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Miche Bag, LLC, A Utah Limited Liability Company v. Be You

September 26, 2011

MICHE BAG, LLC, A UTAH LIMITED LIABILITY COMPANY, PLAINTIFF,
v.
BE YOU, LLC, A MICHIGAN LIMITED LIABILITY COMPANY, DEFENDANT.



The opinion of the court was delivered by: Marvin E. Aspen, District Court Judge:

MEMORANDUM OPINION AND ORDER

Plaintiff Miche Bag, LLC ("Miche Bag"), a Utah limited liability company, filed a four-count amended complaint against Defendant Be You, LLC ("Be You"), a Michigan limited liability company, alleging (1) breach of contract, (2) fraudulent inducement, (3) unfair competition in violation of 15 U.S.C. § 1125, and (4) violation of the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq. Presently before us is Be You's motion to dismiss for failure to state a claim. For the reasons below, we grant Be You's motion in part and deny it in part.

BACKGROUND

The parties have an acrimonious history, as this is the third time that Miche Bag has brought suit against Be You. (Resp. at 1.) The companies compete in the manufacture and sale of handbags with magnetic removable outer covers. (Mot. & Mem. at 2.) Miche Bag and Be You first engaged in litigation in the Eastern District of Michigan (the "Michigan Litigation") when Miche Bag brought suit alleging several patent and copyright infringement claims based on the production and sale of Be You's Shelly Bag line. (Id.) On May 18, 2010, the parties entered into a Settlement Agreement and subsequently dismissed the Michigan Litigation. (Compl. ¶¶ 16--17.) The terms of the Settlement Agreement are confidential, but the parties made the following disclosure in a public statement: "Be You is permitted to liquidate its inventory of original handbags and decorative covers until June 21, 2010 . . . [but] Be You will not sell its Shelly Bag handbags or decorative covers in their original design following the June 21, 2010 deadline." (Mem. at 3.) Be You liquidated its inventory by selling the majority of the handbags to established distributors. Among these distributors was Sullivan Productions, LLC ("Sullivan Productions"), a distinct business entity owned by Jan Sullivan. (Id. at 4.) Jan Sullivan is the mother of Michael Sullivan, a member of Be You. (Compl. ¶ 23.) Pursuant to the terms of the Settlement Agreement, Miche Bag took possession of the remainder of Be You's inventory at the conclusion of the agreed-upon liquidation period. (Mem. at 5.)

Shortly after the resolution of the initial litigation, Miche Bag again brought suit against Be You, this time in the Northern District of Illinois, to enforce certain terms of the Settlement Agreement (the "Chicago Litigation"). (Compl. ¶ 18.) The parties again settled the dispute, agreeing to a permanent injunction against Be You and a $40,000 payment to Miche Bag in October 2010. (Id. ¶ 20.)

Following the resolution of the Chicago Litigation and the close of the liquidation period, Sullivan Productions sold Be You's Shelly Bags to Miche Bag customers at trade shows. (Id. ¶¶ 21--22.) In several of the Sullivan Productions sales, the seller concealed Be You products and only revealed them when a potential customer asked if Be You had similar products. (Id.) Although there are no allegations that Be You sold Shelly Bags to Sullivan Productions after the end of the liquidation period, Miche Bag alleges that the sale of Be You's products to Sullivan Productions constitutes "improper circumvention of the spirit and letter of the Settlement Agreement." (Id. ¶ 25.)

In addition to trade show sales, Shelly Bags were sold online at the www.shellybagshells.comwebsite. (Id. ¶ 26.) This website contains the statement that "Shelley [sic] Bags still have an advantage over other magnetic handbags on the market today. Examples of these enhancements include: Magnets on the bottom and top of the bag to provide greater security . . . ." (Id. ¶ 27.) Miche Bag alleges that the statement is false because Shelly Bags do not include magnets on the bottom of the bag, and that Be You used the false statements to gain an unfair competitive advantage over Miche Bag. (Id. ¶¶ 28--29.) Miche Bag filed its First Amended Complaint ("Complaint") in the Northern District of Illinois, seeking to enjoin Be You from continuing to sell Shelly Bags through Sullivan Productions or misrepresent Shelly Bags in its advertisements. Be You in turn filed the pending motion to dismiss all four claims in the Complaint.

STANDARD OF REVIEW

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) is meant to test the sufficiency of the complaint, not to decide the merits of the case. Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990). In evaluating a motion to dismiss, we must accept all well-pleaded allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Thompson v. Ill. Dep't. of Prof'l Regulation, 300 F.3d 750, 753 (7th Cir. 2002). A court may grant a motion to dismiss under Rule 12(b)(6) only if a complaint lacks "enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974 (2007); see Ashcroft v. Iqbal, --- U.S. ----, ---- - ----, 129 S.Ct. 1937, 1949-50 (2009) (extending Twombly from antitrust to litigation generally and stating that a court's determination "whether a complaint states a plausible claim for relief will . . . be a context-specific task"); Killingsworth v. HSBC Bank Nev., N.A., 507 F.3d 614, 618--19 (7th Cir. 2007); EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776--77 (7th Cir. 2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

Although a facially plausible complaint need not give "detailed factual allegations," it must allege facts sufficient "to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. at 1964--65. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 129 S.Ct. at 1949. These requirements ensure that the defendant receives "fair notice of what the . . . claim is and the grounds upon which it rests." Twombly, 550 U.S. at 555, 127 S.Ct. at 1964; see also Fed. R. Civ. P. 8(a).

ANALYSIS

A. Breach of Contract Claim

In its first claim for relief, Miche Bag alleges that Be You breached the Settlement Agreement that resolved the Michigan Litigation. Under Illinois law, a plaintiff must plead four elements to bring a claim for breach of contract: "(1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the defendant; and (4) resultant damages." Reger Dev., LLC v. National City Bank, 592 F.3d 759, 764 (7th Cir. 2010) (quoting W.W. Vincent & Co. v. First Colony Life Ins. Co., 351 Ill. App. 3d 752, 759, 814 N.E.2d 960, 967 (1st Dist. 2004)); see also Cogswell v. Citifinancial Mortg. Co., 624 F.3d 395, 398 (7th Cir. 2010).

Miche Bag alleges that the parties "entered into a valid and enforceable contract," and has provided details regarding the terms of the agreement and the date upon which it was signed. (Compl. ¶ 31.) In addition, Miche Bag alleges that it complied with the terms of the Settlement Agreement, that Be You breached the Settlement Agreement, and that Miche Bag suffered damages as a result of the breach. (Id. ¶¶ 32--34.) Specifically, Miche Bag alleges that Be You breached the Settlement Agreement by selling the removable purse covers through Jan Sullivan, a circumvention of the "spirit and letter" of the Settlement Agreement. (Id. ¶¶ 21--22, 25.) These allegations are sufficient to provide notice to Be You of the "grounds upon which [the claim] rests." Concentra, 496 F.3d at 776. It is reasonable to infer ...


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