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RBS Holdings, Inc. v. Gordon & Ferguson

March 26, 2008

RBS HOLDINGS, INC., FORMERLY KNOWN AS GORDON & FERGUSON OF DELAWARE, INC., PLAINTIFF,
v.
GORDON & FERGUSON, INC., DEFENDANT.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge

OPINION & ORDER

On August 31, 2007, Defendant Gordon & Ferguson, Inc. ("GFI") moved this Court to dismiss under Fed. R. Civ. P. 12(c) the action brought by Plaintiff RBS Holdings, Inc. ("RBS") and to grant under Fed. R. Civ. P. 56 summary judgment in favor of GFI. Should this Court reject GFI's arguments for dismissing the action in its entirety, GFI moves alternatively to dismiss, pursuant to Fed. R. Civ. P. 12(c), Plaintiff's claim for breach of the implied covenant of good faith and fair dealing. For the reasons set forth below, Defendant's motions are DENIED.

I. FACTUAL BACKGROUND

Plaintiff RBS, a Delaware corporation, is an importer and wholesaler of clothing and, at all relevant times, had its principal place of business in Minnesota. Compl. ¶ 8. Defendant GFI is a New York corporation with its principal place of business in New York, New York. Compl. ¶ 9.

On February 28, 2006, RBS and GFI entered into an agreement by which RBS would sell substantially all of its assets to GFI (the "Second Amended and Restated Purchase Agreement," or "APA"). Def.'s Mot. Dismiss Ex. D (hereinafter "APA"). The APA required GFI to pay RBS: 1) a flat sum of $2.1 million, payable in installments and subject to certain deductions (the "Liquidated Amount"), and 2) certain percentages of GFI's net sales from March 1, 2006 through February 28, 2009 (the "Earn-Out"). APA § 1.3(b).

A condition precedent to the sale was the consent of two secured lenders to RBS: Wells Fargo Century, Inc., formerly known as Century Business Credit Corporation ("Wells Fargo") and The CIT Group/Commercial Services, Inc. ("CIT"). APA § 5.2(g). Under agreements dated March 13, 2003, RBS had granted to Wells Fargo and CIT security interests in all of its assets. Def.'s Mot. Dismiss Ex. C (hereinafter "Consent & Release") 1. On March 15, 2006, Wells Fargo and CIT executed a Consent and Release, whereby they released their security interests and consented to the asset sale to GFI. Consent & Release 1. The Consent and Release provides that "until such time as each of Wells Fargo and CIT has notified [GFI] in writing that all of the payment obligations of [RBS] to Wells Fargo and CIT, respectively, have been paid in full," GFI would make its payments of the Liquidated Amount and Earn-Out directly to Wells Fargo and CIT, respectively. Consent & Release 2, ¶ 3.

The Consent and Release further provides that RBS delegates and assigns to Wells Fargo (and to CIT, subject to the obligations of [RBS] to Wells Fargo having been paid in full prior to the payment in full of the obligations of [RBS] to CIT) the power, upon prior notice to [RBS], to exercise all of the rights of [RBS] set forth in the APA in respect of the calculation, adjustment, collection, enforcement and receipt of the [Liquidated Amount] and Earn-Out (including the right to settle and compromise such amounts on behalf of [RBS]). [GFI] hereby acknowledges and consents to such delegation.

Id. On the date of the Consent and Release, March 15, 2006, RBS was indebted to Wells Fargo and CIT in the amounts of $7,281,864.01 and $2,708,909.08, respectively. APA 2 ¶ 4.

Wells Fargo notified RBS in a letter dated August 22, 2006 that pursuant to the Consent and Release, it would "exercise all of the rights of [RBS] set forth in the APA in respect of the calculation, adjustment, collection, enforcement and receipt of the [Liquidated Amount] and Earn-Out, each as defined in the APA, including the right to settle and compromise such amounts on behalf of [RBS]." Def.'s Mot. Dismiss Ex. E. The parties' papers are silent as to what Wells Fargo did, if anything, to enforce its right to the Liquidated Amount and Earn-Out.

The next day, on August 23, 2006, RBS filed this action alleging that GFI "has continuing payment obligations to Plaintiff, including payment of the Liquidated Amount, which Defendant has not satisfied." Compl. ¶ 9.

II. STANDARD OF REVIEW

Pursuant to Fed. R. Civ. P. 12(c), "[j]udgment on the pleadings is appropriate where material facts are undisputed and where a judgment on the merits is possible merely by considering the contents of the pleadings." Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 642 (2d Cir. 1988). A court "may also consider written instruments attached as exhibits as well as documents that are incorporated by reference or heavily relied upon." World Book, Inc. v. Int'l Bus. Machs. Corp. 354 F. Supp. 2d 451, 453 (S.D.N.Y. 2005) (citing Chambers v. Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir. 2002)). "[A] court must accept the allegations contained in the complaint as true, and draw all reasonable inferences in favor of the non-movant; it should not dismiss the complaint unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir. 1994) (internal quotation marks and citation omitted).

A court will not grant a motion for summary judgment pursuant to Fed. R. Civ. P. 56 unless it determines that there is no genuine issue of material fact and the undisputed facts are sufficient to warrant judgment as a matter of law. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250 (1986). In determining whether there is a genuine issue of material fact, the court must resolve all ambiguities, ...


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