Chicago's Pizza v. Chicago's Pizza Franch.

• Citation: 893 N.E.2d 981
• Decision Date: 07 August 2008
• Docket Number: No. 1-07-0679.,1-07-0679.
• Parties: CHICAGO'S PIZZA, INC., Chicago's Best, Inc., and Flovig, Inc., Plaintiffs-Appellants, v. CHICAGO'S PIZZA FRANCHISE LIMITED USA, f/k/a Pizza USA, Inc., and Irfanullah Muhammed, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

893 N.E.2d 981

CHICAGO'S PIZZA, INC., Chicago's Best, Inc., and Flovig, Inc., Plaintiffs-Appellants, v. CHICAGO'S PIZZA FRANCHISE LIMITED USA, f/k/a Pizza USA, Inc., and Irfanullah Muhammed, Defendants-Appellees.

No. 1-07-0679.

Appellate Court of Illinois, First District, Fourth Division.

August 7, 2008.

Rehearing Denied September 8, 2008.

Craig D. Tobin, Tomas Petkus, Tobin, Petkus & Munoz LLC, Chicago, IL, for appellants.

Steven J. Hampton, Ronald A. DiCerbo, Michael J. Krautner, McAndrews, Held & Malloy, Ltd., Chicago, IL, for appellees.

Justice MURPHY delivered the opinion of the court:

Plaintiffs, Chicago's Pizza, Inc., Chicago's Best, Inc., and Flovig, Inc., filed a complaint against defendants, Chicago's Pizza Franchise Limited and Irfanullah Muhammed, alleging that defendants used the Chicago's Pizza name to mislead consumers, benefit from plaintiffs' investment in the Chicago's Pizza name, and divert sales from plaintiffs' restaurants to defendants'. After a bench trial, the trial court found that plaintiffs did not meet their burden of proving that defendants' actions caused plaintiffs to lose revenue.

I. BACKGROUND

Martin Flores and his wife opened their first Chicago's Pizza restaurant in 1991. By 2002, they had three Chicago's Pizza locations in Chicago: 3114 North Lincoln Avenue, 3006 North Sheffield, and 1919 West Montrose. From 2002 until 2006, Muhammed ran an unaffiliated Chicago's Pizza pizzeria, with its sole location at 5062 North Sheridan Road. Although Muhammed had only one store, his ads listed multiple "locations," some of which corresponded with plaintiffs' locations. The ads also described worldwide locations and claimed that defendants' restaurant had been in existence since 1970, even though Muhammed did not open the restaurant until 2002.

Certain of plaintiffs' restaurants were called Chicago's Pizza, while others went by Chicago's Pizza & Pasta. Plaintiffs' logo was a red oval with the word "Chicago's" written inside, with either "Pizza" and "Pizza & Pasta" under the oval. Defendants' logo was a red, white, and blue pizza with "Chicago's Pizza" written in the bottom, blue portion and "Pizzeria" written in green in the middle.

Plaintiffs filed a 10-count complaint alleging that defendants used the Chicago's Pizza name in an effort to mislead the public into thinking that it was a franchised business affiliated with plaintiffs. Plaintiff Chicago's Pizza, Inc., the Lincoln Avenue location, alleged tortious interference with business expectancy and violations of the Uniform Deceptive Trade Practices Act (Deceptive Trade Practices Act) (815 ILCS 510/1 et seq. (West 2004)) and the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 2004)). Chicago's Best, the Montrose Avenue location, and Flovig, the Sheffield Avenue location, alleged violations of the Deceptive Trade Practices Act against both defendants.

In 2006, the case proceeded to trial, where the following evidence was presented.

A. Martin and Patricia Flores

Martin Flores testified that he owns four locations of Chicago's Pizza: North Lincoln, North Sheffield, West Montrose, and West Irving Park. At the time of trial, the Irving Park location had just been opened, and his West Wilson store relocated to Montrose two years before. The Lincoln store opened in 2001.

Chicago's Pizza was incorporated in 1992 and started as a two-person operation. Sales increased every year, and at the time of the trial, the business had 160 employees. However, at the end of 2002 or 2003, Flores saw a decrease in sales, especially in the Wrigley Field area. Until that time, other competitors opened in the area, but they did not affect his business. He believed that the decrease in business was a result of the opening of a Chicago's Pizza on Sheridan Road, which was not affiliated with his restaurants. He received hundreds of complaints from customers about the quality of the Sheridan restaurant's food.

Furthermore, in February and March 2006, people began complaining that plaintiff was fraudulently charging their credit cards; however, plaintiffs did not charge their credit cards, and the alleged customers were not in plaintiffs' computer system.

Plaintiffs' tax records showed that gross sales for the Lincoln location was $1.9 million for the 2000 tax year; $2.3 million for 2001; $2,078,765 for 2002; $1.8 million for 2003; and $2,296,000 for 2004. During the time frame when he noticed a decrease in sales, he increased his advertising to recover some of the customers he had lost. Sales increased when defendants' restaurant closed in 2006.

