United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
JORGE ALONSO, UNITED STATES DISTRICT JUDGE.
dispute arises from a settlement agreement entered into
between the parties regarding the licensing and distribution
of certain educational materials. Unfortunately, the lengthy
and ongoing feud between the parties reignited, and plaintiff
filed this case, shortly after the ink on the settlement
agreement dried. Plaintiff has filed a sixteen-count First
Amended Complaint, alleging breach of contract, breach of
implied covenant of good faith and fair dealing, unjust
enrichment, tortious interference with a business expectancy,
common law unfair competition, deceptive trade practices,
fraud, and punitive damages. Before the Court is
plaintiff's motion for partial judgment on the pleadings
pursuant to Federal Rule of Civil Procedure 12(c). For the
reasons set forth below, the motion  is denied.
February 24, 2016, after several years of litigation in
several different courts, plaintiff Wave 3 Learning, Inc.
(“Wave 3”) and defendants AVKO Educational
Research Foundation, Inc. (“AVKO”) and Don McCabe
(“McCabe”) entered into a settlement agreement
(the “Agreement”) to resolve their long-standing
dispute over the Sequential Spelling materials. (Am. Ans.
¶¶ 7, 8.) Pursuant to the terms of the Agreement,
Wave 3 agreed to dismiss all claims against defendants, pay
defendants a fixed sum over a four-year period, and pay a 6%
royalty on all future Sequential Spelling-related sales. (Am.
Ans. ¶ 8; Am. Compl., Ex. A.) In exchange, defendants
agreed to dismiss all claims against Wave 3 and allow it to
use the Sequential Spelling website and trademark.
(Id.) Under the Agreement, AVKO was also given the
authority to approve any new Wave 3 material. (Am. Ans.
¶ 25.) The parties agreed that approval would not be
“unreasonably withheld” and created an appeal
mechanism to address any issues arising from the approval
process. (Am. Ans. ¶¶ 26, 30; Am. Compl., Ex. A.)
While defendants admit these material facts, defendants
dispute many of Wave 3's remaining allegations.
crux of the instant case lies in the parties'
disagreement over the licensing rights of the Sequential
Spelling materials. Wave 3 alleges that, under the terms of
the Agreement, defendants granted it an exclusive license to
Sequential Spelling Levels 1-7 and its derivatives in the
U.S. as well as a nonexclusive license to the Sequential
Spelling materials worldwide. (Am. Compl. ¶ 8.)
Defendants deny this and state that “AVKO granted an
exclusive license to Wave 3 Revised Edition Sequential
Spelling Teacher Editions 1-7, not AVKO's Sequential
Spelling.” (Am. Ans. ¶ 9.) In other words,
defendants say that they granted Wave 3 an exclusive license
to the “revised” Sequential Spelling materials
and any derivatives thereof but that they retained the rights
to the “classic” Sequential Spelling materials.
alleges that defendants have breached the Agreement by (1)
selling the Sequential Spelling materials to distributors and
other non-individuals in the United States after February 24,
2016, (2) refusing to give an accounting of and remit payment
for AVKO's sale of the Sequential Spelling materials from
February 24, 2016 to April 28, 2016, and (3) violating the
non-disparagement clause of the Agreement through its
communications with third parties. (Am. Compl. ¶¶
59, 98.) Defendants deny these allegations. (Am. Ans.
¶¶ 9, 59, 98.) They state that Wave 3 did not work
in good faith to fulfill the terms of the Agreement, that
Wave 3 and its President, Thomas Morrow
(“Morrow”), breached the Agreement by posting
disparaging remarks on their website, and that AVKO's
attorneys modified the Agreement without defendants'
consent. (Id. ¶ 9)
further complains that defendants breached the implied
covenant of good faith and fair dealing by abusing the
approval process. (Am. Compl. ¶¶ 28-37.) Wave 3
says defendants unreasonably denied approval of Wave 3's
revised versions of the Sequential Spelling material in an
attempt to force Wave 3 to renegotiate the Agreement. (Am.
Compl. ¶¶ 64, 103.) Additionally, Wave 3 alleges
AVKO abused the approval process so that it could continue
selling the Sequential Spelling material to distributors and
other non-individuals. (Id.)
deny abusing the approval process and contend that they were
merely attempting to correct deficiencies in the Agreement
and coordinate with Wave 3 to reconsider certain terms of the
Agreement, that McCabe was concerned about legal
ramifications related to certain copyrights, and that McCabe
had legitimate concerns about the material submitted to
defendants for approval. (Am. Ans. ¶¶ 10-43, 59,
alleges that defendants were unjustly enriched when they sold
the Sequential Spelling materials to non-individuals after
February 24, 2016. (Am. Compl. ¶¶ 68, 103.) AVKO
admits that it sold the Sequential Spelling materials to
non-individuals after February 24, 2016. (Am. Ans. ¶
next contends that AVKO intentionally interfered with Wave
3's business expectancy by convincing distributors and
customers to purchase AVKO's goods instead of Wave
3's. (Am. Compl. ¶ 75.) Additionally, Wave 3 states
that McCabe told Wave 3's current and potential
distributors and consumers that AVKO had the right to sell
the Sequential Spelling materials and Wave 3 did not.
(Id. ¶ 112.) Defendants deny these allegations.
