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Metro Premium Wines v. Bogle Vineyards

June 14, 2011

METRO PREMIUM WINES PLAINTIFF,
v.
BOGLE VINEYARDS, INC AND WINEBOW, INC. DEFENDANT.



The opinion of the court was delivered by: Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Metro Premium Wines ("Metro") distributed Bogle Vineyards, Inc.'s ("Bogle") wine in Chicago for 20 years before Bogle terminated Metro's distribution rights and handed the distribution over to Winebow, Inc. ("Winebow"). Metro alleges that Bogle and Winebow created a scheme to improperly transfer Metro's distributorship to Winebow, in part using Metro's confidential information acquired by Winebow under the guise of a potential transaction whereby Winebow would buy Metro. Bogle now moves to dismiss Metro's complaint for improper venue under Rule 12(b)(3) or to transfer under 28 U.S.C. § 1406, asserting that Bogle and Metro's dispute must be arbitrated in San Francisco under the terms of their distributor agreement. Winebow moves to dismiss under Rule 12(b)(6), asserting that Metro's claims fail by Metro's own allegations or do not meet Rule 8's pleading standard as outlined by Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). For the below reasons, the Court denies Bogle's motion (Doc. 20) and grants in part and denies in part Winebow's motion (Doc. 21).

I. BACKGROUND

A. Metro's Allegations and Claims

The following allegations in Metro's complaint (Doc. 5) are accepted as true for the purposes of Winebow's Rule 12(b)(6) motion to dismiss. See Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008). Bogle is a California-based vineyard, and Metro is an Illinois-based wine and spirit distributor. Around 1990, Bogle and Metro entered into an oral distributorship agreement that gave Metro the exclusive right to distribute Bogle wines in the Chicagoland area. Over the years sales of Bogle's wine in Metro's territory increased substantially. By 2009, Bogle's wine accounted for 59 percent of Metro's sales.

According to Metro, Bogle was determined to replace Metro with Winebow, Bogle's distributor in New York and New Jersey. Because Winebow did not have the knowledge of the Chicagoland market that Metro had, Bogle and Winebow "hatched a scheme" to replace Metro and use Metro's confidential business information to compete against Metro. To that end, in October 2009, Winebow approached Metro and expressed an interest in buying Metro. Winebow told Metro that it needed Metro's confidential sales, pricing and financial data to perform its "due diligence" in advance of any acquisition. Metro and Winebow signed a confidentiality agreement that Winebow would only use Metro's confidential information in connection with making an offer to buy Metro. Bogle, unsolicited, told Metro that it would look favorably on the transaction. Metro alleges that Winebow had no intention of actually buying Metro, and that the proposed transaction was simply a ruse to obtain Metro's confidential information so that Winebow could successfully distribute Bogle's wine in Chicago. Bogle, according to Metro, knew that Winebow was not interested in buying Metro.

After the parties signed the confidentiality agreement on November 9, 2009, Metro sent its confidential information to Winebow. Three days later, Winebow registered to do business in Illinois and, around the same time, applied to the state liquor commission for a license to distribute alcohol in Illinois. On February 11, 2010, the commission granted that license and Winebow commenced its distribution operations out of a warehouse on Chicago's north side. Two months later, Winebow made an "absurdly" low offer to buy Metro that "was clearly intended to force a rejection from Metro, which it did." On September 30, 2010, Bogle sent Metro a notice of termination of the distributorship. That notice states that it was provided in accordance with Bogle's "standard terms and conditions" as listed on Bogle's invoices. It lists various reasons for the termination, including flagging sales growth, not being able to sell to major chains like Jewel-Osco and Trader Joe's, and problems keeping Bogle wine in stock. Metro's distributorship has since ended, "devastating" its business. Metro also alleges that Winebow actively uses Metro's confidential information to sell all types of wine to Metro's customers.

Metro brings a series claims, some against Bogle, some against Winebow, and some against both. Metro alleges Bogle breached the distributor agreement by not giving Metro reasonable notice and the implied duty of good faith and fair dealing. It also asserts a fraud claim against Bogle for aiding Winebow's fraud by inducing Metro to pursue a possible transaction with Winebow. Metro asserts Winebow breached the confidentiality agreement, tortiously interfered with Metro's relationships with Bogle and its retail customers, fraudulently induced Metro into the confidentiality agreement to steal its information. Metro also alleges unjust enrichment against Winebow for expropriating Metro's profits.*fn1 Metro brings a conspiracy claim against Bogle and Winebow together, and alleges that they have interfered with Metro's relationships with its customers for nonBogle wine.

