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noting " properly pleaded complaint . . . must allege relationships with specific third parties with which the respondent interfered"
Summary of this case from Camelot Si, LLC v. ThreeSixty Brands Grp.Opinion
02 Civ. 1363 (PKL)
May 21, 2003
Stuart A. Blander, Esq., May Orenstein, Esq., Heller Horowitz Feit, P.C., New York, NY, Attorneys for Plaintiffs
Richard Menaker, Esq., Cheryl Davis, Esq., Menaker Hermann LLP, New York, NY, Attorneys for Defendants IBI, L.L.C., Kitchens of Veneto, Inc., Brian Jevremov, Jeffrey McDuffee and Ruben Braha
OPINION AND ORDER
In this contract and tort action, defendants IBI, L.L.C. ("IBI"), Kitchens of Veneto, Inc. ("Kitchens"), Brian Jevremov and Jeffrey McDuffee (collectively the "dealer defendants") have moved the Court for dismissal of several causes of action asserted in the complaint and, in the alternative, for a stay of the proceedings pending arbitration. Defendant Ruben Braha has filed a separate motion seeking dismissal of the complaint, summary judgment, and, in the alternative, a stay pending arbitration. For the following reasons, the dealer defendants' motion to dismiss is granted in part and denied in part, Braha's motion to dismiss is granted in part and denied in part, Braha's motion for summary judgment is denied, and both motions to stay are denied.
In the complaint, the term "dealer defendants" refers only to IBI and Kitchens and does not include Jevremov and McDuffee. The submissions of the parties for this motion include Jevremov and McDuffee when referring to dealer defendants. The Court will use the more inclusive definition.
Plaintiffs originally cross-moved for leave to serve a supplemental complaint setting forth two additional causes of action. On January 14, 2003, the Court issued an Order granting plaintiffs' request to withdraw the cross motion without prejudice.
BACKGROUND
I. Procedural Background
Plaintiffs filed this action in New York Supreme Court on January 10, 2002. On February 7, 2002, pursuant to an arbitration clause, defendant Valcucine S.p.A. ("Valcucine") filed a request for arbitration with the Secretariat of the International Court of Arbitration. On February 21, 2002, Valcucine removed the state court action to this Court on the basis of the Federal Arbitration Act. On February 22, 2002, the Court granted plaintiffs' request for a temporary restraining order, enjoining Valcucine, its agents, attorneys and all those acting on its behalf from (1) selling products offered for sale by Valcucine under the trademarks "Valcucine" and "New Art" dealerships which were established by plaintiff AIM pursuant a contract between Valcucine and AIM; (2) selling products to any person within the United States other than AIM; and (3) directing Valcucine to continue to fulfill and ship on a C.O.D. basis orders for products forwarded to it by AIM in accordance with the contract. See AIM Int'l Trading L.L.C. v. Valcucine S.p.A., 188 F. Supp.2d 384 (S.D.N.Y. 2002) (Leisure, J). On June 11, 2002, the Court granted plaintiffs' motion for a preliminary injunction. See AIM Int'l Trading L.L.C. v. Valcucine S.p.A., No. 02 CV 1263, 2002 WL 1285557 (S.D.N.Y. June 11, 2002) (Leisure, J).
On various dates, the defendants each appealed the entry of the preliminary injunction. Those appeals have since been withdrawn.
On March 4, 2002, the Court approved a stipulation entered into by plaintiffs and Valcucine staying each of the causes of action asserted against Valcucine, except for the tenth cause of action, pending arbitration. On April 18, 2002, the Court approved a similar stipulation regarding the tenth cause of action. At this time, all causes of action asserted against Valcucine are stayed pending arbitration at the International Chamber of Commerce in Switzerland.
II. Factual Background
On a motion to dismiss, the plaintiffs' well-pleaded allegations in their complaint are assumed to be true. Rothman v. Gregor, 220 F.3d 81, 91 (2d Cir. 2000). Therefore, the relevant facts, as alleged by the complaint, are as follows.
Plaintiff AIM International Trading, L.L.C. is a limited liability company in New York. Compl. ¶ 1. Plaintiff AIM International Trading, Inc., is a New York corporation. Id. ¶ 2. Plaintiff AIM Dania, Inc., is a Florida corporation with its principal place of business in New York. Id. ¶ 3. These plaintiffs will be referred to collectively as "AIM" in this Opinion. Plaintiff Moshe Aviv is a New York resident and is a principal of AIM. Id. ¶ 4.
Defendant Valcucine is an Italian company engaged in the manufacturing of high-end kitchen cabinetry and furniture components. Id. ¶ 5. Defendant IBI is a limited liability company organized under the laws of New York. Id. ¶ 7. Defendant Jevremov is a principal of IBI. Id. ¶ 8. Defendant Kitchens is an Illinois corporation. Id. ¶ 9. Defendant McDuffee is a principal of Kitchens. Id. ¶ 10. Defendant Braha is "an independent agent or representative of Valcucine and other manufacturers." Id. ¶ 11.
On March 31, 1999, AIM and Valcucine entered into an agreement in which AIM was appointed the exclusive distributor of Valcucine products in the United States. Id. ¶ 6. On February 1, 2000, Kitchens contracted with AIM to purchase Valcucine products exclusively from AIM for resale to retail customers. Id. ¶ 9. On April 5, 2000, IBI entered into a similar contract with AIM. Id. ¶ 7.
Sometime after these contracts were in place, Braha, as an agent of Valcucine, cultivated a relationship with Jevremov, in spite of the fact that the agreement between AIM and IBI proscribed direct communication between IBI and Valcucine. Id. ¶ 26. Braha and Jevremov reached an agreement "to eliminate AIM from the distribution of Valcucine [p]roducts and for IBI and Jevremov to assume AIM's role as Valcucine' s representative and distributor in the United States." Id. Additionally, during the latter half of 2001, Braha met with McDuffee and obtained Kitchens' cooperation with the plan to eliminate AIM. Id. ¶ 28.
