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United Merchandise Wholesale, Inc. v. IFFCO, Inc.

United States District Court, E.D. New York

September 15, 2014

UNITED MERCHANDISE WHOLESALE, INC., Plaintiff,
v.
IFFCO, INC. and IFFCO INTERNATIONAL CO., Defendants

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For the Plaintiff: Stephen J. Kressel, Esq., Kressel & Rothlein, P.C., Massapequa, NY.

For IFFCO, Inc., Defendant: Gregg A. Rubenstein, Esq., Nixon Peabody LLP, New York, NY.

NO APPEARANCE: IFFCO International Co.

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MEMORANDUM OF DECISION AND ORDER

ARTHUR D. SPATT, United States District Judge.

On June 14, 2013, the Plaintiff United Merchandise Wholesale, Inc. (the " Plaintiff" )

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commenced this action against the Defendants IFFCO, Inc. (" IFFCO" ) and IFFCO International Co. (" International," and collectively, the " Defendants" ) in New York State Supreme Court, County of Suffolk. Thereafter, on July 29, 2013, IFFCO removed the action to federal court.

The Plaintiff brings a total of eight causes of action against the Defendants. In this regard, the Plaintiff asserts (1) six causes of action based on breach of contract; (2) one cause of action based on fraud and fraud in the inducement; and (3) one cause of action based on negligence.

Presently before the Court is a Federal Rule of Civil Procedure (" Fed. R. Civ. P." ) 12(b)(6) (" Rule 12(b)(6)" ) motion by IFFCO seeking to dismiss the Plaintiff's Complaint in its entirety. For the reasons that follow, the Court dismisses the Plaintiff's breach of contract, fraud and negligent omission claims without prejudice with leave to file an Amended Complaint and dismisses the Plaintiff's negligence claim premised on IFFCO's negligent performance of its contractual obligations with prejudice.

I. BACKGROUND

A. Legal Standard for Considering Factual Allegations and Evidence Outside the Complaint

As an initial matter, before reciting the underlying factual allegations of this case, the Court notes that the Defendant IFFCO attaches several exhibits to its motion papers. These exhibits include the following: (1) a contract entered into by IFFCO and the Plaintiff under which the Plaintiff agreed to distribute certain products in the United States (the " U.S. Agreement" ); (2) a contract entered into by IFFCO and the Plaintiff under which the Plaintiff agreed to distribute certain products in Mexico (the " Mexico Agreement" ); (3) a screenshot capturing the results of a search conducted on the online database of the United States Patent and Trademark Office (the " USPTO" ); (4) following the commencement of another, separate lawsuit in the United States District Court for the Eastern District of New York, a settlement agreement entered into by the company Tiffany (NJ) LLC, IFFCO, International and the Plaintiff (the " Tiffany Settlement" ); (5) following the execution of the Tiffany Settlement, a settlement agreement entered into by IFFCO and the Plaintiff (the " IFFCO-UMW Settlement" ); (6) a letter invoice for a shipment from IFFCO to the Plaintiff; and (7) screenshots capturing several searches conducted on the online databases of the USPTO.

In general, evidence outside of the Complaint may not be considered by the Court when deciding a motion to dismiss brought pursuant to Fed.R.Civ.P. 12(b)(6). See DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 113 (2d Cir. 2010) (citations and internal quotation marks omitted) (" In ruling on a motion pursuant to Fed.R.Civ.P. 12(b)(6), the duty of a court is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." ). In this regard, the Second Circuit has held as follows:

When determining the sufficiency of [a] plaintiff['s] claim for Rule 12(b)(6) purposes, consideration is limited to the factual allegations in [the] plaintiff['s][ ] complaint, . . . to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in [the] plaintiff['s] possession or of which [the] plaintiff[ ] had knowledge and relied on in bringing suit.

Brass v. Am. Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir. 1993).

