GBL_395_-_Breach_of_Contract_-_HP_-_Cour

GBL_395_-_Breach_of_Contract_-_HP_-_Cour - IN THE CIRCUIT...

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Unformatted text preview: IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS /.--rv COUNTY DEPARTMENT, LAW DIVISION SCHOLASTIC INC. ) $3” ‘33; ) as .4 Plaintiff, ) 7‘22 “a; L; ) Case No 1:392 / 2,5,. v. ) eff; (-9 ,3; ) Judge "1,» g; r} INFINITY RESOURCES, INC. d/b/a ) 2'31} LflfiE’tfi-fifi "” DEEPDISCOUNTCOM, and LEVYHOME ) 2:52,.2 Engagw nit? 2,2 ENTERTAINMENT, LLC, ) PLAINTIFF DE Bets n‘RngL ) 322.33%": in "apart-tract Defendants. ) W Plaintiff Scholastic Inc. (“Scholastic”) by its attorneys, for its complaint against Defendants Infinity Resources, Inc. (“Infinity”) and Levy Home Entertainment, LLC (“Levy”), alleges as follows: NATURE OF THE ACTION 1. This action arises out of Infinity’s and Levy’s flagrant violations of their strict contractual obligations to refrain from shipping or allowing to be shipped or otherwise diStributing Harry Potter and the Deathly Hallows (“the Book”), the last volume of Plaintiff’s highly acclaimed Harry Potter series of children’s books (the “Series” or the “Books”) by IK. Rowling to the public until the worldwide on—sale date of July 21, 2007. '2. The seventh (and last) book in the Series is scheduled for simultaneous publication in the English language, throughout the world, at 12:01 am. on July 21, 2007. This release is a highly-anticipated event around the world and has received tremendous press coverage. The Book is subject to a worldwide embargo until that time. In the United States, none of the approximately 12 million books in the first announced printing may be sold or delivered until 12:01am. July 21, 2007. Distributors and retailers have all signed special 171717_1.DOC contracts “embargoing” the books until that date and virtually no details regarding the highly anticipated release have been disclosed by the author 1K. Rowling or her publishers. 3. In a complete and flagrant violation of the agreements that they knew were part of the carefiJlly constructed release of this eagerly awaited Book, both Levy and Infinity have ignored the strict contractual requirements to which they expressly agreed, which was fashioned to protect Scholastic’s distribution plans and enforce author Rowling’s right of first publication under the US. Copyright Act. Infinity has shipped, on information and belief, copies of Harry Potter and the Deathly Hallows up to a week before the contractually permitted shipping date, thereby causing damage to Scholastic, and its relationships with its distributors and retailers nationwide. Infinity’s and Levy’s completely unauthorized breach in addition has endangered Scholastic’s efforts and those of the author and the author’s other publishers to maintain the surprise of the Book so that all of the Harry Potter fans around the world may come to its contents at the same time. In addition, this breach has caused Scholastic and others to incur expense in order to mitigate the damages caused by Infinity and Levy. JURISDICTION AND VENUE 4. This Court has personal jurisdiction over Infinity because it does business in Illinois. 5. This Court has personal jurisdiction over Levy because it does business in Illinois. 6, This Court is the proper venue for this action under 735 ILCS 5/2-101 because (a) the principal place of business of Defendant Levy is in Cook County, Illinois; (b) Defendants do business in Cook County; and (c) part of the transactions out of which these causes of action arose occurred in Cook County. THE PARTIES 7. Plaintiff Scholastic is a New York corporation with its principal of business at 557 Broadway, New York, New York, 10012. Scholastic is and, at all times material herein, was engaged in the business of, among other things, publishing and distributing books for children and related merchandise. Scholastic has the exclusive right to publish Harry Potter and the Deathly Hallows in the United States, as well as the first six books in the Series, 8. Defendant Infinity Resources, Inc. (d/b/a DeepDiscount.com) is an Illinois corporation with its principal place of business at 900 N. Rohling Road, Itasca, Illinois 60143. Infinity is an internet marketer and maintains an internet retail website at www.DeepDiscount.com. 9. Defendant Levy Home Entertainment, LLC (“Levy”) is a Delaware Limited Liability Company with its principal place of business at 1930 George Street, Unit 1, Melrose Park, Illinois 60160. Upon information and belief, Levy is engaged in the business of receiving books from publishers such as Scholastic and distributing those books to its retail accounts. FACTS 10. Since the fourth book in the Harry Potter series, the books have all been embargoed prior to their worldwide release. In book publishing, an embargoed book is one that the author and publisher decide should not be put out for sale in book stores or other venues until a particular date in order to protect its contents from premature release. All the sales venues as well as the printing and other vendors are contractually obligated to preserve the confidentiality of the book until what is called the Iaydown date, the date the book is to be put out for sale. The Harm; Potter Books are unusual in that they have not only a laydown date, but a time—12:01 am. This is to allow all the readers to experience the books at the same time at the midnight parties or sleepovers or wherever they choose in accordance with the publishers’ plans and the author’s expressed wishes. 