APS Express, Inc. v. Sears Holdings Corporation et al
Filing
161
MEMORANDUM Opinion and Order: Based on the foregoing, this Court grants Sears' Motion for Summary Judgment 140 in part as to Count I, and denies it as to Counts II, III, IV, and the counterclaim. APS' Motion for Summary Judgment 136 is denied. Signed by the Honorable Sharon Johnson Coleman on 5/22/2018. Mailed notice.(ym, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
APS EXPRESS, INC.,
Plaintiff,
v.
SEARS HOLDING CORPORATION,
SEARS HOLDING MANAGEMENT
CORPORATION, and INNOVEL
SOLUTIONS, INC. formerly known as
SEARS LOGISTICAL SERVICES, INC.,
Defendants.
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Case No. 15-cv-3275
Judge Sharon Johnson Coleman
MEMORANDUM OPINION AND ORDER
Plaintiff, APS Express, Inc. (“APS”) filed its Third Amended Complaint against Sears
Holding Corporation, Sears Holding Management Corporation, and Innovel Solutions (collectively,
“Sears”), to recover the value of the used appliance processing services APS rendered to Sears from
2011 through April 14, 2015, and to recover for damages suffered when it detrimentally relied upon
Sears’ allegedly false representations in bidding for a new haul-away contract. Sears now moves for
summary judgment pursuant to Federal Rule of Civil Procedure 56 for all claims in Sears’ Third
Amended Complaint and for its counter claim against APS. Sears filed a cross-motion for partial
summary judgment on two of its claims, Counts I and IV. After reviewing the parties’ submissions
and the evidence before it, Sears’ Motion is granted in part and denied in part. APS’ Motion is
denied.
Background
The following facts are undisputed unless noted. Defendants, Sears Holding Corporation,
Sears Holding Management Corporation, and Innovel Solutions (collectively, “Sears”) are Delaware
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corporations whose primary place of business is in Illinois. Plaintiff, APS Express, Inc. (“APS”) is a
Florida corporation that operates out of Florida. It formerly performed haul-away services for Sears
from 2001 through April 15, 2015, when Sears terminated the contract. Sears was APS’ only haulaway customer during that time period.
APS and Sears’ business arrangement worked as follows. Sears offered customers that
purchased large items, like appliances, the option of paying a fee to have their old items removed
and recycled. Sears used third-party carriers to deliver the new items and haul-away the old or
broken ones to the APS trailers at the Sears’ distribution centers. After picking up a used appliance
from a customer’s home, the third-party drivers were supposed to bring the item back to a Sears
Distribution Center to be placed in the on-site APS trailer for processing. There were instances
where the third-party drivers stole the hauled away items, or replaced them with appliances from
junkyards before putting them in the APS trailers. Parties dispute whether the third-party carriers or
Sears were responsible for preventing the drivers from taking or swapping out “haul away” items.
Once a trailer was full of used appliances and other haul-away materials, APS transported the trailer
to its facilities where the items were classified as resalable, recyclable, or trash. Since there was a
secondary market for the used appliances, APS agreed to pay a per-appliance fee for certain types of
used appliances it hauled away, in exchange for the right to resell those appliances or recycle the
components for sale as scraps.
March 18 Meeting
On March 18, 2011, APS Executives, Basil Beck and Wendy Beck, attended a meeting at
Sears Headquarters in Hoffman Estates, IL with the Sears Management. The Sears team included
Gary Fenske, Troy Kohler, David Torma, and David Acquaviva, and the loss prevention manager,
Paul Jankowski, via phone, to discuss their potential business agreement. Fenske was APS’ main
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point of contact with Sears. Basil Beck testified that members of the Sears team made the following
representations to APS during that meeting: 1) Sears had better anti-theft measures than tamperproof stickers; 2) Sears already implemented anti-theft processes with the haul-away that are like the
new product; 3) Sears had a zero tolerance for driver theft; 4) Sears did not have a theft problem and
if it did, the loss prevention person would “nip it in the bud”; 5) drivers were terminated if they
stole; 6) Sears knew and believed that any problem with driver theft or “switching out” was under
control; 7) Sears’ loss prevention department was capable of addressing haul-away theft issues; 8) no
other vendors would service APS’ areas; and 9) Sears wanted APS to bid full, premium pricing
because Sears was committed, and would continue to be committed to not tolerating theft. Basil
Beck Dep. 144-404, Nov. 17, 2016. Wendy Beck’s testimony was substantially similar. Wendy Beck
Depo. 88-112, Nov. 22, 2016. Sears offered Fenske’s deposition to dispute that these statements
were made during the meeting and refute that the statements were properly characterized by Basil
and Wendy Beck.
