DIVERSIFIED INDUSTRIES, INC. v. VINYL TRENDS, INC. et al

Filing 33

OPINION. Signed by Chief Judge Jerome B. Simandle on 8/21/2014. (tf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

DIVERSIFIED INDUSTRIES, INC.,

HONORABLE JEROME B. SIMANDLE

Plaintiff,
Civil Action
No. 13-6194 (JBS/JS)

v.
VINYL TRENDS, INC., et al.

OPINION
Defendants.

APPEARANCES:
Kerri E. Chewning, Esq.
ARCHER & GREINER, PC
One Centennial Square
P.O. Box 3000
Haddonfield, NJ 08033
Attorney for Plaintiff Diversified Industries, Inc.
Gregg S. Kahn, Esq.
WILSON ELSER
33 Washington Street
Newark, NJ 07102
Attorney for Defendants Vinyl Trends, Inc. and William
Vance Hardin

SIMANDLE, Chief Judge:
I.

INTRODUCTION
This matter comes before the Court on Defendant Vinyl

Trends, Inc.’s motion for leave to file a Second Amended Answer
and Counterclaim, principally to amend its counterclaim for
tortious interference with a prospective or existing economic
relationship. [Docket Item 26.] Defendant and Plaintiff

Diversified Industries are competitors in the flooring
underlayment industry. Defendant alleges that Plaintiff has
intentionally and maliciously interfered with Defendant’s
prospective and existing business relationships by making false
statements about Defendant’s products to wrongfully induce
certain manufacturers and customers to stop doing business with
Defendant. Defendant previously asserted a tortious interference
counterclaim against Plaintiff, but the Court granted in part
and denied in part Plaintiff’s motion to dismiss, allowing
Defendant’s tortious interference counterclaim to proceed only
to the extent it is based on Defendant’s relationship with
Sekisui Voltek.
Accordingly, Defendant now requests leave to file a second
amended counterclaim to more specifically identify the
prospective and existing suppliers, manufacturers, and customers
with whom Plaintiff allegedly interfered.
For the reasons stated below, the Court will grant in part
and deny in part Defendant’s motion.
II.

BACKGROUND
A. Facts
The facts set forth below are those alleged in Defendant’s

“Second Amended Answer to Complaint and Counterclaim,” [Docket
Item 26-2], which the Court accepts as true for purposes of the

2

instant motion.1 Defendant Vinyl Trends, Inc. (“Vinyl Trends”) is
a Canadian corporation in the business of manufacturing and
selling flooring products in the United States, including foam
products for use as underlayment for flooring. (Second Amended
Answer and Counterclaim (“Second Am. Ans.”) [Docket Item 26-2]
¶¶ 2, 9.) Defendant and Plaintiff, Diversified Industries, Inc.
(“Diversified”), are direct competitors in the flooring
underlayment market. (Id. ¶ 14.) Defendant’s products are
marketed as “VOC free” because they are considered free of
volatile organic compounds pursuant to applicable rulings and
regulations. (Id. ¶ 11.)
Defendant’s Second Amended Counterclaim alleges that
Plaintiff tortiously interfered with Defendant’s prospective and
existing business relationships with suppliers Muchsee Wood Co.
Ltd. (“Muchsee”), Toray Plastics, Inc. (“Toray”), and Sekisui
Voltek (“Voltek”), as well as customers T&L Distributing
(“T&L”), CMH Space (“CMH”), and Home Depot. (Id. ¶¶ 18, 25.)
Specifically, Defendant alleges that one or more of Plaintiff’s
employees has made false statements of fact about Defendant and
its products to these named suppliers, manufacturers, and
customers, including the following:

1

Defendants’ Second Amended Answer to Complaint and Counterclaim
is attached to Defendant’s motion for leave to file same.
[Docket Item 26-1.]
3

