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LK Nutrition, LLC v. Premier Research Labs, LP

United States District Court, N.D. Illinois, Eastern Division

September 19, 2016

PREMIER RESEARCH LABS, LP Defendant and Counterclaimant
LK NUTRITION, LLC, LEE KEMP and MIA SCHEID Counterclaim Defendants MIA SCHEID and FITNESS ARTS, Counterclaimants,
PREMIER RESEARCH LABS, LP Counterclaim Defendants, and ROBERT J. MARSHALL Third-party Defendant.


          Joan B. Gottschall United States District Judge

         Plaintiff LK Nutrition, LLC, formerly known as Forza Technologies, LLC (“Plaintiff” or “Forza”)[1] (“Flanagan”) brings this suit against Premier Research Labs, LP (“Premier”) alleging breach of contract (Count I) and fraud (Count II) based on a failed business relationship between the parties. Before the court is Premier's Motion for Partial Summary Judgment pursuant to Federal Rule of Civil Procedure 56(c) (“motion”). Premier answered Forza's Amended Complaint and asserted its counterclaims against Forza, Mia Scheid (“Scheid”) and Lee Kemp (“Kemp”). Both Scheid and Kemp are members of Forza. Scheid answered Premier's counterclaim and asserted her own third-party claims against Premier's principal, Dr. Robert Marshall (“Marshall”) for (1) tortious interference with business relations and prospective economic advantage; and (2) unfair competition. Premier and Marshall now move for summary judgment as to one part of Forza's breach of contract claim relating to the alleged nonconformity of one of Forza's products and also moves for summary judgment as to Scheid's third-party claims against Marshall. Also before the court is Premier's motion to strike the expert testimony of Paul Duggan. For the reasons set forth below, Premier's partial motion for summary judgment is granted in part and denied in part and its motion to strike is granted in part and denied in part.


         A. Background

         The court takes the following facts from the parties' Local Rule 56.1 statements and exhibits. The facts are undisputed unless expressly noted. Important facts, such as the time period in which the relationship between Forza and Premier began are noticeably absent from Premier's Statement of Facts and Forza's Statement of Additional Facts. In these instances, the court adopts the allegations of Forza's Amended Complaint. Forza's Amended Complaint alleges that Premier breached its contract with Forza by failing to timely supply the nutritional products specified by Forza, by failing to supply, package, and label any products before the 2012 Olympic trials, and by producing at least one product with trace amounts of a banned substance. [Am. Compl. ¶¶ 52-53, ECF No. 17.] Premier's motion for partial summary judgment pertains only to the breach of contract claim regarding the delivery of a product with trace amounts of a banned substance. It does not address the issues surrounding late delivery or mislabeling of products. The court, therefore, will recite only the facts that are pertinent to its ruling.

         Forza (now known as LK Nutrition) is a Wisconsin limited liability company with its sole office in Palatine, Illinois. Forza has designed, developed, and formulated nutritional supplements for use by athletes, in particular, high school and college wrestlers. Premier is a Texas limited liability partnership and is in the business of making and selling nutritional products, including nutrition and dietary supplements.

         Forza's two cofounders are Lee Kemp and Mia Scheid. Lee Kemp is a former collegiate wrestler from the University of Wisconsin who won three NCAA Wrestling Championships and three World Championships. Kemp is also a former Olympic wrestling coach. In addition to being a cofounder of Forza, Scheid is the sole owner of a business called Fitness Arts. [Def. 56.1 Statement of Facts (“SOF”) ¶ 9, ECF No. 239-2.] Fitness Arts is a wellness center providing “exercise, corrective exercise, nutrition, wellness and consultation” services. [Id. ¶ 8.] Fitness Arts sells dietary supplements to its customers including Premier brand supplements. Premier's principal[2] is Marshall. Prior to the formation of the business relationship between Premier and Forza that is the subject of this litigation, Scheid received training and certification to practice Quantum Reflex Analysis (“QRA”), a kinesiology muscle testing procedure used to evaluate acupuncture points, from Marshall, the original developer of QRA. [Id. ¶¶ 10-12.] The relationship between Marshall and Scheid predates the business relationship between Premier and Forza.

         On or about January or February of 2011, Forza began discussions with Marshall regarding its and Premier's ability to help Forza launch a new line of nutritional and dietary supplements specially formulated for athletes and, more specifically, for wrestlers. The parties ultimately reached an agreement whereby Premier would manufacture, test, label, and package four products for Forza-FORCE, STRENGTH, POWER, and REVIVE (collectively, “supplements” or “products”). All four products were manufactured by Premier in Texas and delivered to Forza in Illinois. [Pl. Add'l SOF ¶ 2, ECF No. 260.] The parties agree that no formal written contract governing the sale or purchase of the products was ever executed. Instead, “all material terms of the agreement between Forza, on the one hand, and Marshall and Premier, on the other, are contained in written communications between the parties.” [Def. SOF ¶ 2, ECF No. 239-2.] These written communications essentially amounted to a number of emails that were exchanged between the parties. The emails laid out certain terms of the agreement, including price, quantity, testing of the products, packaging and labeling of the products, and delivery. [Id. ¶ 20; Pl. Add'l SOF ¶ 3.]

