Entm't USA, Inc. v. Moorehead Commc'ns, Inc.
897 F.3d 786
7th Cir.2018Background
- In 2006 Entertainment USA ("OWW") and Moorehead Communications executed a two-page referral agreement: OWW would refer retail stores to Moorehead for Verizon signups and Moorehead would pay a per-activation referral bonus and upgrade fees.
- The agreement used terms like "activation" and "referred location" without precise definitions; it included a sliding per-activation fee schedule and a $10 flat fee per two‑year upgrade.
- Moorehead paid fees from 2006 to 2008 (about $70,979.50 for six stores) but stopped payments in 2008; Entertainment USA sued in 2012 for breach, accounting, and unjust enrichment.
- After summary judgment narrowed several issues ("referred locations" = physical stores; unjust enrichment dismissed), a 2016 bench trial produced findings that the contract lasted while a referred location produced two‑year post‑paid activations and identified twelve referred stores.
- The district court found Moorehead breached in limited respects but concluded Entertainment USA failed to prove damages with reasonable certainty and therefore awarded no damages and denied equitable accounting.
- Entertainment USA appealed; the Seventh Circuit affirmed, holding the failure to prove damages (and inadequate basis for an equitable accounting) was dispositive.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope/duration of agreement | Agreement continues as long as any referred location produces activations | Contract limited by terms and list of referred locations; various limits on covered activations | District court construed agreement to run while referred locations produced two‑year post‑paid activations; Seventh Circuit declined to re-litigate scope because damages issue was dispositive |
| Meaning of "activation" | Broader activations and upgrades should count toward referral fees | "Activation" means two‑year post‑paid line activations and two‑year upgrades only | Court adopted Moorehead's narrower definition (two‑year post‑paid activations/upgrades) |
| Damages proof standard | Damages can be estimated from Moorehead records and spreadsheets; judge could adjust plaintiff's calculations to fit liability findings | Plaintiff's spreadsheets are unreliable, inconsistent with Moorehead records, and based on flawed counting methods | Plaintiff failed to prove damages with reasonable certainty under Indiana law; no damages awarded; Seventh Circuit found no clear error |
| Equitable accounting | Plaintiff sought accounting to determine unpaid ongoing/post‑trial fees | Defendant argued discovery provided records and plaintiff failed to preserve any information asymmetry or fiduciary relationship | District court denied accounting; Seventh Circuit affirmed—accounting inappropriate where plaintiff had access to records and failed to present reliable calculations |
Key Cases Cited
- R&R Real Estate Co. v. C&N Armstrong Farms, Ltd., 854 N.E.2d 365 (Ind. Ct. App. 2006) (Indiana requires damages for breach of contract be proven with reasonable certainty)
- Gigax v. Boone Village L.P., 656 N.E.2d 854 (Ind. Ct. App. 1995) (appellate review focuses on evidence supporting the judgment and reasonable inferences)
- Advertising Specialty Institute v. Hall‑Erickson, Inc., 601 F.3d 683 (7th Cir. 2010) (standard of review for damages findings: clear‑error review of bench trial findings)
- Lesch v. Crown Cork & Seal Co., 282 F.3d 467 (7th Cir. 2002) (single dispositive issue can obviate need to address all claims on appeal)
- Kempner Mobile Electronics, Inc. v. Southwestern Bell Mobile Sys., 428 F.3d 706 (7th Cir. 2005) (equitable accounting is generally inappropriate in garden‑variety contract disputes where discovery could reveal necessary information)