(i) Vinyl Trends products are ‘B’ quality, seconds or
scrap; (ii) zero VOC [volatile organic compounds] is a
scam; (iii) Vinyl Trends makes its products in a shed or
owner’s garage; (iv) Vinyl Trends delivers its products out
of the back of a pickup truck; and (v) Vinyl Trends is not
authorized to sell in the United States.
(Id. ¶ 12.) Defendant claims it had a reasonable expectation of
doing business with the above-named suppliers and customers, and
that Plaintiff intentionally and maliciously interfered with
these relationships to divert business away from Defendant. (Id.
¶¶ 32-33.) Defendant claims monetary damages in the form of lost
revenue and profit, lost sales and other business opportunities,
and unnecessary incurred costs as a result of Plaintiff’s false
and misleading statements. (Id. ¶ 36.)
As to Plaintiff’s alleged interference with Defendant’s
prospective relationship with Muchsee, Defendant alleges that in
2010, while Defendant was “in discussions” with Muchsee
regarding a potential supply contract, Plaintiff entered into a
contract with Muchsee solely to eliminate its competitors from
dealing with Muchsee and, in effect, to prevent Muchsee from
doing business with Defendant. (Id. ¶ 19.) Additionally,
Defendant alleges that Plaintiff made false statements of fact
about Defendant’s products to Muchsee, “including statements
concerning the sound rating, VOC content and other product
specifications/characteristics of Vinyl Trends’ products,” in an

4

effort to wrongfully induce Muchsee to not do business with
Defendant. (Id. ¶ 20.)
Defendant makes similar allegations with regard to
Plaintiff’s interference with Defendant’s existing business
relationship with Toray.2 (Id. ¶ 21.) Defendant alleges that in
2013, Defendant received calls “on a regular basis” from one or
more Toray representatives maintaining that a representative of
Plaintiff was making false statements about Defendant’s products
to Toray, “including statements concerning the sound rating, VOC
content and other product specifications/characteristics of
Vinyl Trends’ products,” in order to wrongfully induce Toray to
stop doing business with Defendant. (Id.) Defendant continues to
use Toray as a manufacturer for its products, however Defendant
alleges it incurred unnecessary costs in correcting the false
statements made by Plaintiff “in the form of employees having to
spend unnecessary time on Toray Plastics issues that could have
been spent on other company business.” (Id.)
Defendant next alleges that Plaintiff tortiously interfered
with Defendant’s existing relationship with Voltek, a
2

The Court previously dismissed Defendant’s claim for tortious
interference in its First Amended Answer and Counterclaim as it
related to Toray because it was barred by the six-year statute
of limitations for asserting a tortious interference claim under
New Jersey law. Diversified Indus., Inc. v. Vinyl Trends, Inc.,
Civ. 13-6194 (JBS), 2014 WL 1767471, at *5 (D.N.J. May 1, 2014).
However, in Defendant’s Second Amended Answer, Defendant
includes new allegations as to Toray that are within the
applicable six-year limitations period.
5

manufacturer who designed and supplied for Defendant an
exclusive LVT (luxury vinyl tile) underlayment product. (Id. ¶
22.) Defendant spent considerable time developing, testing, and
marketing this product, generating numerous sales orders from
customers. (Id.) Defendant alleges that Plaintiff, who knew of
Defendant’s existing relationship with Voltek, told Voltek “in
or prior to April-May 2013” not to make the LVT underlayment
product for Defendant, and, furthermore, made the same false
statements of fact to Voltek concerning Defendant’s products
that Plaintiff allegedly made to Muchsee and Toray. (Id. ¶ 23.)
Defendant claims that Plaintiff’s actions caused Voltek to tell
Defendant “that it would not supply additional, LVT underlayment
product after an initial amount, which amount was far less than
the aggregate amount of orders that Vinyl Trends already was
obligated to provide to customers.” (Id. ¶ 24.) As a result,
Defendant claims it suffered monetary damages by spending
significant time and effort negotiating with Voltek,
communicating with alternate suppliers, and transferring orders
placed with Voltek to other suppliers so that it could honor its
obligations to its customers. (Id.) Defendant attributes the
loss of its customer T&L Distributing to Plaintiff’s
interference with Defendant’s relationship with Voltek, alleging
that T&L told Defendant “the reason why Vinyl Trends lost the
T&L Distributing account was because Vinyl Trends was slow
6

