Maui Jim, Inc. v. Smartbuy Guru Enters.

• Citation: 386 F.Supp.3d 926
• Decision Date: 10 May 2019
• Docket Number: No. 1:16 CV 9788,1:16 CV 9788
• Parties: MAUI JIM, INC., Plaintiff and Counterclaim Defendant, v. SMARTBUY GURU ENTERPRISES, Motion Global Ltd., SmartBuyGlasses Societa a Responsabilita Limitata, SmartBuyGlasses Optical Limited, Defendants and Counterclaimants.
• Court: U.S. District Court — Northern District of Illinois

386 F.Supp.3d 926

MAUI JIM, INC., Plaintiff and Counterclaim Defendant,

v.SMARTBUY GURU ENTERPRISES, Motion Global Ltd., SmartBuyGlasses Societa a Responsabilita Limitata, SmartBuyGlasses Optical Limited, Defendants and Counterclaimants.

No. 1:16 CV 9788

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

Signed May 10, 2019

Genevieve Elizabeth Charlton, John T. Gabrielides, Barnes & Thornburg LLP, Chicago, IL, Michelle Miller Mikol, Barnes & Thornburg LLP, Washington, DC, for Plaintiff and Counterclaim Defendant.

Stephen J. Rosenfeld, Jacob Daniel Radecki, McDonald Hopkins LLC, John David Fitzpatrick, Steven P. Mandell, George V. Desh, Mandell Menkes LLC, Chicago, IL, Jennifer D. Armstrong, Dan Leonard Makee, Pro Hac Vice, McDonald Hopkins LLC, Cleveland, OH, for Defendants and Counterclaimants.

MEMORANDUM OPINION AND ORDER

Honorable Marvin E. Aspen, United States District Judge Before us is Plaintiff and Counterclaim Defendant Maui Jim, Inc.'s ("Maui Jim") motions to dismiss Defendants and Counterclaimants SmartBuy Guru Enterprises, Motion Global Ltd., SmartBuyGlasses Societá a Responsabilitá Limitata, and SmartBuyGlasses Optical Limited's (collectively "SBG") amended counterclaims. (Dkt. Nos. 184, 196, 278.)¹ Maui Jim also moves to strike two of SBG's affirmative defenses. (Dkt. No. 278.) For the reasons stated below, we grant Maui Jim's motions to dismiss Counts I, III, IV, V, and VI of SBG's second amended counterclaim, grant in part and deny in part Maui Jim's motion to dismiss Count II, and deny Maui Jim's motion to dismiss Count VII. In addition, we grant Maui Jim's motion to strike SBG's first affirmative defense (inequitable restraint of trade) with prejudice and fourth affirmative defense (unclean hands) without prejudice.

BACKGROUND

Much of this case's background can be found in our memorandum and order on Maui Jim's earlier motion to dismiss SBG's prior counterclaims. (Order (Dkt. No. 89).) We assume familiarity with that opinion and repeat here only as necessary. At the motion to dismiss stage, we accept all well-pleaded factual allegations in the counterclaim as true and draw all inferences in the plaintiff's favor.

Cole v. Milwaukee Area Tech. Coll. Dist. , 634 F.3d 901, 903 (7th Cir. 2011). Maui Jim is a designer, manufacturer, and provider of prescription and non-prescription sunglasses. (2d Am. Compl. (Dkt. No. 257) ¶ 16.) SBG is an online retailer of luxury designer eyewear. (2d Am. Countercl. (Dkt. No. 259) ¶ 13.) It sells products from more than 180 designer brands, including Maui Jim, on its websites in twenty countries. (Id. ¶¶ 13, 16.)

Maui Jim alleges SBG entities have never been authorized retailers of Maui Jim sunglasses, yet they sold and offered for sale counterfeit sunglasses under Maui Jim's trademarks. (2d Am. Compl. ¶ 2.) Maui Jim brought suit against SBG, asserting (as amended) claims of trademark counterfeiting and infringement, unfair competition, false advertising, and trademark dilution in violation of the Lanham Act, 15 U.S.C. § 1051, et seq. (Counts I–III); copyright infringement in violation of the Copyright Act of 1976, 17 U.S.C. § 101, et seq. (Count IV); unfair trade practices in violation of the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 5/10, et seq. (Count V); and tortious interference with contract (Count VI). (Id. ¶¶ 85–127.)

SBG alleges it procures genuine Maui Jim sunglasses primarily through affiliates and distributors that purchase directly from Maui Jim. (2d Am. Countercl. ¶ 17.) SBG does not contest that it sells Maui Jim prescription sunglasses without the genuine Maui Jim prescription lenses. (Id. ¶ 21.) Instead, SBG asserts that the Maui Jim frames and non-prescription lenses SBG sells are "100% genuine," and that SBG customers also receive prescription lenses "fabricated through [SBG] by a premium optical laboratory." (Id. )

SBG's amended responsive pleading asserts counterclaims against Maui Jim for trade disparagement (Count I); defamation (Count II); violation of the Sherman Antitrust Act, 15 U.S.C. § 1, et seq. (Count III); violation of California's Cartwright Act, Cal. Bus. & Prof. Code § 16700, et seq. (Count IV), and California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. (Count V); violation of Article 101 of the Treaty on the Functioning of the European Union (Count VI); and in the alternative, unjust enrichment (Count VII). (Id. ¶¶ 33–94.)

