Drugstore.com, the largest online pharmacy, is suing Andrew Weil, M.D. and Weil Wellness LLC for breach of a contract under which Drugstore.com would be the exclusive distributor of Weil’s branded products and online “Vitamin Advisor” program. In return, the crontact called for “honorarium” payments totaling $1.6 million to Weil and minimum royalty payments totaling $12.4 million to the company from September 2003 through June 2008. Drugstore.com began featuring Weil’s advice and products in October 2003, but the suit charges that he failed to “make commercially reasonable efforts” to promote what was covered by the agreement. The “Vitamin Advisor” uses an online questionnaire to promote “personalized products” said to be “based on your specific health concerns.” However, virtually everyone who takes the test is encouraged to spend $40 or more per month for supplements that are unnecessary, inappropriate, overpriced, and/or irrationally formulated. The suit was settled in 2006 with undisclosed terms.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No.
DRUGSTORE.COM, INC., a Delaware Corporation
DR. ANDREW WEIL, an individual, and WEIL LIFESTYLE, LLC,
an Arizona limited liability company Defendants.
Plaintiff, drugstore.com, inc. (drugstore.com), through counsel, for its Complaint against Defendants, Dr. Andrew Weil (“Weil”) and Weil Lifestyle, LLC (“Weil Lifestyle”), states as follows:
NATURE OF THE ACTION This is an action arising out of Weil and Weil Lifestyle’s breach of the Custom Nutritional Supplement Program Provider and Internet Commerce and Content Agreement (“the Agreement”), attached hereto as Exhibit A. Per the Agreement, drugstore.com has made frequent and significant payments to Weil and Weil Lifestyle. In return, Weil and Weil Lifestyle are required to engage in marketing and other activities to promote the parties’ business venture and to help maximize the sales revenues of Integrative Nutrition CustomPak Program (“INCP”), the Vitamin Advisor, the Marketplace Site, the My Optimum Health Plan My Shopping Site (“MOHP”), and the Integrative Medicine Store (collectively, the “Online Stores and Services”) that were set up by the parties to sell products and services related to health and wellness. After the Agreement was signed, however, defendants have been content to sit back and enjoy significant payments from drugstore.com without performing the contractual obligations that would justify receipt of such payments.
1. Plaintiff drugstore.com is a Delaware corporation with a principal place of business at 411 108th Avenue NE, Suite 1400, Bellevue, WA 98004.
2. Defendant Weil is an individual who resides in Arizona.
3. Defendant Weil Lifestyle, formerly known as Polaris Health LLC (“Polaris”), is an Arizona limited liability company with a principal place of business in Phoenix, Arizona.
JURISDICTION AND VENUE
4. This Court has jurisdiction over the claims outlined herein under 28 U.S.C. § 1332, based on diversity of citizenship and the amount in controversy. Plaintiff drugstrore.com is a Delaware Corporation. Defendant Weil, an individual, resides in Arizona and Defendant Weil Lifestyle is an Arizona limited liability company with its principal place of business in Arizona. Further, the amount in controversy, exclusive of interest and costs, exceeds the sum of $75,000.00.
5. Venue is appropriate in this Court, pursuant to 28 U.S.C. § 1391(a), because the Parties have agreed to submit to the exclusive jurisdiction of any state or federal court located in Denver, Colorado in litigating any action or proceeding, such as this, that arises out of or relates to the Agreement.
6. Weil is a clinical professor of internal medicine and the director of the Program in Integrative Medicine at the University of Arizona’s Health Sciences Center and is a widely recognized expert on medicinal herbs and integrative medicine.
7. Integrative medicine is a healing-oriented system that offers a unified approach to health maintenance and addresses healing on all levels, including lifestyle factors such as diet and exercise as well as the appropriate use of dietary supplements, herbs, and other forms of treatment.
