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Case 4:21-cv-00091-JMS-DML Document 1 Filed 06/04/21 Page 1 of 15 PageID #: 1

IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF INDIANA
NEW ALBANY DIVISION

SEARS AUTHORIZED HOMETOWN


STORES, LLC,

Plaintiff,

v. Case No. 4:21-cv-91

LYNN RETAIL, INC., JERRY


SCHNEIDER, and LAURA SCHNEIDER,

Defendants.

COMPLAINT

Plaintiff Sears Authorized Hometown Stores, LLC (“SAHS”), by its attorneys, and for its

complaint against defendants Lynn Retail, Inc., Jerry Schneider, and Laura Schneider, alleges and

states as follows:

NATURE OF THE ACTION

1. Plaintiff SAHS is the licensor of Sears Hometown stores, which offer SAHS’s

merchandise, such as major home appliances, for sale to the public on consignment from SAHS.

2. For over 25 years, SAHS licensed a Sears Hometown store in Corydon, Indiana

through dealership agreements with a series of independent dealers.

3. Defendants interfered with SAHS’s contractual rights under its most recent

dealership agreement for the Sears Hometown store in Corydon, Indiana, including its rights to

take over and operate the store.

4. Defendants used their personal relationships with SAHS’s former dealer to block

SAHS’s access to the market and open their own store, “Schneider’s Hometown,” at the same

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location as the former Sears Hometown store. Defendants are now unfairly trading off SAHS’s

name and goodwill in the Corydon market.

5. By this action, SAHS seeks injunctive relief prohibiting defendants from

continuing to unfairly compete with SAHS, as well as a judgment in its favor and against

defendants, jointly and severally, for the substantial damages SAHS has suffered on account of

defendants’ misconduct.

PARTIES

6. SAHS is a Delaware limited liability company with its principal place of business

in Hoffman Estates, Illinois. SAHS’s sole member is Sears Hometown Stores, Inc., a Delaware

corporation with its principal place of business in Hoffman Estates, Illinois.

7. Defendant Lynn Retail, Inc. (“LRI”) is an Indiana corporation with its principal

place of business in Corydon, Indiana.

8. Defendant Jerry Schneider is a citizen and resident of Indiana.

9. Defendant Laura Schneider is a citizen and resident of Indiana.

JURISDICTION AND VENUE

10. The Court has original subject matter jurisdiction of this action under 28 U.S.C. §

1331 in that this is a civil action arising under the Constitution, laws, or treaties of the United

States, and under 28 U.S.C. § 1332 in that this is a civil action where the amount in controversy

exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of

different States. The Court also has supplemental jurisdiction of the state law claims asserted under

28 U.S.C. § 1367(a) because those claims are so related to the claims of which the Court has federal

question jurisdiction that they form part of the same case or controversy.

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11. The Court has personal jurisdiction over defendants because they are Indiana

citizens residing within this judicial district, and venue is proper in this judicial district under 28

U.S.C. § 1391 because a substantial part of the events giving rise to the claims asserted occurred

in this judicial district.

BACKGROUND FACTS

The SAHS Dealership System

12. SAHS is a national retailer of home appliances and the licensor of Sears Hometown

stores.

13. Sears Hometown stores are typically found in smaller communities located across

the country.

14. SAHS invests considerably in these communities through marketing and

advertising, and its business model is based on the long-term presence of the Sears Hometown

brand in these markets.

15. SAHS dealers operate under a written contract with SAHS and offer SAHS’s

merchandise for sale to the public on consignment from SAHS using SAHS’s branding and system,

which includes, among other things, its operations manual, confidential information, vendor

information, and marketing materials.

16. SAHS also owns the goodwill and customer relationships associated with the

dealerships.

17. SAHS has a license to use and sub-license to its dealers two federally-registered

trademarks in connection with their operation of Sears Hometown stores relevant to this matter:

(i) Sears Hometown Store®, registered since September 21, 2010 at registration number 3850796,

for use in connection with “retail store services and dealerships featuring appliances, electronics,

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hardware, tools, and lawn and garden equipment”; and (ii) Sears Authorized Hometown Stores®,

registered since November 15, 2011 at registration number 4056660, for use in connection with

“retail store services and dealerships featuring appliances, electronics, hardware, tools, and lawn

and garden equipment.”

