1038-00007 · Cascade Retail Holdings · Pleadings

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SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF LOS ANGELES

ANSWER AND AFFIRMATIVE DEFENSES OF DEFENDANT CASCADE RETAIL HOLDINGS INC.

I. INTRODUCTION

Defendant Cascade Retail Holdings Inc. ("Cascade" or "Defendant"), a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 2200 Elliott Avenue West, Suite 1400, Seattle, Washington 98119, and publicly traded on the Nasdaq Stock Market under the ticker symbol CRHI, by and through its attorneys of record, Calderwood & Harkness LLP, hereby respectfully files this Answer and Affirmative Defenses in response to the Complaint filed by Plaintiff Vantor Holdings Corp. ("Vantor" or "Plaintiff"), a California corporation headquartered at 18500 Von Karman Avenue, Suite 600, Irvine, California 92612, on September 7, 2021, and duly served upon Cascade on September 28, 2021.

Cascade responds to each allegation of the Complaint as set forth below. Unless a specific allegation is expressly and unequivocally admitted herein, it is denied. All allegations of the Complaint not specifically admitted are hereby denied. Cascade generally denies each and every allegation of the Complaint, denies that Vantor is entitled to any relief whatsoever, and denies that Vantor has been damaged in any manner by any act or omission of Cascade. Nothing contained in this Answer is intended as, or shall be construed as, an admission of any fact, matter, or legal conclusion set forth in the Complaint.

Cascade further reserves the right to amend this Answer, to assert additional affirmative defenses, and to supplement its responses to the allegations of the Complaint as discovery in this matter progresses and as additional facts and circumstances become known.

II. RESPONSES TO ALLEGATIONS OF THE COMPLAINT

A. Responses to Allegations Regarding the Parties (Paragraphs 1 Through 10)

Paragraph 1. Cascade admits that Plaintiff Vantor Holdings Corp. is a California corporation with its principal place of business in Irvine, California. Cascade lacks sufficient knowledge or information to form a belief as to the truth of Vantor's characterizations of the scope, nature, or extent of its business operations, and on that basis denies such characterizations. Cascade admits upon information and belief that Vantor operates approximately eighty-five (85) retail locations in the states of California, Arizona, Nevada, and Oregon. Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 1.

Paragraph 2. Cascade admits that Defendant Cascade Retail Holdings Inc. is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 2200 Elliott Avenue West, Suite 1400, Seattle, Washington 98119. Cascade further admits that it is publicly traded on the Nasdaq Stock Market under the ticker symbol CRHI. Cascade admits that it operates a multi-channel retail and e-commerce business with over three hundred forty (340) retail locations across twenty-two (22) states. Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 2, including any characterization of Cascade's competitive posture, market share, or business strategy that is inconsistent with the facts as understood by Cascade.

Paragraph 3. Cascade admits that Hemsworth Consumer Products LLC ("Hemsworth") is an Oregon limited liability company with its principal place of business at 4720 NW Yeon Avenue, Portland, Oregon 97210. Cascade further admits that Hemsworth manufactures and sells home goods and kitchen accessories. Cascade denies any characterization that Hemsworth was "exclusively" a Vantor supplier to the extent that such characterization implies that Hemsworth was prohibited from doing business with any entity other than Vantor beyond the scope of any written agreement between Hemsworth and Vantor, or that Hemsworth was contractually prohibited from exploring future business opportunities with other retailers. Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 3.

Paragraph 4. Cascade admits that Tridale Manufacturing Inc. ("Tridale") is a Nevada corporation with its principal place of business at 6300 South Pecos Road, Suite 210, Las Vegas, Nevada 89120. Cascade further admits that Tridale manufactures and sells consumer electronics accessories. Cascade denies any allegations to the extent they characterize Tridale's relationship with Vantor in a manner that is inconsistent with the written agreements between Tridale and Vantor or that misrepresent the nature or scope of any exclusivity obligations contained therein. Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 4.

Paragraph 5. Cascade admits that Orion Lifestyle Brands Corp. ("Orion") is a California corporation with its principal place of business at 1900 Avenue of the Stars, Suite 1050, Los Angeles, California 90067. Cascade further admits that Orion manufactures and sells personal care and wellness products. Cascade denies any characterization of Orion's relationship with Vantor that extends beyond the express terms of the written supply agreements between Orion and Vantor. Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 5.

Paragraph 6. Cascade admits that this Court has subject matter jurisdiction over the claims asserted in this action.

Paragraph 7. Cascade admits that venue is proper in the County of Los Angeles, Superior Court of the State of California.

Paragraph 8. Cascade admits that this Court may exercise personal jurisdiction over Cascade for purposes of this action. Cascade does not contest personal jurisdiction in this proceeding. This admission is limited to this action and shall not be construed as a general consent to the jurisdiction of the courts of the State of California for any other purpose.

Paragraph 9. Cascade lacks sufficient knowledge or information to form a belief as to the truth of the broad characterizations of Vantor's purported market position, competitive standing, or alleged reputation in the retail industry set forth in Paragraph 9, and on that basis denies such allegations. Cascade further denies any allegations in Paragraph 9 that characterize Cascade as a direct competitor of Vantor in a manner inconsistent with the nature and scope of each party's respective business operations.

Paragraph 10. Cascade denies the allegations of Paragraph 10 to the extent they contain characterizations of the competitive relationship between Vantor and Cascade, the alleged harm suffered by Vantor, or the purported motivations underlying Cascade's business decisions. Cascade lacks sufficient knowledge or information to form a belief as to the truth of any remaining allegations in Paragraph 10 not specifically addressed herein, and on that basis denies such allegations.

B. Responses to Allegations Regarding the Exclusive Supply Agreements (Paragraphs 11 Through 25)

Paragraph 11. Cascade admits, upon information and belief, that Vantor and Orion Lifestyle Brands Corp. entered into a supply agreement with an effective date of July 1, 2018 (the "Vantor-Orion Agreement"). Cascade admits, upon information and belief, that the Vantor-Orion Agreement had a four (4)-year term expiring on June 30, 2022. Cascade admits, upon information and belief, that the Vantor-Orion Agreement contained a minimum annual purchase commitment of Fourteen Million Six Hundred Thousand Dollars ($14,600,000). Cascade states that the Vantor-Orion Agreement speaks for itself and is the best evidence of its terms.

Paragraph 12. Cascade admits, upon information and belief, that the Vantor-Orion Agreement contained an exclusivity provision. Cascade further admits, upon information and belief, that the Vantor-Orion Agreement contained a termination-for-convenience clause providing for termination by either party upon one hundred twenty (120) days' written notice. Cascade states that the Vantor-Orion Agreement speaks for itself and denies any characterization of the agreement's terms that is inconsistent with the express language of the agreement.

Paragraph 13. Cascade admits, upon information and belief, that Vantor and Hemsworth Consumer Products LLC entered into a supply agreement with an effective date of March 15, 2019 (the "Vantor-Hemsworth Agreement"). Cascade admits, upon information and belief, that the Vantor-Hemsworth Agreement had a three (3)-year term expiring on March 14, 2022. Cascade admits, upon information and belief, that the Vantor-Hemsworth Agreement contained a minimum annual purchase commitment of Twelve Million Five Hundred Thousand Dollars ($12,500,000). Cascade states that the Vantor-Hemsworth Agreement speaks for itself and is the best evidence of its terms.

Paragraph 14. Cascade admits, upon information and belief, that the Vantor-Hemsworth Agreement contained an exclusivity provision. Cascade further admits, upon information and belief, that the Vantor-Hemsworth Agreement contained a termination-for-convenience clause providing for termination by either party upon ninety (90) days' written notice. Cascade states that the Vantor-Hemsworth Agreement speaks for itself and denies any characterization of the agreement's terms that is inconsistent with the express language of the agreement.

Paragraph 15. Cascade admits, upon information and belief, that Vantor and Tridale Manufacturing Inc. entered into a supply agreement with an effective date of January 10, 2020 (the "Vantor-Tridale Agreement"). Cascade admits, upon information and belief, that the Vantor-Tridale Agreement had a two (2)-year term expiring on January 9, 2022. Cascade admits, upon information and belief, that the Vantor-Tridale Agreement contained a minimum annual purchase commitment of Eight Million Three Hundred Thousand Dollars ($8,300,000). Cascade states that the Vantor-Tridale Agreement speaks for itself and is the best evidence of its terms.

