Zeikos Sues Walgreens for Breach of Contract

An electronic accessory supplier has sued Walgreen Co., a subsidiary of Walgreens Boots Alliance Inc., one of the largest retail pharmacy chains in the United States and Europe, for allegedly breaching two contracts. The District of New Jersey complaint claims that Walgreen wronged Zeikos by “shift[ing] its strategy from making money by selling products to making money by squeezing its suppliers.”

Monday’s complaint explains that since 2005, Zeikos has been in the business of importing and selling electronic accessories, such as earphones, battery chargers, and speakers to retailers throughout the United States, mostly under the trademark iHip. The parties maintained a successful supplier-customer relationship for more than eight years until the middle of 2019 when Walgreen offered the plaintiff a new arrangement.

Under the terms of that arrangement, “vendors could bid on the right to sell their merchandise in certain highly desirable sections of Walgreen stores.” Walgreen allegedly represented that past vendors who held these contracts sold between $80 and upwards of $250 million in merchandise per year from the premium space section.

In reliance on the previous sales figures, Zeikos proposed and Walgreen agreed to a seven-figure deal. Among other things, the agreement’s product placement provision stated that Walgreen would purchase certain types of Zeikos’s merchandise, place that merchandise in the premium space section, and that Zeikos would provide Walgreen with a credit of $9 million against Walgreen’s purchases of its merchandise.

Zeikos alleges that between October 2019 and December 2020, its sales of merchandise to Walgreen for the premium space section did not exceed $20 million representing retail sales of less than $40 million. The complaint argues that Walgreen committed several errors constituting breach of contract, including failure to place the merchandise in 5,000 stores, in proper locations in the stores, and properly present the merchandise.

The complaint next details similar problems related to a January 2021 contract. Zeikos alleges that when it demanded payment for authorized credits, Walgreen failed to pay and did not provide any justification for its refusal. Zeikos is represented by Dunnegan & Scileppi LLC.