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Habitat, Ltd. v. Art of the Muse

March 25, 2009

HABITAT, LTD., PLAINTIFF,
v.
THE ART OF THE MUSE, INC. D/B/A OLY STUDIO AND MECOX GARDENS & POTTERY, INC., DEFENDANTS.



The opinion of the court was delivered by: Hurley, Senior District Judge

MEMORANDUM AND ORDER

Plaintiff Habitat, Ltd. ("Plaintiff") brings this antitrust suit against defendants The Art of the Muse, Inc. d/b/a Oly Studio ("Oly") and Mecox Gardens & Pottery, Inc. ("Mecox") (collectively, "Defendants"). The Complaint asserts seven Causes of Action. The First, Second and Fourth Causes of Action are asserted against both Defendants; the Third and Seventh Causes of Action are asserted against Mecox only, and the Fifth and Sixth Causes of Action are asserted against Oly only.

Oly moves to dismiss the First, Second, Fourth and Fifth Causes of Action for failure to state a claim pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). Oly also moves for a more definitive statement pursuant to Rule 12(e) as to the Fifth Cause of Action, and to strike Plaintiff's demand for exemplary damages and attorneys' fees under the Fifth and Sixth Causes of Action. Mecox moves to dismiss the First, Second, Third, Fourth and Seventh Causes of Action pursuant to Rule 12(b)(6). For the reasons that follow, Defendants' motions to dismiss the First, Second and Third Causes of Action -- the federal antitrust claims -- are granted. The Court declines to exercise supplemental jurisdiction over the remaining state law claims.

BACKGROUND

In crafting the following summary of facts, the Court accepts all of the factual allegations in the Complaint as true.

Plaintiff is a domestic retailer of antique and faux antique furniture in Suffolk County, New York. Plaintiff has operated an antique furniture retail store in Water Mill, New York for more than ten years (the "Original Store"). Plaintiff entered the faux antique furniture retail market three years ago. Plaintiff recently opened up a second retail store in Suffolk County in Bridgehampton (the "New Store").

Oly is a manufacturer and distributor of faux antique furniture. For more than three years, Plaintiff and other faux antique furniture dealers in Suffolk County have purchased Oly's products. In fact, Plaintiff has dealt "almost exclusively with Oly with regard to the purchase of faux antique furniture for resale to consumers in Suffolk County, NY." (Compl. ¶ 13.)

Plaintiff first began selling Oly furniture in 2004. According to Plaintiff, Oly's faux antique furniture is one of a kind:

Oly is an industry leader for the manufacture and distribution of faux antiques furniture because of the superior design, reasonable price and quality of its Products. Oly's Products are highly-sought-after pieces in the current market. Oly's Products are a fresh blend of clean lines and antique motifs synchronizing traditional with contemporary. Oly's Products are hand crated, unique and are considered a 'must-have' for any serious retailer or decorator of faux antique furniture in the current market; in fact defendant's Products make a market in and of themselves. No other company rivals the quality, pricing or the extent of Oly's Products. . . . . (Id. ¶ 15.)

In 2004, Plaintiff ordered $21,744.54 worth of merchandise from Oly. In 2005, Plaintiff ordered $18,613.12 worth of merchandise from Oly. "Due to the popularity of Oly's Products at its Original Store . . . and relying to its detriment on the promise by Oly to [Plaintiff] that Oly would supply it with Oly's Products, [Plaintiff] in 2006 prepared to open [the] New Store exclusively for Oly's products . . . ." (Id. ¶ 18.) Plaintiff signed a six-year lease at the total cost of $400,000 and renovated the space for an additional $250,000 plus insurance costs to operate the New Store for the exclusive sale of Oly's products.

In January 2007, Plaintiff placed an order for $27,670.91 of Oly's products for the New Store. On January 28, 2007, Plaintiff's President met with Oly's Director and informed him that Plaintiff was opening a New Store for Oly's products and would soon be ordering an additional $100,000 worth of Oly's products to stock the New Store. Oly's Director responded that "he would have to secure permission from third-party Mecox in order to continue to sell Oly's Products to [Plaintiff]." (Id. ¶ 21.) Mecox is large retailer of home furnishings, including Oly furniture, operating at least seven retail stores nationwide, two of which are located in Suffolk County. Mecox is alleged to be Oly's largest or one of Oly's largest accounts and purchases a significant amount of Oly furniture for resale to consumers in Suffolk County.

On March 9, 2007, after consulting with Mecox and before Plaintiff could place any additional orders with Oly, Oly sent a letter to Plaintiff terminating their business relationship effective that date. As a result of the termination, Plaintiff was forced to exit the business of selling faux antique furniture at its retail stores and was caused a great loss of current and future revenue.

Plaintiff alleges that the intent of Defendants' actions in "boycotting" Plaintiff was to maintain their monopolistic power over the Suffolk County market for faux antique furniture, or alternatively, Oly furniture; to use their enormous market power to prevent competition in Suffolk County; to drive Plaintiff out of the faux antique furniture business; and to discourage other retailers in the faux antique furniture business from expanding. Plaintiff further alleges that Defendants' actions have harmed consumers in Suffolk County "in that consumers have less market options for the purchase of Oly's Products because [P]laintiff, a retail competitor of Mecox has been forced out of the business of selling Oly's Products in Suffolk County, NY and other small competitors in that locality may not seek to purchase larger orders of Oly products for resale for fear of having their purchase agreements similarly terminated." (Id. ¶ 31.)

The Complaint asserts seven causes of action, to wit: (1) Defendants committed a per se violation of Section 1 of the Sherman Act (15 U.S.C. § 1); (2) Defendants violated Section 1 of the Sherman Act under the rule of reason; (3) Mecox violated Section 2 of the Sherman Act (15 U.S.C. § 2); (4) Defendants violated the Donnelly Act (N.Y. Gen. Bus. L. § 340); (5) breach of contract against Oly; (6) detrimental reliance against Oly; and (7) tortious interference with commercial relations against Mecox. Both Oly and Mecox have filed motions to dismiss. For the reasons stated below, Defendants' motions are granted.

DISCUSSION

I. Motion to Dismiss: Legal Standards

A complaint is subject to dismissal under Rule 12(b)(6) where it "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The test is whether the plaintiff is entitled to offer evidence to support her claim, not whether he is ultimately likely to prevail. Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998). A court must liberally construe the claims and "accept[] all factual allegations in the complaint and draw[] all reasonable inferences in the plaintiff's favor." ATSI Commcn's, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).

Rule 8(a) provides that a pleading shall contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court recently addressed the pleading standard applicable in evaluating a motion to dismiss under Rule 12(b)(6). In Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007), the Court disavowed the well-known statement in Conley v. Gibson, 355 U.S. 41 (1957) that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley, 355 U.S. at 45-46. Instead, to survive a motion to dismiss under Twombly, a plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face." 127 S.Ct. at 1974.

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative ...


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