In addition to the meeting on March 18, 2011, Fenske sent several internal email
correspondences suggesting that he and Sears were aware that appliance theft occurred and affected
the volume of haul-away material. In 2010, he sent an email detaining the opportunity for Sears to
accrue over $1.3 million if it could recover all of the haul-away appliances that are sold, traded out,
or taken by drivers. Fenske also sent several internal emails in 2013 and 2014 suggesting that the
discrepancies between the number of delivered appliances and the haul-away volumes in Sears’
internal reports were caused by driver theft of the hauled-away appliances. Sears disputes that theft
is the reason for the missing items and attributes that rationale to rumors from other vendors and
Fenske’s opinions, as the company as a whole was not aware of any theft problem. Finally, Fenske
also sent an email where he expressed that the haul away vendors expected Sears to remedy the
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problem of drivers swapping out the used appliances prior to delivering the items to the vendor
because they were paying premium prices for reasonably used items but receiving junk instead.
Sears argues that these emails were mischaracterized and irrelevant because Fenske’s emails were
directed at other vendors in different territories.
Bidding Auctions
Sears notified APS and other prospective bidders that Sears would conduct its first online
auction in August 2011 to award haul-away business to various vendors over the next three years.
Prior to the auction, on June 22, 2011, Sears’ Facility Services Procurement Manager emailed APS
and other prospective vendors to acquire their haul-away volume information from the month of
April 2011, and compile the data into one sheet.
On August 4, 2011, Sears’ Facility Services Procurement Manager sent APS an email
describing how the online auction would be used to award the haul-away service contracts from
September 2, 2011 until August 31, 2014. Sears also sent all prospective vendors, including APS, a
spreadsheet (“2011 Bid Proposal”) labeled “Monthly Total Number of Units,” which contained
volume numbers for various haul-away items by location. The 2011 Bid Proposal did not specify
that the volume numbers were taken from the month of April 2011 only. APS saw the 2011 Bid
Proposal in advance of the auction. APS now challenges the 2011 Bid Proposal contending that
such a document should have represented the volume average across time, not a single month.
Additionally, while APS acknowledges the veracity of the numbers it submitted for April 2011, but it
disputes the accuracy of the numbers submitted by other vendors. The auction took place on
August 22, 2011. APS was the incumbent provider in 16 locations, which permitted it access to
those historical volume numbers. APS, however, did not examine those previous volumes, but
instead relied on the “Monthly Total Number of Units” provided in the bid sheet when setting its
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prices. Based on APS’ competitive bidding, it was selected as the haul-away vendor for 27 Sears
locations.
On August 30, 2011, Sears and APS signed a Materials Processing Master Services
Agreement (“MSA”) and accompanying Statement of Work (“SOW”). The MSA contained the
terms for the service relationship between Sears and APS. (Dkt. 143-21). It made “no
representations as to the amount of business [APS could] expect under this Agreement.” (Id.). It
determined that “compensation for all Services [would] be set forth in the applicable SOW and
[would] remain in effect for the term thereof and [would] not be changed except by an amendment
to the SOW signed by both parties.” (Id. at 5.1). Under the MSA, Sears would “not be liable to
[APS] for any capital expenditures or expenses incurred for additional personnel, supplies, facilities,
or equipment in reliance upon or in anticipation of providing services to” Sears and APS “release[d]
and discharge[d Sears] . . . from any and all claims in law or equity for expenses or damages incurred
during the term of this Agreement or after its termination arising out of [APS’] investment in such
equipment, materials, personnel and facilities.” (Id. at 5.3-5.44). Both parties also signed the 2011
SOW, which was incorporated as part of the 2011 MSA and included additional terms for the haulaway and appliance processing services. (Dkt. 143-21). The services statement in the SOW
indicated that Sears retained APS “for handling, recycling and disposing of Materials . . . [and a]ll
Services shall be at [APS’] own expense.” (Id.). Under the 2011 SOW, APS agreed to pay Sears for
the services outlined under the agreement and was responsible for “all costs of administering,
operating and performing the Services.” (Id.).
