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ABG Prime Group LLC v. Innovative Salon Products LLC

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

July 19, 2018

ABG PRIME GROUP, LLC, Plaintiff,
v.
INNOVATIVE SALON PRODUCTS, LLC, d/b/a LOMA, et al., Defendants.

          R. Steven Whalen Magistrate Judge.

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS [24, 33]

          LAURIE J. MICHELSON U.S. DISTRICT JUDGE.

         ABG Prime Group sells beauty products on Amazon. This included LOMA hair-care essentials. But once LOMA and its founder, David Hanen, discovered LOMA's products on ABG's virtual shelves, ABG says LOMA and Hanen worked to force ABG off Amazon.com's marketplace.

         According to ABG, LOMA and Hanen wished to maintain control over Amazon.com's beauty-product market. So they reached out to one of ABG's online competitors, All Alliance. LOMA and Hanen gave All Alliance the opportunity to be the exclusive LOMA retailer on Amazon. ABG says, in exchange, LOMA and Hanen required All Alliance to target ABG's store. To get Amazon to suspend ABG's store, All Alliance (along with LOMA and Hanen) fraudulently complained to Amazon that ABG was stealing LOMA's intellectual property. And, as intended, All Alliance's complaints, when coupled with LOMA's, led the retail giant to temporarily close ABG's store.

         In turn, ABG sued LOMA, seeking a declaratory judgment that ABG did not infringe upon LOMA's trademark rights. LOMA counter-sued, alleging trademark infringement. ABG then amended its complaint to add All Alliance and claims of antitrust conspiracy, business tort, and fraud.

         Now LOMA and Hanen move to dismiss ABG's antitrust conspiracy and fraud claims. For the reasons set forth below, the Court will grant, in part, and deny, in part, the motions to dismiss.

         I.

         LOMA and Hanen move to dismiss parts of ABG's amended complaint. So the following well-pled factual allegations from that complaint are accepted as true. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         Gary and Adam Greenberg along with Bryan Acrich incorporated ABG Prime to sell products on Amazon. (R. 13, PageID.148.) Amazon's platform permits third parties-like ABG Prime-to open the digital equivalent of a brick-and-mortar shop. (Id. at PageID.149.) ABG's store, hosted on Amazon.com, relies on Amazon's market share and fulfilment capabilities to generate an average of $10, 000 in daily revenue. (Id. at PageID.149-150.) Among the products on its virtual shelves, ABG stocks LOMA hair-care essentials. (Id. at PageID.153.) ABG purchases LOMA shampoos, conditioners, and other hair-care products from a distributor only to turn around and resell the identical, unopened, and authentic product through its Amazon store. (Id. at Page.ID.153.)

         In March 2017, LOMA complained to Amazon about ABG's store. According to LOMA's complaint, ABG's sale of LOMA products infringed on LOMA's trademark rights. (Id. at PageID.153.) Upon receiving the complaint, Amazon temporarily closed ABG's store, just as LOMA intended. (Id. at PageID.153, 156.) But Amazon's policy requires a complainant to complete a “test buy”-a controlled purchase of the allegedly infringing product to determine its authenticity-prior to claiming trademark infringement. (Id. at PageID.154.) LOMA had not completed a test buy prior to complaining, so LOMA withdrew the complaint and Amazon permitted ABG to reopen. (Id. at PageID.154.)

         Once reopened, ABG continued to sell LOMA hair-care products. And in the months after LOMA withdrew its first complaint, LOMA completed two test buys. (Id. at PageID.154-155.) And doing so, LOMA confirmed the products' authenticity to ABG's lawyer. Id. Yet LOMA again complained to Amazon, but instead of asserting trademark infringement specifically, it more generally asserted that ABG was stealing its intellectual property. (Id. at PageID.155.) Amazon again temporarily closed ABG's store, but, this time, permanently barred ABG from selling LOMA products. Id.

         Sometime after its second suspension, ABG came to believe that a Florida entity, All Alliance Products, was the only third-party storefront selling authentic LOMA goods on Amazon.[1](Id. at PageID.151.) Because All Alliance was the only retailer, ABG suspected that All Alliance and LOMA entered into an exclusive arrangement, (R. 13, PID 152, 157), designed to remove competitors from Amazon (R. 13, PageID.157). Specifically, ABG thinks the arrangement was intended to target and remove ABG. (Id. at Page.ID.165.) According to ABG, All Alliance polices the digital marketplace for third-party retailers of LOMA products. (Id. at PageID.164.) Upon discovering a third-party retailer, either LOMA or All Alliance file complaints with Amazon. (Id. at PageID.165.) Complaining to Amazon results in the third-party retailer temporarily losing its selling privileges. (Id. at PageID.166.)

         ABG unearthed this conspiracy after Amazon forwarded LOMA's first complaint to ABG. The complaint appeared to be written by Cimos Angelis, LOMA's lawyer. (Id. at PageID.153.) But somehow ABG discovered that Demosthenes Prodromitis actually wrote it. (R. 13, PageID.153.) ABG learned that Prodromitis has some connection to All Alliance, (R. 13, PageID.146), and Angelis and Demosthenes Prodromitis have been friends since high school. (R. 13, PageID.152.) So ABG insists that only a conspiracy accounts for the relationship between All Alliance, Prodromitis, Angelis, LOMA, and Hanen. (R. 13, PageID.164.)

         Also, ABG alleges LOMA's complaints to Amazon were fraudulent. (R. 13, PageID.165.) The first complaint said ABG's sales infringed on LOMA's trademark rights, but LOMA had yet to complete a test buy, so LOMA had no basis to make such a complaint. (R. 13, PageID.166.) And as LOMA's test buys confirmed ABG sold authentic LOMA products, the second complaint, claiming theft of LOMA's intellectual property, was equally fraudulent. (R. 123, PageID.156.) In ABG's view, LOMA had no factual basis to complain, knew Amazon would forward the complaints to ABG, intended ABG to stop selling LOMA ...


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