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S.W.B. New England, Inc. v. R.A.B. Food Group

February 27, 2008

S.W.B. NEW ENGLAND, INC., PLAINTIFF,
v.
R.A.B. FOOD GROUP, LLC, MILLBROOK DISTRIBUTION SERVICES, INC., AND BRUCE LEEDS, DEFENDANTS.



The opinion of the court was delivered by: Gerard E. Lynch, District Judge

OPINION AND ORDER

Plaintiff S.W.B. New England, Inc. ("SWB") originally brought this action against defendants R.A.B. Food Group, LLC ("RAB") and Millbrook Distribution Services, Inc. ("Millbrook"), alleging, inter alia, that RAB and Millbrook breached an exclusive distributorship agreement with SWB. An amended complaint subsequently added an antitrust claim against RAB and Millbrook, charging that these defendants attempted to monopolize the kosher food market in New England, and a claim that defendant Bruce Leeds, a former employee of SWB subsequently hired by RAB, breached fiduciary duties owed to SWB. Leeds filed a motion for summary judgment on plaintiff's claim for breach of fiduciary duty, which was denied by this Court. S.W.B. New England, Inc. v. R.A.B. Food Group, LLC, No. 06 CV 15357, 2007 WL 1753067 (S.D.N.Y. June 13, 2007). RAB and Millbrook filed the instant motion to dismiss plaintiff's claims for attempted monopolization and specific performance pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the following reasons, defendants' motion will be granted with respect to plaintiff's antitrust claim, but denied as to its claim for specific performance.

BACKGROUND

Plaintiff SWB is a distributor of kosher, ethnic and specialty food products and related items to retail and wholesale outlets in New England. (Am. Compl. ¶ 5.) Defendant RAB is a manufacturer and distributor of kosher food products. (Id. ¶ 6.) Defendant Millbrook is a distributor affiliated with RAB and under common ownership and control. (Id. ¶ 7.) Millbrook is SWB's only major competitor in the distribution of kosher products in New England. (Id. ¶ 59).

Beginning in 1970, SWB served as the exclusive distributor in New England of kosher food products manufactured by Rokeach Acquisition LLC, its predecessors, affiliates and subsidiaries (collectively, "Rokeach"). (Id. ¶ 11.) During this time, Rokeach kosher products competed with the Manischewitz line of kosher products (Id. ¶ 16), which from 2000 onward was owned and controlled by defendant RAB (Id. ¶ 17).

On or about November 3, 2000, SWB and Rokeach entered into an exclusive distributorship agreement (the "Distributorship Agreement" or the "Agreement"), pursuant to which Rokeach designated SWB as its exclusive distributor in the Exclusive Territory (defined in the Agreement as Massachusetts, New Hampshire, Rhode Island, Maine, Vermont, and Connecticut). (Id. ¶ 19.) The term of the Distributorship Agreement was for ten years, commencing on November 3, 2000, and expiring on November 3, 2010. (Id. ¶ 20.)

On or about May 22, 2006, RAB purchased substantially all of Rokeach's assets and assumed certain of its obligations, including Rokeach's obligations to SWB under the Distributorship Agreement. (Id. ¶ 34.) On or about July 17, 2006, RAB informed SWB that, based upon its review of Rokeach's accounts receivables, SWB had breached the Distributorship Agreement by failing to tender payment to RAB in accordance with the provisions of the Agreement, and taking unauthorized deductions and/or discounts from its payments to RAB. (Id. ¶ 36.)

By letter dated November 28, 2006, RAB purported to terminate the Distributorship Agreement (the "Termination Letter"). (Id. ¶ 43.) By letter dated November 30, 2006, SWB rejected RAB's purported Termination Letter, advising RAB that it had no right to terminate the Distributorship Agreement. (Id. ¶ 45.) On December 15, 2006, RAB advised SWB, by letter, that it would no longer sell products to SWB. (Id. ¶ 47.)

On December 21, 2006, plaintiff brought this action against defendant RAB, in connection with RAB's termination of the Distributorship Agreement. SWB's original complaint (the "Complaint") asserted claims for breach of contract, tortious interference with business relations, and unfair competition. (Compl. ¶¶ 74-88.) RAB was the only named defendant in the original complaint.

On the same day the Complaint was filed, SWB applied to the Court for a temporary restraining order and preliminary injunction to prevent RAB from terminating the Distributorship Agreement. (See Lawrence Decl. Ex. 1 at 1.) The Court denied SWB's request for a temporary restraining order, but held a hearing on plaintiff's request for a preliminary injunction. (Id.) After a two-day hearing held on January 4-5, 2007, the Court granted in part SWB's application for a preliminary injunction. (Id. at 2.) Specifically, the Court enjoined RAB from terminating SWB as a distributor of "Products" (as defined in the Distributorship Agreement) until after April 10, 2007. (Id.)

On February 16, 2007, shortly after the preliminary injunction hearing, plaintiff filed the Amended Complaint, adding Millbrook as a defendant. The Amended Complaint alleges, inter alia, that RAB and Millbrook are "attempting to monopolize part or all of the kosher food market in New England in order to set prices and exclude competition" (Am. Compl. ¶ 102), and that "[i]f RAB's and Millbrook's conduct is not restrained, there is a dangerous probability that they will succeed in achieving monopoly power in the kosher food industry in the Market" (id. ¶ 107). It further alleges that RAB "wrongfully terminated the Distributorship Agreement and has refused to sell Product to SWB . . . in order to enable Millbrook to exist as the dominant kosher distributor in New England." (Id. ¶ 103.) Finally, the Amended Complaint alleges that RAB and Millbrook intend to undercut SWB's pricing on both kosher and ethnic products in order to take over SWB's clients for the purpose of putting SWB out of business. (Id. ¶ 60.)

On March 19, 2007, RAB and Millbrook moved to dismiss SWB's claim of attempted monopolization, as well as its claim for specific performance as a remedy for breach of contract, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

DISCUSSION

I. Motion to Dismiss ...


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