Telebrands Corp. v. My Pillow, Inc.

Decision Date30 April 2019
Docket NumberCase No. 18-CV-06318
PartiesTELEBRANDS CORP., Plaintiff, v. MY PILLOW, INC., Defendant.
CourtU.S. District Court — Northern District of Illinois

Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER

Plaintiff Telebrands Corporation filed a five-count complaint against defendant My Pillow, Inc., alleging breach of contract, breach of implied contract, tortious interference with business expectancy, unjust enrichment, and quantum meruit. Telebrands moves to dismiss Counts II-V of the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons outlined below, My Pillow's Partial Motion to Dismiss [12] is granted.

Background

Telebrands is a consumer products marketing company, and My Pillow manufactures and sells its patented pillow product. Telebrands alleges that My Pillow and Telebrands entered into a License Agreement on May 30, 2012, under which My Pillow had the right to market its pillows directly to consumers, and Telebrands had the exclusive right to "advertise, promote, market, distribute, and sell" My Pillow brand pillows in North American brick and mortar retail stores and their associated online outlets. (Dkt. 1-1 §§ 1-2.) The License Agreement provided for a one-year term and would automatically renew for successive one-year terms if Telebrands ordered at least 1,000,000 units in the immediate prior year. (Id. § 13.)

In the year ending in May 2014, Telebrands purchased 210,000 units. My Pillow's CEO Mike Lindell sent an email to Telebrands that stated: "As you know, the current License Agreement will end on May 30 because sales did not hit the 1,000,000 mark. I would like to set up a time to meet with you ... to put together a new agreement." (Dkt. 1-2.) The parties did not sign a new agreement. However, the parties continued to do business, with Telebrands purchasing more than 8 million My Pillow units from My Pillow since the initial License Agreement in 2012. In March 2018, Telebrands successfully negotiated for Walmart to add the My Pillow product to its main bedding department. Telebrands also had success selling the My Pillow product to a number of other major retails in the U.S., including Kohl's and Bed Bath & Beyond.

On August 21, 2018, My Pillow provided a letter to Telebrands that discontinued its relationship with Telebrands and indicated that My Pillow would fulfill all outstanding purchase orders for which Telebrands had paid a deposit. (Dkt. 1-3.) Telebrands responded to My Pillow by email on August 24, 2018, repudiating My Pillow's attempt to discontinue the parties' business relationship because the License Agreement "remains in full force and effect" and requesting that My Pillow continue "in good faith to honor the parties' agreement." (Dkt. 1-4.) On August 27, 2018, My Pillow sent another letter to Telebrands, taking the position that the License Agreement expired in May 2014 and that no new master agreement was ever entered, so the parties have merely "entered into a series of purchase orders." (Dkt. 1-5.) My Pillow also emailed a Walmart representative on August 30, 3018, regarding the possibility of selling the My Pillow product directly to Walmart. (Dkt. 1-7.)

Telebrands then brought this suit on September 17, 2018. My Pillow now moves to dismiss Counts II-V of the Complaint for failure to state a claim.

Legal Standard

When considering a Rule 12(b)(6) motion, the court accepts all of the plaintiff's allegations as true and views them "in the light most favorable to the plaintiff." Lavalais v. Vill. of Melrose Park, 734 F.3d 629, 632 (7th Cir. 2013). A complaint must contain allegations that "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The plaintiff does not need to plead particularized facts, but the allegations in the complaint must be sufficient to "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Threadbare recitals of the elements of a cause of action and allegations that are merely legal conclusions are not sufficient to survive a motion to dismiss. Iqbal, 556 U.S. at 678.

Pleadings consist of the complaint, the answer, and any written instruments attached as exhibits. See Fed. R. Civ. P. 10(c); see also Hous. Auth. Risk Retention Grp., Inc. v. Chicago Hous. Auth., 378 F.3d 596, 600 (7th Cir. 2004). The Seventh Circuit interprets "written instruments" to include contracts and correspondence between parties. N. Ind. Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 453 (7th Cir. 1998). Thus, the Court may consider the License Agreement and correspondence between Telebrands and My Pillow, attached to the Complaint as Exhibits 1-7.

Analysis

My Pillow first argues that it cannot tortuously interfere with its own contract, so it could not interfere with a business expectancy that was created by that contract. Telebrands responds that My Pillow's argument is contrary to its position that no contract existed in 2014 and that Telebrands is entitled to plead alternative theories, in the event that the Court determines that no express or implied contract has been governing the parties' business relationship. Further, Telebrands contends that My Pillow mischaracterizes Telebrands' claim. Rather than alleging that My Pillow interfered with the expectancy created by the License Agreement, Telebrands maintains that italleges that My Pillow's conduct after the improper termination of the License Agreement damaged Telebrands' reputation and standing with retail customers.

