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Advanced Comfort Technologies, Inc. v. London Luxury, LLC

United States District Court, D. Utah

April 13, 2018

ADVANCED COMFORT TECHNOLOGIES, INC., d/b/a INTELLIBED, a Utah corporation, Plaintiff,
v.
LONDON LUXURY, LLC, a New York limited liability company, Defendant.

          MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF'S MOTION TO DISMISS

          Jill N. Parrish, United States District Court Judge

         I. INTRODUCTION

         This is a contract case. Plaintiff Advanced Comfort Technologies, Inc. d/b/a intelliBED (“Intellibed”) entered into a Non-Circumvention Agreement (the “Agreement”) with Defendant London Luxury. Under the Agreement, London Luxury agreed to act as a middleman, using its “best efforts” to market Intellibed mattresses to a third-party retailer. In exchange, Intellibed agreed not to “circumvent” London Luxury and Intellibed agreed to pay London Luxury a finder's fee. The deal soured. Intellibed sued London Luxury, claiming, among other things, that London Luxury did not use best efforts to market the mattresses to the third-party retailer. London Luxury brings counterclaims against Intellibed for, among other things, breach of contract and unfair competition, claiming that Intellibed circumvented London Luxury by contacting the third-party retailer without London Luxury's approval. Intellibed has moved to dismiss London Luxury's counterclaim for unfair competition. Intellibed contends that London Luxury's counterclaim for unfair competition is duplicative of its counterclaim for breach of contract. The court agrees.

         II. FACTUAL ALLEGATIONS[1]

         In January 2017, Intellibed sought out London Luxury to assist in marketing and selling the Gel Matrix mattress to Mattress Firm, a thiry-party retailer. Countercl. ¶ 7. Intellibed wanted to take advantage of London Luxury's contacts and relationship with Mattress Firm. Countercl. ¶ 7.

         A. The Non-Circumvention Agreement

         On February 21, 2017, Intellibed and London Luxury executed a Non-Circumvention Agreement (the “Agreement”). Countercl. ¶ 8. The Agreement had an effective date of February 17, 2017. Countercl. ¶ 8. In the Agreement, London Luxury agreed to “use its best efforts to market” the Gel Matrix mattress to Mattress Firm. Countercl. ¶ 9. The Agreement requires London Luxury to “not market any other ‘gel matrix' mattress products to” Mattress Firm during the “non-circumvent term” and the “finder's fee term.” Countercl. ¶ 9. The Agreement defines “gel matrix mattresses” to mean “mattresses featuring a gel matrix structure licensed by Edizone.” Countercl. ¶ 9. The Agreement does not prohibit London Luxury from marketing other products to Mattress Firm, including other mattresses that are not gel matrix mattresses. Countercl. ¶ 9.

         The Agreement provides that Intellibed would pay London Luxury a finder's fee only if Intellibed sells products to or enters into a business relationship with Mattress Firm. Countercl. ¶ 10. Specifically, if Intellibed sells products to or enters into a business relationship with Mattress Firm, Intellibed is required to pay a finder's fee “in perpetuity in the amount of six (6%) percent of the net revenue (sales to [Mattress Firm] less returns and damages) received by [Intellibed] from [Mattress Firm] irrespective of when [Intellibed] is actually paid by [Mattress Firm].” Countercl. ¶ 10.

         The Agreement contains provisions that restrict Intellibed's ability to “circumvent” London Luxury. Specifically, Intellibed agreed “not to directly or indirectly contact or initiate contact with [Mattress Firm] or any officers, directors, shareholders, consultants, attorneys, employees, agents or other affiliates of [Mattress Firm] at any time for any purpose, unless such approval is specifically granted in writing by [London Luxury].” Countercl. ¶ 11. “In the event that [Intellibed] is contacted by [Mattress Firm], ” Intellibed agreed that it would “notify [London Luxury] within 24 hours (in person, by phone, voice mail, message, email, or certified mail) of the contact and a detailed account of the nature of the content communicated during said contact.” Countercl. ¶ 11. Intellibed also agreed “not to undertake any transaction . . . of any kind with [Mattress Firm].” Countercl. ¶ 11. These obligations “extend to employees and officers of [the parties'] respective companies/businesses.” Countercl. ¶ 11.

         The Agreement contains a liquidated damages clause. It provides that, in addition to remedies available in law or equity:

(a) [London Luxury] shall be entitled to temporary and/or permanent injunctive relief and specific performance without the necessity of proving actual damages;
(b) if there is a breach of any of the covenants by [Intellibed], [London Luxury] shall recover from [Intellibed] the general damages, the consequential damages, a 10% payment on the sales of products by [Intellibed] to [Mattress Firm], and all court costs and reasonable attorneys' fees incurred by [London Luxury] at both the trial and appellate level;
(c) [London Luxury] shall be entitled to a lien against assets of [Intellibed] in the event that [Intellibed] is not able ...

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