8. Weil has written several best-selling books, including “Spontaneous Healing,” “8 Weeks to Optimum Health,” “The Healthy Kitchen,” and “Eating Well for Optimum Health.” He is also a frequent guest on television shows such as Larry King Live, The Oprah Winfrey Show, and Deborah Norville Tonight.
9. Weil Lifestyle, formerly known as Polaris, is an Arizona-based holding company founded by Weil. Weil Lifestyle is the exclusive worldwide licensor of products and services designed by Weil and that carry the “Weil” name.
10. Weil Lifestyle also owns and operates the website, www.drweil.com, which provides information and products relating to health and wellness.
11. One feature on the www.drweil.com website is the online Vitamin Advisor program. Developed by drugstore.com, Weil, and members of his Science Advisory Board, the Vitamin Advisor program provides specific vitamin and nutritional supplement recommendations based on a questionnaire regarding an individual’s age, gender, medical and family history, diet, lifestyle, and medications.
12. drugstore.com owns and operates www.drugstore.com, the leading online drugstore and information site with health, beauty, wellness, personal care, and pharmacy products.
13. In 2003, drugstore.com acquired Custom Nutrition Services, Inc. (“CNS”), an online provider of vitamins, which had an exclusive partnership with Polaris and Weil for the online sale of vitamins endorsed by Weil.
14. On July 18, 2003, drugstore.com, Weil, and Polaris entered into the Agreement. The Agreement terminated and superseded CNS’s previous agreement with Polaris. Polaris subsequently changed its name to Weil Lifestyle.
15. Under the terms of the Agreement, drugstore.com is entitled to be the exclusive online provider in the United States and Canada of: 1) any products (including, but not limited to, vitamins, herbs, minerals and other supplements) branded with the Weil Lifestyle, Polaris, or Weil name; and 2) the INCP, which includes customized nutritional supplements, vitamins, herbs, minerals and supplements sold under the INCP.
16. drugstore.com developed and operates online stores, including, but not limited to, the Integrative Medicine Store, for the purpose of selling specific vitamin and nutritional supplements recommended through the Vitamin Advisor program. drugstore.com also created, hosts, and maintains websites referred to in the Agreement as the Marketplace Site, and the MOHP Site.
17. Pursuant to the Agreement, Weil Lifestyle and Weil agreed to promote various aspects of the parties’ business relationship and to cooperate with drugstore.com’s operation and marketing of its online stores and services.
18. In exchange, drugstore.com agreed to make monthly payments to Weil, Weil Lifestyle, and a foundation established by Weil Lifestyle (“the Foundation”).
19. Pursuant to the Agreement, drugstore.com pays Weil Lifestyle Monthly Sales Commissions and makes a monthly Donation to the Foundation.
20. In the event that the sum of the aggregate Monthly Sales Commissions and the aggregate Donations a particular calendar quarter is less than the Minimum Royalty Payment specified in the table below, drugstore.com must pay to Weil Lifestyle a Quarterly True-Up to meet the specified Minimum Royalty Payment, pursuant to § 7.4 of the Agreement.
|Calendar Quarter||Minimum Royalty Payment|
21. To date, drugstore.com has paid in excess of $3.9 million in Monthly Sales Commissions, Donations, and Quarterly True-Ups (collectively, “Royalties”).
22. In addition to these amounts, drugstore.com pays a monthly Honorarium directly to Weil, pursuant to § 7.5 of the Agreement, as specified below.
|Calendar Year in which
Calendar Month Occurs
|Monthly Honorarium Amount||Annual Honorarium Amount
for Calendar Year
|2003||$12,500||$75,000 (6 months)|
|2008||$38,889||$233,333 (6 months)|
23. To date, drugstore.com has paid approximately $465,000 in monthly Honorarium to Weil.
24. Despite accepting such payments from drugstore.com, Weil Lifestyle and Weil have failed to fulfill various obligations they have under the Agreement. Indeed, Weil essentially has failed to perform any of his marketing obligations under the Agreement.
