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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`Walgreen Co.,
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`Plaintiff,
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`v.
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`Fitbit, Inc.,
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`Defendant.
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`COMPLAINT
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`Case No.
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`JURY DEMANDED
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`Walgreen Co. (“Walgreens”), by and through its undersigned attorneys, hereby files this
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`Complaint for breach of contract against Fitbit, Inc. (“Fitbit”), alleging as follows:
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`I.
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`NATURE OF THE CASE
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`1.
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`This is an action for breach of contract or, alternatively, unjust enrichment. It
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`arises from Fitbit’s breach of its promises and obligations pursuant to the parties’ contracts and
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`agreements. Specifically, Fitbit sold personal fitness and body tracking electronic products (the
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`“Tracker Products”) to Walgreens on a guaranteed-sale basis. Fitbit specifically agreed to: (1)
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`refund Walgreens to the extent that the Tracker Products did not meet agreed-to benchmarks and
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`unsold units of Tracker Products were ultimately returned to Fitbit; (2) repay Walgreens for units
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`of Tracker Products that, consistent with the applicable written policies and contracts, were
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`deemed unsaleable; and (3) pay Walgreens to participate in various promotions. In this regard,
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`Fitbit has failed to live up to its agreements with Walgreens.
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`2.
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`As a direct and proximate result of Fitbit’s breaches of contract, Walgreens has
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`suffered damages in an amount to be proven at trial, but not less than $140,116.14. This amount
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`Case: 1:19-cv-07215 Document #: 1 Filed: 11/01/19 Page 2 of 9 PageID #:1
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`accounts for offsets that Walgreens has applied to Fitbit’s account with Walgreens, as the parties
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`agreed that Walgreens could do. Walgreens files this lawsuit to recover those damages.
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`II.
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`THE PARTIES
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`3.
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`Walgreens is an Illinois corporation with its principal place of business at 200
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`Wilmot Road, Deerfield, Illinois, 60015. Walgreens is in the business of providing consumer
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`goods and services, as well as pharmacy, health and wellness services, through thousands of
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`retail drugstores throughout the United States.
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`4.
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`Fitbit, Inc. is an active Delaware for-profit corporation engaged primarily in the
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`development, production and distribution of personal fitness and body tracking electronic
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`products, services and applications. Fitbit’s principal place of business is located at 199 Fremont
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`Street, 14th Floor, San Francisco, California 94105.
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`III.
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`JURISDICTION AND VENUE
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`5.
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`This Court has jurisdiction over this dispute pursuant to 28 U.S.C. § 1332 because
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`the citizenship of Walgreens and Fitbit is diverse and the amount in controversy is in excess of
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`$75,000.
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`6.
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`Venue is proper in the Northern District of Illinois pursuant to 28 U.S.C.
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`§ 1391(b)(2) because a substantial part of the events giving rise to the claims made in this
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`lawsuit occurred within the Northern District of Illinois. Moreover, in the written agreement
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`between them (discussed further below), the parties “consent[ed] to the exclusive jurisdiction of
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`the courts of the State of Illinois or Federal District Court of the Northern District of Illinois and
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`agree[d] to waive all objections as to venue and forum non conveniens.”
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`2
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`Case: 1:19-cv-07215 Document #: 1 Filed: 11/01/19 Page 3 of 9 PageID #:1
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`IV.
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`FACTUAL ALLEGATIONS
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`The Parties’ Agreements
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`In 2012, Walgreens and Fitbit agreed that Walgreens would buy Tracker Products
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`A.
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`7.
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`from Fitbit and stock Tracker Products at its stores for resale to consumers. Walgreens and Fitbit
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`agreed that these purchases by Walgreens would be pursuant to certain written agreements.
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`8.
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`The written agreement through which all purchases by Walgreens from Fitbit
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`were made was the Walgreen Co. General Trade and Electronic Data Interchange Agreement
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`(the “GTA”). Fitbit, through its authorized representative Mark Silverio, signed the GTA with an
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`effective date of February 1, 2012.
