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Morefun Co. Ltd. v. Mario Badescu Skin Care Inc.

United States District Court, S.D. New York

June 6, 2014

MOREFUN CO. LTD., Plaintiff,
v.
MARIO BADESCU SKIN CARE INC., et al., Defendant.

OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge.

Plaintiff Morefun Co. Ltd. ("Morefun") brings this case against Defendant Mario Badescu Skin Care Inc. ("Badescu"), alleging that Badescu breached the terms of the parties' distribution agreement dated November 30, 2011 (the "Distributorship Agreement") and fraudulently induced Morefun into settling claims for that breach. The Defendant moves to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), citing an existing and enforceable settlement agreement between the parties. For the following reasons, the Court grants Defendant's Motion.

BACKGROUND

The facts below are taken from the Amended Complaint, and the settlement agreement ("Settlement Agreement"), which is incorporated by reference. On or about November 30, 2011, Plaintiff entered into the Distributorship Agreement with Defendant, which appointed Plaintiff as the exclusive distributor of certain Badescu products in the Republic of Korea. Pursuant to the Distributorship Agreement, Plaintiff purchased seven batches of skin care products from Defendant, each with a unique identifying batch number. To distribute the product in the Republic of Korea, Plaintiff entered into a contract with a local distributor and sold approximately 34, 530 units of the product to customers between May 2012 and October 2012.

In June 2012, Plaintiff learned of customer inquiries about the possible inclusion of steroids in the product. Plaintiff repeatedly asked Defendant about the customer's allegations, which Defendant denied. In September 2012, the Korean Food and Drug Administration (the "KFDA") collected samples of the product from batch number XXXXXXXXXX ("Batch 372"). The KFDA found that Batch 372 contained Glucocorticoid, Hydrocortisone, and Triamcinolone acetonide. As a result of these findings, on December 14, 2012, the KFDA initiated a recall order mandating the recall and destruction of Batch 372. The recall of Batch 372 resulted in damages to Plaintiff in the approximate amount of $900, 000, after Plaintiff was required to refund customers and compensate its local distributor. Defendant represented to Plaintiff numerous times that the remaining six batches of the product that Plaintiff purchased had been tested, and were steroid free. Plaintiff was unable to test or otherwise verify Defendant's representations that Batch 372 was the only contaminated batch, and that the other batches were steroid free.

On June 10, 2013, Plaintiff and Defendant entered into the Settlement Agreement, pursuant to which Defendant agreed to pay Plaintiff $492, 000 in compensation for costs incurred by Morefun following the KFDA's recall of Batch 372. The Recitals in the Settlement Agreement state:

A. [Morefun] purchased from [Badescu], and [Badescu] sold to [Morefun], certain cosmetic products, in particular the Mario Badescu Healing Cream (the "Product");
B. [Morefun] sold the Product to consumers in the Republic of Korea through a third party distributor; and
C. Such consumers have filed various complaints in respect of the Product, due to which [Morefun] has provided compensation to said third party distributor.

The parties entered into the Settlement Agreement to "reach a full and final settlement of the [transactions referenced in the Recitals] and all matters arising therefrom." In Paragraph 4 of the Settlement Agreement Plaintiff released "all legal or equitable claims both direct and indirect including but not limited to the loss of good will which it may have against [Badescu] arising from or in connection with [Morefun's] purchase or sale of the Product from [Badescu]."

In July 2013, following independent tests, the KFDA recalled the remaining six batches of the product Plaintiff had purchased from Defendant. Ultimately, Plaintiff's total damages as a result of the recalls of all seven batches were, at minimum, $1.7 million.

Plaintiff now brings claims against Defendant for: (1) breach of the Distributorship Agreement; (2) delivery of goods in nonconformance with the Distributorship Agreement in violation of the Uniform Commercial Code; (3) breach of implied warranties in the Distributorship Agreement; (4) fraudulent or negligent misrepresentation on the Settlement Agreement; (5) indemnification for personal injury claims; and (6) rescission of the Settlement Agreement.

STANDARD OF REVIEW

On a motion to dismiss, this Court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the non-moving party. See Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 108 (2d Cir. 2010). To withstand dismissal, a pleading "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. While "detailed factual allegations' are not necessary, the pleading must be supported by more than mere "labels and conclusions' or a formulaic recitation of the elements of a cause of action.'" Id. (quoting Twombly, 550 U.S. at 555). "Nor does a complaint suffice if it tenders naked assertion[s]' devoid of further factual enhancement.'" Id. (alteration in original) (quoting Twombly, 550 U.S. at 557). Rule 8 of the Federal Rules of Civil Procedure "requires factual allegations that are sufficient to give the defendant fair notice of what the... claim is and the grounds upon which it rests.'" Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162, 182 (2d Cir. 2012) (alteration in original) (quoting Twombly, 550 U.S. at ...


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