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Metro Premium Wines v. Bogle Vineyards

November 8, 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

Plaintiff Metro Premium Wines, Inc. ("Metro") sued Bogle Vineyards, Inc. ("Bogle") and Winebow, Inc. ("Winebow"), alleging that Bogle and Winebow hatched an improper scheme to take away Metro's distributorship of Bogle's wine in the Chicago area in favor of Winebow. As alleged by Metro, Winebow, with Bogle's assistance, told Metro that Winebow wanted to buy Metro, and Metro turned over its confidential information, only to have Winebow turn around and use that information to jump start its distribution of Bogle's wine in Chicago. The Court previously denied Bogle's motion to dismiss for improper venue, and dismissed Metro's claim that Winebow tortiously interfered with Metro's relationship with Bogle. The Court gave Metro the opportunity to re-plead its tortious interference claim. Now that Metro has filed an amended complaint, Winebow seeks to dismiss the tortious interference claim again, and Bogle moves to dismiss Metro's fraud, conspiracy and tortious interference claims, having moved only under Rule 12(b)(3) before. For the following reasons, the Court grants Winebow's motion and denies Bogle's motion.

I. FACTS*fn1

In an effort to cure the state a claim for tortious interference, Metro added a number of new allegations and exhibits to its amended complaint. The Court will focus on Metro's new allegations in this opinion. About 20 years ago, Bogle, a California vineyard, and Metro, an Illinois wine distributor, entered into an oral distributorship agreement that gave Metro the exclusive right to distribute Bogle wines in the Chicagoland area. Over the years, Bogle's sales in Chicago grew, Metro invested in its distribution efforts for Bogle, and sales of Bogle's wine became majority of Metro's business. According to Metro, Bogle and Metro both took steps in 2009 to 2010 to affirm their relationship, including efforts by Bogle to help Metro distribute Bogle's wine to retailers Target, Sam's Club, and Meijer.

Metro alleges, "on information and belief," that sometime in 2009, Winebow, Bogle's distributor in New York and New Jersey, approached Bogle's national sales manager Sam Bon and "improperly incentivized him" to convince Metro to hand its confidential business information over to Winebow in connection with a proposed purchase of Metro by Winebow. Bon would then convince Metro to sell to Winebow at a firesale price by threatening to end the Metro-Bogle distribution relationship. According to Metro, Bon's plan to swap out Metro in favor of Winebow was not in the best interests of the Bogle or Bogle's owners.

Specifically, in October 2009, Kevin Groff, a Winebow employee, approached Metro and expressed Winebow's interest in buying Metro. Winebow told Metro that it needed Metro's confidential sales, pricing and financial data to perform as due diligence in advance of any acquisition. Metro and Winebow signed a confidentiality agreement stating that Winebow would only use Metro's confidential information in connection with making an offer to buy Metro. Bon then made several unsolicited calls to Larry Palmerson, Metro's president, later that month to encourage him to sell Metro to Winebow. 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. Bon, according to Metro, knew that Winebow was, in fact, not interested in buying Metro. In December 2009, Bon again called Palmerson without prompting, and pressured him to sell Metro to Winebow. The next day, Palmerson wrote a letter to Bon in response to the conversation, noting that Bon "seemed to be selling [him] on Winebow" and that Bon threatened to end the distributorship "regardless" of whether Palmerson sold Metro to Winebow. (See Am. Compl., Doc. 52, Ex. F.) Palmerson also wrote that he hoped Bon had not told Winebow that Bon would take away the distributorship in any event because it would compromise his bargaining position with Winebow. (Id.)

After the parties signed the confidentiality agreement on November 9, 2009, Metro sent its confidential information-including sales, pricing and financial data-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, even though, if it bought Metro, it would not need a separate license. On February 11, 2010, the commission granted that license and Winebow commenced its distribution operations out of a warehouse on Chicago's north side. On March 26, 2010, Groff and Palmerson met and Winebow made an "absurdly" low offer of $500,000 to buy Metro. Palmerson followed up with a letter to Groff, copying Jody Bogle, one of Bogle's owners, stating that Winebow's offer was inadequate because a recent an appraisal found Metro was worth about $2 million. (See id., Ex. G.) Ten days later, Bon sent Palmerson a letter stating that for two years, Bogle had raised issues about Metro's sales performance, inability to service major retailers like Osco and Target, and unwillingness to share retail information with Bogle. (See id., Ex. H.) Bon also noted that Bogle's sales growth in Illinois was just half of the growth rate in the rest of the country and that Metro was locked out of certain retailers. (Id.) The letter requested action by June 30, 2010, or else Bogle would find another distributor. (Id.)

