Empire Indus. Inc. v. Winslyn Indus.
| Decision Date | 21 January 2021 |
| Docket Number | Case No. 18 C 698 |
| Parties | EMPIRE INDUSTRIES INC., Plaintiff, v. WINSLYN INDUSTRIES, LLC, et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Empire Industries Inc., a bathroom and kitchen product distributor, contends that it entered into an exclusive agreement with The Fireclay Factory LLC, a sink manufacturer, to supply certain sinks. Empire originally sued Winslyn Industries, LLC, another distributor, claiming tortious interference with the Empire-Fireclay agreement. Later, Empire added claims against Fireclay for, among other things, breach of contract and fraud. Fireclay has counterclaimed, asserting claims against Empire for tortious interference with prospective advantage and breach of contract. Empire has moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss these claims. For the reasons stated below, the Court dismisses Fireclay's breach of contract claim but declines to dismiss its tortious interference claim.
The Court assumes familiarity with this case's factual and procedural background, which the Court has described in its prior written opinions. See Empire Indus. Inc. v. Winslyn Indus., LLC, No. 18 C 698, 2020 WL 3100581 (N.D. Ill. June 11, 2020) (Ruling on Fireclay's Motion to Dismiss); Empire Indus. Inc. v. Winslyn Indus., LLC, No. 18 C 698, 2019 WL 2743470 (N.D. Ill. June 30, 2019) (); Empire Indus. Inc. v. Winslyn Indus., LLC, No. 18 C 698, 2019 WL 339544 (N.D. Ill. Jan. 28, 2019) (); Empire Indus. Inc. v. Winslyn Indus., LLC, 327 F. Supp. 3d 1101 (N.D. Ill. 2018) (Preliminary Injunction Ruling). The following is a brief synopsis of the factual and procedural background, as relevant for the purposes of the present order.
Empire is a New Jersey-based manufacturer and distributor of bathroom and kitchen products. It contends that it entered into an agreement with Fireclay, a United Arab Emirates-based (UAE) manufacturer of "fireclay-style" sinks, which are formed from clay fired at very high temperatures, to manufacture certain sink designs exclusively for Empire. Empire further contends that Fireclay then produced sinks with an indistinguishable design for Winslyn, another distributor. In January 2018, Empire sued Winslyn, claiming tortious interference with the exclusive agreement between Empire and Fireclay. In June 2018, the Court preliminarily enjoined Winslyn "and anyone affiliated or acting in concert with it . . . from purchasing, marketing, or selling sinks obtained from The Fireclay Factory, LLC based on plaintiff Empire Industries, LLC's . . . designs." Preliminary Injunction Ruling, 327 F. Supp. 3d at 1118. The Court then modified the injunction to apply only to "sinks obtained from The Fireclay Factory, LLC with a design that is identical to or visually distinguishable from plaintiff Empire Industries, LLC's Olde London and Sutton Place designs." See Modified Prelim. Inj. Order (dkt. no. 105).
As indicated earlier, Empire later added a claim against Fireclay for breach of contract. Fireclay has asserted a two-count counterclaim against Empire, which Empire has moved to dismiss. In considering Empire's motion to dismiss, the Court accepts as true the facts alleged in the counterclaim. O'Boyle v. Real Time Resolutions, Inc., 910 F.3d 338, 342 (7th Cir. 2018).
Fireclay alleges that shortly after Empire obtained the preliminary injunction against Winslyn, Empire contacted certain Fireclay customers and told them that purchasing certain sinks from Fireclay would violate the injunction; a contract between Empire and Fireclay prevented the purchase of those sinks; and Empire would sue the customers if they purchased or sold any sinks allegedly covered by the contract. Fireclay contends that all of these representations were false. The entities that Empire allegedly contacted include Imperial Pacific Trading, LLC (IPT), Thompson Traders, Inc., Pelican Sinks International (Pelican), Domain Industries (Domain), and Menards—all of which are existing or prospective Fireclay customers. Fireclay asserts that it had sold or was planning to sell sinks to some or all of these customers. Fireclay claims it had a reasonable business expectation to market and sell its sinks to these customers, but Empire's interference in the relationships caused Fireclay to lose the customers' business.
