GV Sales Group, Inc. v. Apparel Ltd., LLC
Filing
25
ORDER Granting Defendant's 13 Motion to Dismiss With Leave to Replead; Amended Complaint due by 9/19/2012. Signed by Judge Patricia A. Seitz on 9/4/2012. (ral)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 12-20753-CIV-SEITZ/SIMONTON
GV SALES GROUP, INC.,
Plaintiff,
vs.
APPAREL LTD., LLC,
Defendant.
./
______
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO
REPLEAD
THIS MATTER came before the Court upon Defendant's Motion to Dismiss the Complaint.
[DE 13]. Pursuant to an oral agreement, Plaintiff, GV Sales Group, Inc., hired Defendant, Apparel
Ltd., LLC, to work as an independent sales representative in the exclusive territory of Florida, Puerto
Rico, the Bahamas, and other Caribbean islands. Several years later, when Defendant terminated
it, Plaintiff sued Defendant asserting a claim under a Puerto Rico law that prohibits termination of
sales representation contracts without just cause (Count I) and a breach of contract claim to recover
commissions due (Count II).
Upon review of the Motion to Dismiss, Plaintiffs response [DE 14], and the reply [DE 18],
the Court will grant the Motion. The Court must apply Florida's choice of law rules, which provide
that the law of the place where the contract was made governs the parties' dispute concerning the
contract. Because Plaintiff has not pled where the contract was made, the Court will dismiss the
Complaint with leave to replead to allege this information. Moreover, without an allegation as to
1
where the contract was made, the Court cannot address Defendant's argument that Florida's Statute
of Frauds bars Plaintiffs breach of contract claim.
I. BACKGROUND1
This dispute arises out of a sales representation contract between Plaintiff, a Florida
corporation, and Defendant, a California limited liability company. In 2007, Defendant hired
Plaintiff,
who sells and markets girls and ladies apparel, to work as Defendant's exclusive
independent sales representative to market and sell junior girls apparel with the recently licensed
brand name DICKIES in Florida, Puerto Rico, the Bahamas, and other Caribbean islands ("Plaintiffs
territory"). The parties oral agreement was for an indefinite period of time. Plaintiff maintains that
Defendant hired it to generate new business for Defendant because it had no existing licensed
business when it acquired the DICKIES junior girls label.
The parties' agreement required
Defendant to pay Plaintiff a variable commission of between two and five percent of the net-shipped
value of all apparel sold to retail stores with buying offices in Plaintiffs territory. Defendant was
to pay commissions to Plaintiff in the month following the shipment of goods to a retail store, with
standard chargebacks for bad accounts and markdowns.2
In 2011, the parties' relationship apparently soured because Defendant sent an email to all
of Plaintiffs retail store accounts notifying them that Plaintiff had been terminated as Defendant's
independent sales representative. Plaintiff maintains that at the time of its termination, it had
1
Unless otherwise noted, the factual background is derived from Plaintiffs Complaint [DE I] as the Court
must accept all factual allegations as true and construe them in the light most favorable to the Plaintiff. See
American Dental Ass 'n v. Cigna Corp., 605 F.
3d I283 (lith Cir. 20IO).
2
Piaintiff alleges that by 20 I 0, its sales of DICKIES branded junior girls products exceeded $1.7 million,
for which Plaintiff earned over $80,000 in commissions. Plaintiff contends that the sales were divided equally
between retail store accounts in Florida and Puerto Rico. [DE I at� IO].
2
I
$250,000 worth of open, unshipped orders for Defendant's DICKIES branded apparel, which would
have amounted to approximately $8,000 in commissions.
Asserting diversity jurisdiction, Plaintiff sued Defendant in this Court and alleged in Count
I that Defendant violated Puerto Rico law by terminating the sales representation contract without
"just cause." In Count II, Plaintiff claims that Defendant breached the parties' contract and that it
is entitled to recover compensatory damages in the form of lost commissions that exceed $8,000.