18. SAHS dealers then operate under the name “Sears Hometown,” and in conformity

with the trade dress of all Sears Hometown stores, use signage containing SAHS’s blue, red, and

white color scheme and font.

19. SAHS and its authorized dealers have continuously used these marks and trade

dress to identify the source, origin, and sponsorship of SAHS products and services, and to

distinguish those from products and services offered by others.

20. SAHS has extensively advertised in connection with its products and services

throughout the United States, including Southern Indiana, through various media.

Sears Hometown Store in Corydon, Indiana

21. Sears Hometown stores operated at 1480 Old Highway 135 NE, Corydon, Indiana

(“Corydon Location”) under the Sears Hometown name and marks for 25 years leading up to

January 2020.

22. The most recent SAHS dealer at the Corydon Location was SJS Retail, Inc. (“SJS”),

which took over as licensee of the Sears Hometown store at the Corydon Location in or around

2005.

23. On June 29, 2016, SJS and SAHS renewed their written dealer agreement, whereby

SAHS granted SJS a limited license to operate a Sears Hometown store at the Corydon Location

and SJS agreed to do so according to the terms of the contract for an additional five-year term.

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24. Scott Schneider personally guaranteed in writing SJS’s payment and performance

obligations under the dealer agreement and agreed to be personally bound by, and personally liable

for the breach of, each and every provision in the dealer agreement.

25. As a SAHS dealer, Scott Schneider and SJS had access to SAHS’s system, which

included its operations manual, confidential information, vendor information, and marketing

materials. And certain of SJS’s employees, including Laura Schneider, had access to all or portions

of this proprietary and confidential information.

26. SAHS also provided Scott Schneider, SJS, and SJS’s employees with ongoing

training, including training modules and seminars, which covered, among other things, sales

techniques, operational processes, and product information.

27. The Corydon Location also participated in SAHS’s America’s Appliance Experts®

(“AAE”) and Store-of-the-Future branding programs. These initiatives cost SAHS between $8 and

$10 million and were designed solely for use in authorized Sears Hometown stores.

28. The AAE and Store-of-the-Future branding programs consisted of, among other

things, specifically designated paint colors (including red and yellow wall colors with white trim),

exterior signage, specially designed vignettes (including for LG kitchen appliances), vinyl plank

wood flooring, sign holders, merchandise assortment, and certain fixtures, including micro-range

fixtures, double-stacked dishwasher fixtures, and custom Lozier peg boards selected by SAHS and

painted to its specifications, all of which are used in every Sears Hometown participating in the

programs across the country to identify those businesses as being Sears Hometown stores.

29. Defendant Jerry Schneider is Scott Schneider’s father, and he worked part time at

a prior Sears Hometown store at the Corydon Location and was frequently in the store during the

term of SJS’s dealer agreement.

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30. Defendant Laura Schneider is Scott Schneider’s wife, and she was a key employee

of SJS who had access to SAHS’s training, operations manual, customer information, inventory,

and sales records.

31. In December 2019, SAHS learned that Scott Schneider and SJS intended to

abandon their dealership in violation of the dealer agreement.

32. On both December 30, 2019 and January 18, 2020, SAHS sent SJS and Scott

Schneider a “do not abandon” letter in response to their threats to abandon their store, in which

SAHS requested re-affirmation of their intent to comply with the dealer agreement.

33. On January 6, 2020, Scott Schneider emailed his district sales manager from Laura

Schneider’s email account indicating that his Sears Hometown store would close as of January 31,

2020.

34. By January 20, 2020, SJS and Scott Schneider removed SAHS signage from the

store, displayed a “Sears Closed” sign, and told customers that they were no longer open for

business.

