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Brightpoint Distribution, LLC v. Digital Data Devices, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

May 2, 2018

BRIGHTPOINT DISTRIBUTION, LLC, an Indiana Limited Liability Company, Plaintiff,
DIGITAL DATA DEVICES, INC., a New Jersey corporation, Defendant.



         This matter is before the Court on Plaintiff Brightpoint Distribution LLC's (“Brightpoint”) Motion for Summary Judgment. (Filing No. 75.) Brightpoint filed this action alleging breach of contract based on Defendant Digital Data Devices, Inc.'s (“Digital Data”) failure to purchase Brightpoint's inventory of Jawbone UP product line, (the “UP Product”) pursuant to an agreement between the parties. For reasons explained below, the Court grants in part and denies in part, Brightpoint's Motion for Summary Judgment. (Filing No. 75.)

         I. BACKGROUND

         The following material facts are not in dispute and are viewed in a light most favorable to Digital Data, the non-moving party. See Luster v. Ill. Dep't of Corrs., 652 F.3d 726, 728 (7th Cir. 2011). The key players involved in the claims and defenses are as follows: Brightpoint is a consumer electronics distribution corporation that provides services and distributes products to telecommunications and high tech industries. (Filing No. 76 at 3.) Jawbone is a creator of consumer technology and wearable devices, and Jawbone's UP line of products give consumers insight into how they sleep, move, and eat. (Filing No. 1 at 2.) Best Buy is a national consumer electronics retailer. Brightpoint began selling Jawbone products to Best Buy in 2014. Id. at 5. Digital Data is a New Jersey electronics distribution corporation. (Filing No. 83 at 9.) Ely Eddi (“Eddi”) is the principal and sole shareholder of Digital Data. Id. at 7.

         By contractual agreement, Brightpoint began acting as an authorized distributor for Jawbone UP products wearable fitness trackers (the “Jawbone Inventory”), in 2012 and continued to do so at the time of the events giving rise to this lawsuit. (Filing No. 76 at 4-5.) The contract regulated the profit margin that Brightpoint could realize from the sale of Jawbone products to retail customers. Jawbone's representatives were the primary point of contact for sales to Best Buy, and Brightpoint fulfilled those orders. Id.

         In January 2016, Best Buy wanted to significantly reduce the price of UP Products to move its inventory due to poor retail sales. (Filing No. 83-7 at 3.) Best Buy requested that both Jawbone and Brightpoint authorize rebates or “price protection” approval to offset the losses. Id. Brightpoint's contracts with Best Buy allowed Best Buy to return products under certain circumstances. (Filing No. 84-15.) Based on this contract provision, Best Buy requested that Brightpoint take back its entire Jawbone UP inventory. Id. at 16. In the event of a return of this nature, Jawbone was contractually required to reimburse Brightpoint for Best Buy's returns of Jawbone product. Id. In addition to the UP Product that Best Buy sought to return, both Brightpoint and Jawbone sat on millions of dollars of Jawbone Inventory and Jawbone was indebted to Brightpoint for significant credits and reimbursements that Brightpoint had returned to Jawbone. (Filing No. 84 at 16; Filing No. 83 at 10.) Thus, Brightpoint refused to permit Best Buy to return its Jawbone UP inventory to Brightpoint unless Jawbone agreed to pre-pay for the cost of the return. While Jawbone and Best Buy attempted to work towards a solution, Brightpoint stopped participating in discussions altogether. (Filing No. 83-3 at 2-3.)

         On February 9, 2016, Jawbone representative, Jake Langer (“Langer”), informed Brightpoint's representative, Alex Paskoff (“Paskoff”) that Jawbone was considering a proposal that would condition the price protection offered to Best Buy on Best Buy buying Brightpoint's remaining inventory. (Filing No. 83-2 at 2.) (“It appears we are headed towards price protection-lowering prices to a level that allows BBY to adjust retail to at least $149 (if not $129) and ask (require) them to pull in the remaining IMM inventory.”)[1] The next day, Jawbone presented another option to Brightpoint. Jawbone proposed: “If we were to convince BBY (Best Buy) to simply implement TPC/promotional activity (via sell-through credits) what would need to happen in order for you to implement this?” (Filing No. 83-2 at 2.) Brightpoint forwarded these responses to Best Buy Representative Frank Bedo and promised to keep Best Buy updated. Id. However, none of these proposals ever came to fruition.