25. Under § 6.3 of the Agreement, Weil is required to use commercially reasonable efforts to promote the Online Stores and Services.
26. Contrary to this express requirement, Weil has not used commercially reasonable efforts to promote any of the listed Online Stores and Services, let alone all of them. Indeed, upon information and belief, since entering the Agreement, Weil has mentioned publicly the Vitamin Advisor only a few times. Further, upon information and belief, since entering the Agreement, Weil has not mentioned publicly the INCP, the Marketplace Site, the MOHP Site, or the Integrative Medicine Store at all.
27. During an appearance on Larry King Live on November 10, 2004, Larry King asked Weil to explain the licensing agreements of his new business venture, Weil Lifestyle. Specifically, in his introduction of Weil, Mr. King stated, and before we get into some current things, [Weil] has a new business venture, licensing agreements through . . . Weil Lifestyle, LLC. What is that? Although this was a reasonable opportunity for Weil to use efforts to promote the Online Stores and Services, he failed to do so. Instead, Weil discussed agreements with the following companies: Arizona Nutritional Supplements, Jamieson Quest, Origins (a division of Estee Lauder), and Pet Promise (a division of Purina). Later, upon information and belief in reliance on information provided by Weil, Mr. King again identified licensing agreements with specific companies, but made no mention of drugstore.com or any of the Online Stores and Services. Weil appeared on Deborah Norville Tonight on December 11, 2004, and again promoted all or most of his partners except drugstore.com and the Online Stores and Services.
28. In addition to using commercially reasonable efforts to promote the Online Stores and Services, Weil is also required under § 6.3 of the Agreement to make one (1) public appearance per year, at drugstore.com’s reasonable request to promote the Online Stores and Services.
29. Nevertheless, despite drugstore.com’s reasonable requests, Weil refused to make a public appearance in 2004 and has thus far refused to do so in 2005.
30. Weil’s marketing and promotion of the Online Stores and Services was the primary reason that drugstore.com entered into the Agreement. His failure to fulfill his contractual obligations in this regard has resulted in greatly reduced traffic to the Online Stores and Services sites, and thus, reduced revenue to drugstore.com.
31. Despite such reduced revenue, however, Weil continues to demand payment of his monthly Honorarium and Weil Lifestyle continues to demand payment of the Minimum Royalty Payments.
32. Just as Weil has failed to fulfill his obligations under the Agreement, Weil Lifestyle has failed to fulfill its contractual obligations.
33. As an initial matter, contrary to its obligations under § 6.2 (b) of the Agreement, Weil Lifestyle is not using commercially reasonable efforts to promote the Vitamin Advisor. Indeed, Weil Lifestyle has replaced ads for the Vitamin Advisor on www.drweil.com with advertisements for products and services provided by other companies.
34. Moreover, in violation of § 6.2 (c) of the Agreement, there have been, and continue to be, advertisements on www.drweil.com for other parties offering products and services that compete with those offered by drugstore.com under the Agreement.
35. In addition to violations of the Agreement based on the content of the www.drweil.com site, Weil Lifestyle has breached its obligation to spend significant amounts for advertising placements. For example, § 6.2 of the Agreement requires Weil Lifestyle to pay to third parties a specified minimum amount per year on outside marketing and public relations specifically promoting the Vitamin Advisor (Minimum Marketing Amount). Upon information and belief, Weil Lifestyle has not paid the Minimum Marketing Amount in either 2003 or 2004 and has not shown any indication that it will pay the Minimum Marketing Amount for 2005.
36. Further, the timing of Weil Lifestyle’s marketing and public relations promoting the Vitamin Advisor are subject to the prior review and approval of drugstore.com. To date, however, Weil Lifestyle has not sought drugstore.com’s prior review or approval for some of Weil Lifestyle’s marketing efforts.
