Cosmetic Gallery Inc v. Schoeneman Corp

CourtCourt of Appeals for the Third Circuit
DecidedJuly 19, 2007
Docket05-3679
StatusPublished

This text of Cosmetic Gallery Inc v. Schoeneman Corp (Cosmetic Gallery Inc v. Schoeneman Corp) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cosmetic Gallery Inc v. Schoeneman Corp, (3d Cir. 2007).

Opinion

Opinions of the United 2007 Decisions States Court of Appeals for the Third Circuit

7-19-2007

Cosmetic Gallery Inc v. Schoeneman Corp Precedential or Non-Precedential: Precedential

Docket No. 05-3679

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2007

Recommended Citation "Cosmetic Gallery Inc v. Schoeneman Corp" (2007). 2007 Decisions. Paper 653. http://digitalcommons.law.villanova.edu/thirdcircuit_2007/653

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 2007 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 05-3679

COSMETIC GALLERY, INC. d/b/a THE SALON AT IMAGE BEAUTY, Appellant v.

SCHOENEMAN CORPORATION d/b/a SCHOENEMAN BEAUTY SUPPLY; F. DALE SCHOENEMAN, individually, jointly, severally and in the alternative

On Appeal from the United States District Court for the District of New Jersey D.C. Civil Action No. 01-cv-4896 (Honorable Robert B. Kugler)

Argued April 24, 2007 Before: SCIRICA, Chief Judge, FUENTES and ALARCÓN*, Circuit Judges.

(Filed: July 19, 2007)

STEPHEN J. DeFEO, ESQUIRE (ARGUED) Brown & Connery 360 Haddon Avenue Westmont, New Jersey 08108 Attorney for Appellant

BURT M. RUBLIN, ESQUIRE (ARGUED) Ballard, Spahr, Andrews & Ingersoll 1735 Market Street, 51st Floor Philadelphia, Pennsylvania 19103 Attorney for Appellees

OPINION OF THE COURT

SCIRICA, Chief Judge. At issue in this civil antitrust suit alleging a group boycott is whether plaintiff offered sufficient evidence to survive

* The Honorable Arthur L. Alarcón, United States Circuit Judge for the Ninth Judicial Circuit, sitting by designation.

2 defendants’ motion for summary judgment. We will affirm the grant of summary judgment. I. Plaintiff Cosmetic Gallery, Inc. is a New Jersey corporation that owns and operates a hair salon and retails hair care products and professional beauty supplies. Defendant Schoeneman Corporation is a Pennsylvania corporation, owned and operated by co-defendant F. Dale Schoeneman, and does business as Schoeneman Beauty Supply, a wholesale distributor of beauty supplies to salons in Pennsylvania, New Jersey, Delaware and West Virginia. Cosmetic Gallery filed this suit in New Jersey Superior Court, alleging violations of the New Jersey Antitrust Act, N.J. Stat. Ann. § 56:9-3, statutory and common law unfair competition, N.J. Stat. Ann. § 56:4-1, wrongful refusal to deal, tortious interference with contractual relations, and tortious interference with prospective economic advantage. Defendants removed to the United States District Court for the District of New Jersey on diversity grounds.1

1 The District Court had jurisdiction under 28 U.S.C. § § 1332 and 1441. We have jurisdiction over this appeal of a final order of the District Court under 28 U.S.C. § 1291. We review a district court’s decision to grant summary judgment de novo, “employing the same legal standards the [district] court was required to use.” Intervest v. Bloomberg, 340 F.3d 144, 158 (3d Cir. 2003).

3 II. This suit arises from the business of selling and distributing certain lines of hair-care products that are designated as “salon-only” lines and products. Manufacturers of salon-only lines and products routinely place restrictions on distributors that limit resale only to professional hairstylists or hair salons, making these the only outlets from which an end use customer can buy the exclusive products. The restrictions, which effectively limit the availability of the products, serve to increase the cachet and prestige of these salon-only product lines, and enable their sale as exclusive premium products. Although they differ, distribution agreements typically require that in order to purchase salon-only products from a distributor, a retailer must have a salon license and must derive some minimum amount of revenue from salon business, and that salon services—as opposed to product sales—must account for between 30 percent and 50 percent of its revenue. Many agreements also prohibit distribution to any salons or persons who have engaged in “diversion” of salon-only products. In this context, diversion is the sale of salon-only products outside the permitted channels expressly provided in manufacturer-distributor contracts, such as sales by a distributor to a retailer who is not connected to a professional hair salon or licensed hairstylists. The distribution agreements often include sanctions and penalties, including termination of distribution contracts, should the products be diverted outside authorized channels. Cosmetic Gallery, a corporation owned and operated by

4 Charles Eisenberg, is a retailer of hair care products. Cosmetic Gallery also operated two retail stores in southern New Jersey under the name Image Beauty. Cosmetic Gallery asserts it intended to convert or open three facilities under a different business model that included both salon and retail sales services. To that end, Eisenberg had a functioning salon in one of the Image Beauty locations, though it accounted for less than 5 percent of that store’s revenue; the other two salons never materialized. As part of its intended business model, Cosmetic Gallery sought contracts with several distributors of salon-only hair-care lines and products doing business with independent salons and professional hair stylists in southern New Jersey. Among these distributors were Schoeneman Beauty Supply, Inc., East Coast Salon Services, Emiliani Enterprises, and Goldwell Mid-Atlantic. In March 2001, Cosmetic Gallery signed a salon agreement with Emiliani Enterprises to buy Paul Mitchell products. But Emiliani Enterprises soon canceled the agreement because the company had learned Cosmetic Gallery was selling diverted Paul Mitchell products. Cosmetic Gallery contends this cancellation was at defendants’ direction. Unable to secure contracts for salon-only brands from the area distributors, Cosmetic Gallery sued Schoeneman Beauty Supply and F. Dale Schoeneman, its owner, alleging the defendants led and enforced a group boycott of Cosmetic Gallery among hair care product distributors. In addition to Schoeneman Beauty Supply, Schoeneman also owns fifty percent of Renee

5 Beauty Salons, Inc., which owns and operates twelve salon stores in New Jersey under the name Beauty Bar. Just one of these salons is located near a Cosmetic Gallery Image Beauty store—in a neighboring town in southern New Jersey—but that Beauty Bar salon did not open until after the events challenged by Cosmetic Gallery, and the nearby Cosmetic Gallery store did not have competing salon services. Beauty Bar, which combines both retail and salon services, sells salon-only brands of hair products in its stores. Those products are purchased by Beauty Bar from Schoeneman Beauty Supply and other distributors, including East Coast Salon Services, Emiliani Enterprises, and Goldwell Mid- Atlantic. Cosmetic Gallery contends Schoeneman orchestrated a group boycott in order to prevent it from competing with Beauty Bar. Cosmetic Gallery alleges Schoeneman Beauty Supply and other distributors who had an economic interest in the success of Beauty Bar because it was a big customer consequently had an interest in keeping out Image Beauty as a competitor.

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