Union Cosmetic Castle v. Amorepacific Cosmetics

• Court: U.S. District Court — Eastern District of New York
• Writing for the Court: Glasser
• Citation: Union Cosmetic Castle v. Amorepacific Cosmetics, 454 F.Supp.2d 62 (E.D. N.Y. 2006)
• Decision Date: 02 October 2006
• Docket Number: No. 06-CV-3931.,06-CV-3931.
• Parties: UNION COSMETIC CASTLE, INC., Sookhui Kim d/b/a Monet Assi Plaza, Evergreen Cosmetics, Inc., Hi Cho Suh d/b/a Broadway Amore Cosmetics and Chun Ha Mun d/b/a BYC Apparel, Plaintiffs, v. AMOREPACIFIC COSMETICS USA, INC., Amorepacific, Inc., Jee Young Jin d/b/a Jee Young Jin Cosmetics, Jee Young Jin d/b/a the Amore and Yulia Min d/b/a Seoul Plaza Monet, Defendants.

Page 62

454 F.Supp.2d 62

UNION COSMETIC CASTLE, INC., Sookhui Kim d/b/a Monet Assi Plaza, Evergreen Cosmetics, Inc., Hi Cho Suh d/b/a Broadway Amore Cosmetics and Chun Ha Mun d/b/a BYC Apparel, Plaintiffs, v. AMOREPACIFIC COSMETICS USA, INC., Amorepacific, Inc., Jee Young Jin d/b/a Jee Young Jin Cosmetics, Jee Young Jin d/b/a the Amore and Yulia Min d/b/a Seoul Plaza Monet, Defendants.

No. 06-CV-3931.

United States District Court, E.D. New York.

October 2, 2006.

COPYRIGHT MATERIAL OMITTED

Christine M. Bae, Kim & Bae, P.C., New York City, for Plaintiffs.

Mark Allen Robertson, Fulbright & Jaworski LLP, New York City, for Defendants.

MEMORANDUM AND ORDER

GLASSER, Senior District Judge.

INTRODUCTION

Plaintiffs in this civil action alleging violations of federal and state antitrust law and several common law causes of action move this court for a preliminary injunction and temporary restraining order 1) requiring defendants Amorepacific Cosmetics USA, Inc. and Amorepacific, Inc. (collectively, the "Amore Defendants") to resume supplying plaintiffs with Amorepacific brand cosmetics at the prevailing market rate during the pendency of this action; 2) restraining defendants Jee Young Jin d/b/a Jee Young Jin Cosmetics, Jee Young Jin d/b/a The Amore, and Yulia Min d/b/a Seoul Plaza Monet (collectively, the "Retail Defendants") from encouraging, requesting or inducing the Amore Defendants to refuse to supply Amorepacific brand cosmetics to the plaintiffs; 3) awarding the plaintiffs recovery of their costs and disbursements, including reasonably attorneys' fees, incurred in connection with this motion, and 4) awarding such other and further relief as the court deems just and proper. For the reasons stated below, the plaintiffs' motion is denied in its entirety.

FACTS

Plaintiffs Union Cosmetic Castle, Inc., Sookhui Kim d/b/a Monet Assi Plaza, Evergreen Cosmetics, Inc., Hi Cho Suh d/b/a Broadway Amore Cosmetics, and Chun Ha Mun d/b/a BYC Apparel are corporations or sole proprietorships engaged in the retail distribution of Korean cosmetics in Queens, New York. The Amore Defendants are regional distributors of the Amorepacific cosmetic line manufactured by non-party Amorepacific Corporation, the largest cosmetics manufacturer in the Republic of Korea. The Retail Defendants are retailers of Korean cosmetics and compete with the plaintiffs in the Korean cosmetics market in Queens, New York.¹

The gravamen of the plaintiffs' complaint is that the Amore Defendants violated several provisions of the federal and state antitrust laws, New York state law regarding deceptive trade practices, and several common law duties by unilaterally adopting an exclusive distributorship business model and refusing to sell Amorepacific products to former retailers, such as the plaintiffs, who refused to accept the exclusive dealing arrangement proposed by the Amore Defendants, which would preclude them from carrying Korean cosmetic products manufactured or distributed by the Amore Defendants' competitors.² The complaint further alleges that, by accepting the Amore Defendants' offer to enter into such exclusive distribution agreements, the Retail defendants breached the federal and state antitrust laws by conspiring with the Amore Defendants to exclude the plaintiffs from the New York City Korean cosmetics market.³

