Insignia Sys. v. News America Marketing in-Store, Civil No. 04-4213 (JRT/AJB).
| Decision Date | 30 September 2009 |
| Docket Number | Civil No. 04-4213 (JRT/AJB). |
| Citation | 661 F.Supp.2d 1039 |
| Parties | INSIGNIA SYSTEMS, INC., Plaintiff, v. NEWS AMERICA MARKETING IN-STORE, INC., Defendant. News America Marketing In Store, Inc., Counterclaim Plaintiff, v. Insignia Systems, Inc., and Scott Drill, Counterclaim Defendants. |
| Court | U.S. District Court — District of Minnesota |
Stephen Wood and Julian Solotorovsky, Kelley Drye & Warren LLP, Chicago, IL, Kevin J. Smith and Richard E. Donovan, Kelley Drye & Warren LLP, New York, NY, John T. Delacourt, and Lee Istrail, Kelley Drye & Warren, Washington, DC, and Robert L. Meller, Jr. and Jason C. Tarasek, Best & Flanagan LLP, Minneapolis, MN, for Insignia Systems, Inc. and Scott Drill.
Matthew L. Cantor, Ankur Kapoor, Kerin E. Coughlin, Jeffrey I. Shinder, and Samuel H. Rikkers, Constantine Cannon LLP, New York, NY, Seth Greenstein, Mitchell Stoltz, Raymond C. Fay, Constantine Cannon LLP, Washington, DC, Julie Ann Shepard, David R. Singer, and Richard L. Stone, Hogan & Hartson, Los Angeles, CA, and Todd A. Wind and Sarah C.S. McLaren, Fredrikson & Byron, PA, Minneapolis, MN, for News America Marketing In-Store, Inc.
Plaintiff and counterclaim defendant Insignia Systems, Inc. ("Insignia") and defendant and counterclaim plaintiff News America Marketing In-Store, Inc. ("NAMI") are direct competitors in the in-store promotions business. Insignia filed this suit against NAMI alleging violations of federal and state antitrust law, and for disparagement under the Lanham Act, 15 U.S.C. § 1125, and the Minnesota Deceptive Trade Practices Act ("MDTPA"), Minn.Stat. § 325D.44. NAMI filed counterclaims alleging that Insignia wrongfully induced retailers to breach their contracts with NAMI and that Insignia's president, Scott Drill, made false, disparaging comments about NAMI in violation of federal and state law. The case is before the Court on NAMI's motion for summary judgment on Insignia's claims, Insignia and counterclaim defendant Scott Drill's' motions for summary judgment on NAMI's counterclaims, NAMI's motion to exclude, and Insignia's motion to compel discovery. For the reasons below, the Court denies the parties' motions for summary judgment, denies NAMI's motion to exclude, and grants the motion to compel.
Insignia and NAMI are prominent companies in the third-party in-store promotions and advertising business. Third-party promotions companies ("TPPs") such as Insignia and NAMI enter into contracts with product manufacturers, also known as consumer packaged goods companies ("CPGs"), and retailers. TPPs sell CPGs advertising tactics and services for placing products in retail stores. TPPs purchase from retailers the right to place those tactics in the retail stores.
TPPs potentially provide two layers of exclusivity that have value to CPGs: category exclusivity and retail exclusivity. TPPs compete to sell CPGs a variety of promotional tactics for placement in retail stores, including print and electronic signage in the store, end-of-aisle displays, freezer displays, floor signage, cart advertising, and coupons. (Overstreet Report, Docket No. 516, Ex. 3 at 21-36.) CPGs typically demand that TPPs promote only their products within a particular product category for specified periods of time. Referred to as "category exclusivity," the TPP guarantees that it will not sell similar advertising tactics to another CPG in the same product category during certain "cycles," often four-week periods. CPGs also promote their products through "trade" promotions at retail stores, bypassing the TPPs and working directly with retailers.
TPPs also contract with retailers to purchase the right to place promotional tactics, which advertise CPGs' products, in the retail stores. A variety of retailers use in-store promotions, including grocery stores, drug chains, mass retailers, home improvement stores, and bargain chains. NAMI often includes clauses in its retail contracts providing for "retail exclusivity." That is, NAMI seeks to secure the exclusive right to provide certain promotional vehicles in particular retail stores, to the exclusion of other TPPs with similar promotional vehicles. Retail exclusivity can maximize the effectiveness of in-store advertising for CPGs, and CPGs apparently pay more to TPPs that are able to secure retail exclusivity, because such exclusivity enables CPGs to advertise in certain stores in the absence of advertising from their competitors. (Overstreet Dep. Tr., Docket No. 476, Ex. 4 at 263, Ex. 5 at 498; Payton Dep. Tr., Docket No. 476, Ex. 6 at 137.)