When the initial haul-away contracts reached their expiration, Sears conducted a second
haul-away auction on July 2, 2014. It differed from the 2011 auction because vendors were expected
to bid by state and not by the geographic groupings of the Sears’ facilities. Sears also included nine
outlet stores in the auction as potential haul-away assignments. These locations, however, were
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operated by a separate entity, which had sole discretion over awarding contracts for its outlet stores.
Parties dispute whether Sears clearly articulated that it could not guarantee the contracts for the
outlets. Similar to the first auction, Sears distributed a bid and pricing proposal sheet (“2014 Bid
Proposal”) to the vendors on June 30, 2014 that contained the exact same haul-away volume
information used in the 2011 Bid Proposal. APS saw the 2014 Bid Proposal at least one time prior
to the auction; however, it did not ask about the source of the volume figures or do any independent
investigating into the numbers.
After the 2014 auction, APS was selected as the haul-away vendor in six states and was the
incumbent supplier in many of the Sears facilities it was awarded. Some of the territories APS won
housed outlets. The 2014 MSA and SOW contained substantially similar terms and provisions as
the 2011 versions. APS signed the MSA on May 14, 2014 and the SOW on June 11, 2014, but Sears
never did. (Dkt. 9 and 27). On September 1, 2014, APS continued to haul-away materials from the
facilities consistent with the terms of the 2014 MSA and SOW. Sears sent APS “final” versions of
the MSA and SOW to sign around November 2014, but the documents were not executed by either
party prior to this suit.
APS’ Haul-Away Numbers
Over the course of its relationship with Sears, APS prepared and maintained “month-end
reports,” containing the numbers and type of appliances it hauled-away. This permitted APS to
calculate payments to Sears. Between September 2011 and April 2015, APS hauled away 1,041,045
used appliances from Sears locations, generating $31,008,109 in revenue from the resale and
recycling of those appliances. APS paid Sears a total of $15,019,466 to acquire those appliances
during that time, except for in between December 2014 and April 2015 when Sears asserts that APS
did not remit any payments. While APS agrees that the aforementioned numbers are technically
correct, it disputes that they are complete and accurate figures because they fail to include the
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millions of dollars in expenses, labor, equipment, materials, fuel, rent, and other costs associated
with providing recycling services. APS claims that it lost $8,647,148 by providing gratuitous
recycling services to Sears between September 2011 and April 2015, and such services afforded Sears
a benefit of $11,228,824.
Sears now claims that APS stopped paying for the haul-away merchandise from December
2014 and April 2015, and so, it now owes Sears a total of $1,667,8668.14. In an effort to mitigate
damages, Sears drew $200,000 from APS’ line of credit and applied the cash deposit credit of
$925,000 that APS provided to Sears under the 2014 agreement. This reduced the total amount
Sears alleged APS owed Sears for the hauled-away used appliances to $542,868.14. APS contends
that this retained amount of $1,125,000 is Sears’ compensation for the period of alleged
nonpayment.
In April 2015, Sears terminated its relationship with APS because APS failed to pay for the
hauled-away appliances from December 2014 through April 2015. APS disputes this reason, alleging
that Sears terminated the agreement because APS wanted Sears to fix the appliance theft problem so
that it could receive the full benefit of the haul-away services.
Legal Standard
Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex
Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); see also Fed. R. Civ. P.