Paragraph 16. Cascade admits, upon information and belief, that the Vantor-Tridale Agreement contained an exclusivity provision. Cascade further admits, upon information and belief, that the Vantor-Tridale Agreement contained a termination-for-convenience clause providing for termination by either party upon sixty (60) days' written notice. Cascade states that the Vantor-Tridale Agreement speaks for itself and denies any characterization of the agreement's terms that is inconsistent with the express language of the agreement.

Paragraph 17. Cascade states that the Vantor-Orion Agreement, the Vantor-Hemsworth Agreement, and the Vantor-Tridale Agreement (collectively, the "Vantor Supply Agreements") speak for themselves and are the best evidence of their respective terms. Cascade denies any characterization of the Vantor Supply Agreements that is inconsistent with the express language of those agreements. Cascade specifically notes that each of the Vantor Supply Agreements expressly permitted termination for convenience upon written notice, and that the existence of such termination-for-convenience clauses is a material term of each agreement.

Paragraphs 18 through 20. To the extent these paragraphs characterize the exclusivity provisions of the Vantor Supply Agreements, Cascade states that the agreements speak for themselves and denies any characterization inconsistent with their express terms. Cascade specifically denies that the exclusivity provisions prohibited the suppliers from entering into agreements with third parties following the proper exercise of the termination-for-convenience clauses contained in each of the Vantor Supply Agreements.

Paragraphs 21 through 23. To the extent these paragraphs allege that Cascade had knowledge of, or access to, the specific terms of the Vantor Supply Agreements—including without limitation the exclusivity provisions—at or prior to the time Cascade entered into its own supply agreements with Hemsworth, Tridale, and Orion, Cascade denies such allegations. Cascade did not have actual knowledge of the specific exclusivity provisions or other terms of the Vantor Supply Agreements at the time Cascade entered into its supply agreements with the three suppliers.

Paragraphs 24 through 25. Cascade denies each and every remaining allegation of Paragraphs 24 and 25 to the extent not specifically admitted herein. To the extent these paragraphs contain legal conclusions, no response is required, and Cascade denies any such legal conclusions to the extent a response is deemed required.

C. Responses to Allegations Regarding Project Atlas and Cascade's Conduct (Paragraphs 26 Through 40)

Paragraph 26. Cascade admits that it launched an internal strategic initiative known as "Project Atlas" in or about February 2021 for the purpose of diversifying and strengthening its supplier network in the categories of home goods, consumer electronics accessories, and personal care products. Cascade states that Project Atlas was a lawful and commercially reasonable business initiative designed to enhance Cascade's supply chain resilience and improve its competitive position in the marketplace.

Paragraph 27. Cascade admits that it allocated a budget of approximately Four Million Two Hundred Thousand Dollars ($4,200,000) for supplier transition costs associated with Project Atlas. Cascade states that such budget allocations are consistent with ordinary course business planning for a retailer of Cascade's size and scale.

Paragraph 28. Cascade admits that Project Atlas was led by Annika Bergström, Vice President of Strategic Sourcing, who reported to Lena Torvik, Senior Vice President of Supply Chain & Procurement. Cascade denies any characterization of Ms. Bergström's or Ms. Torvik's roles, responsibilities, or conduct that is inconsistent with the facts as understood by Cascade.

Paragraph 29. Cascade admits that it entered into a supply agreement with Orion Lifestyle Brands Corp. on or about May 10, 2021 (the "Cascade-Orion Agreement"). Cascade admits that the Cascade-Orion Agreement has a four (4)-year term and provides for an annual purchase commitment of approximately Thirty-One Million Dollars ($31,000,000). Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 29.

Paragraph 30. Cascade admits that it entered into a supply agreement with Hemsworth Consumer Products LLC on or about June 1, 2021 (the "Cascade-Hemsworth Agreement"). Cascade admits that the Cascade-Hemsworth Agreement has a five (5)-year term and provides for an annual purchase commitment of approximately Twenty-Eight Million Dollars ($28,000,000). Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 30.

Paragraph 31. Cascade admits that it entered into a supply agreement with Tridale Manufacturing Inc. on or about August 15, 2021 (the "Cascade-Tridale Agreement"). Cascade admits that the Cascade-Tridale Agreement has a three (3)-year term and provides for an annual purchase commitment of approximately Nineteen Million Five Hundred Thousand Dollars ($19,500,000). Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 31.

Paragraphs 32 through 34. Cascade denies that it "poached," "systematically targeted," or "induced" any supplier to breach any agreement with Vantor. Cascade denies that it engaged in any improper, unlawful, tortious, or otherwise wrongful conduct in connection with its entry into the Cascade-Orion Agreement, the Cascade-Hemsworth Agreement, or the Cascade-Tridale Agreement. Cascade states that it engaged in ordinary and lawful competitive activity in negotiating and entering into supply agreements with willing counterparties.

Paragraphs 35 through 37. Cascade denies that any officer, director, employee, or agent of Cascade had actual knowledge of the specific exclusivity provisions contained in the Vantor Supply Agreements at the time the Cascade-Orion Agreement, the Cascade-Hemsworth Agreement, or the Cascade-Tridale Agreement was executed. Cascade further denies that it employed any improper means, threats, coercion, or other wrongful conduct to induce, persuade, or cause any of the suppliers to enter into agreements with Cascade or to alter, terminate, or otherwise disrupt their existing relationships with Vantor.

Paragraphs 38 through 40. Cascade states that each of the three suppliers—Hemsworth Consumer Products LLC, Tridale Manufacturing Inc., and Orion Lifestyle Brands Corp.—independently and voluntarily chose to enter into supply agreements with Cascade. Cascade further states that, upon information and belief, each supplier independently exercised its respective termination-for-convenience clause under its existing agreement with Vantor prior to or contemporaneously with entering into its agreement with Cascade. Cascade denies each and every remaining allegation of Paragraphs 38 through 40 to the extent not specifically admitted herein.

D. Responses to Allegations Regarding the First Cause of Action: Tortious Interference with Contractual Relations (Paragraphs 41 Through 55)

Paragraph 41. Cascade incorporates by reference each of its responses to the preceding paragraphs of the Complaint as though fully set forth herein.

Paragraphs 42 through 45. Cascade denies all material allegations of the First Cause of Action for Tortious Interference with Contractual Relations. Cascade specifically denies that it had knowledge of the existence of the exclusive supply agreements or their specific exclusivity terms at the time Cascade entered into discussions or negotiations with Hemsworth Consumer Products LLC, Tridale Manufacturing Inc., or Orion Lifestyle Brands Corp.

Paragraphs 46 through 50. Cascade denies that it engaged in any intentional acts designed to induce, cause, or contribute to a disruption of the contractual relationships between Vantor and any of the three suppliers. Cascade further denies that any actual breach of any of the Vantor Supply Agreements occurred as a result of any conduct by Cascade. Cascade states that each supplier properly and independently exercised its respective termination-for-convenience clause prior to or contemporaneously with contracting with Cascade, and that a lawful exercise of a contractual termination right does not constitute a breach of contract.

Paragraphs 51 through 55. Cascade denies that Vantor suffered any damages that were proximately caused by any act or omission of Cascade. Cascade denies each and every remaining allegation of Paragraphs 51 through 55 to the extent not specifically admitted herein. To the extent any of the allegations of these paragraphs contain legal conclusions, no response is required, and Cascade denies any such legal conclusions to the extent a response is deemed required.

E. Responses to Allegations Regarding the Second Cause of Action: Tortious Interference with Prospective Economic Advantage (Paragraphs 56 Through 70)

Paragraph 56. Cascade incorporates by reference each of its responses to the preceding paragraphs of the Complaint as though fully set forth herein.

Paragraphs 57 through 60. Cascade denies all material allegations of the Second Cause of Action for Tortious Interference with Prospective Economic Advantage. Cascade specifically denies that Vantor had a reasonable expectation of continued or renewed supply relationships with Hemsworth, Tridale, or Orion beyond the express terms of the existing Vantor Supply Agreements, particularly given that each agreement contained a termination-for-convenience clause permitting termination at any time upon written notice.