NAMI offers a variety of advertising tactics to CPGs, including shelf-mounted machines that dispense coupons or rebates (SmartSource Coupon Machines and SmartSource ShelfTake One), floor decal advertisements (FloorTalk), and shopping cart advertisements (SmartSource Carts). NAMI also offers two at-shelf signage tactics: Shelftalk, which is an "at-shelf" sign with a brand message; and Price Pop Guaranteed ("Price Pop"), which is an at-shelf sign with product prices. NAMI claims that its extensive array of promotional tactics gives it a competitive advantage because a CPG can do "one-stop shopping" with NAMI for all of its in-store promotion needs.
NAMI does not dispute that its contracts with retailers often incorporate retail-exclusivity clauses to secure NAMI's ability to be the exclusive provider of particular categories of in-store advertising tactics. NAMI notes, however, that many retailers negotiate to "carve-out" exceptions to these exclusivity provisions for particular tactics offered by other TPPs or by the retailer itself.
Insignia's promotional offerings are more limited. Indeed, it appears that Insignia's most predominant and successful offering is the "POPSign" at-shelf advertising tactic, which incorporates both brand equity messaging and product price, and is designed to attract consumer attention at the point of purchase. In 2006, Insignia sold POPSigns to 57 CPGs and, as of 2008, Insignia placed POPSigns in 9,000-10,000 retail stores. (Overstreet Report, Docket No. 476, Ex. 3 at 21 n. 22.) Insignia's POPSigns are in direct competition with NAMI Price Pop, and Insignia appears to have had success: in 2007, Insignia's POPSign revenues were over $20.8 million, while NAMI's revenues for Price Pop sales were only $2.76 million. (Murphy Report, Docket No. 476, Ex. 1, at Ex. 3.)
FLOORgraphics ("FGI") also competes with NAMI and Insignia for in-store advertising placements, offering floor decals that are affixed to floors of a store aisle. According to Insignia, FGI generated revenues of nearly $70 million in 2002 by selling a variety of at-shelf advertising products, including floor decals. Insignia asserts that by 2007, however, FGI's revenues had fallen to $13 million and were based solely on sales of floor decals. (Overstreet Report, Docket No. 516, Ex. 3 at 30; Jones Deck, Docket No. 516, Ex. 7, ¶ 11(A).)
Many TPPs offer services to CPGs, including NAMI, Insignia, FGI, Vestcom, Menasha, and Catalina Marketing. Insignia asserts, however, that among all TPPs, there are only three main competitors for at-shelf, in-store advertising—NAMI, Insignia, and, to a far lesser extent, FGI. Insignia notes that the revenue for the top three firms providing advertising services to CPGs grew from $292 million to $393 million between 2002 and 2006. Insignia explains that NAMI and Insignia accounted for more than all of that growth because FGI revenues declined over that period. Further, Insignia states that NAMI alone accounted for 90 percent of the growth.
TPPs manage the implementation of in-store tactics either by having retailers install the tactics, or by providing their own field force to install the tactics and oversee compliance. TPPs measure compliance rates based on the percentage of contracted-for signs actually mounted in retail stores. Under Insignia's business model, retailers are responsible for hanging POP-Signs in retail stores. NAMI notes that compliance rates on retailer-installed programs are inferior to compliance rates for field-force-installed programs. Indeed, given the lower compliance rate for retailer-installed Price Pops, NAMI discontinued retailer installation in 2003. NAMI thereafter began offering a field-force-installed Price Pops program and was able to guarantee at least 90 percent compliance.
Prior to discontinuing its retailer-installed program, NAMI conducted an audit of the compliance rates of several third-party programs, including Insignia's retailer-installed POPSigns. (Peiser Dep. Tr., Docket No. 476, Ex. 23 at 33-39.) According to NAMI, that audit revealed that Insignia's retailer-installed program had extremely low compliance rates of less than 20 percent. (Porco Letter, Docket No. 476, Ex. 47.) NAMI also reported that FGI's compliance rate was less than 50 percent. (Id.)
Insignia contends that the audit was methodologically flawed and inaccurate, and that NAMI was aware of those problems. Insignia contends that its compliance rate was 75% or higher during the relevant time period. Insignia also contends that NAMI ignored potentially higher compliance rates; misrepresented the size of NAMI's field force, which according to NAMI included 10,000 employees; and misrepresented the source of the audit data by claiming that syndicated data suppliers conducted the audits.
Based on the audit results, NAMI discontinued its own retailer-installed Price Pops...
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