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House of Brides, Inc. v. Alfred Angelo, Inc.

United States District Court, Seventh Circuit

January 8, 2014

HOUSE OF BRIDES, INC., HOUSE OF BRIDES WORLD'S LARGEST ONLINE WEDDING STORE, INC., HOB HOLDING CORPORATION, AND HOB I HOLDING CORPORATION, Plaintiffs,
v.
ALFRED ANGELO, INC., Defendant.

MEMORANDUM OPINION AND ORDER

JOHN J. THARP, Jr., District Judge.

The plaintiffs, House of Brides, Inc., House of Brides World's Largest Online Wedding Store, Inc., HOB Holding Corporation, and HOB I Holding Corporation (collectively, "House of Brides"), [1]filed suit against Defendant Alfred Angelo, Inc. ("Alfred Angelo"), for breach of contract, breach of implied warranty of merchantability, violations of federal and state antitrust law, and tortious interference with the plaintiffs' business expectancy. Pending now is Alfred Angelo's motion to dismiss the antitrust and tortious interference claims pursuant to Rule 12(b)(6). For the reasons that follow, Alfred Angelo's motion is granted.

BACKGROUND

The following facts, taken from the First Amended Complaint, are accepted as true for the purposes of this motion. Navarro v. Neal, 716 F.3d 425, 429 (7th Cir. 2013). Alfred Angelo is a corporation that designs, manufactures, brands, and distributes a variety of products for weddings, including bridal gowns and bridesmaid dresses. Am. Compl. ¶¶ 11, 35. House of Brides purchases, markets, and sells bridal gowns and bridesmaid dresses both in brick-and-mortar stores and online. Id. ¶¶ 9, 42. Since 2002, House of Brides has become a "premier online retailer of wedding products." Id. ¶ 42. House of Brides was among the first such companies to publish retail prices for its products online, allowing consumers to comparison shop. Id. ¶ 43. House of Brides also offers weddings products at prices substantially below prices charged by "most, if not all of, their competitors." Id. ¶ 44. For more than forty years, House of Brides was an authorized dealer of Alfred Angelo products. Id. ¶ 46. In that role, House of Brides purchased, marketed, and sold Alfred Angelo bridal gowns and bridesmaid dresses. Id. ¶ 12. Both parties profited from this relationship. Alfred Angelo wedding products became one of the best-selling and most profitable lines sold by House of Brides, and House of Brides became Alfred Angelo's top retailer in the United States. Id. ¶¶ 47, 52. House of Brides had gross sales revenues of approximately $1 million, $1.3 million, and $1.7 million for Alfred Angelo wedding products in 2009, 2010, and 2011, respectively. Id. ¶ 48. The majority of House of Brides sales transactions for Alfred Angelo products took place online. Id. ¶ 47.

As an authorized dealer, House of Brides purchased Alfred Angelo products via special order and purchased a required minimum stock twice a year. Id. ¶ 47. Some of the House of Brides purchase orders specified a date for delivery. Id. ¶ 14. On numerous occasions, Alfred Angelo failed to meet this date and the affected customers refused to accept the dress, causing House of Brides to lose the sale. Id. On other occasions, the delay damaged the relationship between House of Brides and its customers. Additionally, Alfred Angelo shipped duplicate, incorrect, or defective orders to House of Brides, forcing House of Brides to pay for dresses that had not been ordered by a customer. Id. ¶¶ 15-17. According to House of Brides, certain dresses that were supplied to it by Alfred Angelo were not of fair or average quality and would not pass without objection in the trade under the contract description. Id. ¶ 26.

Until recently, Alfred Angelo was "strictly a designer and manufacturer, " but now Alfred Angelo also operates retail stores throughout the United States. Id. ¶ 50. Upon its expansion into operating retail stores, Alfred Angelo became a direct competitor to House of Brides. Id. ¶ 51.

On January 1, 2004, Alfred Angelo announced marketing policies, including a mandatory minimum retail pricing policy. Id. ¶ 53. Alfred Angelo's mandatory minimum retail pricing policy solicited "agreement from retailers not to discount [Alfred Angelo] products" below the policies' minimum prices and threatened to terminate retailers who did not comply. Id. ¶ 53. House of Brides was not aware of Alfred Angelo's marketing policies until January 2007. Id. ¶ 54. On April 18, 2007, Alfred Angelo sent House of Brides a letter notifying it of the marketing policies that had been introduced in January 2004. Id. ¶ 54. At the same time, Alfred Angelo also notified House of Brides that failure to comply with the minimum retail pricing policies would result in termination of its status as an authorized Alfred Angelo dealer. Id. ¶ 56. House of Brides rejected Alfred Angelo's mandatory minimum prices, stating that other retailers were selling at discounted prices and that House of Brides needed to remain competitive. Id. ¶ 55. The Chief Financial Officer of Alfred Angelo reported receiving complaints from other customers of Alfred Angelo regarding the refusal of House of Brides "to abide by the minimum resale price." Id. ¶ 52. These complaints included threats to stop purchasing from Alfred Angelo unless House of Brides met the agreed minimum prices or until Alfred Angelo stopped supplying products to House of Brides.

