DANDO v. BIMBO FOOD BAKERIES DISTRIBUTION, LLC et al

Filing 38

OPINION. Signed by Judge Noel L. Hillman on 4/10/2017. (TH, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
_________________________________
ROBERT DANDO,
Plaintiff,

Civil No. 14-2956 (NLH/KMW)

v.
OPINION
BIMBO FOOD BAKERIES DISTRIBUTION,
LLC, et al.,
Defendants.
__________________________________

APPEARANCES:
TERANCE J. BENNETT, ESQ.
3431 Route 47
P.O. Drawer 520
Port Elizabeth, New Jersey 08348
Counsel for Plaintiff
MORGAN, LEWIS & BOCKIUS LLP
By: Michael J. Puma, Esq.
Courtney Wirth Griffin, Esq.
1701 Market Street
Philadelphia, Pennsylvania 19103
Counsel for Defendants
HILLMAN, District Judge
This is primarily a diversity contract suit arising out a
Distribution Agreement between Plaintiff and Defendants.

Defendants

move to dismiss, pursuant to Fed. R. Civ. P. 12(b)(6), Counts 1
through 4 of the five-count Amended Complaint. 1

1

For the reasons

Count Five asserts an independent breach of the Distribution
Agreement based on Defendants’ alleged failure to pay Plaintiff all
of the commissions due under the agreement. Count 5 is not
challenged by the instant motion.
1

stated herein, the motion will be granted in part, and denied in
part.
I.
Plaintiff’s theory of his case is a classic bait and switch
story.

Plaintiff asserts that Defendants, exercising their rights

under the Distribution Agreement, acted in bad faith when they
refused to approve Plaintiff’s proposed sale of his exclusive
distribution rights on the basis that the proposed sale price was
too high and then, when Plaintiff proposed a lower price, Defendants
exercised their right to buy back the rights, only to promptly turn
around and sell those rights to Plaintiff’s proposed buyer at the
original, higher price.
In support of this theory, the Amended Complaint alleges the
following facts.

The Distribution Agreement between Plaintiff and

Defendants grants Plaintiff “the exclusive rights to deliver and
sell Defendants’ products in a geographic territory in Gloucester
County, New Jersey.” (Amend. Compl. ¶ 10)

Further, “[i]n 2014,

Plaintiff negotiated with a third party to sell his rights under the
contract, and [pursuant to the terms of the agreement] presented
Defendants with notice of intent to sell at a price of $289,900.00”
(Amend. Compl. ¶ 12)

In this regard, the Distribution Agreement

provides, “[t]he Distribution Rights are owned by the [Plaintiff]
and may be sold . . . provided that any such sale . . . shall be
subject to: (a) the prior written approval of [Defendants], which

2

approval will not be unreasonably withheld.” (Distribution Agreement
§ 6.1)
Defendants allegedly did not approve the notice of sale,
“informing Plaintiff that the price was too high to be acceptable to
Defendants but that Defendants would approve the sale at a lower
price.” (Amend. Compl. ¶ 13)

“Plaintiff subsequently presented

Defendants with a notice of intent to sell at the price of
$210,000.00, to the same buyer” (Amend. Compl. ¶ 14), at which point
Defendants allegedly exercised their right under the contract to buy
Plaintiff’s delivery rights themselves at the price of $210,000.00.
(Id. ¶ 16)

In this regard, the Distribution Agreement provides,

“[t]he Distribution Rights are owned by the [Plaintiff] and may be
sold . . . provided that any such sale . . . shall be subject to: .
. . (b) a right of first refusal on the part of [Defendants] at the
same terms and conditions offered to [Plaintiff] by a bona fide
purchaser.” (Distribution Agreement § 6.1)
Then, allegedly, “Defendants promptly sold [for the original
price of $289,900.00] these delivery territory rights just obtained
from Plaintiff, to the very third party to whom Plaintiff had
previously contracted to sell,” resulting in a $79,000.00 profit to
Defendants, and a $79,000.00 loss to Plaintiff. (Amend. Compl. ¶¶
18, 28, 36-38)
The Amended Complaint asserts the following counts: (1) breach
of the covenant of good faith and fair dealing; (2) tortious
interference with prospective economic advantage; (3) unjust
3

enrichment; (4) fraud; and (5) breach of contract based on
Defendant’s alleged separate failure to pay Plaintiff all
commissions due under the agreement. 2
II.
When considering a motion to dismiss a complaint for failure to
state a claim upon which relief can be granted pursuant to Federal
Rule of Civil Procedure 12(b)(6), a court must accept all wellpleaded allegations in the complaint as true and view them in the
light most favorable to the plaintiff. Evancho v. Fisher, 423 F.3d
347, 351 (3d Cir. 2005).

