Fresh Direct Inc. v. Harvin Foods Inc. et al
Filing
101
MEMORANDUM AND ORDER DENYING 46 MOTION to Dismiss for Failure to State a Claim regarding Defendant's Counterclaim filed by Fresh Direct Inc., GRANTING 84 MOTION for Leave to File First Amended Complaint filed by Foodsource. Signed by Chief Judge Gregory M. Sleet on 3/9/2012. (asw)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
FRESH DIRECT, INC., et al.,
Plaintiffs,
v.
HARVIN FOODS, INC., et al.,
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C.A. No. 10-040-GMS
Defendants.
____________________________)
MEMORANDUM
I.
INTRODUCTION
Plaintiff, Fresh Direct, Inc., et al. ("Fresh Direct"), filed this action against defendant,
Harvin Foods, Inc., et al. ("Harvin Foods"), alleging a breach of the Perishable Agriculture
Commodities Act, 7 U.S.C. ยงยง 499a-499t. (D.I. 47 at 4.)
Defendant, Harvin Foods, counterclaims that Fresh Direct was negligent. Harvin Foods
claims that Fresh Direct had a duty to verify that Raymond Maragni, Jr. and Vincent Giuffridasalesmen in the food brokerage business-were authorized to make purchases on behalf of
Harvin Foods. (D.I. 48 at 7.) Harvin Foods claims that Fresh Direct breached this duty and as a
result, caused injury, "including but not limited to damage to its credit rating, reputation and loss
of goodwill." (ld) Presently before the court is Fresh Direct's motion to dismiss Harvin Foods'
counterclaim pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief
can be granted.
II.
BACKGROUND
Harvin Foods is in the wholesale produce business, and purchases produce from vendors,
which is shipped to and stored in its warehouse, until it is ultimately sold and delivered to
customers. (D.I. 48 at 5.) During the summer of 2009, Harvin Foods agreed to enter the food
brokerage business through a limited arrangement with Maragni and Giuffrida, two businessmen
in that industry. (Id at 6.) In a food brokerage business, food is purchased from vendors and
shipped directly to the customer. (!d) Prior to this time, Harvin Foods had never been involved
in that aspect of the food industry. (Id)
For the first couple of weeks, the arrangement operated without incident. (D.I. 48 at 6.)
Maragni and Giuffrida then stopped showing up to work, and did not respond to Harvin Foods'
efforts to contact them. (!d) Vendors began to lodge complaints against Harvin Foods claiming
that they had not been paid for produce that Maragni and/or Giuffrida had ordered. (Id)
Thereafter, Harvin Foods learned that Maragni and Giuffrida had been using its credit to
fraudulently order produce from growers and/or vendors. (Id at 7.) Moreover, the vendors had
been sending their payment checks to Maragni and/or Giuffrida. (!d) After discovering this
scheme, Harvin Foods terminated the limited arrangement with Maragni and Giuffrida, and made
numerous efforts to put a stop to the fraud. (D.I. 48 at 7.) Those efforts included terminating the
limited arrangement with Maragni and Giuffrida, and filing a criminal complaint with the
Wilmington Police Department. (!d) Fresh Direct claims that Harvin Foods, by and through
Maragni and/or Giuffrida, ordered produce from them in the respective aggregate amounts of
$113,358.97 and $57,361.60, which it claims is due and outstanding. (!d) Fresh Direct initiated
this suit to recover those amounts. (D.I. 47 at 4.)
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Harvin Foods filed a counterclaim against Fresh Direct alleging that it was negligent by
breaching its "duty to verify that Maragni and Giuffrida were authorized to make purchases on
behalf of Harvin Foods and/or use the credit of Harvin Foods before making any alleged sales to
Harvin Foods through Maragni and/or Giuffrida." (D.I. 48 at 7.) Harvin Foods claims that Fresh
Direct breached this duty and that this was both the factual and proximate cause of the injury it
sustained, which "includ[ed] damage to its credit rating, reputation and loss of goodwill." (!d. at
11.) Harvin Foods claims that "had [Fresh Direct] taken any actions to confirm the false
representations of authority made by Maragni and Giuffrida, both [Fresh Direct] and Harvin
Foods would have been alerted to Maragni and Giuffrida's fraudulent scheme and neither party
would have sustained the damages to the extent complained of in this matter." (/d. at 12.)
Fresh Direct contends that there is no such "duty to verify." (D.I. 47 at 5.) Fresh Direct
also claims that even if there was such a duty, its actions were not a proximate cause of Harvin
Foods' injury. (!d.) Fresh Direct therefore asks this court to dismiss Harvin Foods'
counterclaim.
III.
STANDARD OF REVIEW
In deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6), all factual allegations are
taken as true and construed in the light most favorable to the non-moving party. Gross v.
German Found. Indus. Initiative, 549 F.3d 605, 610 (3d Cir. 2008). To state a claim adequately,
there "must be enough to raise a right to relief above the speculative level." Bell At!. Corp. v.
Twombly, 550 U.S. 544, 545 (2007). It must be shown that there are sufficient "facts to state a
claim that is plausible on its face." /d. at 54 7. A claim is plausible on its face "when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). There must
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be "enough facts to raise a reasonable expectation that discovery will reveal evidence of' the
necessary element. Bell, 550 U.S. at 545.
IV.
