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B&M Linen, Corp. v. Kannegiesser

January 21, 2010

B&M LINEN, CORP. PLAINTIFF,
v.
KANNEGIESSER, USA, CORP., MICHAEL H. DREHER, MARTIN KANNEGIESSER, AND HERBERT KANNEGIESSER GMBH & CO., DEFENDANTS.



The opinion of the court was delivered by: Richard J. Holwell, District Judge

MEMORANDUM OPINION AND ORDER

This action arises from a protracted dispute about commercial laundering machinery. A launderer, B&M Linen Corporation ("B&M"), brings a variety of contract and tort claims against Kannegiesser, USA, Corp. ("K-USA"), the company that built much of its laundering machinery; Herbert Kannegiesser GmbH & Co. ("K-Germany"), which allegedly controls Kannegiesser; Michael H. Dreher, K-USA's President; and Martin Kannegiesser, K-Germany's managing partner and executive officer (collectively, "defendants"). The defendants have moved to dismiss most of the tort claims and all of the claims against Dreher. For the reasons given below, the Court grants that partial motion to dismiss in its entirety.

BACKGROUND

For purposes of this motion, the following allegations are taken as true.

Miron Markus formed B&M in 1992 to provide laundry services to clients in the hospitality industry. (Compl. ¶ 13.) B&M operated from a facility in the Bronx from 1992 to 2006, when it moved operations to a new plant in the same area. (Id. ¶ 14.) The new facility uses a conveyer line of machinery to sort, load, wash, rinse, wring, press, and fold linens. (Id. ¶ 14.) Most of the machinery is interconnected and centrally controlled by specially designed computer software. (Id. ¶ 14.) A malfunction in any of the machines can bring the entire system to a halt. (Id. ¶ 14.)

K-Germany manufactures machinery of the sort B&M uses in its laundry facility. (Id. ¶ 16.) K-USA is apparently the company that sells, installs, and repairs K-Germany's products for customers in the United States, though the complaint does not spell out the exact relationship between the two. (Id. ¶ 16.) B&M's first contact with K-USA occurred in 2001, at a hospitality industry trade convention. (Id. ¶ 16, 17.) After the convention, Miron Markus spoke with representatives from several companies, including K-USA, about the prospect of purchasing laundry machinery. (Id. ¶ 17.) In the summer of 2001, Dreher visited B&M's facility to discuss B&M's needs and K-Germany's product offerings. (Id.) After Markus visited Germany to see K-Germany's manufacturing operations for himself, B&M decided to buy its equipment from KUSA. (Id. ¶¶ 18, 19.) From mid-2001 to early 2005, B&M ordered more than five hundred thousand dollars' worth of equipment from K-USA. (Id. ¶ 20.)

In the early stages of B&M's relationship with the defendants, they quickly and efficiently resolved problems with their equipment. (Id. ¶ 21.) B&M believes that this was part of defendants' "scheme" to increase its dependence on Kannegiesser products and services; once B&M became dependent on the defendants, they began to ignore its complaints. (Id. ¶¶ 22, 24.)

In 2004*fn1 , B&M decided to move its operations to a new facility and to upgrade equipment. (Id. ¶ 24.) K-Germany promised to design and manufacture customized products for B&M, which it assured were of "superior quality and durability." (Id. ¶¶ 25, 26.) Relying on these promises, B&M placed a large order with the defendants for equipment to be delivered and installed at the new plant. (Id. ¶¶ 27, 28, 30.)

As the equipment arrived at B&M's new facility, various problems, including design defects and manufacturing errors, became apparent almost immediately. (Id. ¶ 31.) Defendants also failed to meet certain agreed-upon deadlines. (Id. ¶ 31.) And when B&M asked for a refund on defective equipment, defendants refused, even though defendant Dreher had assured B&M in 2005 that defective equipment could be returned. (Id. ¶¶ 32, 46.) To date, significant problems with the defendants' machinery persist at B&M's new plant. (Id. ¶ 39.) It is B&M's belief that defendants knew of these problems from the beginning but have refused to accept blame for their mistakes. (Id. ¶ 35.) Defendants have performed only "minimal repairs or replacements, most done at Plaintiff's cost and expense." (Id. ¶ 39.)

On March 5, 2009, B&M filed a First Amended Complaint against the defendants, alleging claims sounding in tort and contract. Defendants have since moved to dismiss many of plaintiff's claims, including its fourth claim, for breach of fiduciary duty; fourteenth claim, for fraud; eighth claim, for misrepresentation; fifteenth claim, for negligent misrepresentation; tenth claim, for intentional interference with business obligations; and sixteenth claim, for attorneys' fees. Defendants have also moved to dismiss all of B&M's claims against defendant Dreher.

DISCUSSION

I. Standard

On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court accepts as true all factual allegations in the complaint and draws all reasonable inferences in the plaintiff's favor. In re DDAVP Direct Purchaser Antitrust Litigation, 585 F.3d 677, 692 (2d Cir. 2009). The complaint's allegations, however, "must be enough to raise a right of relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Only a "plausible claim for relief survives a motion to dismiss." LaFaro v. New York Cardiothoracic Group, PLLC, 570 F.3d 471, 476 (2d Cir. 2009). Thus courts are "not bound to accept as true a legal conclusion couched as a factual allegation," and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949--50 (2009) (internal quotation marks omitted).

II. Breach of Fiduciary Duty Claim

Defendants have moved to dismiss plaintiff's claim for breach of fiduciary duty. The elements of that claim are: (1) the existence of a fiduciary relationship between the parties and (2) breach of the fiduciary duty. See Cramer v. Devon Group, Inc., 774 F. Supp. 176, 184 (S.D.N.Y. 1991). Under New York law, courts do not determine the existence of a fiduciary relationship "by recourse to rigid formulas." Scott v. Dime Sav. Bank, 886 F. Supp. 1073, 1078 (S.D.N.Y. 1995) (citing Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb Inc., 767 F. Supp. 1220, 1231 (S.D.N.Y. 1991)). Courts instead "conduct a fact-specific inquiry into whether a party reposed confidence in another and reasonably relied on the other's superior expertise or knowledge." Facella v. Fed'n of Jewish Philanthropies of New York, Inc., No. 98 Civ. 3146, 2004 WL 1700616, at *6 (S.D.N.Y. July 30, 2004) (citation omitted). Still, "[a]bsent extraordinary circumstances, . . . parties dealing at arm[']s length in a commercial transaction lack the requisite level of trust or confidence between them necessary to give rise to a fiduciary obligation." Henneberry v. Sumitomo Corp. of America, 415 F. Supp. 2d 423, 460 (S.D.N.Y. 2006); see Nat'l Westminster Bank, U.S.A. v. Ross, 130 B.R. 656, 679 (S.D.N.Y. 1991) ("Where parties deal at arm[']s length in a commercial transaction, no relation of confidence or trust sufficient to find the existence of a fiduciary relationship will arise absent extraordinary circumstances.").

B&M's amended complaint is filled with legal conclusions and hazy factual claims, but it lacks sufficient allegations to make it plausible that the plaintiff had a fiduciary relationship with the defendants. The complaint, for example, baldly claims that a fiduciary duty exists "[b]y virtue of rights and obligations created by and set forth in the [Purchase Agreement ("PA")] I and PA II, as well as by virtue and as the direct result of the exact nature of relationship [sic] which was created, cultivated and existed between the Defendants, and each one of them and Plaintiff." (Compl. ΒΆ 56.) What it fails to explain is why the parties' relationship is plausibly different from a typical arm's length commercial transaction between a buyer and a seller. B&M points to the fact ...


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