United States District Court, W.D. Pennsylvania
WILLIAM S. STICKMAN IV, UNITED STATES DISTRICT JUDGE.
and wellness care is one the fastest growing markets in
America. Deborah Weinswig, Wellness is the New Luxury; Is
Health and Happy the Future of Retail, Forbes (June 30,
2017, 4:09 p.m.),
Plaintiff Right Way Nutrition, LLC ("RWN") and
Defendant General Nutrition Corporation ("GNC")
entered into a business arrangement to profit from this
trend. But their deal unraveled. Litigation ensued. Currently
pending before the Court are their cross motions for summary
judgment. For the reasons set forth below, RWN's Motion
for Partial Summary Judgment (ECF No. 60) will be granted in
part and denied in part. GNC's Motion for Partial Summary
Judgment (ECF No. 64) will be denied and its Amended
Counterclaim (ECF No. 44) will be dismissed.
2010, Kevin Wright ("Wright") founded RWN. He
currently serves as RWN's President and CEO. RWN
specializes in the development of wellness products. GNC is a
national retailer of health, wellness, and performance
products. In or about late April/early May 2011, GNC entered
a deal with RWN to sell two RWN wellness products at GNC
stores nationwide and on GNC's website. RWN communicated
with GNC daily and visited GNC stores every two weeks for
inspection purposes. RWN had access to GNC buyers twenty-four
hours a day, seven days a week. RWN National Sales Director
Charlie Chiaverini ("Chiaverini"), former Vice
President of GNC, was responsible for the GNC account.
Appendix to Plaintiffs Motion for Partial Summary Judgment
(ECF No. 62) ("Pl.'s App.") Ex. A at pp. 1-15;
Pl.'s App. Ex. D at p. 2, ¶ 4; Appendix to
Defendant's Motion for Partial Summary Judgment (ECF No,
64) ("Def.'s App, ") Ex. 1 at pp. 5-6, 119;
Statement of Undisputed Material Facts in Support of General
Nutrition Corporation's Motion for Partial Summary
Judgment and Response to Plaintiffs Undisputed Material Facts
(ECF No, 66) ("Def.'s Statement") at pp. 1-2,
12, ¶¶ 1-5, 76.
The Terms of the Deal
deal initially consisted of the Purchase Agreement, the
Vendor Book,  and the Purchase Order Form (collectively,
the "founding documents"). Def.'s App. Ex. 1 at
pp. 2, 115, 123; Def.'s Statement at pp. 3, 12,
¶¶ 11, 77; Pl.'s Resp. to Def.'s Statement
at p. 2, ¶ 11.
8 of the Purchase Agreement required RWN to maintain a $2,
000, 000.00 general products liability occurrence policy.
Pl.'s App. Ex. A at pp. 3-4, ¶ 8. RWN procured such
a policy from Citadel Insurance Services, LC. Def.'s App,
Ex. 1 at p. 136. Paragraph 9 of the Purchase Agreement, the
indemnity clause, required RWN to hold GNC harmless for any
litigation arising from the sale of its products under the
Purchase Agreement. Pl.'s App. Ex. A at p. 4, ¶ 9.
Paragraph 11 of the Purchase Agreement established the
following formula for calculating RWN product's margin
= GNC Retail Price / RWN Product Price - GNC Retail Price
App. Ex. A at pp. 4-5, ¶ 11. Exhibit Four to the
Purchase Agreement contained the General Nutrition Returns
Agreement ("GNRA"),  which detailed GNC's Reverse
Logistics Program. That program allowed GNC to return RWN
products to RWN for credit or cash payment. Pl.'s App.
Ex. A at p. 10. The GNRA also guaranteed GNC the right to
increase costs thirty days after providing written notice to
RWN. Pl.'s App. Ex. A at pp. 10-12.