At some point in time during the months of September and October 2001, Valcucine entered into an agreement and conspiracy with and among defendants IBI and Kitchens to which Valcucine, IBI and Kitchens agreed that, following a purported unilateral termination of AIM's distributorship by Valcucine, IBI and Kitchens would continue as Valcucine [p]roducts dealers and would purchase Valcucine [p]roducts directly from Valcucine.Id. ¶ 32. On October 17, 2001, Kitchens attempted unilaterally to terminate its contract with AIM. Id. ¶ 28. By letter dated October 21, 2001, Valcucine attempted to terminate its agreement with AIM, effective February 28, 2002. Id. ¶ 33.
As part of his attempt to undermine and destroy AIM's relationship with its dealers, Braha made several statements regarding AIM and its principals. Id. ¶ 31. In July 2001, Braha told John Schaefer of FLG Enterprises, Inc., that Izzy Ashkenazy, a principal of AIM, was not trustworthy and that Valcucine had no faith in AIM's abilities to support its dealers. Id. In October 2001, Braha made similar statements to McDuffee and Steven Cooper of Cooper Pacific Kitchens, Inc. Id.
FLG is a Valcucine products dealer but is not a defendant in this action. See Compl. ¶ 30.
Cooper Pacific Kitchens, Inc., is another Valcucine products dealer that is not a defendant in this action. See Compl. ¶ 30.
According to plaintiffs, this factual background gives rise to causes of action against the dealer defendants for tortious interference with contract and business relationship, breach of contract and the implied covenant of good faith, and unjust enrichment; against Jevremov and McDuffee for tortious interference with contract and business relationship; and against Braha for tortious interference with contract and business relationship and disparagement and injurious falsehood.
DISCUSSION
The dealer defendants seek dismissal of the claims for tortious interference, breach of contract and the implied covenant of good faith, and unjust enrichment. Braha seeks dismissal of the tortious interference claims and the disparagement and injurious falsehood claims. He also seeks summary judgment. Both the dealer defendants and Braha request the alternate remedy of a stay pending the resolution of the AIM-Valcucine arbitration.
I. Motions to Dismiss
A movant is entitled to dismissal under Rule 12(b)(6) only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see also Lipsky v. Commonwealth United Corp., 552 F.2d 887, 894-95 (2d Cir. 1976). Nevertheless, the complaint "must contain allegations concerning each of the material elements necessary to sustain recovery under a viable legal theory." Huntington Dental Med. Co., Inc. v. Minnesota Mining Mfg. Co., No. 95 Civ. 10959, 1998 WL 60954, at *3 (S.D.N.Y. Feb. 13, 1998).
The Court must read the complaint generously and draw all reasonable inferences in favor of plaintiffs, accepting the complaint's allegations as true. Conley, 355 U.S. at 46-46; Hosp. Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 740 (1976); Dublin v. E.F. Hutton Group, Inc., 695 F. Supp. 138 (S.D.N.Y. 1988). Accordingly, the factual allegations set forth in the complaint do not constitute findings of fact by the Court, but rather are presumed to be true for the purpose of deciding the motion to dismiss. See Emergent Capital Inv. Mgmt., L.L.C. v. Stonepath Group, Inc., 165 F. Supp.2d 615, 625 (S.D.N.Y. 2001). Thus, "[t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).
II. The Dealer Defendants' Motion to Dismiss
Before the merits of the motion to dismiss can be discussed, the Court must consider an issue that was not fully addressed by the parties.
A. Submission of Additional Documents
In deciding a motion under Rule 12(b)(6), the Court may consider only the facts stated on the face of the complaint, and in documents appended to the complaint or documents incorporated by reference in the complaint. Schnall v. Marine Midland Bank, 225 F.3d 263, 266 (2d Cir. 2000). "[T]he complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference." Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991); Fed.R.Civ.P. 10(c). When a party introduces matters extraneous to the pleadings, the Court must convert the motion to dismiss into a motion for summary judgment or exclude the extraneous documents from consideration. See Fonte v. Bd. of Managers of Cont'l Towers Condo., 848 F.2d 24, 25 (2d Cir. 1988); Fed.R.Civ.P. 12(b). The Second Circuit has held, however, that "when a plaintiff chooses not to attach to the complaint or incorporate by reference a [document] upon which it solely relies and which is integral to the complaint," the court may nevertheless take that document into consideration in deciding the defendants' motion to dismiss, without converting the motion into one for summary judgment. Cortec Indus., 949 F.2d at 47-48; see also Int'l Audiotext Network, Inc. v. ATT Co., 62 F.3d 69, 72 (2d Cir. 1995).
Both the dealer defendants and Braha have submitted documents in connection with their motions that were not attached to the complaint. Neither movants nor plaintiffs have noted the significance of this fact. The Court declines to convert the motions into summary judgment motions and therefore the extraneous documents may not be considered. Not all of the submitted documents, however, are extraneous. The following documents submitted by the dealer defendants and/or Braha are properly considered in the context of these Rule 12(b)(6) motions: (1) the dealership agreement between IBI and AIM, (2) the dealership agreement between Kitchens and AIM, and (3) an October 24, 2001 letter from Valcucine to AIM purporting to terminate the contract between these two parties. AIM had notice of these documents and relied upon them in bringing suit. See Cortec Indus., 949 F.2d at 48. They are "integral to [the] complaint" Id.; see also Advanced Marine Techs., Inc. v. Burnham Sec., Inc., 16 F. Supp.2d 375, 378 (S.D.N.Y. 1998) (finding that a letter referred to and quoted by complaint was incorporated by reference); Kreiss v. McCown DeLeeuw Co., 37 F. Supp.2d 294, 298 n. 3 (S.D.N.Y. 1999) (considering documents not attached to the complaint, but which were integral to the plaintiffs' claims, and which the plaintiff had notice of and relied upon). The remaining documents, however, are extraneous and are not properly considered in a motion to dismiss. Therefore, the Court will disregard these submissions. B. The Tortious Interference Claims
In discussing the standard for a Rule 12(b)(6) motion, the dealer defendants do state that the Court can consider documents incorporated in the complaint by reference. Memorandum of Law in Support of the Dealer Defendants' Motion to Dismiss ("Dealer Defs. Memo.") at 5 n. 2. They make no attempt, however, to explain how this rule applies to the documents they have submitted that are clearly outside of the scope of the complaint.
