Opinion
03 Civ. 106 (SAS)
July 21, 2003
Robert J. Mastrogiacomo, Esq. Gentile Dickler, New York, NY, for the Plaintiff
Ricardo E. Oquendo, Esq. Davidoff Malito LLP, New York, NY, for Defendant
OPINION AND ORDER
Eastside Food Plaza, Inc. ("Eastside"), as the assignee of Talpa Sales, Inc. ("Talpa"), brings this action against "R" Best Produce, Inc. ("'R' Best") asserting three claims under multiple theories of recovery: violations of the unfair conduct provision under the Perishable Agricultural Commodities Act ("PACA") of 1930, amended in 1984, 7 U.S.C. § 499b, breach of contract, account stated, monies due and owing, and unjust enrichment. "R" Best now moves to dismiss the Amended Complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(1) and for failure to state a claim pursuant to Rule 12(b)(6). "R" Best further moves for reasonable attorney's fees and costs to be imposed against the plaintiff for bringing claims without legal basis. For the reasons stated below, "R" Best's motions are denied in part and granted in part.
I. BACKGROUND
A. Facts
Talpa, a broker of fresh fruit and vegetables, is incorporated in and has its principal place of business in New York. Amended Complaint ("Am. Compl.") ¶ 4. "R" Best is a dealer of produce, also incorporated and having its principal place of business in New York. Id. ¶¶ 5, 6. In July 1994, "R" Best hired Talpa as its broker in the sale of produce. Id. ¶ 9. According to their agreement, "R" Best was to pay Talpa brokerage commissions based on completed sales.Id. ¶ 10. In July 1995, "R" Best hired Larry Schembri and Schembri Produce, Inc. ("Schembri") as a broker in the sale of produce.Id. ¶ 11. "R" Best appointed Talpa to train, oversee and manage Schembri's produce sales. Id. ¶ 12. In return, "R" Best agreed to pay Talpa commissions based on the number of sales completed by Schembri. Id. ¶ 13.
Though plaintiff first alleged in the Amended Complaint that defendant is a "dealer and/or commission merchant," plaintiff argues in its Memorandum in Opposition to the Motion to Dismiss that defendant is a "dealer" as statutorily defined under PACA. See Plaintiff's Memorandum in Opposition to Motion to Dismiss at 3.
Between July 1995 and March 2002, Schembri completed produce sales on behalf of "R" Best ("Schembri sales") for which Talpa earned commissions totaling $877,500.00, but which "R" Best failed to pay. Id. ¶¶ 15, 17, 19. Between July 1, 2000, and December 31, 2000, Talpa completed produce sales on behalf of "R" Best ("Talpa sales") for which it earned commissions totaling $25,240.80, but which "R" Best again failed to pay. Id. ¶¶ 24, 26, 28. Talpa also submitted to "R" Best periodic statements of account for brokerage commissions earned on the Talpa sales, to which "R" Best never objected, protested or made any claim of error. Id. ¶¶ 33-34. Between July 1, 2000, and December 31, 2000, Talpa overpaid "R" Best for debts due and owing in relation to its completed sales in the amount of $28,174.00, which "R" Best failed to return. Id. ¶¶ 39-41.
Neither the Amended Complaint nor plaintiff's Memorandum in Opposition to Motion to Dismiss makes clear the facts giving rise to Talpa's obligation to pay "R" Best.
B. Procedural History
Talpa brought this action on January 8, 2003, for the unpaid commissions on the sales completed by Schembri, the unpaid commissions on its own sales, and for the overpayment on its debt. The three claims were raised under various theories of recovery: unfair conduct under PACA, breach of contract, action on account stated, monies due and owing and unjust enrichment. The case was first assigned to the Honorable Denise L. Cote as possibly related to another pending action. On February 28, 2003, "R" Best filed a motion for an order staying this action during the pendency of the same action between the same parties in state court.See Motion for Order Staying This Action. On April 8, 2003, Judge Cote denied the motion for a stay. See Talpa Sales, Inc. v. "R" Best Produce, Inc., No. 03 Civ. 106, 2003 WL 1845234, at *1 (S.D.N.Y. Apr. 8, 2003). On May 7, 2003, Talpa assigned to Eastside all of its rights, title and interest in the claims asserted in this action. See Am. Compl. ¶ 8. On June 13, 2003, Eastside filed an Amended Complaint, asserting identical claims as the original complaint. The case was found not to be related to Judge Cote's ongoing case and was reassigned to the undersigned on May 23, 2003. "R" Best now moves to dismiss the Amended Complaint and for reasonable attorney's fees and costs to be imposed on Eastside for bringing claims without legal basis.
