Chicago Business Litigation Lawyer Blog

Does the Lanham Act Prohibit Allegedly False Claims of Authorship? – Gensler v. Strabala

July 16, 2012 | Peter S. Lubin and Patrick Austermuehle

Claims for trademark infringement and false advertising under the Lanham Act do not apply to allegedly false assertions of “authorship of a creative work,” according to the U.S. District Court for the Northern District of Illinois. In M. Arthur Gensler, Jr. & Associates, Inc. v. Jay Marshall Strabala, the court dismissed a Lanham Act suit based on claims of authorship of architectural designs, but suggested that a copyright claim might be more appropriate.

The plaintiff, M. Arthur Gensler, Jr. & Associates, Inc. (“Gensler”) is a design firm with offices in multiple countries. It employed the defendant, Jay Marshall Strabala (“Strabala”) as an architect from 2006 to 2010. Gensler sued Strabala under the Lanham Act and two Illinois deceptive trade practice statutes. Strabala moved the court to dismiss Gensler’s suit for failure to state a claim for which relief may be granted, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The court agreed and dismissed the case.

In considering a 12(b)(6) motion, a court must consider all of a plaintiff’s “well-pleaded factual allegations” as true. While Strabala was an employee of Gensler, he worked on multiple high-profile projects, including the Shanghai Tower in China and multiple buildings in Houston, Texas. Strabala left Gensler in February 2010 and began practicing under an assumed business name, 2DEFINE Architecture. While based in Chicago, he advertised offices in Shanghai, China and Seoul, South Korea. Strabala set up a website and a page on the photo-sharing site Flickr to market his business. His Flickr site included claims that he designed the Shanghai Tower and several of Gensler’s Houston buildings. Gensler sued to stop Strabala from claiming primary responsibility for the design of these buildings.

Gensler alleged that Strabala’s claims constituted “false designation of origin” and “false advertising” under the Lanham Act. The court considered whether a claim of authorship of a creative work could be considered a “false designation of origin,” and concluded that it cannot. In Dastar Corp. v. Twentieth Century Fox Film Corp., a 2003 Supreme Court case involving a film studio and a video publisher, the Supreme Court considered whether “origin of goods” included the author/producer of the films themselves, or just the actual physical videotapes. It specifically interpreted the “origin of goods” provision to refer to actual tangible goods, not creative works. Because Gensler could not cite any authority that overruled the Dastar holding, the Illinois district court found its claim unpersuasive. The court did note, however, two federal appellate cases that applied Dastar but allowed the possibility of copyright claims.

Illinois Court Explains Tortious Interference with Contract Claim – Metro Premium Wines v. Bogle Vineyards, Inc.

July 12, 2012 | Peter S. Lubin and Patrick Austermuehle

The legal theory of tortious interference with a contract protects a business’s relationships from tampering by others. In Metro Premium Wines v. Bogle, the District Court for the Northern District of Illinois explains how the theory is applied.

Plaintiff Metro Premium Wines, Inc. (Metro), an Illinois wine distributor, sued Bogle Vineyards, Inc. (Bogle), a California vineyard, and fellow distributor Winebow, Inc. (Winebow), alleging that Bogle and Winebow hatched an improper scheme to take away Metro’s distributorship of Bogle’s wine in Chicago in favor of Winebow.

Under the terms of an oral agreement, Metro held the exclusive rights to distribute Bogle wines in the area for roughly 20 years. Metro asserts that in 2009 a Winebow executive approached Metro about buying the company. Claiming that he needed to perform due diligence before making an offer, the executive allegedly requested that Metro provide confidential sales, pricing and financial data. The parties signed a confidentiality agreement providing that Winebow would use this information only in relation to tendering an offer. Bogle sales manager Sam Bon allegedly then made several calls to Metro, encouraging it to sell the company to Winebow.

According to Metro, Winebow had no intention of buying the company and, with Bogle’s assistance, instead allegedly hatched the ruse in order to obtain the confidential information. Shortly after allegedly receiving the information, Winebow began operating a distributorship in Chicago and offered to buy Metro for only $500,000, despite the fact that the company had been recently appraised at $2 million. 10 days after the offer, Bogle allegedly sent a letter to Metro questioning the company’s sales performance and demanding that it take action to increase sales within four months or lose its exclusive distributorship. In September 2010, Bogle terminated Metro’s distributorship and made Winebow its exclusive distributor in the area.

Metro filed suit, bringing fraud, conspiracy and tortious interference claims against both Winebow and Bogle – as well as separate breach of contract claims against Winebow – asserting that the parties conspired to improperly take Metro’s confidential information in order to jump start Winebow’s Chicago operations. Bogle and Winebow subsequently filed a motion to dismiss the fraud, conspiracy and tortious interference claims.