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As the above guidance from the Second Circuit suggests, in certain circumstances, courts may consider documents that are outside of the Complaint on a Fed.R.Civ.P. 12(b)(6) motion to dismiss. For example, " [w]here the claim is for breach of contract,. . . the complaint is deemed to incorporate the alleged contract by reference because the alleged contract is integral to the claim." Oppenheimer & Co. v. Trans Energy, Inc., 946 F.Supp.2d 343, 344 (S.D.N.Y. 2013) (citing Broder v. Cablevision Sys.Corp., 418 F.3d 187, 196 (2d Cir. 2005)).

However, " [t]he Second Circuit has emphasized that 'a plaintiff's reliance on the terms and effect of a document in drafting the complaint is a necessary prerequisite to the court's consideration of the document on a dismissal motion; mere notice or possession is not enough.'" St. Michael Enterprises, LLC v. Serbia Ministry of Privatization, No. 09-CV-5147 (SLT)(MDG), 2012 WL 1117592,at *4 (E.D.N.Y. Mar. 30, 2012) (citing Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (emphasis in original)). In other words, " [w]here a document is not incorporated by reference, . . . it must be clear on the record that no dispute exists regarding the authenticity or accuracy of the document. It must also be clear that there exist no material disputed issues of fact regarding the relevance of the document." DiFolco, 622 F.3d at 111 (citations and internal quotation marks omitted).

In addition, " [t]he court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201. This exception may apply to public documents and other materials, as " a court may [ ] consider public documents of which the plaintiff has notice." Tiraco v. New York State Bd. of Elections, 963 F.Supp.2d 184, 189 n.4 (E.D.N.Y. 2013) (citation and internal quotation marks omitted). Moreover, " [a] court may take judicial notice of a document filed in another court not for the truth of the matters asserted in the other litigation, but rather to establish the fact of such litigation and related filings." Global Network Commc'ns, Inc. v. City of New York, 458 F.3d 150, 157 (2d Cir. 2006) (citation omitted).

Of note, courts are reluctant to take judicial notice of settlement agreements unless it is referenced in the plaintiff's complaint. New York Dist. Council of Carpenters Pension Fund v. Forde, 939 F.Supp.2d 268, 277 (S.D.N.Y. 2013) (excluding settlement agreement from prior action from court's consideration on Rule 12(b)(6) motion where the agreement was not referenced in the complaint, the plaintiffs did not refer to the " terms and effects" of the agreement in their allegations, and the agreement was " not integral to determining whether [the] [p]laintiffs ha[d] stated a claim in their [c]omplaint" ); Shahzad v. Cnty. of Nassau, No. CV 13-2268(SJF), 2013 WL 6061650, at *4 (E.D.N.Y. Nov. 14, 2013) (declining to take judicial notice of settlement agreement from a prior action on Rule 12(b)(6) motion where the agreement was not referenced in the complaint and was not part of the judicial record in the prior action); Rolon v. Henneman, 389 F.Supp.2d 517, 519 (S.D.N.Y. 2005) (because it was referenced in the complaint, the court considered a settlement agreement on a Rule 12(b)(6) motion), aff'd, 517 F.3d 140 (2d Cir. 2008).

When a court is confronted on a Fed.R.Civ.P. 12(b)(6) motion with evidence falling outside of the exceptions recited by the Second Circuit in Brass, the court must either exclude the evidence or convert the

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motion to dismiss to one for summary judgment pursuant to Fed.R.Civ.P. 12(d). See St. Michael Enterprises, 2012 WL 1117592, at *4; Chambers, 282 F.3d at 152.

In the Court's view, the U.S. Agreement is incorporated by reference in the Plaintiff's Complaint. (Compl., ¶ ¶ 9, 12, 15.) Further, the Court finds that the Mexico Agreement is integral to the Complaint, and is thus deemed to be incorporated by reference in the Complaint. Oppenheimer & Co., 946 F.Supp.2d at 344. In addition, the Court takes judicial notice of the screenshots of the USPTO online databases, as they " can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned," Fed.R.Evid. 201, and are " public documents of which the [P]laintiff ha[d] notice." Tiraco, 963 F.Supp.2d at 189 n.4.