37. In addition to third-party payments for advertising placements, Weil Lifestyle is required to send out marketing e-mails, pursuant to § 6.2 (b)(ii) of the Agreement, promoting the Vitamin Advisor. drugstore.com has advised Weil Lifestyle that most of these e-mails have been blocked because Weil Lifestyle’s e-mail service provider is on spam blocking lists. drugstore.com has requested that Weil Lifestyle change service providers, but Weil Lifestyle has refused to address this problem. As a result of Weil Lifestyle’s failure to address the spam blocking issue and Weil’s failure to properly market the stores and services, new orders from Weil marketing e-mails fell from almost 1,500 in the first quarter of 2004 to a mere fraction of that amount in the second quarter of 2005. Although complete data is not yet available, the new orders for second quarter of 2005 from Weil marketing e-mails are projected to be less than 25 – a reduction of approximately 98%.
38. Weil Lifestyle has also refused to approve reasonable marketing efforts suggested by drugstore.com. Under § 6.1 of the Agreement, drugstore.com may suggest marketing efforts. Although Weil Lifestyle has the right to grant or withhold approval for such marketing efforts, the Agreement provides that approval shall not unreasonably be withheld or delayed. Weil Lifestyle, however, has unreasonably withheld and/or delayed approval for such marketing efforts. For example, in the spring of 2005, drugstore.com proposed a catalog to be mailed to all drugstore.com INCP customers. This catalog was to contain Dr. Weil’s statements regarding the benefits of certain vitamins, along with ordering information for the appropriate INCP vitamins. Weil Lifestyle refused to approve the catalog unless the INCP vitamins (which are manufactured by a drugstore.com partner) were replaced with Weil’s other private-label vitamins (which are manufactured by a company that, upon information and belief, pays licensing royalties or other compensation to Dr. Weil and/or Weil Lifestyle). This action was taken in bad faith and for no other reason than to maximize Weil Lifestyle’s profits at drugstore.com’s expense.
39. Weil Lifestyle has also unreasonably withheld and/or delayed approval of one or more new products suggested by drugstore.com to be offered for sale through the Integrative Medicine Store. This is a breach of Weil Lifestyle’s obligations under § 4.1 of the Agreement,
40. In addition to improperly impeding the introduction of new products, until recently, Weil Lifestyle refused to allow drugstore.com to market its services in Canada, despite the fact that, under §3.5 of the Agreement, drugstore.com was granted a license to sell and market Weil-branded products, Weil Lifestyle branded products, and INCP Vitamins in the US and Canada. Weil Lifestyle’s refusal in this regard resulted in reduced revenue to drugstore.com.
41. Finally, Weil Lifestyle has failed to make payments due under the Agreement to drugstore.com. Under § 7.6 of the Agreement, drugstore.com is required to include a link to the MOHP operated by Weil Lifestyle and a third party. In exchange, Weil Lifestyle was required to pay drugstore.com a Customer Acquisition Fee of $20.00 for each New MOHP Customer. Drugstore.com has linked to MOHP. Since entering into the Agreement, however, Weil Lifestyle has never paid a Customer Acquisition Fee to drugstore.com. 42. Despite paying defendants, collectively, nearly $4.5 million, drugstore.com has not received the benefit of its bargain, as Weil and Weil Lifestyle have done little to live up to their obligations under the Agreement.
FIRST CLAIM FOR RELIEF
(Breach of Contract against Weil)
43. drugstore.com incorporates paragraphs 1 through 42 of its Complaint as if fully set forth herein.
44. drugstore.com substantially performed its obligations under the Amended Agreement.
45. As set forth above, Weil breached the Agreement by, among other things, failing to use commercially reasonable efforts to promote the INCP, the Vitamin Advisor, the Marketplace Site, the MOHP Site, and the Integrative Medicine Store, and by refusing to make one public appearance per year, at drugstore.com’s reasonable request, to promote such items.
46. Weil’s breach caused and continues to cause damages to drugstore.com in an amount to be proven at trial.
SECOND CLAIM FOR RELIEF
(Breach of Contract against Weil Lifestyle)
47. drugstore.com incorporates paragraphs 1 through 46 of its Complaint as if fully set forth herein.
