Dalmatia Import Group, Inc. v. Foodmatch, Inc. et al

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

E.D. Pa.August 16, 2016

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA _________________________________________ DALMATIA IMPORT GROUP, INC. and MAIA, MAGEE Plaintiffs, Case No. 2:16-cv-02767-EGS vs. FOODMATCH, INC. et al., Defendant. _________________________________________ DEFENDANTS LANCASTER FINE FOODS, INC., EARTH PRIDE ORGANICS, LLC AND MICHAEL S. THOMPSON’S MOTION TO DISMISS Defendants, Lancaster Fine Foods, Inc., Earth Pride Organics, LLC and Michael S. Thompson hereby move this Court, pursuant to FED.R.CIV.P. 12(b)(6), to dismiss with prejudice Counts V, VI and X of the Second Amended Complaint filed by Plaintiff, Dalmatia Import Group, Inc., on the grounds that Plaintiff has failed to state a claim for which relief may be granted. In support of the Motion, Defendants rely on the accompanying Memorandum of Law. Respectfully submitted, FOX ROTHSCHILD LLP /s/ George J. Krueger_________ George J. Krueger, Esquire Brian A. Berkley, Esquire Alexandra C. Scanlon, Esquire 2000 Market Street, 20th Floor Philadelphia, PA 19103-3222 Phone: 215-299-2000 Fax: 215-299-2150 Email: gkrueger@foxrothschild.com Email: bberkley@foxrothschild.com Email: ascanlon@foxrothschild.com Dated: August 16, 2016 Attorneys for Lancaster Fine Foods, Inc., Earth Pride Organics, LLC and Michael S. Thompson Case 2:16-cv-02767-EGS Document 64 Filed 08/16/16 Page 1 of 2 CERTIFICATE OF SERVICE I hereby certify that on August 16, 2016 a true and correct copy of the foregoing Motion and accompanying Memorandum of Law was served by email on all counsel pursuant to Paragraph 8 of the Scheduling Order, including as follows: Counsel for Dalmatia Import Group, Inc.: SAMUEL EZRA COHEN, ESQUIRE GROSS MCGINLEY LLP 33 S. 7TH ST. P.O. BOX 4060 ALLENTOWN, PA 18105 Email: scohen@grossmcginley.com LAUREN E. HANDEL, ESQUIRE HANDEL FOOD LAW LLC 75 WASHINGTON VALLEY RD #416 BEDMINSTER, NJ 07921 Email: lauren@handelfoodlaw.com MICHAEL S. NADEL, ESQUIRE JOHN DABNEY, ESQUIRE MCDERMOTT WILL & EMERY LLP 500 NORTH CAPITOL STREET NW WASHINGTON, DC 20001 Email: mnadel@mwe.com Email: jdabney@mwe.com Counsel for FoodMatch, Inc.: RICHARD FELDMAN, ESQUIRE MICHAEL SMITH, ESQ. ROSENBERG FELDMAN SMITH LLP 551 FIFTH AVE., FLOOR 24 NEW YORK, NEW YORK 10176 Email: rfeldman@rfs-law.com Email: msmith@rfs-law.com /s/ Alexandra C. Scanlon Alexandra C. Scanlon Case 2:16-cv-02767-EGS Document 64 Filed 08/16/16 Page 2 of 2 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA _________________________________________ DALMATIA IMPORT GROUP, INC. and MAIA, MAGEE Plaintiffs, Case No. 2:16-cv-02767-EGS vs. FOODMATCH, INC. et al., Defendant. _________________________________________ PROPOSED ORDER AND NOW, this _______ day of ______________________, 2016, upon consideration of the Motion of Defendants, Lancaster Fine Foods, Inc., Earth Pride Organics, LLC and Michael S. Thompson, to Dismiss Counts V, VI and X of the Second Amended Complaint filed by Plaintiff, Dalmatia Import Group, Inc., and any response thereto, it is hereby ORDERED that: 1. Defendants’ Motion is GRANTED; and 2. Counts V, VI and X are DISMISSED WITH PREJUDICE. BY THE COURT: ____________________________________ Edward G. Smith, U.S.D.J. Case 2:16-cv-02767-EGS Document 64-1 Filed 08/16/16 Page 1 of 1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA DALMATIA IMPORT GROUP, INC. et al., Plaintiffs, vs. FOODMATCH, INC. et al., Defendants. Case No. 2:16-cv-02767-EGS MEMORANDUM OF DEFENDANTS LANCASTER FINE FOODS, INC., EARTH PRIDE ORGANICS, LLC AND MICHAEL S. THOMPSON IN SUPPORT OF THEIR MOTION TO DISMISS PURSUANT TO FED. R. CIV. P. 12(b)(6) George J. Krueger, Esquire Brian A. Berkley, Esquire Alexandra C. Scanlon, Esquire FOX ROTHSCHILD LLP 2000 Market Street, 20th Floor Philadelphia, PA 19103-3222 Phone: 215-299-2000 Fax: 215-299-2150 Email: gkrueger@foxrothschild.com Email: bberkley@foxrothschild.com Email: ascanlon@foxrothschild.com Attorneys for Lancaster Fine Foods, Inc., Earth Pride Organics, LLC and Michael S. Thompson Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 1 of 18 i TABLE OF CONTENTS INTRODUCTION .......................................................................................................................... 1 SUMMARY OF ALLEGATIONS................................................................................................. 2 I. Dalmatia Fails To Plead That Any Lancaster Defendant Signed The Agreements Or Accepted An Assignment Of Them. ............................................. 