A federal appeals panel has ruled Honey Bum can’t sue its women’s clothing rival Fashion Nova over allegations of forcing a supplier boycott.
Court records describe both companies as retailers in the so-called fast fashion industry. Honey Bum alleged Fashion Nova and its founder, Richard Saghian, threatened to halt purchases from vendors who sold to Honey Bum, and filed its antitrust lawsuit in the Central District of California after more than 30 vendors agreed to those demands.
After U.S. District Judge R. Gary Klausner granted summary judgment to Fashion Nova, Honey Bum took its case to the U.S. Ninth Circuit Court of Appeals. Judge Milan Smith Jr. wrote the panel’s opinion, issued March 22; Judges Daniel Collins and Paul Kelly Jr. concurred. Kelly, a 10th Circuit Court of Appeals member, sat by designation.
According to Smith, Fashion Nova “came to believe” Honey Bum sought to copy its business model, hiring the same website designer along with models and social media influencers, then a former Fashion Nova employee. The panel said Judge Klausner determined Honey Bum failed to allege a plausible market to support its monopoly allegations, because “Los Angeles-sourced fast fashion online clothing” intentionally excluded interchangeable products.
Klausner further concluded Honey Bum failed to show an agreement among the 30-plus vendors who stopped working with it, a requirement to establish boycott claims, and said a claim for tortious interference with contract lacked evidence Fashion Nova “know about our intended to disrupt any contractual relationship.”
“A group boycott, as its name suggests, is an agreement among multiple firms not to deal with another firm,” Smith wrote, adding that not all boycotts are inherently illegal.
The panel explained its definition of a “hub-and-spoke group boycott” in which “one dominant firm pressures other firms at a different level of the supply chain” and said a plaintiff must show “agreements among the spokes” for a claim to survive.
Smith said Honey Bum didn’t try to define a market where Fashion Nova controlled power or analyze the impact of the alleged boycott on consumers. The panel agreed with Judge Klausner’s opinion that Honey Bum showed no agreement among the vendors and rejected Honey Bum’s insistence that agreement needn’t be alleged or that Klausner misconstrued facts.
Honey Bum said an employee of one vendor, Rehab, later worked at another, Honey Punch, but the fact both firms joined the boycott doesn’t show cooperation, Smith wrote, just employee movement. The same was true of seeing the same name affiliated with two vendors on Fashion Nova’s “vendors to block” spreadsheet. Communication from one vendor showing understanding of Fashion Nova’s conduct, Smith continued “establishes only ‘conscious parallelism’ — that the vendor ‘understood’ Fashion Nova imposed the same vertical restraints on other vendors.”
Looking at Honey Bum’s circumstantial evidence, the panel said the company needed to show participating in the boycott would be in each vendor’s own economic best interests only if every other firm agreed and didn’t adequately allege communication between the boycotting vendors exceed standard business conversation.
“Acceding to Fashion Nova’s demands was in the economic self-interest of each vendor regardless of what other vendors chose to do,” Smith wrote. “Fashion Nova is a well-established, high-volume purchaser whereas Honey Bum is an upstart, low-volume purchaser. If a vendor believed Fashion Nova’s threats, it would rationally choose to retain Fashion Nova’s business. Honey Bum survived a motion to dismiss on a narrow theory that the economic benefit of accepting Fashion Nova’s demands depended on other vendors doing so. After discovery failed to bear out that theory, Honey Bum abandoned it and failed to advance any other argument that an individual vendor acted against its self-interest by accepting Fashion Nova’s terms.”
The panel also explained the claims of interfering with contracts failed because Honey Bum only introduced canceled purchase orders for goods from vendors, and vendors have the right to reject such offers. At best, Smith wrote, Honey Bum could show “interference with prospective economic relations” but not disruption of an existing, valid contract.
Honey Bum is represented by the Los Angeles firm of McKool Smith Hennigan.
Representing Fashion Nova were attorneys from the Los Angeles and Washington, D.C., offices of Sidley Austin.