Alfred Angelo implemented a new set of marketing policies on November 24, 2010. Id. ¶ 58. The 2010 policies set forth both a Manufacturer's Suggested Retail Price ("MSRP") and a Minimum Pricing Policy ("MPP"). Id. ¶ 58. The MSRP represented the expected retail price for online sales while the MPP represented the minimum price for products sold at brick-and-mortar stores. Id. ¶ 58. House of Brides alleges that Alfred Angelo and its retail dealers deliberately established these policies to "unreasonably restrain prices." Id. ¶ 59. House of Brides also alleges that Alfred Angelo set its MSRP substantially higher than its MPP, thus prohibiting the plaintiffs from competing with retail stores. Id. ¶ 60. On December 20, 2010, Alfred Angelo solicited House of Brides via email for confirmation of its agreement to Angelo's new marketing policies. Id. ¶ 61. Once again, however, House of Brides informed Alfred Angelo that it would not agree to the minimum pricing policies. Id. ¶ 61. At that time, numerous other online distributors of Alfred Angelo products both advertised and sold Alfred Angelo products below the MSRP and MPP, including Dress for Less, E Bridal Superstore, Prom Save, and Plus Size Bridal. Id. ¶ 63.

Alfred Angelo sent House of Brides another e-mail on or about May 4, 2011, containing notification that Alfred Angelo would cease supplying House of Brides with bridesmaid dresses on April 30, 2011. Id. ¶ 64. House of Brides alleges that Alfred Angelo sent this termination letter due to pressure placed on it by competitors of House of Brides, including Alfred Angelo's own retail stores, demanding that Alfred Angelo compel House of Brides to comply with its minimum prices. Id. ¶ 64. At this time, however, even Alfred Angelo sold its own products below the 2010 MPP. According to the First Amended Complaint, Alfred Angelo was seeking to "enhance its own retail sales" at the expense of House of Brides; its policies were even designed to drive House of Brides out of business. Id. ¶¶ 65, 86. After the May 2011 email request, House of Brides continued to discount Alfred Angelo products; Alfred Angelo then terminated its relationship with House of Brides on August 12, 2011. Id. ¶ 66.

As a result of this termination, House of Brides alleges that it is left with retail store samples of Alfred Angelo products that it had been required to purchase but on which it cannot now take orders. Id. ¶ 18. House of Brides estimates that it has lost in excess of $285, 000, including stock inventory, customer returns, duplicate orders, and customer cancellations. Id. ¶ 19. House of Brides claims that it has been rendered unable to fill existing orders and unable to enter into new contracts with individuals inquiring prospectively about Alfred Angelo products. Id. ¶ 68. Finally, House of Brides alleges that Alfred Angelo's conduct has resulted in artificially high prices for consumers and a lack of competition for Alfred Angelo products. Id. ¶ 67.

House of Brides filed suit against Alfred Angelo in the Circuit Court of Cook County, Illinois, on October 7, 2011, alleging claims for breach of contract, breach of warranty, and seeking a declaratory judgment of its rights. Dkt. 1-1. Alfred Angelo removed the action to this Court on the basis of diversity jurisdiction and filed an answer and counterclaims. Dkt. 6. On December 21, 2012, House of Brides was permitted to file a First Amended Complaint alleging additional claims for violations of the Sherman Act, the Robinson-Patman Act, Illinois antitrust law, and tortious interference with the plaintiffs' business expectancy, in addition to the contract and warranty claims. Dkt. 47. Alfred Angelo now moves to dismiss the antitrust and tortious interference claims (Counts IV, V, VI, and VII) from the First Amended Complaint.

DISCUSSION

At the heart of the pending motion is the proper scope of this dispute. Alfred Angelo argues that House of Brides has not pleaded plausible antitrust claims and that the suit is properly characterized as a "simple collection case." Def.'s Mot. 1, Dkt. 49. House of Brides argues that Alfred Angelo's conduct reduced competition in the market for Alfred Angelo wedding products by forcing consumers to pay artificially high prices, and that it was unable to fill existing customer orders or convert prospective customer inquiries into orders. Am. Compl. ¶¶ 40, 67. 68.

A Rule 12(b)(6) motion to dismiss "challenges the sufficiency of the complaint to state a claim upon which relief may be granted. Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). To survive a motion to dismiss, a complaint must include enough factual detail to give the defendant fair notice of the claims and grounds upon which they rest, and the allegations must add up to a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009); Bell Atl. v. Twombly, 550 U.S. 544, 545, 555-57, 570 (2007); Engel v. Buchan, 710 F.3d 698, 709 (7th Cir. 2013). To make out a claim that is plausible, plaintiffs must allege enough factual matter, taken as true, to "raise a right to relief above the speculative level" and "nudge[] their claims across the line from conceivable to plausible." Twombly, 550 U.S. at 555, 570. In making this determination, the Court accepts all well-pleaded facts as true and draws all reasonable inferences in favor of the plaintiff, but does not accept as true a "legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 679; Navarro, 716 F.3d at 429. Formulaic recitation of the elements of a cause of action supported by conclusory statements will not suffice. Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555); Tamburo v. Dworkin, 601 F.3d 693, 699 (7th Cir. ...


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