Suing an Auto Insurer for Underpaying on an Accident Claim – Greenberger v. Geico

June 28, 2012 | Peter S. Lubin and Patrick Austermuehle

In previous posts, we’ve explained some of the ways in which car buyers who have been hoodwinked by dealers and manufacturers can seek to get their money back. The Seventh Circuit Court of Appeal’s ruling in Greenberger v. Geico concerns another player in the auto industry accused of fraud: an auto insurance company. The ruling explains that a plaintiff looking to sue an insurance company for breach of contract or fraud for low-balling a damage estimate must have the physical evidence to prove that the money paid by the insurer was not enough to fix the car.

Plaintiff Steven Greenberger sued Defendant Geico, his car insurance carrier, alleging breach of contract, consumer fraud in violation Illinois law and common-law fraud. In 2002, Plaintiff was involved in an auto accident, which left his 1994 Acura with bumper, steering box, suspension and lower body damage. After inspecting the car, a Geico adjuster issued Plaintiff a check for just over $3,000. Plaintiff did not repair the car. An individual later approached Plaintiff about buying the car, but when the potential buyer had it inspected by a mechanic, the mechanic indicated that the car needed more than $5,000 worth of repairs.

Plaintiff filed a proposed class action, claiming that Geico systematically violates its promise to restore policyholders’ vehicles to pre-loss condition by omitting certain necessary repairs from it collision damage estimates. A district court dismissed Plaintiff’s claims.

On appeal, the Seventh Circuit affirmed the lower court’s decision, finding that Plaintiff’s claims are barred by the Illinois Supreme Court’s decision in Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill.2d 100, (2005). In Avery, the Supreme Court held that a policyholder’s suit against his insurer for failing to restore his collision-damaged car to its pre-loss condition cannot succeed without an examination of the car to determine whether the money paid by the insurer to cover the claim is sufficient to repair it. In the present matter, Plaintiff’s car was damaged in an accident; Geico inspected it and issued a check to cover Plaintiff’s insurance claim. Instead of repairing the car, however, Plaintiff donated it to charity. Thus the car was not available for examination.

Avery also established, according to the court, that a fraud claim cannot be simply a reformulated breach of contract claim. In other words, a fraud claim must allege more than simple failure to follow through on a promise. Since Plaintiff’s claims are limited to allegations concerning Geico’s promise to restore damaged cars to pre-loss condition, these are essentially contract claims that cannot also be alleged as fraud.

Recovering Damages for Future Income in Business Breach of Contracts Cases – Hardee’s Food Systems, Inc. v. Hallbeck

June 14, 2012 | Peter S. Lubin and Patrick Austermuehle

A company who is injured by another entity or individual’s breach of a contract is generally entitled to recover damages. In Hardee’s Food Systems. Inc. v. Hallbeck, the District Court for the Eastern District of Missouri explains that in addition to recovering based on the immediate economic damage caused by a contract breach, a plaintiff may also seek to recoup the loss of future or expected income.

Defendants are five individuals who owned a Hardee’s fast food restaurant franchise in Ottawa, Illinois. They first opened the Ottawa franchise in the early 1970’s and owned 21 Hardee’s restaurant franchises over the following decades. By 2008, however, the Ottawa restaurant was the last remaining Hardee’s in its market area. Defendants closed this restaurant in February 2009.

Plaintiff, which operates and licenses others to operate Hardee’s restaurants, filed this action alleging that Defendants violated a five-year Renewal Franchise Agreement (Agreement) between the parties by closing the Ottawa franchise more than a year before the Agreement expired. Plaintiff seeks damages in the amount of approximately $50,000 in lost royalty and advertising fees, allegedly due under the Agreement. In response, Defendants filed a motion for summary judgment, arguing that the Agreement’s fees provision was terminated when they closed the restaurant, that the fees sought are speculative and that enforcement of the fee provision is against public policy.

The court denied Defendant’s summary judgment motion, ruling that prospective royalty and advertising fees that Plaintiff argues it would have earned if the franchise remained open may be recoverable. Noting that the Agreement provided that any disputes be governed by Missouri law, the court held that “[a] fact finder could reasonably find that absent the closure, some revenue would have been realized from continued operation, and the length of operations and amount of revenue that might have been derived are fact issues.” While it was not certain that Plaintiff would ultimately be able to recover damages here, there was, according to the court, “a genuine issue of material fact… as to whether lost royalties and advertising fund contributions in the event of a breach were reasonably within parties’ contemplation at the time they entered into the Agreement.”

The court further ruled that the damages sought were not merely speculative because Plaintiff based the figure on projected sales, applicable fee rates and the time value of money. Finally, the court noted that it was confident that the same conclusion would be reached if the matter was subject to Illinois law.

Car Fraud Cases and the “Economic Loss” Doctrine – Martin v. Ford Motor Co.

