The opinion of the court was delivered by: Sand, District Judge.
The case is presently before the Court on three motions.
First, defendant ZGI moves to dismiss the complaint in part
pursuant to Fed.R.Civ.P. 12(b)(6). ZGI seeks to dismiss all
counts except Schmid's unfair competition claim. Second, ZGI
moves to set aside this Court's January 3, 1991 grant of
Schmid's motion for a default judgment against the defendants
Regalos and Zucker. ZGI urges this Court not to enter a final
judgment against these two defendants. Finally, Schmid moves
for the entry of a protective order pursuant to Fed.R.Civ.P.
26(c), pertaining to certain information to be produced by the
parties which is allegedly confidential. For the reasons
discussed below, ZGI's motions to dismiss and to set aside the
default judgment are denied. Schmid's motion for a protective
order is referred to a Magistrate Judge.
Since 1985, Schmid has been a distributor in the United
States of figurines and other porcelain products manufactured
by Goebel of Roedental, Germany. These porcelain products,
known as "Hummels," are derived from and inspired by the art of
Berta Hummel. On November 8, 1988, Schmid and Goebel signed a
contract which gave Schmid "the permanent, exclusive right to
distribute Goebel Hummel products in the United States and
Puerto Rico." The contract obligates Goebel to "use its best
efforts, consistent with applicable laws to prevent
unauthorized importation of Hummels into the United States and
Puerto Rico." Complaint ¶ 8.
Schmid alleges that there are United States retail dealers
selling Hummels in the United States which were not obtained
from Schmid. According to Schmid, ZGI, a company established in
1985 to sell gifts and camera equipment in the United States to
the general public and retailers, is "one of the principal gray
marketers of Hummels in this country." Plaintiff's Memorandum
of Law in Opposition to Defendant's Motion to Dismiss the
Complaint, p. 2. Plaintiff alleges that ZGI is importing into
the United States Hummels which it illegally obtained through
a shell corporation located in Panama. The alleged shell
corporation, Regalos, is owned and operated by Edward Zucker,
the president of ZGI. Regalos is registered as a Panamanian
corporation, but has no retail or wholesale store in Central or
South America and is not engaged in any business activities.
The company's resident agent in Panama is a law firm.
Schmid alleges that Zucker and ZGI, through Regalos, have
devised a scheme to deprive Schmid of the fruits of its
exclusive distribution contract with Goebel through mail,
telephone and other means, from ZGI's New York office.
Allegedly, it is through Regalos that ZGI fraudulently
purchases Hummels from Goebel and has them diverted to New
York, where ZGI re-sells them. According to Schmid, "this is
done by creating false commercial documents which purport to
show orders and payments from shipments to Regalos even though
the shipments are made directly to and paid for by ZGI in New
York." Complaint ¶ 26. Schmid alleges that as a result of ZGI's
illegal actions it has suffered "millions of dollars in damages
from lost sales, injury to its goodwill, and other injuries."
Plaintiff's Memorandum of law, p. 3.
ZGI argues that while Schmid may have been injured by
increased competition from the importation of Hummels into the
United States by Regalos there was no
illegal action by ZGI and therefore Schmid has failed to state
a claim upon which relief may be granted. Consequently, ZGI
urges this Court to dismiss all but one count of the complaint.
In a motion to dismiss, this Court looks to the four corners of
the complaint and is required to accept plaintiff's allegations
as true and construe those allegations in the light most
favorable to plaintiff. See Scheuer v. Rhodes, 416 U.S. 232,
236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Dacey v. New
York County Lawyers' Ass'n, 423 F.2d 188, 191 (2d Cir. 1969),
cert. denied, 398 U.S. 929, 90 S.Ct. 1819, 26 L.Ed.2d 92
(1970). The complaint will be dismissed only if plaintiff can
prove no set of facts that would entitle him to relief.
A. Tortious Interference with Contract
To state a cause of action for tortious interference with
existing contractual relations, a plaintiff must allege 1) the
existence of a valid contract between plaintiff and another
contracting party; 2) defendant's knowledge of that contract;
3) defendant's intentional procurement of a breach of that
contract by the other party; and 4) damages. See Nifty Foods
Corp. v. Great Atlantic & Pac. Tea Co., 614 F.2d 832, 839 (2d
Cir. 1980); Walters v. Fullwood, 675 F. Supp. 155, 159 (S.D.N Y
1987); Guard-life Corp. v. S. Parker Hardware Mfg. Corp., 50
N Y2d 183, 406 N.E.2d 445, 428 N.Y.S.2d 628 (1980).
Defendant ZGI's knowledge of the contract between Schmid and
Goebel and its intent to effectuate a breach of that contract
by Goebel are in essence the claims at issue.*fn1 In its
complaint, Schmid claims that the defendants knew that Schmid
and Goebel were parties to an exclusive distributorship
contract. ¶ 15. It was because of this knowledge, according to
Schmid, that defendants fraudulently schemed and conspired
through Regalos, an allegedly shell corporation controlled by
Zucker, to import Hummels into the United States through a
third country in circumvention of that agreement. ¶ 13. Schmid
urges that by utilizing the Regalos "fiction and subterfuge"
that Zucker and ZGI have and continue to transact business with
Goebel in furtherance of a conspiracy to deprive Schmid of the
fruits of its contract with Goebel. ¶ 14.
In support of its claim that the defendants intentionally
caused Goebel to breach its contract, Schmid alleges that
through Regalos, Zucker and ZGI send false documentation in the
form of orders, invoices and bills of lading for purchases and
shipments of Hummels. The purpose of this ploy allegedly is to
avoid having to reveal to Goebel or overseas Goebel
distributors that Zucker and ZGI were the true parties in
interest. Schmid urges that by these misrepresentations and
false statements, the defendants conspired to induce Goebel to
sell Hummels in violation of its contract with ...