Blue Book Servs., Inc. v. Amerihua Produce, Inc.

• Decision Date: 31 August 2018
• Docket Number: No. 16 C 10495,16 C 10495
• Citation: 337 F.Supp.3d 802
• Parties: BLUE BOOK SERVICES, INC., Plaintiff, v. AMERIHUA PRODUCE, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

337 F.Supp.3d 802

BLUE BOOK SERVICES, INC., Plaintiff,

v.AMERIHUA PRODUCE, INC., Defendant.

No. 16 C 10495

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

Signed August 31, 2018

James Michael Heiser, Eric S. Silvestri, Joseph Patrick Lombardo, Chapman & Cutler, Chicago, IL, for Plaintiff.

Brian Patrick Fredericks, Pro Hac Vice, John Vincent Golaszewski, Pro Hac Vice, Schiller Law Group, P.C., New York, NY, Jeannie Gallucci, Tanzillo Gallucci, LLC, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

Honorable Edmond E. Chang, United States District Judge

Blue Book Services gathers information about the produce industry and sells that information to subscribers. In July 2016, Blue Book discovered, much to its surprise, that its entire proprietary database of members-only credit rating information had been downloaded and publicly posted to an unaffiliated website. R. 58, PSOF ¶¶ 1, 5, 52, 21-23.¹ After tracing the log-in credentials of the download back to one of its subscribers, Amerihua Produce, Blue Book brought this suit, alleging that Amerihua breached the terms of its membership contract with Blue Book. R. 53, DSOF Exh. A, Compl.² After discovery closed, both parties moved for summary judgment. R. 51, Def. Mot. Summ. J.; R. 57, Pl. Resp. and Mot. Summ. J. For the following reasons, both motions are narrowly granted in part but otherwise denied.

I. Background

In deciding each party's respective motions for summary judgment, the Court views the evidence and draws all reasonable inferences in the light most favorable to the non-moving party against whom the motion under consideration is made. Gazarkiewicz v. Town of Kingsford Heights , 359 F.3d 933, 939 (7th Cir. 2004) ; see Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Blue Book Services provides credit and marketing information to members of the produce industry by gathering and updating financial and marketing data. PSOF ¶ 1. Subscribers to Blue Book's database can access the full catalogue of information by logging in online and paying an annual fee. See id. ¶¶ 13, 16, 23, 49.

One such subscriber was Amerihua Produce, Inc., a New York importer specializing in garlic and ginger distribution. PSOF ¶¶ 3, 6. In June 2008, Amerihua's CEO, Baozhu Wu, id. ¶ 4, signed a contract with Blue Book and paid an annual membership fee so that he (and Amerihua) could access the Blue Book database. Id. ¶¶ 8-10. The Membership Agreement is the "legal agreement" governing the terms of the membership and Amerihua's "authorized use" of the "software products and any associated media." DSOF Exh. C, Membership Agreement.³ It specifies that Amerihua is "subject to all the terms set forth in this agreement AND any other agreement (e.g. Terms of Use) that accompanies the Products and Services." Id. Not surprisingly, one provision in the Agreement bans sharing Blue Book's information:

[Members] acknowledge and agree that the Database and all ratings, reports, and information obtained by or through these Products and Services, or by and through Blue Book Membership, are provided for your internal use only, and you may not loan or show or in any way share or distribute such ratings, reports, information, or data to third-parties.

Membership Agreement.⁴ The Terms of Use accompanying the Membership Agreement in effect at the time of the breach were updated in 2014, and Blue Book's records show that whoever was using Wu's User ID on June 18, 2014, agreed to those updated Terms. PSOF ¶ 12. But Wu contends he never saw nor agreed to the updated Terms, Def. Resp. PSOF ¶ 12.

After becoming a member, Wu gave out his unique User ID to his three employees, who accessed the database as well. PSOF ¶¶ 15-17. Amerihua continued using the Blue Book database nearly every day, id. ¶ 15, and presumably remained a Blue Book member for the ensuing years before the breach's discovery, see PSOF ¶ 26. On July 28, 2016, Blue Book discovered its proprietary data had been publicly posted to two websites, FreshTerminal.com and Co-produce.com. id. ¶ 52.⁵ After contacting Fresh Terminal's proprietor, Mario Zhuo, and sending a cease-and-desist letter, the offending websites were taken down around October 2016. Id. ¶¶ 52-55.