         Forza contends that the emails also establish that the products were to be free of contaminants and that they were to satisfy anti-doping regulations. [Pl. Add'l SOF ¶ 11.] Forza also contends that Premier knew that the products could not be contaminated with even trace amounts of banned substances. [Pl. Resp. to Def. SOF ¶ 20, ECF No. 260.] As evidence of Premier's knowledge, Forza states that Premier understood that the products it produced for Forza would be consumed by athletes who would be tested for banned substances. [Pl. Add'l SOF ¶ 12, ECF No. 260.] Forza also identifies a number of emails it sent Premier with links to websites containing anti-doping information. [Id. ¶ 11; Def. SOF, Exs. F-O, Q, S, T, V, Y, ECF No. 239-2.] Most of the emails contained only a Uniform Resource Locator (“URL”), or link, to an internet website that presumably[3] contained information regarding anti-doping policies and lists of banned substances. [See, e.g., Def. SOF Ex. F, ECF No. 239-2.]

         One email exchange between Premier and Forza in January 2012 details Forza's need for all four of the products produced by Premier to be tested for banned substances. [Id. Ex. M.] Forza indicated its need that the products to be tested; Forza also indicated hat it needed the products to be certified and approved for use by athletes. On January 31, 2012, Premier sent Forza an email detailing the preliminary results received from HFL Sport Science (“HFL”) for anti-doping testing performed on REVIVE, FORCE, and POWER. [Id. Ex. Y.] HFL is an internationally recognized and accredited laboratory providing testing for athlete healthcare and nutritional supplements. [Id. Ex. S.] HFL is accredited for supplement analysis and has experience testing within the framework of the World Anti-Doping Agency (“WADA”). [Id.] The preliminary results revealed that REVIVE tested “clean, ” POWER tested “clean” on the tests it completed, and FORCE showed “traces of DHEA (a banned substance) below the reporting limit.” [Id. Ex. Y.]

         Forza received the full and final HFL results on March 27, 2012. [Id. Ex. S.] The results revealed that all four of the supplements passed their respective tests. [Id.] However, as with the preliminary results, the final results revealed that while FORCE passed its tests, the screening tests indicated trace presence of DHEA below the specified reporting limit. [Id.] The results further indicate that “trace presence of DHEA does not indicate a positive result for DHEA and is not a danger to an athlete.” [Id. (emphasis added).]

         At around the same time, Forza published HFL's findings on its website and stated that “HFL Sport Science, World Anti-Doping Agency (WADA) accredited laboratory clears FORZA products.” [Def. SOF Ex. T.] In addition to stating that HFL cleared its products, Forza posted the actual test results on the web, which, again, indicated that trace amounts of DHEA were found in POWER, but not enough to have to report it. [Id.] Forza also published a promotional flier for its products and stated that its products meet “the regulations set forth by WADA” and that “[a]ll this means your athletes compete CLEAN and SAFE.” [Id. Ex. V (emphasis in original).] The web page promoting HFL's findings stayed active up to and subsequent to the filing of the present action. [Def. SOF ¶ 46.]

         On August 30, 2012, Tim Weesner of Iowa State University, a potential customer of Forza, requested that the National Center for Drug Free Sport (“NCDFS”) review two Forza products-STRENGTH and POWER-and make a recommendation regarding their safety and compliance with the rules governing anti-doping. [Id. ¶ 48.] Weesner reached out to the NCDFS because it was his understanding that FORCE “contains DHEA so that ma[de] [him] concerned about their other products.” [Id. Ex. W.] The next day, on August 31, Forza emailed Premier and stated the following: “The trace amount of DHEA found in FORCE (herbal capsule) is concerning potential University athletic teams. Is there a report that shows how much DHEA was found (isn't it a miniscule amount?).” [Id. Ex. Q.] Premier responded the same day by stating that “[t]he trace level of [DHEA] showed on the screen but was below the 10ng/g reporting limit and therefore not considered a positive test. No further quantification was reported.” [Id.]

         On September 5, 2012, Forza emailed Premier stating that coaches are expressing their concern over the positive test for trace amounts of DHEA and asking if FORCE can be retested.

