Court Opinion

ID: 2994394
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:14:26.423682+00
Date Added: 2024-06-11T15:03:13.404544
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 99-4080

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

4500 AUDEK MODEL NUMBER 5601
AM/FM CLOCK RADIOS,

Defendant,

and

ABBEY MANUFACTURING COMPANY,

Claimant-Appellant.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 C 8047--John F. Grady, Judge.

Argued May 11, 2000--Decided July 17, 2000

  Before COFFEY, EVANS and WILLIAMS, Circuit Judges.

  COFFEY, Circuit Judge. On February 28, 1998, the
United States Customs Service in Chicago,
Illinois, seized 4500 clock radios from Abbey
Manufacturing Company on the grounds that the
radios contained counterfeit Underwriters
Laboratories Certification Marks attached
thereto. See 19 U.S.C. sec.sec. 1526(e) &
1595a(c)(2)(C); 15 U.S.C. sec. 1127. This appeal
involves Abbey’s attempt to regain possession of
the 4500 clock radios. We affirm.

I.    BACKGROUND
A.    The Parties

  Abbey Manufacturing Company has been engaged in
the manufacture of OEM plastic injection molding
since 1989./1 In an effort to enter the
electronics market, Abbey created a wholly owned
subsidiary known as Audek Corporation in 1993 to
develop a domestic clock radio manufacturing
operation.
  Underwriters Laboratories (UL), in Northbrook,
Illinois, is a not-for-profit testing laboratory
that examines and tests numerous products,
including clock radios. Manufacturers submit
samples of their products to UL for examination
and testing so that UL may independently
determine if the products meet specific standards
and requirements for fire, electrical, and
casualty hazards. If the product meets UL’s
standards, the manufacturer and UL enter into a
"follow-up services agreement,"/2 and, at this
point, manufacturers may attach UL’s
certification mark to their product. The
agreement provides that UL’s mark may only be
used: 1) in connection with the covered product;
2) by the manufacturer named in the Procedure;
and 3) at the location of the manufacture or
assembly specified in the Procedure.

  UL then prepares a document called a
"Procedure." The Procedure identifies and
describes which products meet UL’s safety
standards and may therefore use the UL
certification mark; specifies the type of mark to
be used; denotes the manufacturer who may use
UL’s mark; and delineates the factory location at
which covered products bearing UL’s mark may be
manufactured./3

B.   The Agreement

  On July 25, 1994, Audek and UL entered into a
follow-up services agreement in which Audek
sought approval to affix UL’s mark on its clock
radios. After UL tested samples of the clock
radios, it agreed to approve Audek’s request, and
Audek commenced manufacturing radios with UL’s
mark./4

  Pursuant to the agreement between Audek and UL,
a Procedure was agreed upon and approved whereby
Audek was allowed to affix UL’s mark to radios
manufactured in China. However, Audek arranged
and paid for UL inspections of the clock radios
manufactured in the plant in China. Furthermore,
Audek also paid UL to list the factory in China
in the Procedure as an authorized manufacturing
location.
  In November 1996, Audek notified UL that it
would no longer be manufacturing radios in China
and that "all future production" would be
completed "at 2140 West Fulton Street, Chicago."
The notice also advised UL that "[a]ny future
inspections need to be conducted at [the Fulton
Street] location." Based on Audek’s
representation, the Procedure was modified to
eliminate references to the manufacturing
facility in China, and UL ceased their periodic
inspections of clock radios manufactured at the
Chinese factory by the end of 1996. Since that
time, neither Audek nor Abbey has paid UL for the
testing, listing, or inspection of any clock
radios manufactured in China.

  In December 1996, Abbey notified UL that, as of
January 1, 1997, Audek was being eliminated as a
corporate entity and all future business would be
done by Abbey. Accordingly, Abbey and UL entered
into a follow-up services agreement dealing with
Abbey’s rights to affix UL’s mark on its clock
radios. The agreement stated that, "[e]xcept
where otherwise specifically authorized, the [UL]
mark shall be applied to or used in connection
with the covered product only by the Manufacturer
named in the Procedure and only at the location
of manufacture or assembly specified in the
Procedure."

  The only manufacturing location listed on the
January 15, 1997 Procedure (between Abbey and UL)
was 2140 West Fulton Street, Chicago, Illinois.
Furthermore, the Procedure authorized the use of
UL’s mark "only at the above manufacturing
location on such products which comply with this
Procedure and any other applicable requirements."