48. drugstore.com substantially performed its obligations under the Amended Agreement.
49. As set forth above, Weil Lifestyle breached the Agreement by, among other things, not using commercially reasonable efforts to promote the Vitamin Advisor, permitting advertisements on www.drweil.com for other parties offering products and services that compete with those offered by drugstore.com under the Agreement, failing to spend required amounts on outside marketing and public relations specifically promoting the Vitamin Advisor, failing to seek drugstore.com’s prior review or approval for the timing of Weil Lifestyle’s marketing efforts, refusing to address problems with Weil Lifestyle’s e-mail service provider, refusing to approve reasonable marketing efforts suggested by drugstore.com, unreasonably withholding and/or delaying approval of one or more new products suggested by drugstore.com, refusing to allow drugstore.com to market its services in Canada, and failing to make payments due under the Agreement to drugstore.com.
50. Weil Lifestyle’s breach caused and continues to cause damages to drugstore.com in an amount to be proven at trial.
THIRD CLAIM FOR RELIEF
(Breach of Implied Covenant of Good Faith and Fair Dealing Against Weil)
51. drugstore.com incorporates paragraphs 1 through 50 of its Complaint as if fully set forth herein.
52. The Agreement contains an implied duty of good faith and fair dealing.
53. By giving Weil discretion in promoting the INCP, the Vitamin Advisor, the Marketplace Site, the MOHP Site, and the Integrative Medicine Store, the Agreement imposes upon Weil the duty to act in good faith and engage in fair dealing when exercising that discretion.
54. Weil breached his duty of good faith and fair dealing by abusing his discretion in this regard. In doing so, Weil impaired and violated drugstore.com’s reasonable expectations under the Agreement.
55. Weil’s breach caused and continues to cause damages to drugstore.com in an amount to be proven at trial.
FOURTH CLAIM FOR RELIEF
(Breach of Implied Covenant of Good Faith and Fair Dealing Against Weil Lifestyle)
56. drugstore.com incorporates paragraphs 1 through 55 of its Complaint as if fully set forth herein.
57. The Agreement contains an implied duty of good faith and fair dealing.
58. By giving Weil Lifestyle discretion with respect to promoting the Vitamin Advisor, selecting an e-mail service provider, and approving reasonable marketing efforts and new products suggested by drugstore.com, the Agreement imposes upon Weil Lifestyle the duty to act in good faith and engage in fair dealing when exercising that discretion.
59. Weil Lifestyle breached its duty of good faith and fair dealing by abusing its discretion in this regard. In doing so, Weil Lifestyle impaired and violated drugstore.com’s reasonable expectations under the Agreement.
60. Weil Lifestyle’s breach caused and continues to cause damages to drugstore.com in an amount to be proven at trial.
PRAYER FOR RELIEF
ACCORDINGLY, drugstore.com requests the following relief in its favor and against the Defendants as follows:
(a) For an entry of judgment against the Defendants and in favor of drugstore.com on all claims;
(b) For all actual and consequential damages sustained by drugstore.com, in an amount to be determined at trial;
(c) For an award to drugstore.com of interest, costs, and reasonable attorneys’ fees, in accordance with the Agreement and applicable law; and
(d) For such other relief as the Court deems just and proper.
PLAINTIFF REQUESTS A JURY TRIAL ON ALL ISSUES SO TRIABLE.
Dated August 26, 2005
s/Mark T. Barnes
Mark T. Barnes
Annie T, Kao
BROWNSTEIN HYATT & FARBER, P.C.
410 Seventeenth Street Twenty-Second Floor
Denver, Colorado 80202-4437
Attorneys for Plaintiff drugstore.com, inc.
13920 SE Eastgate Way, Suite 300
Bellevue, WA 98005
This article was revised on November 14, 2009.