Fireclay also alleges—in the alternative to its denial that an enforceable contract exists1—that Empire breached its contract based on seven instances of conduct:
(a) failing to order the sinks in the quantities required; (b) failing to order the sinks exclusively from Fireclay; (c) threatening to order the sinks from other suppliers; (d) threatening to end its relationship with Fireclay altogether on a regular basis; (e) breaching the [implied] covenant of good faith and fair deal by failing to timely provide Fireclay information on the type and quantity of sinks required; (f) defaming Fireclay and misrepresenting Fireclay's obligations as set forth in Count I above; and (g) otherwise.
Def.'s Countercl. (dkt. no. 342) ¶ 98. In short, Fireclay alleges that Empire's failure to meet its contractual obligations, "to the extent such a contract is implied," gives rise to a breach of contract claim. Id. ¶ 97.
Empire has moved to dismiss Fireclay's claims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a counterclaim must allege facts sufficient "to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inferences that the defendant is liable for the misconduct alleged." Sloan v. Am. Brain Tumor Ass'n, 901 F.3d 891, 894 (7th Cir. 2018) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). At this stage, the law does not impose a highly exacting standard on Fireclay, however: "[t]he plausibility standard is not akin to a 'probability requirement.'" Iqbal, 556 U.S. at 678. Fireclay's burden to avoid dismissal is limited to alleging "enough details about the subject-matter of the case to present a story that holds together." Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010). Thatsaid, in ruling on a motion to dismiss, the Court is "not obliged to accept as true legal conclusions or unsupported conclusions of fact." St. John's United Church of Christ v. City of Chicago, 502 F.3d 616, 633 (7th Cir. 2007) (internal quotation marks omitted).
The parties dispute which state's law governs Fireclay's claims. Fireclay contends, in a footnote, that the law of the United Arab Emirates applies. See Def.'s Resp. to Mot. to Dismiss (dkt no. 396) at 7 n.5. It has forfeited this contention, however, by making it in a perfunctory way, relegating it to a footnote, and citing no supporting authority. See Batson v. Live Nation Ent, Inc., 746 F.3d 827, 833 (7th Cir. 2014) (). Empire argues that Georgia law controls Fireclay's tort claim because any alleged injury to Fireclay would have occurred there. Empire also contends that New Jersey law applies to the breach of contract claim based on its own status as a New Jersey-based entity. In the absence of a viable argument to the contrary, the Court will follow the course argued by Empire.
In count 1 of its counterclaim, Fireclay alleges that Empire tortiously interfered with Fireclay's prospective business advantage. Specifically, Fireclay alleges that Empire contacted Fireclay's existing and prospective customers and (1) falsely represented to them that the injunction Empire had obtained against Winslyn prevented the customers from purchasing certain sinks from Fireclay, including sinks that were not covered by the injunction; (2) threatened litigation against them; and (3) made other false representations regarding Empire's right to certain sinks manufactured by Fireclay. Fireclay asserts that it had a reasonable expectation of selling sinks to these customers—of which Empire was aware—and that instead the entities that Empirecontacted purchased fewer sinks from Fireclay or none at all.
To prevail on a claim for tortious interference with a prospective economic advantage, a plaintiff must prove: (1) its expectation of entering into a valid business relationship; (2) defendant's knowledge of the plaintiff's expectancy; (3) defendant's purposeful interference with and defeat of the expectancy; and (4) damages to the plaintiff resulting from the interference. Dowd & Dowd, Ltd. v. Gleason, 181 Ill. 2d 460, 484, 693 N.E.2d 358, 370 (1998) (internal quotation marks and citations omitted); Cook Pecan Co., Inc. v. McDaniel, 344 Ga. App. 370, 374, 810 S.E.2d 186, 190 (2018) (describing similar elements); Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 751-52, 563 A.2d 31, 37 (1989).
Empire has moved to dismiss Fireclay's claim on three grounds: (1) the claim is insufficiently pleaded because it rests "on information and belief"; (2) Empire's conduct—threatening litigation to safeguard its own legal interests—is protected by the "competitor's privilege"; and (3) Fireclay's claim is implausible because it was the injunction itself that "altered the customer's conduct," not Empire's "embellishment of that order" in its communication with Fireclay customers. Pl.'s Mem. (dkt. no. 365) at 1-2, 12. In response, Fireclay argues that it was Empire's specific misrepresentations to existing and prospective Fireclay customers, not the injunction against Winslyn, that deterred customers from doing business with...
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