These documents include (1) a January 21, 2002 letter from Valcucine that was sent to IBI and Kitchens stating that the contract between AIM and Valcucine had been terminated and (2) a July 25, 2001 letter from Jevremov to Izzy Ashkenazy at AIM. Braha also submitted affidavits sworn to by himself and John Schaefer. These affidavits appear to be connected to Braha's motion for summary judgment, addressed infra, and not his motion to dismiss. They have not been considered by the Court in deciding either of the motions to dismiss.
In their memorandum of law, the dealer defendants state the following in a footnote: "The tenth cause of action appears to assert an interference claim against Valcucine and Dealer Defendants on behalf of Moshe Aviv, AIM Dania, and AIM Inc. Since these allegations are essentially identical to those asserted against IBI and Kitchens, this memorandum will address these claims for relief collectively." Dealer Defs. Memo. at 5 n. 3 (internal citations omitted). This footnote is the only reference to the tenth cause of action in the entirety of the parties' submissions.
The tenth cause of action is the only claim in the complaint that is not expressly labeled as a particular cause of action. It is not clear based on the substance of allegations exactly what type of action plaintiffs are attempting to plead. However, it does not appear to be a tortious interference claim. Therefore, to the extent that the dealer defendants seek dismissal of this cause of action based on their tortious interference arguments, the motion is denied. A future motion directed squarely toward the substance of tenth claim, however, might well be appropriate.
The fifth and seventh causes of action are tortious interference claims. The first is directed at IBI and Kitchens, while the second is directed at Jevremov and McDuffee. The dealer defendants contend that both claims are deficient. Each claim alleges both tortious interference with contract and tortious interference with business relations.
The seventh cause of action is also directed toward Braha and is discussed infra.
1. Tortious Interference with Contract Claims
A properly pled complaint for tortious interference with contract under New York law must allege (1) the existence of a valid contract between a third party and plaintiff, (2) that defendant had knowledge of that contract, (3) that defendant intentionally procured a breach, and (4) damages. Finley v. Giacobbe, 79 F.3d 1285, 1294 (2d Cir. 1996); Israel v. Wood Dolson Co., 134 N.E.2d 97, 99 (N.Y. 1956). There can be no recovery unless there was a valid and enforceable contract, Durante Bros. Constr. Corp. v. College Point Sports Assoc., Inc., 615 N.Y.S.2d 455, 457 (App.Div. 1994), and plaintiffs must prove that the underlying contract has been breached. Baylis v. Marriott Corp., 906 F.2d 874, 877 (2d Cir. 1990) (Kearse, J.); NBT Bancorp Inc. v. Fleet/Norstar Fin. Group. Inc., 664 N.E.2d 492, 495 (N.Y. 1996) (Kaye, C.J.); Jack L. Inselman Co., Inc. v. FNB Fin. Co., 364 N.E.2d 1119, 1120 (N.Y. 1977) ("In order for the plaintiff to have a cause of action for tortious interference of contract, it is axiomatic that there must be a breach of that contract by the other party. . . ."). Therefore, the complaint must identify a valid contract between plaintiffs and a third party. G-I Holdings, Inc. v. Baron Budd, 179 F. Supp.2d 233, 252-53 (S.D.N.Y. 2001); Mobile Data Shred, Inc. v. United Bank of Switzerland, No. 99 Civ. 10315, 2000 WL 351516, at *7 (S.D.N.Y. Apr. 5, 2000). There is also a causation requirement. Plaintiffs must allege in the complaint that there would not have been a breach but for defendants' conduct. Sharma v. Skaarup Ship Mgmt Corp., 916 F.2d 820, 828 (2d Cir. 1990); Astor Holdings, Inc. v. Roski, No. 01 Civ. 1905, 2002 WL 72936, at *15 (S.D.N.Y. Jan. 17, 2002).
The parties agree that New York law applies.
The complaint alleges tortious interference with AIM's contracts with Valcucine and "Valcucine [p]roducts dealers." Compl. ¶¶ 57, 64. The dealer defendants' first contention is that the claims with respect to "Valcucine [p]roducts dealers" must be dismissed because the complaint fails to allege who these dealers are, what contracts were interfered with and that contracts with these dealers were breached. Their argument is well taken. Indeed, plaintiffs have not attempted to argue differently. To the extent that the fifth and seventh causes of action attempt to allege tortious interference with contracts between plaintiffs and "Valcucine [p]roducts dealers," they are dismissed.
These claims are also dismissed to the extent that they attempt to allege tortious interference with business relationships between AIM and "Valcucine [p]roducts dealers," for the same reasons.
The dealer defendants' next argument addresses the alleged nature of the AIM-Valcucine contract. A contract terminable at will cannot be the basis for a tortious interference with contract claim. Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 406 N.E.2d 445, 450 (N.Y. 1980); see also Drug Emporium, Inc. v. Blue Cross of Western New York, Inc., 104 F. Supp.2d 184, 192 n. 5 (W.D.N.Y. 2000); World Wide Communications, Inc. v. Rozar, 96 Civ. 1056, 1997 WL 795750, at *7 (S.D.N.Y. Dec. 30, 1997); Coliniatis v. Dimas, 848 F. Supp. 462, 470 (S.D.N.Y. 1994); Miller v. Mount Sinai Med. Ctr., 733 N.Y.S.2d 26, 27 (App.Div. 2001); Snyder v. Sony Music Entm't, Inc., 684 N.Y.S.2d 235, 238-39 (App.Div. 1999); American Preferred Prescriptions Inc. v. Health Mgmt., Inc., 678 N.Y.S.2d 1, 4 (App.Div. 1998). The reason for this principle is intuitive: there can be no breach of contract, a necessary element for tortious interference with contract, when the contract may be terminated at will. See Guard-Life, 406 N.E.2d at 450 ("[T]he party seeking to impose liability enjoys no legally enforceable right to performance; his interest is a mere expectancy — a hope of future contractual relations.").
