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Scrappost LLC v. Peony Online, Inc.

United States District Court, E.D. Michigan, Southern Division

February 22, 2017

Scrappost, LLC, Plaintiff/Counter-Defendant
v.
Peony Online, Inc., Defendant/Counter-Plaintiff

          OPINION & ORDER GRANTING SCRAPPOST'S MOTION FOR SUMMARY JUDGMENT (Doc. # 52) RE: PEONY'S COUNTER-CLAIM

          SEAN F. COX UNITED STATES DISTRICT JUDGE.

         This case involves a dispute between two companies that publish pricing information relating to the scrap metal industry. Defendant/Counter-Plaintiff Peony Online Inc. (“Peony”) alleges that Plaintiff/Counter-Defendant Scrappost, LLC (“Scrappost”) wrongfully obtained Peony's publications and subsequently solicited Peony's subscribers to also become subscribers of Scrappost. Peony's counter-claim includes claims for tortious interference, unfair competition, unjust enrichment and misappropriation of hot news.

         Currently before the Court is Scrappost's Motion for Summary Judgment. The motion has been fully briefed by the parties. The Court finds that oral argument would not significantly aid in the decisional process and therefore orders that the instant motion will be decided upon the briefs. See E.D. Mich. LR 7.1(f). The Court shall GRANT Scrappost's Motion for Summary Judgment for the reasons that follow.

         BACKGROUND

         A. Factual Background

         The Parties

         Peony is in the business of publishing pricing information relating to the scrap metal industry. Since 1993, Peony has offered its customers a Consumer Broker Exporter's (“CBE”) report. (Scrappost's Stmt. ¶ 11; Peony's Stmt. ¶ 11). The CBE report is a single-page, daily report that contains 70 price quotes for several scrap metal varieties. (Scrappost's Stmt. ¶ 11; Peony's Stmt. ¶ 11).

         The CBE report's format has not changed since its creation. (Scrappost's Stmt. ¶ 13; Peony's Stmt. ¶ 13). The CBE report is not interactive and Peony subscribers do not directly contribute to the report. (Scrappost's Stmt. ¶ 14; Peony's Stmt. ¶ 14). Peony publishes data from a subscriber if it deems the metal trader suitable for the service. (Scrappost's Stmt. ¶ 17; Peony's Stmt. ¶ 17). The purpose of the CBE report is to provide buyers and sellers of scrap metal with price information. (Scrappost's Stmt. ¶ 16; Peony's Stmt. ¶ 16).

         The CBE report can be accessed by Peony subscribers through fax or email. (Scrappost's Stmt. ¶ 12; Peony's Stmt. ¶ 12). In 2009, Peony began providing the CBE report on its website. (Scrappost's Stmt. ¶ 18; Peony's Stmt. ¶ 18).

         Scrappost operates a website that provides “an online marketplace for scrap [metal] dealers, brokers and consumers - offering a single destination to easily get scrap market news, commodity pricing and real time offers to buy/sell scrap materials.” (Scrappost's Stmt. ¶ 1; Peony's Stmt. ¶ 1). Scrappost considers itself to be a “Craigslist” type of business for the scrap metal industry. (Scrappost's Stmt. ¶ 2; Ex. B to Scrappost's Stmt., at 25).

         The purpose of the Scrappost business is to connect scrap metal buyers and sellers in order to enable the direct transaction of business in one forum. (Scrappost's Stmt. ¶ 3; Peony's Stmt. ¶ 3). Scrappost's business model is “software as a subscription, ” wherein Scrappost derives revenue from the annual or monthly subscription fees it charges to users of its website. (Scrappost's Stmt. ¶ 4; Ex. D to Scrappost's Stmt., at 163).

         Peony's co-presidents acknowledged that the pricing services provided by both Scrappost and Peony are not unique and that other pricing services exist in the scrap metal industry. (Ex. G to Scrappost's Stmt., at 229; Ex. I to Scrappost's Stmt., at 34).

