Celex Group, Inc. v. Executive Gallery, Inc., No. 94 C 1087.

• Court: United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
• Writing for the Court: Thomas F. Gardner, Jones, Day, Reavis & Pogue, Chicago, IL, for Executive Gallery, Inc
• Citation: 877 F. Supp. 1114
• Docket Number: No. 94 C 1087.
• Decision Date: 31 January 1995
• Parties: CELEX GROUP, INC., an Illinois corporation, and Celebrating Excellence, Inc., an Illinois corporation, Plaintiffs/counterclaim-defendants, v. The EXECUTIVE GALLERY, INC., an Ohio corporation, Defendant/counterclaim-plaintiff.

877 F. Supp. 1114

CELEX GROUP, INC., an Illinois corporation, and Celebrating Excellence, Inc., an Illinois corporation, Plaintiffs/counterclaim-defendants,
v.
The EXECUTIVE GALLERY, INC., an Ohio corporation, Defendant/counterclaim-plaintiff.

No. 94 C 1087.

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

January 31, 1995.

877 F. Supp. 1115

COPYRIGHT MATERIAL OMITTED

877 F. Supp. 1116

COPYRIGHT MATERIAL OMITTED

877 F. Supp. 1117

Robert M. Kluchin, Malcolm McCaleb, Jr., Sharon R. Barner, Jeffrey A. Roth, Keck, Mahin & Cate, Kevin G. McBride, Jones, Day, Reavis & Pogue, Chicago, IL, for Celex Group, Inc. and Celebrating Excellence, Inc

Thomas F. Gardner, Jones, Day, Reavis & Pogue, Chicago, IL, for Executive Gallery, Inc.

MEMORANDUM OPINION AND ORDER

CASTILLO, District Judge.

Plaintiffs Celex Group, Inc. and Celebrating Excellence, Inc. (collectively "plaintiffs" or "Celex")¹ sue The Executive Gallery, Inc. ("Executive Gallery"), alleging federal and common law trademark infringement (counts III and VII, respectively), Lanham Act and common law trade dress infringement (counts I, IV, V Lanham Act and VII common law), common law unfair competition (count VI), copyright infringement (count II), violation of Illinois' Deceptive Trade Practices Act, 815 ILCS § 510/1 et seq. (count VIII), violation of Illinois' Consumer Fraud and Deceptive Business Practices Act, 815 ILCS § 505/1 et seq. (count VIII), breach of contract (count IX), account stated (count X), and unjust enrichment (count XI). Executive Gallery answered the complaint raising approximately eighteen "defenses"² and

877 F. Supp. 1118

counterclaiming against plaintiffs — alleging "tortious interference with business opportunity" (counterclaim count I) and violation of Illinois' Consumer Fraud and Deceptive Business Practices Act (counterclaim count II). Presently before the court are the following motions by Celex: (1) Motion for Preliminary Injunction; (2) Motion to Dismiss Counterclaims or Alternatively for Summary Judgment; and (3) Motion for Summary Judgment on Counts IX, X, and XI

UNDISPUTED FACTS³

This lawsuit represents the unfortunate but somewhat inevitable fallout from the break-up of what appears to have once been a fairly close — if not, in some ways, symbiotic — commercial relationship between Celex and Executive Gallery. Celex Group, Inc. is an Illinois corporation with its executive offices in Lombard, Illinois. Celebrating Excellence, Inc. is also an Illinois corporation and is a wholly-owned subsidiary of Celex Group, Inc. Executive Gallery is an Ohio corporation with its principal place of business in Columbus, Ohio.

Celex sells motivational wall and desk products, business-oriented motivational books, desk accessories, stationary and clothing. Celex sells its products through retail stores, direct mail catalogs and magazine advertisements for telephone or mail order. In 1988, Celex released its first Celebrating Excellence catalog and distributed it by mail; Celex now mass mails its catalogs. In 1991, Celex opened its first retail SUCCESSORIES store.⁴ At present there are more than sixty company owned and franchised stores and outlets. The stores sell Celex's proprietary product lines as well as an assortment of self-improvement products purchased wholesale from other vendors. Executive Gallery was one of the vendors that sold products to Celex's retail stores.

