Purchasing Power, LLC v. Bluestem Brands, Inc.

22 F. Supp. 3d 1305, 2014 WL 1870734, 2014 U.S. Dist. LEXIS 64101
CourtDistrict Court, N.D. Georgia
DecidedMay 9, 2014
DocketNo. 1:12-cv-258-WSD
StatusPublished
Cited by4 cases

This text of 22 F. Supp. 3d 1305 (Purchasing Power, LLC v. Bluestem Brands, Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Purchasing Power, LLC v. Bluestem Brands, Inc., 22 F. Supp. 3d 1305, 2014 WL 1870734, 2014 U.S. Dist. LEXIS 64101 (N.D. Ga. 2014).

Opinion

OPINION AND ORDER

WILLIAM S. DUFFEY, JR., District Judge.

This matter is before the Court on Defendant’s Motion for Summary Judgment [127] and Plaintiffs Motion for Trial by Jury [155],

I. BACKGROUND

This is a commercial dispute between companies that compete in the business of “payroll deduction” sales. Plaintiff Purchasing Power, LLC (“Plaintiff’) alleges [1308]*1308that Defendant Bluestem Brands, Inc. (“Defendant”) misappropriated Plaintiffs trade secrets, violated provisions of a confidentiality agreement between the parties, and engaged in fraud against Plaintiff.

A. Factual Background1

Defendant is a national retailer whose business largely consists of selling consumer products to low-income and “credit-constrained” customers by allowing purchases to be completed with payments “over time.” (SUMF ¶¶ 3-5.) Purchases are made through mail order catalogs and over the internet. (Id.) At least as early as March 2010, Defendant began exploring methods to sell more “big ticket” items, priced between $500 and $2,000. (Id. ¶ 19; Resp. SUMF ¶ 19.)

Plaintiff is a retailer that sells “big ticket” consumer products through a “voluntary payroll deduction” program called Purchasing Power. (See SAMF ¶¶ 1-6.) Plaintiff markets Purchasing Power to employers as a benefit to offer to their employees. (See id.) Under the program, employees may purchase products from Plaintiff and pay for them by having installment payments deducted from their paychecks. (See id.)

In June 2010, one of Defendant’s investors informed Defendant’s CEO that Plaintiffs business might be for sale and could represent a business opportunity for Defendant. (SUMF ¶¶ 74-77.) Defendant’s executives, who were not previously aware of Plaintiff or its Purchasing Power business model, conducted preliminary research on Plaintiff and determined that its “payroll deduction” model could be a way for Defendant to expand into the “big ticket” product purchase market. (Id. ¶ 78.) Defendant’s executives expressed their interest in meeting with Plaintiff, and Defendant’s investor arranged a telephone meeting between the parties’ principals to be conducted July 27, 2010. (Id. ¶¶ 84-85.) During the July 27, 2010, telephone call, the parties exchanged general information about their respective businesses. (Id. ¶ 85.)

The next day, on July 28, 2010, Defendant commenced an internal effort, named “Project Cortes,” to evaluate developing its own “payroll deduction” model for “big ticket” sales. (Id. ¶¶ 108-109.) The Project Cortes team, which included employees with consumer credit experience, began researching a “go-to-market” strategy for a payroll deduction sales program. (Id. ¶¶ 112-113,115-117.)

In August 2010, Plaintiff and Defendant indicated their mutual interest in pursuing a merger of their businesses, or an acquisition of Plaintiff by Defendant. (Id. ¶ 90.) The parties agreed to enter into a NonDisclosure Agreement (“NDA”) to govern the exchange of business information during the parties’ business combination negotiations. (Id.) Defendant’s in-house counsel drafted the NDA, which the parties entered into on September 1, 2010. (Id. ¶¶ 91, 97.)

