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Maurice Sporting Goods, Inc. v. BB Holdings, Inc.

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

June 22, 2017

MAURICE SPORTING GOODS, INC., Plaintiff,
v.
BB HOLDINGS, INC. d/b/a BUCK BOMB, Defendant.

          MEMORANDUM OPINION AND ORDER

          AMY J. ST. EVE United States District Court Judge

         Plaintiff Maurice Sporting Goods, Inc. (“Maurice”) has moved the Court to dismiss Count II and III of Defendant BB Holdings, Inc., d/b/a Buck Bomb (“Buck Bomb's”) Counterclaim. (R. 83, Def.'s Counterclaim.) For the following reasons, the Court grants in part and denies in part Plaintiff's motion.

         PROCEDURAL HISTORY

         On October 6, 2015, Plaintiff filed a Complaint in Illinois state court in Cook County against Defendant alleging counts for breach of contract and unjust enrichment. Defendant removed the Complaint to this Court on December 28, 2015. On May 11, 2016, the Court issued a Memorandum Opinion and Order (the “First Order”) on Maurice's initial motion to strike and dismiss Defendant's affirmative defenses. (R. 31, First Order.) In relevant part, the Court struck without prejudice Defendant's First, Second, Third, Fifth, Sixth, Seventh, and Eighth Affirmative Defenses.

         On May 25, 2016, Defendant filed a Second Amended Answer, reasserting five affirmative defenses: (1) prior material breach; (2) contribution; (3) unclean hands; (4) equitable estoppel; and (5) statute of frauds. On August 23, 2016, the Court issued a Memorandum Opinion and Order (the “Second Order”) denying Plaintiff's motion to strike Defendant's prior material breach affirmative defense and striking Defendant's contribution, unclean hands, and equitable estoppel affirmative defenses. (R. 46, Second Order.) In striking Defendant's unclean hands and equitable estoppel defenses, which were based on three allegedly fraudulent statements Plaintiff's representatives made to Defendant's then-president, the Court found that Plaintiff's alleged misconduct sounded in promissory fraud, but Defendant failed to show that Plaintiff engaged in a fraudulent scheme in relation to the Buy-Back Agreement at issue in Plaintiff's Complaint.

         On January 12, 2017, Defendant filed a Third Amended Answer, in which it asserts a Counterclaim that includes three counts against Plaintiff: (1) Breach of Contract; (2) Promissory Fraud; and (3) Tortious Interference. (R. 83, Third Amended Answer.)

         BACKGROUND

         In considering this motion, the Court presumes familiarity with the background of this action-as set forth in the First and Second Orders-and does not recite a detailed background here. The Court will, however, provide a brief factual background, particularly as it pertains to the two counts at issue in this motion.

         Plaintiff is a wholesale sporting goods distributor. (R. 2, Compl. ¶ 8.) It works with vendors, such as Defendant, to sell and distribute products to retailers. (Id. ¶ 11.) For approximately eight years, Plaintiff and Defendant “had an ongoing business relationship pursuant to which Maurice would wholesale Buck Bomb products to retailers.” (Id. ¶ 10.) During the course of that “business relationship, ” however, Defendant “unilaterally decided to sell Buck Bomb products directly to Maurice-supplied retailers.” (Id. ¶ 12.) As a result, around January 2015, the parties “formally sought to end their relationship.” (Id.) Plaintiff alleges- and Defendant does not dispute-that in January 2015, “Maurice and Buck Bomb entered into a written agreement via e-mail wherein Maurice agreed to return all Buck Bomb product in Maurice's possession for which it had received an invoice from Buck Bomb.” (Id. ¶ 14; R. 14, Am. Answer ¶ 14) (the “Buy-Back Agreement.”)[1] Defendant agreed to buy back the product in Plaintiff's inventory, subject to certain credits. (Compl. ¶ 15.)[2] Plaintiff alleges that Defendant has failed to remit payment of $88, 932.66 in breach of the parties' written agreement. (Id. ¶ 20.)