However, the Court declines to consider the Tiffany Settlement and the IFFCO-UMW Settlement while ruling on the pending Rule 12(b)(6) motion. First, the Plaintiff's Complaint does not refer to either settlement. Brass, 987 F.2d at 150. In fact, the Complaint contains no references to any litigation with Tiffany (NJ) LLC. Second, the Court cannot take judicial notice of the Tiffany Settlement or the IFFCO-UMW Settlement, because neither are public documents, as they were never filed with another court. Tiraco, 963 F.Supp.2d at 189 n.4; Global Network Commc'ns, Inc., 458 F.3d at 157. Third, there is no evidence that the Plaintiff " relied on" these documents " in bringing suit." Brass, 987 F.2d at 150.

Accordingly, the Court will not consider the Tiffany Settlement or the IFFCO-UMV Settlement at this stage of the litigation. For substantially similar reasons, the Court will also not consider the letter invoice for a shipment from IFFCO to the Plaintiff, as it does not appear that invoice is incorporated by reference in the Complaint, was relied on by the Plaintiff in commencing this action or a public document of which the Court can take judicial notice.

With this in mind, the Court draws the following facts from the Plaintiff's Complaint and the parties' exhibits, excluding the Tiffany Settlement, the IFFCO-UMW Settlement and the letter invoice. The Court construes the facts in a light most favorable to the Plaintiff. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009).

B. Underlying Factual Allegations

1. The Parties

The Plaintiff is incorporated in the State of New York and is a wholesale distributor that sells food products and other goods to retail stores in both the United States and internationally. (Compl., ¶ ¶ 1, 8, 22, 49.) The Defendant IFFCO is incorporated in the State of Georgia. (Id., ¶ 2.) IFFCO imports, manufactures and sells cookies, biscuits, wafers and other snack products in the United States, as well as in other countries. (Id., ¶ ¶ 3, 22, 49.) The Defendant International is a United Arab Emirates corporation, and it manufactures, sells and exports cookies, biscuits, wafers and other snack products. (Id., ¶ 4.) UMW alleges that IFFCO is a subsidiary or affiliate of International. (Id., ¶ 7.)

2. The U.S. Agreement

On or about January 19, 2011, IFFCO and the Plaintiff entered into the U.S. Agreement, under which the Plaintiff agreed to distribute certain snack products in the United States. (Compl., ¶ 9; Gerecci Dec., Exh. A,, ¶ 1.) These snack products were manufactured by IFFCO or International and used the brand name " Tiffany" (the " IFFCO Tiffany products" ). (Compl., ¶ 9; Gerecci Dec., Exh. A,, ¶ 1.) In this

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regard, the U.S. Agreement provided that the Plaintiff would distribute the following IFFCO Tiffany products: " Tiffany Break" ; " Tiffany Wafers" ; and " Tiffany Biscuits (Cookies)." (Compl., ¶ ¶ 10-11; Gerecci Dec., Exh. A,, ¶ 1.)

Pursuant to the U.S. Agreement, the Plaintiff was required to promote the IFFCO Tiffany products at trade shows and supply them to specified retailers. (Compl., ¶ ¶ 10-11, 13; Gerecci Dec., Exh. A, ¶ ¶ 3-4.) However, before proceeding with any promotional activities, the Plaintiff first had to obtain prior written approval from IFFCO, and " [e]xpenses for the promotions" were to be " agreed upon in writing jointly" by IFFCO and the Plaintiff. (Gerecci Dec. Exh.. A, ¶ 4.) The U.S. Agreement stated that the Plaintiff would engage in a " promotional period" lasting twelve months, which would begin on the date of the first shipment from International to the Plaintiff. (Compl., ¶ 12; Gerecci Dec., Exh. A,, ¶ 2.) The U.S. Agreement also contained an indemnification provision, under which the Plaintiff agreed to indemnify IFFCO against any claims or damages resulting from the Plaintiff's marketing and sale of the IFFCO Tiffany products. (Gerecci Dec., Exh. A, ¶ 5.)