coming out with its LVT underlayment product . . . and T&L
Distributing went in a different direction as a result.” (Id. ¶
26.)
Defendant further alleges that Plaintiff tortiously
interfered with Defendant’s relationship with CMH Space,
Defendant’s biggest customer, by spreading false and misleading
information to CMH concerning the subject matter of the present
litigation. (Id. ¶ 28.) While Defendant continues to do business
with CMH, Defendant claims it suffered monetary damages because
it had to spend significant time and costs correcting the false
statements made by Plaintiff. (Id. ¶ 30.)
Lastly, Defendant alleges tortious interference as to its
prospective relationship with Home Depot. (Id. ¶ 31.) In 2012,
Defendant and Home Depot were “in discussions” regarding the
sale of Defendant’s products in Home Depot stores. (Id.)
Defendant claims that the discussions “progressed to a point
then suddenly and mysteriously stopped.” (Id.) Defendant later
learned that Home Depot instead placed its business with
Plaintiff. (Id.) Defendant alleges that Plaintiff made false
statements of fact about Defendant’s products to Home Depot,
“including statements concerning the sound rating, VOC content
and other product specifications/characteristics of Vinyl
Trends’ products,” in order to wrongfully induce Home Depot not

7

to do business with Defendant and do business with Plaintiff
instead. (Id.)
B. Procedural background
On October 18, 2013, Plaintiff filed a Complaint against
Defendants Vinyl Trends, Inc. and its employee, William Vance
Hardin, asserting claims for tortious interference with
contractual relations or prospective economic advantage, as well
as for violations of Section 43(a) of the Lanham Act, 15 U.S.C.
§ 1125(a), and New Jersey’s Fair Trade Act, N.J.S.A. § 56:4-1.
[Docket Item 1.] On December 2, 2013, Defendant filed an answer
denying the allegations in Plaintiff’s Complaint and asserting
Defendant Vinyl Trends’ counterclaims against Plaintiff for
tortious interference with a prospective or existing economic
relationship, unfair competition, and misappropriation of trade
secrets. [Docket Item 9.]
Plaintiff then filed a motion to dismiss Defendant’s
counterclaims [Docket Item 12], which the Court granted in part
and denied in part. [Docket Items 23, 24.] The Court found that
Defendant’s First Amended Answer and Counterclaim, submitted as
a cross-motion to amend [Docket Item 17], stated a plausible
claim for tortious interference as to its relationship with
Voltek. Diversified Indus., 2014 WL 1767471, at *4. However, the
Court dismissed without prejudice Defendant’s amended
counterclaim for tortious interference as to its relationship
8

with Toray because such claim was barred by the statute of
limitations. Id. at *5-6. Further, the Court dismissed without
prejudice Defendant’s amended counterclaim for tortious
interference as to its relationship with current or prospective
customers, as well as Defendant’s amended counterclaim for
misappropriation of trade secrets. Id. The Court dismissed
Defendant’s amended counterclaim for unfair competition with
prejudice. Id.
On May 15, 2014, Plaintiff filed an Answer to Defendant’s
counterclaims. [Docket Item 25.] On June 2, 2014, Defendant
filed the instant motion seeking leave to file a second amended
answer and counterclaim [Docket Item 26], which Plaintiff
opposes [Docket Item 27.] The Court heard oral argument on
August 19, 2014.
III. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 15(a), leave to amend
shall be freely given, but “the grant or denial of an
opportunity to amend is within the discretion of the District
Court . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962). “Among
the grounds that could justify a denial of leave to amend are
undue delay, bad faith, dilatory motive, prejudice, and
futility.” In re Burlington Coat Factory Sec. Litig., 114 F.3d
1410, 1434 (3d Cir. 1997). “‘Futility’ means that the complaint,
as amended, would fail to state a claim upon which relief could
9