56(c). The moving party bears the initial burden of demonstrating that there is no genuine issue of
material fact, and if done, judgment as a matter of law should be granted in its favor. Vision Church
v. Vill. of Long Grove, 468 F.3d 975, 988 (7th Cir. 2006). “To determine whether genuine issues of
material fact exist, we ask if ‘the evidence presents a sufficient disagreement to require submission to
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a jury or whether it is so one-sided that one party must prevail as a matter of law.’” Adeyeye v.
Heartland Sweeteners, LLC, 721 F.3d 444, 449 (7th Cir. 2013) (citing Anderson, 477 U.S. at 251-52). All
evidence and inferences must be viewed in the light most favorable to the non-moving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
Discussion
Count I – Quantum Meruit (unjust enrichment)
Both parties move for summary judgment as to the first count of quantum meruit. APS alleges
that it performed non-negotiated, valuable services for Sears from 2011 through April 14, 2015
when it hauled away and processed junk appliances that Sears’ delivery drivers acquired at used
appliance dealers or junk yards. APS contends that it never received compensation for this collateral
service of recycling junk, and that it is entitled to summary judgment as to the unjust enrichment
claim because Sears accepted this benefit to APS’ detriment. Sears, on the other hand, contends that
it is entitled to summary judgment on this claim because the service contract provided that APS
would provide haul-away and recycling services at its own expense to Sears.
Unjust enrichment occurs when a party retains benefits to the other party’s detriment, and
retention of that benefit violates the principles of justice, equity, and good conscience. Cleary v.
Philip Morris Inc., 656 F.3d 511, 516 (7th Cir. 2011). A successful claim based on the theory of
quantum meruit exists (1) where one party performs a service for another’s benefit; (2) the benefiting
party accepts the benefit; and (3) the circumstances surrounding the agreement indicate that the
service was not intended to be gratuitous. ImagePoint, Inc. v. BFS Retail & Commer. Operations, LLC,
No. 13 C 4339, 2014 U.S. Dist. LEXIS 175622, at *10 n.19 (N.D. Ill. Dec. 19, 2014)(Cox, J.)(citing
Midwest Emergency Assoc.-Elgin Ltd. v. Harmony Health Plan of Ill., Inc., 382 Ill. App. 3d 973, 888 N.E.2d
694, 701, 321 Ill. Dec. 175 (Ill. App. 1st Dist 2008)). “Illinois law [however,] does not permit a party
to recover on a theory of quasi-contract when an actual contract governs the parties’ relations on
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that issue.” Keck Garrett & Assocs., Inc. v. Nextel, 517 F.3d 476, 487 (7th Cir. 2008)(citing Illinois ex rel.
Hartigan v. E & E Hauling, Inc., 153 Ill. 2d 473, 607 N.E.2d 165, 177 (Ill. 1992)).
APS contends that it provided Sears with valuable recycling and disposal services in
conjunction with the contracted for haul-away services, and so, it is entitled to recover money for
Sears’ collateral benefit now. As the law stands, the theory of quantum meruit cannot apply here since
a clear agreement between the parties that outlines the expectations for the disposal and recycling of
the haul-away materials exists. See Keck, 517 F.3d at 487. It appears, however, that APS is trying to
obtain compensation that it could not recover under the terms of its agreement with Sears. There is
no dispute about whether APS and Sears signed the 2011 MSA and SOW, which governed their
business relationship for the following three years. Additionally, although Sears did not sign the
2014 MSA and SOW along with APS, both parties acted in substantial compliance with those terms,
continuing to engage and operate as though the contracts were in place. Neither party disputes this.
This continued course of dealing reflects a willingness to be bound by the contract. See Kransz v.
Uedelhofen, 193 Ill. 477, 489, 62 N.E. 239, 244 (1901)(finding that acts of acquiescence, adoption, and
recognition of the terms of the contract are sufficient to bind both parties to the agreement even if
only one party signed the document).