35. On January 21, 2020, SAHS sent a notice to SJS and Scott Schneider informing

them that their abandonment of their Sears Hometown store constituted a unilateral and wrongful

termination of the dealer agreement.

36. The notice provided that SAHS expected SJS and Scott Schneider’s “full

cooperation in transferring to SAHS any and all access, permissions, and information” in allowing

SAHS to access the store and “maintain the flow of Store operations” in accordance with the dealer

agreement, which specifically provided that upon its termination, SAHS would have the right to

“protect, secure, maintain, and preserve the Store” and operate the Sears Hometown store for its

own account, among other things.

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Defendants’ Misconduct and Unfair Competition

37. Once it was clear that SJS and Scott Schneider were abandoning their Sears

Hometown store at the Corydon Location, SAHS contacted Alden Shipley (“Shipley”), the store’s

landlord, in order to take possession of the store.

38. SAHS intended to take possession of and operate the Sears Hometown store at the

Corydon Location while transitioning it to a new dealer pursuant to the terms of the dealer

agreement.

39. SAHS informed Shipley of the termination and requested access to the store to

secure its merchandise, and an occupancy agreement for SAHS while it transitioned the Sears

Hometown store to a new dealer.

40. Initially, Shipley stated that he would negotiate a lease with SAHS for the Corydon

Location.

41. But only days later, he abruptly told SAHS that he had a “new tenant” lined up to

take over the store.

42. SAHS was unable to operate a transition store as contemplated by the dealer

agreement because of this “new tenant,” and instead was forced to have its merchandise removed

from the store.

43. The new tenant under the lease that prevented SAHS from taking the store was LRI,

an entity owned and formed by Jerry Schneider on January 16, 2020.

44. By December 2019, Jerry Schneider knew his son Scott Schneider intended to

abandon the Sears Hometown store at the Corydon Location.

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45. Weeks before SJS and Scott Schneider’s dealer agreement was terminated on

January 21, 2020, Jerry Schneider had already begun making arrangements to prevent SAHS from

taking over the store. These actions included, but were not limited to:

a. Filing articles of incorporation for LRI on January 16, 2020, using Scott

Schneider’s email address;

b. Through LRI, acquiring the fixtures used by SJS and Scott Schneider in the

operation of the Sears Hometown store at the Corydon Location;

c. Through LRI, entering into a lease for the Corydon Location with Shipley prior to

Scott Schneider’s termination of his dealer agreement with SAHS;

d. Coordinating with Laura Schneider daily regarding the opening and operation of a

competing business at the Corydon Location; and

e. Contacting Nationwide Marketing Group, LLC (“Nationwide”), one of SAHS’s

biggest competitors, to assist in opening a competing business.

46. Laura Schneider played an integral role in SJS’s abandonment and termination of

its dealer agreement and working with Jerry Schneider to prevent SAHS from taking over the Sears

Hometown store. These actions included, but were not limited to:

a. Operating as the primary SJS representative during December 2019 and January

2020;

b. Sending emails from her account to SAHS that SJS was requesting a mutual

termination agreement, that SJS would be closing on January 31, 2020, and that

SJS would not remain open prior to closing;

c. Transferring the fixtures used by SJS and Scott Schneider in the operation of the

Sears Hometown store at the Corydon Location to LRI;

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d. Coordinating with Jerry Schneider daily regarding the opening and operation of a

competing business at the Corydon Location; and

e. Contacting Nationwide to assist in opening a competing business.

Defendants Opened Schneider’s Hometown

47. Jerry Schneider and Laura Schneider were in the Corydon Location in the first week

of February, just days after SAHS had retrieved its merchandise on February 1, 2020, to open and

operate a new, competing appliance store.

48. In February 2020, Laura Schneider and the personal guarantor of SAHS’s former

dealer, Scott Schneider, attended a Nationwide trade show in Texas on behalf of LRI. By this time,

Jerry Schneider, Laura Schneider, and LRI had applied for membership in the Nationwide

network, which membership application was approved shortly after the trade show.