Further, the U.S. Agreement stated, without any qualification, that IFFCO may withdraw from the U.S. Agreement upon the issuance of a thirty-day notice. (Id., ¶ 7.) In the event the U.S. Agreement was terminated or expired, the Plaintiff was not " entitled [to] any compensation for any indirect or consequential loss or damages arising out of . . . [said] termination or expiration." (Id.)

Despite entering into the U.S. Agreement, IFFCO did not own a trademark in the United States for the name " Tiffany," nor did International. (Compl., ¶ 17.) According to the Plaintiff, both the Defendants knew that the name " Tiffany" was a registered trademark in the United States, but they did not inform the Plaintiff that they " had no right to use the Tiffany name in the United States" when the U.S. Agreement was formed. (Id., ¶ ¶ 16, 21, 73, 99.) The Plaintiff claims that it relied on the Defendants to provide it with " all relevant information about [the] Defendants' Tiffany range of branded products, including advising [the Plaintiff] of any problems Defendant [sic] had with the ownership of the brand names it used for its products." (Id., ¶ 77.) The Plaintiff further claims that it would not have made " any contractual arrangements with [the] Defendant[s]" if it had been told that neither Defendant owned the right to the " Tiffany" name. (Id., ¶ 78.)

After January 19, 2011, the Plaintiff began performance of the U.S. Agreement by purchasing and promoting the IFFCO Tiffany products in the United States. (Id., ¶ ¶ 15, 22-25.) In this regard, on or about January 31, 2011, the Plaintiff began ordering shipments from IFFCO. (Kressel Dec., Exh. 1.) The Plaintiff also promoted the IFFCO Tiffany products to the chain retailer Dollar Tree, among other stores. (Compl., ¶ 25.) However, Dollar Tree refused to buy branded products which did not have trademark protection. (Id., ¶ 26.) Accordingly, on March 2, 2012, the Plaintiff attempted to trademark the name " Tiffany" in the United States by filing a trademark application with the USPTO. (Id., ¶ 27; Gerecci Dec. Exh. C.) The Plaintiff intended to transfer the " Tiffany" trademark to International, and billed IFFCO for the costs of applying for the trademark. (Compl., ¶ 31.)

On March 23, 2012, the Plaintiff received a letter from counsel for Tiffany (NJ) LLC advising that Tiffany (NJ) LLC owned the " Tiffany" name as a registered trademark, which the Plaintiff determined to be true.

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(Id., ¶ ¶ 28, 30.) Thereafter, the Plaintiff discovered that on May 20, 2008, International had applied for a trademark registration for " IFFCO Tiffany" at the USPTO. (Id., ¶ ¶ 18, 29; Kressel Dec., Exh. 2.) This application had been opposed by Tiffany (NJ) LLC. (Compl.,¶ ¶ 19, 29; Kressel Dec., Exh. 2.) As such, on September 18, 2009, International had withdrawn its trademark application with the USPTO, and on October 22, 2009, the trademark application had been officially abandoned or terminated. (Compl., ¶ ¶ 20, 29; Kressel Dec., Exh. 2.)

The Plaintiff alleges that the " Defendants made repeated attempts to obtain a trademark for the name Tiffany to be associated with its [sic] products." (Compl., ¶ ¶ 72, 99; see also Kressel Dec., Exh. 2, showing a trademark application for " IFFCO Tiffany" by International as early as September 5, 2007.) The Plaintiff further alleges that the Defendants never informed the Plaintiff that they had attempted and failed to trademark the name " Tiffany." (Compl., ¶ 99.)

On September 17, 2012, after the Plaintiff learned that Tiffany (NJ) LLC owned the " Tiffany" trademark, the Plaintiff abandoned its trademark application with the USPTO. (Compl., ¶ 32; Gerecci Dec., Exh. C.) The Plaintiff claims that once it determined that Tiffany (NJ) LLC owned the " Tiffany" trademark, it was " unable" to continue to sell or promote IFFCO Tiffany products in the United States. (Compl., ¶ 33.)