Under Illinois law, a claim for tortious interference with business expectancy must allege: (1) plaintiff had a reasonable expectancy of entering into a valid business relationship; (2) defendant had knowledge of the expectancy; (3) defendant intentionally and unjustifiably interfered with the realization of the business expectancy; and (4) damages resulting from the interference. A-Abart Elec. Supply, Inc. v. Emerson Elec. Co., 956 F.2d 1399, 1404 (7th Cir. 1992). It is undisputed that the only parties at issue are My Pillow and Telebrands, who are one time had a valid contract. "[A] party cannot tortiously interfere with its own contract,' nor can it tortiously interfere with any business expectancies created by that contract.'" Heiman v. Bimbo Foods Bakeries Distribution Co., 902 F.3d 715, 720 (7th Cir. 2018) (citing Bass v. SMG, Inc., 328 Ill. App. 3d 492, 503, 765 N.E.2d 1079 (1st Dist. 2002)). Tortious interference with business expectancy requires that My Pillow's interference was directed toward a third party. Slamecka v. Empire Kosher Poultry, Inc., No. 03 C 4122, 2004 WL 1882241, at *3 (N.D. Ill. Aug. 12, 2004) (Gettleman, J.). That means that Telebrands does not have a cause of action against My Pillow for conspiring to breach their own contract or for wrongfully interfering with its own contract. Heiman, 902 F.3d at 720; Slamecka, 2004 WL 1882241 at *3.

Here, the inquiry is whether Telebrands sufficiently alleges that My Pillow had a reasonable expectation of entering a valid business relationship that Telebrands interfered with through actions directed at a third party that caused harm to My Pillow. Telebrands alleges that the License Agreement provided it a license "to exclusively advertise, promote, market, distribute, and sell the My Pillow product." (Dkt. 1 ¶ 13.) It further alleges that My Pillow interfered with Telebrands' relationships by "wrongfully attempting to sell [My Pillow's own product] directly to Telebrands' customers." (Id. ¶ 45.) It is clear from Telebrands' own allegations that its claims of alleged harmare based on an expectancy rooted in the parties' expired License Agreement. Such a claim does not constitute tortious interference with business expectancy under Illinois and is dismissed.

Further, My Pillow contends that Telebrands' tortious interference with business expectancy claim should be dismissed due to the competitor's privilege affirmative defense. Telebrands responds that Illinois law does not require it to anticipate and provide allegations against the competitor's privilege in its complaint. Under Illinois law, commercial competitors are privileged to interfere with each other's business expectancy. See Speakers of Sport, Inc. v. ProServ, Inc., 178 F.3d 862, 865 (7th Cir. 1999) (citing Soderlund Bros., Inc. v. Carrier Corp., 278 Ill. App. 3d 606, 615, 663 N.E.2d 1 (1st Dist. 1995)); Int'l Mktg., Ltd. v. Archer-Daniels-Midland Co., Inc., 192 F.3d 724, 731 (7th Cir. 1999).

Although "[a] litigant may plead itself out of court by alleging (and thus admitting) the ingredients of a defense," U.S. Gypsum Co. v. Indiana Gas Co., Inc., 350 F.3d 623, 626 (7th Cir. 2003), the Illinois Supreme Court emphasized that the competitor's privilege is "an affirmative defense to the tort of intentional interference with prospective business advantage." Gen. Motors Corp. v. State Motor Vehicle Review Bd., 224 Ill.2d 1, 15, 862 N.E.2d 209 (2007). As a result, federal courts have not required plaintiffs to overcome the competitor's privilege in the complaint itself. See, e.g., Serv. By Air, Inc. v. Phoenix Cartage & Air Freight, LLC, 78 F. Supp. 3d 852, 869 (N.D. Ill. 2015) (Dow, J.); ATC Healthcare Servs., Inc. v. RCM Techs., Inc., 282 F. Supp. 3d 1043, 1053 (N.D. Ill. 2017) (Chang, J.). This Court also finds that this alternative argument would not serve as grounds to dismiss Telebrands' tortious interference with business expectancy claim. However, as discussed, this claim is dismissed due to its failure to allege that the harm is independent of the License Agreement.

Next, My Pillow contends that Telebrands' claim for unjust enrichment cannot survive because Telebrands has claimed the existence of a contract and did not properly plead this count in the alternative. Telebrands responds that it alleges unjust enrichment in the alternative and a...

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