Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-02692/USCOURTS-ca7-14-02692-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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In the 

United States Court of Appeals 

For the Seventh Circuit ____________________

No. 14‐2692  

WILLIAM J. BURFORD,

Plaintiff‐Appellant,

v.

ACCOUNTING PRACTICE SALES, INC. and

GARY HOLMES,

Defendants‐Appellees.

____________________

Appeal from the United States District Court for the

Southern District of Illinois.

No. 3:12‐cv‐1212‐JPG‐SCW — J. Phil Gilbert, Judge.

____________________

ARGUED DECEMBER 8, 2014 — DECIDED MAY 13, 2015

____________________

Before BAUER and HAMILTON, Circuit Judges, and ELLIS,

District Judge.



                                                   The Honorable Sara L. Ellis, United States District Judge for the

Northern District of Illinois, sitting by designation.

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HAMILTON, Circuit Judge. Plaintiff William J. Burford

agreed to market and facilitate the purchase and sale of ac‐

counting practices on behalf of defendant Accounting Prac‐

tice Sales, Inc. (APS) in various territories from Kentucky to

Louisiana. The parties initially signed one written contract

assigning Louisiana to Burford. They later modified this

agreement by orally agreeing that Burford should also cover

Alabama, Mississippi, Tennessee, and Kentucky. There is

some dispute about the precise terms of the oral agreements

and/or modifications, but for purposes of this appeal, we

treat the parties’ entire relationship as being governed by the

terms of the written contract.

APS terminated its contract with Burford. He brought

suit in an Illinois state court claiming that APS breached the

terms of the contract. He also sought to pierce the corporate

veil to hold Gary Holmes, the owner of APS, personally lia‐

ble for any judgment against APS.

APS removed the case to federal court and moved to

dismiss under Federal Rule of Civil Procedure 12(b)(6) for

failure to state a claim. After Burford’s complaint survived

the motion to dismiss, APS filed a four‐count counterclaim.

Relevant here is the count of the counterclaim alleging that

Burford misappropriated APS’s trade name in violation of

the Lanham Act, 15 U.S.C. § 1051 et seq. Shortly after APS

terminated his contract, Burford started a rival business

named “American Accounting Practice Sales.” Both sides

moved for summary judgment on the opposing side’s

claims.

APS prevailed on the contract claim on the theory that its

contract with Burford was of indefinite duration and was

therefore terminable at will. After APS’s motion on the con‐

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No. 14‐2692 3

tract claim was granted, but before the district court could

consider the counterclaim, APS voluntarily dismissed its

counterclaim with prejudice. As the prevailing party on the

Lanham Act claim, Burford then sought attorney fees under

15 U.S.C. § 1117(a), arguing that APS’s pursuit of a meritless

Lanham Act claim until right before trial amounted to the

sort of abuse of process that entitled Burford to fees. The dis‐

trict court denied this motion, reasoning that APS’s Lanham

Act claim could have been pursued by a rational party seek‐

ing to protect its trademark.

Burford appeals the grant of summary judgment on the

contract claim and the denial of his request for attorney fees

under the Lanham Act. We reverse the grant of summary

judgment but affirm the denial of attorney fees. The contract

provided that it could be terminated by APS only if Burford

violated the terms of the agreement. Thus, even if the con‐

tract was indefinite in duration, the parties contracted

around the default rule making such contracts terminable at

will by either party. On the Lanham Act issue, the district

court did not abuse its discretion by denying Burford’s re‐

quest for fees.  

I. Contract Interpretation

We review de novo the district court’s interpretation of a

written contract, including its conclusion that the contract

was terminable at will. See BKCAP, LLC v. CAPTEC Franchise

Trust 2000‐1, 572 F.3d 353, 358 (7th Cir. 2009). Illinois law

governs the contract in this diversity jurisdiction case. See

A.T.N., Inc. v. McAirlaid’s Vliesstoffe GmbH & Co. KG, 557 F.3d

483, 485 (7th Cir. 2009). Under Illinois law, our primary task

is “to determine and give effect to the intent of the parties as

expressed in the language” of the contract. Id., quoting Clay‐

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ton v. Millers First Ins. Cos., 892 N.E.2d 613, 615 (Ill. App.