         In its Third Amended Answer, Defendant alleges that its eight-year “business relationship” with Plaintiff relating to Plaintiff's wholesale of Defendant's products to retailers constituted a binding “distribution agreement” (“the Distribution Agreement”). (R. 83, Third Am. Answer 11, ¶¶ 34-36.) The parties memorialized the Distribution Agreement in purchase orders, invoices, and a written vendor agreement. (Id. 12, ¶ 37.) Defendant alleges that Plaintiff breached this agreement both by failing to make timely payments on invoices for ordered product and by “failing to use its best efforts to meet the Walmart sales forecast” for 2014. (Id. 12, ¶¶ 39-40.)

         Defendant alleges that in early 2014, it reached an agreement with Walmart to distribute its product to Walmart directly. (Id. 17, ¶¶ 72-73.) Although Plaintiff assured Walmart and Defendant that it would continue to distribute the product through 2014, Defendant alleges that Plaintiff actually engaged in a scheme to defraud Defendant as revenge for Defendant's termination of the parties' relationship and to develop a competitor product. (Id. 14, ¶¶ 45-46.) According to Defendant, Plaintiff's scheme was designed to convince Defendant to continue its business relationship with Plaintiff under the assumption that Plaintiff would continue to distribute its product, even though Plaintiff had no intention of doing so. (Id. 13, ¶ 46.) Defendant claims that Plaintiff's goal was to “sabotage” Defendant's product sales both as revenge against Defendant and to develop a market share for Plaintiff's competitor product. (Id. 13, ¶ 47.)

         As part of Defendant's alleged scheme, in April 2014, Rick Schmidt, Defendant's President, participated in a telephone call with Brad Stevenson, Plaintiff's executive, in which Stevenson told Schmidt that Plaintiff would continue to use its best efforts, consistent with past years, to distribute Defendant's product to Walmart and meet Walmart's sales forecasts. (Id. 14, ¶¶ 49-51.) Defendant alleges that Stevenson knew Plaintiff had no intention of using its best efforts to distribute Defendant's product to Walmart. (Id. 14, ¶ 52.) Defendant claims that Mike Shannon and Joe Mulheim, Plaintiff's employees, also told Schmidt in telephone conversations in April 2014 that Plaintiff would use its best efforts to distribute Defendant's product to retailers, even though they knew Plaintiff had no intention of doing so. (Id. 14-15, ¶¶ 53-60.) Defendant alleges that it reasonably relied on these statements, which were intended to mislead Defendant, based on the parties' longstanding business relationship, and Defendant would not have continued the parties' Distribution Agreement had it not been for these statements. (Id. 15-16, ¶¶ 61-65.) When Plaintiff did not perform its distribution services, Defendant suffered losses and ultimately PEAK Rock, another company, purchased Defendant at a reduced price. (Id. 16, ¶¶ 66-68.) Defendant also alleges that Plaintiff's actions not only reduced its 2014 sales, but also reduced its 2015 sales to Walmart because Walmart reduced its sales forecast for 2015 based on Defendant's poor sales in 2014, which resulted from Plaintiff's failure to use its best efforts to distribute Defendant's product. (Id. 18, ¶¶ 87-88.)

         LEGAL STANDARD

         “A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the viability of a complaint by arguing that it fails to state a claim upon which relief may be granted.” Camasta v. Jos. A. Bank Clothiers, Inc.,761 F.3d 732, 736 (7th Cir. 2014). Under the federal pleading standards, a plaintiff's “factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Put differently, a “complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). In determining the sufficiency of a complaint under the plausibility standard, courts must “accept all well-pleaded facts as true and draw reasonable inferences in the plaintiffs' favor.” Roberts v. City of Chicago, 817 F.3d 561, 564 (7th Cir. 2016). In ruling on a Rule 12(b)(6) motion, district courts may also consider documents ...


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