"R" Best also submitted a Local Civil Rule 56.1 Statement of Material Facts on Motion for Summary Judgment but because this is a motion to dismiss, the Statement is irrelevant and will not be considered. See Local Civil Rule 56.1 of the Local Rules of the United States District Courts for the Southern and Eastern Districts of New York (statement submitted only on a motion for summary judgment).
II. MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION
A. Legal Standard
"A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). Plaintiff bears the burden of proving that a court has subject matter jurisdiction over its case by a preponderance of the evidence. See Id. When the defendant challenges the legal sufficiency of plaintiff's jurisdictional allegations, the court must take all facts alleged in the complaint as true and draw all reasonable inferences in favor of the plaintiffs. See Robinson v. Gov't of Malaysia, 269 F.3d 133, 140 (2d Cir. 2001) (internal quotation marks and citation omitted).
B. This Court Has Subject Matter Jurisdiction over This Dispute
Whether plaintiff as a broker of produce sales has standing to sue under PACA is a question of first impression. To determine whether this Court has jurisdiction, the terms of PACA must be examined., A plain reading of the statute reveals that an unpaid broker of produce sales may bring an unfair conduct claim under PACA. Section 2, the unfair conduct provision, provides, in relevant part:
Because the citizenship of the parties is not diverse, the only basis for jurisdiction is federal question. See 28 U.S.C. § 1331 ("The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States.").
Statutory analysis begins with the plain meaning of the statute.See United States v. Ripa, 323 F.3d 73, 81 (2d Cir. 2003) (internal citation omitted). A court looks first to the language of the statute itself. See Committee to Stop Airport Expansion v. FAA, 320 F.3d 285, 287-88 (2d Cir. 2003). When the language of a statute is unambiguous, "'the judicial inquiry is complete.'" Marvel Characters, Inc. v. Simon, 310 F.3d 280, 290 (2d Cir. 2002) (quoting Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54 (1992)). Where the statute is plain on its face, the court does not resort to legislative history or to the purpose of the statute to discern its meaning. See In re Venture Mortgage Fund, L.P., 282 F.3d 185, 188 (2d Cir. 2002) (internal quotation marks and citation omitted).
It shall be unlawful . . . [f]or any commission merchant, dealer, or broker . . . to fail or refuse truly and correctly to account and make full payment promptly in respect of any transaction in any [perishable agricultural] commodity to the person with whom such transaction is had. . . .7 U.S.C. § 499b (emphasis added). Defendant contends that PACA was enacted to protect unpaid sellers and suppliers of produce, and that because Talpa is merely an alleged unpaid broker of produce sales, plaintiff lacks standing to bring a claim under PACA and thereby divests this Court of jurisdiction. See Defendant's Memorandum in Support of Motion to Dismiss ("Def. Mem.") at 2, 4-5. The constricted construction urged by the defendant cannot prevail over the plain meaning of the statute. Section 2 restricts those subject to liability to "commission merchant[s], dealer[s] or broker[s]" and defines these terms in great detail. 7 U.S.C. § 499b(4)
Defendant does not dispute plaintiff's assertions that as defined by PACA, plaintiff is a broker and fresh fruits and vegetables constitute perishable agricultural commodities. See 7 U.S.C. § 499a(b)(4), 499a(b)(7).
7 U.S.C. § 499a(5)-(7) reads in full:
The term "commission merchant" means any person engaged in the business of receiving in interstate or foreign commerce any perishable agricultural commodity for sale, on commission, or for or on behalf of another.
The term "dealer" means any person engaged in the business of buying or selling in wholesale or jobbing quantities, as defined by the Secretary, any perishable agricultural commodity in interstate or foreign commerce, except that (A) no producer shall be considered as a "dealer" in respect to sales of any such commodity of his own raising; (B) no person buying any such commodity solely for sale at retail shall be considered as a "dealer" until the invoice cost of his purchases of perishable agricultural commodities in any calendar year are in excess of $230,000; and (C) no person buying any commodity other than potatoes for canning and/or processing within the State where grown shall be considered a "dealer" whether or not the canned or processed product is to be shipped in interstate or foreign commerce, unless such product is frozen or packed in ice, or consists of cherries in brine, within the meaning of paragraph (4) of this section. Any person not considered as a "dealer" under clauses (A), (B), and (C) may elect to secure a license under the provisions of section 499c of this title, and in such case and while the license is in effect such person shall be considered as a "dealer".
The term "broker" means any person engaged in the business of negotiating sales and purchases of any perishable agricultural commodity in interstate or foreign commerce for or on behalf of the vendor or the purchaser, respectively, except that no person shall be deemed to be a "broker" if such person is an independent agent negotiating sales for and on behalf of the vendor and if the only sales of such commodities negotiated by such person are sales of frozen fruits and vegetables having an invoice value not in excess of $230,000 in any calendar year.