Some cases seem to state that a tortious interference with contract claim can apply to a contract terminable at will if the defendant used wrongful means. See, e.g., Auto. Elec. Serv. Corp. v. Ass'n of Auto. Aftermarket Distribs., 747 F. Supp. 1483, 1507 (E.D.N.Y. 1990). To be more exact, however, a claim for interference with a contract terminable at will is actually a claim for tortious interference with prospective contractual relations. Waste Serv., Inc. v. Jamaica Ash Rubbish Removal Co., Inc., 691 N.Y.S.2d 150, 151 (App.Div. 1999) ("Agreements that are terminable at will are classified as prospective contractual relations, and a cause of action to recover damages for the tortious interference with prospective contractual relations requires a showing of malice or wrongful conduct.").
The dealer defendants state that Valcucine will argue in arbitration that the AIM-Valcucine contract is terminable at will under Italian law. Plaintiffs, however, dispute this interpretation of Italian law. Under Rule 44.1, determinations of foreign law are questions of law to be decided by the Court. Fed.R.Civ.Pro. 44.1. In a typical litigation involving foreign law, a motion to dismiss may be an appropriate time to decide the substance of another country's law that bears on the case at hand. In this matter, however, the Court must consider the ongoing arbitration between AIM and Valcucine. In that arbitration, the arbitrators from the International Chamber of Commerce in Switzerland will determine how Italian law applies to the AIM-Valcucine contract. This determination may have preclusive effects on AIM in the instant proceeding. Therefore, it would be a more efficient use of judicial resources to wait until the summary judgment stage, after the arbitration is complete, to decide how Italian law affects this case. As such, this Court cannot find at this time that the underlying contract was terminable at will and therefore, the dealer defendants' motion to dismiss the tortious interference with contract claim on this ground is denied.
The dealer defendants further contend that plaintiffs have not sufficiently pled causation. As stated supra, the complaint must allege that the Valcucine would not have breached its contract with AIM but for the actions of the defendants. This argument does give the Court some pause because the required causation is not as clearly alleged as the other elements. However, drawing all inferences in favor of the plaintiffs, the allegations "suggest that [AIM] could show that without the assurance of a future business partner, [Valcucine] would not have breached the contract," Astor Holdings, 2002 WL 72936, at *16, and that is sufficient to satisfy the causation requirement in this procedural context.
The dealer defendants make much of the fact that the "[c]omplaint itself states that Valcucine cited objective reasons for its termination of the contract." Dealer Defs. Memo. at 7. While true, they get no mileage out of this statement. Fairly read, the complaint alleges that while Valcucine cited objective factors, those factors were either false or pretextual.
Finally, Jevremov and McDuffee argue that the tortious interference claims asserted against them as individuals should be dismissed because they were acting in their official capacity as officers of their respective companies. They cite Kelly v. MD Buyline, Inc., 2 F. Supp.2d 420, 439 (S.D.N.Y. 1998), and Murtha v. Yonkers Child Care Ass'n, Inc., 383 N.E.2d 865, 865-66 (N.Y. 1978). The company officers involved in these cases were sued individually for causing their own company to breach a contract. In the case at bar, Jevremov's and McDuffee's respective companies were not parties to the contract with which these two defendants allegedly interfered. As such, Kelly and Murtha are inapplicable to this case. Jevremov and McDuffee can be held liable for tortious interference even if they were acting in their official capacities. Their motion in this regard is denied.
2. Tortious Interference with Business Relations Claims
To state a claim for tortious interference with prospective economic advantage, a claimant "must show (1) business relations with a third party; (2) defendants' interference with those business relations; (3) defendants acted with the sole purpose of harming the plaintiff or used dishonest, unfair, or improper means; and (4) injury to the relationship." Purgess v. Sharrock, 33 F.3d 134, 141 (2d Cir. 1994); See also Lombard v. Booz-Allen Hamilton, Inc., 280 F.3d 209, 214 (2d Cir. 2002); PPX Enters., Inc. v. Audiofidelity Enters., Inc., 818 F.2d 266, 269 (2d Cir. 1987); Riddell Sports Inc. v. Brooks, 872 F. Supp. 73, 78 n. 2 (S.D.N.Y. 1995) (Leisure, J.). This cause of action has a "limited scope." Piccoli A/S v. Calvin Klein Jeanswear Co., 19 F. Supp.2d 157, 169 (S.D.N.Y. 1998).
A properly pleaded complaint for this tort must allege relationships with specific third parties with which the respondent interfered. Four Finger Art Factory, Inc. v. Dinicola, No. 99 Civ. 1259, 2000 WL 145466, at *7 (S.D.N.Y. Feb. 9, 2000); Minnesota Mining Mfg. Co. v. Graham-Field, Inc., No. 96 Civ. 3839, 1997 WL 166497, at *7 (S.D.N.Y. Apr. 9, 1997) (Mukasey, J.); Winner Int'l v. Kryptonite Corp., No. 95 Civ. 247, 1996 WL 84476, at *4 (S.D.N.Y. Feb. 27, 1996) ("As Winner does not allege that Kryptonite's conduct interfered with its business relationship with any specific party, it cannot establish the elements necessary for this tort. . . ."). Furthermore, the relationship must be in existence at the time of the interference. See Huntington Dental, 1998 WL 60954, at *4; Minnesota Mining, 1997 WL 166497, at *7.