2 II. The Unambiguous Language Of The Asset Purchase Agreement And Dalmatia’s Allegations Demonstrate Beanies Did Not Transfer The Non- Disclosure Agreement Or Supply Agreement To The Lancaster Defendants. ............................................................................................................. 4 III. The Parties Did Not Comply With The Supply Agreement. .................................. 5 IV. Dalmatia Pleads Lancaster Misappropriated Dalmatia’s Trade Secrets No Later Than Early January 2016............................................................................... 6 ARGUMENT.................................................................................................................................. 7 I. The Applicable Legal Standard Under Rule 12(b)(6) And Twombly. .................... 7 II. Dalmatia’s Breach Of Contract Claims Fail As A Matter Of Law......................... 7 A. Dalmatia Cannot Enforce The Non-Disclosure And Supply Agreements Against Non-Signatories Lancaster Defendants..................... 7 B. The APA Does Not Save Dalmatia’s Breach Of Contract Claims. ............ 9 C. The Parties Did Not Comply With The Supply Agreement ..................... 11 III. Dalmatia Cannot Assert A Claim Under The DTSA............................................ 13 CONCLUSION............................................................................................................................. 14 Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 2 of 18 ii TABLE OF AUTHORITIES Page(s) Cases Ancile Inv. Co. v. Archer Daniels Midland Co., 784 F. Supp. 2d 296 (S.D.N.Y. 2011)........................................................................................7 Ashcroft v. Iqbal, 556 U.S. 662 (2009)...................................................................................................................7 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)...............................................................................................................7, 8 DHL Glob. Forwarding Mgmt. Latin Am., Inc. v. Pfizer, Inc., No. 13-cv-8218 KBF, 2014 WL 5169033 (S.D.N.Y. Oct. 14, 2014)........................................7 Hardee-Guerra v. Shire Pharm., 737 F. Supp. 2d 318 (E.D. Pa. 2010) .........................................................................................8 Harvey v. Liberty Mut. Grp., Inc., 8 F. Supp. 3d 666, 675 (E.D. Pa. 2014) ...................................................................................10 Iles v. de Jongh, 638 F.3d 169 (3d Cir. 2011).....................................................................................................13 Innovative BioDefense, Inc. v. VSP Techs., Inc., No. 12 CIV. 3710 ER, 2013 WL 3389008 (S.D.N.Y. July 3, 2013) .........................................9 Kania v. Potter, 358 F. App'x 338 (3d Cir. 2009)..............................................................................................13 Karpf v. Massachusetts Mut. Life Ins. Co., No. CIV.A. 10-1401, 2014 WL 1259605 (E.D. Pa. Mar. 27, 2014)..........................................8 Landgraf v. USI Film Products, 511 U.S. 244, 114 S. Ct. 1483, 128 L. Ed. 2d 229 (1994).......................................................13 Princeton Ins. Co. v. Converium Reinsurance (N. Am.) Inc., 344 F. App'x 759 (3d Cir. 2009)..............................................................................................11 Renner v. Progressive N. Ins. Co., No. 2:12-cv-2570-CDJ, 2014 WL 1091359 (E.D. Pa. Mar. 18, 2014) (Jones, J.)..............................................................................................................................................10 Rex Med. L.P. v. Angiotech Pharm. (US), Inc., 754 F. Supp. 2d 616 (S.D.N.Y. 2010)......................................................................................10 Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 3 of 18 iii Tax Matrix Techs., LLC v. Wegmans Food Markets, Inc., 154 F. Supp. 3d 157, 173 (E.D. Pa. 2016) .................................................................................1 Statutes Defense of Trade Secrets Act of 2016 ...................................................................................2, 3, 13 Other Authorities Fed. R. Civ. P. 12(b)(6)....................................................................................................................7 Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 