Executive Gallery is predominantly a family owned business operated by Marvin Williams (majority shareholder and CEO) and his children, Dwayne Williams (president) and Wendy Williams Fairbanks. Executive Gallery is engaged in the marketing and sale of its patented "Scan Card" time management systems and other executive products. Executive Gallery sells its products through direct mail mass marketing in three distribution channels: (a) mail order catalogs published under the name Executive Gallery; (b) direct-response advertisements in business-oriented magazines; and (c) direct-response advertisements in on-board airline magazines.⁵ Just as Celex bought

877 F. Supp. 1119

products wholesale from Executive Gallery and retailed them through its retail stores, Executive Gallery purchased Celex products at wholesale and then advertised and resold them through various channels. In 1992 and 1993, Executive Gallery was Celex's largest dollar volume customer

Executive Gallery's first business transaction with Celex was to purchase Celex wall plaques at wholesale and then resell them through direct mail advertisements in airline magazines. Thereafter, from 1990 through 1993, Celex and Executive Gallery continued to purchase each other's products and advertise them in their respective catalogs and other marketing channels — generally without attribution as to source.⁶ Additionally, Executive Gallery included Celex products in its airline magazine advertisements. Executive Gallery's president Dwayne Williams characterized the relationship between Executive Gallery and Celex as "a close, mutually beneficial and sharing relationship," D. Williams 7/8/94 Aff. ¶ 9, and Celex executives similarly characterized the relationship as "cooperative" and a "relationship of trust," Sexton Dep. at 59, 190, and a "sharing relationship," McKee Dep. at 101. However, despite these suggestive references, there was no partnership agreement (or other type of enterprise agreement) governing the relationship between these parties who were simultaneously competitors and wholesale vendors and customers of each other.⁷

In addition to buying and reselling each other's products, Celex and Executive Gallery entered into a number of agreements whereby they shared advertising mailing costs and, on some occasions, shared advertising space.⁸ For instance, on several occasions Executive Gallery sold advertising space in its on-board airline magazine inserts to Celex. Celex controlled the content of the advertising space which it purchased from Executive Gallery and Celex's order forms accompanying its advertisements identified the source of its products as either "SUCCESSORIES" or "CELEBRATING EXCELLENCE." In such instances, customers purchased products directly from Celex. On at least one occasion in which the parties shared advertising space (viz., November 1990 Success Magazine), the cover page of the parties' shared advertising space advertised both parties' products under the "Successories"

877 F. Supp. 1120

name.⁹ Executive Gallery and Celex also frequently shared advertising photography and copy; and, Executive Gallery developed advertising for Celex. For example, Celex uses the following slogan, written by Executive Gallery to promote its "Corporate Impressions" posters: "First Class Imagery For Your Company Walls."

Celex and Executive Gallery made several attempts to reach agreements governing various aspects of their relationship — including the "sensitive" issue of exclusive advertising rights for Executive Gallery. On June 26, 1991, Dwayne Williams sent Mac Anderson a proposed distributorship agreement covering a five year term. In pertinent part, the letter provides:

This letter will confirm our understanding regarding Executive Gallery, Inc. ("EGI") continuing to serve as a distributor for Celebrating Excellence ("CE").

During the term of this continuing relationship, EGI will serve as a distributor for CE with the right to advertise, market and sell through EGI's marketing channels all of the products advertised, marketed or sold by CE ("CE Products"). This right shall be exclusive to EGI, and thus CE shall not, and shall not authorize others, to advertise, market or sell CE Products in the following markets:

. . . . .

2. Airline magazines, magazine inserts and other materials distributed through the airline companies and designed for marketing goods to airline travelers.

Celex's Facts I, Ex. 10.¹⁰ The letter ends with a request that Anderson confirm his agreement to the terms by signing and returning a copy of the letter. Anderson never signed the letter. Notwithstanding Executive Gallery's admission that Anderson never signed the letter, see Ex. Gallery's Facts I ¶ 21, Dwayne Williams maintains that Anderson told him that he agreed with the terms of the letter, see D. Williams 4/11/94 Dep. at 72; D. Williams 7/8/94 Aff. ¶ 17, and he further maintains that "On numerous occasions during the period from 1991 through 1993," Neil Sexton and Peter Walts — Celex's Senior Vice President of Direct Marketing and Celex's Senior Vice President of Business Development, respectively — as well as Anderson "each reaffirmed to me that as between the two companies, Executive Gallery had exclusive rights to advertise in the airlines." D. Williams 7/8/94 Aff. ¶ 17. Anderson denies ever telling Dwayne Williams that Executive Gallery could have exclusive airline advertising rights relative to Celex. Anderson Dep. at 448.¹¹

877 F. Supp. 1121

Subsequently, on October 26, 1992, Anderson sent Dwayne Williams a copy of an agreement setting out the terms governing the parties' relationship for the period October 1, 1992 to December 31, 1993. Celex's Facts I, Ex. 11. Anderson's proposed agreement, which contained no provisions granting Executive Gallery exclusive advertising rights, was not signed by Williams. See Anderson Dep. at 452. Additionally, Anderson testified during his deposition that shortly after sending Williams the agreement in October of 1992, he explained to Williams that Celex wished to retain flexibility with respect to its ability to advertise in airlines and for that reason Celex would not agree to exclusive advertising rights for Executive Gallery.

Meanwhile, the parties were increasingly becoming competitors both for the sale of the same Celex products and because Executive Gallery was beginning to offer its own line of wall decor and other motivational products which competed with Celex's motivational products. In February of 1992, Executive Gallery created its...