Success Sys., Inc. v. Excentus Corp.
| Decision Date | 01 February 2020 |
| Docket Number | No. 3:19-cv-455 (VAB),3:19-cv-455 (VAB) |
| Citation | 439 F.Supp.3d 31 |
| Court | U.S. District Court — District of Connecticut |
| Parties | SUCCESS SYSTEMS, INC., Smart C-Stores, LLC, Plaintiffs, v. EXCENTUS CORP., Skupos, Inc., Defendants. |
Nathan Craig Zezula, Lueker Mott Zezula LLC, Stamford, CT, for Plaintiffs.
Jonathan Adam Winter, St. Onge, Steward, Johnston & Reens, Stamford, CT, Michael B. Johnson, Katrina Eash, William G. Fox, Winston & Strawn LLP, Dallas, TX, Susannah P. Torpey, Winston & Strawn LLP, New York, NY, Erica Ruth Sutter, Joseph Stephen Belichick, Fenwick & West LLP, Mountain View, CA, James T. Shearin, Pullman & Comley, Bridgeport, CT, Kathryn Jean Fritz, Fenwick & West LLP, San Francisco, CA, for Defendants.
RULING AND ORDER ON MOTIONS TO DISMISS
Success Systems, Inc. and Smart C-Stores, LLC ("Success Systems," "Success," or "Plaintiffs") have sued Excentus Corp. ("Excentus") and Skupos, Inc. ("Skupos") (collectively, "Defendants") under §§ 1 and 2 of the Sherman Act, § 3 of the Clayton Act and Connecticut causes of action.
Any state law claims against Excentus will be dismissed because the Court lacks jurisdiction over them. While venue also is improper for these state law claims, because the Court lacks jurisdiction over them and they are dismissed, no further action by this Court is necessary. The federal antitrust claims against Excentus will be dismissed on the merits.
As to Skupos, the federal antitrust claims against them also will be dismissed. Having dismissed the federal claims against them, the Court declines to exercise supplemental jurisdiction over any state law claim against Skupos and that claim will be dismissed as well.
Excentus's motion to dismiss for failure to state a claim or in the alternative transfer venue is GRANTED to the extent Excentus argues Success Systems failed to state a claim; the motion is MOOT to the extent Excentus seeks to transfer venue. Excentus's motion to dismiss for lack of jurisdiction and improper venue is GRANTED . Skupos's motion to dismiss for failure to state a claim is GRANTED.
For the following reasons, all motions to dismiss are GRANTED .
Success Systems, a corporation based in Connecticut, alleges that this Court has jurisdiction under 28 U.S.C. §§ 1337, 1331, 1367 as the and the Court may exercise supplemental jurisdiction over the state law claims accordingly. Am. Compl. ¶ 5. The Court also allegedly has jurisdiction under 28 U.S.C. ß 1332 and venue is allegedly proper under 28 U.S.C. § 1391, Sections 4 and 12 of the Clayton Act, 15 U.S.C. §§ 15 and 22. Id. ¶¶ 6-7. The Court allegedly "has personal [j]urisdiction over the Defendants as a substantial part of the events or omissions giving rise to the claims occurred in Connecticut, Defendants have transacted a substantial amount of business in Connecticut" and the harm from Defendants' anticompetitive and tortious conduct was felt in Connecticut. Id. ¶ 8.
Success Systems "offers automation solutions for convenience, grocery, liquor, tobacco and gasoline service stations (collectively ‘C-stores’) across the country." Am. Compl. ¶ 9. One of its programs "is a tobacco loyalty program named ‘Smokin' Rebates®.’ " Id. Success Systems alleges that "Smokin' Rebates is the most diversified and complete solution for compliancy-based rebate reporting system through which major tobacco manufacturers ... offer rebates to C-store owners who agree to share tobacco sale and scan data from their stores." Id. ¶ 10. The program allegedly allows participants "to charge their customers as much as $2 per pack of cigarettes less than other C-stores" that do not enroll or engage in the tobacco rewards program. Id. ¶ 11.
The savings allegedly are important to C-stores because tobacco suppliers have reported "a 6-11% drop in tobacco category sales for retailers" that do not participate in the rebate programs. Id. ¶ 12. Even with declining smoking rates, C-stores allegedly "report that they still derive upwards of 50-65% of their revenue from tobacco products," making the lower priced packs of cigarettes "a critical competitive advantage." Id. ¶ 13.
"Smokin' Rebates [allegedly] is one of the few providers of the tobacco rewards programs and is compatible with 13 Point of Sale ("POS") registers" C-stores often use. Id. ¶ 14.