11. For the past several months, Scholastic has been working with national and local retail promoters on the launch of Harry Potter and the Deathly Hallows. Scholastic’s marketing plan, based on the theme “THERE WILL SOON BE 7,” is centered on the Book’s 12:01 am. July 21 release and the mysteries that will be resolved at that time. 12. Author Rowling’s revelation of the few meager details of this final book in the series, including its title, has been met with extraordinary public interest. In the one month from the date Rowling revealed the title on her website the site received 259 million “hits” and the event merited worldwide press coverage. 13. Scholastic and Rowling have worked hard to ensure that all of the content of Harry Potter and the Deathly Hallows remains secret until the book’s official release. Rowling has refused to discuss Harry Potter and the Deathly Hallows in any detail in media interviews and her fans, in general, do not want “spoilers” about what will happen in Harry Potter and the Deathly Hallows. In addition, Scholastic’s own website, Scholasticcorn has received approximately 9.5 million hits from fans interested in discussing the Book and the Series and expressing their wishes not to learn of the Book’s contents before its scheduled publication. The Book’s fans fervently support and respect Rowling’s wish to keep details about the book secret until publication. Scholastic’s Extraordinafl Security Measures 14. Scholastic has implemented numerous security measures to prevent pre- publication leaks of any details regarding Harry Potter and the Deathly Hallows. Among other things, Scholastic has severely restricted access to the book solely to individuals with a need to know, stored drafts and finished copies of the book in a safe or locked facility, utilized confidential tracking codes for shipments of the finished book and declined to send out pre- publication review copies (which is highly unusual in the publishing industry). 15. Scholastic has entered into agreements with distributors and booksellers that obligate those parties to store copies of the book securely and not to release any copies to the public before 12:01 am. on July 21, 2007. In addition, Scholastic’s contracts with distributors and retailers absolutely require that for any shipments to customers to occur before July 20, 2007, each distributor and/or retailer was clearly required to obtain Scholastic’s prior written approval, an approval that required a review of that retailer’s shipping plans to avoid early receipt of the Book by its readers. It was the duty of the distributor to enforce this requirement with its retailers as well as the direct duty of each retailer to comply with these provisions. 16. Scholastic also has entered into strict confidentiality agreements with all of the third parties withwhom it contracts to provide services in connection with Harry Potter and the Deathly Hallows, including those responsible for printing, storing and shipping the books specifically prohibiting these third parties from disclosing any materials or information relating to the book. The Infinity And Levy Contracts 17. On or about March 10, 2007, along with Scholastic’s other retailers nationwide, Infinity signed a contract obligating it to strictly comply with the worldwide embargo for the sale and shipment of Harry Potter and the Deathly Hallows (the “Infinity Embargo Agreement” attached hereto as Exhibit A.) The Infinity Embargo Agreement is a supplement to the Scholastic Inc. On—Sale Date Policy Contract, attached hereto as Exhibit B. In pertinent part the Infinity Embargo Agreement provides as follows: The undersigned account (“we”) [i.e., Infinity] hereby agrees to abide by the embargo of Harry Potter and the Deathly Hallows until the national on—sale date of July 23, 2007 (the “On-Sale Date”). If we receive our copies prior to the On-Sale Date, we shall ensure that those books are kept secure . . . and are not sold or distributed and do not leave our Secure environment . _ . prior to the On—Sale Date. We acknowledge and agree that this embargo prohibits distribution to our staff and distribution of complimentary copies. . . . We further agree to keep the number of our employees with access to the secure environment to the minimum number necessary for our operation. Any retailers, including on-line retailers: who wish to ship to their customers prior to the Orr-Sale Date: may do so only with prior written approval from Scholastic. The earliest ship dates allowed wiil be July 20= 2007. No customer may receive the hook prior to the On-Sale Date and any such wishing to early ship to their customers must agree that they shall not ship any copies in any manner or at any time that might allow their customers to receive such copies prior to July 21: 2007. #94:”: In addition to the consequences which apply to violations of the 2007 Scholastic On—Sale Date Policy, and without limiting Scholastic’s rights and remedies, we acknowledge and agree that any store that violates the restrictions found in this Agreement (“Violations”) will be subject to the following: (i) the violating store will be liable for any and all attorney’s fees and damages, incurred as a result of such Violations. . . . Furthermore, we acknowledge and agree that any such Violation will cause irreparable harm to Scholastic and the author, IK. Rowling, and that monetary damages will be inadequate to compensate for Violations and that, in addition to any other remedies that may be available, at law, in equity or otherwise, Scholastic and/or IK. Rowling shall be entitled