Paragraphs 61 through 65. Cascade denies that it engaged in any independently wrongful conduct, as is required under California law to sustain a claim for tortious interference with prospective economic advantage. See Glenrock Corporation, 29 Cal. 4th 1134, 1153 (2003) (holding that a plaintiff must demonstrate that the defendant's interference was independently wrongful). Cascade's entry into supply agreements with Hemsworth, Tridale, and Orion—following each supplier's exercise of its termination-for-convenience rights under its respective Vantor Supply Agreement—constitutes lawful competitive activity and does not give rise to liability for tortious interference with prospective economic advantage.

Paragraphs 66 through 70. Cascade denies that Vantor suffered any damages that were proximately caused by any act or omission of Cascade. Cascade denies each and every remaining allegation of Paragraphs 66 through 70 to the extent not specifically admitted herein.

F. Responses to Allegations Regarding the Third Cause of Action: Unfair Business Practices Under California Business and Professions Code § 17200 (Paragraphs 71 Through 80)

Paragraph 71. Cascade incorporates by reference each of its responses to the preceding paragraphs of the Complaint as though fully set forth herein.

Paragraphs 72 through 75. Cascade denies all material allegations of the Third Cause of Action for violation of California Business and Professions Code § 17200 et seq. Cascade denies that it engaged in any unfair, unlawful, or fraudulent business practice within the meaning of Section 17200.

Paragraphs 76 through 78. Cascade states that its competitive conduct in entering into supply agreements with willing suppliers constitutes lawful competition and does not give rise to liability under Section 17200 or any other provision of the California Business and Professions Code. Cascade further states that Vantor's Section 17200 claim does not state an independent basis for relief separate from the tortious interference causes of action and is, therefore, duplicative and without merit.

Paragraphs 79 through 80. Cascade denies each and every remaining allegation of Paragraphs 79 and 80 to the extent not specifically admitted herein. To the extent any of the allegations of these paragraphs contain legal conclusions, no response is required, and Cascade denies any such legal conclusions to the extent a response is deemed required.

G. Responses to Allegations Regarding Damages (Paragraphs 81 Through 90)

Paragraph 81. Cascade denies that Vantor suffered damages in the amount of Eighty-Seven Million Four Hundred Thousand Dollars ($87,400,000) or in any amount whatsoever as a result of any act or omission of Cascade.

Paragraphs 82 through 84. Cascade denies the accuracy, methodology, and sufficiency of Vantor's alleged damages calculations. Cascade specifically denies the claimed Thirty-Four Million Two Hundred Thousand Dollars ($34,200,000) in lost profits allegedly arising from the Hemsworth relationship, the claimed Twenty-Two Million Eight Hundred Thousand Dollars ($22,800,000) in lost profits allegedly arising from the Tridale relationship, and the claimed Thirty Million Four Hundred Thousand Dollars ($30,400,000) in lost profits allegedly arising from the Orion relationship. Cascade states that Vantor's damages calculations are speculative, unsubstantiated, and not supported by reliable methodologies.

Paragraphs 85 through 87. Cascade denies that Vantor is entitled to damages based on projected multi-year revenue streams extending beyond the remaining terms of the existing exclusive supply agreements. Cascade states that any damages, to the extent they exist—which Cascade denies—must be limited to the remaining exclusive terms of the Vantor Supply Agreements at the time of the alleged interference. Specifically, upon information and belief, the remaining exclusive terms at the time of the alleged interference were: approximately nine (9) months remaining for the Vantor-Hemsworth Agreement, approximately five (5) months remaining for the Vantor-Tridale Agreement, and approximately thirteen (13) months remaining for the Vantor-Orion Agreement.

Paragraphs 88 through 90. Cascade states that Vantor failed to take reasonable steps to mitigate any alleged damages by seeking alternative suppliers to replace Hemsworth, Tridale, and Orion. The home goods, consumer electronics accessories, and personal care product markets contain numerous alternative suppliers that were and remain available to Vantor. Vantor's failure to mitigate its alleged damages defeats or substantially reduces any damages claim. Cascade denies each and every remaining allegation of Paragraphs 88 through 90 to the extent not specifically admitted herein.

H. Response to Prayer for Relief

Cascade denies that Vantor is entitled to any of the relief requested in the Complaint, including without limitation compensatory damages, consequential damages, disgorgement, restitution, injunctive relief, attorneys' fees, costs of suit, prejudgment or post-judgment interest, or any other relief of any kind or nature whatsoever.

III. AFFIRMATIVE DEFENSES

Without admitting any of the allegations of the Complaint and without assuming the burden of proof on any issue on which the burden of proof rests with Plaintiff under applicable law, Cascade hereby asserts the following affirmative defenses to each and every cause of action alleged in the Complaint:

FIRST AFFIRMATIVE DEFENSE

(Lack of Knowledge of Exclusivity Provisions)

Cascade did not have actual knowledge of the specific exclusivity provisions contained in the supply agreements between Vantor and Hemsworth Consumer Products LLC, Tridale Manufacturing Inc., or Orion Lifestyle Brands Corp. (collectively, the "Vantor Supply Agreements") at the time Cascade entered into its own supply agreements with the three suppliers. Under California law, actual knowledge of the existence and terms of a valid contract between the plaintiff and a third party is a required element of a claim for tortious interference with contractual relations. See Harborview Industries, 50 Cal. 3d 1118, 1126 (1990). Because Cascade lacked actual knowledge of the specific exclusivity provisions and related terms of the Vantor Supply Agreements, Vantor cannot establish the knowledge element of its tortious interference with contractual relations claim, and that claim fails as a matter of law.

SECOND AFFIRMATIVE DEFENSE

(Independent Action by Suppliers)

Each of the three suppliers—Hemsworth Consumer Products LLC, Tridale Manufacturing Inc., and Orion Lifestyle Brands Corp.—independently and voluntarily chose to enter into supply agreements with Cascade. Cascade did not induce, coerce, threaten, or employ any improper means or wrongful conduct to cause the suppliers to alter, terminate, or otherwise disrupt their existing relationships with Vantor. The decision of each supplier to enter into a supply agreement with Cascade was the result of the supplier's own independent business judgment, informed by its own assessment of the commercial attractiveness of the opportunity presented by Cascade, and was not caused, induced, or precipitated by any wrongful conduct on the part of Cascade. Because the suppliers acted independently and voluntarily, Cascade is not liable for the consequences of the suppliers' independent commercial decisions.

THIRD AFFIRMATIVE DEFENSE

(Suppliers' Exercise of Termination-for-Convenience Clauses)

Each of the three Vantor Supply Agreements contained an express termination-for-convenience clause permitting either party to the agreement to terminate the agreement upon written notice, as follows: ninety (90) days' notice for the Vantor-Hemsworth Agreement, sixty (60) days' notice for the Vantor-Tridale Agreement, and one hundred twenty (120) days' notice for the Vantor-Orion Agreement. Upon information and belief, each supplier duly and properly exercised its termination-for-convenience clause prior to entering into its supply agreement with Cascade. As a result, no breach of any Vantor Supply Agreement occurred, and Cascade cannot be held liable for inducing a breach of contract that did not, in fact, occur. The existence of termination-for-convenience provisions—which permitted either party to terminate the contract at any time upon written notice—negates the contractual interference claims because the contracts were terminable at will and did not guarantee Vantor an uninterrupted supply relationship for the full duration of their respective terms.

FOURTH AFFIRMATIVE DEFENSE

(Failure to Mitigate Damages)

Vantor failed to take reasonable steps to mitigate its alleged damages. Upon learning that its suppliers intended to terminate their exclusive supply agreements, Vantor had an obligation under California law to exercise reasonable diligence in seeking alternative suppliers to minimize any alleged losses. See Valle de Oro Bank v. Gamboa, 26 Cal. App. 4th 1686, 1691 (1994). Vantor's failure to take reasonable steps to mitigate its alleged damages defeats, or at a minimum substantially reduces, any damages claim asserted by Vantor in this action. The home goods, consumer electronics accessories, and personal care product markets are served by numerous alternative manufacturers and suppliers that were and remain available to Vantor, and Vantor could have replaced the supply relationships at issue within a commercially reasonable period of time.

