United States District Court, D. Nevada
before the court is defendant Ashley Furniture Industries,
Inc.'s motion to dismiss. (ECF No. 7). Plaintiff Bond
Manufacturing Co. filed a response (ECF No. 12), to which
defendant replied (ECF No. 17).
is an industry leader in the designing and manufacturing of
lawn, garden, and outdoor living products. (ECF No. 1).
Plaintiff's products are sold in the major retail outlets
for such products. Id. Plaintiff has invested
significant resources in the development and improvement of
the materials it uses for its outdoor heating products.
Id. Plaintiff regularly enters into private label
design and manufacturing agreements with third party
companies. Id. These agreements include terms
providing that plaintiff will be the exclusive manufacturer
and supplier of products that plaintiff designs. Id.
Plaintiff typically does not execute written private label
design and manufacturing agreements before commencing design
and manufacturing work with third party companies.
is one of the largest manufacturers, distributors, and
sellers of furniture in the United States, with over 450
retail locations doing business under the name Ashley
Furniture HomeStore. Id. Defendant also sells its
furniture products wholesale to third party furniture
of 2016, at the National Hardware Show in Las Vegas, Andy
Sokol, vice president of merchandising for defendant and the
director of defendant's outdoor patio program, and
Cameron Jenkins, president of plaintiff, discussed an
agreement between plaintiff and defendant to develop an
exclusive patio and outdoor heating furniture program (the
“program”) for defendant. Id. Jenkins
was familiar with Sokol. Id. Sokol described the
program as a private label design and manufacturing program,
“knowing that Jenkins would understand the offer as one
that was consistent with the private label programs Sokol had
worked on [when he was an] executive [for plaintiff].”
had been employed by plaintiff as plaintiff's director of
product development for plaintiff's patio program in
2009. Id. Because of this employment, Sokol gained a
full understanding of plaintiff's policies and practices.
Id. Plaintiff alleges that Sokol thus knew at the
time he offered the program to plaintiff that plaintiff would
provide product design and manufacturing services only on the
condition that it be the exclusive manufacturer of any its
products for the program. Id.
9, 2016, Sokol sent Jenkins ideas for the program and
requested a meeting on May 29 in China at plaintiff's
Shenzhen showroom. Id. On May 29, 2016, plaintiff
presented designs and samples. Id. Sokol identified
the designs defendant wanted to include in the program and
requested additional renderings of those products and price
quotations. Id. Following the meeting, Sokol sent an
email to plaintiff expressing excitement about
plaintiff's participation in the program:
[B]y the conclusion of this May 29, 2016, meeting, Bond and
Ashley had agreed through Jenkins and Sokol: (i) that Bond
would proceed with designing and manufacturing product to be
displayed by Ashley at Ashley's booth/showroom at the
then upcoming Las Vegas Furniture Show under Ashley's
brand as part of Ashley's roll-out to the world of its
new Signature Line of outdoor furniture, (ii) that the
parties would negotiate in good faith over the price to
Ashley for such products, and (iii) that should the parties
fail to reach agreement on pricing or on Bond's
participation in the Ashley Program, Ashley would not be
permitted to use, copy, manufacture or sell any Bond designed
response to Sokol's requests on behalf of defendant,
plaintiff devoted a large team from plaintiff's China and
U.S. offices to work with its manufacturing factories to
prepare quotes and samples on an expedited basis.
Id. Plaintiff began sending price quotations to
Sokol on or about June 6, 2016. Id.
occurred throughout June regarding the furniture designs.
Id. Price lists were continually exchanged and
updated per defendant's requests. Id. Sokol
provided plaintiff with defendant's logo in order to
incorporate the logo into the products. Id.
2, 2016, another meeting was held and Jenkins flew to China
to attend. Id. At the meeting, Sokol selected the
samples defendant wanted for its rollout of its outdoor
furniture line at Las Vegas Market. Id. Plaintiff
made the selected samples and shipped them on-time for
defendant's unveiling at Las Vegas Market, as requested
by Sokol. Id.
correspondence continued in July and August of 2016.
Id. On July 10, 2016, Sokol asked Jenkins if any
duties are owed “on the items we are buying from
you?” Id. On July 21, 2016, Sokol provided
Jenkins with a file with target prices for the cost of
plaintiff's products. Id. On July 22, 2016,
Jenkins emailed Sokol an updated file with the “final
and best pricing that [plaintiff] can offer.”
