Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.D. Ill.: Statute of frauds defense survives motion to strike in contract action, (May 12, 2016)

By Michael Menzhuber, J.D., LL.M.

The federal district court in Chicago struck all but one of the affirmative defenses to a former distributor’s claim that the manufacturer failed to remit payments pursuant to the parties’ buy-back agreement. The manufacturer’s statute of frauds affirmative defense survived a motion to strike defenses (Maurice Sporting Goods, Inc. v. BB Holdings, Inc., May 11, 2016, St. Eve, A.).

After eight years, Maurice Sporting Goods, Inc. and BB Holdings, Inc., d/b/a Buck Bomb, formally sought to end their ongoing business relationship pursuant to which Maurice had been wholesaling Buck Bomb products to retailers. The parties entered into a written agreement (buy-back agreement) wherein Buck Bomb would buy back, subject to certain credits, the Buck Bomb products in Maurice’s inventory. However, after receiving the returned inventory, Buck Bomb failed to make payment to Maurice.

Maurice brought an action against Buck Bomb, alleging breach of a written contract and, alternatively, breach of an oral contract and unjust enrichment. Buck Bomb pleaded several affirmative defenses, as well as several counterclaims against Maurice. After Maurice filed a motion to dismiss the counterclaims and to strike the affirmative defenses, Buck Bomb voluntarily dismissed its counterclaims.

The court denied Maurice’s motion to strike Buck Bomb’s affirmative defense that the buy-back agreement between the parties violated the statute of frauds. The court determined that the factual basis for the statute of frauds defense was inferable from the pleadings and could be viable if Maurice were unable to prevail on its written contract theory.

However, Buck Bomb’s affirmative defense that Maurice’s recovery was barred by its material breach of the parties’ long-standing distribution agreement contained no allegations that plausibly suggested the existence of an oral distribution agreement encompassing the buy-back agreement at issue. The court also struck Buck Bomb’s affirmative defense that Maurice caused or contributed to its own alleged damages by making disparaging comments regarding Buck Bomb and its products because Buck Bomb failed to give Maurice “fair notice” of this defense and the grounds upon which it rested.

Further, Buck Bomb’s affirmative defense that the equitable defense of unclean hands barred Maurice’s claim was stricken. The court noted that Buck Bomb failed to include any facts establishing the essential elements of the unclean hands defense. Finally, the court struck Buck Bomb’s estoppel and waiver affirmative defenses because Buck Bomb did not identify any facts plausibly suggesting the existence of a long-standing distribution agreement or constituting the complained-of-actions.

The case is No. 15-cv-11652.

Attorneys: Jeffrey Thomas Stevenson (Patzik, Frank & Samotny Ltd.) for Maurice Sporting Goods, Inc. Richard I. Woolf (Boyle Brasher LLC) for BB Holdings, Inc.

Companies: Maurice Sporting Goods, Inc.; BB Holdings, Inc.

Cases: FranchisingDistribution IllinoisNews