49. In March 2020, defendants opened an appliance store called Schneider’s

Hometown in the Corydon Location.

50. Schneider’s Hometown uses a sign designed to be confusingly similar to the sign

used to designate a Sears Hometown store, including using the same font and color scheme:

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51. The website for Schneider’s Hometown was approved by Laura Schneider and

reflects this same branding and describes defendants as “experts” in the appliance business who

“have been in the Appliances, Furniture, and Mattresses business for years.”

52. The interior of the Schneider’s Hometown store uses the same trade dress and

fixtures used in SAHS’s AAE and Store-of-the-Future branding programs, including, but not

limited to, the paint colors and trim and vinyl plank wood flooring.

53. Defendants are selling the same types of products and many of the same brands that

were sold by SJS and Scott Schneider in their operation of the Sears Hometown store at the

Corydon Location.

54. Defendants are using the same phone number for Schneider’s Hometown as Scott

Schneider and SJS used in their operation of the Sears Hometown store at the Corydon Location,

which is advertised on their Facebook page, website, and exterior signage.

COUNT ONE – UNFAIR COMPETITION

55. SAHS repeats and realleges the allegations of ¶¶ 1 through 54 of its complaint as

and for this ¶ 55 as is fully set forth herein.

56. Defendants’ acts, practices, and conduct constitute unfair competition and false or

misleading descriptions or representations of fact, in that they are likely to cause confusion or

mistake, to deceive others as to the affiliation, connection, or association of the parties, and/or to

misrepresent the nature, characteristic, qualities, or geographic origin of the products and services

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being offered and sold by defendants, all in violation of section 43(a) of the Lanham Act, 15 U.S.C.

§ 1125(a).

57. Defendants’ misconduct has been, and continues to be, knowing and willful.

58. As a direct and proximate result of defendants’ unfair competition, SAHS has

suffered, and unless defendants’ unfair competition is enjoined, will continue to suffer actual,

substantial, and irreparable harm, including, without limitation, diminution in the value of and

damage to SAHS’s goodwill and reputation, and incalculable lost revenues and profits.

59. SAHS has no adequate remedy at law to account for the damage to SAHS’s identity,

reputation, and goodwill, such that monetary damages alone cannot fully compensate SAHS for

the defendants’ misconduct.

60. Unless enjoined by the Court, defendants will continue to compete unfairly with

SAHS to its irreparable injury. The threat of future injury to SAHS’s business, identity, goodwill,

and reputation requires injunctive relief to prevent defendants’ continued unfair competition and

to ameliorate and mitigate SAHS’s injuries.

61. Because defendants’ actions have been committed willfully and with the intent to

profit from SAHS’s goodwill, this is an exceptional case, and SAHS is entitled to recover all gains,

profits, and advantages derived by defendants as a result of their unfair competition, to the full

extent provided for by Section 35 of the Lanham Act, 15 U.S.C. § 1117, including treble damages,

attorneys’ fees, and costs.

COUNT TWO – TORTIOUS INTERFERENCE WITH CONTRACT

62. SAHS repeats and realleges the allegations of ¶¶ 1 through 54 of its complaint as

and for this ¶ 62 as is fully set forth herein.

63. The dealer agreement between SAHS and SJS was a valid and enforceable contract.

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64. Defendants had actual knowledge of the existence of the dealer agreement and its

terms, including, but not limited to, SAHS’s rights under the dealer agreement to enter the Corydon

Location and operate it as a transition store upon SJS’s termination.

65. Despite their knowledge of the dealer agreement, defendants intentionally

interfered with SAHS’s contractual rights by inducing SJS and Scott Schneider to abandon their

Sears Hometown store in breach of their dealer agreement with SAHS and preventing SAHS from

operating the Sears Hometown store at the Corydon Location.

66. There is no justification for defendants’ knowing and intentional interference.

67. As a direct and proximate result of defendants’ tortious interference with the dealer

agreement, SAHS has been and continues to be harmed in its business and has sustained, and will

continue to sustain, damages.