F of the Purchase Agreement's General Terms contained a
merger clause that provided, in pertinent part, as follows,
This Agreement (including the Vendor Book, the Purchase
Order, and all exhibits) contains the entire agreement of the
Parties relating to the subject matter of this Agreement, and
the Parties agree that this Agreement supersedes all prior
written or oral agreements, representations, and warranties
relating to the subject matter of this Agreement. In the
event of any conflict between the terms of this Agreement and
the Vendor Book, the terms of this Agreement shall control.
F later states that the parties cannot modify the Purchase
Agreement except by a signed writing. Pl.'s App. Ex. A at
p. 5, ¶ F. The deal initially covered two RWN products:
African Mango and Beta Bum. Pl.'s App. Ex. A at p. 9;
Def.'s Statement at p. 13, ¶ 78. The parties
subsequently executed addenda modifying the Purchase
Agreement to allow GNC to sell new RWN products as they
GNC wanted to purchase a product from RWN, it had to issue a
purchase order. Def.'s App. Ex. 1 at p. 6; Def.'s
Statement at p. 3, ¶ 15; Pl.'s Resp. to Def.'s
Statement at p. 2, ¶ 15. The Purchase Order Form, which
is included in the Vendor Book, states in pertinent part that
"The parties agree that the total price stated in the
purchase order contains all the charges to be paid by GNC to
[RWN]. The price described herein is not subject to
escalation of any kind or for any reason." Def.'s
App. Ex. 1 at p. 125, ¶ 6. The parties stipulated that
Pennsylvania law governed interpretation of the founding
documents. Pl.'s App. Ex. 1 at p. 7, ¶ H; Def.'s
App. Ex. Latp. 91, ¶ H.
The Disputes Over RWN Products
are three RWN products at the core of this case: Garcinia
Cambogia Extract, Cerebral Success, and Green Coffee
Beanቷꮃ. The Court will recount the controversies
involving each product below.
Garcinia Cambogia Extract
2013, RWN launched Garcinia Cambogia Extract
("Garcinia") as a new product. RWN and GNC entered
price negotiations by email in early January 2013. Def.'s
Statement at pp. 6-7, ¶¶ 37-39; Pl.'s Resp. to
Def.'s Statement at p. 4, ¶¶ 37-39. GNC
contracted with RWN to sell Garcinia and another RWN
product-Green Coffee Beanቷꮃ. GNC initially agreed to pay
$14.00/unit for Garcinia. The corresponding retail price was
$39.99/ unit. Def.'s App. Ex. 1 at pp. 139-148. The
parties memorialized the sale in Addendum G to the Purchase
Agreement on January 23, 2013. Pl.'s App. Ex. A at p. 22;
Pl's App Ex. D at p. 2, ¶ 5; Def.'s Statement at
p. 7, ¶ 40; Pl.'s Resp. to Def.'s Statement at
p. 4, ¶ 40. On February 28, 2013, RWN shipped the first
order of Garcinia to GNC. Def.'s App. Ex. 1 at p. 172.
March 2013, GNC asked RWN for a price reduction for Garcinia
to facilitate that product's retail launch. RWN agreed to
reduce the cost from $14.00/unit to $12.25/unit so that the
retail price could drop from $39.99/unit to $34.99/unit.
Def.'s App. Ex. 1 at p. 172. On April 12, 2013, GNC
requested that RWN confirm the correct cost. Def.'s App.
Ex. 1 at pp. 154-60; Def.'s Statement at p. 7, ¶ 41;
Pl.'s Resp. to Def.'s Statement at p. 4, ¶ 41.
Various GNC and RWN personnel exchanged emails to ensure that
the Garcinia purchase order reflected the reduced price.
Id. On April 13, 2013, however, Wright emailed GNC
requesting that the Garcinia purchase orders be valued at
$14.00/unit "moving forward." GNC agreed. The
parties dispute the precise meaning of that email exchange,
specifically-whether the phrase "moving forward"
meant that the price reduction was terminated, and the
original price was restored. Def.'s Statement at pp. at
8-9, ¶¶ 43-47; Pl.'s Resp. to Def.'s
Statement at pp. 4-5, ¶¶ 43-47.
