Play Beverages v. Playboy — Trial Court Did Not Err in Admitting Evidence of Threats in Breach of License Agreement Trial — Chicago Breach of Contract and Dealer Termination Lawyers in DuPage County

Where a beverage distributor fell behind on license payments and failed to hit required annual sales targets, the trial court did not err at trial when it admitted evidence of threats made by a manager at beverage distributor and declined to interrupt jury deliberations.

Playboy Enterprises International, Inc. is a corporation with its principal place of business in California. Playboy derives substantial revenue from licensing its name and bunny-head logo to entities who sell products as varied as apparel, handbags, luggage, and fragrances. PlayBev is a limited liability company based in Utah, which was formed in 2006 for the purpose of creating and selling a non-alcoholic drink.

PlayBev and Playboy entered into an exclusive license agreement in December 2006. Playboy agreed to license the Playboy marks to PlayBev for use on the Playboy Energy Drink. The license agreement provided that PlayBev would pay Playboy minimum annual royalties, beginning at $1 million and later increasing to $2 million, for the use of the marks. The agreement also required PlayBev to achieve certain annual sales. The original principals of PlayBev did not have experience with beverage marketing or distribution. In 2007, the PlayBev principals sold their interest in PlayBev to Iehab Hawatmeh, the CEO of Cirtran Beverage Corporation. CTB had experience in marketing consumer products. PlayBev subsequently contracted with CTB to manufacture and distribute the Playboy Energy Drink.

PlayBev focused on distributing their drink in the on-premises market, which included sales at restaurants, bars, and nightclubs. PlayBev was unsuccessful, though, and it sustained severe operating losses for calendar years 2007 to 2012, ultimately resulting in the failure of the Playboy Energy Drink. Playboy sent PlayBev termination notices in May and June 2011. PlayBev responded by filing suit for breach of contract, breach of the implied covenant of good faith and fair dealing, tortious interference with contract, promissory estoppel, injunctive relief, and civil conspiracy. The jury found in favor of Playboy on each of plaintiffs’ claims and also returned a verdict in favor of Playboy on its counterclaims of breach of contract and trademark infringement, awarding Playboy $6.6 million in damages. Plaintiffs then appealed.

On appeal, PlayBev argued that the trial court erred in denying their request to interrupt the second day of jury deliberations and question three jurors regarding their statement to the court clerk the day before that they were “scared” of “the men in the gallery,” and that it erred in admitting the testimony of a witness regarding threatening comments made to her by a manager of PlayBev.

The appellate court began by noting that PlayBev fell behind in its payment of the royalty payments in April 2010, and that Playboy allowed PlayBev to pay installments rather than the lump $2 million that was owed. The panel stated that PlayBev stopped making any royalty payments in May 2011, with $1.6 million still owed to Playboy. The panel then found that the trial court did not err in declining to interrupt jury deliberations. The panel stated that the trial court had considered the absence of any allegation or evidence that any of the men in the gallery had contacted, spoken with, threatened, or even looked at the jurors. The panel stated that the court’s decision that the plaintiffs had failed to make any showing that the deliberations of the jurors were affected or influenced was therefore not error.

Finally, the panel found that the trial court did not err in admitting testimony regarding a possible threat made by a manager of PlayBev. Citing People v. Gambony, the panel stated that the Illinois Supreme Court had held that threats by a party to a suit are relevant and admissible as consciousness of guilt, and that, therefore, the court did not err in admitting the testimony. The panel, therefore, affirmed the decision of the trial court.

You can view the decision here.Super Lawyers named DuPage County breach of contract and dealer and franchise termination trial attorney Peter Lubin a Super Lawyer and Illinois breach of contract and employment termination attorney Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating franchise and dealer termination, breach of contract, complex class action, copyright, partnership, and shareholder oppression suits, noncompete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes.  Our Evanston  and Naperville franchise and dealer termination lawyers, civil litigation lawyers and copyright attorneys handle emergency business lawsuits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago, Schaumburg and Oak Brook area businesses and business owners who are victims of fraud. You can contact us by calling (630) 333-0333 or our toll-free number (833) 306-4933.  You can also contact us online here.