To determine the source of the data breach, Blue Book audited its internal systems using a tool that tracks every page visited by licensed Blue Book users. PSOF ¶ 20. The tool tracks the data viewed, the date and time it was retrieved, and the internet connection that accessed it. Id. Blue Book learned that Amerihua's unique user ID, assigned to Wu, accessed 63,054 pages of Blue Book's database on November 26, 2014. Id. ¶ 21. The access rate was nearly 200 pages per minute—a speed impossible for a human user to read. Id. ¶ 22. And during its review, Blue Book discovered that the data posted publicly on the Fresh Terminal and Co-produce websites was identical to the entire database of information downloaded using Amerihua's credentials on that date in November. Id. ¶¶ 23, 25. After this revelation, in around August 2016, Blue Book accused Amerihua of being behind the breach. Id. ¶ 26. Amerihua denied all knowledge and said that it did not download the database at all. Def. Resp. PSOF ¶ 27.

Before the full-database download in November 2014, Zhuo, Fresh Terminal's proprietor, reached out to Wu about a proposal to launch the website. PSOF ¶ 30. Wu discussed forming a business relationship with Zhuo centered around the general business concept of Fresh Terminal. Def. Resp. PSOF ¶ 31. Specifically, Zhuo proposed that Amerihua would invest $800,000 in exchange for a 20% share in the business; Zhuo and Wu did not end up agreeing, however, on any investment terms. PSOF ¶ 41-42. Between September 2014 and the summer of 2015, Wu had around 10-12 communications with Fresh Terminal, and Zhuo visited Amerihua's offices four to five times. Def. Resp. PSOF ¶¶ 36-37. Later, in its marketing materials, Fresh Terminal would compare itself to Blue Book, PSOF ¶ 32, and its business plan identified Wu as an "Advisor" and "Co-founder." Id. ¶ 33. A testimonial attributed to Wu (along with his photo) also appeared on the Fresh Terminal website that discussed the ease and cost-effectiveness of using Fresh Terminal. PSOF ¶ 38-39. Amerihua, for its part, contends that it never authorized Fresh Terminal to use Wu's password or access Blue Book with its credentials, but does not know if its password was stolen. DSOF ¶ 43; Pl. Resp. DSOF ¶ 43.

The parties now cross-move for summary judgment on the breach of contract claim (the sole claim in the case). Blue Book contends that the available evidence proves that Amerihua perpetrated the breach and shared Blue Book's database without authorization, while Amerihua argues that it did not perform or facilitate the data distribution. See Def. Mot. Summ. J.; Pl. Resp. and Mot. Summ. J. But a reasonable jury could see it either way, so neither side wins summary judgment.

II. Standard of Review

Summary judgment must be granted "if 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). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In evaluating summary judgment motions, courts must view the facts and draw reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris , 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). The Court may not weigh conflicting evidence or make credibility determinations, Omnicare, Inc. v. UnitedHealth Grp., Inc. , 629 F.3d 697, 704 (7th Cir. 2011), and must consider only evidence that can "be presented in a form that would be admissible in evidence." Fed. R. Civ. P. 56(c)(2). The party seeking summary judgment has the initial burden of showing that there is no genuine dispute and that they are entitled to judgment as a matter of law. Carmichael v. Village of Palatine , 605 F.3d 451, 460 (7th Cir. 2010) ; see also Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Wheeler v. Lawson , 539 F.3d 629, 634 (7th Cir. 2008). If this burden is met, the adverse party must then "set forth specific facts showing that there is a genuine issue for trial." Anderson , 477 U.S. at 256, 106 S.Ct. 2505.

III. Analysis

Both parties move for summary judgment on myriad grounds. Amerihua asserts that: (1) no reasonable jury could find that it breached its contract with Blue Book; (2) even if Amerihua breached the contract, Blue Book suffered no damages; and (3) anyway, the contract was invalid and parts of it were unconscionable. R. 56, Def. Br. at 4-5. Amerihua also seeks to bar Blue Book's damages expert. Id. at 12-13. In parrying Amerihua's summary judgment motion, Blue Book also moves for summary judgment, contending that a jury must find that Amerihua breached the contract, and that Blue Book is entitled to attorney's fees. Pl. Resp. and Mot. Summ. J. at 8, 12.

1. Enforceability and Unconscionability

To succeed on a breach of contract claim, 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) resulting damages. Lindy Lu LLC v. Ill. Cent. R. Co., 368 Ill.Dec. 701, 984 N.E.2d 1171, 1175 (2013). Amerihua argues that Blue Book's breach claim must fail on its face, because the agreement was not a valid and enforceable contract. Def. Br. at 4. A contract will not be enforceable if its formation or terms are unconscionable. See Hanover Ins. Co. v. N. Bldg. Co., 751 F.3d 788, 791, 793-794 (7th Cir. 2014). The question of unconscionability is a legal one, decided by the Court. Id. at 791. Amerihua asserts both procedural and substantive unconscionability to...