2013, GNC adjusted the retail price back up to $39.99/unit
but continued to pay RWN$12.25/unit. Def.'s App. Ex. 1 at
p. 172. RWN ultimately became aware of, and dissatisfied
with, the pricing discrepancy. On May 14, 2014, Chiaverini
emailed GNC Director of Merchandising John Telencho
("Telencho"), advising him of the discrepancy.
Pl.'s App. Ex. C at p. 2; Pl.'s App Ex. D at p. 3,
¶ 7; Def.'s App. Ex. 1 at p. 164; Def.'s
Statement at p. 9, ¶ 57; Pl.'s Resp. to Def.'s
Statement at p. 6, ¶ 57. That message initiated roughly
six months of discussion between the parties. Pl.'s App.
Ex. D at p. 3, ¶ 8; Def.'s App. Ex. 1 at pp. 24, 33,
172, 175. All the while, GNC continued to purchase Garcinia
from RWN. Def.'s Statement at p. 14, ¶ 86.
October 20, 2014, Wright sent a letter to GNC outlining
RWN's position on the dispute. Pl.'s App. Ex. D at p.
3, ¶ 10; Pi's App. Ex. E at pp. 2-4; Def.'s
Statement at p. 14, ¶ 87. Wright sent another letter on
December 23, 2014, stating that although RWN accepted the
reduced Garcinia price at first, adjustments to the unit
price should be commensurate with that of the retail price.
Thus, RWN's position was that GNC should adjust the unit
price to $14.00/unit to match the retail price adjustment
from $34.99/unit to $39.99/unit. Def.'s Statement at p.
9, ¶ 60; Pl.'s Resp. to Def.'s Statement at p.
7, ¶ 60.
continued to do business with RWN notwithstanding the
Garcinia pricing dispute. In late July/early August 2014, for
example, the parties executed Addendum M to the Purchase
Agreement. Addendum M memorialized the parties' agreement
for GNC to sell Cerebral Success for $24.50 per unit.
Pl.'s App. Ex. A at pp. 28-30; Pl.'s App. Ex. D at p.
4, ¶ 21; Def.'s Statement at p. 21, ¶ 109.
Cerebral Success is a cognitive performance product that
purportedly increases focus, memory, and overall health.
Def.'s Statement at p. 20, ¶ 107. Addendum M
originally contained an exclusivity provision: "GNC will
only carry this product within this category and no other
product of its likeness for 1 year." On April 29, 2015,
the parties modified Addendum M by deleting the exclusivity
provision. Pl.'s App. Ex. A at p. 28. GNC began selling
Cerebral Success in October 2014. Def.'s Statement at p.
21, ¶ 111.
Green Coffee Beanቷꮃ
sold Green Coffee Beanቷꮃ to GNC in 2013. In 2015, six
class action lawsuits were filed against GNC relating to that
product. The plaintiffs in those suits alleged, among other
things, that Green Coffee Beanቷꮃ was a false and
misleading product because it used two non-dietary
ingredients that are allegedly dangerous substances:
acacia rigidula and Betamethylphenethylamine
("BMPEA"). Responsive Appendix to Plaintiffs Brief
in Opposition to Defendant's Motion for Partial Summary
Judgment/Reply Brief in Support of Motion for Partial Summary
Judgment (ECF No. 69) ("Pl.'s App. to Br. in
Opp.") Ex. C at pp. 2, 16-26, 30-31, ¶¶ 3,
53-78, 88; Pl.'s App. to Br. in Opp. Ex. D at pp. 10, 12,
19-20, ¶¶ 36-38, 43, 72-78. GNC notified RWN of
these lawsuits and requested indemnification under Paragraph
9 of the Purchase Agreement. Def.'s Statement at p. at 6,
¶ 32; Pl.'s Resp. to Def.'s Statement at p. 3,
¶ 32. RWN never paid.