The complaint must also state how the defendant interfered in those relationships. See Four Finger, 2000 WL 145466, at *7; Envirosource, Inc. v. Horsehead Res. Dev. Co., No. 95 Civ. 5106, 1996 WL 363091, at *14 (S.D.N.Y. July 1, 1996). That interference must be "direct interference with a third party, that is, 'the defendant must direct some activities towards the third party and convince the third party not to enter into a business relationship with the plaintiff.'" Black Radio Network, Inc. v. NYNEX Corp., No. 96 Civ. 4138, 2000 WL 64874, at *4 (quoting Fonar Corp. v. Magnetic Resonance Plus, Inc., 957 F. Supp. 477, 482 (S.D.N.Y. 1997)); see also Piccoli, 19 F. Supp.2d at 167-68.
The dealer defendants first contend that because the same allegations are cited in support of both the tortious interference with contract claims and the tortious interference with prospective business relations claims, they are redundant and therefore the latter claims should be dismissed. Rule 8, however, allows parties to plead in the alternative. Fed.R.Civ.Pro. 8; G-I Holdings, Inc. v. Baron Budd, 238 F. Supp.2d 521, 534-35 (S.D.N.Y. 2002). In G-I Holdings, Judge Sweet noted that in the event that a tortious interference claim would fail because the underlying contract was unenforceable, an alternate claim of tortious interference claim would become viable. G-I Holdings, 238 F. Supp.2d at 535-36. That is exactly the situation presently before this Court. If the AIM-Valcucine contract is enforceable under Italian law, then the tortious interference with contract claim is viable and the tortious inference with prospective business relations claim is unnecessary. However, if the contract is unenforceable, tortious interference with contract is inapplicable and the cause of action is properly styled as a tortious interference with prospective business relations claim. Therefore, the claims are properly pled in the alternative at this juncture.
The dealer defendants' next claim is specious. They state that AIM has failed to allege any business relations with a third party other than the relationship with Valcucine. However, that relationship is, of course, sufficient to sustain the claim at the pleadings stage.
Finally, the dealer defendants argue that plaintiffs failed to allege that defendants acted with the sole purpose of harming plaintiffs or used dishonest, unfair or improper means. The parties have directed much of their arguments in this regard toward whether a breach of contract can constitute wrongful means. While the Court is skeptical that breaching a contract by itself can be considered dishonest, unfair or improper means, that issue does not need to be decided today because plaintiffs have clearly pled wrongful means. See Compl. ¶ 56 ("The conduct of the [d]ealer [d]efendants has been for the sole purpose of harming AIM and constitutes dishonest, unfair, fraudulent and improper means."); id. 58 ("The [d]ealer [d]efendants' conduct is wanton and outrageous, has been undertaken for a malicious purpose and warrants the imposition of punitive damages. . . ."); id. ¶ 63 ("The conduct of . . . Jevremov and McDuffee has been taken for the sole purpose of harming AIM and constitutes dishonest, unfair, fraudulent and improper means."); id. ¶ 65 ("Jevremov's and McDuffee's conduct is wanton and outrageous, has been undertaken for a malicious purpose and warrants the imposition of punitive damages. . . ."). Because these allegations must be considered true at this stage of the proceedings, they are sufficient to plead wrongful means. Cf. MDC Corp., Inc. v. John H. Harland Co., 228 F. Supp.2d 387, 397-98 (S.D.N.Y. 2002) (finding allegation that defendant "acted maliciously and used fraudulent or illegal means" is sufficient pleading of wrongful means); Preferred Health Care, Ltd. v. Empire Blue Cross Blue Shield, No. 94 Civ. 9326, 1997 WL 160489, at *3 (S.D.N.Y. Apr. 7, 1997) (stating that the words "with malice" are sufficient). Therefore, this claim survives the motion to dismiss.
C. The Breach of Contract and Implied Covenant of Good Faith Claims
The sixth cause of action purports to assert a breach of contract and the implied covenant of good faith claim against IBI and Kitchens. Defendants claim that the complaint fails to adequately plead this cause of action. To rule in their favor, however, would require the Court to resolve factual questions in their favor, which would obviously be inappropriate on a Rule 12(b)(6) motion.
A properly stated claim for breach of contract under New York law must allege (1) the existence of a contract, (2) plaintiffs' performance, (3) breach by the defendant, and (4) damages. Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir. 1996). These elements do not have to be pled separately. "All that is necessary is a concise and plain statement of the claim showing that the pleader is entitled to relief." Van Brunt v. Rauschenberg, 799 F. Supp. 1467, 1470 (S.D.N.Y. 1992).
IBI and Kitchens contend that AIM has not adequately alleged a breach by defendants. The complaint, however, gives sufficient notice to defendants regarding more than one purported breach of the relevant contracts.
With respect to IBI, the complaint alleges that Jevremov communicated directly with Valcucine on behalf of IBI in violation of the IBI-AIM contract. Compl. ¶ 26. Defendants claim that AIM's allegations are "vague and conclusory, devoid of any specific facts or circumstances with respect to the alleged 'communications.'" Dealer Defs. Memo. at 11. The complaint, however, states that IBI and Valcucine engaged in extensive discussions and agreed "to eliminate AIM from the distribution of Valcucine [p]roducts and for IBI and Jevremov to assume AIM's role as Valcucine's representative and distributor in the United States." Compl. ¶ 26. This allegation is neither vague nor conclusory. Indeed, to require more would be tantamount to requiring plaintiffs to plead the actual and complete words spoken in quotations, a result hardly contemplated by the notice pleading requirements of Rule 8. The dealer defendants also argue that "[a]ny contact that [d]efendants had with Valcucine S.p.A. while the [a]greements were in force was either incidental or authorized by [s]eller and thus could not constitute a breach of contract." Dealer Defs. Memo. at 12 (internal citation omitted). Such an argument is an issue of fact outside the scope of the complaint and therefore not useful to the Court on a motion to dismiss.