DISCUSSION
To state a claim for negligence, the injured party must allege that (1) the wrongdoer owed
the injured party a duty of care, (2) the wrongdoer breached that duty, and (3) the wrongdoer's
breach was the proximate cause of the harm sustained by the injured party. Halchuck v.
Williams, 635 F. Supp. 2d 344, 346 (D.Del. 2009).
A. Duty to Verify
Harvin Foods contends that Fresh Direct had a duty to verify, which is based upon a
"reasonableness" or an industry standard. (D .I. 48 at 9-10.) However, in support of its
contention that there is a duty to verify, Harvin Foods cites to cases that do not relate to the duty
of, or transactions between, merchants. (/d. at 9.) Instead, Harvin Foods cites a case discussing
the duty of an owner or general contractor to protect the employees of an independent contractor
from the hazards of completing a contract. Hawthorne v. Edis Co., 2003 WL 23009254, at *9
(Del. Super. Ct. 2003). It also cites a case discussing the duty of a reasonably prudent
manufacturer under all the particular factual circumstances of that case. Massey-Ferguson, Inc.
v. Wells, 383 A.2d 640, 642 (Del. 1978). Another case it cites discusses the duty of
manufacturers when designing a product. McLaughlin v. Dover Downs, Inc., 2008 WL 2943392,
at * 13 (Del. Super. Ct. 2008).
Nevertheless, Harvin Foods correctly notes that in Delaware, duty is measured in terms
of reasonableness. "One's duty is to act reasonably, as a reasonably prudent man (or entity)
would." Delmarva Power & Light Co. v. Burrows, 435 A.2d 716, 718 (Del. 1981). While
Harvin Foods does not cite to any case law governing the duty of merchants, it claims that "[a]
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reasonably prudent produce seller would not enter into a business transaction with a companywith which they have never before done business - without first verifying that the persons with
whom they are dealing have the authority to make decisions on behalf of the company." (D.I. 48
at 9.) Harvin Foods also references the Blue Book, which provides information and ratings on
companies in the international wholesale produce industry to suggest that in this context, to act
reasonably, one should reference the listed buyers in the Blue Book. (!d. at 10.)
Since all factual allegations are taken as true and construed in the light most favorable to
the non-moving party, here, Harvin Foods, it is plausible that merchants in the food business
have a duty to verify based on (1) reasonableness or (2) industry standard. Harvin Foods
contends that there is a duty to verify who is an authorized buyer, and that Fresh Direct should
have used the Blue Book to do so. (D.I. 26 at 11.) Further, Harvin Foods alleges that Fresh
Direct did not verify whether Maragni and/or Giuffrida were authorized to make purchases on
behalf of Harvin Foods or to use their credit. (!d.) As such, there is a reasonable expectation
that with discovery, a duty to verify will be revealed. Bell, 550 U.S. at 545.
B. Proximate Cause
Based on Harvin Foods' factual allegations, it is plausible that Fresh Direct's omissions
were a proximate cause of the injury it suffered. Harvin Foods alleges "damages, including
damage to its credit rating, reputation, [and] loss of goodwill" as a proximate result of Fresh
Direct's breach of the duty to verify. (D.I. 26 at 12.) Harvin Foods contends that "had Plaintiffs
taken any actions to confirm the false representations of authority made by Maragni and
Giuffrida, both Plaintiffs and Harvin Foods would have been alerted to Maragni and Giuffrida's
fraudulent scheme and neither party would have sustained the damages to the extent complained
of in this matter." (D.I. 48 at 12.)
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Proximate cause is "the direct cause without which the injury would not have occurred."
Drummondv. Delaware Transit Corp., 365 F. Supp. 2d 581,585 (D.Del. 2005). The proximate
cause must occur "in a natural and continuous sequence, unbroken by any intervening cause,
produc[ing] the injury." !d. If there was an intervening cause, "the causal chain is not
automatically broken, as there may be more than one proximate cause to an injury." Halchuck,
635 F. Supp. 2d at 347. An intervening act must have been unforeseeable to the original
tortfeasor to break the causal chain. !d.
If Fresh Direct had a duty to verify, and that duty was breached, then it is plausible that
Fresh Direct was the proximate cause of the injury suffered by Harvin Foods, since its omission
might have been a cause of Harvin Foods' injuries.
V.
CONCLUSION
For the reasons stated above, Fresh Direct's motion to dismiss pursuant to Fed. R. Civ. P.
12(b)(6) is denied.
Dated: March
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'2012
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
FRESH DIRECT, INC., et al.,
Plaintiffs,
v.
HARVIN FOODS, INC., et al.,
Defendants.
_____________
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C.A. No. 10-040-GMS
ORDER
For the reasons stated in the court's Memorandum of this same date, IT IS HEREBY
ORDERED that:
1.
Fresh Direct Inc.'s Motion to Dismiss Harvin Foods Inc.'s counterclaim (D.I. 46)
is DENIED; and
2.
Dated: March
1
Foodsource's Motion to File an Amended Complaint (D.I. 84) is GRANTED.'
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'2012
Federal Rule of Civil Procedure provides that leave should be freely granted when justice so requires. This is the
first time Foodsource has sought leave to amend its Complaint, and seeks to do so in order to correct an error in the
identity of the individual defendant. Furthermore, the motion is unopposed and does not prejudice any other party.
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