In its motion to dismiss, Defendant maintains that Count I should be dismissed because
Puerto Rico law does not apply to the parties' dispute, rather Florida law governs terminations.
Likewise, Plaintiffs breach of contract claim must be dismissed because of Florida's Statute of
Frauds. Plaintiff opposes the Motion and insists that Puerto Rico law applies due to a choice of law
provision in Puerto Rico's Law 21.
II. DISCUSSION
A. Legal Standard
A Rule 12(b)(6) motion to dismiss for "failure to state a claim upon which relief can be
granted" tests the sufficiency of the allegations in the complaint. FED. R. Crv. P. 12(b)(6). In ruling
on a motion to dismiss, the Court accepts the well-pleaded factual allegations as true and construes
them in the light most favorable to the Plaintiff.
Speaker v. US. Dept. ofHealth and Human Serv.,
623 F.3d 1371, 1379 (11th Cir. 2010). To survive a motion to dismiss, a "complaint must contain
sufficient factual allegations, accepted as true, to 'state a claim to relief that is plausible on its face."'
Ashcroft v. Iqbal,
129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v.
Twombly,
550 U. S.
544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
3
alleged."
Iqbal,
129 S.Ct. at 1949. This "requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action."
Wilchombe v. Tee Vee Toons, Inc.,
555 F.3d 949, 958
( lith Cir. 2009) (citing Twombly, 550 U. S. at 555)).
B. Analysis
Plaintiff relies on diversity of citizenship to invoke the Court's jurisdiction. [DE 1 at� 4].
A federal court sitting in diversity must apply the choice of law rules of the forum state.
v. Stentor Elec. Mf Co.,
g.
Klaxon Co.
313 U. S. 487, 496 (1941). "Florida has traditionally applied the lex loci
contractus rule for choice of law determinations regarding issues of contract law."
Investments, NV v. Union Capital Partners, Inc.,
Trumpet Vine
92 F.3d 1 110, 1 1 19 ( 1 1th Cir. 1996). Under this
rule, the governing law concerning the validity and substantive obligations of contracts is the law
of the place where the contract was made.
complete the contract is performed."
!d.
"A contract is made where the last act necessary to
!d.
Here, the Complaint is devoid of any allegation as to where the parties entered into this oral
contract. Plaintiff does not address this fact and instead simply insists that Puerto Rico law applies,
at least with respect to the portion of the contract that concerns sales in Puerto Rico. In Plaintiff's
opposition to the motion to dismiss, it maintains that Puerto Rico's Law 21 statutory choice of law
provision applies instead of Florida's choice of law rules for two reasons. First, Plaintiff asserts that
Count I is a statutory cause of action for "wrongful termination" under Law 21 and, therefore, does
not concern the validity, execution, interpretation, or obligations under the parties' contract. As
such, lex loci contractus does not govern. Second, Plaintiff contends that the choice of law provision
set forth in Law 21 trumps Florida's common law rules governing choice of law. [DE 14 at 6-10].
Plaintiff's contention that Count I does not concern the parties' contractual obligations and
4
instead merely constitutes a statutory " wrongful termination" claim is not supported by either
Plaintiffs Complaint or Law 21. The Complaint clearly alleges that Plaintiff is suing Defendant for
terminating the contract without just cause. [DE 1 at� 17, 18]. Thus, the Plaintiffs cause of action
�
clearly arises out of the contract as a just cause determination necessarily requires an adjudication
of the parties' obligations under the terms of the contract. In fact, Law 21 defines just cause to
include "noncompliance of any of the essential obligations of the sales representation contract by
the sales representative,
or any act or omission on his/her part that may adversely and substantially
affect the interests of the principal or grantor in the development of the market or the sale of
merchandise or services . . . " P.R. Laws Ann. tit. 10, § 279(d) (emphasis added). Thus, Count I is
a cause of action pursuant to contract law.