         On March 14, 2016, Langer (representing Jawbone) sent an email to Eddi and Paskoff and suggested that Digital Data and Brightpoint might be interested in working with one another. (Filing No. 78-1 at 138-140.) Between March 14 and March 22, 2016, Brightpoint and Digital Data negotiated a potential purchase price for UP Products. Id. at 12. On March 22, 2016, Digital Data made a best and final offer of $797, 668.00 for 18, 117 units of UP Products. Brightpoint rejected that offer as far below what it would be willing to accept. Id. (SeeFiling No. 78-1 at 150-51).

         By March 2016, Amazon's price point for the UP Product became problematic. Langer requested that Best Buy move its online pricing for the UP Product back to $99.00. (Filing No. 83-3 at 3.) Best Buy representative Whitney Hill (“Hill”) responded that it was price matching, but could bring the price up to regular retail for twenty-four hours only and “go from there”. Id. Langer informed Hill that Jawbone would have Amazon raise its price back up as well. Id. On March 25, 2016, Langer asked Hill if they could sell all colors of the UP Product at $99.00 or to let Jawbone know if the strategy is to burn through inventory at a really aggressive price point, so that Jawbone could manage expectations with Amazon. Id. On March 27, 2016, Hill responded that Best Buy's strategy was to burn through what they could, at that point in time, as the UP Product was already showing much slower sales. Id.

         On April 5, 2016, two weeks after rejecting Digital Data's best and final offer, Brightpoint suddenly reversed its position and informed Digital Data that it would now accept its March 22, 2016 offer. (Filing No. 78-1 at 41.) Because of Brightpoint's abrupt reversal from its prior rejection, Eddi sensed something was amiss and requested a follow-up telephone call with Paskoff to address his concerns. (See Filing No. 78-1 at 45.) The telephone call occurred late in the afternoon on April 6, 2016. (Filing No. 78-1 at 188-89.) Eddi asked Paskoff to “tell me the truth. Why do you want to do the deal now, is there a price move?” (Filing No. 78-1 at 41-42.) Paskoff responded that there was no price move and that Brightpoint just wanted to move the inventory off their books. Id. at 42. Eddi asked Paskoff when the next price move would occur. Id. Paskoff responded not until back-to-school around Labor Day. Eddi asserts that Paskoff represented the following during the telephone call, in response to his inquiries:

(i) as the exclusive distributor of Jawbone products to Best Buy and other major retailers, Brightpoint was in a unique position to know, and did in fact know, whether or not any immediate price drops for UP Products were forthcoming;
(ii) no price drops for UP Products by its retail customers such as Best Buy were on the immediate horizon, and that any such price drops would not be occurring until the “back-to-school” season; and
(iii) Plaintiff's sole reason for suddenly accepting Digital Data's previously-rejected offer was simply because it wanted to move UP Products off of its books.

(Filing No. 83 at 13). On April 6, 2016, Paskoff emailed Eddi, and copied Steve Krieger to coordinate the wire/inventory transfer details with Eddi for liquidation of the balance of Brightpoint's Jawbone UP inventory to Digital Data for $797, 668.00. (Filing No. 78-1 at 143.) Brightpoint sent Digital Data a three-page application in conjunction with the sale, which was completed by Digital Data on April 7, 2016. (Filing No. 78-1 at 161.) The Terms and Conditions of the Sale stated that “[a]ll accepted purchase orders are binding and non-cancellable.” Id. at 114. The terms also included a clause that “APPLICANT may only return erroneously shipped product that were damaged prior to shipment by BRIGHTPOINT.” Id. Applicant's requests for credits must adhere to Brightpoint's then-current return processing guidelines, which Brightpoint asserts was ...

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