         Scrappost's website went live in early September 2013. (Scrappost's Stmt. ¶ 5; Peony's Stmt. ¶ 5). Matthew Newman runs Scrappost's day-to-day operations. (Scrappost's Stmt. ¶ 6; Peony's Stmt. ¶ 6). According to Scrappost, its employees sought to obtain new subscribers by: (1) searching for scrap metal companies on the internet and cold-calling them or emailing them; (2) networking with scrap traders at conventions; (3) contacting scrap traders in Scrappost owner Michael Bassirpour's rolodex; and (4) contacting members of trade associations. (Scrappost's Stmt. ¶ 7).

         Newman solicits postings to the Scrappost website from subscribers by contacting Scrappost subscribers throughout the day and asking if they wish to post materials for sale on the Scrappost website. (Scrappost Stmt. ¶ 8; Peony Stmt. ¶ 8). In June 2015, Scrappost began to broker scrap metal transactions directly. (Scrappost's Stmt. ¶ 10; Peony's Stmt. ¶ 10).

         Events Giving Rise To Instant Action

         According to Peony, Scrappost obtained its subscribers by having access to Peony reports. Newman testified that during the time frame that he was soliciting subscribers, he periodically received email attachments containing Peony reports from Mike Comisso (a former owner of Scrappost), Mike Bassirpour (Scrappost owner) and Dale Turken (of Scrapgo). (Ex. 1 to Peony Resp., at 125). The reports were not sent on a regular basis and there is no evidence as to how the information in the reports was used.

         On October 2, 2013, Peony sent a letter to Scrappost asking Scrappost to “stop immediately receiving the Peony report, using in any manner the Peony report or any information contained within the report.” (Ex. 7 to Doc. #55). The letter further asked Scrappost to stop targeting or soliciting Peony's contributors.

         In 2014, Peony created the Instant Quote (“IQ”) service. (Scrappost's Stmt. ¶19). IQ provided customers with the ability to directly post scrap metal for sale. (Scrappost's Stmt. ¶ 19). In order to subscribe to the IQ service, subscribers were required to sign an exclusivity provision contained within IQ's subscriber agreement. The exclusivity provision reads:

Subscriber agrees to list his or her materials and prices on Peony Instant Quote exclusively. Subscriber agrees not to list any prices in a similar fashion (i.e., along with his or her name, company name and contact information) on any other web sites or price reports, except on Peony.s [sic] CBE and subscriber.s [sic] own web site, during his or her subscription to Peony.s [sic] CBE/Instant Quote.”

(Ex. L to Scrappost Br.).

         Peony's co-president, Ganru Ge, testified that Scrappost coming into existence was one reason IQ was created, however, the main reason was to better serve Peony's subscribers. (Ex. G to Scrappost's Stmt. at 194). Ganru Ge also testified that one of the reasons for the exclusivity provision was to prevent third-parties from trying to enter into relationships with Peony customers. (Id. at 211). Peony co-president Vivian Ge testified that Peony has never taken any action against Peony subscribers for violating its exclusive listing provision and that Peony would never take such action. (Scrappost's Stmt. ¶ 21; Peony Stmt. ¶ 22).

         Matthew Newman was first made aware of the exclusivity provision Peony had with its subscribers in April 2014. (Ex. 6 to Peony's Resp. at 12-13). Scrappost claims that its subscribers complained that Peony called them advising that they were not allowed to advertise on both Scrappost and Peony's sites. (Ex. B. to Scrappost's Stmt. at 135-36). Once made aware of the exclusivity provision, Scrappost continued to run its business as it normally did. (Ex. 1 to Peony Resp. at 101). Specifically, Newman testified as to the following:

Q. Okay. After that date, did you continue soliciting price information from your subscribers who had told you that Peony told them that they couldn't list with you?
A. Yes, they were my subscribers. Their agreements with Peony have nothing to do with ...

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