B. Bogle's Terms and Conditions and the Arbitration Clause

Bogle submits three declarations in support of its motion to dismiss in favor of arbitration. The first, from Bogle's Vice President Ryan Bogle ("Ryan"), states that there is no written distributorship agreement between Bogle and Metro. (Doc. 20-1, Ryan Dec. ¶ 3.) Bogle has posted "Terms and Conditions" ("Terms") on its website in various versions since January 30, 2008. (Id. ¶ 4.) Starting on August 25, 2010, Bogle put the same Terms on the back of its invoices to its distributors, including Metro. (Id.) Those Terms direct that California law governs Bogle's relationships with its distributors and include an arbitration clause with states:

In the event of any dispute related to [Bogle], [Bogle's] Products or Distributor's rights to continue distributing [Bogle] products, Distributor agrees that the same shall be resolved by arbitration in San Francisco in accordance with the [rules] of JAMS . . . . The decision of the arbitrator shall be final and binding on the parties. (Doc. 20-1, Ex. A, ¶ 4.) The Terms "apply to any goods purchased from [Bogle] by Distributor .... [A Distributor's] submission of a purchase order for any [Bogle] product shall constitute agreement to these [Terms], which may [sic] by modified at any time by policies found at [Bogle's website]. (Id. ¶ 6.) It allows the arbitrator to allocate attorney's fees and costs but forbids punitive damages. (Id. ¶ 4.) Bogle put the arbitration clause favoring San Francisco in the Terms to reduce its litigation burden as a "small Northern California winery." (Ryan Dec. ¶ 5.)

According to Harry Brody, Bogle's Midwest Regional Manager, Bogle's Terms were available on Bogle's website by clicking on first on one tab of the website, then a second tab, and finally by clicking by a link at the end of a page. (Doc. 20-2, Brody Dec. ¶ 2.) Bogle's website also posted several items "essential to any distributor," including marketing, advertising and sales materials. (Id. ¶ 3.) Brody referred Metro employees, including its president, Larry Palmerson, to Bogle's website at least five times per year between 2008 and 2010, emphasizing that it was important for Bogle's distributors to be familiar with the website. (Id. ¶ 5.) Brody discussed Bogle's published Terms with Palmerson "numerous" times between 2008 and 2010, usually in the context of reminding Palmerson that Bogle extended more generous payment terms to Metro than other distributors. (Id. ¶ 7.) He sent at least one email telling Palmerson to go to the website to download a sales sheet. (Id. ¶ 6.)

Brian Wilkinson, Bogle's controller, states that since Feburary 2008 (right after the Terms went on the website), Metro has submitted 175 purchase orders to Bogle for over $3.5 million worth of wine. (Doc. 20-3, Wilkinson Dec. ¶ ¶ 4-5.) In response to those purchase orders, Bogle shipped wine to Metro and sent an invoice for payment. (Id. ¶ ¶ 4-6.) On August 26, 2010, Wilkinson sent all of Bogle's distributors, including Metro, a notice stating that Bogle's Terms had been on its website since 2008 and that they would, going forward, also appear on the back of Bogle's invoices. (Id. ¶ 6.) The Terms appeared on half a dozen invoices sent to Metro after August 26, 2010, and Metro submitted three purchase orders to Bogle after that date. (Id. ¶ 6.)

Metro, in turn, offers a declaration from Palmerson. According to Palmerson, Metro had no notice of Bogle's Terms until August 26, 2010. (Doc. 26-1, Palmerson Dec. ¶ 6.) Specifically, Bogle did not direct any Metro employee to review the Terms on Bogle's website or suggested that anyone at Metro review the Terms on the website. (Id. ¶ 7.) The distributor agreement between Bogle and Metro did not have an arbitration provision, and Palmerson (and Metro) never discussed an arbitration provision with Bogle. (Id. ¶ 7.) Bogle unilaterally imposed the Terms, never giving Metro an opportunity to negotiate any arbitration term. (Id. ¶ 8.) Bogle's August 26, 2010 notice did not ...


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