COUNT THREE – TORTIOUS INTERFERENCE


WITH PROSPECTIVE ECONOMIC ADVANTAGE

68. SAHS repeats and realleges the allegations of ¶¶ 1 through 54 of its complaint as

and for this ¶ 68 as is fully set forth herein.

69. The dealer agreement between SAHS and SJS was a valid and enforceable contract.

70. Defendants had actual knowledge of the existence of the dealer agreement and its

terms, including, but not limited to, SAHS’s rights under the dealer agreement to enter the Corydon

Location and operate it as a transition store upon SJS’s termination.

71. Despite their knowledge of the dealer agreement and SAHS’s reasonable

expectation of continued relationships with dealers in the Corydon Location, defendants

intentionally interfered with SAHS’s contractual rights by preventing SAHS from entering into a

lease and continuing at Corydon Location.

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72. There is no justification for defendants’ knowing, intentional, and unlawful

interference.

73. As a direct and proximate result of defendants’ tortious interference with the dealer

agreement, SAHS has been and continues to be harmed in its business and has sustained, and will

continue to sustain, damages.

PRAYER FOR RELIEF

WHEREFORE, SAHS demands judgment in its favor and against defendants, jointly and

severally, as follows:

A. A permanent injunction enjoining defendants, and each of them and their respective

agents, servants, employees, and all persons in active convert or participation with

them, from:

1. Unfairly competing with SAHS or its licensed dealers in any manner;

2. Causing a likelihood of confusion or misunderstanding as to the source or

sponsorship of their business, products, or services with SAHS;

3. Causing a likelihood of confusion or misunderstanding as to their

affiliation, connection, or association with SAHS, or with any of its

products or services;

4. Passing off any products or services as those of SAHS or its licensed

dealers; and

5. Using the same phone number for Schneider’s Hometown as Scott

Schneider and SJS used in their operation of the Sears Hometown store at

the Corydon Location.

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B. An order that defendants file with the Court and serve upon SAHS’s counsel within

ten days after entry of any injunction issued herein, a sworn written report setting

forth in detail the manner in which they have complied with such injunction;

C. An order that defendants, and each of them, account and pay to SAHS all gains,

profits, and advantages derived by them as a result of their unfair competition, to

the full extent provided for by Section 35 of the Lanham Act, 15 U.S.C. § 1117;

D. An order that defendants, and each of them, pay to SAHS such damages as it has

sustained by reason of defendants’ unfair competition, and that, because of the

willful nature of such unfair competition, judgment in SAHS’s favor in an amount

equal to three times the amount of such damages, pursuant to Section 35 of the

Lanham Act, 15 U.S.C. § 1117;

E. An order that defendants, and each of them, pay to SAHS such damages as it has

sustained by reason of defendants’ unfair competition, and that, because of the

willful nature of such unfair competition, SAHS’s reasonable attorneys’ fees,

pursuant to Section 35 of the Lanham Act, 15 U.S.C. § 1117;

F. Judgment in favor of SAHS and against defendants, jointly and severally, in

amounts to be proved at trial; and

G. Such other and further relief as the Court deems just and proper.

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Dated: June 4, 2021 SEARS AUTHORIZED HOMETOWN


STORES, LLC

By: /s/ MICHAEL W. OYLER

Michael W. Oyler (Attorney No. 15806-22)


FURMAN NILSEN & OYLER, PLLC
2527 Nelson Miller Parkway, Suite 101
Louisville, KY 40223
Tel: (502) 593-3118
Fax: (502) 244-8383
mike@oylerlegal.com
mikeoyler34@yahoo.com

-and-

Fredric A. Cohen (pro hac vice forthcoming)


Allison R. Grow (pro hac vice forthcoming)
Charles J. Hoover (pro hac vice forthcoming)
CHENG COHEN LLC
363 W. Erie Street, Suite 500
Chicago, IL 60654
Tel.: (312) 243-1701
Fax: (312) 277-3961
fredric.cohen@chengcohen.com
allison.grow@chengcohen.com
charles.hoover@chengcohen.com

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