Super Natural Distributors, Inc. v. Muscletech Research & Development

196 F. Supp. 2d 761, 2002 U.S. Dist. LEXIS 7037, 2002 WL 507066
CourtDistrict Court, E.D. Wisconsin
DecidedMarch 12, 2002
Docket00-C-1361
StatusPublished
Cited by4 cases

This text of 196 F. Supp. 2d 761 (Super Natural Distributors, Inc. v. Muscletech Research & Development) is published on Counsel Stack Legal Research, covering District Court, E.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Super Natural Distributors, Inc. v. Muscletech Research & Development, 196 F. Supp. 2d 761, 2002 U.S. Dist. LEXIS 7037, 2002 WL 507066 (E.D. Wis. 2002).

Opinion

ORDER

STADTMUELLER, Chief Judge.

Defendant MuscleTech Research and Development [“MuscleTech”] is a Canadian manufacturer of a popular line of dietary supplements. Plaintiff Super Natural Distributors, Inc. [“Super Natural”] is a national distributor of health products, including those of MuscleTech, whose physical plant is located in Waukesha, Wisconsin. This case arises out of Muscle-Tech’s termination of Super Natural’s distributorship after learning that Super Natural had obtained nearly $1 million worth of possibly counterfeit MuscleTech product from a mysterious off-shore supplier recommended by a former MuscleTech employee currently under indictment for fraud. Super Natural claims that the termination was improper under the Wisconsin Fair Dealership Law [‘WFDL”] because the termination notice did not set out all the reasons for termination and did not offer a realistic opportunity to cure. Super Natural also alleges that Muscle-Tech violated the Robinson-Patman Act, 15 U.S.C. §§ 13(a) et seq., by engaging in price discrimination injurious to interstate commerce.

As the injuries complained of exceed $75,000 and the parties are of diverse citizenship, jurisdiction in this court is proper pursuant to 28 U.S.C. §§ 1332, 1441. Jurisdiction is also proper under 28 U.S.C. §§ 1331, 1337 due to the presence of a federal claim. Venue is proper pursuant to 28 U.S.C. § 1441(a) because the claims arose in this district.

*763 In its defense, MuscleTech contends that the MuscleTech — Super Natural relationship was not a “dealership” and that Super Natural is not entitled to the protections of the WFDL. 1 It further argues that if the relationship was in fact a dealership within the meaning of the WFDL, it was not a “Wisconsin” dealership protected by that law. MuscleTech is currently before the court seeking summary judgment on the WFDL claim. The parties agree that a trial is necessary on the Robinson-Pat-man Act claim.

BACKGROUND

Super Natural is a large operation. In 2000, its sixteenth year of existence, Super Natural sold nearly $23 million worth of merchandise to 1400 different retailers nationwide, 2 earning gross profits of over $3.7 million. 3 Although Super Natural distributes the products of more than 200 vendors, it generated 19.25% of its revenue 4 in 2000 from sales of MuscleTech-branded goods. This was a sharp increase over the previous year, when MuscleTech accounted for only 8.7% of Super Natural’s sales. In the other two years of the non-contractual MuscleTech-Super Natural relationship, the shares of revenue derived from MuscleTech goods were 6.42% (1998) and 0.85% (1997). Super Natural attributes the annual increases, especially the increase from 1999 to 2000, to its increased investments and sales efforts dedicated to the MuscleTech brand. MuscleTech attributes the gains to its own increased advertising, to its expansion of the product line, to a more than 50% decrease in the number of authorized MuscleTech distributors, and, most significantly, to Super Natural obtaining unauthorized, possibly counterfeited, products, which it could sell at below-market prices. MuscleTech points out that “MuscleTech” product obtained from MuscleTech Research and Development itself only accounted for 12.5% of Super Natural’s revenues in 2000 and 7.63% in 1999. The other 6.75% and 1.07%, respectively, came from an unauthorized supplier named “M Olympus” (discussed below).

In support of her position that Super Natural’s efforts led to most of the sales increases, Super Natural president Patricia Calvy notes that in September 2000, Super Natural signed a fourteen-month lease on a larger warehouse than it had previously occupied. This warehouse costs $21,000 a month in rent, as opposed to the $9,000 per month it had previously paid. Ms. Calvy says MuscleTech pressured her into leasing this larger space by instituting a $100,000 per month order minimum (raised to $200,000 in April 2000) 5 for dis *764 tributors wishing to receive the company’s largest discounts. MuscleTech disputes that it forced Super Natural to increase capacity, noting that Super Natural’s overall sales increased more than 100% between 1997 and 1999 and that only l/28th of the new warehouse’s floor space was actually dedicated to MuscleTech product before the relationship was finally severed in February 2001. 6 MuscleTech suggests that increased demand for bulky products from two other manufacturers played an as large, if not larger, role in the decision to move. Both parties agree, however, that Super Natural’s sales of MuscleTech goods likely would have grown in the future had the relationship not come to an end. Super Natural originally hired eight additional employees to work in the new warehouse, though seven have since been released.

Super Natural undertook one other relatively significant investment in 2000, spending $40,000 to purchase a permanent mobile trade show booth to bring to the five annual trade shows it has attended for at least the last half-decade. 7 Ms. Calvy states in an affidavit that Super Natural would not have undertaken this expense had it known that its ties to MuscleTech would soon be severed (though pictures supplied to the court show that Muscle-Tech was but one of over a dozen manufacturers promoted in the booth). Ms. Calvy asserts that Super Natural gave “priority” to MuscleTech’s products during trade shows, but she has not explained how she did so and the pictures supplied to the court do not suggest any MuscleTech emphasis. She states that she intends to cut back on the number of shows Super Natural attends now that the company no longer represents MuscleTech or Cytodyne (a health products company that accounted for 9% of Super Natural’s sales in 2000).

The relationship between Super Natural and MuscleTech began to unravel in the summer of 2000. On June 29 of that year MuscleTech informed Ms. Calvy that Kent Mosur, a MuscleTech employee she had done business with, had been fired for suspected participation in an operation counterfeiting MuscleTech products. Mr. Mosur had been Super Natural’s regular contact at MuscleTech until January 2000. At that time, he was promoted from assistant wholesale manager to international sales manager. In late 1999, before Mr. Mosur’s promotion, Ms. Calvy contacted Mr. Mosur to complain that another distributor, Costello’s, was receiving lower prices than she. Mr. Mosur reportedly suggested that she could obtain lower-than-wholesale prices by purchasing from a Spanish distributor named M Olympus.

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Bluebook (online)
196 F. Supp. 2d 761, 2002 U.S. Dist. LEXIS 7037, 2002 WL 507066, Counsel Stack Legal Research, https://law.counselstack.com/opinion/super-natural-distributors-inc-v-muscletech-research-development-wied-2002.