FIFTH AFFIRMATIVE DEFENSE

(Section 17200 Claim is Duplicative and Preempted)

Vantor's Third Cause of Action under California Business and Professions Code § 17200 et seq. is duplicative of and subsumed by Vantor's First and Second Causes of Action for tortious interference with contractual relations and tortious interference with prospective economic advantage, respectively. The Section 17200 claim is based entirely on the same operative facts and the same alleged conduct as the tortious interference causes of action. Vantor does not allege any independent unfair, unlawful, or fraudulent business practice distinct from the common law tort claims alleged in the First and Second Causes of Action. Vantor may not repackage its common law tort claims as a statutory unfair competition claim in order to obtain duplicative relief or to circumvent the limitations applicable to its tort claims. To the extent the tortious interference claims fail on the merits, the derivative Section 17200 claim necessarily fails as well.

SIXTH AFFIRMATIVE DEFENSE

(No Independently Wrongful Conduct — Prospective Economic Advantage)

To prevail on a claim for tortious interference with prospective economic advantage under California law, a plaintiff must demonstrate that the defendant's conduct was "independently wrongful"—that is, wrongful by some legal measure other than the fact of the interference itself. See Glenrock Corporation, 29 Cal. 4th 1134, 1153 (2003); della Penna v. Crowne Albany Industries, 11 Cal. 4th 376, 393 (1995). Cascade's conduct in entering into supply agreements with willing suppliers who had exercised their contractual termination rights constitutes lawful competitive activity and does not rise to the level of independently wrongful conduct. Cascade did not engage in conduct that was unlawful, unethical, oppressive, or in violation of any established public policy. Vantor cannot establish this required element of its prospective economic advantage claim, and that claim fails as a matter of law.

SEVENTH AFFIRMATIVE DEFENSE

(Justification / Legitimate Competition)

Cascade's actions were justified by legitimate competitive interests and constitute privileged competitive activity. Cascade's Project Atlas initiative was a lawful business strategy developed in the ordinary course of Cascade's operations to diversify and strengthen its supplier network, reduce supply chain risk, and improve its competitive position in the marketplace. Entering into supply agreements with available and willing suppliers is a core competitive activity protected under the principles of free market competition. Under California law, competitive activity standing alone does not constitute tortious interference. See Morriven & Linley LLP, 216 Cal. App. 3d 1139, 1153-54 (1989). Cascade's conduct was motivated solely by legitimate business objectives and was not undertaken for the purpose of injuring Vantor or disrupting Vantor's business relationships.

EIGHTH AFFIRMATIVE DEFENSE

(No Proximate Causation)

Vantor cannot establish that any act or omission of Cascade was the proximate cause of Vantor's alleged damages. The suppliers' decisions to terminate their agreements with Vantor were made independently by each supplier and were driven by each supplier's own commercial considerations—including, without limitation, the suppliers' assessment of the relative economic attractiveness of the Cascade supply agreements as compared to the Vantor Supply Agreements, the suppliers' desire to diversify their own customer bases, and the suppliers' independent evaluation of their respective business strategies. Any alleged losses suffered by Vantor were the direct and proximate result of the suppliers' independent commercial decisions, not of any interference or wrongful conduct by Cascade. The causal chain between Cascade's conduct and Vantor's alleged damages is broken by the independent, voluntary decisions of the three suppliers.

NINTH AFFIRMATIVE DEFENSE

(Speculative and Uncertain Damages)

Vantor's alleged damages of Eighty-Seven Million Four Hundred Thousand Dollars ($87,400,000) are speculative, uncertain, contingent, and not capable of proof with the reasonable certainty required under California law. See GHK Assocs. v. Mayer Group, Inc., 224 Cal. App. 3d 856, 873 (1990). Vantor's damages calculations rely on projected multi-year revenue streams extending far beyond the remaining terms of the exclusive supply agreements, which is inherently speculative given that each agreement was terminable at will upon written notice. Vantor's damages methodology applies an inappropriate discount rate, fails to account for the termination-for-convenience clauses that permitted either party to terminate the agreements at any time upon written notice, fails to account for ordinary market risks and uncertainties, and fails to account for the possibility that the suppliers would have terminated their agreements with Vantor for independent reasons unrelated to Cascade. As a matter of law, Vantor's damages must be limited, if recoverable at all, to the remaining exclusive terms of the Vantor Supply Agreements at the time of the alleged interference, and even those damages are subject to reduction based on mitigation and other applicable defenses.

TENTH AFFIRMATIVE DEFENSE

(Unclean Hands)

Cascade reserves the right to assert the equitable defense of unclean hands to the extent that discovery reveals that Vantor engaged in inequitable, unconscionable, or improper conduct relating to the subject matter of this litigation, including without limitation any conduct by Vantor that contributed to the suppliers' decisions to terminate their agreements with Vantor, any failure by Vantor to perform its obligations under the Vantor Supply Agreements, or any improper conduct by Vantor directed at Cascade or the suppliers in connection with the events at issue in this action.

ELEVENTH AFFIRMATIVE DEFENSE

(Statute of Limitations)

To the extent any of Vantor's claims are based on conduct occurring outside the applicable statute of limitations periods, such claims are barred by the applicable statutes of limitations, including without limitation California Code of Civil Procedure §§ 335.1 and 338, and California Business and Professions Code § 17208.

TWELFTH AFFIRMATIVE DEFENSE

(Reservation of Rights)

Cascade reserves the right to assert additional affirmative defenses as the facts and circumstances warrant following completion of discovery in this matter. Cascade's assertion of the foregoing affirmative defenses does not constitute an admission that Cascade bears the burden of proof on any issue. Cascade further reserves the right to amend this Answer and these affirmative defenses as permitted by the California Code of Civil Procedure and the applicable Rules of Court.

IV. PRAYER FOR RELIEF

WHEREFORE, Defendant Cascade Retail Holdings Inc. respectfully prays for judgment as follows:

1. That Plaintiff Vantor Holdings Corp. take nothing by its Complaint;

2. That each and every cause of action alleged in the Complaint be dismissed with prejudice and in its entirety;

3. That Cascade be awarded its costs of suit incurred herein pursuant to California Code of Civil Procedure § 1032;

4. That Cascade be awarded its reasonable attorneys' fees to the extent permitted by law, contract, or statute; and

5. For such other and further relief as this Court deems just and proper.

V. JURY DEMAND

Defendant Cascade Retail Holdings Inc. hereby demands a trial by jury on all issues so triable in this action pursuant to the California Constitution, Article I, Section 16, and California Code of Civil Procedure § 631.

DATED: October 18, 2021

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Carmichael (State Bar No. 187234) Francesca Morano (State Bar No. 215678) Yuki Nakamura (State Bar No. 298431) Carlos Espinoza (State Bar No. 312756) 600 South Grand Avenue, Suite 3200 Los Angeles, California 90071 Telephone: (213) 555-4800 Facsimile: (213) 555-4801

Attorneys for Defendant Cascade Retail Holdings Inc.

PROOF OF SERVICE

I, the undersigned, declare as follows:

I am over the age of eighteen (18) years and am not a party to this action. My business address is 600 South Grand Avenue, Suite 3200, Los Angeles, California 90071. On October 18, 2021, I served the foregoing ANSWER AND AFFIRMATIVE DEFENSES OF DEFENDANT CASCADE RETAIL HOLDINGS INC. on the following party(ies) by the method(s) indicated below:

Martin Kessler Natalie Whitfield Jason Okafor KESSLER, BRANDT & WHITFIELD LLP 1999 Avenue of the Stars, Suite 2800 Los Angeles, California 90067 Telephone: (310) 555-7200 Facsimile: (310) 555-7201

Attorneys for Plaintiff Vantor Holdings Corp.

BY ELECTRONIC SERVICE: I caused the above-referenced document to be served via the Court's electronic filing and service system on the above-named party(ies) at the electronic service address(es) on file with the Court.

BY U.S. MAIL: I caused the above-referenced document to be enclosed in a sealed envelope, with postage thereon fully prepaid, and deposited in the United States Mail at Los Angeles, California, addressed to the above-named party(ies) at the address(es) set forth above.

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

Executed on October 18, 2021, at Los Angeles, California.

________________________________________

Carlos Espinoza

VANTOR HOLDINGS CORP., a California corporation,	Case No. 21STCV-34872
Plaintiff,	ANSWER AND AFFIRMATIVE DEFENSES OF DEFENDANT CASCADE RETAIL HOLDINGS INC.

Complaint Filed: September 7, 2021

CASCADE RETAIL HOLDINGS INC., a Delaware corporation,

Defendant.

SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
ANSWER AND AFFIRMATIVE DEFENSES OF DEFENDANT CASCADE RETAIL HOLDINGS INC.
I. INTRODUCTION
Defendant Cascade Retail Holdings Inc. ("Cascade" or "Defendant"), a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 2200 Elliott Avenue West, Suite 1400, Seattle, Washington 98119, and publicly traded on the Nasdaq Stock Market under the ticker symbol CRHI, by and through its attorneys of record, Calderwood & Harkness LLP, hereby respectfully files this Answer and Affirmative Defenses in response to the Complaint filed by Plaintiff Vantor Holdings Corp. ("Vantor" or "Plaintiff"), a California corporation headquartered at 18500 Von Karman Avenue, Suite 600, Irvine, California 92612, on September 7, 2021, and duly served upon Cascade on September 28, 2021.
Cascade responds to each allegation of the Complaint as set forth below. Unless a specific allegation is expressly and unequivocally admitted herein, it is denied. All allegations of the Complaint not specifically admitted are hereby denied. Cascade generally denies each and every allegation of the Complaint, denies that Vantor is entitled to any relief whatsoever, and denies that Vantor has been damaged in any manner by any act or omission of Cascade. Nothing contained in this Answer is intended as, or shall be construed as, an admission of any fact, matter, or legal conclusion set forth in the Complaint.
Cascade further reserves the right to amend this Answer, to assert additional affirmative defenses, and to supplement its responses to the allegations of the Complaint as discovery in this matter progresses and as additional facts and circumstances become known.
II. RESPONSES TO ALLEGATIONS OF THE COMPLAINT
A. Responses to Allegations Regarding the Parties (Paragraphs 1 Through 10)
Paragraph 1. Cascade admits that Plaintiff Vantor Holdings Corp. is a California corporation with its principal place of business in Irvine, California. Cascade lacks sufficient knowledge or information to form a belief as to the truth of Vantor's characterizations of the scope, nature, or extent of its business operations, and on that basis denies such characterizations. Cascade admits upon information and belief that Vantor operates approximately eighty-five (85) retail locations in the states of California, Arizona, Nevada, and Oregon. Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 1.
Paragraph 2. Cascade admits that Defendant Cascade Retail Holdings Inc. is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 2200 Elliott Avenue West, Suite 1400, Seattle, Washington 98119. Cascade further admits that it is publicly traded on the Nasdaq Stock Market under the ticker symbol CRHI. Cascade admits that it operates a multi-channel retail and e-commerce business with over three hundred forty (340) retail locations across twenty-two (22) states. Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 2, including any characterization of Cascade's competitive posture, market share, or business strategy that is inconsistent with the facts as understood by Cascade.
Paragraph 3. Cascade admits that Hemsworth Consumer Products LLC ("Hemsworth") is an Oregon limited liability company with its principal place of business at 4720 NW Yeon Avenue, Portland, Oregon 97210. Cascade further admits that Hemsworth manufactures and sells home goods and kitchen accessories. Cascade denies any characterization that Hemsworth was "exclusively" a Vantor supplier to the extent that such characterization implies that Hemsworth was prohibited from doing business with any entity other than Vantor beyond the scope of any written agreement between Hemsworth and Vantor, or that Hemsworth was contractually prohibited from exploring future business opportunities with other retailers. Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 3.
Paragraph 4. Cascade admits that Tridale Manufacturing Inc. ("Tridale") is a Nevada corporation with its principal place of business at 6300 South Pecos Road, Suite 210, Las Vegas, Nevada 89120. Cascade further admits that Tridale manufactures and sells consumer electronics accessories. Cascade denies any allegations to the extent they characterize Tridale's relationship with Vantor in a manner that is inconsistent with the written agreements between Tridale and Vantor or that misrepresent the nature or scope of any exclusivity obligations contained therein. Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 4.
Paragraph 5. Cascade admits that Orion Lifestyle Brands Corp. ("Orion") is a California corporation with its principal place of business at 1900 Avenue of the Stars, Suite 1050, Los Angeles, California 90067. Cascade further admits that Orion manufactures and sells personal care and wellness products. Cascade denies any characterization of Orion's relationship with Vantor that extends beyond the express terms of the written supply agreements between Orion and Vantor. Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 5.
Paragraph 6. Cascade admits that this Court has subject matter jurisdiction over the claims asserted in this action.
Paragraph 7. Cascade admits that venue is proper in the County of Los Angeles, Superior Court of the State of California.
Paragraph 8. Cascade admits that this Court may exercise personal jurisdiction over Cascade for purposes of this action. Cascade does not contest personal jurisdiction in this proceeding. This admission is limited to this action and shall not be construed as a general consent to the jurisdiction of the courts of the State of California for any other purpose.
Paragraph 9. Cascade lacks sufficient knowledge or information to form a belief as to the truth of the broad characterizations of Vantor's purported market position, competitive standing, or alleged reputation in the retail industry set forth in Paragraph 9, and on that basis denies such allegations. Cascade further denies any allegations in Paragraph 9 that characterize Cascade as a direct competitor of Vantor in a manner inconsistent with the nature and scope of each party's respective business operations.
Paragraph 10. Cascade denies the allegations of Paragraph 10 to the extent they contain characterizations of the competitive relationship between Vantor and Cascade, the alleged harm suffered by Vantor, or the purported motivations underlying Cascade's business decisions. Cascade lacks sufficient knowledge or information to form a belief as to the truth of any remaining allegations in Paragraph 10 not specifically addressed herein, and on that basis denies such allegations.
B. Responses to Allegations Regarding the Exclusive Supply Agreements (Paragraphs 11 Through 25)
Paragraph 11. Cascade admits, upon information and belief, that Vantor and Orion Lifestyle Brands Corp. entered into a supply agreement with an effective date of July 1, 2018 (the "Vantor-Orion Agreement"). Cascade admits, upon information and belief, that the Vantor-Orion Agreement had a four (4)-year term expiring on June 30, 2022. Cascade admits, upon information and belief, that the Vantor-Orion Agreement contained a minimum annual purchase commitment of Fourteen Million Six Hundred Thousand Dollars ($14,600,000). Cascade states that the Vantor-Orion Agreement speaks for itself and is the best evidence of its terms.
Paragraph 12. Cascade admits, upon information and belief, that the Vantor-Orion Agreement contained an exclusivity provision. Cascade further admits, upon information and belief, that the Vantor-Orion Agreement contained a termination-for-convenience clause providing for termination by either party upon one hundred twenty (120) days' written notice. Cascade states that the Vantor-Orion Agreement speaks for itself and denies any characterization of the agreement's terms that is inconsistent with the express language of the agreement.
Paragraph 13. Cascade admits, upon information and belief, that Vantor and Hemsworth Consumer Products LLC entered into a supply agreement with an effective date of March 15, 2019 (the "Vantor-Hemsworth Agreement"). Cascade admits, upon information and belief, that the Vantor-Hemsworth Agreement had a three (3)-year term expiring on March 14, 2022. Cascade admits, upon information and belief, that the Vantor-Hemsworth Agreement contained a minimum annual purchase commitment of Twelve Million Five Hundred Thousand Dollars ($12,500,000). Cascade states that the Vantor-Hemsworth Agreement speaks for itself and is the best evidence of its terms.
Paragraph 14. Cascade admits, upon information and belief, that the Vantor-Hemsworth Agreement contained an exclusivity provision. Cascade further admits, upon information and belief, that the Vantor-Hemsworth Agreement contained a termination-for-convenience clause providing for termination by either party upon ninety (90) days' written notice. Cascade states that the Vantor-Hemsworth Agreement speaks for itself and denies any characterization of the agreement's terms that is inconsistent with the express language of the agreement.
Paragraph 15. Cascade admits, upon information and belief, that Vantor and Tridale Manufacturing Inc. entered into a supply agreement with an effective date of January 10, 2020 (the "Vantor-Tridale Agreement"). Cascade admits, upon information and belief, that the Vantor-Tridale Agreement had a two (2)-year term expiring on January 9, 2022. Cascade admits, upon information and belief, that the Vantor-Tridale Agreement contained a minimum annual purchase commitment of Eight Million Three Hundred Thousand Dollars ($8,300,000). Cascade states that the Vantor-Tridale Agreement speaks for itself and is the best evidence of its terms.