Moreover, Plaintiffs argument that Law 21's choice of law provision3 trumps Florida's
choice of law rules is not supported by binding legal authority. Plaintiff contends that common law
choice of law provisions are trumped in two circumstances, either where the parties' have a
contractual agreement on choice of law or where choice of law provisions are contained in local
statutes or regulations. [DE 14 at 6-7]. Here, the Complaint does not allege that the parties agreed
that Puerto Rico law governs their agreement. Instead, Plaintiff relies on the Restatement (Second)
Conflicts and a number of cases that it claims stand for the proposition that a statutory choice of law
provision trumps the forum state's common law rules concerning choice of law. [DE 14 at 7].
3
If Plaintiff is correct, the place where the contract was made is irrelevant because Puerto Rico's Sales
Representatives Act of 1990 ("Law 21") P.R. Laws Ann. tit. 10, § 279f (2009), states that "sales representation
contracts ... shall be governed by the laws of the Commonwealth of Puerto Rico, and any stipulation to the contrary
shall be null."
,
5
However, Plaintiff has misread the Restatement and the cases cited in its brief. The Restatement4
and the cases reflect that where there is a statute in
the f
orum state
that contains a relevant choice
of law provision, the Court should apply that provision instead of the forum state's common law
choice of law rules. Notwithstanding the Restatement language, Plaintiff wants the Court to apply
a choice of law provision contained in a Puerto Rico statute, not a Florida law.
Going further, Plaintiff argues that a similar choice of law provision in an analogous Puerto
Rico law- "Law 75"- has been found to trump contractual choice of law provisions. [DE 14 at 910]. However, unlike the cases Plaintiff cited, the instant case does not involve a contractual choice
of law provision. Here, the Court must follow Klaxon Co. and its progeny and apply Florida choice
of law rules, which require that the law of the place where the contract was made is what governs
disputes arising out of the parties' contract. Thus, the Court will grant the motion to dismiss, but
give Plaintiff leave to amend its Complaint to plead where the parties made their agreement. Until
Plaintiff repleads, the Court cannot reach the second issue Defendant raises in its Motion to Dismiss
as to whether Florida's Statute of Frauds bars Plaintiffs breach of contract claims.
Finally, to the extent Law 21 does not apply because the parties' agreement was not made
in Puerto Rico, the parties will need to address whether the Court has subject matter jurisdiction over
Plaintiffs claims. As currently pled, it appears that without a Law 21 claim, Plaintiffs damages are
4
Section 6(1) of the Restatement (Second) Conflicts states that "[a] court, subject to constitutional
restrictions, will follow a statutory directive of its own state on choice of law. (emphasis added). Section 188(1)
provides that "[t]he rights and duties of the parties with respect to an issue in contract are determined by the local
law of the state which, with respect to that issue, has the most significant relationship to the transaction and the
parties under the principles stated in § 6." However, the "significant relationship" test referenced has been rejected
by the Eleventh Circuit in determining the applicable law in contract disputes; the test is used only for tort claims.
See Trumpet Vine Investments,
N. V, 92 F.3d at 1115-1116.
6
less than $8,000 in lost commissions, [DE 1 at� 12],5 well below the jurisdictional minimum of
$75,000.
See
28 U.S.C. § 1332(a). Accordingly, upon review, it is
ORDERED THAT
(1) Defendant's Motion to Dismiss is GRANTED. [DE 13].
(2) Plaintiff shall file an Amended Complaint no later than September 19, 2012.
7Z-
DONE AND ORDERED in Miami, Florida this
_:!_ day of Se
tember, 2012.
PATRICIA A. S TZ
UNITED STATES DISTRICT JUDGE
cc:
Honorable Andrea M. Simonton
All Counsel of Record
5
Plaintiff states in its opposition to Defendant's Motion to Dismiss that since the Complaint was filed,
Defendant has paid a portion of the $8,000 in commissions Plaintiff claims it is owed. [DE
7
14
at fn. 3].
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