4 of 18 1 Lancaster Fine Foods, Inc. (“Lancaster”), Earth Pride Organics, LLC (“EPO”), and Michael S. Thompson (collectively “Lancaster Defendants”) submit this Memorandum of Law in Support of Their Motion to Dismiss the Second Amended Complaint filed by Dalmatia Import Group, Inc. (“Dalmatia”). INTRODUCTION “Where the words of a contract are clear and unambiguous, its meaning must be determined by its contents alone, without reference to extrinsic aids or evidence.” Tax Matrix Techs., LLC v. Wegmans Food Markets, Inc., 154 F. Supp. 3d 157, 173 (E.D. Pa. 2016). This basic contract principle dooms Dalmatia’s breach of contract claims. In Counts V and VI, Dalmatia alleges the Lancaster Defendants breached agreements to which none of them is a party. Those two agreements – a non-disclosure agreement dated May 21, 2007 (the “Non- Disclosure Agreement”) and a supply agreement dated July 16, 2008 (“Supply Agreement”) – were both between just Dalmatia and a company called Beanies of Lancaster, Inc. (“Beanies”). The unambiguous language of those two agreements demonstrates that those agreements were not assigned to any Lancaster Defendant. Indeed, with respect to the Non-Disclosure Agreement, the unambiguous language shows that contract terminated upon the termination of the co-packing relationship between Beanies and Dalmatia. Dalmatia attempts to hoist these two contracts onto the Lancaster Defendants through another agreement – the Asset Purchase Agreement between Beanies and EPO (the “APA”). Yet, the unambiguous language of that contract also dooms Dalmatia’s claims. The APA dictates which assets EPO purchased from Beanies. The APA’s express terms – as set forth in Sections 1.1 and 2.6, Exhibit A to the APA, and Schedule 2.6 of the APA – specifically identify which assets and contracts transferred from Beanies to EPO. The Non-Disclosure Agreement and Supply Agreement are unambiguously NOT identified. Noticeably, and critically, Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 5 of 18 2 Dalmatia does not identify an ambiguity in the contract language that explains this omission. Thus, the Court must rely solely on the unambiguous language within the four corners of the APA. That language demonstrates Beanies did not transfer the Non-Disclosure Agreement and Supply Agreement to any Lancaster Defendant. The parties’ course of dealing, which shows they did not comply with the terms of the Supply Agreement, and Dalmatia’s failure to plead as much, further buttresses the conclusion that the Non-Disclosure Agreement and Supply Agreement do not apply to the Lancaster Defendants. Accordingly, Counts V and VI should be dismissed. Count X should also be dismissed because it alleges a violation of The Defense of Trade Secrets Act of 2016 (“DTSA”) based on facts that predate the DTSA’s enactment. Congress enacted the DTSA on May 11, 2016. The act is expressly not retroactive. The factual allegations supporting Dalmatia’s misappropriation of trade secrets claim predate May 11, 2016. Accordingly, the DTSA does not apply and Count X should be dismissed with prejudice. SUMMARY OF ALLEGATIONS I. Dalmatia Fails To Plead That Any Lancaster Defendant Signed The Agreements Or Accepted An Assignment Of Them. Dalmatia alleges it entered into the Non-Disclosure Agreement with Beanies. See SAC at ¶ 55. It also alleges that it entered into the Supply Agreement with Beanies. Dalmatia and Beanies are the only two parties that ever signed either of these documents. See Non-Disclosure Agreement at pg. 3 and Supply Agreement at pg. 11. Beanies is not a party to this lawsuit and it is not charged with breaching either of these agreements. See SAC. None of the Lancaster Defendants signed the Supply Agreement. See Supply Agreement at pg. 11. The Supply Agreement also specifically precludes Lancaster, EPO, or any party from becoming assignees of the Supply Agreement: Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 6 of 18 3 This Agreement shall be binding upon . . . the successors or permitted assignees of each of the parties and may not be assigned or transferred by either party without the prior written consent of the other. See id. at 11.6 (emphasis added). The Supply Agreement further provides that a waiver or amendment of its terms must be in writing. See id. at 11.4-11.5. In its SAC, Dalmatia does not plead a writing signed by it, Beanies or Lancaster sufficient to comply with the requirements of this provision. Moreover, the Supply Agreement precludes