It is well settled that a pleading is

sufficient if it contains “a short and plain statement of the claim
showing that the pleader is entitled to relief.”

Fed. R. Civ. P.

8(a)(2).
Under the liberal federal pleading rules, it is not necessary
to plead evidence, and it is not necessary to plead all the facts
that serve as a basis for the claim. Bogosian v. Gulf Oil Corp., 562
F.2d 434, 446 (3d Cir. 1977).

2

However, “the Federal Rules of Civil

The Distribution Agreement provides that “[t]he validity,
interpretation and performance of this Agreement shall be controlled
by and construed in accordance with the laws of the State of New
York.” (Distribution Agreement § 11.8) The parties’ original briefs
on the Motion to Dismiss cited only New Jersey law and did not
acknowledge the choice of law provision in the contract. Therefore,
the Court dismissed the motion without prejudice and directed the
parties to address the choice of law issue in a renewed motion and
round of briefing. The parties now agree that there is no material
difference between New York law and New Jersey law with regard to
the issues raised by the instant motion. (See Moving Brief, p. 5;
Opposition Brief, p. 2) Accordingly, the Court applies New Jersey
law.
4

Procedure . . . do require that the pleadings give defendant fair
notice of what the plaintiff’s claim is and the grounds upon which
it rests.” Baldwin Cnty. Welcome Ctr. v. Brown, 466 U.S. 147, 149-50
n.3 (1984) (quotation and citation omitted).
A district court, in weighing a motion to dismiss, asks “‘not
whether a plaintiff will ultimately prevail but whether the claimant
is entitled to offer evidence to support the claim.’” Bell Atlantic
v. Twombly, 550 U.S. 544, 563 n.8 (2007) (quoting Scheuer v.
Rhoades, 416 U.S. 232, 236 (1974)); see also Ashcroft v. Iqbal, 556
U.S. 662, 684 (2009)(“Our decision in Twombly expounded the pleading
standard for ‘all civil actions’ . . . .”); Fowler v. UPMC
Shadyside, 578 F.3d 203, 210 (3d Cir. 2009)(“Iqbal . . . provides
the final nail in the coffin for the ‘no set of facts’ standard that
applied to federal complaints before Twombly.”).
III.
Defendants assert three arguments: (A) Counts 1, 2 and 4 are
barred by the economic loss doctrine; (B) all four counts fail to
pass muster under Fed. R. Civ. P. 8, Twombly, and Iqbal; and (C)
Plaintiff’s claims for consequential, punitive, treble, and lost
profit damages, as well has his right to a jury trial, have been
waived by the express language of the Distribution Agreement.
A.
The Court holds that the economic loss doctrine applies to bar
the tortious interference claim (Count 2) and the fraud claim (Count
4), but not the good faith and fair dealing claim (Count 1).
5

“The economic loss doctrine precludes the tort liability of
parties to a contract when the relationship between them is based on
a contract, ‘unless the breaching party owes an independent duty
imposed by law.’” New Jersey-American Water Co. v. Watchung Square
Assocs., LLC, 2016 N.J. Super. Unpub. LEXIS 1637 (App. Div. July 15,
2016)(quoting Saltiel v. GSI Consultants, Inc., 170 N.J. 297, 316-17
(2002)).
The doctrine applies only to tort claims. See Saltiel, 170 N.J.
at 309 (explaining that the economic loss doctrine helps to maintain
the “critical” “distinctions between tort and contract actions”);
SRC Constr. Corp. v. Atl. City Hous. Auth., 935 F. Supp. 2d 796, 801
(D.N.J. 2013)(explaining that the economic loss doctrine bars a
“contract claim in tort claim clothing,” and holding that a breach
of express warranty claim is not barred by the economic loss
doctrine).

Count 1, breach of the covenant of good faith and fair

dealing, sounds in contract. See Sons of Thunder, Inc. v. Borden,
Inc., 148 N.J. 396, 420 (1997)(“A covenant of good faith and fair
dealing is implied in every contract in New Jersey.”); see
generally, Restatement (Second) of Contracts § 205 (“Every contract
imposes upon each party a duty of good faith and fair dealing in its
performance and its enforcement.”).

Thus, as a matter of law, Count

1 cannot be barred by the economic loss doctrine.
The other two counts, however, sound in tort and are subject to
the economic loss doctrine.