be granted.” Id. “In assessing ‘futility,’ the district court
applies the same standard of legal sufficiency as applies under
Rule 12(b)(6).” Id.
Under the Rule 12(b)(6) standard, the Court must “accept
all factual allegations as true, construe the complaint in the
light most favorable to the plaintiff, and determine whether,
under any reasonable reading of the complaint, the plaintiff may
be entitled to relief.” Fleisher v. Standard Ins. Co., 679 F.3d
116, 120 (3d Cir. 2012). The complaint 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) (quotations omitted). “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 alleged.” Id. However,
“[a] pleading that offers labels and conclusions or a formulaic
recitation of the elements of a cause of action will not do.”
Id. (citation omitted).
Where, as here, a Defendant seeks leave to amend its
counterclaim, the Court will analyze the legal sufficiency of
the counterclaim under the same “plausibility” pleading standard
as used to determine the sufficiency of a complaint.

10

IV.

DISCUSSION
Plaintiff acknowledges that the majority of Defendant’s

counterclaim contains sufficient factual allegations to state a
plausible claim, and accordingly, does not oppose the filing of
Defendant’s proposed Second Amended Answer and Counterclaim.
However, Plaintiff opposes the inclusion of Defendant’s
allegations for tortious interference as to Defendant’s
relationships with Toray and Home Depot, which Plaintiff
contends fail to state a claim. Therefore, the Court will assess
the plausibility of Defendant’s counterclaim as to Toray and
Home Depot only.
Plaintiff argues that Defendant fails to identify any
actual interference with Defendant’s relationship with Toray
attributable to Plaintiff and fails to identify any damage to
Defendant as a result of the alleged interference. Further,
Plaintiff contends that Defendant fails to identify any false
statements or misrepresentations made by Plaintiff. To the
extent Defendant’s tortious interference claim is based on
Defendant’s relationship with Home Depot, Plaintiff argues that
Defendant’s claim is not plausible because Defendant fails to
allege that it had a reasonable expectation of doing business
with Home Depot and fails to identify any false statements made
by Plaintiff.

11

Defendant responds that it has sufficiently pleaded a claim
for tortious interference as to its relationships with both
Toray and Home Depot based on allegations that Plaintiff has
made false statements about Defendant’s products to these
entities in order to gain an unfair competitive advantage over
Defendant. Defendant alleges it has suffered damages in the form
of incurring unnecessary costs having to correct the false
statements made by Plaintiff, as well as lost sales, revenue,
and profit. Further, Defendant refutes Plaintiff’s argument that
Defendant had no reasonable expectation of doing business with
Home Depot.
Under New Jersey law, to bring a claim of tortious
interference with a prospective or existing economic
relationship, a plaintiff must show: (1) a plaintiff’s existing
or reasonable expectation of economic benefit or advantage; (2)
the defendant’s knowledge of that expectancy; (3) the
defendant’s wrongful, intentional interference with that
expectancy; (4) the reasonable probability that the plaintiff
would have received the anticipated economic benefit in the
absence of interference; and (5) damages resulting from the
defendant’s interference. Lightning Lube, Inc. v. Witco Corp., 4
F.3d 1153, 1167 (3d Cir. 1993) (citing Fineman v. Armstrong
World Indus., Inc., 980 F.2d 171, 186 (3d Cir. 1992); Printing

12

Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 751
(1989)).
As to Plaintiff’s alleged interference with Defendant’s
relationship with Toray, Defendant alleges that it had an
existing economic relationship with Toray (Second Am. Ans. ¶¶
21-22); Plaintiff knew of Defendant’s relationship with Toray
(id. ¶ 21); and Plaintiff intentionally made false statements
about Defendant to Toray concerning the sound rating, VOC
content, and other specifications/characteristics of Defendant’s
products (id.). Accordingly, the Court rejects Plaintiff’s
arguments that Defendant has failed to identify any actual
interference with Defendant’s relationship with Toray and failed
to identify any false statements or misrepresentations made by
Plaintiff.3
However, Defendant’s second amended counterclaim fails to
sufficiently state a tortious interference claim as to
Defendant’s relationship with Toray because Defendant fails to
identify any actual damage or loss of anticipated economic
benefit resulting from Plaintiff’s alleged interference. A
tortious interference claim must contain “allegations of fact

