Tuft & Needle Calls For Dismissal Of Lawsuit Of Steinhoff Subsidiary Mattress Firm
PHOENIX, Dec. 12, 2017 /PRNewswire/ -- As the latest move in the accelerating disruption of the traditional mattress industry, Tuft & Needle's litigation counsel, Charles "Chip" Babcock of Jackson Walker LLP, sought dismissal yesterday of a federal lawsuit filed by Mattress Firm against Tuft & Needle in Houston, Texas. Tuft & Needle asks the court to decide whether Mattress Firm's lawsuit is a thinly-veiled, strategic attempt by Mattress Firm to weaken its competition, the industry innovator and "bed-in-a-box" pioneer Tuft & Needle. Tuft & Needle believes it may have significant counter-claims against Mattress Firm and, potentially, its South Africa-based parent company, Steinhoff International Holdings NV, for anti-competitive misconduct, and has instructed Babcock to investigate. In 2016, global furniture giant Steinhoff paid $2.4 billion to acquire Mattress Firm, the United States' biggest mattress chain, which now operates over 3,500 stores in 49 states, including former Sleepy's and Sleep Train outlets. Last week, Steinhoff became engulfed in a financial scandal—its CEO, Markus Jooste, resigned amid fraud allegations, and he and other senior executives are under investigation for misconduct.
In a classic David vs. Goliath scenario, in October 2017 Steinhoff's subsidiary Mattress Firm filed a lawsuit against Tuft & Needle, attacking the start-up's modern, tongue-in-cheek advertising campaigns—including a notorious run of Phoenix, AZ billboards calling mattress stores "greedy"— all of which, Babcock argues, is protected under the laws and the United States Constitution. Tuft & Needle was founded in 2012 by two Silicon Valley engineers with a personal investment of $6,000, with a goal of disrupting the traditional mattress industry. The company has grown to generate over $100 million in annual sales, and has taken position as the #1 top-rated mattress on Amazon.com and catalyzed the "bed-in-a-box" category. With Tuft & Needle and the "bed-in-a-box" category thriving—now believed to have close to ten-percent market share in the U.S. mattress market—Steinhoff has been attempting to breathe new life into its acquisition of Mattress Firm, including the development of its own tag-along "bed-in-a-box" product, called "Tulo."
Tuft & Needle's founders met with Mattress Firm executives in late Summer 2017. Discussions began with a cordial, informal exploration of a potential partnership. Tuft & Needle subsequently rebuffed Mattress Firm's proposal to acquire control of Tuft & Needle through a minority investment. By mid-October, Mattress Firm dragged the industry innovator into an expensive legal battle, demanding Tuft & Needle's profits to date in "damages." Tuft & Needle believes Mattress Firm's claims are unfounded, and that it is attempting to eliminate an up-and-coming American innovator through the expense of this lawsuit, rather than a business transaction.
Tuft & Needle's submission to the court argues that Mattress Firm's lawsuit should be dismissed. As Babcock contends: "As is characteristic of many anti-competitive lawsuits, this one fails to state claim. It seeks to sanction Defendant's opinions and apparently resents a tiny competition's "playful" efforts at satire and parody, all of which is protected under the laws it relies upon and under the First Amendment to the United States Constitution."
The court document is available as of Monday, December 11, 2017.
About Tuft & Needle
Tuft & Needle is a Phoenix-based company that pioneered the disruption of the mattress industry. Founded in 2012 by JT Marino and Daehee Park, Tuft & Needle is leading the revolution against unfair mattress markups, commission-based sales models, and information asymmetry by creating an exceptional, honestly-priced product. Having bypassed the option to raise outside capital, Tuft & Needle has nurtured the co-founders' personal investment of $6,000 into month-over-month profitability, outstanding customer satisfaction reviews, and remarkable growth of over $100 million in sales in 2016. The company was ranked #1 for "Top Company Cultures" in the U.S. by Entrepreneur Magazine in 2017.
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