Date: 05-13-2015

Case Style: William J. Burford v. Accounting Practices Sales, Inc. and Garry Holmes

Case Number: 14-2692

Judge: Hamilton

Court: United States Court of Appeals for the Seventh Circuit on appeal from the Southern District of Illinois (Sangamon County)

Plaintiff's Attorney: David Hall

Defendant's Attorney: John Grady and Lauren Catlin

Description: Plaintiff William J. Burford
agreed to market and facilitate the purchase and sale of accounting
practices on behalf of defendant Accounting Practice
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 liable
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 conNo.
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 district
court denied this motion, reasoning that APS’s Lanham
Act claim could have been pursued by a rational party seeking
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 contract
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 request
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 Clay4
No. 14‐2692
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 influence”).
As an interpretive guide, we rely on background
principles of contract law to fill in the details when the parties
were silent. See, e.g., Jespersen, 700 N.E.2d at 1017 (relying
on default presumption that indefinite contracts are terminable
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 after
it went into effect, “it renews automatically on each anniversary
date of this agreement for another period of twelve
months.” The fact that the initial contract was for a twelvemonth
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 occurrence
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,
No. 14‐2692 5
when the parties agree to a contract of indefinite duration,
courts assume that they intend for the contract to be terminable
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 nofault
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 parsing
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
6 No. 14‐2692
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 terminable
at will when either party could terminate by simply
stopping purchases or sales).
These principles guide our decision on whether this contract
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 terminate
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 terminate
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 otherwise,
“any contract is terminable upon the occurrence of a
No. 14‐2692 7
material breach.” Jespersen, 700 N.E.2d at 1016; see also Profile
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 contained
a “permissive and nonexclusive termination provision”
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 breaches
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 between
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 demolish
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 representative
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.
8 No. 14‐2692
In this case, the principal economic risks are evident. So
are the contractual provisions protecting each side from exploitation
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 reduced
the risk that they would come about in three principal
ways. First, it protected APS by subjecting Burford to a oneyear
non‐compete clause after termination. Second, it protected
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 performance
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 terminate
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
No. 14‐2692 9
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 discretion
by failing to award him attorney fees under the Lanham
Act after APS dismissed its claim with prejudice. District
courts may award attorney fees to those prevailing under
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 Therapy,
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 process
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 frivolous
claim in order to obtain an advantage unrelated to obtaining
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.
10 No. 14‐2692
(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 intended
to harass or to obtain an advantage unrelated to winning
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). Burford
argues that the district court abused its discretion because
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 Nightingale,
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 summary
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
No. 14‐2692 11
trial if necessary. All the voluntary dismissal shows, then, is
that APS believed the economic benefits it might have obtained
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 marketplace—
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 extortionate
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 forcing
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 prevailing
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 similar
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 pre12
No. 14‐2692
pared those disclosures before it filed the counterclaim.
APS’s later interrogatory answers and its summary judgment
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 protectable—
APS offered evidence in the form of dictionary definitions
and advertisements by others in the business of brokering
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 determine
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 argued
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 protectable.
“Accounting Practice Sales, Inc.” seems closer to an unprotected
description of the business than a designation of
origin based on secondary meaning that would prevent Burford
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
No. 14‐2692 13
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 goodfaith
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 argue
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 models,
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 only
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).

Outcome: Accordingly, we REVERSE the grant of summary judgment
to defendants on the contract claim and REMAND for
further proceedings consistent with this opinion. We

AFFIRM the district court’s denial of Burford’s request for
attorney fees on the Lanham Act counterclaim.

Plaintiff's Experts:

Defendant's Experts:

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