United States District Court, N.D. Illinois, Eastern Division
SUNNY HANDICRAFT H.K. LTD., AND BIN TEH HANDICRAFT SHENZEN CO., LTD., Plaintiffs,
ENVISION THIS!, LLC, AND WALGREEN CO., Defendants.
MEMORANDUM OPINION AND ORDER
Z. LEE, UNITED STATES DISTRICT JUDGE.
Sunny Handicraft, Ltd., and Bin Teh Co., Ltd., (collectively
“Sunny”) are Chinese companies that manufacture
holiday decorations. Defendant Envision This!, LLC,
(“Envision”) imports and distributes those
decorations to retailers such as Defendant Walgreen, Co.
(“Walgreens”). The Court presumes familiarity
with earlier opinions in this case, which detail the
breakdown of the companies' relationships. See Sunny
Handicraft (H.K.) Ltd. v. Envision This!, LLC, No. 14 CV
1512, 2017 WL 1105400 (N.D. Ill. Mar. 24, 2017); Sunny
Handicraft Ltd. v. Envision This!, LLC, No. 14 CV 1512,
2015 WL 5462054 (N.D. Ill. Sept. 16, 2015); Sunny
Handicraft Ltd. v. Envision This!, LLC, No. 14 CV 1512,
2015 WL 231108 (N.D. Ill. Jan. 16, 2015).
anticipation of trial, the parties dispute whether
Sunny's breach of fiduciary claim against Envision (Count
VII) and unjust enrichment claims against Envision (Count IV)
and Walgreens (Count II) should be tried before a jury or
resolved by the Court. For the following reasons, the Court
concludes that all three claims sound in equity and must be
resolved by the Court.
right to trial by jury is determined by federal procedural
law. Int'l Fin. Servs. Corp. v. Chromas Techs. Can.,
Inc., 356 F.3d 731, 735 (7th Cir. 2004). Fed.R.Civ.P.
38(a) dictates that there is a right to a jury trial where
either the Seventh Amendment or a federal statute so
requires. Id. Defendants have not pointed to any
statutes supporting a right to trial by jury here. As a
result, the Court must determine whether the claims at issue
are legal or equitable. If a claim is legal in nature, it
qualifies as a “Suit at common law” to which
“the right of trial shall be preserved” under the
Seventh Amendment. Lebow v. Am. Trans Air, Inc., 86
F.3d 661, 668 (7th Cir. 1996). On the other hand, if a claim
is equitable in nature, its resolution is for the Court.
analysis proceeds in two parts. First, the Court must
“compare the action to 18th-century actions brought in
the courts of England prior to the merger of the courts of
law and equity.” Id. (internal quotation marks
and ellipsis omitted) (citing Chauffeurs, Teamsters &
Helpers, Local No. 391 v. Terry, 494 U.S. 558,
565 (1990)). The second step requires the Court to
“examine the remedy sought and determine[s] whether it
is legal or equitable in nature.” Id. The
second step is the more important of the two.
Chauffeurs, 494 U.S. at 565.
Plaintiffs' Breach of Fiduciary Duty Claim
breach of fiduciary duty claim, Sunny contends that Envision
served as Sunny's agent and owed Sunny fiduciary duties
of loyalty and good faith and that Envision breached these
duties by, inter alia, failing to forward to Sunny
payments made by Walgreens for certain goods produced and
delivered to Walgreens by Sunny. 3d Am. Compl. ¶¶
110-14. Envision asserts that the claim is entitled to trial
by jury, Defs.' Supp. Mem. at 3-4, ECF No. 243; Sunny
argues that it is equitable and should be resolved by the
Court, Pls.' Resp. to Court Order at 3-4, ECF No. 244.
courts have considered a claim for breach of fiduciary duty
to be a matter for courts of equity.” George v.
Kraft Foods Glob., Inc., No. 07 C 1713, 2008 WL 780629,
at *3 (N.D. Ill. Mar. 20, 2008); see also Client Funding
Sols. Corp. v. Crim, 856 (N.D. Ill. 2013) (“There
is no dispute that actions for breach of fiduciary duty
historically were considered equitable.”); Ed
Peters Jewelry Co., Inc. v. C & J Jewelry Co., Inc.,
215 F.3d 182, 186 (1st Cir. 2000) (“Actions for breach
of fiduciary duty, historically speaking, are almost
uniformly actions ‘in equity'-carrying with them no
right to trial by jury.” (internal quotation marks and
said, Defendants argue that, because Sunny seeks money
damages, the remedy is purely legal in nature. Defs.'
Supp. Mem. at 3-4. But the mere fact that Sunny is seeking
money damages is not dispositive, for even claims seeking
money damages are “equitable where they are
restitutionary, such as in action[s] for disgorgement of
improper profits.” Chauffeurs, 494 U.S. at
570. “[T]he fact that disgorgement involves a claim for
money does not detract from its equitable nature: in such an
action, ‘the court is not awarding damages to which
plaintiff is legally entitled but is exercising the
chancellor's discretion to prevent unjust
enrichment.'” S.E.C. v. Rind, 991 F.2d
1486, 1493 (9th Cir. 1993) (quoting S.E.C. v.
Commonwealth Chem. Sec., Inc., 574 F.2d 90, 95 (2d Cir.
breach of fiduciary duty claim against Envision seeks
disgorgement of funds Envision received from Walgreens, which
Sunny contends Envision unjustly retained. Such a remedy is
equitable. See Chauffeurs, 494 U.S. at 570. But
there is yet another wrinkle.
Sunny also seeks punitive damages, 3d Am. Compl. ¶ 114,
and this complicates matters, as “[p]unitive damages
have traditionally been viewed as a legal remedy that must be
imposed by a jury.” Lebow v. Am. Trans Air,
Inc., 86 F.3d 661, 669 (7th Cir. 1996).
Client Funding Sols. Corp. v. Crim, a court in this
district encountered precisely this situation-a breach of
fiduciary duty claim sounding in equity, together with an
equitable request for relief, a legal request for
compensatory damages, and a legal request for punitive
damages. Crim, 943 F.Supp.2d at 857-58. Noting that
the dual nature of the relief “presents a challenging
question, ” the court concluded after thoughtful
analysis that, because the first prong of the test indicated