McDonald's Corp. v. American Motorists Insurance

748 N.E.2d 771, 321 Ill. App. 3d 972, 255 Ill. Dec. 67
CourtAppellate Court of Illinois
DecidedMay 2, 2001
Docket2-00-0566
StatusPublished
Cited by24 cases

This text of 748 N.E.2d 771 (McDonald's Corp. v. American Motorists Insurance) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McDonald's Corp. v. American Motorists Insurance, 748 N.E.2d 771, 321 Ill. App. 3d 972, 255 Ill. Dec. 67 (Ill. Ct. App. 2001).

Opinion

JUSTICE GEOMETER

delivered the opinion of the court:

This appeal involves an insurance coverage dispute. Plaintiff-insured, McDonald’s Corporation (McDonald’s), appeals from an order of the circuit court of Du Page County granting summary judgment in favor of defendants-insurers, American Motorists Insurance Company, Century Indemnity Company & Indemnity Insurance Company of North America, and St. Paul Surplus Lines Insurance Company (collectively, insurers). The trial court determined that the advertiser’s coverage part of the “Media Special Perils” policies issued to McDonald’s by insurers did not require insurers to indemnify McDonald’s in the settlement of an underlying federal lawsuit alleging, inter alla, violation of the Illinois Trade Secrets Act (765 ILCS 1065/1 et seq. (West 1994)). McDonald’s also appeals from a trial court order denying its motion to compel discovery, an issue we discuss in the nonpublished portion of this opinion. We affirm.

I. BACKGROUND

The parties are already familiar with the long and complex factual background of this case. Accordingly, we recite only those facts necessary for an understanding of the issues raised on appeal.

At the time of the events giving rise to the underlying federal litigation, McDonald’s was a named insured under the advertiser’s coverage part of a “Media Special Perils” (MSP) policy issued by First National Insurance Company of America (Safeco). To secure additional protection, McDonald’s also purchased excess insurance from insurers, with defendant-insurer American Motorists Insurance Company (AMICO) being the lead umbrella carrier. The purpose of the MSP policies was to insure McDonald’s against the cost of defending lawsuits arising out of its advertising, publicity, or promotional activities and to indemnify McDonald’s for the adverse judgments that may result from any such lawsuits. The AMICO policies contained “broad as primary” endorsements. The “broad as primary” endorsements provided that AMICO agreed to be bound by the terms of the underlying primary policy, notwithstanding any more restrictive terms in the excess policy. The AMICO policy listed Safeco as the primary carrier for the MSP policy. The remainder of the excess insurance policies indicated that they “follow form” to the AMICO policy. In other words, coverage under the excess carriers was also provided on the same terms as the Safeco policy and was to be implicated once the underlying layers of coverage were exhausted. The instant dispute concerns the excess insurance policies. Safeco is not a party to this appeal.

On February 7, 1997, McDonald’s filed a complaint against insurers in the circuit court of Du Page County. The second amended complaint consisted of six counts. Relevant here are those counts in which McDonald’s sought a declaration that insurers were required to indemnify it for the settlement of a complaint filed in federal court and captioned as Thermodyne Food Service Products, Inc. v. McDonald’s Corp., originally filed as No. 95 CV 0232 (D. Ind.), later transferred and redocketed as No. 95 C 6747 (N.D. Ill.) (Thermodyne litigation).

The Thermodyne litigation stemmed from the development of a product known as the “Thermodyne” oven. The appeal of this product to McDonald’s was its ability to heat frozen food to serving temperature and hold it for extended periods of time without affecting the quality or taste of the food. The technology used in the Thermodyne oven was developed principally by an engineer named Benno Liebermann. Liebermann developed this technology while he was the owner of a company called Advanced Food Technology, Inc. (AFTEC). Eventually, Vincent Tippman purchased a majority of the stock in AFTEC and formed Thermodyne Food Service Products, Inc. (Thermodyne). AFTEC researches and develops food service equipment, which Thermodyne then manufactures and markets. Liebermann refined the technology used in the Thermodyne oven while working for Tippman. As part of the purchase agreement for AFTEC, Liebermann executed a five-year employment contract with Tippman, which included a covenant not to compete. For a period of time, McDonald’s worked with Thermodyne and AFTEC in developing products for McDonald’s restaurants using the Thermodyne oven. McDonald’s eventually purchased a Thermodyne oven. Shortly after the purchase, a representative from McDonald’s told Tippman that McDonald’s was no longer interested in the Thermodyne oven.

Liebermann eventually became unhappy with his relationship with Tippman and resigned from Thermodyne. Liebermann began working for Beltec, a partnership between himself and OSI Industries, Inc. (OSI). OSI was a meat supplier for McDonald’s. Thereafter, Beltec developed a product known as the “Temperfect” oven. Beltec licensed the right to manufacture the Temperfect oven to Taylor Company (Taylor), a division of Specialty Equipment Companies, Inc. (Specialty Equipment). Specialty Equipment was one of McDonald’s equipment suppliers. Taylor began to manufacture the Temperfect oven for Me-Donald’s use. Soon thereafter, McDonald’s began developing products prepared using the Temperfect oven. Once the Temperfect oven was installed in a restaurant, representatives from other companies, including competitors of McDonald’s, visited the restaurant to observe the Temperfect oven in use. McDonald’s also showcased the Temperfect oven to owner-operators of its restaurants as well as various equipment and food suppliers. In addition, at McDonald’s request, Taylor developed for distribution a specification sheet and a brochure for the Temperfect oven. The specification sheet stated that “THE INFORMATION SHOWN ON THIS SPECIFICATION SHEET IS FOR THE EXCLUSIVE USE OF LICENSEES OF MCDONALD’S SYSTEMS, INC.”

Eventually, Thermodyne and AFTEC (collectively, the Thermodyne plaintiffs) became aware of the development of the Temperfect oven. On July 20, 1995, the Thermodyne plaintiffs initiated their lawsuit in federal district court. The Thermodyne plaintiffs claimed that McDonald’s and others misappropriated their trade secret to develop a competing product called the “Temperfect” oven. The Thermodyne plaintiffs alleged that McDonald’s and the other named defendants “engaged in a course of conduct designed to misappropriate [pjlaintiffs’ employees, technology, and trade secrets.” The complaint further alleged that “[djefendants’ promotion of the ‘Temperfect Oven’ exposed [pjlaintiffs’ trade secrets to the market place.”

The Thermodyne plaintiffs’ amended complaint consisted of eight counts, the following six of which were directed against McDonald’s. Count I alleged violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 1994)). Count II alleged a violation of the Illinois Trade Secrets Act. Count III alleged unfair competition. Count IV alleged breach of confidence. Count V alleged interference with contractual relations. Count VIII alleged conspiracy. On McDonald’s motion, the district court dismissed with prejudice counts I, III, and IV on the basis that they were preempted by the Illinois Trade Secrets Act. As the litigation progressed, the parties to the Thermodyne litigation prepared a “Final Pretrial Order” pursuant to Rule 16

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Bluebook (online)
748 N.E.2d 771, 321 Ill. App. 3d 972, 255 Ill. Dec. 67, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mcdonalds-corp-v-american-motorists-insurance-illappct-2001.