Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Illinois Tamale Co. v. EL-Greg, Inc.

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

September 13, 2019

ILLINOIS TAMALE CO., Plaintiff,
v.
EL-GREG, INC., Defendant.

          CORRECTED MEMORANDUM OPINION AND ORDER

          MATTHEW F. KENNELLY, UNITED STATES DISTRICT JUDGE

         Illinois Tamale Co., which owns the registered trademark "Pizza Puffs," among other "puffs" trademarks, brought this lawsuit in May 2016 against El-Greg, Inc. Illinois Tamale and El-Greg are Chicago-based businesses that manufacture and sell competing versions of a frozen, hand-held stuffed sandwich filled with meat, cheese, and sauce. This lawsuit concerns El-Greg's use of the product names "Pizza Pies™ (Puffs), "[1] "Chili Cheese Puff," and "Veggie Pizza Puff," among others, as well as similarities between the parties' slogans and packaging. Illinois Tamale asserted claims for trademark and trade dress infringement, unfair competition, and false advertising under the Lanham Act and state law. Illinois Tamale also asserted a state law breach of contract claim, alleging that El-Greg breached a prior settlement agreement in which it agreed not to use "Pizza Puff," alone or in combination with other words, to market, advertise, or identify its goods. The Court denied both parties' motions for partial summary judgment. See Illinois Tamale Co. v. El-Greg, Inc., No. 16 C 5387, 2018 WL 1534971 (N.D. Ill. Mar. 29, 2018).

         In October 2018, the case was tried before a jury, which found in favor of Illinois Tamale and against El-Greg on all claims. The jury also made a finding of willfulness on each of the Lanham Act claims. It awarded Illinois Tamale $100, 000 on the breach of contract claim. Because El-Greg asserted a laches defense to the Lanham Act claims, which the parties agreed the Court would adjudicate after the jury trial, the Court directed the jury to provide two sets of damages awards for those claims: one for the entire infringement period and another for the infringement period post-dating the filing of the lawsuit. After a bench trial held on November 7, 2018, the Court concluded that El-Greg had established its defense of laches and that, as a consequence, Illinois Tamale should not be able to recover "damages and profits that predate the filing of suit." See Illinois Tamale Co. v. El-Greg, Inc., No. 16 C 5387, 2018 WL 6590558, at *3 (N.D. Ill.Dec. 14, 2018) ("Laches Order"). The Court, therefore, adopted the jury's damages award for the infringement period post-dating the filing of the lawsuit: $10, 000 for Illinois Tamale's lost profits and $30, 000 for El-Greg's profits resulting from the Lanham Act violations. The Court directed the clerk to enter judgment in favor of Illinois Tamale on all of its claims against El-Greg, awarding Illinois Tamale damages in the total amount of $140, 000. See id.

         Both parties challenge the judgment. El-Greg has moved under Federal Rule of Civil Procedure 50(b) for judgment as a matter of law on all claims. In the alternative, El-Greg has moved under Rule 59(a) for a new trial on all claims. In that motion, El-Greg has made an alternative request for a remittitur of the damages award on the breach of contract claim. Illinois Tamale, for its part, has moved under Rule 50(b) for judgment as a matter of law concerning the jury's award of El-Greg's profits on the Lanham Act claims. In the alternative, Illinois Tamale has moved under Rule 59(a) for a new trial on that award. Illinois Tamale has also moved under Rule 59(e) to alter or amend the Court's judgment on El-Greg's laches defense. Finally, Illinois Tamale has moved for a permanent injunction; enhancement of damages, a declaration of exceptional case, and attorneys' fees under 15 U.S.C. § 1117(a); and sanctions under 28 U.S.C. § 1927. The Court addresses each request in turn.

