PITTSBURGH – The GNC health company is taking PetSmart to court over what it alleges is the latter’s failure to pay more than $1.3 million for product pursuant to a contract between the companies, as well as failing to compensate GNC for manufacturing $5 million in product according to PetSmart’s forecasts.
General Nutrition Corporation of Pittsburgh filed suit in the U.S. District Court for the Western District of Pennsylvania on June 23 versus PetSmart, Inc., of Phoenix, Ariz.
“GNC manufactures and sells health and nutrition products, including vitamins, minerals and supplements, and also manufactures and sells various pet nutrition and pet health products. PetSmart is a nation-wide pet supply chain store which sells pet products both in its physical stores and through its website,” the suit states.
“In 2010 GNC and PetSmart entered into a contractual relationship whereby GNC would provide PetSmart with products which PetSmart would sell at it physical stores and on its website. As part of the 2010 contract, the parties included a clause whereby GNC would provide PetSmart with a 2 percent discount for expired, discontinued, or damaged product.”
But in 2015, PetSmart notified that GNC that it was not going to renew the 2010 contract, which then expired. Subsequently, the parties entered into an amended agreement on Feb. 25, 2015.
In the revised agreement, the parties did not include any clause providing for a discount to PetSmart for lost, stolen, or damaged goods in the amended agreement, and Section 6a provided PetSmart with a 1 percent discount for any invoice that it paid within 35 days and required the invoice to be paid “in full” within 36 days, the suit says.
However, through Amendment No. 1, GNC agreed to reinsert PetSmart’s 2 percent discount for lost, stolen, outdated and damaged goods on Dec. 21, 2016, the suit says.
“Starting on or about Sept. 21, 2018, and in violation of the amended agreement and Amendment No. 1, PetSmart began deducting amounts owed to GNC in excess of the agreed upon 2 percent Damage Allowance for what PetSmart referred to as “Defectives Shortfall Bill,” the suit states.
“PetSmart has continued to take deductions for ‘Defectives Shortfall’ in violation of the parties’ agreement. Through May 6, 2020, the total deductions for ‘Defectives Shortfall’ in excess of the agreed upon 2 percent Damage Allowance is $1,051,277.18, not including interest.”
The suit also addressed the subject of product forecasts in the relationship between GNC and PetSmart.
“On or around Aug.30, 2019, PetSmart provided GNC with its forecast worth $4,970,104 covering 103 different products. Prior to that date, the amount forecast throughout 2019 had never been below that amount, and the number of products covered was consistently over 100,” according to the lawsuit.
“Two weeks later, PetSmart issued a forecast worth $2,073,830, covering 56 products. As GNC had done in the past, GNC relied on the forecasts from PetSmart and manufactured approximately $5 million worth of product for PetSmart to meet its demand. As a result of PetSmart’s actions, GNC was left with in excess of $3 million worth of unsold product.”
GNC attempted to mitigate its loss by attempting to sell the remaining product to its other customers, which it says cost them valuable time and money. Even when selling at a discount, it said it was unable to sell the remaining stock, resulting in a loss. As a result of PetSmart’s action, GNC says it has lost more than $3 million.
For counts of breach of contract, unjust enrichment, promissory estoppel, breach of the implied covenant of good faith and fair dealing, the plaintiff is seeking compensatory, liquidated and consequential damages as a result of PetSmart’s breach of contract, promissory estoppel and unjust enrichment in an amount in excess of $1.3 million, compensatory, liquidated, and consequential damages as a result of PetSmart’s breach of the implied covenant of good faith and fair dealing in an amount in excess of $3 million, attorney’s fees, pre-judgment interest, costs and such other relief as this Court shall deem just and equitable under the circumstances, in addition to a trial by jury.
The plaintiff is represented by Peter J. Ennis of Cozen O’Connor, in Pittsburgh.
The defendant has not yet secured legal counsel.
U.S. District Court for the Western District of Pennsylvania case 2:20-cv-00935
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com