C.   The Radios from China

  In February 1998, Abbey attempted to import
4500 clock radios into the United States, bearing
UL’s mark, which it had assembled in China.
However, the United States Customs Service in
Chicago, Illinois, seized the clock radios and
contacted UL to determine if the UL certification
mark displayed on the clock radios was
authorized.

  After Customs notified UL that the radios had
been seized, UL wrote to Abbey and requested an
explanation as to why it was still importing
radios manufactured in China with UL’s mark
despite the fact that Abbey was now only
authorized to manufacture radios bearing the UL
mark in Chicago, Illinois. Abbey responded by
claiming that in October of 1996, Mark Harkowski,
an associate project engineer with UL, advised
Audek that "in order to move the inspection
location" for the clock radios to Chicago, "it
would be necessary to provide the UL inspector
with copies of invoices showing that UL approved
parts were purchased for these radios by the
manufacturer."/5 Because, under the terms of the
January 15, 1997 agreement with UL, Abbey was no
longer authorized to manufacture clock radios in
China for importation into the United States, UL
informed Customs that Abbey’s attempt to import
the 4500 radios was unauthorized. After receiving
this information, the government commenced
forfeiture proceedings on the 4500 clock radios
in their possession.
D.    The District Court

  Upon completion of discovery, the government
moved for summary judgment, arguing that the
undisputed facts demonstrated that UL had not
authorized the use of its mark on the seized
radios. According to the district judge,

[i]t is undisputed that the Procedure issued to
Audek did not allow Audek (or Abbey) to use the
UL mark in conjunction with any products
manufactured outside of the United States. This
exclusion comports with the agreement’s stated
rationale that UL would only authorize its mark
to be used on goods manufactured at factories
subject to its inspection. Because Abbey (and
previously, Audek) did not pay UL for inspections
of its factories in China during the time
defendant radios were manufactured, UL did not
inspect the factories, or the products
manufactured there. Accordingly, by the terms of
the agreement, any radios manufactured in China
after the Procedure was issued should not have
borne the UL mark.

The court also rejected, under the parol evidence
rule, Abbey’s argument that it had authorization
from UL to manufacture the radios in China via
Harkowski’s alleged statement in 1996. The judge
granted the government’s motion for summary
judgment, and ordered the forfeiture of the 4500
clock radios. Abbey appeals.

II.    ISSUES

  On appeal, Abbey argues that the trial judge
erroneously granted summary judgment because the
agreement between it and UL was ambiguous under
Illinois law and therefore the judge should have
permitted the introduction of extrinsic evidence,
namely Harkowski’s alleged, oral 1996
authorization to import clock radios from China
bearing UL’s mark in 1998.

III.    ANALYSIS

  As this case is governed by Illinois law, we
initially determine whether the contract is
ambiguous. See Echo, Inc. v. Whitson Co., Inc.,
52 F.3d 702, 705 (7th Cir. 1995) (citing Metalex
Corp. v. Uniden Corp. of America, 863 F.2d 1331,
1333 (7th Cir. 1988)). If the court determines
that the contract is unambiguous, there is no
issue of material fact and the court must decide
the contract’s meaning as a matter of law. See
id. And, as we have repeatedly stated, contract
interpretation is particularly suited to
disposition by summary judgment, a decision we
review de novo. See Echo, Inc. v. Whitson Co.,
Inc., 121 F.3d 1099, 1102 (7th Cir. 1997) (citing
Malcak v. Weschester Park Dist., 754 F.2d 239,
243 (7th Cir. 1985))./6

  In this case, the agreement   reached between
Abbey and UL authorized Abbey   to use UL’s mark
under only two circumstances:   1) according to the
specifications of a Procedure   issued by UL; or 2)
where "otherwise specifically   authorized."

  It is undisputed that after Audek informed UL
that it would no longer be producing radios in
China, the amended Procedure eliminated China as
an authorized location for radio production./7
It is, therefore, also undisputed that the
amended Procedure issued to Audek did not allow
either Audek or Abbey to use UL’s mark in
conjunction with any products manufactured
outside of Chicago, Illinois./8 Accordingly, the
follow-up services agreement between Abbey and
UL, in terms of expressly authorizing the
production of clock radios in China, is clear and
unambiguous, and any radios assembled in China
after the revised Procedure between Audek and UL
was issued in 1996 should not have contained the
UL mark.