Paragraph 16. Cascade admits, upon information and belief, that the Vantor-Tridale Agreement contained an exclusivity provision. Cascade further admits, upon information and belief, that the Vantor-Tridale Agreement contained a termination-for-convenience clause providing for termination by either party upon sixty (60) days' written notice. Cascade states that the Vantor-Tridale Agreement speaks for itself and denies any characterization of the agreement's terms that is inconsistent with the express language of the agreement.
Paragraph 17. Cascade states that the Vantor-Orion Agreement, the Vantor-Hemsworth Agreement, and the Vantor-Tridale Agreement (collectively, the "Vantor Supply Agreements") speak for themselves and are the best evidence of their respective terms. Cascade denies any characterization of the Vantor Supply Agreements that is inconsistent with the express language of those agreements. Cascade specifically notes that each of the Vantor Supply Agreements expressly permitted termination for convenience upon written notice, and that the existence of such termination-for-convenience clauses is a material term of each agreement.
Paragraphs 18 through 20. To the extent these paragraphs characterize the exclusivity provisions of the Vantor Supply Agreements, Cascade states that the agreements speak for themselves and denies any characterization inconsistent with their express terms. Cascade specifically denies that the exclusivity provisions prohibited the suppliers from entering into agreements with third parties following the proper exercise of the termination-for-convenience clauses contained in each of the Vantor Supply Agreements.
Paragraphs 21 through 23. To the extent these paragraphs allege that Cascade had knowledge of, or access to, the specific terms of the Vantor Supply Agreements—including without limitation the exclusivity provisions—at or prior to the time Cascade entered into its own supply agreements with Hemsworth, Tridale, and Orion, Cascade denies such allegations. Cascade did not have actual knowledge of the specific exclusivity provisions or other terms of the Vantor Supply Agreements at the time Cascade entered into its supply agreements with the three suppliers.
Paragraphs 24 through 25. Cascade denies each and every remaining allegation of Paragraphs 24 and 25 to the extent not specifically admitted herein. To the extent these paragraphs contain legal conclusions, no response is required, and Cascade denies any such legal conclusions to the extent a response is deemed required.
C. Responses to Allegations Regarding Project Atlas and Cascade's Conduct (Paragraphs 26 Through 40)
Paragraph 26. Cascade admits that it launched an internal strategic initiative known as "Project Atlas" in or about February 2021 for the purpose of diversifying and strengthening its supplier network in the categories of home goods, consumer electronics accessories, and personal care products. Cascade states that Project Atlas was a lawful and commercially reasonable business initiative designed to enhance Cascade's supply chain resilience and improve its competitive position in the marketplace.
Paragraph 27. Cascade admits that it allocated a budget of approximately Four Million Two Hundred Thousand Dollars ($4,200,000) for supplier transition costs associated with Project Atlas. Cascade states that such budget allocations are consistent with ordinary course business planning for a retailer of Cascade's size and scale.
Paragraph 28. Cascade admits that Project Atlas was led by Annika Bergström, Vice President of Strategic Sourcing, who reported to Lena Torvik, Senior Vice President of Supply Chain & Procurement. Cascade denies any characterization of Ms. Bergström's or Ms. Torvik's roles, responsibilities, or conduct that is inconsistent with the facts as understood by Cascade.
Paragraph 29. Cascade admits that it entered into a supply agreement with Orion Lifestyle Brands Corp. on or about May 10, 2021 (the "Cascade-Orion Agreement"). Cascade admits that the Cascade-Orion Agreement has a four (4)-year term and provides for an annual purchase commitment of approximately Thirty-One Million Dollars ($31,000,000). Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 29.
Paragraph 30. Cascade admits that it entered into a supply agreement with Hemsworth Consumer Products LLC on or about June 1, 2021 (the "Cascade-Hemsworth Agreement"). Cascade admits that the Cascade-Hemsworth Agreement has a five (5)-year term and provides for an annual purchase commitment of approximately Twenty-Eight Million Dollars ($28,000,000). Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 30.
Paragraph 31. Cascade admits that it entered into a supply agreement with Tridale Manufacturing Inc. on or about August 15, 2021 (the "Cascade-Tridale Agreement"). Cascade admits that the Cascade-Tridale Agreement has a three (3)-year term and provides for an annual purchase commitment of approximately Nineteen Million Five Hundred Thousand Dollars ($19,500,000). Except as expressly admitted, Cascade denies each and every remaining allegation of Paragraph 31.
Paragraphs 32 through 34. Cascade denies that it "poached," "systematically targeted," or "induced" any supplier to breach any agreement with Vantor. Cascade denies that it engaged in any improper, unlawful, tortious, or otherwise wrongful conduct in connection with its entry into the Cascade-Orion Agreement, the Cascade-Hemsworth Agreement, or the Cascade-Tridale Agreement. Cascade states that it engaged in ordinary and lawful competitive activity in negotiating and entering into supply agreements with willing counterparties.
Paragraphs 35 through 37. Cascade denies that any officer, director, employee, or agent of Cascade had actual knowledge of the specific exclusivity provisions contained in the Vantor Supply Agreements at the time the Cascade-Orion Agreement, the Cascade-Hemsworth Agreement, or the Cascade-Tridale Agreement was executed. Cascade further denies that it employed any improper means, threats, coercion, or other wrongful conduct to induce, persuade, or cause any of the suppliers to enter into agreements with Cascade or to alter, terminate, or otherwise disrupt their existing relationships with Vantor.
Paragraphs 38 through 40. Cascade states that each of the three suppliers—Hemsworth Consumer Products LLC, Tridale Manufacturing Inc., and Orion Lifestyle Brands Corp.—independently and voluntarily chose to enter into supply agreements with Cascade. Cascade further states that, upon information and belief, each supplier independently exercised its respective termination-for-convenience clause under its existing agreement with Vantor prior to or contemporaneously with entering into its agreement with Cascade. Cascade denies each and every remaining allegation of Paragraphs 38 through 40 to the extent not specifically admitted herein.
D. Responses to Allegations Regarding the First Cause of Action: Tortious Interference with Contractual Relations (Paragraphs 41 Through 55)
Paragraph 41. Cascade incorporates by reference each of its responses to the preceding paragraphs of the Complaint as though fully set forth herein.
Paragraphs 42 through 45. Cascade denies all material allegations of the First Cause of Action for Tortious Interference with Contractual Relations. Cascade specifically denies that it had knowledge of the existence of the exclusive supply agreements or their specific exclusivity terms at the time Cascade entered into discussions or negotiations with Hemsworth Consumer Products LLC, Tridale Manufacturing Inc., or Orion Lifestyle Brands Corp.
Paragraphs 46 through 50. Cascade denies that it engaged in any intentional acts designed to induce, cause, or contribute to a disruption of the contractual relationships between Vantor and any of the three suppliers. Cascade further denies that any actual breach of any of the Vantor Supply Agreements occurred as a result of any conduct by Cascade. Cascade states that each supplier properly and independently exercised its respective termination-for-convenience clause prior to or contemporaneously with contracting with Cascade, and that a lawful exercise of a contractual termination right does not constitute a breach of contract.
Paragraphs 51 through 55. Cascade denies that Vantor suffered any damages that were proximately caused by any act or omission of Cascade. Cascade denies each and every remaining allegation of Paragraphs 51 through 55 to the extent not specifically admitted herein. To the extent any of the allegations of these paragraphs contain legal conclusions, no response is required, and Cascade denies any such legal conclusions to the extent a response is deemed required.
E. Responses to Allegations Regarding the Second Cause of Action: Tortious Interference with Prospective Economic Advantage (Paragraphs 56 Through 70)
Paragraph 56. Cascade incorporates by reference each of its responses to the preceding paragraphs of the Complaint as though fully set forth herein.
Paragraphs 57 through 60. Cascade denies all material allegations of the Second Cause of Action for Tortious Interference with Prospective Economic Advantage. Cascade specifically denies that Vantor had a reasonable expectation of continued or renewed supply relationships with Hemsworth, Tridale, or Orion beyond the express terms of the existing Vantor Supply Agreements, particularly given that each agreement contained a termination-for-convenience clause permitting termination at any time upon written notice.