Excentus "develops and operates loyalty programs[.]" Id. ¶ 15. Fuel Rewards, a program operated in conjunction with Shell Oil, allegedly is Excentus's flagship product. Id. Fuel Rewards allegedly "gathers all data relating to the sale of fuel and all products sold at Shell service stations, including tobacco products" and then provides the data to Shell. Id. ¶ 16. According to Success Systems, "Excentus does not offer or support the tobacco loyalty programs provided by the major tobacco manufactures." Id. ¶ 17.
For a Shell service station to participate in a tobacco loyalty program, the service station would allegedly require Excentus "to provide the POS data for all tobacco sales to the tobacco loyalty program provider[.]" Id. ¶ 18. This is because "Excentus' Fuel Rewards system [allegedly] is the only system that can gather and provide this data in a Fuel Rewards Shell service station." Id.
Johnson Oil allegedly "owns and operates several Shell service stations in Illinois and Iowa[.]" Id. ¶ 19. Johnson Oil allegedly participates in the Excentus-operated Fuel Rewards program. Id.
In 2017, Johnson Oil allegedly began working with Success Systems to use "several of its back-office productivity solutions...." Id. ¶ 20. In September 2018, Johnson Oil allegedly "decided that it would like to participate in the tobacco loyalty rewards program, and asked Success to implement its Smokin' Rebates program in the Johnson Oil Shell service stations." Id. ¶ 21. Excentus allegedly agreed to provide Success Systems with the Fuel Rewards data, in order for the tobacco rebate program to work. Id. ¶ 22. Excentus allegedly "contacted Success in Connecticut" which allegedly began "the relationship between the parties which led to the agreement to integrate their respective programs." Id.
During that initial call and on subsequent calls, Excentus allegedly "agreed to provide the required data and agreed to integrate Smokin' Rebates with the Shell Fuel Rewards program for Johnson Oil, and the Shell Fuel Rewards program in general[.]" Id. ¶ 23. The integration allegedly "would make the Smokin' Rebates available to all Shell Fuel Rewards users." Id.
According to Success Systems, this was an "oral agreement made between representatives for Excentus—with at least apparent authority—and representatives from Success." Id. ¶ 24. Numerous e-mails sent between the parties allegedly "documented the agreement," id. ¶ 25, and "provide evidence of the agreement between the parties, as does Excentus' willingness to provide its confidential data to Success as well as its willingness to provide extensive support for integration," id. ¶ 26. The effort in the following months that required cooperative work, the e-mails, and the practice and conduct of the parties allegedly demonstrates "a meeting of the minds and an agreement." Id. ¶ 27. Although the agreement "did not provide for any payments either from Excentus to Success or vice versa, it nonetheless bears all the hallmarks of an oral contract." Id. ¶ 28.
Allegedly, in exchange for providing the Fuel Rewards data to Success Systems, Excentus obtained "the ability to advertise to other locations ... that if they subscribed to Shell Fuel Rewards, they would now also be able to take advantage of the lucrative Smokin' Rebates tobacco rewards program." Id. ¶ 29.
Altria Group, a major tobacco manufacturer, id. ¶ 10, has data which indicates providers of loyalty solutions, like Excentus, "are having a difficult time competing in the marketplace without rebate reporting module[s]," especially considering the current high demand of rebate programs, id. ¶ 30. An integration of the systems allegedly "made Fuel Rewards more valuable to Shell station owners." Id.
The allegedly competitive advantage "a tobacco rewards program provides C-store operators[,]" and Excentus's potential "ability to provide such a program as a part of Fuel Rewards was a direct and a real and direct benefit to Excentus." Id. ¶ 31. Success Systems also alleges that Excentus's conspiracy "to replace Success with another tobacco rewards provider" before implementing Smokin' Rebates in sixty-eight Johnson Oil locations further demonstrates "the value Excentus placed on the service that Success was providing." Id. ¶ 32.
Success Systems allegedly would have benefitted from a partnership with Excentus "by securing set and subscription fees" from the initial sixty-eight Johnson Oil locations "and then from other Shell Fuel Rewards locations." Id. ¶ 33.
Success Systems and Excentus allegedly discussed expanding the Smokin' Rewards program to Excentus's "other non-rewards Shell locations beyond the Johnson Oil stores." Id. ¶ 34. Both allegedly had begun installing "Smokin' Rewards at another Fuel Rewards location[s]...." Id. ¶ 35.
Over a month before Excentus allegedly breached its agreement with Success Systems, Success Systems allegedly "published several announcements on prominent social media platforms advertising that it had integrated Smokin' Rebates with the Shell Rewards network[,]" relying on Excentus that full integration was on the horizon. Id. ¶ 36. Excentus allegedly objected to the post for the first time then. Id.
Success Systems alleges that Excentus's late-hour objection to its announcement "is further evidence of the agreement to make Smokin['] Rewards available to all Fuel Rewards locations after" after integration to the platforms was complete. Id. ¶ 37.
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