2008); see also Jespersen v. Minn. Mining & Manufacturing Co.,

700 N.E.2d 1014, 1017 (Ill. 1998) (“in general, individuals

should be free to order their affairs subject to important

qualifications for instances of fraud, duress, or undue influ‐

ence”). As an interpretive guide, we rely on background

principles of contract law to fill in the details when the par‐

ties were silent. See, e.g., Jespersen, 700 N.E.2d at 1017 (rely‐

ing on default presumption that indefinite contracts are ter‐

minable at will when contract is silent on issue).

We agree with the district court that the contract here

was of indefinite duration. The agreement provided that af‐

ter it went into effect, “it renews automatically on each anni‐

versary date of this agreement for another period of twelve

months.” The fact that the initial contract was for a twelve‐

month period did not make it for a definite period. By its

terms, the agreement would renew itself without the need

for either party to take action, and there appears to have

been no way for the parties to prevent automatic renewal.

Because the parties provided that the contract would renew

perpetually, there was no objective event upon which the

agreement would terminate. It was therefore of indefinite

duration. See R.J.N Corp. v. Connelly Food Products, Inc., 529

N.E.2d 1184, 1187 (Ill. App. 1988) (a contract has a definite

duration only if it can be read to terminate upon the occur‐

rence of an objective event).

Under Illinois law, perpetual contracts are disfavored, so

the law presumes that such contracts are terminable at will

by either party. Jespersen, 700 N.E.2d at 1015 (“It has long

been recognized that contracts of indefinite duration are

generally terminable at the will of the parties.”). That is,

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when the parties agree to a contract of indefinite duration,

courts assume that they intend for the contract to be termi‐

nable at will. Id. at 1017. This does not mean that Illinois law

forbids parties from making contracts of indefinite duration;

Illinois law merely disfavors them and assumes that most

contracting parties do too. Id.

This presumption in favor of indefinite contracts being

terminable at will can be overcome if the parties clearly

agree to place limits on when termination may take place.

The Illinois Supreme Court made this clear in Jespersen itself:

“An agreement without a fixed duration but which provides

that it is terminable only for cause or upon the occurrence of

a specific event is in one sense of indefinite duration, but is

nonetheless terminable only upon the occurrence of the

specified event and not at will.” 700 N.E.2d at 1016. We

acknowledged the same point in Baldwin Piano, Inc. v.

Deutsche Wurlitzer GmbH, 392 F.3d 881, 885 (7th Cir. 2004),

where we recognized the terminable‐at‐will presumption

but held that parties could avoid the presumption with a

clear agreement to the contrary, as they had in that case. We

described the presumption as “the business equivalent of no‐

fault divorce, with the possibility of covenant marriage if the

parties make the necessary declarations.” Id.

Consistent with these principles, courts facing contracts

of indefinite duration have been called upon to determine

whether the parties intended to circumscribe their default

rights to terminate at will. This question calls for close pars‐

ing of the contract language. Compare Donahue v. Rockford

Showcase & Fixture Co., 230 N.E.2d 278, 281 (Ill. App. 1967)

(contract not terminable at will when parties could terminate

only if specified sales goals were not met), with Jespersen, 700

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N.E.2d at 1016–17 (contract terminable at will when parties

could terminate for specified but non‐exclusive instances of

material breach), and A.T.N., 557 F.3d at 487 (contract termi‐

nable at will when either party could terminate by simply

stopping purchases or sales).