  However, Abbey contends that it was "otherwise
specifically authorized" to use the UL mark on
the radios./9 Abbey argues that its conversation
with Harkowski constitutes such authorization.
Even if we were to accept Abbey’s account of the
conversation as accurate, Harkowski’s statement
cannot be construed as specific authorization for
Abbey to produce clock radios in China bearing
the UL mark. Rather, Harkowski merely stated that
"in order to move the inspection site for these
radios to Abbey Manufacturing Company’s Fulton
Street facility, it would be necessary to provide
the Underwriters Laboratories inspector with
copies of invoices showing that Underwriters
Laboratories approved parts had been purchased
for and used in the radios by the manufacturer."
This alleged statement merely concerned part of
the necessary process for moving the
manufacturing location from China to Chicago,
Illinois, and cannot be considered any form of
specific authorization to import clock radios
from China into the United States with the UL
mark attached. Rather, it was an oral statement
made by an associate project engineer, sixteen
months before the attempted importation of the
radios, and at a time when Audek was still paying
UL for inspection of clock radios manufactured at
the China facility.

  The decision of the district court is

AFFIRMED.
/1 A plastic injection molding machine makes parts,
and when they come out, assembly workers trim
away the extra plastic and join the pieces or
parts into one unit.

/2 A follow-up services agreement is merely a
contract between UL and a manufacturer which
permits the manufacturer to affix UL’s
certification mark on approved products.

/3 The follow-up services agreement and the
subsequent Procedure form the contract between UL
and the manufacturer.

/4 Because the terms are used interchangeably, it is
unclear from the record whether Abbey/Audek
actually manufactured or merely assembled the
clock radios in China. Consequently, the opinion
refers to both the assembling and manufacturing
of clock radios without any intent to infer
different actions on the part of Abbey/ Audek or
UL.

/5 According to Harkowski’s affidavit, however, he
has "never informed anyone that the UL Mark could
be used on a product except as specified in the
Procedure covering such product, nor would [he]
have the authority to make such a representation
on UL’s behalf."

/6 According to National Diamond Syndicates, Inc. v.
United Parcel Serv., Inc., 897 F.2d 253, 256 (7th
Cir. 1990) (footnote omitted):

Under Illinois law, if a contract is "in writing,
is unambiguous and contains no uncertain terms,
interpretation of the contract is a question of
law for the court," Nerone v. Boehler, 34 Ill.
App.3d 888, 890-91, 340 N.E.2d 534, 536 (5th Dist.
1976), and no evidence outside the four corners
of the contract may be employed to construe its
terms. A.A. Conte, Inc. v.
Campbell-Lowrie-Lautermilch Corp., 132 Ill.
App.3d 325, 329, 87 Ill. Dec. 429, 432, 477
N.E.2d 30, 33 (1st Dist. 1985). Whether a contract
is ambiguous is a question of law, and "ambiguity
can be found only if the language [of the
contract] is reasonably or fairly susceptible of
more than one construction." Id., 132 Ill. App.3d
at 328, 87 Ill. Dec. at 432, 477 N.E.2d at 33;
accord W.H. Lyman Constr. Co. v. Village of
Gurnee, 131 Ill. App. 3d 87, 96, 86 Ill. Dec. 276,
283, 475 N.E.2d 273, 280 (2d Dist. 1985); see
also Fields v. Franklin Life Ins. Co., 115 Ill.
App.3d 954, 958, 71 Ill. Dec. 776, 778, 451
N.E.2d 930, 932 (5th Dist. 1983) (ambiguity in
meaning of contract may be created by language
used, or by some disputed extrinsic facts, such
as peculiar meaning attached to words by
parties).
But see Home Ins. Co. v. Chicago and Northwestern
Transp. Co., 56 F.3d 763, 767-68 (7th Cir. 1995).

/7 Although Abbey claims to not have received the
Procedure UL produced after UL was informed that
Abbey would be taking over operations for Audek
(the government did produce the Procedure), it is
of no consequence because it is undisputed that
Audek received the amended Procedure after it
informed UL that it would not be manufacturing
radios in China. Furthermore, Abbey does not
claim that the Procedure did list or should have
listed China as an authorized manufacturing site.

/8 We agree with the district judge’s statement
that:

This exclusion comports with the agreement’s
stated rationale that UL would only authorize its
mark to be used on goods manufactured at
factories subject to its inspection. Because
Abbey (and previously, Audek) did not pay UL for
inspections of its factories in China during the
time defendant radios were manufactured, UL did
not inspect the factories, or the products
manufactured there.

/9 Although we are of the opinion that the district
judge correctly determined that the contract was
unambiguous, we add the following to demonstrate
that even if the parol evidence rule was
inapplicable, the district court’s decision was
still correct.