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Ciamara Corp. v. Widealab, Inc.

United States District Court, Second Circuit

December 5, 2013

CIAMARA CORP., Plaintiff,
v.
WIDEALAB, INC., et al., Defendants.

MEMORANDUM OPINION AND ORDER

JESSE M. FURMAN, District Judge.

Plaintiff Ciamara Corporation ("Ciamara"), a high-end audio components retailer, sues Defendant Widealab, Inc. ("Widealab"), a high-end audio components manufacturer; its Chief Executive Officer, Defendant Harry Lee; its Marketing Team Leader, Defendant Charles Kim; and other nominal corporate and individual defendants. (Compl. ¶¶ 1-7 (Docket No. 7 Ex. A) ("Compl.")). In essence, Ciamara alleges, in state-law claims heard by this Court in diversity, that Defendants breached an agreement naming Ciamara the exclusive North American Retailer for Widealab's Aurender S10 ("S10") product. (Compl. ¶ 10). In addition to breach-of-contract claims, Ciamara also pleads causes of action that sound in tort (fraudulent inducement, tortious interference) and equity (quantum meruit, unjust enrichment). ( Id. ¶ 9).

Defendants move, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss Plaintiffs claims for fraudulent inducement, tortious interference, quantum meruit, and unjust enrichment. (Mem. Law Supp. Mot. To Partially Dismiss Compl. as Against Def. Widealab, Inc. 1 (Docket No. 8) ("Defs.' Mem."); Docket No. 6). Defendants also move to dismiss Plaintiffs request for loss-of-future-profits, harm-to-business-reputation, and loss-of-goodwill damages related to their breach-of-contract claims. (Defs.' Mem. 7-8). For the reasons discussed below, Defendants' motion is GRANTED in all respects.

BACKGROUND

On a Rule 12(b)(6) motion, a court must take the facts alleged in the complaint as true and draw all reasonable inferences in Plaintiffs favor. See N.Y. Life Ins. Co. v. United States, 724 F.3d 256, 261 (2d Cir. 2013). Accordingly, the following statement of facts draws on the Complaint and documents it references, most notably the contract between Ciamara and Widealab. Beginning on June 21, 2011, Ciamara and Widealab began negotiating an agreement whereby Ciamara would sell Widealab's products in the United States. (Compl. Ex. A ¶ 4). During the negotiation period, Widealab engaged in negotiations with at least two of Ciamara's competitors. (Compl. Ex. A ¶ 10). On September 13, 2011, after these negotiations had reached a mature point, Plaintiff received an email from Defendant Kim, with the draft contract attached, stating: "This is just to officially confirm that our CEO is okay with the revised proposal and agrees to Ciamara being our exclusive North American distributor. We will try to list Ciamara as the Exclusive North American Distributor on our website today, or at latest by tomorrow." (Compl. ¶ 11). Later that same day, Ciamara and Widealab entered into the contract, under which Ciamara "would market and distribute for high end audio products provided by" Widealab. (Compl. ¶ 10). As part of that contract, Widealab agreed to name Ciamara as the "sole distributor of its product, " the S10, "in the United States and Canada." ( Id. ; accord Compl. Ex. B ("Contract"), at 2). The contract specified that Ciamara would remain the exclusive distributor for a two-year term; violation of that clause incurred a twenty percent penalty. (Compl. ¶ 11).

Ciamara alleges that, in reliance on the contract and on Kim's email, it proceeded to purchase fourteen S10 units from Widealab. (Compl. ¶ 12). Ciamara also engaged the services of a public-relations firm, hired a sales manager to a two-year contract to manage the product line, traveled to audio conventions, contacted approximately forty other dealers regarding the S10, and listed on its website that it had Widealab products available for sale. (Compl. ¶ 12).

On November 26, 2011, however, all references to Ciamara were removed from Widealab's website. (Compl. ¶ 13). Four days later, Lee emailed a Ciamara representative and indicated that Widealab was no longer interested in having Ciamara serve as the exclusive S10 distributor. (Compl. ¶ 14). On January 16, 2012, Widealab listed a Ciamara competitor, Goodwin's High End, as a North American dealer. (Compl. ¶ 15). Ciamara alleges that it has fourteen remaining unsold S10 units. (Compl. ¶ 17). Ciamara initiated this action in the Supreme Court of the City of New York, County of New York, on November 29, 2012. (Compl. 10). Defendants removed the case to this Court on February 19, 2013. (Docket No. 1).

THE LEGAL STANDARD

"In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept the factual allegations set forth in the complaint as true and draw all reasonable inferences in favor of the plaintiff." Cohen v. Avanade, Inc., 874 F.Supp.2d 315, 319 (S.D.N.Y. 2012) (citing Holmes v. Grubman, 568 F.3d 329, 335 (2d Cir. 2009)). The Court will not dismiss any claims unless Plaintiff has failed to plead sufficient facts to state a claim to relief that is facially plausible, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), that is, one that contains "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged, " Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). More specifically, Plaintiff must allege facts showing "more than a sheer possibility that a defendant acted unlawfully." Id. A complaint that offers only "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. Further, if Plaintiff has not "nudged [his or her] claims across the line from conceivable to plausible, [those claims] must be dismissed." Id. at 570. Moreover, Rule 9(b) requires Plaintiff to plead all fraud claims "with particularity, " specifying "the circumstances constituting fraud." Fed.R.Civ.P. 9(b).

DISCUSSION

Defendants move to dismiss Plaintiff's claims for (1) fraud, (2) tortious interference, (3) unjust enrichment and quantum meruit, and (4) speculative damages under its breach-of-contract theory. In opposition, Plaintiff does not contest Defendants' claim that its tortious interference claim fails to state a claim, so that claim is deemed abandoned. See, e.g., Brandon v. City of New York, 705 F.Supp.2d 261, 268 (S.D.N.Y. 2010) ("In his brief, [Plaintiff] did not raise any arguments opposing Defendants' motion regarding these... claims. Accordingly, the Court deems [these] claims abandoned."). The Court will address the other claims in turn.

A. Fraud

First, Defendant gives six reasons why Plaintiffs fraud claim should be dismissed: (1) because the offending statements were not false; (2) because the offending statements were not directed at Plaintiff; (3) because Plaintiff did not rely on the offending statement; (4) because Defendants made only future promises; (5) because the economic loss rule precludes Plaintiffs claims sounding in tort, rather than contract; and (6) because Plaintiff has failed to plead its fraud claims with the level of particularity required by Rule 9(b). The Court agrees with the first and fourth reasons, and therefore need not address the others.

As an initial matter, Plaintiff fails to allege falsity, which is indisputably an "essential element[ ]" of a fraud claim. N.Y. Univ. v. Cont'l Ins. Co., 87 N.Y.2d 308, 318 (1995). Plaintiff identifies two statements as allegedly false: Kim's statement that Widealab agreed to the exclusivity agreement and Kim's promise that Widealab would list Ciamara as a distributor on its website. (Mem. Law Opp'n Def.'s Mot. To Partially Dismiss Compl. as Against Widealab, Inc. 6 (Docket No. 12) ("Pl.'s Mem.")). But even an indulgent reading of the complaint makes plain that these statements were not false when made. The first statement, that Widealab agreed to the exclusivity provision in the contract, is best shown to be true by the simple fact that Widealab agreed to the contract containing that very provision that very day. In other words, the very contract that Plaintiff relies upon is conclusive evidence of the implausibility of Plaintiff's fraud claim. Similarly, as Defendants argue (Defs.' Mem. 3), the complaint contains no ...


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