[1309]*1309The NDA stated that the parties were “engaged in competitive businesses.” (SAMF ¶ 68.) The NDA also provided that Plaintiff would provide “confidential information,” as defined in the NDA, to Defendant to allow Defendant to conduct due diligence in connection with its evaluation of whether to purchase or otherwise invest in Plaintiff. (SAMF ¶¶ 67, 70.) Section 4 of the NDA prohibited Defendant from using any “confidential information” for any purpose other than due diligence. (SAMF ¶ 67.) Section 6 of the NDA required Defendant to allow Plaintiff access to review Defendant’s “operations and procedures to ensure compliance” with the NDA’s requirements. (SUMF ¶ 100.)

From mid-September to early December 2010, Defendant conducted its evaluation of Plaintiffs business ‘in a project Defendant named “Project Braves.” (Id. ¶ 130.) In September 2010, after the NDA was executed, Defendant separated the Project Braves and Project Cortes teams. (Id. ¶ 123.) The separation was to avoid the communication of information shared with Defendant during business combination negotiations to members of the Project Cortes team. (Id.)2 The Project Cortes team continued to develop a payroll deduction product, including by meeting with Defendant’s payroll department to understand payroll deduction, researching the applicability of sales taxes, and meeting with benefits brokers to determine an effective broker commission. (Id. ¶¶ 245, 253.)

While Defendant’s Project Cortes work was ongoing, Plaintiffs and Defendant’s executives met at each other’s headquarters on different occasions in connection with their business combination discussions. (Id. ¶¶ 131, 134.) During one of these meetings, an executive of Defendant told Plaintiffs executives that he had never before considered a payroll deduction product like Purchasing Power. (Id. ¶ 133.) Over the course of Defendant’s due diligence to consider merger with or acquisition of Plaintiff, Plaintiff disclosed information to Defendant that Plaintiff characterizes as “confidential” • under the NDA and a “trade secret” under state law. (See, e.g., SAMF ¶¶ 121-125.)

On December 17, 2010, Defendant made its formal offer to purchase Plaintiffs business. (SUMF ¶ 150.) Plaintiff rejected the offer, and did not make a counteroffer. (Id. ¶ 152.) On January 5, 2011, Plaintiff informed Defendant that it was formally terminating its negotiations with Defendant, and requested Defendant to return or destroy Plaintiffs confidential information as provided by the' NDA. (SAMF ¶ 140.) On February 23, 2011, Defendant’s in-house counsel advised Plaintiff that Defendant had returned or destroyed Plaintiffs confidential information that was provided. (Id. ¶¶ 141-142.)

During the parties’ negotiations, Defendant did not disclose to Plaintiff the Project Cortes work Defendant had commenced to evaluate offering its own payroll deduction product purchase system. (Id. ¶ 219.)

In July 2011, the payroll deduction product Defendant developed was branded by Defendant as “PayCheek Direct.” (SUMF ¶ 259.) In November 2011, Defendant launched a “beta” version of its PayCheek Direct by offering it to Defendant’s employees. (Id. ¶ 270.) In May 2012, Defendant, having refined its program during its beta test, began marketing its PayCheek Direct program to outside clients. (Id. [1310]*1310¶¶ 272-273.) The final version of PayCheck Direct was in some respects similar to, and in other respects, different from, the Purchasing Power program. (See id. ¶ 274; SAMF ¶ 215.) For example, differences between the programs’ features included the following:

Feature_PayCheck Direct_Purchasing Power

SKUs_;_1200 “offers”_775 “offers”_

Assumed participation rate_5% to 10%_5%_

Assumed loss ratio_8% to 10%_5% to 6%_

Average order size_$1,000_$1,300_

Spending limit as a percentage of income 3% to 3.5%6.5% to 7.5%

(SAMF ¶ 215.)3

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Cite This Page — Counsel Stack

Bluebook (online)
22 F. Supp. 3d 1305, 2014 WL 1870734, 2014 U.S. Dist. LEXIS 64101, Counsel Stack Legal Research, https://law.counselstack.com/opinion/purchasing-power-llc-v-bluestem-brands-inc-gand-2014.