With respect to Kitchens, the complaint alleges that on October 17, 2001, Kitchens "improperly and unilaterally purported to terminate its dealership agreement with ADA." Compl. ¶ 28. This allegation sufficiently alleges a breach of the Kitchens-AIM contract. The dealer defendants contend that "[b]y their correspondence and actions, plaintiffs have waived their right to consider Kitchens' letter of October 17, 2001 a breach of contract." Dealer Defendants' Reply Memorandum ("Dealer Defs. Reply") at 5. Waiver is an issue of fact and the Court cannot make this determination at this stage in the proceedings.
IBI and Kitchens also contend that the claim for breach of the covenant of good faith is redundant because it alleges the same facts as the breach of contract claim. Under New York law, all contracts include the implied covenant of good faith. Fasolino Foods Co., Inc. v. Banca Nazionale Del Lavoro, 961 F.2d 1052, 1056 (2d Cir. 1992); Filner v. Shapiro, 633 F.2d 139, 143 (2d Cir. 1980); Dalton v. Educ. Testing Serv., 663 N.E.2d 289, 291 (N.Y. 1995) (Kaye, C.J.); 22 N.Y. Jur.2d Contracts § 230 (2002). The implied covenant is breached when one party to a contract "'seeks to prevent its performance by, or to withhold its benefits from, the other.'" In re Houbigant, Inc., 914 F. Supp. 964, 989 (S.D.N.Y. 1995) (quoting Collard v. Incorporated Village of Flower Hill, 427 N.Y.S.2d 301 (App.Div. 1980)); See also Kader v. Paper Software, Inc., 111 F.3d 337, 342 (2d Cir. 1997); Aventine Inv. Mgmt., Inc. v. Canadian Imperial Bank of Commerce, 697 N.Y.S.2d 128, 130 (App. Div. 1999) (stating that the covenant is breached "when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under the agreement"). "Encompassed within the implied obligation of each promisor to exercise good faith are any promises which a reasonable person in the position of the promisee would be justified in understanding were included." Dalton, 663 N.E.2d at 291; see also Times Mirror Magazines, Inc. v. Field Stream Licenses Co., 294 F.3d 383, 394 (2d Cir. 2002); New York Univ. v. Cont'l Ins. Co., 662 N.E.2d 763, 769 (N.Y. 1995). As such, "neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Kirke La Shelle Co. v. Paul Armstrong Co., 188 N.E. 163, 167 (N.Y. 1933).
If AIM had attempted to plead breach of the implied covenant of good faith as a separate cause of action, the Court would have had to consider seriously the dealer defendants' redundancy argument. See Fasolino Foods, 961 F.2d at 1056 (stating that a breach of the duty of good faith is merely a breach of the underlying contract (internal quotations omitted)); MDC Corp., 228 F. Supp.2d at 394; W.S.A., Inc. v. ACA Corp., Nos. 94 Civ. 1868, 94 Civ. 1493, 1996 WL 551599, at *9 (S.D.N.Y. Sept. 27, 1996); Houbigant, 914 F. Supp. at 989; New York Univ., 662 N.E.2d at 769; Apfel v. Prudential-Bache Sec. Inc., 583 N.Y.S.2d 386, 339 (App. Div. 1992). But see Butvin v. Doubleclick, Inc., No. 99 Civ. 4727, 2001 WL 228121, *8 (S.D.N.Y. Mar. 7, 2001) (Keenan, J.) ("New York courts have recognized a separate cause of action for breach of the covenant of good faith and fair dealing, however, in cases involving efforts by one party to a contract to subvert the contract itself."). However, AIM has not attempted to do so. Instead, the doctrine is part and parcel of the plaintiffs' breach of contract claim. The complaint is replete with allegations that the dealer defendants entered into an agreement with Valcucine to eliminate AIM as the "middle man." Such conduct, if true, certainly implicates the implied covenant of good faith, which gives rise to a breach of contract claim.
The dealer defendants misunderstand plaintiffs' opposition in this regard. They state that AIM has now added allegations that IBI and Kitchens purchased products directly from Valcucine and that no such allegations appear in the complaint. Plaintiffs are not claiming, however, that IBI and Kitchens purchased products from Valcucine. They are claiming, as they alleged in the complaint, that the dealer defendants agreed to purchase products directly from Valcucine.
The dealer defendants' argument that the complaint's allegations in this regard are conclusory is of no merit. The allegations satisfy the notice pleading requirement of Rule 8.
D. Unjust Enrichment
Plaintiffs' unjust enrichment claim is easily addressed. Unjust enrichment is inapplicable when there is a valid contract between the parties, Clark-Fitzpatrick, Inc. v. Long Island R. Co., 516 N.E.2d 190, 193 (N.Y. 1987), as is the case in this action. Therefore, a claim for unjust enrichment has not been adequately pled and the ninth cause of action is dismissed.
Plaintiffs have made no attempt to defend their assertion of this cause of action.
III. Braha's Motion to Dismiss
The complaint attempts to allege two causes of action against Braha. The seventh cause of action alleges that Braha tortiously interfered with plaintiffs' contracts or business relations and the eight cause of action is for disparagement and injurious falsehood.
A. Tortious Interference Claims
The law with respect to tortious interference with contract and tortious interference with business relations has already been discussed in this Opinion and does not need to be repeated.
The complaint alleges that Braha tortiously interfered with AIM's contracts with Valcucine and with unspecified "other Valcucine [p]roducts dealers." To the extent that the complaint attempts to allege tortious interference with unspecified "Valcucine [p]roducts dealers," it must be dismissed for the same reasons discussed supra in connection with the dealer defendants' motion to dismiss.