In November of 2012, the " Defendants cancelled their contractual arrangements" with the Plaintiff. (Id., ¶ 34.) Before the Defendants terminated the U.S. Agreement, the Plaintiff alleges that it had performed all it was required to do under the contract. (Id., ¶ 35.) In addition, the Plaintiff incurred various costs in distributing and promoting IFFCO Tiffany products, such as the costs of purchasing products, storing products in warehouses, participating in trade shows and hiring brokers. (Id., ¶ ¶ 15, 23, 37-44.) According to the Plaintiff, it would not have spent this money if the Defendants had informed it that they did not own the " Tiffany" trademark in the United States. (Id., ¶ ¶ 76, 78.) Further, the Plaintiff's United States customers are allegedly demanding reimbursement for unsellable IFFCO Tiffany products that they bought from the Plaintiff. (Id., ¶ ¶ 37, 39.) In addition, Dollar Tree " has refused to engage in business" with the Plaintiff. (Id., ¶ 48.)

3. The Mexico Agreement

Beginning on or after January 19, 2011, the Plaintiff began promoting IFFCO Tiffany products in Mexico. (Id., ¶ ¶ 22, 49.) Approximately six months later, on July 12, 2011, IFFCO and the Plaintiff entered into the Mexico Agreement, under which the Plaintiff agreed to distribute the following IFFCO Tiffany products in Mexico: " Tiffany Break" and " Tiffany Delight." (Gerecci Dec., Exh. B, ¶ 1. )The Mexico Agreement specified a " provisional period" of six months beginning from the date of the first shipment of IFFCO Tiffany products to Mexico. (Id., ¶ 2.) The Mexico Agreement could be " withdrawn by [IFFCO] upon issuance of a one month notice," subject to IFFCO fulfilling purchase orders placed by the Plaintiff before such notice, and with the condition that IFFCO would not supply IFFCO Tiffany products to the customers specified in the Mexico Agreement for six months after the withdrawal of the Mexico Agreement. (Id., ¶ 4.) The Plaintiff was not " entitled any compensation for any indirect or consequential loss or damages arising out of . . . the termination or expiration" of the Mexico Agreement. (Id.)

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The Plaintiff marketed IFFCO Tiffany products to a large chain in Mexico called OXXO, which expressed interest in purchasing such products. (Compl., ¶ ¶ 50, 84.) OXXO requested information about IFFCO Tiffany products, including price. (Id., ¶ ¶ 50, 85.) However, when the Plaintiff asked the Defendants for this information, they did not provide it. (Id., ¶ ¶ 50, 85.) In November of 2012, the Defendants terminated the contract with the Plaintiff to sell in Mexico. (Id., ¶ 87.) The Plaintiff incurred various costs promoting IFFCO Tiffany products in Mexico, including costs for trade shows, warehouse storage, and transportation of products. (Id., ¶ ¶ 41-42, 49, 90.)

4. Allegations Common to Both the U.S. Agreement and the Mexico Agreement

The Court pauses here to collectively discuss in further detail the U.S. Agreement and the Mexico Agreement, as the Plaintiff raises identical allegations pertaining to both Agreements. In this regard, the Plaintiff alleges that one of the Defendants promised to assist the Plaintiff in promoting IFFCO Tiffany products in the United States and Mexico, but does not clarify as to which of the Defendants. (Id., ¶ 93.) This assistance was to include timely shipments of products, proper English-language packaging, packaging without spelling errors and providing product information. (Id., ¶ ¶ 94-97.) Instead, the Plaintiff alleges that the Defendants failed to deliver products to the Plaintiff on time. (Id., ¶ 98.) The Complaint does not specify whether delays occurred under the U.S. Agreement, the Mexico Agreement or both.

In addition, the Plaintiff claims that the Defendants did not supply requested product information " such as ingredients." (Id.) Again, the Complaint does not indicate if this alleged failure on the part of the Defendants occurred under both Agreements or only under one of the Agreements. Further, apparently the Defendants used Arabic-language packaging instead of English-language packaging for products to be sold in the United States, and ...


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