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Strategic Digital Signage, LLC v. Ashley Home Stores, Ltd.

United States District Court, W.D. Wisconsin

September 13, 2019




         Plaintiff Strategic Digital Signage, LLC, (“SDS”) sued defendant Ashley Home Stores, Ltd. (“Ashley”) for breach of contract, alleging that Ashley breached the terms of their “In-Store Technology Authorization Agreement” (the “Authorization Agreement”) by failing to provide content in exchange for SDS's development of technology for Ashley retailers. Presently before the court are: (1) Ashley's motion for summary judgment (dkt. #33); (2) SDS's motion to dismiss Ashley's counterclaim (dkt. #57);[1] and (3) Ashley's motion to strike Paul Miller's declaration (dkt. #62). For the reasons that follow, the court will deny defendant's motion to strike, grant defendant's motion for summary judgment, and grant in part and deny in part plaintiff's motion for summary judgment.


         According to the Illinois Secretary of States, SDS was formed in 2014. On July 18, 2015, SDS and Ashley entered the Authorization Agreement. Kevin Hook, Ashley's executive vice president of brand development, eventually became the lead business negotiator for Ashley, while final approval of the Authorization Agreement remained with Ashley's CEO, Mark Dufresne. Ashley did not have a standard protocol for vetting potential vendors, and VP Hook did not inquire, nor was he aware of anyone else inquiring about, whether Miller had a criminal background. (See Hook Dep. (dkt. #56) 14:8-15:13, 17:21-24.) Hook was also unaware of anyone asking for financial information about either Miller or SDS, although he remembered being told about a conversation addressing finances. (Id. at 15:14-16:10, 17:5-20, 17:25-18:20.)

         Ashley created an XML data feed between September and December 2016, which was accessible through an application program interface (an “API”).[3] This “contain[ed] product information for all products sold on the website, which would cover all products sold by ‘brick and mortar' Ashley HomeStore branded retailers and about 85 percent of the products sold by non-HomeStore retailers.” (Daniels Decl. (dkt. #34) ¶ 2.) This data feed is the most complete data feed that Ashley provides to vendors and wholesale customers; it contains 80-100 data fields for each product SKU. Ashley gave SDS access to the XML data feed in December 2016.

         Before Ashley's creation of the XML data feed, wholesale customers and vendors such as SDS received product information through CSV data feeds, with or without updates from Ashley's electronic data interchange (an “EDI”).[4] In fact, Ashley still uses its CSV data feeds with vendors or wholesale customers who lack the capability to use the API.

         SDS contends that it entered the Authorization Agreement expecting to turn a profit based on the projection that 260 stores would sign up for at least three years. (See Outline of Agreement (dkt. #41-4) 10 (anticipating a rollout of 260 stores “based on Licensee buy in and interest in the program as well as success of the program within the original 25 locations, ” but adding that “Ashley cannot guarantee Licensee participation.”); SDS 30(b)(6) Dep. (dkt. #28) 169:4-12, 182:8-19 (Paul Miller testifying that he thought three years “was a fair number” and “everyone loved what we were doing. They loved what was in their stores. They liked what they saw.”).)

         Even so, SDS had never developed or sold a product like the In-Store Technology offered to the Licensees. Likewise, John Miller acknowledged that the service contemplated by the Agreement was fundamentally different from work SDS had previously performed. Before entering into the Authorization Agreement, the only sale SDS had made was to a café run by John Miller's friend, and that consisted of TV monitors that could display digital messages and ads.

         John Miller characterized Ashley as SDS's “$5 billion company as a partner, ” and he considered the arrangement to be “monumental” for SDS. (John Miller Dep. (dkt. #29) 57:3-7, 86:9-18.) SDS devoted its resources to Ashley, declining to offer its technology to Ashley's competitors. (Id. at 86:19-87:7.) Following execution of the Authorization Agreement, however, SDS did not have sufficient revenue to cover its overhead and costs, making it unable to pay its debts. SDS contends that its financial problems were caused by Ashley. (Pl.'s Add'l PFOF (dkt. #49) ¶ 14.)[5]


         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). For the party with the burden of proof in particular, “[s]ummary judgment is the ‘put up or shut up' moment in a lawsuit.” Sigel v. Shell Oil Co., 612 F.3d 932, 937 (7th Cir. 2010) (quoting Johnson v. Cambridge Indus., Inc., 325 F.3d 892, 901 (7th Cir. 2003)). Accordingly, it is not enough for the nonmoving party to “simply show that there is some metaphysical doubt as to the material facts, ” as a mere “scintilla of evidence in support of the nonmoving party's position will be insufficient to survive a summary judgment motion.” Id. (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). Instead, “there must be evidence on which the jury could reasonably find in favor of the nonmoving party.” Id. (citing Anderson, 477 U.S. at 252). Applying that standard here, defendant's motion for summary judgment and a substantial part of plaintiff's motion will be granted.