to obtain injunctive relief against any Violation, without the necessity of proving actual damages or posting any bond. On behalf of the undersigned account, I have read the On—Sale Date Announcement and this Agreement concerning the On—S ale Date for Harry Potter and the Deathly Hollows and agree to abide by the conditions set forth above. Furthermore, Iwill make sure all personnel involved with Harry Potter and the Deathly Hollows as our company are informed of, and comply with, this Agreement and its restrictions. (Emphasis Added) 18. On or about April 9, 2007, Levy executed a supplement to the Scholastic Inc. On—Sale Date Policy Contract obligating it to “ensure” that the books shipped to Levy “are not sold or distributed by our accounts ... prior to the On—Sale Date.” (A copy of the “Levy Agreement” is attached as Exhibit C.) In accordance with this obligation, Levy agreed as follows : In the event that one of our accounts commits a Violation, we acknowledge and agree that we may be held jointly liable with the violating account for such Violation and subject to the foregoing [list of available remedies]. 19. Upon information and belief, Infinity is an “account” of Levy for purposes of the Levy Agreement. Infinity’s Breach 20. On information and belief, Infinity has repeatedly violated the Infinity Embargo Agreement in all of the following ways: 0 Shipping copies of Harry Potter and the Deathly Hallows to customers prior to July 20, 2007; 0 Shipping copies of Harry Potter and the Deathly Hallows to customers prior to July 20, 2007 Without the express prior written consent of Scholastic; 0 Delivering copies of Harry Potter and the Deathly Hallows to customers prior to July 21, 2007, 21. As a consequence of Infinity’s violations, Scholastic has sustained damages and incurred costs. At the time of the filing of this Complaint, Scholastic is not able to fully assess its damages, but will supplement this filing as the facts become available 22. Plaintiff Scholastic demands a trial by jury. COUNT I - BREACH OF CONTRACT AGAINST INFINITY 23. Plaintiff realleges and incorporates by reference the allegations in Paragraphs 1 through 22. 24. The Infinity Embargo Agreement is a valid and binding contract supported by consideration. 25. Infinity breached the Infinity Embargo Agreement by shipping Harry Potter and the Deathly Hallows to customers prior to July 20, 2007, shipping Harry Potter and the Deathly Hallows to customers prior to July 20, 2007 without the express consent of Scholastic, and by delivering copies of Harry Potter and the Deathly Hallows to customers prior to July 21, 2007. 26. Plaintiff has performed each and every obligation required of it under the Infinity Embargo Agreement. 27. Plaintiff has been injured and will continue to be injured due to Infinity’s breach. WHEREFORE, Plaintiff Scholastic requests that the Court enter a judgment in Scholastic’s favor and against Infinity and provide Scholastic the following relief: A. Order, adjudge and decree that Infinity has materially breached the Infinity Embargo Agreement with Scholastic; B. Temporarily, preliminarily and permanently restrain and enjoin Infinity from fiarther violations of its contractual obligations under the Infinity Embargo Agreement; C. Award damages in an amount to be determined after discovery and such other relief to Scholastic as Scholastic requests and the Court deems appropriate and just. COUNT 11 m BREACH OF CONTRACT AGAINST LEVY 28. Plaintiff realleges and incorporates by reference the allegations in Paragraphs 1 through 27. 29. The Levy Agreement is a valid and binding contract supported by consideration. 30. Under the Levy Agreement, Levy agreed to “ensure” that the books shipped to Levy “are not sold or distributed by our accounts ... prior to the On—Sale Date.” 31. Infinity, an account of Levy, shipped Harry Potter and the Deathly Hallows to customers prior to July 20, 2007, shipped Harry Potter and the Deathly Hallows to customers prior to July 20, 2007 without the express consent of Scholastic, and by delivering copies of Harry Potter and the Deathly Hallows to its customers prior to July 21, 2007. 32. Through the Levy Agreement, Levy agreed to be jointly and severally liable for any damages caused by a breach by Infinity of the Infinity Embargo Agreement. 33. Plaintiff has been injured and will continue to be injured due to Infinity’s breach. WHEREFORE, Plaintiff Scholastic requests that the Court enter a judgment in Scholastic’s favor and against Levy and provide Scholastic the following relief: A. Order, adjudge and decree that Levy has materially breached the Levy Agreement with Scholastic; B. Hold Levy jointly liable with Infinity for Infinity’s breach of the Infinity Agreement; C. Temporarily, preliminarily and permanently restrain and enjoin Levy from further violations of its contractual obligations under the Levy Agreement; D. Award damages in an amount to be determined after discovery and such other relief to Scholastic as Scholastic requests and the Court deems appropriate and just. OF Q’l' W61"? 30, COL E30 Dated: July 18, 2007 Respectfully submitted, Mm 3 M One of the Attorneys for Plaintiff Scholastic Inc. Kenneth E. Kraus William B. Berndt SCHOPF & WEISS LLP One South Wacker Drive, 28th Floor Chicago, Illinois 60606-4617 312.701.9300 # EXHIBIT A E:E."-"-1 LHEE'Iiflr'IS [HT 1551.": HEfiEL-‘lh'u . 5M. 53:": SCENIC INC. flN-EAL'E BATE- FE'ILJC'E CUNTRACT flaw w-mp'au :u-ru'. Imam: Helm Bantu fibhflhlm :15? Bmfiww . F'Hm HH‘ T515531 1W1? 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