million in revenue from the sale of Native American arts and crafts. [Dkt.#279-1, ¶94; # 298-2, ¶ 16]. Apart from this statement, there is no proof in the form of any business records that have been offered into evidence. Indeed, there is no evidence on this record that NAA even maintain business records - and the citation provided to support the figure has nothing to do with revenues; it says conclusorily that NAA has a significant web presence - whatever that may mean. [Dkt. # 279-1, ¶ 94; Pl.Ex. 1, ("Mullen Dec."), ¶ 26].
Crediting Mr. Mullen's unsupported assertion, NAA's gross receipts come to less than $70, 000 a year. NAA's profits, if any, are anyone's guess - again there are no records, but the numbers cannot be too impressive. Mr. Mullen claims that in the 18 years NAA has been in business, it has spent $52, 000 in advertising - which averages about $2800 a year. This represents about 4% of NAA's sales. NAA calls that outlay "substantial." [Dkt. # 279-1, ¶ 102]. But that is an opinion, not a fact admissible in summary judgment. Moreover, experts in the field have recommended that small businesses spend 10-12% of their sales times their markup (which is 100%, see infra below), minus rent. http://www.entrepreneur.com/article/54436. We don't know what NAA's rent is, as there are no financial records, and Mr. Mullen does not say what it is. But the before-rent recommended figure would be $7, 000 to $8, 400 annually, or almost three times the amount NAA spends.
Mr. Mullen also claims that NAA has spent $25, 000 on its website, or about $1400 a year. There is no claim there was either an upward or downward adjustment following the defendant's sale of its products and no proof that its sales have, in fact, diminished. This does not seem particularly "substantial." (Pl.Ex. 1. ¶33). NAA states that it employs artists from Indian Tribes, but does not say how much their salaries are or how many. [Dkt. # 279-1, ¶ 103]. Also, according to Mr. Mullen, NAA marks up every item it purchases from a Native American artisan once; that is, an item that costs NAA $20 is sold for $40. (Pl.Ex. 1, ¶ 78). Then there is the rent on NAA's brick and mortar store. It's mostly guesswork in the absence of business records, but NAA's annual profit would seem to not exceed $30, 000 per annum. The statutory damages NAA wants from Stone - over $36 million, representing an amount that NAA would be unable to generate in gross revenues over the course of more than two centuries. If we are talking about profits, it would take NAA half a millennium to reach that lofty summit based on past performance.
What did Stone do to warrant this? In 2006, it began selling jewelry designed by Wendy Whiteman, which she called the "Wolfwalker" Collection. On its website, Stone advertised these items as "Authentic Native American Jewelry, " "Native American Jewelry, " "Native American Designs, " or "Genuine Indian Handmade." [Dkt. # 279-1, ¶¶ 98, 107]. But it's not clear whether Wendy Whiteman qualifies as an Indian - a member of an Indian Tribe or certified as an Indian artisan by an Indian Tribe - under the IACA. §305e(a)(1). NAA claims she is not [Dkt. # 279-1, ¶ 111], but the evidence it cites to - deposition testimony from Ms. Whiteman and Stone's owner, Peter Koslowski - does not support its assertion.
At her deposition, Ms. Whiteman was asked why she used the "Wolfwalker" name, and she said it's because her " spiritual roots are Native American." (Pl. Ex. 4 (Whiteman Dep.), at 12)(Emphasis supplied). That statement is not proof that she is not an "Indian." To the contrary, having spiritual roots of a Native American is perfectly consistent with being one. Mr. Mullen's contrary conclusion is conjecture, not proof. She was then asked whether she is an "enrolled member of a recognized Indian tribe, " to which she responded that she is not. (Whiteman Dep., at 15). But, the word "enrolled" does not appear in the IACA. So if NAA is relying on Ms. Whiteman not being an enrolled member of a tribe, its case rests on flimsy footing based on the record so far. Significantly, Ms. Whiteman was never asked if she was an Indian/Native American.
To be sure, Tribal enrollment is a common evidentiary means of establishing Indian status, but it is not the only means, and it is certainly not necessarily determinative. United States v. Bruce, 394 F.3d 1215, 1224 (9th Cir. 2005). This isn't an argument that Stone raises here, but we must bring it up because NAA, in responding to a motion for summary judgment, is expected to strictly comply with Local Rule 56.1. That means its asserted facts must be supported by specific references to evidence in the record. Ammons v. Aramark Uniform Services, Inc., 368 F.3d 809, 817-18 (7th Cir. 2004). NAA has clearly missed that mark here.
According to NAA, Peter Koslowski didn't know any better, saying "she gave [him] every indication that she was a Native American to the heart and soul." [Dkt. # 279-1, ¶ 111]. Ms. Whiteman told him she could provide him with "an authentic or a line of Native American jewelry created by a Native American." (Pl. Ex. 8 (Koslowski Dep., at 33)). So, as far as Mr. Koslowski knew, he was offering such a product. (It is unclear what purpose NAA offers this evidence for, but it does not support the proposition that Ms. Whiteman was not an "Indian").
NAA claims that, at his deposition, Mr. Koslowski "admitted" that he violated the IACA by selling counterfeit Indian jewelry [Dkt. # 279-1, ¶ 110]; but, again, the evidence NAA cites does not support its assertion. While NAA relies on testimony from Mr. Koslowski's deposition, nowhere in the cited pages does he admit that he violated the Act. In fact, Mr. Koslowski testified that "when [he] speak[s] with Wendy Whiteman, [he's] talking to a Native American." (Koslowski Dep., at 57). That's the opposite of conceding a violation of the IACA. The assertion being unsupported is also a violation of the Local Rule.
In any event, Stone offered the Wolfwalker line from 2006 through 2009. In those four years, total sales came to $27, 905.09. [Dkt. # 279-1, ¶ 32]. Over that time period, the product line constituted less than 3/10 of one percent of Stone's sales, which were nearly $10 million. [Dkt. # 279-1, ¶¶ 16, 32, 33]. The line was clearly a minuscule portion of Stone's business, which concentrates on Celtic and New Age designs. [Dkt. # 279-1, ¶ 22]. Yet, NAA denies that the Wolfwalker collection was a "very small amount and percentage of Peter Stone's sales." [Dkt. # 270-1, ¶ 32]. NAA can offer no support for this denial, of course, and it is rather unpersuasive to argue that 3 cents out of every $10 is not a very small percentage.
Stone is a wholesaler; less than 2% of its sales are to end users. [Dkt. #279-1, ¶ 9]. It has little or no presence in Illinois. Mr. Koslowski has attended two trade shows here, a gift show and a Celtic and Irish jewelry show in January 2006 and September 2006, respectively. [Dkt. # 279-1, ¶ 13]. Stone has a website, www.peterstone.com, but between 2006 and 2009, the internet accounted for less than 1% of its sales. [Dkt. # 279-1, ¶ 17]. Less than 4% of Stone's customers are in Illinois. Of these, Mr. Mullen claims just two are NAA's competitors: Buffalo Gal Home Gallery in Frankfort, Illinois, and ...