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`9.
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`The GTA stated in its preamble that: “The terms and conditions contained herein
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`shall apply to all merchandise . . . sold by Vendor [Fitbit], directly or indirectly through its
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`distributors, to Walgreen[s].”
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`10.
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`The GTA further provided that: “[Fitbit]’s performance shall be in accordance
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`with these terms, dating and conditions. Any other terms in [Fitbit]’s acceptance are rejected
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`unless agreed to in writing and signed by Walgreen’s authorized representative.” Further
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`clarifying that the GTA controlled the parties’ relationship, it provided that: “In the event of a
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`conflict between these terms or any purchase order issued by Walgreen[s], and any document
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`issued by [Fitbit], the terms of this Agreement shall control.” The GTA further provided that:
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`“No oral modification or waiver of any of the provisions of this Agreement shall be binding on
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`either party.”
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`11.
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`The parties never signed any written modification of the GTA that contradicted or
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`modified any of its terms.
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`3
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`Case: 1:19-cv-07215 Document #: 1 Filed: 11/01/19 Page 4 of 9 PageID #:1
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`12.
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`The GTA states that “if a purchase order is designated as a ‘Guaranteed Sale,’ . . .
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`Walgreen[s] shall not be obligated to pay for any merchandise until after it is sold by
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`Walgreen[s] in accordance with terms agreed upon by the parties.”
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`13.
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`All purchases by Walgreens from Fitbit were on a “Guaranteed Sale” basis. Thus,
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`consistent with the GTA, Walgreens was not obligated to pay for the merchandise until it was
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`sold pursuant to agreed-upon terms. Moreover, by the terms of the GTA, if Walgreens’ sales
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`expectations were not met, Walgreens had a right to return the merchandise to Fitbit (with no
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`payment obligation having arisen), which would provide a corresponding refund to Walgreens
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`for the Tracker Products and costs incurred by Walgreens when it returned the unsold units of
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`Tracker Products to Fitbit, including the agreed-to upcharge fee and applicable freight expenses.
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`14.
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`The GTA further states that “ . . . Walgreen[s] shall have the unrestricted right to
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`rescind its purchase of the merchandise from [Fitbit] both before and after acceptance of such
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`merchandise by Walgreen[s].”
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`15.
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`The GTA states that “[i]n the event that Walgreen[s] is entitled to credits, offsets
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`or charge backs (collectively, ‘Credits’) with respect to any transaction, Walgreen[s] may take
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`such Credits against any amounts otherwise due to [Fitbit] arising from or under any transaction
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`between [Fitbit] and Walgreen[s] . . .”
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`16.
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`Additionally, the GTA states “[Fitbit] is subject to all policies, procedures, terms
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`and conditions as posted on Walgreen’s SupplierNet website located at
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`https://vendor.walgreens.com and all such policies, terms and conditions, as updated from time
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`to time, are hereby incorporated herein and made a part hereof.”
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`17.
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`One policy listed on SupplierNet, and incorporated into the GTA, is the
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`Unsaleables Policy. The Unsaleables Policy provides that Walgreens “requires its vendors to
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`4
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`Case: 1:19-cv-07215 Document #: 1 Filed: 11/01/19 Page 5 of 9 PageID #:1
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`bear the risk of merchandise in Walgreens’ possession that is deemed by Walgreens, in its sole
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`discretion, to be unsaleable.” Unsaleable goods include outdated or defective goods along with
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`goods returned by customers. For goods that are deemed “unsaleable,” “unless otherwise
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`agreed,” the “merchandise is reported to the District Manager and then disposed of.” These
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`unsaleable claims are then “charged against [Fitbit] on a monthly basis.”
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`B.