         Background A. Evidence at trial

         1. Illinois Tamale's products

         Illinois Tamale's owner Warren Shabaz (W. Shabaz, to distinguish him from Adam Shabaz) testified that he created a tortilla-wrapped, deep-fried pizza product in or around 1976. He decided to call the product a Pizza Puff and trademarked the term Pizza Puffs in 1976. He testified that Illinois Tamale began selling Pizza Puffs "to the masses" in Chicago in 1976 and has used the trademark (which is also registered) continuously since then. Oct. 22, 2018 Trial Tr. at 66:10-11, 71:20-72:8. W. Shabaz testified that in the late 1970s and early 1980s, Illinois Tamale expanded its sales to the East Coast and began making and selling other "puffs" products, including a Pepperoni Puff, a Taco Beef Puff, and a Sloppy Joe Puff. He said that Illinois Tamale has advertised its puffs products together, such as by listing them as a group on price sheets for customers, since the 1980s. Illinois Tamale currently sells twelve puffs products, W. Shabaz testified, and it has trademarked each of them.

         2. El-Greg's products

         El-Greg's co-owner Gregory Lereno (Mr. Lereno, to distinguish him from Maria Lereno) testified that he and his mother founded El-Greg in 1986 as a frozen pizza company. According to Mr. Lereno, someone asked him in or around 1989 to make a product similar to Illinois Tamale's Pizza Puff. He conceded that at the time, Illinois Tamale was the only company "selling this kind of product." Oct. 22, 2018 Trial Tr. at 111:10-11, 112:2-4. Mr. Lereno testified that El-Greg made a similar product and that while choosing a name for it, he knew that Illinois Tamale owned the Pizza Puffs trademark. El-Greg called its product a "Pizza Pie" and began selling it in 1989. El-Greg, Mr. Lereno testified, later introduced other products, including a beef Pizza Pie, also in 1989; a Spinach Puff in 1990; a Chili Cheese Puff in 2006; a Deluxe Beef Puff in 2010; and, at some point, a Veggie Pizza Pie.

         3. Illinois Tamale's 2002 lawsuit against El-Greg

         In 2002, Illinois Tamale learned that El-Greg was selling Pizza Pies to certain Chicago-area restaurants, which were calling the products Pizza Puffs. Illinois Tamale sued El-Greg, and the parties reached a settlement agreement in 2004. Maria Lereno, El-Greg's chief financial officer (CFO) and vice president of sales, testified that the settlement agreement required El-Greg to recognize Illinois Tamale's ownership of the Pizza Puffs trademark. The settlement agreement also provided that El-Greg

will not use Pizza Puff alone or in combination with other words or designs; example, "El-Greg Pizza Puff" or "Stuffed Pizza Puff," as a trademark, service mark, trade name, trade name component, website, metatag, linked to their websites or other use in the marketing or advertisement of their respective goods or services except for comparative advertising.

         Oct. 22, 2018 Trial Tr. at 82:15-23 (quoting Pl. Ex. 11).

         4. The accused Restaurant Depot label

         The jury heard testimony that Illinois Tamale sells Pizza Puffs and El-Greg sells Pizza Pies to a national wholesale supplier called Restaurant Depot. El-Greg sells only three Pizza Pies varieties to Restaurant Depot: original (pork), beef, and halal. In late 2008 or early 2009, Restaurant Depot asked its suppliers to create new labels for their products. According to Ms. Lereno, Restaurant Depot made this request because its suppliers had been providing products in plain boxes and customers were having trouble identifying their contents. Adam Shabaz (A. Shabaz), Illinois Tamale's CFO, and Mr. Lereno both testified that Restaurant Depot asked that the labels include the product's picture, brand name, quantity, and weight.

         A. Shabaz testified that Illinois Tamale created a new label for Pizza Puffs as soon as possible and began selling newly labeled boxes to Restaurant Depot in August 2009. The following photograph depicts Illinois Tamale's new label:

         (Image Omitted)

         Illinois Tamale Opp. to Rule 50 Mot., Ex. D.

         The jury heard testimony that El-Greg did not complete a new label until approximately May 2010. Mr. Lereno testified that he asked Restaurant Depot for guidance on how to create the label, and Restaurant Depot suggested that he look at other labels in the store. Based on this advice, Mr. Lereno testified, he and Ms. Lereno collected several new labels from Restaurant Depot, including Illinois Tamale's; sent them to a designer; and asked the designer to create something similar for El-Greg. The following photograph depicts El-Greg's new label:

         (Image Omitted)

         Illinois Tamale Opp. to Rule 50 Mot., Ex. E.