These principles guide our decision on whether this con‐

tract allowed APS to terminate it at will. The intentions of

the parties regarding APS’s termination rights are found in

the very last sentence of the agreement: “APS cannot termi‐

nate this agreement unless it is violated by Burford.” (Emphasis

added.) The plain reading of this statement, and the only one

that avoids rendering it meaningless, is that APS could ter‐

minate the agreement if—but only if—Burford had breached

it. This is the clear statement that Jespersen and Baldwin Piano

explained could keep a contract of indefinite duration from

being terminable at will. By allowing APS to terminate only

when Burford had breached, the contract made as clear as

could be that APS could not terminate the contract at will. By

way of comparison, the contract expressly provided that

Burford could terminate the contract at any time on thirty

days’ notice. The parties knew how to give a party the right

to terminate at will. They chose to give that right to Burford

but not to APS.

The district court found this language insufficient to

overcome the presumption expressed in Jespersen and other

cases that the parties intended to allow APS to terminate the

agreement at will. In its view, the provision merely stated

the obvious: APS could terminate the agreement if Burford

breached it. Such provisions do nothing to limit the right to

terminate at will because, unless the parties provide other‐

wise, “any contract is terminable upon the occurrence of a

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material breach.” Jespersen, 700 N.E.2d at 1016; see also Pro‐

file Products, LLC v. Soil Management Technologies, Inc., 155 F.

Supp. 2d 880, 883 (N.D. Ill. 2001). Repeating what would be

true even if unstated does nothing to alter the presumption

that agreements of indefinite duration are terminable at will.

The district court’s reasoning would be persuasive if the

contract had said “APS may terminate this agreement if it is

violated by Burford,” or if, as in Jespersen, it merely con‐

tained a “permissive and nonexclusive termination provi‐

sion” that specified instances of material breach. See 700

N.E.2d at 1016–17. But it did not. It said APS could terminate

the contract only if Burford violated it. There is a decisive

difference between saying that A may terminate if B breach‐

es and saying that A may terminate only if B breaches. Here,

the difference is between reading a sentence out of a contract

or not, see Baldwin Piano, 392 F.3d at 883 (cautioning against

interpreting contracts so that major clauses fall out), and be‐

tween the right to terminate at will or only for cause.

APS’s interpretation of this provision would threaten to

deprive Burford of the economic basis for the bargain he

struck. As we said in Baldwin Piano, “courts should not de‐

molish the economic basis of bargains that would be sound

if the contract were given a natural reading.” 392 F.3d at 883–

84. The type of relationship found here—where a sales rep‐

resentative builds a territory on the other party’s behalf—

poses significant risks to both sides if either party is free to

walk away at any time without consequence. The economic

incentives and risks associated with this sort of relationship

can be complex, especially over many years. See id. at 885.

And given this complexity, of course, parties may navigate

these risks in innumerable ways.

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In this case, the principal economic risks are evident. So

are the contractual provisions protecting each side from ex‐

ploitation by the other. If Burford could walk away at any

time, he could use his time at APS to build goodwill in his

territories, only to leave APS and capitalize on that goodwill

with another company or for himself. If APS could walk

away at any time, it could wait until Burford had built up

the territories, and then, without much loss to itself, reassign

the territory to someone it could pay less. At the same time,

APS also needed protection from the risk that its exclusive

representative in a territory might perform poorly.

The agreement anticipated these possibilities and re‐

duced the risk that they would come about in three principal

ways. First, it protected APS by subjecting Burford to a one‐

year non‐compete clause after termination. Second, it pro‐

tected Burford by providing that APS could not terminate

the contract so long as he did not violate the agreement.

Third, at the same time, it protected APS if Burford’s per‐

formance as an exclusive representative was not satisfactory

because poor sales performance constituted a good cause for

which APS could terminate Burford and replace him with

someone else. From APS’s perspective, it did not matter that

Burford could terminate at will because he was otherwise

prevented from capitalizing immediately on goodwill he

had built up while working for APS.

Based on the clear statement that APS could not termi‐

nate the agreement unless Burford violated it, we conclude

that the district court erred in granting summary judgment

for APS on Burford’s contract claim. Both the text of the

agreement and the context in which it was signed show that

APS could not terminate at will. In both the district court

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and on appeal, APS’s sole argument for summary judgment

was that the contract was terminable at will. Absent APS’s

ability to terminate the agreement at will, then, the contract

claim survives APS’s motion for summary judgment.1

II. Lanham Act Attorney Fees

Burford also argues that the district court abused its dis‐

cretion by failing to award him attorney fees under the Lan‐

ham Act after APS dismissed its claim with prejudice. Dis‐

trict courts may award attorney fees to those prevailing un‐

der the Act in “exceptional cases.” 15 U.S.C. § 1117(a)(3).