Id. Price-related discussions continued for another
August 2, 2016, during a meeting at the Las Vegas Market,
Sokol informed Jenkins that defendant may manufacture
plaintiff's furniture products itself or through other
manufacturers in order to get the same product at a lower
price. Id. Jenkins informed Sokol that while
defendant may use another manufacturer for outdoor furniture,
it could not use any of plaintiff's designs to do so, and
that plaintiff's products were proprietary to plaintiff
and the subject of patent and copyright protection.
Id. Negotiations continued despite the threat to use
other manufacturers. Id.
August 17, 2016, Sokol informed Jenkins that the program
would be finalized the coming week and orders sent shortly
after. Id. The email also stated that defendant was
planning to order 75 products per month to start, with a
forecast of 900 products for the first season. Id.
August 19, 2016, defendant invited plaintiff's China team
to meet with defendant's representatives at
defendant's Dongguan office for training on
defendant's purchase order process. Id. The
factory owner from one of plaintiff's OEM factories who
would be responsible for manufacturing some of the
plaintiff's furniture products was also in attendance.
Id. A representative of plaintiff contacted this
factory owner to question why he had attended the training
meeting. Id. The factory owner acknowledged that
defendant's representatives had contacted him directly to
ask that his factory make certain of the plaintiff's
products for direct delivery to defendant, thereby cutting
plaintiff out of any transaction. Id.
about January 25, 2017, defendant began marketing and
promoting various furniture products which plaintiff alleges
are direct knock-offs of plaintiff's furniture products.
Id. Plaintiff alleges that defendant used
photographs and video Sokol took of plaintiff's products
in plaintiff's showroom. Id. Defendant is also
selling knock-off products wholesale to numerous third party
retail companies. Id.
alleges that defendant has a consistent pattern of breaking
its contractual promises and infringing the intellectual
property of furniture companies. Id.
30, 2017, plaintiff filed suit against defendant, alleging
thirteen claims for relief. Id.
may dismiss a complaint for “failure to state a claim
upon which relief can be granted.” Fed.R.Civ.P.
12(b)(6). A properly pled complaint must provide “[a]
short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2);
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007). While Rule 8 does not require detailed factual
allegations, it demands “more than labels and
conclusions” or a “formulaic recitation of the
elements of a cause of action.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).
allegations must be enough to rise above the speculative
level.” Twombly, 550 U.S. at 555. Thus, to
survive a motion to dismiss, a complaint must contain
sufficient factual matter to “state a claim to relief
that is plausible on its face.” Iqbal, 556
U.S. at 678 (citation omitted).
Iqbal, the Supreme Court clarified the two-step
approach district courts are to apply when considering
motions to dismiss. First, the court must accept as true all
well-pled factual allegations in the complaint; however,
legal conclusions are not entitled to the assumption of
truth. Id. at 678-79. Mere recitals of the elements
of a cause of action, supported only by conclusory
statements, do not suffice. Id. at 678.
the court must consider whether the factual allegations in
the complaint allege a plausible claim for relief.
Id. at 679. A claim is facially plausible when the
plaintiff's complaint alleges facts that allow the court
to draw a reasonable inference that the defendant is liable
for the alleged misconduct. Id. at 678.
the complaint does not permit the court to infer more than
the mere possibility of misconduct, the complaint has
“alleged-but not shown-that the pleader is entitled to
relief.” Id. (internal quotation marks
omitted). When the allegations in a complaint have not
crossed the line from conceivable to plausible,
plaintiff's claim must be dismissed. Twombly,
550 U.S. at 570.
Ninth Circuit addressed post-Iqbal pleading
standards in Starr v. Baca, 652 F.3d 1202, 1216 (9th
Cir. 2011). The Starr court stated, in relevant
First, to be entitled to the presumption of truth,
allegations in a complaint or counterclaim may not simply
recite the elements of a cause of action, but must contain
sufficient allegations of underlying facts to give fair
notice and to enable the opposing party to defend itself
effectively. Second, the factual allegations that are taken
as true must plausibly suggest an entitlement to relief, such
that it is not ...