SBG alleges it brings its counterclaims "to compensate it for, and put an end to, Maui Jim's ongoing illegal campaign to stifle competition." (Id. ¶ 1.) According to SBG, Maui Jim "seeks to eradicate lawful competition and monopolize control over its worldwide supply chain, allowing it to illegally prop up prices of its eyewear." (Id. ¶ 2.) SBG further alleges Maui Jim's efforts to stifle competition from discount retailers include Maui Jim's alleged attempt to "exploit recent xenophobia

by engaging in a negative public relations campaign that painted SmartBuyGlasses as a dishonest, foreign counterfeiter." (Id. ¶¶ 2, 26.) In furtherance of its efforts, SBG alleges Maui Jim issued a press release dated January 23, 2017, which included the following statement from Maui Jim's Vice President of Global Marketing:

Companies that utilize these types of disingenuous and misleading sales practices undermine the integrity of the Maui Jim brand and the quality and technology it has come to represent .... [Maui Jim] simply cannot allow our brand to be harmed by the sale of counterfeit or non-genuine Maui Jim products that do not live up to our—and most importantly our customers'—expectations.

(Id. ¶ 28.) SBG also alleges that Maui Jim's corporate headquarters and customer service representatives falsely instructed potential customers that SBG sells "fake" or inauthentic products, and that SBG is "not an authentic website." (Id. ¶ 29.) Maui Jim has allegedly made the same claims of inauthenticity to United States customs officials. (Id. ¶ 30.) Moreover, SBG asserts Maui Jim "used this case to discover and then attempt to eviscerate SmartBuyGlasses' supply chain" by cancelling accounts with certain SBG suppliers after they were confidentially disclosed in discovery. (Id. ¶ 31.) SBG alleges that it has been harmed in the marketplace as a result of Maui Jim's actions. (Id. ¶ 32.)

Separately, SBG alleges that Maui Jim has entered into anticompetitive agreements with its distributors to maintain minimum retail prices and to restrict to whom distributors can sell. (Id. ¶ 52.) Maui Jim has allegedly threatened to terminate and has actually terminated retailers that have sold authentic goods to SBG. (Id. ¶¶ 56, 68.) As a result of these agreements, SBG claims that consumers paid artificially high prices for Maui Jim sunglasses and that SBG's business was injured by Maui Jim's efforts to eliminate SBG's supply of Maui Jim sunglasses. (Id. ¶ 58.)

In addition, SBG alleges that it "sources the vast majority of its Maui Jim product from Member States within the European Union, and the alleged restrictive contracts at issue (particularly with respect to Maui Jim's tortious interference with contract claims) all involve retailers in the European Union." (Id. ¶ 88.) SBG claims that these contracts and Maui Jim's "actions to discover and close the accounts of [SBG's] suppliers within the European Union" caused SBG damage and violate European antitrust law. (Id. ¶¶ 89, 90.)

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) governs a motion to dismiss for failure to state a claim upon which relief may be granted. We accept "the allegations in the complaint as true unless they are ‘threadbare recitals of a cause of action's elements, supported by mere conclusory statements.’ " Katz-Crank v. Haskett , 843 F.3d 641, 646 (7th Cir. 2016) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) ). The pleading must state a claim that is plausible on its face to survive a motion to dismiss. Iqbal , 556 U.S. at 678, 129 S. Ct. at 1949 ; Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L.Ed.2d 929 (2007) ; St. John v. Cach, LLC , 822 F.3d 388, 389 (7th Cir. 2016). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S. Ct. at 1949. The plausibility standard "is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. at 1949 (quoting Twombly , 550 U.S. at 555, 127 S. Ct. at 1964–65 ). That is, while the plaintiff need not plead "detailed factual allegations," the counterclaim must allege facts sufficient "to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S. Ct. at 1964–65.

Maui Jim's motion to strike is governed by Federal Rule of Civil Procedure 12(f), which states that "[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). Motions to strike are generally disfavored because they "potentially serve only to delay," and so affirmative defenses "will be stricken only when they are insufficient on the face of the pleadings." Heller Fin., Inc. v. Midwhey Powder Co., Inc. , 883 F.2d 1286, 1294 (7th Cir. 1989). To survive a motion to strike, an affirmative defense must satisfy a three-part test: "(1) the matter must be properly pleaded as an affirmative defense; (2) the matter must be adequately pleaded under the requirements of Federal Rules of Civil Procedure 8 and 9 ; and (3) the matter must withstand a Rule 12(b)(6) challenge." Sarkis' Cafe, Inc. v. Sarks in the Park, LLC , 55 F. Supp. 3d 1034, 1039 (N.D. Ill. 2014) (citation omitted). We follow the majority view of district court decisions in this circuit, which apply the pleading standard set forth in Twombly , 550 U.S. 544, ...