Plaintiffs operate stores and boutiques in predominantly Korean-American communities in Queens, and are former retail vendors of the Amorepacific line of cosmetics distributed in New York City by the Amore Defendants. The plaintiffs allege that, from at least August 2004 until March 2006,⁴ Amorepacific products were the dominant cosmetic products sold in each plaintiffs store, and comprised more than 50% of each plaintiffs annual gross sales in 2005. Although the parties' business relationships were never reduced to a written or oral contract, the plaintiffs allege that shortly after the inception of their at-will relationships, the Amore Defendants introduced certain promotional initiatives, including free samples of Amore products, rebates on wholesale purchases, and monetary awards, which were intended to motivate the plaintiffs to purchase and carry more Amorepacific cosmetics than they otherwise would have. These marketing tactics, to which the plaintiffs "acquiesced," in conjunction with the unique qualities of Amorepacific brand cosmetics, enabled the Amore Defendants to deeply penetrate the Korean cosmetics market in New York, such that Amorepacific became the dominant brand in that market. The plaintiffs allege that, notwithstanding the lack of a formal contract between the parties, the Amore Defendants exercised greater control over the business decisions of their retailers than is generally the case, by, for example, dictating rather than suggesting the retail price at which the retailers could sell Amorepacific products, and further allege that each plaintiff complied with all demands and conditions made by the Amore Defendants during the period of their commercial relationship.

The parties' relationship began to deteriorate in August 2004, when the Amore Defendants held a meeting with the plaintiffs and other retailers in which they first announced their intention to enter into exclusive dealing agreements with Amorepacific retailers. Nearly a year later, in June 2005, a second meeting was held, in which the plaintiffs allege that the Amore Defendants demanded that the plaintiffs cease carrying cosmetics from other manufacturers and enter into exclusive distributorship agreements. The plaintiffs refused to comply with the Amore Defendants' request, and in January 2006, the Amore Defendants notified the plaintiffs of their intention to discontinue sales of Amorepacific products to retailers who had not agreed to operate their establishments as "Amore Exclusive Shops."⁵ Finally, in March 2006, the Amore Defendants notified each plaintiff by letter of their intention to terminate the distribution and sale of Amorepacific cosmetic products to the plaintiffs, because of the plaintiffs' rejection of the Amore Defendants' invitation to participate in the exclusive distribution arrangement. On or about March 31, 2006, the Amore Defendants did terminate the distribution and sale of Amorepacific products to each plaintiff, and have thereafter refused to sell Amorepacific products to any plaintiff. The Retail defendants, who are competitors with the plaintiffs in the Korean cosmetics retail market in New York City, entered into exclusive distribution agreements with the Amore Defendants, and continue to receive supplies of Amorepacific cosmetics from the Amore Defendants in accordance with those agreements. The plaintiffs allege that, largely due to the demand created by their own earlier efforts on behalf of the Amore Defendants, Amorepacific cosmetics are now the predominant cosmetic products in the New York City Korean cosmetics market, and that the plaintiffs' sales have declined significantly since their supply of Amorepacific products was terminated by the Amore Defendants. The plaintiffs further allege that this reduction in sales and the loss of their customer base and good-will put their businesses in serious jeopardy of financial insolvency in the near future.

The plaintiffs commenced this action in August 2006, alleging various violations of federal and state law against the defendants.⁶ Currently before the court is the plaintiffs' motion for a temporary restraining order and preliminary injunction ordering, inter alia, the Amore Defendants to resume supplying the plaintiffs with Amorepacific products at the current market price during the pendency of the underlying action. The defendants oppose the plaintiffs' motion on the grounds that the plaintiffs have failed to establish either irreparable harm or a likelihood of success on the merits of their various claims.

DISCUSSION

A. Standard for Injunctive Relief

Federal Rule of Civil Procedure 65 permits this court to grant such provisional remedies as preliminary injunctions and temporary restraining orders in appropriate circumstances. However, "[a] preliminary injunction is considered an `extraordinary' remedy that should not be granted as a routine matter." Ahmad v. Long Island Univ., 18 F.Supp.2d 245, 247 (E.D.N.Y.1998) (citing JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75, 80 (2d Cir.1990) (recognizing that the preliminary injunction is "one of the most drastic tools in the arsenal of judicial remedies")). In order to establish the propriety of such drastic judicial intervention, the general rule is that the moving party must demonstrate "(1) irreparable harm in the absence of the injunction and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor." My-WebGrocer, LLC v. Hometown Info, Inc., 375 F.3d 190, 192 (2d Cir.2004) (quoting Merkos L'Inyonei Chinuch, Inc. v. Otsar Sifrei Lubavitch, Inc., 312 F.3d 94, 96 (2d Cir.2002)). This is a heavy burden of persuasion, and it becomes even heavier when the moving party seeks mandatory relief, rather than prohibtory maintenance of the status quo, by means of a provisional remedy. "The party seeking the injunction must show a `clear' or `substantial' likelihood of success where the injunction sought is mandatory-i.e., it will alter, rather than maintain, the status quo." Sunward Elecs., Inc. v. McDonald, 362 F.3d 17, 24 (2d Cir.2004) (citing Tom Doherty Assoc., Inc. v. Saban Entm't Co., 60 F.3d 27, 34 (2d Cir.1995)).

The plaintiffs argue that the provisional relief they seek would be prohibitory, and therefore not subject to the higher standard applied to requests for mandatory injunctions, because it would merely maintain the status quo by restoring the relationship between the plaintiffs and defendants to the state in which it existed before...