         At trial, Ms. Lereno agreed that El-Greg's new label "was very similar to" Illinois Tamale's. Oct. 23, 2018 Trial Tr. at 292:15-17. She conceded, for example, that the font on El-Greg's label is identical to that on Illinois Tamale's. She further testified that although El-Greg had not previously used the slogan "Makers of the Original Puffs," El-Greg put it on the new label after seeing the slogan "Makers of the Original Pizza Puff" on Illinois Tamale's label. Mr. Lereno testified that El-Greg added the word "puffs" in parentheses to its product name, even though it had not previously called its Pizza Pie products "puffs." According to Mr. Lereno, El-Greg added the word "puffs" to its product name to indicate that "the product cooks and puffs up." Id. at 165:19-25.

         A. Shabaz testified when he first saw El-Greg's new label, he "thought it was virtually a copy of" Illinois Tamale's. Oct. 24, 2018 Trial Tr. at 487:19. He further testified that in 2011, Illinois Tamale sent El-Greg a cease-and-desist letter concerning the label. Illinois Tamale sent another cease-and-desist letter in December 2015, and it filed this lawsuit in May 2016. Mr. Lereno testified that approximately seven months later, El-Greg removed the word "puffs" from its Restaurant Depot labels.

         5. Expert testimony on likelihood of confusion and family of marks

         Illinois Tamale's survey expert, Thomas Maronick, testified that he conducted two surveys relevant to Illinois Tamale's claims. One survey tested whether there is a likelihood of confusion when people see the Pizza Pies (Puffs) brand and the Pizza Puffs brand. The other tested whether "consumers see the 'Puffs' brand mark as a family of marks." Oct. 24, 2018 Trial Tr. at 377:24-378:3. At trial, Maronick explained his methodology, including the questions he asked and their sequence. He also walked the jury through the survey responses. According to Maronick, the results of the first survey provide "very strong evidence that there is a likelihood of confusion" between Illinois Tamale and El-Greg's marks in the frozen sandwich market. Id. at 374:20-23. Similarly, Maronick testified that the results of the second survey "show[] pretty strongly that the Puffs name is a family name as it relates to the frozen stuffed sandwich market." Id. at 380:4-8.

         El-Greg's survey expert, Dr. Martin Block, also testified at trial. Dr. Block did not conduct any surveys. Instead, he testified that Maronick's survey methodologies were flawed and his conclusions unsound.

         6. Expert testimony on damages

         a. Illinois Tamale's expert William Polash

         William Polash, Illinois Tamale's damages expert, testified that as a result of the alleged infringement, El-Greg earned profits of $1, 282, 841 for the entire infringement period and $187, 152 for the post-suit infringement period. Polash also testified that Illinois Tamale's lost profits for the entire infringement period were $148, 329.

         Polash testified that he calculated El-Greg's profits based on its total (or gross) revenue from sales of Pizza Pies (Puffs)-original, beef, and halal-to Restaurant Depot during the infringement period. El-Greg's financial records, Polash testified, show that revenue to be $1, 282, 841 for the entire infringement period and $187, 152 for the post-suit infringement period. Polash testified that he tried to calculate El-Greg's profit from those sales by deducting the cost of goods sold (COGS), but he could not do so because El-Greg "does not track [COGS] by product." Oct. 23, 2018 Trial Tr. at 212:8-20. Thus he did not deduct anything from El-Greg's total revenue.

         Polash testified that he calculated Illinois Tamale's lost profits by estimating its lost sales as a function of El-Greg's sales and applying Illinois Tamale's actual profit margin. He estimated Illinois Tamale's lost sales by comparing the number of accused products (i.e., products bearing the new label) El-Greg sold to Restaurant Depot during the infringement period with the number of the same kinds of products El-Greg sold to other customers (i.e., without the new label) during the infringement period. Polash said he assumed that absent infringement, El-Greg's sales growth at Restaurant Depot would track its sales growth for other customers. When El-Greg's actual sales to Restaurant Depot "were greater than what [Polash] projected them to be if there wasn't an infringement," Polash counted them as Illinois Tamale's lost sales. Id. at 223:4-18. Next, Polash calculated Illinois Tamale's profit margin on Pizza Puffs sales to Restaurant Depot using records of the company's total revenue and COGS by product. Applying the profit margin to the estimated lost sales, Polash testified, results in lost profits of $148, 329.