In contrast, Section 2 denotes the protected claimant very generally as "the person with whom such transaction is had." 7 U.S.C. § 499b(4). Subdivision (a) of Section 5 of PACA, which governs the amount of damages available under an unfair conduct claim, also refers to claimants as "persons": "If any commission merchant, dealer, or broker violates any provision of section 499b of this title he shall be liable to the person or persons injured thereby for the full amount of damages . . . sustained in consequence of such violation." 7 U.S.C. § 499e(a) (emphasis added). "Person" is defined broadly to include "individuals, partnerships, corporations and associations." 7 U.S.C. § 499a(b)(1). Talpa, as a corporation, is a "person."
Moreover, as a broker, plaintiff may pursue an unfair conduct claim in light of the definition of "full payment promptly." 7 U.S.C. § 499b(4). "Full payment promptly" is defined in part as "[p]ayment of brokerage earned and other expenses in connection with produce purchased or sold, within 10 days after the day on which the broker's invoice is received by the principal. . . ." 7 C.F.R. § 46.2(aa)(4). There is no question that the unfair conduct provision of PACA permits a broker to sue a principal for failure to remit "full payment promptly."
Limiting the protection of the unfair conduct provision of PACA to sellers and buyers as the defendant suggests would directly contravene the plain meaning of the statutory language drafted and defined by the legislature. A broker who was engaged in transactions involving perishable agricultural commodities with a dealer and was not promptly paid in full may raise an unfair conduct claim under PACA. Therefore, this Court has jurisdiction over the claims asserted under PACA, see 28 U.S.C. § 1331, and supplemental jurisdiction over the remainder of plaintiff's claims. See 28 U.S.C. § 1367.
III. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM
A. Legal Standard
"Given the Federal Rules' simplified standard for pleading, '[a] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Swierkiewicz v. Sorema, N.A., 534 U.S. 506, 514 (2002) (quoting Hishon v. King Spalding, 467 U.S.69, 73 (1984)). Thus, a plaintiff need only plead "'a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957) (quoting Fed.R.Civ.P. 8(a)(2)). A plaintiff need not, in other words, plead the elements of a claim.See In re Initial Pub. Offering Sec. Litig., 241 F. Supp.2d 281, 323 (S.D.N.Y. 2003) ("Rule 8(a) does not require plaintiffs to plead the legal theory, facts or elements underlying their claim.").
At the motion to dismiss stage, the issue "'is not whether plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleading that a recovery is very remote and unlikely but that is not the test.'" Phelps v. Kapnolas, 308 F.3d 180, 184-85 (2d Cir. 2002) (per curiam) (quoting Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998)).
The task of the court in ruling on a Rule 12(b)(6) motion is "merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Pierce v. Marano, No. 01 Civ. 3410, 2002 WL 1858772, at * 3 (S.D.N.Y. Aug. 13, 2002) (quotation marks and citation omitted). When deciding a motion to dismiss pursuant to Rule 12(b)(6), courts must accept all factual allegations in the complaint as true and draw all reasonable inferences in plaintiff's favor. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152(2d Cir. 2002).
B. Plaintiff Has Sufficiently Stated Most of Its Claims
Plaintiff has sufficiently alleged claims of unfair conduct under PACA in regard to both the Schembri sales and the Talpa sales. The elements of an unfair conduct claim are: (1) a person (2) who had a transaction in any perishable agricultural commodity (3) with any commission merchant, dealer or broker (4) who failed or refused truly and correctly to account and make full payment promptly for that transaction. See 7 U.S.C. § 499b(4). As the Supreme Court has emphatically reiterated, a plaintiff need not plead his claim in exhaustive detail, nor must he plead the elements of a particular claim. See Swierkiewicz, 534 U.S. at 512. The purpose of pleadings is merely to put the adverse party on notice of the claims against it and the grounds upon which they rest. See Id.
Defendant argues that the Amended Complaint and all the claims therein should be dismissed because there is no factual basis to support the existence of an alleged brokerage agreement and the alleged transactions in regards to either the Schembri sales or the Talpa sales. See Def. Mem. at 6-8. However, with the exception of one claim, plaintiff has done all that is required at this early stage of the proceedings. Plaintiff has put defendant on sufficient notice of its PACA unfair conduct claims. The Amended Complaint alleges that defendant is a dealer who failed and refused to make full payment promptly as agreed in respect to sales of fresh fruits and vegetables by Talpa as defendant's broker and sales by Schembri, whose sales Talpa was hired by defendant to oversee. See Am. Compl. ¶¶ 6, 9-13, 15-17, 24-26. Defendant has not shown that plaintiff can prove no set of facts in support of its claims that would entitle it to relief. See Conley, 335 U.S. at 45-46. Indeed, plaintiff is not required to produce its factual support at this stage of the proceedings.
