Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—11th Cir.: Hair accessory manufacturer not liable for breach of distribution agreement, (Feb 29, 2016)

By Jody Coultas, J.D.

A district court’s dismissal of Ingenuity, Inc.’s breach of contract, tortious interference, and breach of confidentiality agreement claims against a sub-distributor of a hair accessory was affirmed by the U.S. Court of Appeals in Atlanta (Ingenuity, Inc. v. Linshell Innovations Limited, February 26, 2016, Per Curiam).

Ingenuity was the exclusive distributor of Linshell Innovations Limited’s hair accessory known as the Linziclip. Several years into the agreement, Ingenuity approached Conair Corporation about providing sub-distribution services but the negotiations fell through. Later, Linshell decided to find a new distributor for the Linziclip and executed a distribution agreement with Conair.

Ingenuity sued Linshell for breach of contract and Conair for tortious interference with contractual and business relations and breach of the confidentiality agreement.

A district court granted dismissal of the claim against Conair. Because Ingenuity failed to pursue a default judgment against Linshell even after the district court ordered it do so, the district court dismissed Ingenuity’s claims against Linshell with prejudice for want of prosecution. Ingenuity appealed.

Ingenuity failed to raise a material dispute of fact regarding Conair’s intent to interfere with the distribution agreement between Ingenuity and Linshell, according to the court. Conair was aware of the distribution agreement between Ingenuity and Linshell, and attempted to obtain information about the agreement’s status from Linshell. However, Ingenuity offered only speculations to support its argument that Conair intended to induce a breach. Even if Ingenuity could prove the requisite level of intent on the part of Conair, the undisputed evidence in the record established that Linshell either believed it was justified in terminating the distribution agreement with Ingenuity or simply did not care. Therefore, Linshell was predisposed to breach.

Additionally, there was no error in dismissing Ingenuity’s claim that Conair breached the confidentiality agreement, according to the court. Ingenuity offered no evidence that Conair used confidential information in a manner contrary to the non-disclosure agreement.

Finally, the district court did not err in dismissing Ingenuity’s claims against Linshell for want of prosecution, according to the court. Ingenuity declined to pursue a default judgment on its claims against Linshell because it believed doing so would not be “congruent with the [summary judgment] order and findings in favor of Conair.” The district court ordered Ingenuity to file a motion for default judgment within a specified time or face dismissal with prejudice for lack of prosecution. Ingenuity failed to file a motion for default judgment, provided no adequate justification for its failure, and provided no such justification on appeal.

The case is No. 15-10214.

Attorneys: Kevin Patrick Kelly (Kelly Law, PA) for Ingenuity, Inc. Courtney Marie Keller (Greenberg Traurig, LLP) and Lee A. Miller (Arthur, Chapman, Kettering, Smetak & Pikala, PA) for Conair Corp.

Companies: Ingenuity, Inc.; Linshell Innovations Limited; Conair Corporation

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