amendment by course of dealing. See Supply Agreement at Section 11.4. Similarly, none of the Lancaster Defendants signed the Non-Disclosure Agreement. See Non-Disclosure Agreement at pg. 3-4. Instead, the agreement is between Beanies and Dalmatia. See id. The agreement, by its terms, terminated once Beanies stopped acting as Dalmatia’s co- packer: The obligations under this Agreement shall remain in force for a period of all times while the Recipient [Beanies] is an authorized co-packer of Discloser’s [Dalmatia’s] Food Products and in the event of a termination of any co-packing relationship between the Parties. . . . See id. at Section 4(a). Like the Supply Agreement, the Non-Disclosure Agreement only permitted written amendments. See id. (“This Agreement may not be modified, changed or discharged, in whole or in part, except by the prior written agreement of the Parties.”). Dalmatia does not plead that it or Beanies complied with this provision. Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 7 of 18 4 II. The Unambiguous Language Of The Asset Purchase Agreement And Dalmatia’s Allegations Demonstrate Beanies Did Not Transfer The Non-Disclosure Agreement Or Supply Agreement To The Lancaster Defendants. On or about February 29, 2008, several months prior to the formation of Lancaster, EPO entered into an Asset Purchase and Sale Agreement (the “APA”) with non-party Beanies. See APA at pg. 1. The APA closed on July 31, 2008. See id. at Section 7.1. Through the APA, Beanies assigned certain contracts to EPO. Section 1.1 is titled “Purchase and Sale of Assets” (emphasis in the original). It states: Upon and subject to the terms and conditions contained in this Agreement, Purchaser shall purchase from Seller and Seller shall sell, convey, assign, transfer and deliver to Purchaser all of Seller’s assets used in the Business (collectively, the “Acquired Assets”), free and clear of all liens and encumbrances of any kind whatsoever, including, without limitation, the following assets, properties and rights of Seller. (emphasis in the original). Subpart (e) of that section identifies the “Assigned Contracts” (emphasis in the original) to include “[a]greements, contracts, bids and orders (and rights thereunder for Sellers product lines) as and to the extent set forth on Exhibit A.” Exhibit A lists several contracts but, critically, it does not list the Non-Disclosure Agreement or the Supply Agreement. Under Section 2.6, Beanies represented and warranted that, on Schedule 2.6, it identified “a list of all contracts and agreements (other than normal short term purchase orders and sale commitments made in the ordinary course of business and cancelable without liability on not more than (30) days’ notice) pertaining to the Business to which the Seller is a party including, but not limited: (a) all contracts or agreements for the purchase or sale of products or services; (b) secrecy agreements and all agreements for the services of third parties . . . .” Critically, Schedule 2.6 did not include the Supply Agreement or Non-Disclosure Agreement. Both those Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 8 of 18 5 agreements are the type that, had the parties intended to include them, would have been listed on Schedule 2.6 consistent with Sections 2.6(a) and (b). Accordingly, under the sections, exhibits, and schedules in which Beanies was to list supply agreements and non-disclosure agreements – Section 1.1(e), Exhibit A, Section 2.6, and Schedule 2.6 – it did not list either the Non-Disclosure Agreement or the Supply Agreement. Further, Dalmatia pleads that on or around July 31, 2008, “Beanies of Lancaster, Inc. ceased all operations.” Id. at ¶ 71. The Non-Disclosure Agreement between Beanies and Dalmatia, therefore, terminated under Section 4(a) of the Non-Disclosure Agreement. III. The Parties Did Not Comply With The Supply Agreement. Consistent with the unambiguous language of the Supply Agreement’s assignment provision and the APA, the parties did not act as though the Supply Agreement applied during their course of conduct. The Supply Agreement required Beanies and Dalmatia to do the following: • Section 2.2 of the Supply Agreement requires Dalmatia to provide Beanies with an annual forecast. • Section 2.3 identifies several items of labeling equipment purchased by Dalmatia for Beanies’ use and states that the equipment is to be returned to Dalmatia or sold after a negotiation between the parties. • Section 2.4 requires Dalmatia to fax or email all purchase orders at least fifteen business days prior to the expected delivery date. • Section 2.6 requires the submission of trucking charges to Dalmatia in writing prior to each product delivery. • Section 2.8 contains a non-competition provision that is antithetical to Lancaster’s business model as a contract manufacturer working simultaneously with several brands on common items produced through different recipes. • Section 3.2 contains certain Termination Provisions, including the requirement that a party receive notice and an opportunity to cure prior to termination. Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 9 of 18 6 • Section 11.4 provides that, “No modification of any terms of this Agreement shall be deemed to be valid unless it is in writing and signed by the party against whom enforcement is sought.” • Exhibit “B” of the Supply Agreement requires prepayment. Nowhere in the SAC does Dalmatia plead the parties complied with these provisions of the Supply Agreement. The reason for that is simple – they did not. IV. Dalmatia Pleads Lancaster Misappropriated Dalmatia’s Trade Secrets No Later Than Early January 2016. In the sections titled “FoodMatch and Lancaster Unlawfully Use Dalmatia’s Proprietary Recipe and Manufacturing Process to Create Competing Divina Fig Spreads” and “FoodMatch Launches Its Divina Fig Spreads,” Dalmatia pleads the allegations that form the basis for its misappropriation of trade secrets claims. See SAC at ¶¶ 115-135. Dalmatia’s allegations all point to a purported misappropriation that occurred (if at all) no later than January 2016: • “In late October 2015, Lancaster also committed that it would meet FoodMatch’s extremely aggressive deadline to have the Divina fig and orange fig spreads ready for launch by mid-January.” Id. at ¶ 118 (emphasis added). • “When they began working together, in late October and early November, 2015, Mr. Hunt asked Mr. Greenberg for FoodMatch’s fig spread formula and information about specifications FoodMatch desired. Mr. Greenberg informed Mr. Hunt that he did not have a formula or ‘any strict parameters.’ He further directed Mr. Hunt that, ‘the product we know and have become used to will be the basis for development.’ In other words, Mr. Greenberg told Mr. Hunt to base development of the Divina fig spread on Dalmatia’s product.” Id. at ¶¶ 121-22 (emphasis added). • As planned, Defendant FoodMatch launched the Divina fig and orange fig spreads at the Winter Fancy Food Show in January 2016. But some of the Divina-brand products were distributed as early as January 1, 2016 – literally the day after the Distribution Agreement between Plaintiff and FoodMatch expired. . . . In early 2016, FoodMatch also launched ‘Ficoco’ (fig with cocoa) spread to compete with Dalmatia’s fig cocoa spread, as well as a fig spread with Kalamata olives and almonds.” Id. at ¶ ¶ 128-29 (emphasis added). Accordingly, Dalmatia’s purported misappropriation of trade secrets claims stem from alleged conduct that occurred no later than early January 2016. Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 10 of 18 7 ARGUMENT I. The Applicable Legal Standard Under Rule 12(b)(6) And Twombly. Federal Rule of Civil Procedure 12(b)(6) governs dismissals for failure to state a claim. FED.R.CIV.P. 12(b)(6). Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009) changed the pleading standards, which now require a showing that factual allegations are “plausible” before a plaintiff can proceed. Twombly, 550 U.S. 544. Indeed, Dalmatia does not refute this position, but instead “embraces it.” See NY Dkt. (16-cv- 0933), No. 98 at pg. 22 of 31 (“Rather than dispute that interpretation of Twombly, Dalmatia embraces it.”). II. Dalmatia’s Breach Of Contract Claims Fail As A Matter Of Law. Dalmatia’s breach of contract claims – Counts V and VI – under the Non-Disclosure Agreement and Supply Agreement fail under Rule 12(b)(6) for at least three reasons. First, the Lancaster Defendants are not signatories to the Non-Disclosure Agreement and Supply Agreement and the terms of those agreements preclude applying them to the Lancaster Defendants. Second, the APA does not assign those agreements to the Lancaster Defendants. Finally, with respect to the Supply Agreement, the parties themselves did not follow the terms of the Supply Agreement throughout their seven-year business relationship. A. Dalmatia Cannot Enforce The Non-Disclosure And Supply Agreements Against Non-Signatories Lancaster Defendants. The existence of a valid contract is a fundamental element for any breach of contract claim. Ancile Inv. Co. v. Archer Daniels Midland Co., 784 F. Supp. 2d 296, 304-05 (S.D.N.Y. 2011) (dismissing contract claim as plaintiff, by only identifying contracts to which defendant was a non-signatory, had failed to allege an enforceable agreement); DHL Glob. Forwarding Mgmt. Latin Am., Inc. v. Pfizer, Inc., No. 13-cv-8218 KBF, 2014 WL 5169033, at *6 (S.D.N.Y. Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 11 of 18 8 Oct. 14, 2014). See also Karpf v. Massachusetts Mut. Life Ins. Co., No. CIV.A. 10-1401, 2014 WL 1259605, at *2 (E.D. Pa. Mar. 27, 2014) (granting motion to dismiss breach of contract claims against defendant that was not a party to the contract holding, “It is fundamental contract law that one cannot be liable for a breach of contract unless one is a party to that contract.”) (Internal citations omitted). See also Hardee-Guerra v. Shire Pharm., 737 F. Supp. 2d 318, 325 (E.D. Pa. 2010) (granting summary judgment on breach of contract because plaintiff had failed to demonstrate the existence of a contract). The SAC alleges that Dalmatia and Beanies entered into two contracts. See SAC at ¶¶ 55, 77. However, Dalmatia fails to plead any facts whatsoever to show that the Lancaster Defendants were parties to either of the alleged “contracts” (e.g. the Supply Agreement and Non-Disclosure Agreement), as they never signed them, never accepted a written assignment of them, and never agreed to be bound by their terms. These claims fail under Twombly because the SAC does not plead plausible facts showing that the contracts it claims existed actually bound the Lancaster Defendants or that the “contracts” were understood by the parties (including one party that never signed either of the “contracts”) to govern their conduct. Likewise, the SAC concludes that the Non-Disclosure Agreement is binding on the non- party/non-signatory Lancaster Defendants under a theory that they are “successors in interest to Beanies.” See SAC at ¶ 210. By its express terms, however, the Non-Disclosure Agreement only applies to Beanies, not any of its successors in interest. Two provisions of the Non-Disclosure Agreement are dispositive. First, Section 1(a) makes reference to the Non-Disclosure Agreement applying to Dalmatia’s “affiliates, subsidiaries or investments,” but, critically, nowhere in the Non-Disclosure Agreement does it refer to Beanie’s affiliates, subsidiaries or investments. “Under accepted canons of contract construction, when certain language is omitted from a Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 12 of 18 9 provision but placed in other provisions, it must be assumed that the omission was intentional.” Innovative BioDefense, Inc. v. VSP Techs., Inc., No. 12 CIV. 3710 ER, 2013 WL 3389008, at *5 (S.D.N.Y. July 3, 2013). The second dispositive provision is Section 4(a). There, Beanies and Dalmatia agreed that the contract would terminate once the “co-packing relationship” between Beanies (and only Beanies, not any of its affiliates, subsidiaries or investments) and Dalmatia ended. As Dalmatia pleads, that co-packing relationship ended on July 31, 2008 when “Beanies of Lancaster, Inc. ceased all operations.” SAC at ¶ 71. Accordingly, the Non-Disclosure Agreement, by its terms, terminated on July 31, 2008. B. The APA Does Not Save Dalmatia’s Breach Of Contract Claims. Dalmatia tries to save its claims by pleading the APA between Beanies and EPO binds Lancaster to the Non-Disclosure Agreement and Supply Agreement. The unambiguous language of the APA, however, forecloses Dalmatia’s argument. Section 1.1 of the APA states that EPO “shall purchase from Seller . . . all of Seller’s assets used in the Business.” Section 1.1(e) notes that one type of asset – the Assigned Contracts – shall be listed on Exhibit A. Neither the Non-Disclosure Agreement nor the Supply Agreement is listed in Exhibit A. In Section 2.6, Beanies represented and warranted that “all contracts or agreements for the purchase or sale of products or services” and “all secrecy agreements” were listed on Schedule 2.6. Neither the Non-Disclosure Agreement nor the Supply Agreement is listed in Exhibit A. Thus, under the unambiguous language of the APA, the Non-Disclosure Agreement and the Supply Agreement did not transfer from Beanies to EPO. Critically, Dalmatia does not plead the APA contains an ambiguity. Under these circumstances, as a matter of basic contract law, the Court must not rewrite the terms of the APA and