         [Def. SOF Ex. Q.] Premier responded by stating the following:

I recall the conversation where Premier agreed to perform testing of each product to verify the absence of banned substances. Upon reviewing the reports from HFL, Premier shared the results with Forza for each product. You were made aware of the presence of DHEA below reportable limits in the FORCE product and you made the decision to proceed. If Forza, in studying its target markets, was aware that even a trace amount, below reportable limits, of a given banned substance is not acceptable, then different course of action should have been followed.
You will need to seek expert opinion/advice on whether the trace amounts of DHEA present in FORCE is reason for concern when testing athletes for banned substances. Premier cannot supply you with that answer.
I believe Premier has met its agreement to test the product for banned substances and report the findings to Forza.


         On that same day, Ms. Becky Achen of the NCDFS responded to Weesner's August 30th email by stating that Forza “might be a good company to stay away from. If they have had a positive testing for contamination, even though it says it was a low level, it seems that would be a red flag.” [Id. Ex. W.] In response to Ms. Achen's answer to Mr. Weesner's inquiry regarding the safety of Forza's products, Forza's attorney Ray Niro wrote to Mr. Achen on September 13, 2012 stating that her statements to Mr. Weesner were “categorically false and have damaged both its business and reputation. [Id. Ex. X.] Mr. Niro's letter also stated that Forza's supplements were “carefully formulated, used by Olympic athletes, and have repeatedly passed the most rigorous drug tests available.” [Id.]

         On May 16, 2013, Scheid, on behalf of Forza, sent a letter to Marshall and Premier asking that Premier “accept the return of [Forza's] complete remaining inventory of these products-FORCE, POWER, REVIVE, and STRENGTH-and that [Premier] refund [Forza] the full amount of [Forza's] payments to [Premier].” [Def. SOF Ex. R.] Forza explained that it has faced substantial resistance in the market place for the sale of any of its nutritional products that were supplied by Premier. One of the reasons for the resistance was the presence of DHEA in one of the products. [Id.] When Forza attempted to sell its products to major collegiate wrestling programs, it “discovered that the mere presence of the banned substance reflected negatively on the quality control practices of the manufacturer.” [Id.] Forza goes on to state that “[s]ince September 2012, [it] ha[s] effectively been boycotted because of the presence of trace amounts of DHEA in products that [Premier] supplied to [it].” [Id.] Finally, Forza states the following:

Although the amount of DHEA was not sufficient in itself to cause the products to be rejected, the fact that any DHEA was present in the products alone reflected negatively on the adequacy of [Premier's] manufacturing operation. In other words, the fact that the products were tainted with any amounts of DHEA showed that inadequate efforts were taken to clean your equipment after products containing DHEA were made. [Forza] now ha[s] learned that in June 2012, [Premier] actually took the steps to remedy the contamination issue, unfortunately too late for Forza.


         Premier refused to provide a refund to Forza and also refused to accept the remaining inventory in Forza's possession. As a result, Forza filed the instant suit. As noted, Premier answered the complaint and asserted a counterclaim against Forza, Lee, and Scheid. In response to the counterclaim, Scheid asserted her third-party claims against Marshall. According to Scheid, she and Marshall had an “understanding” that Marshall would give Scheid and Fitness Arts referrals while on a radio show that Marshall periodically hosted. [Pl. Add'l SOF ¶ 35, ECF No. 260.] This “understanding” started sometime in 2007 and came about when Scheid emailed Marshall stating, “We need referrals…Any mention of our practice on our radio show is as always greatly appreciated.” [Id.] Scheid emailed Marshall four years later in October 2011 again asking for referrals. [Id. ¶ 36.] In addition to providing referrals to Scheid and Fitness Arts, Marshall also provided a 15% discount on its products to Fitness Arts from December 2011 to March 2013. Scheid contends that Marshall stopped endorsing her and Fitness Arts after the instant lawsuit was filed. [Id. ¶ 38.] As a result, Fitness Arts' sales declined. [Id. ¶ 39.]

         B. Legal Standard

         Summary judgment is proper when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). A genuine issue of material fact exists only if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The party seeking summary judgment has the burden of establishing the lack of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In determining whether a genuine issue of material fact exists, the Court construes the facts in a light most favorable to the non-moving party and draws all reasonable inferences in favor of that party. Anderson v. Liberty Lobby, Inc., 477 U.S. at 255, 106 S.Ct. 2505. The existence of a factual dispute alone is not sufficient to defeat a summary judgment motion, instead the non-moving party must present definite, competent evidence to rebut the summary judgment motion. Butts v. Aurora Health Care, Inc., 387 F.3d 921, 924 (7th Cir. 2004).

         C. Analysis

         i. Breach of Contract Claim[4]

         Premier argues that trace amounts of DHEA in one of the products it made for Forza did not breach any agreement between it and Forza. More specifically, Premier argues that there was no language in the contract prohibiting trace presence of contaminants. Moreover, Premier argues that Forza admitted that trace contamination of one its products did not render the goods non-conforming. Even if the presence of trace contamination made the product “non-conforming, ” ...

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