May 31, 2012 | Peter S. Lubin and Patrick Austermuehle

For a person seeking to sue for car fraud, it’s not enough to know who swindled you and how they did it. You also need to know what claims to raise in order to recover your losses. In Martin v. Ford Motor Co., the district court for the Eastern District of Pennsylvania explains that fraud claims may not always do the trick.

Plaintiff Aaron D. Martin filed a Complaint against Defendant Ford Motor Company, including class action claims brought “on behalf of himself and other similarly situated.” He claims that Ford failed to disclose a known defect in its 1999-2003 Ford Windstar model cars. Specifically, Plaintiff argues that although Ford expressly warranted that the 2001 Windstar that Plaintiff purchased from an authorized dealer was free of defects, the car’s rear axle is allegedly unsealed, causing it to rust and corrode over time before ultimately cracking. The defect is allegedly widely known and much discussed in the automotive industry, according to Plaintiff, and therefore Ford should have been aware of it. Three months after the complaint was filed, Ford recalled all Windstars manufactured between 1998 and 2002 in order to fix the rear axle problem.

Plaintiff’s many claims against Ford include a general fraud claim as well as those for intentional misrepresentation or omission, false statements and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. Defendants countered by arguing that these claims are barred by the “economic loss” doctrine, which in Pennsylvania prohibits a Plaintiff from recovering economic losses in a tort claim where the entitlement to the money is based in contract. In other words, because Plaintiff’s right to recover any losses from Ford is based on the parties’ contract, the company argued that he cannot seek to recover these losses in tort (i.e., via the fraud claims).

While the court noted that the economic loss doctrine does not apply to intentional misconduct, such as fraud, it also held that this exception is not available where the intentional misconduct alleged concerns the quality of a good being sold. In this case the intentional misconduct – Ford’s alleged misrepresentations – concerned the quality of the vehicle, a good offered for sale. As a result, the economic loss doctrine barred Plaintiff’s fraud claims under state law, which the court dismissed.

The ruling does not mean, however, that Plaintiff cannot recover damages against Ford. The court refused to dismiss Plaintiff’s fraud claims raised under the laws of various states other than Pennsylvania. Nor did it dismiss his claim for unjust enrichment. Plaintiff also retains the right to sue for breach of contract.

Retired Supreme Court Justice Stevens Discusses Bush v. Gore

May 24, 2012 | Peter S. Lubin and Patrick Austermuehle

Justice Stevens conducted a detailed analysis of Bush v. Gore, finding it hard to square with the Court’s reticence to date to view partisan gerrymandering as justiciable:

If a mere defect in the standards governing voting recount practices can violate the state’s duty to govern impartially, surely it must follow that the intentional practice of drawing bizarre boundaries of electoral districts in order to enhance the political power of the dominant party is unconstitutional.

Video: Used Car Rip-Off

May 23, 2012 | Peter S. Lubin and Patrick Austermuehle

Video: Avoid Used Car Scams

May 22, 2012 | Peter S. Lubin and Patrick Austermuehle

Today Show Reports: Vin Number Cloning: The Nation’s Biggest Used Car Scam

May 21, 2012 | Peter S. Lubin and Patrick Austermuehle

7th Circuit Finds that Dunning Letter Containing Puffery Does not Violate the FDCPA

May 20, 2012 | Peter S. Lubin and Patrick Austermuehle

Debt collector letters to consumers can violate the Fair Debt Collection Practices Act otherwise known as the FDCPA if they confuse unsophisticated consumers and set time lines that contradict or over shadow the time lines provided in the FDC for validation of debts.

Under the FDCPA, a debt collector’s dunning letter to a debtor must contain:

(1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; (4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and (5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor. 15 U.S.C. § 692g(a).

The FDCPA also dictates that“[a]ny collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.” 15 U.S.C. § 1692g(b).

The 7th Circuit in a new opinion has rejected a claim that a dunning letter from a debt collector for Capital One was overshadowed a consumer’s notice rights under the FDCP. In Zemeckis v. Global Credit Collection Corp., Capital One retained Global, a collection agency, which sent plaintiff, its debtor, a dunning letter with notice of her debt validation rights. Plaintiff claimed that the content as a whole over-shadowed the debt validation notice, violating the Fair Debt Collection Practices Act, 15 U.S.C. 1692g. The district court dismissed, stating that language like “act now” is only puffery and that placement of the notice on the back of the letter complies with the Act. The Seventh Circuit affirmed, upholding the district court’s rejection of a request to conduct a consumer survey to prove that the letter was confusing. However, the 7th Circuit recognized that in cases where it is not easily apparent that the dunning letter contains mere puffery consumer surveys are useful. It also recognized that placing deadlines with exact time frames such as one week to act or referencing set number of days to act that do not conform with the FDCPA timelines do violate the FDCPA.

You can see the entire 7th Circuit opinion in Zemeckis v Global Credit Collection Corp. by downloading the file here.