3

Further, the Court previously found, on nearly identical
allegations, that Defendant had identified allegedly false
statements made by Plaintiff and that these statements were
sufficient to plead the “wrongful, intentional interference”
element of a tortious interference claim. Diversified Indus.,
2014 WL 1767471, at *4.
13

giving rise to some reasonable expectation of economic
advantage.” Soldinger v. Football Univ., LLC, No. L-2870-11,
2014 WL 2178465, at *3 (N.J. Super. Ct. App. Div. May 27, 2014)
(quoting Printing Mart, 116 N.J. at 751-52). “A plaintiff must
show that if there had been no interference[,] there was a
reasonable probability that the victim of the interference would
have received the anticipated economic benefits.” Id. In other
words, a tortious interference claim must “allege facts leading
to the conclusion that the interference caused the loss of the
prospective gain.” Id.
Defendant’s amended counterclaim alleges that it continues
to conduct business with Toray despite Plaintiff’s alleged
interference, but that it “incurred unnecessary costs having to
correct the false statements made by Diversified Industries, in
the form of employees having to spend unnecessary time on Toray
Plastics issues that could have been spent on other company
business.” (Second Am. Ans. ¶ 21.) Because Defendant continues
to receive the anticipated economic benefits of conducting
business with Toray, Defendant has not alleged that Plaintiff’s
interference caused the loss of any prospective economic gain.
Compare Norwood Easthill Assocs. v. Norwood Easthill Watch, 222
N.J. Super. 378, 385 (App. Div. 1988) (holding that plaintiffdevelopers failed to show actual damage to their settlement
negotiations with borough officials where defendant citizens
14

group and its members allegedly threatened to initiate an IRS
audit against borough officials, but settlement agreement
between borough and developers remained unaffected), with
Printing Mart, 116 N.J. at 760 (holding that plaintiff’s
complaint alleged actual damages because it asserted that
plaintiff lost anticipated economic gain as a result of
defendant’s interference). On the face of Defendant’s pleading,
Defendant states that its relationship with Toray was unaffected
by any alleged interference by Plaintiff, and Defendant’s
counsel at oral argument stated unequivocally that Defendant
does not allege any lost profits or lost business as a result of
Plaintiff’s alleged interference with Toray. Moreover, the
consequential damages sought by Defendant are not the type of
lost prospective gain necessary to state a claim for tortious
inference. Defendant has identified no authority which would
permit recovery for reputational harm and time diverted from
ordinary business where there is no allegation of lost profit or
economic gain. Conclusory allegations of lost profit elsewhere
in the Amended Answer are bare conclusions unworthy of the
Court’s consideration. Accordingly, the Court finds that
Defendant failed to sufficiently plead damages to state a claim
for tortious interference as to Defendant’s relationship with
Toray.

15

In contrast to Defendant’s allegations based on its
relationship with Toray, Defendant’s amended counterclaim
sufficiently states a claim for tortious interference as to
Defendant’s relationship with Home Depot. Defendant alleges that
it had a reasonable expectation of an economic relationship with
Home Depot; Plaintiff knew of Defendant’s expected relationship
with Home Depot; Plaintiff intentionally made false statements
about Defendant to Home Depot concerning the sound rating, VOC
content, and other specifications/characteristics of Defendant’s
products; it was reasonably probable that Defendant would
receive economic benefit from its expected relationship with
Home Depot without Plaintiff’s false statements; and damages
resulted from Plaintiff’s false statements in the form of lost
sales, revenue, and profit. (Second Am. Ans. ¶ 31.) Thus, the
Court rejects Plaintiff’s argument that Defendant fails to
allege that it lost actual anticipated business from Home Depot
and fails to identify misleading or false statements made by
Plaintiff.4
Defendant has sufficiently alleged that it had a reasonable
expectation of economic benefit from its prospective