Plaintiff sufficiently states its state law claims, with one exception. Plaintiff sufficiently states claims for breach of contract. Under New York law, the plaintiff must prove: (1) existence of a contract, (2) performance by plaintiff, (3) breach of the contract by defendant and (4) damages resulting from the breach.See Terwilliger v. Terwilliger, 206 F.3d 240, 245-246 (2d Cir. 2000). Plaintiff alleges that defendant agreed to pay brokerage commissions for sales consummated by itself and Schembri, that plaintiff performed by consummating sales of produce, that defendant never paid, and that plaintiff has suffered damages in the amount of the commissions owed. See Am. Compl. ¶¶ 9-13, 15, 17, 21, 24, 26, 30.
the breach of contract causes of action are an alternative theory of recovery on the same claims asserted under the unfair conduct provision of PACA.
Plaintiff sufficiently states a claim for account stated. Under New York law, an account stated "is an agreement, expressed or implied, that an examination of the account between the parties has occurred, a statement of that account has been asserted, and accepted as correct."Nationscredit Commercial Corp. v. Matlock, No. 99 Civ. 3274, 2000 WL 1211579, at *6 (S.D.N.Y. Aug. 25, 2000). An account stated may be implied when a creditor sends a statement of an account to a debtor and the debtor, who has a duty to examine the statement to ascertain whether it is correct or not, keeps it for a reasonable time without objecting to the correctness of the account. See id. (quotation marks and citation omitted). Plaintiff alleges that it submitted periodic statements of account on the brokerage commissions earned on the Talpa sales, and that because defendant never objected to the correctness of the account, thereby impliedly agreeing to its veracity, defendant owes the amount due as stated on the account. See Am. Compl. ¶¶ 33-35.
The account stated cause of action is an alternative theory of recovery for the Talpa sales commissions asserted under the unfair conduct provision of PACA and the breach of contract cause of action.
Plaintiff sufficiently states a claim for unjust enrichment. To succeed on a claim of unjust enrichment, a plaintiff must prove: "(1) that the defendant was enriched; (2) that the enrichment was at the plaintiff's expense; and (3) that the circumstances are such that in equity and good conscience the defendant should return the money or property to the plaintiff." Golden Pac. Bancorp v. FDIC, 273 F.3d 509, 519 (2d Cir. 2001). Plaintiff alleges that it overpaid defendant for debts due and owing on Talpa's produce sales, and that despite repeated demands, defendant has not returned the overpayment that it presently holds in constructive trust for plaintiff. See Am. Compl. ¶¶ 39-41.
However, plaintiff does not sufficiently state a claim for monies due and owing pursuant to an overpaid debt. To succeed on this claim, plaintiff must prove that defendant had an express legal obligation to pay the monies due and owing. See e.g., MCI Worldcom Communications, Inc. v. North American Communications Control, Inc., No. 98 Civ. 6818, 2003 WL 21279446, at *4 (S.D.N.Y. June 4, 2003) (claim for monies due and owing pursuant to a credit adjustment agreement); British Intern. Ins. Co. Ltd. v. Seguros La Republica, No. 90 Civ. 2370, 1999 WL 301689, at *2 (S.D.N.Y. May 12, 1999) (claim for monies due and owing in connection with reinsurance agreements and certificates of reinsurance); National Credit Union Admin. Bd. v. Glickman, No. Civ. 92-1540, 1993 WL 17436, at *1 (E.D.N.Y. Jan. 11, 1993) (claim for monies due and owing pursuant to a loan agreement). Plaintiff alleges that it owed a debt to the defendant, that it overpaid that debt, and that defendant refuses to return the balance that remained after satisfaction of the debt. See Am. Compl. ¶¶ 38-41. Because plaintiff does not allege any agreement requiring repayment, the claim for monies due and owing is insufficient and should be dismissed for failure to state a claim. The remainder of plaintiff's claims are legally sufficient. Defendant's motion to dismiss the Amended Complaint is denied in part and granted in part, and the motion for attorney's fees and costs is denied.
The monies due and owing cause of action is an alternative theory of recovery on the same claim asserted under the unjust enrichment cause of action.
IV. CONCLUSION
For the reasons discussed above, defendant's motions are denied in part and granted in part. A conference is scheduled for August 1, 2003, at 4:00 p.m. The Clerk is ordered to close this motion.
SO ORDERED