As to Count 2, the alleged act of

tortious interference is Defendants’ “refus[al] to approve
6

Plaintiff’s contract with the third party.” (Amend. Compl. ¶ 34) 3
Such allegation is just another way of stating that Defendants
unreasonably withheld their approval, which the Distribution
Agreement expressly says Defendants will not do.

Indeed, the

tortious interference claim is no different than the breach of good
faith claim which alleges that “[i]n refusing to approve Plaintiff’s
sale of his distribution rights to a third party for $289,000.00,
Defendants exercised their contractual authority arbitrarily,
unreasonably, and capriciously, with the objective of preventing
Plaintiff from receiving his reasonably expected fruits under
Contract [sic].” (Amend. Compl. ¶ 22)

Thus, Count 2 is nothing more

than a “contract claim in tort claim clothing,” SRC Constr. Corp.,
935 F. Supp. 2d at 801, and is barred by the economic loss doctrine.
Likewise, the alleged misrepresentation upon which the fraud
claim (Count 4) is founded is Defendants’ representation “that
Defendants intended not to unreasonably withhold their approval of
any future sale by Plaintiff of his distribution rights.” (Amend.
Compl. ¶ 56)

This alleged misrepresentation is contained within the

Distribution Agreement itself.

Defendants have an obligation under

the agreement not to unreasonably withhold their approval.

Any

claim resting upon an assertion that Defendants did, in fact,

3

In his opposition brief, Plaintiff further articulates the theory
of his tortious interference claim: “[i]n unreasonably withholding
approval, in violation of their contract with Plaintiff, Defendants
simultaneously interfered with the contract Plaintiff had formed
with his prospective buyer.” (Opposition brief, p. 2)(emphasis
added).
7

unreasonably withhold their approval is a breach of contract claim,
not a fraud claim extrinsic to the contract.

Plaintiff has pled

nothing more than Defendants’ “false promises to perform as
contracted,” and therefore the fraud claim is barred by the economic
loss doctrine. Cioni v. Globe Specialty Metals, Inc., 618 Fed. Appx.
42, 47 (3d Cir. 2015)(citing Saltiel); see also RNC Sys. v. Modern
Tech. Group, Inc., 861 F. Supp. 2d 436, 452 (D.N.J. 2012) (“Clearly,
MTG’s two purported misrepresentations are addressed squarely within
the language of the License Agreement and are not unrelated to the
performance of the contract as required under the economic loss
doctrine.”).
The Motion to Dismiss will be granted as to the tortious
interference and fraud claims (Counts 2 and 4). 4
B.
As to the remaining good faith and fair dealing and unjust
enrichment claims, the Court holds that those counts are adequately
pled.

To state a claim for breach of the implied duty of good faith

and fair dealing, the plaintiff must plead facts supporting the

4

Plaintiff asserts that he should be given leave to amend his
Amended Complaint to, once again, attempt to “cure as necessary” any
pleading deficiencies. (Opposition Brief, p. 8) Defendants oppose
any further amendment, observing that this Court already gave
Plaintiff one chance at amendment, which resulted in the Amended
Complaint which is the subject of this second motion to dismiss.
The Court is not required to allow Plaintiffs a third bite at the
pleading apple, particularly three years after the original
complaint was filed. This is the fourth pre-discovery opinion this
Court has written in this case. It is time to move this case
forward and finally hold a Rule 16 conference. Accordingly, the
Court will not grant leave to amend.
8

plausible conclusion that “(1) . . .

the defendant’s conduct

destroyed plaintiff’s reasonable expectations and right to receive
the fruits of the contract, and (2) . . . the defendants’ bad motive
or intention.” Cryofab, Inc. v. Precision Med., Inc., 2008 U.S.
Dist. LEXIS 51758 (D.N.J. July 3, 2008)(citing Dewey v. Volkswagen
AG, 558 F. Supp. 2d 505, 2008 U.S. Dist. LEXIS 28077 *20 (D.N.J.
March 31, 2008) and Wilson v. Amerada Hess Corp., 168 N.J. 236, 251
(2001)).
Defendants argue that the Amended Complaint pleads only
conclusory assertions of Defendants’ bad motive.
disagrees.

The Court

The facts pled adequately support an inference that

Defendants refused to approve Plaintiff’s proposed sale, not based
on any honest belief that the price was too high, but rather because
they intended to buy the distribution rights at a discount and then
make a profit of $79,000.00 by selling the rights themselves.