conclude that the Non-Disclosure Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 13 of 18 10 Agreement and Supply Agreement were included as part of the APA. See, e.g., Harvey v. Liberty Mut. Grp., Inc., 8 F. Supp. 3d 666, 675 (E.D. Pa. 2014) (recognizing that courts may not rewrite a contract or give it a construction that conflicts with the plain, ordinary, and accepted meaning of the words). Instead of pleading ambiguity, Dalmatia cites to Section 1.1(d)(iv), which is titled “Intangibles” (emphasis in the original), and alleges the Non-Disclosure and Supply Agreements fit within that section. Section 1.1(d)(iv) identifies “all licenses, franchise agreements or other consents or approvals granted to the Seller by third parties for the use of trademarks, trade names, computer software and other intellectual property.” SAC at ¶ 68. This section unambiguously does not include either agreement. First, Section 1.1(e) identifies specific “Agreements, contracts, bids and orders” sold by Beanies to EPO. It refers to Exhibit A as defining the “Assigned Contracts” which are part of the transaction. Exhibit A, in turn, identifies on an attached schedule 14 specific contracts which were “Assigned” to EPO. Notably, the specifically identified “Assigned Contracts” do not include either the Supply Agreement or the Beanies NDA. This is of controlling significance because, in interpreting contracts, the specific controls the general. Here, the separate and specific reference to “Assigned Contracts” immediately after the section governing “intangibles” requires rejection of Dalmatia’s claim that the sale of general “intangibles” included the sale of “contracts” which are separately and more specifically identified elsewhere. See, e.g., Rex Med. L.P. v. Angiotech Pharm. (US), Inc., 754 F. Supp. 2d 616, 624 (S.D.N.Y. 2010) (“[I]t is a settled maxim of contract construction that the specific controls the general—i.e., where the contract contains a provision that specifically addresses a particular contingency. . . that provision must be relied on rather than some other, more general provision.”). See also Renner v. Progressive N. Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 14 of 18 11 Ins. Co., No. 2:12-cv-2570-CDJ, 2014 WL 1091359, at *4 (E.D. Pa. Mar. 18, 2014) (“[W]hen there are two conflicting contract clauses, the specific language qualifies and controls the more general language”) (internal citations omitted) (Jones, J.). Moreover, if “intangibles” included “contracts”, as Dalmatia claims, then there would be no need for the use of the separate term “contracts” throughout the APA. See APA at Sections 1.2(a), 2.6, Exhibit A. Indeed Section 2.6 of the APA, entitled “Contracts” would be misnamed if the word “contract” was subsumed within “intangibles”. Princeton Ins. Co. v. Converium Reinsurance (N. Am.) Inc., 344 F. App'x 759, 763 (3d Cir. 2009) (recognizing principle that, in interpreting a contract, all parts of the writing and every word of it will be given effect). Second, neither the Supply Agreement nor the Non-Disclosure Agreement purports to constitute “licenses” as contemplated by Section 1.1(d)(iv). By way of example, the Supply Agreement refers to a license as an intangible item separate and apart from the underlying Supply Agreement. See Supply Agreement at § 2.11 (“Such License shall be terminable upon any default under this Agreement”). Third, Dalmatia’s interpretation is inconsistent with the plain language of the APA, which provides in unambiguous language that EPO disclaims liability for any Beanies contracts not “expressly accepted [by it] in writing”. See APA ¶ 1.2(a). Here, there is no “writing” reflecting the “express[] accept[ance]” by either EPO or Lancaster of the contract. The APA specifically identifies only those contracts EPO acquired from Beanies in writing. Accordingly, Dalmatia fails to allege plausible claims for breach of contract in the Amended Complaint. Counts V and VI of the First Amended Complaint should be dismissed. C. The Parties Did Not Comply With The Supply Agreement With respect to the Supply Agreement, Dalmatia does not plead that the parties complied with all of the terms of the Supply Agreement during their seven-year relationship. That is not Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 15 of 18 12 surprising. Here, the record evidence from the preliminary injunction phase shows indisputably the parties did not: • On or about July 16, 2008, Dalmatia entered into a contract with Beanies containing