Paragraphs 61 through 65. Cascade denies that it engaged in any independently wrongful conduct, as is required under California law to sustain a claim for tortious interference with prospective economic advantage. See Glenrock Corporation, 29 Cal. 4th 1134, 1153 (2003) (holding that a plaintiff must demonstrate that the defendant's interference was independently wrongful). Cascade's entry into supply agreements with Hemsworth, Tridale, and Orion—following each supplier's exercise of its termination-for-convenience rights under its respective Vantor Supply Agreement—constitutes lawful competitive activity and does not give rise to liability for tortious interference with prospective economic advantage.
Paragraphs 66 through 70. Cascade denies that Vantor suffered any damages that were proximately caused by any act or omission of Cascade. Cascade denies each and every remaining allegation of Paragraphs 66 through 70 to the extent not specifically admitted herein.
F. Responses to Allegations Regarding the Third Cause of Action: Unfair Business Practices Under California Business and Professions Code § 17200 (Paragraphs 71 Through 80)
Paragraph 71. Cascade incorporates by reference each of its responses to the preceding paragraphs of the Complaint as though fully set forth herein.
Paragraphs 72 through 75. Cascade denies all material allegations of the Third Cause of Action for violation of California Business and Professions Code § 17200 et seq. Cascade denies that it engaged in any unfair, unlawful, or fraudulent business practice within the meaning of Section 17200.
Paragraphs 76 through 78. Cascade states that its competitive conduct in entering into supply agreements with willing suppliers constitutes lawful competition and does not give rise to liability under Section 17200 or any other provision of the California Business and Professions Code. Cascade further states that Vantor's Section 17200 claim does not state an independent basis for relief separate from the tortious interference causes of action and is, therefore, duplicative and without merit.
Paragraphs 79 through 80. Cascade denies each and every remaining allegation of Paragraphs 79 and 80 to the extent not specifically admitted herein. To the extent any of the allegations of these paragraphs contain legal conclusions, no response is required, and Cascade denies any such legal conclusions to the extent a response is deemed required.
G. Responses to Allegations Regarding Damages (Paragraphs 81 Through 90)
Paragraph 81. Cascade denies that Vantor suffered damages in the amount of Eighty-Seven Million Four Hundred Thousand Dollars ($87,400,000) or in any amount whatsoever as a result of any act or omission of Cascade.
Paragraphs 82 through 84. Cascade denies the accuracy, methodology, and sufficiency of Vantor's alleged damages calculations. Cascade specifically denies the claimed Thirty-Four Million Two Hundred Thousand Dollars ($34,200,000) in lost profits allegedly arising from the Hemsworth relationship, the claimed Twenty-Two Million Eight Hundred Thousand Dollars ($22,800,000) in lost profits allegedly arising from the Tridale relationship, and the claimed Thirty Million Four Hundred Thousand Dollars ($30,400,000) in lost profits allegedly arising from the Orion relationship. Cascade states that Vantor's damages calculations are speculative, unsubstantiated, and not supported by reliable methodologies.
Paragraphs 85 through 87. Cascade denies that Vantor is entitled to damages based on projected multi-year revenue streams extending beyond the remaining terms of the existing exclusive supply agreements. Cascade states that any damages, to the extent they exist—which Cascade denies—must be limited to the remaining exclusive terms of the Vantor Supply Agreements at the time of the alleged interference. Specifically, upon information and belief, the remaining exclusive terms at the time of the alleged interference were: approximately nine (9) months remaining for the Vantor-Hemsworth Agreement, approximately five (5) months remaining for the Vantor-Tridale Agreement, and approximately thirteen (13) months remaining for the Vantor-Orion Agreement.
Paragraphs 88 through 90. Cascade states that Vantor failed to take reasonable steps to mitigate any alleged damages by seeking alternative suppliers to replace Hemsworth, Tridale, and Orion. The home goods, consumer electronics accessories, and personal care product markets contain numerous alternative suppliers that were and remain available to Vantor. Vantor's failure to mitigate its alleged damages defeats or substantially reduces any damages claim. Cascade denies each and every remaining allegation of Paragraphs 88 through 90 to the extent not specifically admitted herein.
H. Response to Prayer for Relief
Cascade denies that Vantor is entitled to any of the relief requested in the Complaint, including without limitation compensatory damages, consequential damages, disgorgement, restitution, injunctive relief, attorneys' fees, costs of suit, prejudgment or post-judgment interest, or any other relief of any kind or nature whatsoever.
III. AFFIRMATIVE DEFENSES
Without admitting any of the allegations of the Complaint and without assuming the burden of proof on any issue on which the burden of proof rests with Plaintiff under applicable law, Cascade hereby asserts the following affirmative defenses to each and every cause of action alleged in the Complaint:
FIRST AFFIRMATIVE DEFENSE
(Lack of Knowledge of Exclusivity Provisions)
Cascade did not have actual knowledge of the specific exclusivity provisions contained in the supply agreements between Vantor and Hemsworth Consumer Products LLC, Tridale Manufacturing Inc., or Orion Lifestyle Brands Corp. (collectively, the "Vantor Supply Agreements") at the time Cascade entered into its own supply agreements with the three suppliers. Under California law, actual knowledge of the existence and terms of a valid contract between the plaintiff and a third party is a required element of a claim for tortious interference with contractual relations. See Harborview Industries, 50 Cal. 3d 1118, 1126 (1990). Because Cascade lacked actual knowledge of the specific exclusivity provisions and related terms of the Vantor Supply Agreements, Vantor cannot establish the knowledge element of its tortious interference with contractual relations claim, and that claim fails as a matter of law.
SECOND AFFIRMATIVE DEFENSE
(Independent Action by Suppliers)
Each of the three suppliers—Hemsworth Consumer Products LLC, Tridale Manufacturing Inc., and Orion Lifestyle Brands Corp.—independently and voluntarily chose to enter into supply agreements with Cascade. Cascade did not induce, coerce, threaten, or employ any improper means or wrongful conduct to cause the suppliers to alter, terminate, or otherwise disrupt their existing relationships with Vantor. The decision of each supplier to enter into a supply agreement with Cascade was the result of the supplier's own independent business judgment, informed by its own assessment of the commercial attractiveness of the opportunity presented by Cascade, and was not caused, induced, or precipitated by any wrongful conduct on the part of Cascade. Because the suppliers acted independently and voluntarily, Cascade is not liable for the consequences of the suppliers' independent commercial decisions.
THIRD AFFIRMATIVE DEFENSE
(Suppliers' Exercise of Termination-for-Convenience Clauses)
Each of the three Vantor Supply Agreements contained an express termination-for-convenience clause permitting either party to the agreement to terminate the agreement upon written notice, as follows: ninety (90) days' notice for the Vantor-Hemsworth Agreement, sixty (60) days' notice for the Vantor-Tridale Agreement, and one hundred twenty (120) days' notice for the Vantor-Orion Agreement. Upon information and belief, each supplier duly and properly exercised its termination-for-convenience clause prior to entering into its supply agreement with Cascade. As a result, no breach of any Vantor Supply Agreement occurred, and Cascade cannot be held liable for inducing a breach of contract that did not, in fact, occur. The existence of termination-for-convenience provisions—which permitted either party to terminate the contract at any time upon written notice—negates the contractual interference claims because the contracts were terminable at will and did not guarantee Vantor an uninterrupted supply relationship for the full duration of their respective terms.
FOURTH AFFIRMATIVE DEFENSE
(Failure to Mitigate Damages)
Vantor failed to take reasonable steps to mitigate its alleged damages. Upon learning that its suppliers intended to terminate their exclusive supply agreements, Vantor had an obligation under California law to exercise reasonable diligence in seeking alternative suppliers to minimize any alleged losses. See Valle de Oro Bank v. Gamboa, 26 Cal. App. 4th 1686, 1691 (1994). Vantor's failure to take reasonable steps to mitigate its alleged damages defeats, or at a minimum substantially reduces, any damages claim asserted by Vantor in this action. The home goods, consumer electronics accessories, and personal care product markets are served by numerous alternative manufacturers and suppliers that were and remain available to Vantor, and Vantor could have replaced the supply relationships at issue within a commercially reasonable period of time.
FIFTH AFFIRMATIVE DEFENSE
(Section 17200 Claim is Duplicative and Preempted)
