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Imagenetix, Inc., On Behalf of Itself and All Others Similarly Situated v. Walgreen Co

April 12, 2012

IMAGENETIX, INC., ON BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
WALGREEN CO., DEFENDANT.



The opinion of the court was delivered by: Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

Plaintiff Imagenetix, Inc. brings a three-count complaint against Walgreen Co., alleging fraud, breach of contract, and unjust enrichment. Plaintiff also seeks to represent a class of manufacturers alleged to have been similarly ill-treated by Walgreen Co. Defendant seeks to have the substantive counts dismissed and the class allegation stricken. For the following reasons, the motion as to the counts is granted without prejudice. The motion to strike the class allegations is denied, without prejudice to the defendant raising the argument anew if faced with an amended complaint.

BACKGROUND

Plaintiff Imagenetix, Inc. is a Nevada corporation with its principal place of business in San Diego, California. Imagenetix develops and manufactures nutritional supplements, among other things. The product at the center of this lawsuit is known as Celadrin, a supplement that "promotes healthy joints." Defendant Walgreen Co. is an Illinois corporation that does business as the large drugstore chain "Walgreens."

According to the complaint, from January of 2007 through the first half of 2011, Imagenetix sold Celadrin to Walgreens for retail sale. In late 2010, Walgreens informed Imagenetix that Walgreens would not continue to sell Celadrin unless Imagenetix participated in a Walgreens program called "Register Rewards."

Under Register Rewards, when a customer purchases certain items being promoted by the manufacturer, a machine installed by a third party (Catalina Marketing) prints out coupons at the point of sale that are targeted to the customer based on the particular items the customer has purchased. The manufacturer agrees to reimburse Walgreens for the face value of each coupon issued and redeemed in connection with the sale of their promoted product. The manufacturer also agrees to pay certain fees. Walgreens maintains a set of Coupon Policy Guidelines which govern the Register Rewards program.

The complaint alleges that Walgreens manipulated Register Rewards to commit a large-scale fraud. According to the complaint, after Walgreens threatened to discontinue selling Celadrin, Imagenetix agreed to participate in Register Rewards for a one-week period: March 20 to March 26, 2011. During that period, consumers would be issued a $10 Register Rewards coupon if they purchased one or more 60-capsule bottles of Celadrin at a purchase price of $10. Each coupon expired two weeks after the time of purchase and could only be applied to future purchases of eligible items selling for over $10.

When the promotion was over, according to the complaint, Walgreens represented to Imagenetix that it issued approximately 54,000 Register Rewards coupons related to the purchase of Celadrin and 52,039 of those were later redeemed by customers. Based on those redemptions, Walgreens billed Imagenetix $533,000 for coupons purportedly redeemed plus $188,000 in associated fees.

The complaint goes on to assert that "[b]ecause of the extremely high redemption rate for its Register Rewards promotion, Imagenetix audited the program [and] Imagenetix's audit revealed wide-spread fraud by Walgreens."

Imagenetix also participated in a Walgreens program known as "Easy Saver" in September 2007. Under the Easy Saver program, Imagenetix offered a rebate of the entire purchase price of Celadrin, or $19.99. According to the allegations, Walgreens sought reimbursement for 32,057 rebates totaling $640,000.

Similar to the later Register Rewards program, the redemption rate was over ninety percent, prompting Imagenetix to audit the program. According to Imagenetix, the audit revealed that of the 186 rebate submissions they examined, 96 (or over half) "were improperly approved by Walgreens despite incomplete or inaccurate rebate submissions. The flaws included such things as missing original receipts (allegedly a requirement for the rebate) or receipts that reflected purchases of Celadrin outside of the promotional period. Imagenetix claims it shared the results of this audit, but Walgreens was ultimately "unwilling" to provide documentation supporting its rebates.

The complaint does not state when the audit took place. Regarding any payments Imagenetix made to Walgreens connected to the Easy Saver program, the complaint says only that "[o]n information and belief, Walgreens charged Imagenetix an amount in excess of the payments received by consumers."

STANDARD OF REVIEW

When considering a motion to dismiss under Rule 12(b)(6), a court must accept as true all facts alleged in the Amended Complaint and construe all reasonable inferences in favor of the plaintiff. See Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995). To state a claim upon which relief can be granted for most allegations, 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). Detailed factual allegations are not required, but the plaintiff must allege facts that, when accepted as true, state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949(2009) (internal quotations omitted). When analyzing whether a complaint has met this standard, the "reviewing court [must] draw on its judicial experience and common ...


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