In 2000, Flores changed the name of the restaurant on his menus and the Internet to Chicago's Pizza & Pasta. When he opened his first full-service restaurant in Lincoln in 2001, the name on the sign was Chicago's Pizza & Pasta. The signs at the Wilson and Sheffield locations have always been Chicago's Pizza, and the sign on Montrose was Chicago's Pizza & Pasta beginning in 2003.

Patricia Flores, Martin's niece, testified that until the year before, she worked at the Chicago's Pizza location on Montrose. At one point, a customer presented a coupon for what purported to be Chicago's Pizza, which listed one phone number for "downtown area, Lincoln area" and "Lincoln Park, Sheffield area" and another number for "Wilson area, Montrose location" and "Rogers Park, Sheridan area." Patricia testified that this coupon was not for plaintiffs' Chicago Pizza. After receiving additional complaints, she called the phone number that the customer gave her for a Chicago's Pizza located on Sheridan. Patricia asked the person who answered the phone whether the restaurant was affiliated with the Chicago's Pizza on Montrose, and he said yes.

Patricia testified that when the Montrose store was opened in 2002, the sign placed outside said Chicago's Pizza & Pasta, as did the menus. However, they always answered the phone "Chicago Pizza."

B. Defendant Irfanullah Muhammed

Irfanullah Muhammed testified that he bought the goodwill of an existing pizzeria named Paisan's Pizza for $87,000 and changed the name. He did not examine the books and records for the business before purchasing it, and his only experience with the pizza business was observing his friend's pizza business in Japan for three or four months.

At the time he incorporated his business in 2002, Muhammed told the State that he would be doing business under the name Chicago Pizza Inn U.S.A. However, he never opened a business named Chicago Pizza Inn U.S.A. When he opened his business under the name Chicago's Pizza, he did not look in the phone book to determine whether any other businesses were already using that name. For a short time in 2004 the business was dissolved for failure to pay the franchise fee, but he continued to run it. When he reincorporated in 2004, he learned that he could not use the name Pizza U.S.A. and instead tried to use the name Chicago Pizza & Pasta. He ultimately closed the business in February or March 2006.

Defendants' ads had either a "circle R" next to "Chicago's Pizza," as if it were registered, or the "TM" designation. Muhammed never obtained a registration; he abandoned his application with the United State Patent and Trademark Office.

Although defendants only had one location, on Sheridan Road, their ads included multiple "locations," with different phone numbers for each. For example, defendants' phone book ad and one of their menus¹ showed locations for Lincoln/Sheffield, Downtown/Loop, Montrose/Wilson, and Lakefront/Sheridan/Loyola, and urged customers to "call for your nearest location." In a Yellow Book coupon, defendants listed one phone number for "Downtown Area, Lincoln Area, Lincoln Park, Sheffield Area" and a second number for "Wilson Area, Montrose Location, Rogers Park, Sheridan Area." Another ad had six phone numbers for different areas that were not labeled "locations": Lincoln Park, Sheffield area, Montrose/Wilson, Downtown, UIC & Loop, and Sheridan & Loyola. Muhammed testified that his ads had different phone numbers for different "locations" to avoid overwhelming one phone line and so that the order could be assigned to drivers who delivered in particular areas. He denied that he was trying to create the impression that his restaurant had multiple locations.

Several of defendants' ads or menus listed worldwide locations, including Dubai, Frankfurt, Rome, and New York. Muhammed admitted that these locations did not exist, but he wanted to open franchises in New York and Tokyo. His friend was going to open a location in San Francisco and his brother was going to open one in Washington, D.C.

Certain ads or menus also made reference to "Established 1970" and "Since 1970" or provided, "Thanks to all Wonderful Customers for their Continued Support towards the Prosperity of Chicago's Pizza Since 1970." As Muhammed did not open the restaurant until 2002, the restaurant was not established in 1970. He testified that the year 1970 refers to when a restaurant called Strawberry Pizza, located in Japan, began using a particular crust recipe.

Certain ads also state that defendants' restaurant is open until 5 a.m. Muhammed testified that the restaurant's closing time was 5 a.m. but was changed to 3 a.m. During the time when a 5 a.m. closing time was advertised, sometimes he closed earlier.

Muhammed testified that he first learned of plaintiffs' restaurants after this lawsuit was filed. In response, he put up a sign visible to both the public and the employees that answered the phone saying that the restaurant was not affiliated with any other locations or companies. Employees answered the phone "Chicago's Pizza Sheridan," and he instructed them that if any customers asked about Chicago's Pizza & Pasta, "tell them to call different numbers."

Muhammed testified that plaintiffs' and defendants' restaurants carry different items. For example, Muhammed testified that his...