Palmerson responded a week later with a letter to Bogle's owners, stating that he was "hurt" by Bon's letter given Metro and Bogle's long relationship, that Bon's expectations were unrealistic, and that Bon had rejected a solution proposed by Palmerson to distribute wine to a particular grocery store chain. (See id., Ex. I.) He closed by stating that Bon was pressuring him to sell Metro to Winebow. (Id.) On May 7, 2010, Winebow told Metro that Winebow would not raise its offer, but that it would keep the discussions confidential. A few days later, Palmerson wrote to Bon again, complaining that Bon had undermined his negotiations with Winebow by telling Winebow that Bon intended to take away Metro's distribution rights, and that Metro's salespeople had heard from a rumor from Metro's retailers that Metro was losing Bogle's business. (See id., Ex. I.) A few months later, Palmerson reported to Bogle's owners that Metro's sales were up and that Metro had made efforts to place Bogle wine at Sam's Club. In the same letter, Palmerson suggested that he speak with two other distributors that distributed to all the major chains, and reiterated that he would not sell Metro "for a low ball figure." (See id., Ex. L.) In August 2010, Palmerson sent a letter to Winebow's CEO, listing various scenarios for Winebow to purchase Metro and requested the return of Metro's confidential information, but Winebow never raised its offer or returned the information.

Later that summer, Bogle changed its credit terms for Metro and would not ship wine to Metro until Metro's checks cleared, and the parties had disputes about whether Metro being out of stock was Metro's or Bogle's fault. Metro attached to its complaint one communication from September 23, 2010 from a Bogle employee complaining to Metro that it was currently out of stock on popular types of wine and these shortages "have been a familiar topic over the past year, but with little response from Metro." (Id. at Ex. Q.) Ultimately, on September 30, 2010, Bogle sent Metro a notice that it was terminating the distributorship. The notice 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. Winebow has taken over the distribution of Bogle's wine in Chicago, and Metro alleges that Winebow actively uses Metro's confidential information to sell all types of wine, including Bogle wine, to Metro's customers.

Finally, Metro alleges that although Bon was acting in the scope of his authority as national sales manager at Bogle when he pressured Metro to sell to Bogle, his tactics were not in the best interests of Bogle. According to Metro, because Bogle could end the oral distribution arrangement at any time, Bogle could have simply exercised its right to terminate the agreement and handed the distribution over to Metro. In other words, Bogle would have been no better off if Palmerson sold Metro to Bogle, and "on information and belief," is worse off, because Winebow is selling less than Metro. These facts, Metro asserts, demonstrate that Bon was improperly incentivized by Winebow.

Metro brings the following claims in its new complaint: breach of oral distributor agreement and breach of the implied duty of good faith against Bogle (Counts I and II); reformation and breach of the confidentiality agreement against Winebow (Counts III and IV); tortious interference with prospective economic relations (as to the relationship with Bogle) against Winebow (Count V); fraud and aiding and abetting fraud against Winebow and Bogle, respectively (Counts VI and VII); tortious interference (as to Metro's relationships with third party customers) against Winebow and Bogle (Count VIII); and conspiracy against both defendants (Count IX).

II. STANDARD

To state a claim upon which relief can be granted, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). To survive a motion to dismiss, a complaint must be "plausible on its face." Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 570); see also Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010) (noting "'plausibility' in this context does not imply that the district court should decide whose version to believe, or which version is more likely than not.") A claim is facially plausible "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. Determining whether a complaint states a plausible claim for relief requires "the reviewing court to draw on its judicial experience and common sense." Id. at 1950. "Specific facts are not necessary . . . the statement need only give the defendant fair notice of what the claim is and the grounds upon which it rests." Swanson, 614 F.3d at 404 (citing Erickson ...


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