         On cross-examination, Polash conceded that in the first year and a half after El-Greg began using the new label, El-Greg's sales decreased. He testified, however, that El-Greg's sales to Restaurant Depot had been decreasing in the years before the label change; began increasing in 2012; and "increased exponentially after that." Oct. 23, 2018 Trial Tr. at 229:1-230:17. Polash also conceded that in calculating Illinois Tamale's lost sales, he did not account for several factors during the infringement period: El-Greg (1) began selling the products to additional Restaurant Depot locations; (2) began participating in a Restaurant Depot marketing promotion program, while Illinois Tamale did not; (3) introduced a new Pizza Pie product (halal) that Illinois Tamale did not offer; and (4) charged increasingly lower prices than Illinois Tamale. On the other hand, Polash testified that El-Greg did not provide data that shows how, if at all, these factors affected its sales to Restaurant Depot.

         b. El-Greg's expert Lindsey Fisher

         El-Greg's damages expert, Lindsey Fisher, also estimated the profits that El-Greg earned by selling products bearing the accused label at Restaurant Depot. Unlike Polash, however, Fisher did not calculate Illinois Tamale's lost profits.

         In calculating El-Greg's profits, Fisher agreed with Polash that El-Greg's total revenue was $1, 282, 841 for the entire infringement period and $187, 152 for the post-suit infringement period.[2] She stated, however, that Polash should have deducted El-Greg's COGS from its total revenue even though El-Greg did not provide product-specific COGS information. She calculated COGS using company-wide, rather than product-specific, costs from El-Greg's annual profit-and-loss statements and stated that after deducting COGS, El-Greg's profits on the sales at issue were approximately $504, 000 for the entire infringement period and $72, 000 for the post-suit infringement period.

         After offering her opinion on the measure of El-Greg's profits, Fisher testified that Polash used a flawed methodology to calculate Illinois Tamale's lost profits. Among other things, Fisher testified, Polash should have accounted for the factors mentioned above, such as that El-Greg started selling Pizza Pies to more Restaurant Depot locations during the infringement period. Fisher, however, did not present the jury with any data showing how much, if at all, those factors actually affected El-Greg's sales to Restaurant Depot during the infringement period.

         Discussion

         A. El-Greg's motion for judgment as a matter of law

         El-Greg has moved for judgment as a matter of law on all of Illinois Tamale's claims. Under Federal Rule of Civil Procedure 50(b), judgment as a matter of law is proper if "a reasonable jury would not have a legally sufficient evidentiary basis" to support a verdict for the nonmovant. Fed.R.Civ.P. 50(a)(1), (b); see Thorne v. Member Select Ins. Co., 882 F.3d 642, 644 (7th Cir. 2018). On a Rule 50(b) motion, a court "construes the evidence strictly in favor of the party who prevailed before the jury and examines the evidence only to determine whether the jury's verdict could reasonably be based on that evidence." Passananti v. Cook County, 689 F.3d 655, 659 (7th Cir. 2012). A jury verdict will be overturned only if the court concludes that "no rational jury could have found for the prevailing party." Stragapede v. City of Evanston, 865 F.3d 861, 865 (7th Cir. 2017) (internal quotation marks omitted).

         1. Breach of contract

         As noted earlier, the settlement agreement between Illinois Tamale and El-Greg provided that El-Greg

will not use Pizza Puff alone or in combination with other words or designs; example, "El-Greg Pizza Puff" or "Stuffed Pizza Puff," as a trademark, service mark, trade name, trade name component, website, metatag, linked to their websites or other use in the marketing or advertisement of their respective goods or services except for comparative advertising.