4

As discussed above, the Court previously found, on nearly
identical allegations, that Defendant had identified allegedly
false statements made by Plaintiff concerning the sound rating,
VOC content, and other specifications/characteristics of
Defendant’s products. Diversified Indus., 2014 WL 1767471, at
*4.
16

relationship with Home Depot and that absent Plaintiff’s
interference, it was reasonably probable Defendant would have
received such benefit. Defendant alleges that it was “in
discussions with a prospective customer, Home Depot, so Home
Depot could sell Vinyl Trends’ products in its stores.” (Second
Am. Ans. ¶ 31.) Defendant also alleges that Plaintiff made false
statements “concerning the sound rating, VOC content and other
product specifications/characteristics of Vinyl Trends’ products
— to Home Depot in order to wrongfully induce Home Depot to not
do business with Vinyl Trends and do business with plaintiff
instead . . . .” (Id.) After the discussions “suddenly and
mysteriously stopped,” Defendant learned that Home Depot placed
its business with Plaintiff. (Id.) In its reply brief, Defendant
presents additional factual allegations concerning its
prospective relationship with Home Depot and explains that
“Vinyl Trends presented its products to Home Depot through
another company, Nance Carpet, who has significant dealings with
Home Depot.” (Def. Reply [Docket Item 30] at 7 n.1.) These
discussions “got to the point where the parties were discussing
doing a trial whereby Home Depot would sell Vinyl Trends’
products at several of its stores.” (Id.) Defendant’s counsel
represented at oral argument that his client furnished the basis

17

for these allegations, and he would include these allegations in
a third amended counterclaim if necessary.5
Contrary to Plaintiff’s position, these allegations are
sufficient to establish the “reasonable expectation” element of
a tortious interference claim. “A complaint of tortious
interference must allege ‘facts that show some protectable
right—a prospective economic or contractual relationship.
Although the right need not equate with that found in an
enforceable contract, there must be allegations of fact giving
rise to some reasonable expectation of economic advantage.’”
Soldinger, 2014 WL 2178465 at *3 (quoting Printing Mart 116 N.J.
at 751-52). Importantly, “[a] complaint must demonstrate that a
plaintiff was in ‘pursuit’ of business.” Id. Here, Defendant’s
allegation that it was “in discussions” with Home Depot so that
“Home Depot could sell Vinyl Trends’ products in its stores”
demonstrates that Defendant was in “pursuit” of Home Depot’s
business.
Nonetheless, Plaintiff argues that Defendant’s allegations
“fail[] to identify who at Diversified made undefined
statements, to whom, and when,” and therefore, Defendant’s
tortious interference claim as to its relationship with Home
Depot must fail. (Pl. Opp. at 8.) Under Rule 12(b)(6), “[a]

5

Given counsel’s representation at oral argument, the Court
finds no need to require a third amended pleading.
18

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 alleged.” Iqbal,
556 U.S. at 678. Details about the timing, context, and content
of the allegedly false statements must be identified in
discovery. For the purposes of alleging sufficient facts to
plead a plausible claim for relief, Defendant has met its
burden. Accordingly, the Court finds Defendant’s allegations as
to Plaintiff’s interference with Defendant’s relationship with
Home Depot sufficient to establish a tortious interference
claim.
V.

CONCLUSION
In light of the foregoing, the Court will grant Defendant’s

motion for leave to file a Second Amended Answer and
Counterclaim for tortious interference as to Defendant’s
relationships with Muchsee, Voltek, T&L, CMH, and Home Depot,
but deny Defendant’s motion for leave to file a Second Amended
Answer and Counterclaim for tortious interference as to
Defendant’s relationship with Toray. An accompanying Order will
be entered.

August 21, 2014
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge

19