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`Fitbit Breaches its Agreements with Walgreens
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`18. Walgreens ordered Tracker Products from Fitbit at prices ranging from $16 to
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`$106 per unit, paid for the items and placed them for sale in its stores. However, the units of
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`Tracker Products did not all sell and some units were returned or never delivered to Walgreens.
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`19.
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`Consistent with the terms of the GTA, Walgreens returned at least 3,616 units of
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`Tracker Products to Fitbit between August 2018 and March 2019. Each unit of Tracker Products
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`that Walgreens returned to Fitbit was authorized by the parties’ agreements either because the
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`Tracker Product did not meet agreed-to benchmarks or because it was sold to Walgreens on a
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`guaranteed sale basis. Fitbit accepted those returned items, for which Walgreens had paid Fitbit
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`approximately $160,561.64.
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`20. Walgreens incurred costs when it returned unsold Tracker Products to Fitbit.
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`Consistent with Walgreens’ right to rescind in the GTA, Fitbit is responsible to Walgreens for
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`those costs, including the agreed-to upcharge fee, which in this case totals approximately
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`$8,331.71, plus freight expenses, totaling approximately $565.40.
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`21.
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`As a result of the returns referenced in Paragraphs 19 and 20 above, Fitbit now
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`owes Walgreens at least $169,458.75 for the units of Tracker Products that Walgreens returned
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`to Fitbit. Walgreens demanded this payment from Fitbit, but in breach of the parties’ agreements,
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`Fitbit has refused to pay this amount.
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`5
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`Case: 1:19-cv-07215 Document #: 1 Filed: 11/01/19 Page 6 of 9 PageID #:1
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`22.
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`Consistent with the terms of the GTA, Walgreens also destroyed 41 units of
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`unsaleable Tracker Products for which it had paid Fitbit approximately $1,603.76. Consistent
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`with the terms of the parties’ agreements, Walgreens demanded this payment from Fitbit. In
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`breach of the parties’ agreements, however, Fitbit has refused to pay this amount.
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`23.
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`Consistent with the terms of the GTA, Fitbit agreed with Walgreens to participate
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`in various promotions throughout the parties’ business relationship. The amount that Fitbit owes
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`to Walgreens for Fitbit’s participation in these promotions is $6,984.91. Consistent with the
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`parties’ written agreements, Walgreens demanded this payment from Fitbit. In breach of the
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`parties’ agreements, however, Fitbit has refused to pay this amount.
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`24.
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`In total, Fitbit owes Walgreens $178,047.42 arising from its breaches of its
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`agreements with Walgreens. However, as provided for in the GTA, Walgreens has taken credits
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`against Fitbit’s account with Walgreens to mitigate its damages, reducing the current amount that
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`Fitbit owes to Walgreens to $140,116.14.
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`V.
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`CAUSES OF ACTION
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`COUNT I: BREACH OF CONTRACT
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`25. Walgreens re-alleges as Paragraph 25 of Count I paragraphs 1-24 above.
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`26. Walgreens and Fitbit contracted for Walgreens to buy Tracker Products from
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`Fitbit on a “Guaranteed Sale” basis. Walgreens agreed to and did pay prices ranging from $16 to
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`$106 per unit of Tracker Product.
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`27. Walgreens and Fitbit also contracted that any unsold units of Tracker Products
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`could and would be returned to Fitbit. Fitbit agreed to refund Walgreens the amounts Walgreens
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`had paid for those units of Tracker Products, and that Fitbit would be responsible for paying
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`freight costs and an upcharge fee for all returned units of Tracker Products.
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`6
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`Case: 1:19-cv-07215 Document #: 1 Filed: 11/01/19 Page 7 of 9 PageID #:1
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`28. Walgreens and Fitbit contracted by the GTA that Walgreens would be refunded
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`for the amounts Walgreens paid for any goods deemed unsaleable by Walgreens, in its sole
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`discretion.
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`29. Walgreens and Fitbit also contracted that Fitbit would participate in various
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`marketing promotions and would reimburse Walgreens for the associated costs.