Vantor's Third Cause of Action under California Business and Professions Code § 17200 et seq. is duplicative of and subsumed by Vantor's First and Second Causes of Action for tortious interference with contractual relations and tortious interference with prospective economic advantage, respectively. The Section 17200 claim is based entirely on the same operative facts and the same alleged conduct as the tortious interference causes of action. Vantor does not allege any independent unfair, unlawful, or fraudulent business practice distinct from the common law tort claims alleged in the First and Second Causes of Action. Vantor may not repackage its common law tort claims as a statutory unfair competition claim in order to obtain duplicative relief or to circumvent the limitations applicable to its tort claims. To the extent the tortious interference claims fail on the merits, the derivative Section 17200 claim necessarily fails as well.
SIXTH AFFIRMATIVE DEFENSE
(No Independently Wrongful Conduct — Prospective Economic Advantage)
To prevail on a claim for tortious interference with prospective economic advantage under California law, a plaintiff must demonstrate that the defendant's conduct was "independently wrongful"—that is, wrongful by some legal measure other than the fact of the interference itself. See Glenrock Corporation, 29 Cal. 4th 1134, 1153 (2003); della Penna v. Crowne Albany Industries, 11 Cal. 4th 376, 393 (1995). Cascade's conduct in entering into supply agreements with willing suppliers who had exercised their contractual termination rights constitutes lawful competitive activity and does not rise to the level of independently wrongful conduct. Cascade did not engage in conduct that was unlawful, unethical, oppressive, or in violation of any established public policy. Vantor cannot establish this required element of its prospective economic advantage claim, and that claim fails as a matter of law.
SEVENTH AFFIRMATIVE DEFENSE
(Justification / Legitimate Competition)
Cascade's actions were justified by legitimate competitive interests and constitute privileged competitive activity. Cascade's Project Atlas initiative was a lawful business strategy developed in the ordinary course of Cascade's operations to diversify and strengthen its supplier network, reduce supply chain risk, and improve its competitive position in the marketplace. Entering into supply agreements with available and willing suppliers is a core competitive activity protected under the principles of free market competition. Under California law, competitive activity standing alone does not constitute tortious interference. See Morriven & Linley LLP, 216 Cal. App. 3d 1139, 1153-54 (1989). Cascade's conduct was motivated solely by legitimate business objectives and was not undertaken for the purpose of injuring Vantor or disrupting Vantor's business relationships.
EIGHTH AFFIRMATIVE DEFENSE
(No Proximate Causation)
Vantor cannot establish that any act or omission of Cascade was the proximate cause of Vantor's alleged damages. The suppliers' decisions to terminate their agreements with Vantor were made independently by each supplier and were driven by each supplier's own commercial considerations—including, without limitation, the suppliers' assessment of the relative economic attractiveness of the Cascade supply agreements as compared to the Vantor Supply Agreements, the suppliers' desire to diversify their own customer bases, and the suppliers' independent evaluation of their respective business strategies. Any alleged losses suffered by Vantor were the direct and proximate result of the suppliers' independent commercial decisions, not of any interference or wrongful conduct by Cascade. The causal chain between Cascade's conduct and Vantor's alleged damages is broken by the independent, voluntary decisions of the three suppliers.
NINTH AFFIRMATIVE DEFENSE
(Speculative and Uncertain Damages)
Vantor's alleged damages of Eighty-Seven Million Four Hundred Thousand Dollars ($87,400,000) are speculative, uncertain, contingent, and not capable of proof with the reasonable certainty required under California law. See GHK Assocs. v. Mayer Group, Inc., 224 Cal. App. 3d 856, 873 (1990). Vantor's damages calculations rely on projected multi-year revenue streams extending far beyond the remaining terms of the exclusive supply agreements, which is inherently speculative given that each agreement was terminable at will upon written notice. Vantor's damages methodology applies an inappropriate discount rate, fails to account for the termination-for-convenience clauses that permitted either party to terminate the agreements at any time upon written notice, fails to account for ordinary market risks and uncertainties, and fails to account for the possibility that the suppliers would have terminated their agreements with Vantor for independent reasons unrelated to Cascade. As a matter of law, Vantor's damages must be limited, if recoverable at all, to the remaining exclusive terms of the Vantor Supply Agreements at the time of the alleged interference, and even those damages are subject to reduction based on mitigation and other applicable defenses.
TENTH AFFIRMATIVE DEFENSE
(Unclean Hands)
Cascade reserves the right to assert the equitable defense of unclean hands to the extent that discovery reveals that Vantor engaged in inequitable, unconscionable, or improper conduct relating to the subject matter of this litigation, including without limitation any conduct by Vantor that contributed to the suppliers' decisions to terminate their agreements with Vantor, any failure by Vantor to perform its obligations under the Vantor Supply Agreements, or any improper conduct by Vantor directed at Cascade or the suppliers in connection with the events at issue in this action.
ELEVENTH AFFIRMATIVE DEFENSE
(Statute of Limitations)
To the extent any of Vantor's claims are based on conduct occurring outside the applicable statute of limitations periods, such claims are barred by the applicable statutes of limitations, including without limitation California Code of Civil Procedure §§ 335.1 and 338, and California Business and Professions Code § 17208.
TWELFTH AFFIRMATIVE DEFENSE
(Reservation of Rights)
Cascade reserves the right to assert additional affirmative defenses as the facts and circumstances warrant following completion of discovery in this matter. Cascade's assertion of the foregoing affirmative defenses does not constitute an admission that Cascade bears the burden of proof on any issue. Cascade further reserves the right to amend this Answer and these affirmative defenses as permitted by the California Code of Civil Procedure and the applicable Rules of Court.
IV. PRAYER FOR RELIEF
WHEREFORE, Defendant Cascade Retail Holdings Inc. respectfully prays for judgment as follows:
1. That Plaintiff Vantor Holdings Corp. take nothing by its Complaint;
2. That each and every cause of action alleged in the Complaint be dismissed with prejudice and in its entirety;
3. That Cascade be awarded its costs of suit incurred herein pursuant to California Code of Civil Procedure § 1032;
4. That Cascade be awarded its reasonable attorneys' fees to the extent permitted by law, contract, or statute; and
5. For such other and further relief as this Court deems just and proper.
V. JURY DEMAND
Defendant Cascade Retail Holdings Inc. hereby demands a trial by jury on all issues so triable in this action pursuant to the California Constitution, Article I, Section 16, and California Code of Civil Procedure § 631.
DATED: October 18, 2021
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael (State Bar No. 187234) Francesca Morano (State Bar No. 215678) Yuki Nakamura (State Bar No. 298431) Carlos Espinoza (State Bar No. 312756) 600 South Grand Avenue, Suite 3200 Los Angeles, California 90071 Telephone: (213) 555-4800 Facsimile: (213) 555-4801
Attorneys for Defendant Cascade Retail Holdings Inc.
PROOF OF SERVICE
I, the undersigned, declare as follows:
I am over the age of eighteen (18) years and am not a party to this action. My business address is 600 South Grand Avenue, Suite 3200, Los Angeles, California 90071. On October 18, 2021, I served the foregoing ANSWER AND AFFIRMATIVE DEFENSES OF DEFENDANT CASCADE RETAIL HOLDINGS INC. on the following party(ies) by the method(s) indicated below:
Martin Kessler Natalie Whitfield Jason Okafor KESSLER, BRANDT & WHITFIELD LLP 1999 Avenue of the Stars, Suite 2800 Los Angeles, California 90067 Telephone: (310) 555-7200 Facsimile: (310) 555-7201
Attorneys for Plaintiff Vantor Holdings Corp.
BY ELECTRONIC SERVICE: I caused the above-referenced document to be served via the Court's electronic filing and service system on the above-named party(ies) at the electronic service address(es) on file with the Court.
BY U.S. MAIL: I caused the above-referenced document to be enclosed in a sealed envelope, with postage thereon fully prepaid, and deposited in the United States Mail at Los Angeles, California, addressed to the above-named party(ies) at the address(es) set forth above.
I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.
Executed on October 18, 2021, at Los Angeles, California.
________________________________________
Carlos Espinoza
VANTOR HOLDINGS CORP., a California corporation, | Case No. 21STCV-34872
Plaintiff, | ANSWER AND AFFIRMATIVE DEFENSES OF DEFENDANT CASCADE RETAIL HOLDINGS INC.
v.
Complaint Filed: September 7, 2021
CASCADE RETAIL HOLDINGS INC., a Delaware corporation, | Trial Date: Not Yet Set
Defendant.