(Am. Ans. ¶¶ 75, 112.)
also complains that defendants used deceptive trade practices
by inducing third parties to purchase the Sequential Spelling
materials from AVKO by misrepresenting to third parties that
Wave 3 did not have the rights to sell the Sequential
Spelling materials. (Am. Ans. ¶¶ 84, 122.)
Defendants deny these allegations. (Am. Ans. ¶¶ 84,
Wave 3 says that AVKO, at the direction of McCabe, committed
fraud by making false statements of material facts to Wave
3-that it had licensed the Sequential Spelling material only
to JJH Publishing only when AVKO had in fact sold the
materials to twenty other non-individuals-to make Wave 3
believe that its improper sale of the Sequential Spelling
material was less egregious than it was. (Am. Ans.
¶¶ 87, 124.) Defendants deny these allegations.
(Am. Ans. ¶¶ 87, 124.)
a motion for judgment on the pleadings under Rule 12(c) is
governed by the same standards as a motion to dismiss for
failure to state a claim pursuant to Rule 12(b)(6). See
Hayes v. City of Chi., 670 F.3d 810, 813 (7th Cir.
2012). However, when, as here, a party uses Rule 12(c)
“to attempt to dispose of [a claim] on the basis of the
underlying substantive merits[, ].. . . the appropriate
standard is that applicable to summary judgment, except that
the court may consider only the contents of the
pleadings.” Alexander v. City of Chi., 994
F.2d 333, 336 (7th Cir. 1993); see also Hous. Auth. Risk
Retention Grp., Inc. v. Chicago Hous. Auth., 378 F.3d
596, 600 (7th Cir. 2004) (stating that the pleadings
“consist of the complaint, the answer, and any written
instruments attached as exhibits”). In considering such
a motion, the Court must view the facts and all reasonable
inferences drawn from those facts in the light most favorable
to the non-moving party. Janssen v. BRI Holding,
LLC, No. 16 C 10098, 2017 WL 2080424 at *2 (N.D. Ill.
May 15, 2017). “A judgment on the pleadings is proper
when only questions of law, and not questions of fact, exist
after the pleadings have been filed.” All Am. Ins.
Co. v. Broeren Russo Const., Inc., 112 F.Supp.2d 723,
728 (C.D. Ill. 2000). A court will grant a motion for
judgment on the pleadings only when “no genuine issues
of material fact remain to be resolved and . . . the [moving
party] is entitled to judgment as a matter of law.”
See Alexander, 994 F.2d at 336. A dispute involving
interpretation of a contract is generally amenable to
resolution in the context of a judgment on the pleadings.
See Asta, L.L.C. v. Telezygology, Inc., 629
F.Supp.2d 837, 842 (N.D. Ill. 2009) (quoting Rickher v.
Home Depot, Inc., 535 F.3d 661, 664 (7th Cir. 2008)
(“Under Illinois law, the interpretation of a contract
presents a question of law that is decided by the
of Contract (Counts I and IX)
settlement agreement is in the nature of a contract and is
governed by principles of contract law.” Rose v.
Mavrakis, 799 N.E.2d 469, 473 (Ill.App.Ct. 2003). Under
Illinois law, to assert a claim for breach of contract, a
plaintiff must show “(1) the existence of a valid and
enforceable contract; (2) substantial performance by the
plaintiff; (3) a breach by the defendant; and (4) the
resultant damages.” Hongbo Han v. United Cont'l
Holdings, Inc., 762 F.3d 598, 600 (7th Cir. 2014)
(quoting Reger Dev., L.L.C. v. Nat'l City Bank,
592 F.3d 759, 764 (7th Cir. 2010)). A court's primary
objective in interpreting a contract is to give effect to the
intent of the parties. See Matthews v. Chi. Transit
Auth., 51 N.E.3d 753, 775 (2016). A court will first
look to the language of the contract because the language,
given its plain and ordinary meaning, is the best indication
of the parties' intent. See Gallagher v. Lenart,
874 N.E.2d 43, 58 (2007). A court will also view the contract
as a whole rather than viewing particular terms and
provisions in isolation. See Matthews, 51 N.E.3d at
776. “In Illinois, the determination of
whether a contract is ambiguous, as well as the construction
of an unambiguous contract, are questions of law for the
court.” Hickman v. Wells Fargo Bank N.A., 683
F.Supp.2d 779, 791 (N.D. Ill. 2010). “A contract is
ambiguous when its terms may reasonably be interpreted in
more than one way.” Krilich v. Am. Nat. Bank and
Trust Co. of Chi., 778 N.E.2d 1153, 1164 (Ill.App.Ct.
2002). However, a term in a contract is not automatically
rendered ambiguous simply because the parties disagree on the
meaning of that term. See Thompson v. Gordon, 948
N.E.2d 39, 48 (Ill. 2011).
main point of contention between the parties involves the
scope of the licensing rights granted to Wave 3 under the
Agreement. Paragraph 3 of the Agreement provides:
shall grant and hereby grants an exclusive license in the
United States and Canada, and a worldwide nonexclusive
license to the below titles and their derivatives
(collectively “Sequential Spelling”):
• Sequential Spelling Level 1 Teacher Guide
• Sequential Spelling Level 2 Teacher Guide
• Sequential Spelling Level 3 Teacher Guide
• Sequential Spelling Level 4 ...