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`30.
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`The GTA, including its incorporated policies, as well as the agreements for Fitbit
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`to participate in the marketing programs identified herein are valid and enforceable contracts.
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`31. Walgreens fully complied with its obligations pursuant to these contracts.
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`32.
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`Fitbit, however, breached the terms of the parties’ agreements, including by:
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`a.
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`Accepting the return of unsold Tracker Products, but refusing to refund the
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`amounts already paid by Walgreens and refusing to reimburse for the
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`incurred freight costs and related administrative fees;
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`b.
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`Failing to refund Walgreens for the 41 units of unsaleable Tracker
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`Products; and
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`c.
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`Failing to reimburse Walgreens for its participation in various marketing
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`promotions.
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`33.
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`Fitbit’s breaches proximately caused Walgreens’ damages, in the amount of
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`$178,047.42, of which Fitbit owes Walgreens at least $140,116.14, after accounting for credits
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`taken by Walgreens pursuant to the GTA.
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`WHEREFORE, Walgreens prays that judgment be entered in its favor and against Fitbit
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`for damages in an amount to be determined by the Court, but not less than $140,116.14, plus pre-
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`judgment interest, and for such other relief as the Court deems just and proper.
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`7
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`Case: 1:19-cv-07215 Document #: 1 Filed: 11/01/19 Page 8 of 9 PageID #:1
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`COUNT II: UNJUST ENTRICHMENT, PLED IN THE ALTERNATIVE
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`34. Walgreens re-alleges as Paragraph 34 of Count II the foregoing allegations,
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`except those relating to its breach-of-contract claim, as if fully set forth herein.
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`35.
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`By accepting return of the approximately 3,616 units of Tracker Products from
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`Walgreens, but refusing to refund amounts already paid by Walgreens for those goods, and
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`benefitting by the cost to Walgreens incurred making those returns, Fitbit has unjustly received a
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`benefit from Walgreens.
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`36.
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`Fitbit’s benefit was received to Walgreens’ detriment, as Walgreens paid for the
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`units of Tracker Products that Fitbit now has and may re-sell. Additionally, Walgreens incurred
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`the costs associated with returning those units of Tracker Products to Fitbit.
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`37.
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`Fitbit was further unjustly enriched by Walgreens’ payment for the 41 units of
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`Tracker Products that were ultimately unsaleable.
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`38.
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`Fitbit was unjustly enriched by its participation in various marketing promotions,
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`the costs of which Fitbit has refused to reimburse Walgreens.
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`39.
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`Allowing Fitbit to retain the benefits of its own wrongdoing, as alleged herein,
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`would violate fundamental principles of justice, equity and good conscience, including by
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`affording Fitbit the opportunity to sell the returned items twice.
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`WHEREFORE, Walgreens hereby requests that this Court enter Judgment in its favor
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`and against Fitbit, awarding damages in an amount to be determined by the Court, but not less
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`than $140,116.14, plus pre-judgment interest, and such other relief as the Court deems just and
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`proper.
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`VI.
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`JURY DEMAND
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`Pursuant to Federal Rule of Civil Procedure 38, Walgreen Co. hereby demands trial by
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`jury in this case.
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`Case: 1:19-cv-07215 Document #: 1 Filed: 11/01/19 Page 9 of 9 PageID #:1
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`Respectfully submitted,
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`WALGREEN CO.
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`By:
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` s/ Robert M. Andalman
`One of its Attorneys
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`Robert M. Andalman (ARDC #6209454)
`Rachael Blackburn (ARDC #6277142)
`Kristin Opal (ARDC #6327394)
`A&G Law LLC
`542 S. Dearborn St., 10th Floor
`Chicago, IL 60605
`(312) 341-3900
`randalman@aandglaw.com
`rblackburn@aandglaw.com
`kopal@aandglaw.com
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`9
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