The MSAs and SOWs included an explicit payment structure for the business relationship,
which consisted of the contractor, APS, agreeing to haul-away products from Sears locations and
pay Sears a per-appliance fee for what was taken. As part of the agreement, APS was free to sell the
used appliances or the scrap parts at a profit. The remainder of the unusable materials were to be
recycled and disposed of in accordance with the expectations of the contract. There was no
guarantee about the amount of usable versus unusable appliances in the agreement. Further, the
contract expressly proscribed that all expenses related to the haul-away services, including recycling
or disposal services, were to be absorbed by APS with no cost to Sears. APS was to bear the
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financial burden for any capital, expenditures, salaries, etc… acquired to effectuate the haul-away
services. APS agreed to these terms twice, by signing the 2011 and 2014 agreements. APS also
adhered to the terms in practice for the majority of their relationship with Sears, making it clear that
APS intended to include the collateral benefit along with the contracted haul-away services. APS
cannot now attempt to recoup for the added value it agreed to provide at its own expense to Sears
under the contract. APS’ present dissatisfaction with the profitability of this venture is not a basis
for unjust enrichment, especially where an existing contract explicitly dictates that these expenses
were to be accepted by APS. It is not appropriate to apply this equitable relief theory under these
circumstances. As a matter of law, APS’ claim of quantum meruit fails and Sears’ motion for
summary judgment as to Count I is granted.
Counts II and II – Fraudulent Misrepresentations
Sears moves for summary judgment on Counts II and III because APS did not prove that
Sears made any material false statements or misrepresentations in its 2011 and 2014 Bid Proposals,
respectively, that caused APS to suffer actual damages. In the aforementioned counts, APS alleges
that Sears’ induced APS to increase its bid prices by fraudulently labeling the Bid Proposals
“Monthly Volume Totals by Unit,” but only including figures from a single month that differed
substantially from the actual historical volumes. Additionally, APS alleged in Count III that the
2014 Bid Proposal included outlet locations for which it lacked the authority to award contracts in
order to increase APS’ bid prices.
A successful claim of fraud against Sears requires clear and convincing evidence that Sears:
(1) made a false statement that they knew to be false; (2) with the intent to induce APS to act; (3)
that APS justifiably relied on that information to their detriment; and (4) that damages resulted from
that reliance. Ass'n Ben. Servs. v. Caremark Rx, Inc., 493 F.3d 841, 852 (7th Cir. 2007). The
misrepresentation must be of a material fact. This means that “the party claiming fraud would have
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acted differently had it been aware of [the fact] or if [the fact] concerned the type of information
upon which one would be expected to rely when making the decision to act.” BP Amoco v. Flint Hills
Res., No. 05 C 5661, 2009 U.S. Dist. LEXIS 131278, at *40 (N.D. Ill. Mar. 12, 2009)(St. Eve, J.). To
be successful, APS must prove that Sears had intent to induce reliance on the false statements. This
can be demonstrated “either where a party makes the representation knowing it is false or where the
misrepresentation was made with a reckless disregard for its truth or falsity.” Id. at *42-43. The
burden is on the movant to demonstrate that there is no dispute of material fact. Hotel 71 Mezz
Lender Ltd. Liab. Co. v. Nat'l Ret. Fund., 778 F.3d 593, 601 (7th Cir. 2015).
Sears believes it is entitled to summary judgment because the numbers included in the 2011
and 2014 bid and pricing proposals were real figures and technically correct. The Court is not
convinced. Merely citing the accuracy of the numbers does not defeat the question of whether that
information was passed on to the vendors with the intent to induce reliance. The law is clear that
even if a statement is technically true, omission of critical information or ambiguity may still render
it a misrepresentation. See Thacker v. Menard, Inc., 105 F.3d 382, 386 (7th Cir. 1997)(“Opinions or
ambiguous statements by the salesperson may be considered as factual representations if it would be
reasonable for the other party to treat it as such.”). The record does not provide any evidence that
Sears intended the 2011 and 2014 bid and pricing proposals to be read as an exemplar that strictly
applied to one month. Compare BP Amoco Chem. Co. v. Flint Hills Res., LLC, 600 F. Supp. 2d 976, 981
(N.D. Ill. 2009)(St. Eve, J.)(finding that summary judgment is not appropriate for the interpretation
of an ambiguity).