Plaintiffs' memorandum of law in opposition to the motion states that the complaint alleges that Braha interfered with AIM's contracts with IBI and Kitchens. While they may be able to state a claim for tortious interference with those contracts, they have not done so. Fairly read, the seventh cause of action makes no reference to the IBI and Kitchens contracts. It only is addressed to plaintiffs' contracts with Valcucine and "other Valcucine [p]roduct dealers."
The tortious interference claims must also be dismissed with respect to the AIM-Valcucine contract. The complaint alleges that Braha is an agent or representative of Valcucine. See Compl. ¶ 11. An agent cannot be held liable in tort for inducing his principal to breach a contract, unless he is operating outside the scope of his authority. Solow v. Stone, 994 F. Supp. 173, 181 (S.D.N.Y. 1998); Nu-Life Const. Corp. v. Bd. of Educ. of City of New York, 611 N.Y.S.2d 529, 530 (App.Div. 1994); see also Murtha, 383 N.E.2d at 865-66. The complaint contains no allegation that Braha acted outside the scope of his agency and, therefore, the tortious interference claims must be dismissed.
B. Disparagement and Injurious Falsehood Claim
Braha makes two arguments with respect to this cause of action. First, he contends that the claim fails because plaintiffs have not alleged the actual words spoken. Second, he argues that damages are not adequately pled. Both contentions are without merit.
With regard to the actual words spoken, Braha is simply incorrect. Pleadings in federal diversity cases are governed by the Federal Rules of Civil Procedure and not New York's pleading rules. Kelly v. Schmidberger, 806 F.2d 44, 46 (2d Cir. 1986). "The test of a complaint's sufficiency is whether it is detailed and informative enough 'to enable defendant to respond and to raise the defense of res judicata if appropriate.'" Id. (quoting Geisler v. Petrocelli, 616 F.2d 636, 640 (2d Cir. 1980)). In actions such as the case at bar, the complaint need only give defendant sufficient notice of the words at issue to allow him to defend himself. Kelly, 806 F.2d at 46; Kirkland v. Local 32B/32J, Int'l Serv. Workers Union, No. 90 Civ. 2238, 1990 WL 213046, at *2 (S.D.N.Y. Dec. 11, 1990); Odom v. Columbia, 906 F. Supp. 188, 196-97 (S.D.N.Y. 1995). As such, the complaint does not have to plead the statements at issue in haec verba. Kelly, 806 F.2d at 46; Kalika v. Stern, 911 F. Supp. 594, 603 (E.D.N.Y. 1995); Odom, 906 F. Supp. at 196-97; Bomar Res., Inc. v. Sierra Rutile Ltd., No. 90 Civ. 3773, 1991 WL 4544, at *10 (S.D.N.Y. Jan. 15, 1991) (Keenan, J.). The complaint in this matter satisfies these requirements. See Compl. ¶ 31.
Even if plaintiffs were required to plead the statements in haec verba, the claim is adequately alleged, at least with respect to the statements made to Schaefer. The words "need not be in quotations." Langenbacher Co. Inc. v. Tolksdorf, 605 N.Y.S.2d 34, 35 (App.Div. 1993).
Braha's contentions regarding special damages are also incorrect. While normally special damages must be alleged in this type of action, they are unnecessary here because the statements at issue fall into an exception. When "disparaging statements impeach the business methods or integrity of the plaintiff himself, special damages need not be proved as a direct accusation." Angio-Med. Corp. v. Eli Lilly Co., 720 F. Supp. 269, 274 (S.D.N.Y. 1989); Drug Res. Corp. v. Curtis Pub. Co., 166 N.E.2d 319, 322 (N.Y. 1960); John Langenbacher Co. Inc. v. Tolksdorf, 605 N.Y.S.2d 34, 35 (App.Div. 1993) ("[T]he [lower] court properly found that, as the disparagement impugned the basic integrity, creditworthiness and competence of the business, injury was presumed and no proof of special damages was required."); see also Boule v. Hutton, ___ F.3d ___, 2003 WL 1967693, at *8 (2d Cir. Apr. 24, 2003) ("Where a statement impugns the basic integrity of a business, an action for defamation per se lies, and general damages are presumed." (internal quotations omitted)); Davis v. Ross, 754 F.2d 80, 82 (2d Cir. 1985); Bomar Res., 1991 WL 4544, at *11; Grimaldi v. Schillaci, 484 N.Y.S.2d 159, 161 (App.Div. 1984); Vacca v. Gen. Elec. Credit Corp., 451 N.Y.S.2d 869, 740-41 (App.Div. 1982). Braha cannot seriously contend that his alleged statements that one of AIM's principals is untrustworthy and that Valcucine had no faith in AIM's abilities to support the dealers did not impugn the integrity and competence of AIM. The action is adequately pled.
In his reply papers, Braha argues that the statements alleged in the complaint are directed toward Ashkenazy and he is not a plaintiff in the action. This is a new argument not raised in defendant's initial moving papers, and in light of this fact, the Court will only address it because it is wholly without merit. See Dunlop-McCullen v. Pascarella, No. 97 Civ. 0195, 2002 WL 31521012, at *22 n. 43 (S.D.N.Y. Nov. 13, 2002) (Leisure, J.); see also Tetra Techs., Inc. v. Harter, 823 F. Supp. 1116, 1120 (S.D.N.Y. 1993) ("Nor may entirely new but foreseeable points relevant to a motion be presented in a reply affidavit. . . . Such a procedure is foreign to the spirit and objectives of the Federal Rules of Civil Procedure. Were tactics of this type permitted, a sur-reply affidavit would be necessary from the adversary, followed by a further supplemental response by the moving party, and so on ad infinitum." (citations omitted)).
First, Braha is incorrect. At least one of the statements — that Valcucine had no faith in AIM — is expressly directed at plaintiffs. Second, Ashkenazy is a principal of AIM and the statements are allegedly directed toward him in that capacity. Therefore, AIM is a proper plaintiff.