an anti-assignment provision and prohibiting oral modification or modification by course of conduct. See Pa. Dkt. (16-cv-2767) No. 28 at ¶ 5. • On October 22, 2008, Dalmatia received correspondence from Lancaster’s President Michael Thompson reflecting new terms, new charges, additional fees and “new company information.” See id. at ¶ 19. • Dalmatia took no steps to formally assign the Supply Agreement to Lancaster or make a written modification of the Supply Agreement to comply with its plain terms. See id. at ¶ 11. • Both Lancaster and Dalmatia failed to comply with several, pertinent provisions of the Supply Agreement during the parties’ relationship. See id. at ¶ 15, 38. • Neither party could locate the Supply Agreement in 2015. See id. at ¶ 16. Despite an opportunity to assert allegations designed to rebut these record facts, Dalmatia failed to do so in its SAC. While the Court need not rely on the preliminary injunction phase to grant the Lancaster Defendants’ motion on this basis, it is nevertheless noticeable that it is futile for the claims under the Supply Agreement to continue under this record. If Dalmatia really thought that the Supply Agreement applied to its relationship with Lancaster, it would allege that it abided by its provisions and provided annual usage estimates, issued purchase orders 15 days in advance of shipment, prepaid for deliveries, amended the agreement after altering the underlying recipe and terminated the agreement per its terms. It does not plead it did any of these things. See SAC. Dalmatia would have also alleged that Lancaster disposed of the labeling equipment in accordance with the agreement, submitted trucking charges and altered its business model to accommodate the non-competition clause. Dalmatia alleged none of these “facts.” Its claim, that a non-signatory to a “contract” breached the alleged “contract” to which it Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 16 of 18 13 never accepted an assignment and which neither party ever followed in seven years is wholly implausible. In sum, Dalmatia has not met its burden of pleading that the Supply Agreement is binding on the Lancaster Defendants, permitting it to enforce the non-competition provision against them. III. Dalmatia Cannot Assert A Claim Under The DTSA. Section (e) of the DTSA states that “the amendments made by this section shall apply with respect to any misappropriation of a trade secret . . . for which any act occurs on or after the date of the enactment of this Act.” The DTSA’s effective date is May 11, 2016. Dalmatia alleges “Lancaster has misappropriated Dalmatia’s trade secrets by using its knowledge of Dalmatia’s trade secret recipes and manufacturing processes to develop fig and orange fig spreads for FoodMatch.” See SAC at ¶ 239. As set forth in Paragraphs 115-135, the allegations purportedly supporting this claim all describe conduct that takes place, at the latest, in January 2016. This conduct is alleged to have occurred prior to the DTSA’s enactment of May 11, 2016. Accordingly, under the express anti-retroactive terms of the DTSA, Dalmatia’s DTSA claim must be dismissed with prejudice. See Kania v. Potter, 358 F. App'x 338, 341, n. 5 (3d Cir. 2009) (holding that statute containing an “express command” that it not apply retroactively could not be applied retroactively); see also Landgraf v. USI Film Products, 511 U.S. 244, 280, 114 S. Ct. 1483, 1505, 128 L. Ed. 2d 229 (1994) (recognizing presumption that courts must follow direction of Congress with respect to retroactive application of statutes and even in the event of Congressional silence, a statute may not apply retroactively absent clear congressional intent favoring such a result); Iles v. de Jongh, 638 F.3d 169, 177 (3d Cir. 2011) (applying Landgraf presumption against retroactive application). Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 17 of 18 14 CONCLUSION For the reasons stated herein, the Lancaster Defendants respectfully request that Counts V, VI, and X of the Second Amended Complaint be dismissed with prejudice. Respectfully submitted, FOX ROTHSCHILD LLP /s/ George J. Krueger____________ George J. Krueger, Esquire Brian A. Berkley, Esquire Alexandra C. Scanlon, Esquire 2000 Market Street, 20th Floor Philadelphia, PA 19103-3222 Phone: 215-299-2000 Fax: 215-299-2150 Email: gkrueger@foxrothschild.com Email bberkley@foxrothschild.com Email: ascanlon@foxrothschild.com Dated: August 16, 2016 Case 2:16-cv-02767-EGS Document 64-2 Filed 08/16/16 Page 18 of 18