Here, although the volume numbers are technically true, APS presented sufficient evidence,
from the vaguely labeled Bid Proposals to testimony and emails indicating Sears’ desire to increase
revenue, that there is a genuine issue of fact about Sears’ intent to use the representations to induce
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higher bidding prices. Accordingly, Sears’ request for summary judgment is denied as to Counts II
and III.
Count IV – March 18, 2018 Meeting
Both parties move for summary judgement as to Count IV. APS argues that this Court
should rule in its favor because Sears made false statements of material fact to APS during the
March 18, 2011 meeting that APS relied upon in deciding to increase the price of its bids and
continue servicing Sears. Sears maintains that the allegedly fraudulent statements either did not
occur or that the evidence could not sustain a fraud claim.
APS offered the testimony of both Basil Beck and Wendy Beck as evidence that the Sears’
management team, mainly Fenske, made false statements about Sears’ applianceanti-theft measures
to control appliance losses and concealed the pervasiveness of haul-away theft in order to induce
APS to bid at a premium price. Sears disputes these statements because the Fenske, and others on
the Sears team, deny saying what Basil and Wendy Beck allege. APS also offered internal emails
from Fenske as proof that Sears was aware of the appliance-theft issue, yet still made representations
to assure APS that it was not a problem. Sears denies the validity and relevance of these emails,
contending that they were mischaracterized, unsubstantiated opinions of Fenske alone and did not
pertainto APS’ specific situation. The substance of the meeting and Fenske’s statements are the
crux of Count IV’s fraud claim. These statements are critical to determine whether Sears was aware
of the theft problems and still made assurances that APS relied on to its detriment. Evaluating
conflicting testimony requires this Court to weigh the credibility of the witnesses, which is not
appropriate for summary judgment. Payne v. Pauley, 337 F.3d 767, 771 (7th Cir. 2003)(finding it to be
“dangerous territory” for a court to weigh conflicting evidence during summary judgment).
Accordingly, as there is still a triable issue, both Motions for Summary Judgment are denied as to
Count IV.
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Defendant’s Counterclaim
One of the defendants, Innovel, filed a counterclaim and maintains that it is entitled to
summary judgment on it because APS breached their contract by refusing to pay for the thousands
of used appliances it hauled away from the Sears facilities between December 2014 and April 2015.
To make out a claim for breach of contract in Illinois, MLIC must allege: “(1) the existence
of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the
defendant; and (4) resultant damages.” Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 764 (7th
Cir. 2010)( citing W.W. Vincent & Co. v. First Colony Life Ins. Co., 351 Ill. App. 3d 752, 814 N.E.2d
960, 967 (Ill. App. Ct. 2004)).
As an initial matter, this Court rejects any argument that no contract existed to govern the
work performed after September 2014 because Sears did not sign the 2014 MSA and SOW, for the
reasons discussed above, see supra at 8-10. Innovel maintains that it performed under the contract
by supplying appliances to APS and so, it is owed the per-item fees. APS disputes that Innovel
satisfied the condition precedent to payment—supplying the used appliances obtained through
Sears’ home delivery service as agreed upon, not from junk yards and thrift stores. Additionally,
APS contends that Sears was adequately compensated during this time because it maintained
possession of $1,125,000 of APS’ money. These diverging positions create an issue of material fact
about whether Innovel actually complied with the contract and whether APS’ failure to pay was a
justifiable breach. Thus, summary judgment is inappropriate here and Sears’ motion is denied. Sunny
Handicraft (H.K.) Ltd. v. Envision This!, LLC, No. 14 C 1512, 2017 U.S. Dist. LEXIS 42980, at *20
(N.D. Ill. Mar. 24, 2017)(Lee, J.).
Conclusion
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Based on the foregoing, this Court grants Sears’ Motion for Summary Judgment in part as to
Count I, and denies it as to Counts II, III, IV, and the counterclaim. APS’ Motion for Summary
Judgment is denied.
IT IS SO ORDERED.
SHARON JOHNSON COLEMAN
United States District Court Judge
Dated: 5/22/2018
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