When the party bringing the claim—here APS—does not

prevail, it is an “exceptional case” within the meaning of the

Act if the decision to bring the claim can be called an abuse

of process. Nightingale Home Healthcare, Inc. v. Anodyne Thera‐

py, LLC, 626 F.3d 958, 963–64 (7th Cir. 2010) (explaining when

prevailing defendants and plaintiffs can obtain attorney fees

under the Act). It is enough for there to be an abuse of pro‐

cess when the claim was objectively unreasonable because it

is one “a rational litigant would pursue only because it

would impose disproportionate costs on his opponent.” Id.

at 965. It could also be enough to show an abuse of process if

there were direct evidence that APS sought to “bring a frivo‐

lous claim in order to obtain an advantage unrelated to ob‐

taining a favorable judgment,” though such evidence is not

required for a litigant to be entitled to fees. See id. at 965–66

                                                  1 This appeal has not required us to consider Burford’s attempt to

pierce APS’s corporate veil to hold Holmes liable for a breach. Nor have

we needed to determine whether the oral agreements are subject to the

same terms as the written agreement. Those may be questions for the

district court in due course.

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(finding that plaintiff had made Lanham Act claim solely to

coerce a price reduction out of defendant). Applying the

Nightingale standard here, the district court concluded that

APS’s decision to bring the claim did not amount to an abuse

of process. Burford failed to persuade the district court that

pursuit of the claim was objectively unreasonable or was in‐

tended to harass or to obtain an advantage unrelated to win‐

ning a favorable judgment.

The decision whether to award Lanham Act attorney fees

is left to the district court’s sound discretion. BASF Corp. v.

Old World Trading Co., 41 F.3d 1081, 1099 (7th Cir. 1994). Bur‐

ford argues that the district court abused its discretion be‐

cause APS’s Lanham Act claim was nothing more than an

attempt to impose costs on him solely to gain a competitive

advantage and to push him out of the market. See Nightin‐

gale, 626 F.3d at 962. In Burford’s view, APS’s actions were

objectively unreasonable because it chose to pursue the

claim for as long as it possibly could—so as to impose more

costs—before voluntarily dismissing, even though it knew it

had no evidence supporting its claim.

Two reasons, taken together, show that the district court

did not abuse its discretion by rejecting this argument. First,

APS’s voluntary dismissal of its claim right before trial says

nothing definitive about its view of the merits or about its

reasons for filing the counterclaim in the first place. APS

sought dismissal of its claim immediately after it won sum‐

mary judgment on Burford’s contract claim, so dismissal of

the counterclaim would allow APS simply to walk away

from the case without further expense or effort. Absent that

grant of summary judgment, though, APS told the district

court, it would have pursued its Lanham Act claim through

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trial if necessary. All the voluntary dismissal shows, then, is

that APS believed the economic benefits it might have ob‐

tained from bringing the Lanham Act claim—whether in the

form of damages or the monetary value of forcing Burford to

stop using “American Accounting Practice Sales” in the mar‐

ketplace—did not outweigh the costs of going to trial once

Burford’s contract claim was out of the suit.

It can be perfectly rational to pursue a counterclaim

when you already have to spend time and money defending

other claims in a case, yet to think the counterclaim is not

worth the effort after your opponent’s claims drop out. As

far as we can tell from this record, APS had little interest in

pursuing a stand‐alone Lanham Act claim, let alone for ex‐

tortionate reasons, even though it might reasonably have

thought the counterclaim worth pursuing if it had to be in

court anyway. If the motive behind APS’s suit had been only

to impose litigation costs on a new entrant in the market, it

certainly could have imposed more costs on Burford by forc‐

ing him to continue defending the Lanham Act claim until

the case reached its bitter end. It did not do so.

