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AllergEase v. Walgreens Co.

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

January 6, 2017

ALLERGEASE, INC., Plaintiff,
v.
WALGREEN CO., Defendant.

          MEMORANDUM OPINION

          CHARLES P. KOCORAS, District Judge:

         Before the Court is Defendant Walgreen Co.'s (“Walgreens”) motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 against Plaintiff AllergEase, Inc. (“AllergEase”), on all of AllergEase's claims and on Walgreens' counterclaim for breach of contract against AllergEase. For the following reasons, the motion is granted.

         BACKGROUND

         Walgreens filed its motion for summary judgment on June 28, 2016. Then, AllergEase file its response brief on September 9, 2016. Finally, Walgreens filed its reply brief on September 30, 2016. Subsequently, the Court held oral argument on the instant motion on December 14, 2016.

         The following facts taken from the record are undisputed, except where otherwise noted. “In early 2013, AllergEase and Walgreens entered into a contract for the sale of allergy lozenges, ” (“the Product”). On May 1, 2013, Walgreens placed a series of purchase orders with AllergEase totaling $496, 026.72. The following day, AllergEase confirmed the order. The parties dispute whether AllergEase communicated to Walgreens that it would need to “go into production” to fill the purchase order placed on May 1, 2013. However, the parties agree that on June 28, 2013, four days before the product was set to be shipped, “Walgreens rescinded some of the purchase orders” that it placed on May 1, 2013. At this point, the Product had not yet been delivered. Thereafter, AllergEase delivered some of the Product to Walgreens.

         Sales of the Product were weak. Thus, according to Walgreens, in February 2014, it informed AllergEase that it was terminating their vendor relationship. AllergEase disputes this, and instead asserts that Walgreens informed AllergEase of a “discontinuation.” Nevertheless, AllergEase does not dispute that subsequently “[a] Walgreens employee contacted” its CEO, Zeeshan Kaba (“Kaba”), “to arrange for the return of the excess inventory.” Moreover, AllergEase does dispute that Kaba “agreed to a 50% markdown of the store inventory, ” and that “he refused to accept the excess inventory” because he was unable to accept it in the middle or end of July. Thereafter, AllergEase admits that in August 2014, Kaba again agreed to a 50% markdown. AllergEase also admits that on several occasions through April and May 2014, a Walgreens employee tried to obtain Kaba's “approval to accept a return of the excess inventory.”

         It is undisputed that “[w]hen Walgreens discontinues a product, [it] typically takes one of three actions to dispose of the product: (1) destroy, (2) return, or (3) donate” it. “If a product is returned to the vendor, Walgreens asks the vendor for a return authorization (‘RA'), and this communication typically occurs via email.” However, “[i]n certain situations, such as when a vendor refuses to accept return of its discontinued product that is set to expire, Walgreens will look at alternative methods to dispose of the product, including third party-liquidation.”

         According to Walgreens, in August 2014, after AllergEase had repeatedly refused to approve the return of its excess Product, “Walgreens sought bids from third-party liquidators so as to recoup some money from the excess inventory that AllergEase refused to take back.” Subsequently, a third-party “won the liquidation bid for the excess AllergEase product in the Walgreens distribution centers.” Conversely, AllergEase asserts that “by June 10, 2014 . . . the process of discontinuation ceased, ” and therefore, the Product had not been discontinued in August 2014. In fact, according to AllergEase, the Product “was still being sold in 5500 stores and had been back in the planogram since June 10, 2014.” Thus, according to AllergEase, when Walgreens liquidated the excess Product, it violated the parties' contractual agreement.

         Walgreens does not dispute that the Product “was still being sold in 5500 stores and that it had been back in the planogram since June 10, 2015.” Moreover, the parties agree that “[i]n September and October of 2014 Walgreens issued additional purchase orders to AllergEase, which AllergEase shipped.” These purchase orders amounted to $35, 011.68. However, in November 2014, Walgreens informed Kaba that because the Product was not performing well, it “was looking for [an] exit strategy.” Consequently, “[i]n March 2015, a Walgreens employee again notified [ ] Kaba that AllergEase was being discontinued.” “AllergEase never provided a return authorization to Walgreens for the excess inventory following this final termination.”

         After these events, AllergEase filed a complaint alleging that Walgreens breached the 2013 contract when Walgreens: (i) reduced its purchase order from $496, 026.72, as agreed upon, to $139, 771.68; (ii) failed to pay $496, 026.72, as stated in the contract; (iii) “assessed AllergEase with a wide variety of charges, reductions and fees” totaling $73, 010.67, “which the parties did not agree to in the 2013 agreement;” (iv) failed to return the unsold Product to AllergEase and instead liquidated it; (v) “failed to dishonor” Register Rewards coupons, which AllergEase had previously agreed to fund, “even after their 2-week expiration date;” and (vi) “otherwise failed to fulfill its obligations under the 2013 agreement.” AllergEase also alleges that Walgreens breached the 2014 contract by failing to pay $35, 011.68 for the purchase orders placed in the fall 2014 and by otherwise failing to fulfill its obligations under the 2014 agreement.

         The Complaint also states claims for unjust enrichment based on allegations that Walgreens benefitted from receiving the fall 2014 purchase orders and failing to pay (Count II); detrimental reliance on Walgreens' representations that it would pay $496, 026.72 for the May 1, 2013 purchase orders (Count III); and tortious interference with prospective economic advantage when Walgreens liquefied the excess Product (Count IV).

         Walgreens moves for summary judgment on all four counts as well as on Count I of its counterclaim for breach of contract based on AllergEase's “failure to pay invoices submitted by Walgreens pursuant to a valid contract.” Thus, Walgreens seeks judgment in the amount of $77, 873.22, plus interest, costs, and attorneys' fees.

         LEGAL STANDARD

         Summary judgment is appropriate when the movant establishes that “there is no genuine dispute as to any material fact and [that] the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine issue of material fact arises where a reasonable jury could find, based on the evidence of record, in favor of the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A motion for summary ...


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