         I. Defendant's Motion for Summary Judgment (dkt. #33)

         In its motion for summary judgment, defendant raises a number of circuitous arguments that challenge plaintiff's ability to establish a breach of contract claim under Wisconsin law. Because the undisputed facts are such that a reasonable jury could not find for plaintiff on this claim, the court will grant summary judgment to defendant. As the court previously explained, a claim for breach of contract under Wisconsin law requires proof of three elements: (1) formation of a valid contract; (2) breach; and (3) damages caused by that breach. (MTD Op. & Order (dkt. #31) 3 (citing Matthews v. Wis. Energy Corp., 534 F.3d 547, 553 (7th Cir. 2008)).) While the Authorization Agreement certainly comprised of a valid contract between the parties, plaintiff cannot establish the other elements of its claim for the reasons addressed below.

         A. Breach

         To begin, contract construction aims “to ascertain the true intentions of the parties as expressed by the contractual language” with the purpose of “determin[ing] what the parties contracted to do as evidenced by the language they saw fit to use.” State ex rel. Journal/Sentinel, Inc. v. Pleva, 155 Wis.2d 704, 711, 456 N.W.2d 359, 362 (1990). “Stated another way, the best indication of the parties' intent is the language of the contract itself, for that is the language the parties ‘saw fit to use.'” Town Bank v. City Real Estate Develop., LLC, 2010 WI 134, ¶ 33, 330 Wis.2d 320, 793 N.W.2d 476 (internal citations omitted).

         The Authorization Agreement here opens with an explanation that “SDS has developed for Licensor an in-store technology system that manages the display of video content on Internet-connected in-store video monitors and that may, after continued development, also include additional functionality . . . such as a virtual catalog . . . .” (Authorization Agreement (dkt. #1-1) 1.) Plaintiff acknowledges that “a virtual catalog, a virtual room design tool, and shopping and ordering tools had not been developed” as of the Authorization Agreement's effective date. (SDS 30(b)(6) Dep. (dkt. #28) 278:9-13.)

         The Authorization Agreement also grants plaintiff permission to offer interested Licensees the “In-Store Technology, ” if the Licensees: “(i) enter[ed] into a separate written agreement in substantially the form attached . . . with SDS and (ii) enter[ed] into an agreement with [Ashley] pursuant to which the Licensee is granted a limited license to publish . . . content supplied by [Ashley].”[6] (Authorization Agreement (dkt. #1-1) 1.) The in-store technology system SDS wanted to sell to Ashley's Licensees included hardware, installation and content management. Even so, SDS could only provide In-Store Technology to Licensees who signed both an agreement with SDS and a Content License with Ashley. At the motion to dismiss stage, the court referred to plaintiff's allegation in its complaint that Licensees had “terminated their In-Store Technology Agreements.” (Compl. (dkt. #1) ¶ 11.) However, at summary judgment, SDS produced only two SDS Agreements with Ashley Licensees. (SDS Discovery Resp. (dkt. #41-1).) Moreover, SDS has produced no content licenses. SDS also failed to identify any other Licensees that may have executed a Content License or SDS Agreement. Finally, the terms of the two SDS Agreements actually signed were limited to the shorter of either 12 months following “the first live productive use of the In-Store Technology” or 13 months after the Effective Date. (SDS Agreements (dkt. #41-1) 13, 26.)

         There is no breach of contract here to the extent that plaintiff is alleging a breach based on its own unmet expectation that all 260 Licensees would pay a $6, 000 one-time development fee, and commit for at least three years to pay annual content and management fees of $4, 260 and purchase hardware for $3, 500. (Pl.'s Interrog. Resp. No. 17 (dkt. #41-2) 10-11; see also Outline of Agreement (dkt. #41-4) 4.) The Authorization Agreement does not guarantee a rollout of the In-Store Technology, much less that 260 retail stores will sign SDS Agreements or rely on SDS technology for at least three years. On the contrary, the Authorization Agreement limits use of the In-Store Technology to “interested Licensees” and the sample SDS Agreement contemplates a term of up to 13 months. (Authorization Agreement (dkt. #1-1) 1, 8.)

         The Authorization Agreement is also limited to its written terms, as it provides that it “constitutes the sole and entire agreement of the parties . . . with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written an oral, with respect to such subject matter.” (Id. at 4.) See Town Bank, 2010 WI 134, ¶ 37 (“A contract that represents the final and complete expression of the parties' agreement is considered fully ‘integrated.' If the contract is integrated, absent the evidence of fraud, duress, or mutual mistake, the court construing the contract may not consider evidence of any prior or contemporaneous oral or written agreement between the parties.”); id. ¶ 39 (“[A]n unambiguous merger or integration clause demonstrates that the parties intended the contract to be a final and complete expression of their agreement.”). Accordingly, the lack of signed-up Licensees cannot by itself be the basis for a breach of contract claim.

         Next, the Authorization Agreement required SDS to “perform additional development work with respect to the In-Store Technology and create additional content . . . in accordance with statements of work acceptable to [Ashley].” (Authorization Agreement (dkt. #1-1) 2.) In particular, Section 4 of the Authorization Agreement outlines future development, including the virtual catalog. (Id.; see also 30(b)(6) Dep. (dkt. #28) 278:9-13.) This provision of the Authorization Agreement required “Deliverables, ” which were to “conform to the specifications set forth in the Statement of Work, ” as well as “be subject to [Ashley's] review, testing and acceptance.” (Authorization ...

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