Orologio of Short Hills Inc. v. Swatch Group (U.S.) Inc.

653 F. App'x 134
CourtCourt of Appeals for the Third Circuit
DecidedJune 24, 2016
Docket15-3024
StatusUnpublished
Cited by4 cases

This text of 653 F. App'x 134 (Orologio of Short Hills Inc. v. Swatch Group (U.S.) Inc.) 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
Orologio of Short Hills Inc. v. Swatch Group (U.S.) Inc., 653 F. App'x 134 (3d Cir. 2016).

Opinion

OPINION *

KRAUSE, Circuit Judge.

Appellants Orologio of Short Hills and Orologio International Ltd. (collectively, “Orologio”) seek reversal of the District Court’s order (1) granting summary judgment to Appellee Swatch Group on Orolo-gio’s claims under the New Jersey Franchise Practices Act (FPA), N.J. Stat. Ann. § 56:10-1 to -15, and § 2(d), (e) of the Robinson-Patman Act (RPA), 15 U.S.C. § 13(d), (e), (2) denying Orologio’s motion for partial summary judgment on its RPA claims, and (3) denying Orologio’s “Motion for an order striking [Swatch’s] answer in part and impos[e] other sanctions based upon [Swatch’s alleged] spoliation of evidence.” We conclude that the District Court properly granted summary judgment on the FPA claim, erred in granting summary judgment on the RPA claims, and did not abuse its discretion in denying the motion to strike and for sanctions. We will thus affirm in part and reverse in part, remanding the case for proceedings consistent with this opinion.

I. Background 1

Orologio operates a business in The Mall at Short Hills in Millburn, New Jersey, selling high-end watches of various brands. Since 1994 this top-notch watch shop was an authorized dealer of Swatch’s premier “Omega” brand of watches, famed, among other things, for their use by the fictional international super-spy James Bond. While there was no formal, written contract between Orologio and Swatch, 2 the two had, by all accounts, what appeared to be a durable business relationship in which Or-ologio purchased Omega watches for resale, was permitted to display Swatch’s trademarks, and benefited from advertising assistance from Swatch. This relationship hummed along until 2011, when Swatch terminated its relationship with Orologio because Swatch planned to open its own company store in The Mall at Short Hills. In its Complaint, Orologio avers that, at the time of the termination, Omega sales accounted for roughly 25% of Orologio’s total revenue. Nonetheless, after losing its status as an Omega dealer, Orologio’s business increased until at least 2014.

Swatch provides a number of promotional benefits to retailers that sell its products, four of which are particularly relevant to this case. First, under the Partner Plan, a voluntary program between Swatch and a given Omega dealer, retailers earn from Swatch a monetary credit if they achieve a previously-set minimum retail sales threshold, and that size of the credit increases with the amount of sales once *137 the threshold is passed. Orologio received credits under the Partner Plan in 2004 and 2005, but it failed to reach the threshold necessary to earn credits in subsequent years. Second, retailers may apply for coop support, through which Swatch provides funds to select retailers to help defray the costs of specific, additional advertising (though some degree of cost sharing between the retailer and Swatch is expected). Orologio’s president has stated that the shop has received co-op support “over [its] more than 20-year relationship” with Swatch, with the most recent successful application providing funds in 2006. Third, Swatch at times would invest in “tagging,” which amounts to advertisements (e.g., billboards, television commercials, and magazine ads) funded entirely by Swatch that feature the name of a specific retailer. Fourth, Swatch has offered “slotting fees” to at least one Omega retailer, whereby Swatch pays a premium in order to ensure Omega watches are displayed in an especially advantageous spot in a given store.

In 2007, things changed. Under new management, Swatch imposed new restrictions and requirements on authorized Omega dealers, compliance with which was required in order to retain their buyer-seller relationship with Swatch’s Omega line. The most dramatic change was a requirement that any authorized retailer maintain at least sixty-five timepieces in its inventory at any given time. Despite the increase in financial investment this uptick in inventory would require, Orologio wanted to preserve its access to Omega products and thus agreed to make the change. 3 Orologio also claims the Partner Plans fundamentally changed in January 2008, shifting the rewards available to retailers who reached agreed-upon thresholds from monetary credits on future inventory purchases to funds for promotional and advertising support — i.e., co-op funds. According to Orologio’s president and the owner of another specialty watch shop, Swatch represented the newly formulated Partner Plan as the exclusive means of accessing co-op funding, thus eliminating the separate application process. Swatch disputes this characterization, insisting that meeting the targets under the Partner Plan to trigger credits was not required for receipt of co-op funds.

Orologio discovered that some of its competitors were, in fact, receiving co-op funds even without participating in the new Partner Plan and insists that these coop decisions were not only done behind Orologio’s back but were also doled out at Swatch’s whim without any objective standards guiding which retailers received coop funds. Meanwhile, Orologio also discovered that some of its competitors had benefited from tagged ads and slotting fees— benefits Orologio insists were not offered to it at any time and were not based on any objective criteria.

In 2011, upon being dropped as an authorized Omega dealer, Orologio brought suit first in New Jersey state court, alleging that, under the FPA, N.J. Stat. Ann. § 56:10-4, it was a franchisee of Swatch and that Swatch’s termination of their business relationship without cause thus violated New Jersey law, id. § 56:10-5. The state court denied Orologio relief. Or-ologio filed its Complaint in federal court a few months later, seeking declaratory and *138 injunctive relief for its FPA claim along with claims under § 2(d), (e) of the Robinson-Patman Act, 15 U.S.C. § 13(d), (e), and a state law claim for breach of the covenant of good faith and fair dealing. Orologio’s RPA claims rest on the idea that Swatch failed to provide promotional benefits to all its authorized Omega dealers in a way that was “available on proportionally equal terms.” 15 U.S.C. § 13(d). Orologio claims Swatch failed to meet that bar (1) by not providing notice that co-op funds were available outside the Partner Plan nor that tagging and slotting fees were on the table, and (2) by offering co-op support, tagging, and slotting fees in an ad hoc manner rather than through the use of objective criteria.

During the pendency of this litigation, Swatch authorized the destruction of hard-copy tapes containing the tagged television commercials it funded for other authorized Omega dealers. Based on the evidence in the record, the tapes were destroyed without reference to this litigation and for the sole reason that Swatch no longer wished to pay a storage company to house the tapes.

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653 F. App'x 134, Counsel Stack Legal Research, https://law.counselstack.com/opinion/orologio-of-short-hills-inc-v-swatch-group-us-inc-ca3-2016.