IV. Braha's Motion for Summary Judgment
Braha's motion also requested summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. This part of the motion appears to have been treated by both Braha and plaintiffs as a mere afterthought and both sides have neglected to comply with the rules regarding summary judgment motion practice in this District.
Local Rule 56.1 dictates that a motion for summary judgment must be accompanied by "a separate, short and concise statement of material facts as to which the moving party contends there is no genuine issue to be tried." Local Civil Rule 56.1(a). The moving party's failure to include such a statement "may constitute grounds for denial of the motion" Id.; see Stone v. 866 3rd Next Generation Hotel, L.L.C., No. 00 Civ. 9005, 2002 WL 482558, at *1 n. 2 (S.D.N.Y. Mar. 29, 2002) (denying summary judgment motion for failure to comply with Local Rule 56.1); Frank v. Plaza Constr. Corp., 186 F. Supp.2d 420, 432 (S.D.N.Y. 2002) (same); Misla v. CVS Pharmacy, Inc., No. 99 Civ. 9989, 2001 WL 637384, *2 (S.D.N.Y. June 8, 2001); Rossi v. New York City Police Dep't, No. 94 Civ. 5113, 1998 WL 65999, *4 (S.D.N.Y. Feb. 17, 1998) (Keenan, J.); see also Holtz v. Rockefeller Co., Inc., 258 F.2d 62, 73 (2d Cir. 2001) ("A district court has broad discretion to determine whether to overlook a party's failure to comply with local rules."). Opponents of a summary judgment motion are required to submit a similar statement consisting of material facts that are in dispute. Local Civil Rule 56.1(b). Each statement of material fact, whether by movant or respondent, "must be followed by citation to evidence which would be admissible." Id. 56.1(d). Neither Braha nor plaintiffs have filed Rule 56.1 statements. Accordingly, Braha's motion for summary judgment is denied without prejudice.
Based on the submissions, it seems somewhat unlikely that summary judgment would have been granted in Braha's favor even if he had complied with Rule 56.1. The motion seems premature, but that issue is now for another day.
V. Motions to Stay Action Pending Arbitration
Finally, both the dealer defendants and Braha have moved to stay this action pending arbitration. They argue that the AIM-Valcucine dispute is at the heart of this entire litigation and therefore, it would be more efficient to await a result in that arbitration.
The Court has inherent power to grant a stay in a case in which some of the parties are in arbitration. WorldCrisa Corp. v. Armstrong, 129 F.2d 71, 75 (2d Cir. 1997); Citrus Mktg. Bd. of Israel v. J. Lauritzen A/S, 943 F.2d 220, 225 (2d Cir. 1991); Nederlandse Erts-Tankersmaatschappij, N.V. v. Isbrandtsen Co., 339 F.2d 440, 441 (2d Cir. 1964). To grant such a stay is left to the sound discretion of the district court. Genesco, Inc. v. T. Kakiuchi Co., Ltd., 815 F.2d 840, 856 (2d Cir. 1987); NPS Communications, Inc. v. Cont'l Group. Inc., 760 F.2d 463, 466 (1985). The party requesting the stay bears the burden of establishing that it is necessary. Nederlandse, 339 F.2d at 442. The movants must demonstrate that they have not and will not hamper the arbitration proceeding, that the arbitration will likely be completed within a reasonable time, and that the delay will not cause undue hardship to plaintiffs. Nederlandse, 339 F.2d at 442. "Broad stay orders are particularly appropriate if the arbitrable claims predominate the lawsuit and the nonarbitrable claims are of questionable merit." Genesco, 815 F.2d at 856.
It is important for the Court to focus on how the arbitration would affect each of the remaining causes of action individually in order to judge the cumulative affect of the AIM-Valcucine dispute on this case. The arbitration is unrelated to the breach of contract claim asserted against the dealer defendants. It is only related to the remaining claim against Braha in that the outcome might have some affect on the amount of damages. With respect to the tortious interference claims asserted against the dealer defendants, the resolution of the arbitration could impact whether the claims proceed as tortious interference with contract or tortious interference with business relations.
On balance, there is no need to stay this action. The arbitration resolution is not necessary for any of the claims to proceed, especially at the discovery stage. While the Court prefers that the validity of the AIM-Valcucine contract be first determined at arbitration, if the present litigation between AIM and the dealer defendants reaches a stage in which a determination of foreign law is necessary to proceed, the Court at that point will make such a determination under Rule 44.1. It may well be that the arbitration is resolved before a determination of Italian law is needed in this case given the relative early stage of this case. Therefore, the both the dealer defendants' and Braha's motion for a stay is denied.
Because of the early stage of this litigation and the fact that arbitrations generally proceed at a faster pace than cases in federal court, the Court does not share defendants' concerns regarding the risks of inconsistent results.
Furthermore, neither the dealer defendants nor Braha have met their burden to show that they have not and will not hamper the arbitration proceeding, and that the arbitration will likely be completed within a reasonable time. They have not even addressed these points in their moving papers. A failure to meet this requirement is sufficient in and of itself to warrant a denial of the stay request. Cf. Hubei Provincial Garments Imp. Exp. (Group) Corp. v. Rugged Active Wear, Inc., No. 97 Civ. 7564, 1998 WL 474091, at *5 (S.D.N.Y. Aug. 11, 1998).
CONCLUSION
Based on the foregoing, the dealer defendants' motion to dismiss is granted in part and denied in part, Braha's motion to dismiss is granted in part and denied in part, Braha's motion for summary judgment is denied, and both motions to stay are denied. With respect to the dismissed claims, plaintiffs are granted leave to file an amended complaint consistent with this Opinion, provided it is filed within thirty days of the date of this Opinion. The parties are ordered to appear for a pre-trial conference on June 23, 2003, at 11:00 A.M.SO ORDERED.