         Oct. 22, 2018 Trial Tr. at 82:15-23 (quoting Pl. Ex. 11). At trial, Illinois Tamale argued that El-Greg breached the agreement "by selling goods with the label 'Pizza Pies (Puffs)' and through marketing a product as 'Veggie Pizza Puffs.'" Jury Instructions at 22. The Court instructed the jury that to prevail on its breach of contract claim, Illinois Tamale had prove, among other things, that El-Greg breached the agreement and that Illinois Tamale suffered damages as a result. See Id. El-Greg argues that Illinois Tamale failed to establish these two elements.

         On the issue of breach, El-Greg contends that the settlement agreement was unambiguous: it prohibited El-Greg from using Illinois Tamale's "actual trademark 'Pizza Puffs' as such and nothing else." El-Greg Rule 50 Mot. at 2. El-Greg notes that the agreement "specifically defined the phrase 'Pizza Puffs' as [Illinois Tamale's] registered trademark," and it emphasizes that the agreement provided examples of prohibited terms-specifically, El-Greg Pizza Puff and Stuffed Pizza Puff. Id. at 2-3. Because the parties listed these examples, El-Greg maintains, they intended for "the restriction [to] appl[y] only to similar examples using the actual trademark 'Pizza Puff' . . . and not other permutations of 'pizza' and 'puffs.'" Id. at 2-3 (citing Hugh v. Amalgamated Tr. & Sav. Bank, 235 Ill.App.3d 268, 275, 602 N.E.2d 33, 38 (1992) (stating that under the "common law rule of ejusdem generis," "[w]hen general words or phrases follow a set of enumerated things . . . the general word is limited in meaning to the same kind or class as those previously enumerated" (internal quotation marks omitted)); FMS Inc. v. Volvo Constr. Equip. N. Am., Inc., 557 F.3d 758, 764 (7th Cir. 2009) (similar)).

         Whatever merit these arguments may have, El-Greg presented them to the jury, and the jury disagreed. Mr. Lereno, for example, testified that in entering the settlement agreement, El-Greg agreed only that it would not use the term Pizza Puffs on its own or "with modifiers like 'El-Greg Pizza Puffs.'" Oct. 23, 2018 Trial Tr. at 175:19-176:5; see also, e.g., id. at 268:16-21 (testimony by Ms. Lereno that El-Greg agreed not to use the term Pizza Puffs but never agreed not to use the term puffs). Illinois Tamale, on the other hand, presented testimony from W. Shabaz that as he understood the settlement agreement, El-Greg could not use "[a]ny combination of the Puff, Pizza Puff, Pizza Pie Puff . . . ." Oct. 22, 2018 Trial Tr. at 86:2-9. The jury did not act irrationally or unreasonably in finding Illinois Tamale's interpretation more convincing.[3] Alternatively, the jury reasonably could determine that Pizza Pies (Puffs) falls "within the category of potential breach examples listed in the agreement." Illinois Tamale Opp. to Rule 50 Mot. at 13. Either way, the jury's determination that El-Greg breached the settlement agreement was reasonably supported.

         El-Greg's contention that Illinois Tamale failed to prove damages as a result of the breach is also unpersuasive. First, El-Greg argues that the record lacks evidence that customers "mistakenly purchased" its product instead of Illinois Tamale's because El-Greg's label contained the term Pizza Pies (Puffs). El-Greg Rule 50 Mot. at 3. The Court, however, did not instruct the jury that on the contract breach claim, Illinois Tamale had to present evidence of actual confusion to show it was damaged. Rather, the Court instructed the jury that Illinois Tamale simply had to establish "[d]amages . . . as a result" of El-Greg's breach of contract. Jury Instructions at 22; see also, e.g., W.W. Vincent & Co. v. First Colony Life Ins. Co., 351 Ill.App.3d 752, 759, 814 N.E.2d 960, 967 (2004) (in order to prevail on a breach of contract claim under Illinois law, a plaintiff must establish, among other things, "resultant damages"); Swyear v. Fare Foods Corp., 911 F.3d 874, 886 (7th Cir. 2018) (citing same). Illinois Tamale's damages expert, Polash, testified that Illinois Tamale lost ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.