These

alleged facts plausibly support a conclusion of bad motive. 5
As to the unjust enrichment claim, relying on Baumgardner v.
Bimbo Food Bakeries Distrib., 697 F. Supp. 2d 801 (N.D. Ohio 2010),
Defendants argue that the Amended Complaint fails to state a claim.
The Court in Baumgardner dismissed the plaintiff’s unjust enrichment
claim explaining that, because the parties did not dispute the
existence and enforceability of the express contract, and “the
conduct complained of is explicitly covered by that express

5

See also Fed. R. Civ. P. 9(b)(“Malice, intent, knowledge, and
other conditions of a person’s mind may be alleged generally.”).
9

contract,” there could be no unjust enrichment claim as a matter of
law. 697 F. Supp. 2d at 816-17.
While Baumgardner is factually analogous in some respects, this
Court declines to follow it.

As Baumgardner itself acknowledges,

the Federal Rules of Civil Procedure expressly permit inconsistent
pleading. See Fed. R. Civ. P. 8(d)(3).

While Plaintiff cannot

recover on both his contract claim and his unjust enrichment claim,
the Court will not eliminate Plaintiff’s unjust enrichment claim as
a potential avenue of recovery at the pleadings stage of the case.
See Simonson v. Hertz Corp., 2011 U.S. Dist. LEXIS 32755 (D.N.J.
Mar. 28, 2011)(Hillman, D.J.)(“While a plaintiff may not recover on
both a breach of contract claim and an unjust enrichment claim, a
plaintiff may plead alternative and inconsistent legal causes of
action arising out of the same facts. . . . Plaintiff may plead
alternative legal theories at the motion to dismiss stage.”);
Doherty v. Hertz Corp., 2010 U.S. Dist. LEXIS 124714 (D.N.J. Nov.
24, 2010)(Hillman, D.J.)(same); MK Strategies, LLC v. Ann Taylor
Stores Corp., 567 F. Supp. 2d 729, 736 (D.N.J. 2008)(“This Court has
regularly permitted claims for both unjust enrichment and breach of
contract to proceed at the motion to dismiss stage, finding that
dismissal of one of these claims would be premature.”).
The Motion to Dismiss will be denied as to the breach of good
faith and fair dealing claim (Count 1) and the unjust enrichment
claim (Count 3).

10

C.
The Amended Complaint demands “compensatory damages . . . ,
consequential damages, punitive damages, and exemplary damages of
treble the amount of actual damages.” (Amend. Compl. ¶¶ 31, 41, 54,
and 62)

Defendants move to strike all but the demand for

compensatory damages arguing that the Distribution Agreement
precludes such damages.
The Distribution Agreement provides in Section 11.12, “DAMAGES:
Notwithstanding anything to the contrary contained in this
Agreement, in no event shall either party be liable to the other for
any consequential, incidental, indirect or special damages,
including lost profits and punitive damages.”

In opposition,

Plaintiff argues that punitive damages must be allowed because any
contract language to the contrary is void as against public policy.
The Court concludes that this issue has been mooted by the
Court’s dismissal of all the tort claims contained in the Amended
Complaint.

As a matter of law, punitive damages are not recoverable

in contract. Thomas v. Nova Southeastern Univ., 468 Fed. Appx. 98,
100 (3d Cir. 2012)(citing Lightning Lube, Inc. v. Witco Corp., 4
F.3d 1153, 1194 (3d Cir. 1993)).
Compensatory damages are the prevailing measure of damages in
contract actions, see generally Perini Corp. v. Greate Bay Hotel &
Casino, Inc., 129 N.J. 479, 497-98 (1992), absent specific contract
language to the contrary.

Obviously no such language exists in the

Distribution Agreement at issue.
11

As to the asserted jury trial waiver, Plaintiff briefly and
generically asserts that waiver is an issue of fact and therefore
Defendants’ motion is premature.

While the Court notes that the

language of the asserted waiver is clear, conspicuous, and
unequivocal, and that Plaintiff has not identified any facts that
might call into question the validity of the waiver, the Court will
decline to decide the jury trial issue at this stage of the case.
Defendants have not asserted that any prejudice will result from
deciding this issue, if necessary, at summary judgment or even
later.
IV.
For the reasons stated above, Defendants’ Motion to Dismiss
will be granted as to the tort claims (Counts 2 and 4) and denied as
to the breach of good faith and fair dealing claim (Count 1) and the
unjust enrichment claim (Count 3).

Defendant’s Motion to Strike all

but the demand for compensatory damages will be denied as moot and
to strike a demand for jury trial as waived will be denied without
prejudice.
An appropriate order accompanies this opinion.

Dated: April 10, 2017
At Camden, New Jersey

__s/ Noel L. Hillman ____
NOEL L. HILLMAN, U.S.D.J.

12