Second, Burford’s suggestion that APS has not supported

its claim with evidence—and thus must have pursued for

extortionate reasons a claim it knew it would lose—also is

not supported by the record. To have any chance of prevail‐

ing on its claim, APS would need to offer evidence that its

mark was protectable and that APS’s customers would likely

confuse Burford’s services with its own because of their simi‐

lar names. See Door Systems, Inc. v. Pro‐Line Door Sys., Inc., 83

F.3d 169, 173 (7th Cir. 1996). Burford points out that APS’s

initial Rule 26 disclosures contained no information about

APS’s counterclaim. That’s not surprising since APS pre‐

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pared those disclosures before it filed the counterclaim.

APS’s later interrogatory answers and its summary judg‐

ment filings show, however, that APS was prepared to offer

evidence in support of its trademark claim. Given APS’s

readiness to offer evidence on its claim, the district court did

not abuse its discretion in finding that APS’s claim was not

frivolous.

As to the first element—whether the mark was protecta‐

ble—APS offered evidence in the form of dictionary defini‐

tions and advertisements by others in the business of broker‐

ing accounting practices that “Accounting Practice Sales” is

descriptive rather than generic. See id. at 171–72 (explaining

that dictionaries and advertisements can be consulted to de‐

termine whether mark was generic). APS also suggests it

would have been able to establish that its mark had taken on

secondary meaning for customers as a result of its extensive

dealings in the accounting practice brokerage market. See

Packman v. Chicago Tribune Co., 267 F.3d 628, 641 (7th Cir.

2001); G. Heileman Brewing Co. v. Anheuser‐Busch, Inc., 873

F.2d 985, 998 n.12 (7th Cir. 1989). APS also would have ar‐

gued that Burford’s intentional copying of the phrase

showed that it had secondary meaning in the marketplace.

See Packman, 267 F.3d at 641.

We are skeptical about whether APS’s mark is protecta‐

ble. “Accounting Practice Sales, Inc.” seems closer to an un‐

protected description of the business than a designation of

origin based on secondary meaning that would prevent Bur‐

ford from using the name “American Accounting Practice

Sales.” (Consider the difference between “Widgets, Inc.” and

“American Widgets, Inc.”) And as Burford notes, APS did

not have the most helpful type of evidence of secondary

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meaning—market studies and consumer testimony—though

it is also true that such evidence is not strictly required to

establish secondary meaning. See Platinum Home Mortgage

Corp. v. Platinum Financial Group, 149 F.3d 722, 728 (7th Cir.

1998). Despite our skepticism, though, we do not believe the

district court abused its discretion by seeing at least a good‐

faith basis for APS’s argument that its mark was protected.

On the likelihood‐of‐confusion issue, the district court

could similarly find at least a good‐faith basis for APS to ar‐

gue that consumers would be confused. APS would have

provided evidence about how the two businesses’ markets

overlap, the similarity of the two names and business mod‐

els, and Burford’s attempts to pass off his services as those of

APS. See Forum Corp. of N.A. v. Forum, Ltd., 903 F.2d 434, 439

(7th Cir. 1990).

Without deciding the ultimate merits of APS’s Lanham

Act claim, we find no abuse of discretion by the district court

in finding that it was not objectively unreasonable for APS to

have brought the claim in the first place. That is, a rational

litigant might bring this claim at least in substantial part to

protect its trademark. Thus, we cannot presume that the on‐

ly reason APS pursued this claim was to impose costs on

Burford. Nor is there direct evidence that APS brought suit

solely to obtain an economic benefit for itself unrelated to

winning the suit. Cf. Nightingale, 626 F.3d at 965–66 (finding

that plaintiff had made Lanham Act claim solely to coerce a

price reduction out of defendant).

Accordingly, we REVERSE the grant of summary judg‐

ment to defendants on the contract claim and REMAND for

further proceedings consistent with this opinion. We

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AFFIRM the district court’s denial of Burford’s request for

attorney fees on the Lanham Act counterclaim.

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