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MARCRAFT REC. CORP. v. FRANCES DEVLIN CO.

October 5, 1978

MARCRAFT RECREATION CORP., Plaintiff, against FRANCES DEVLIN CO., INC. and HOELZEL S/A, Defendants.


The opinion of the court was delivered by: DUFFY

OPINION AND ORDER

This is a diversity action brought by plaintiff Marcraft Recreation Corp., a New Jersey company, against defendants Frances Devlin Co., Inc. and Hoelzel S/A, citizens of New York and Brazil, respectively. Plaintiff is a manufacturer of sporting goods equipment, including paddle and racquet products. Defendant Hoelzel, a Brazilian manufacturer of rubber products, allegedly entered into a contract with plaintiff, through its New York representative, Devlin, designating plaintiff the sole merchandiser of Hoelzel's sporting goods in the United States. Plaintiff claims that Hoelzel breached this contract and has brought the instant action against both defendants seeking an injunction, an accounting and damages. Defendants have moved to dismiss the complaint for failure to state a claim upon which relief can be granted.

Assuming the truth of the well pleaded allegations, as I must for purposes of this motion, the facts are as follows: plaintiff and Hoelzel entered into a written agreement on February 14, 1975, whereby for a one-year period Hoelzel designated plaintiff the sole merchandiser of Hoelzel's sporting equipment supplied to the United States. Pursuant to the agreement, plaintiff and Hoelzel "expended joint efforts in developing tooling, dies and molds for manufacturing handballs." Complaint P 11. These efforts continued until after the formal expiration of the written agreement on January 20, 1976, and were manifested by numerous visits by Devlin to the Marcraft facilities in New York and New Jersey right up until the filing of the complaint. Additionally, "on at least six occasions" Jorge Hoelzel, Jr. and Frances Devlin, presidents of the defendant corporations bearing their names, visited the Marcraft facility in connection with finalizing the design for racquet balls and handballs. Complaint P 11.

 Marcraft made repeated efforts to finalize the exclusive distribution arrangement and wrote to Hoelzel on March 21, 1977, insisting that the parties enter into a written contract. Jorge Hoelzel, Jr. replied by letter dated March 31, 1977, as follows:

 
You have had problems and so did I, Nat. We are together in this enterprise relating to the No. 1 and M-21 balls and I think that any written arrangement between us is superfluous and unnecessary as far as we have motivation with these articles . . .
 
But if you still feel necessary a contract Nat, please send me a sketch of one. I will make the necessary adjustments on my part and return it for your approval.

 Complaint P 13.

 On December 21, 1977, plaintiff proposed a contract whereby it would be the exclusive distributor of Hoelzel's racquet balls and handballs for a three-year period with an option to renew. Hoelzel wrote to plaintiff on January 12, 1978, advising that it would not enter in to a written arrangement and that it intended to sell the handballs and racquet balls to others.

 Thereafter, on June 6, 1978, Marcraft brought this action asserting five causes of action. In the first, plaintiff charges Hoelzel with a willful and wanton breach of its exclusive agreement with plaintiff. The second claim is that defendants are being unjustly enriched as a result of manufacturing and selling the racquet balls and handballs "using the tooling, dies and molds and know-how" jointly developed by plaintiff and Hoelzel to meet plaintiff's specifications. Plaintiff's third claim is that defendants have wrongfully converted plaintiff's assets for their own benefit. The fourth claim charges defendants with unfair competition, while the fifth claim alleges a conspiracy between defendants and unknown third parties to distribute racquet balls and handballs resulting in tortious interference with the advantageous business relationships developed between defendants and plaintiff.

 Defendants contend that plaintiff has alleged no more in its first three claims than an agreement to agree. Clearly the written agreement between plaintiff and Hoelzel had expired on January 20, 1976. Thereafter, according to defendants, there was no agreement, nor is one alleged. A fair reading of the complaint reveals, however, that while no formal written agreement was entered into after the February 15 contract expired, plaintiff and defendants were continuing performance of their original agreement. Thus, some sort of informal arrangement was clearly contemplated by the parties and is evidenced by the letter of Hoelzel's president to Marcraft's president

 
We are together in this enterprise . . . and I think any written arrangement between us is superfluous and unnecessary.

 This is more than a mere agreement to agree. And while the second paragraph of the letter calls for a written contract If Marcraft's president still felt one necessary, it certainly does not suggest that any activities in pursuit of the enterprise prior to formalizing the arrangement would be beyond the scope of their understanding. Indeed, it appears that Hoelzel believed a written arrangement superfluous and agreed to it solely as an accommodation to Marcraft.

 In view of the import of this letter, I believe plaintiff's allegations are sufficient to withstand this motion to dismiss. Present in the complaint are pleadings that suggest the existence of an agreement, due performance thereunder by plaintiff and a breach by defendant Hoelzel. See Marquardt-Glenn Corp. v. Lumelite Corp., 11 F.R.D. 175 (S.D.N.Y.1951). The fact that a formal written agreement was never executed does not suggest the absence of a contract especially where defendant's own statement belies such a conclusion. *fn1"

 Defendants also challenge the second claim insofar as it charges defendants with unjust enrichment. Unjust enrichment contemplates a situation where benefits are received by one party which, in fact, belong to another. See Bradkin v. Leverton, 26 N.Y.2d 192, 309 N.Y.S.2d 192, 257 N.E.2d 643 (1970). What arises is a quasi-contract to make restitution for these benefits. This quasi-contract rests upon equitable principles and is not contingent upon the existence of an express or even an implied agreement. Id. at 197, 309 N.Y.S.2d at 196. Thus, the second claim in the instant complaint is independent of the cause of action for breach of contract, except to the extent that the pleadings in the ...


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