LAWMEN SUPPLY COMPANY OF NEW JERSEY, INC. v. GLOCK, INC.
Filing
64
OPINION. Signed by Judge Noel L. Hillman on 6/29/18. (dd, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
LAWMEN SUPPLY COMPANY OF NEW
JERSEY, INC.,
No. 1:17-cv-6166 (NLH/JS)
OPINION
Plaintiff,
v.
GLOCK, INC.,
Defendant.
APPEARANCES:
JONATHAN LOUIS TRIANTOS
SHAWN C. HUBER
WILLIAM M. TAMBUSSI
BROWN & CONNERY, LLP
360 HADDON AVENUE
WESTMONT, NJ 08108
On behalf of Plaintiff
JOHN VINCENT TAIT
RENZULLI LAW FIRM, LLP
81 MAIN STREET, SUITE 508
WHITE PLAINS, NY 10601
On behalf of Defendant
HILLMAN, District Judge
This matter arises from a Distribution Agreement between
Plaintiff Lawmen Supply Company of New Jersey, Inc. and
Defendant Glock, Inc.
Dismiss.
Before the Court is Defendant’s Motion to
For the reasons that follow, the Court will grant in
part and deny in part Defendant’s motion.
The Court will grant
Plaintiff leave to file an amended complaint.
I.
The Court takes its facts from Plaintiff’s Complaint.
Plaintiff is a licensed distributor of law enforcement products
from leading manufacturers to law enforcement agencies.
Defendant makes pistols and related products.
For over twenty-
five years, Plaintiff and Defendant have been in business
together.
Approximately four years prior to the filing of the
Complaint, Plaintiff became a “Glock Only” distributor.
At the time of the filing of the Complaint, Plaintiff held
an exclusive state contract with the State of New Jersey for
Glock weapons, and thus all law enforcement agencies within the
state were required to purchase Glock pistols from Plaintiff.
Plaintiff has had similar contracts with the State of Delaware
and the State of Maryland.
On December 6, 2016, Plaintiff and Defendant entered into a
Distribution Agreement for Plaintiff to distribute “Glock Only”
pistols to the law enforcement market.
This Distribution
Agreement is an annual contract that has been renewed every year
since 2011.
On July 10, 2017, Defendant attempted to
unilaterally terminate the Distribution Agreement “effective
immediately.”
Defendant claimed Plaintiff violated the
2
Distribution Agreement by selling 340 Glock products to the
commercial market rather than the law enforcement market. 1
Plaintiff’s Complaint brings the following claims: (1)
violation of the New Jersey Franchise Practices Act (NJFPA)
(unlawful termination); (2) violation of the NJFPA (engagement
in prohibited practices); (3) breach of contract; (4) breach of
the implied covenant of good faith and fair dealing; (5)
promissory and equitable estoppel; (6) tortious interference
with business relations; (7) tortious interference with
contract; (8) breach of fiduciary duty; (9) fraud and negligent
misrepresentation; (10) unjust enrichment, (11) violation of the
New Jersey Uniform Commercial Code; and (12) violation of the
New Jersey Consumer Fraud Act (NJCFA).
Defendant filed its
Motion to Dismiss on October 4, 2017.
II.
This Court has subject matter jurisdiction over this matter
pursuant to 28 U.S.C. § 1332.
Plaintiff is a New Jersey
corporation with its principal place of business in Delaware.
Defendant is a Georgia corporation with its principal place of
business in Georgia.
As Defendant’s Notice of Removal pleads an
1
On January 31, 2018, the Court signed a Consent Order
submitted by the parties to resolve Plaintiff’s request for
preliminary injunctive relief in this matter. This Consent
Order, entered into “to eliminate any potential inconvenience to
[Lawmen’s] law enforcement agency customers,” governs the
current relationship between the parties.
3
amount in controversy in excess of $75,000, exclusive of
interest and costs, this Court has diversity jurisdiction
pursuant to 28 U.S.C. § 1332.
III.
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 well-pleaded 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).
“While a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, a
plaintiff’s obligation to provide the ‘grounds’ of his
‘entitle[ment] to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do . . . .”
Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (alteration in original)
(citations omitted) (first citing Conley v. Gibson, 355 U.S. 41,
47 (1957); Sanjuan v. Am. Bd. of Psychiatry & Neurology, Inc.,
40 F.3d 247, 251 (7th Cir. 1994); and then citing Papasan v.
Allain, 478 U.S. 265, 286 (1986)).
4
To determine the sufficiency of a complaint, a
court must take three steps.
First, the court must
“tak[e] note of the elements a plaintiff must plead to
state a claim.”
Second, the court should identify
allegations that, “because they are no more than
conclusions, are not entitled to the assumption of
truth.” Third, “whe[n] there are well-pleaded factual
allegations, a court should assume their veracity and
then determine whether they plausibly give rise to an
entitlement for relief.”
Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011) (alterations
in original) (citations omitted) (quoting Ashcroft v. Iqbal, 556
U.S. 662, 664, 675, 679 (2009)).
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.”
Twombly, 550 U.S. at 563 n.8 (quoting Scheuer v. Rhoades, 416
U.S. 232, 236 (1974)); see also Iqbal, 556 U.S. at 684 (“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.”).
“A motion to dismiss
should be granted if the plaintiff is unable to plead ‘enough
facts to state a claim to relief that is plausible on its
face.’”
Malleus, 641 F.3d at 563 (quoting Twombly, 550 U.S. at
570).
5
IV.
The Court first addresses what law it applies in deciding
this motion.
“A federal district court applies the forum
state’s choice of law rules to diversity actions.”
Rosen, 908 F. Supp. 2d 545, 552 (D.N.J. 2012).
Ciecka v.
Accordingly, the
Court will apply New Jersey choice of law rules.
“New Jersey
choice-of-law rules provide that ‘[o]rdinarily, when parties to
a contract have agreed to be governed by the laws of a
particular state, New Jersey courts will uphold the contractual
choice.’”
Collins v. Mary Kay, Inc., 874 F.3d 176, 183-84 (3d
Cir. 2017) (quoting Instructional Sys., Inc. v. Comput.
Curriculum Corp., 614 A.2d 124, 133 (N.J. 1992)).
Parties’ freedom to choose the law applicable to their
agreements is not without boundaries in New Jersey law.
New Jersey looks to Restatement § 187 to determine under
what circumstances a choice-of-law clause will not be
respected. Specifically, the Restatement provides that
the parties’ contractual choice will not govern if: “(a)
the chosen state has no substantial relationship to the
parties or the transaction and there is no other
reasonable basis for the parties’ choice, or (b)
application of the law of the chosen state would be
contrary to a fundamental policy of a state which has a
materially greater interest than the chosen state in the
determination of the particular issue and which . . .
would be the state of the applicable law in the absence
of an effective choice of law by the parties.”
Id. at 184 (quoting Instructional Sys., 614 A.2d at 133).
The Distribution Agreement provides: “This Agreement and
the rights and obligations of the parties hereunder shall be
governed and construed in accordance with the internal,
6
substantive laws of the State of Georgia, USA, including its
provisions of the Uniform Commercial Code, but without giving
effect to its conflicts of laws principles.”
The parties do not dispute that, if their relationship
constitutes a franchise, the NJFPA applies regardless of the
Georgia choice of law provision.
See, e.g., Colt Indus. v.
Fidelco Pump & Compressor Corp., 700 F. Supp. 1330, 1333 (D.N.J.
1987) (“[I]f this Court finds that the relationship between the
parties amounts to a franchise as that term is used in the
[NJFPA], the choice of law provision contained in the agreements
will not abrogate the right of the [parties] to invoke the
protections of [the NJFPA].”).
The same holds true for
Plaintiff’s other state statutory claim.
Prescription Counter
v. AmerisourceBergen Corp., No. 04-5802, 2007 WL 3511301, at *13
(D.N.J. Nov. 14, 2007) (“The importance of the consumer
protection policy manifested by the NJCFA has led the courts to
apply New Jersey law, even though other choice of law rules
pointed elsewhere.”).
However, the parties disagree as to what law applies to the
state common law claims.
Plaintiff argues New Jersey law
applies; Defendant argues Georgia law applies.
The Court finds
that, regardless of whether the NJFPA applies, it must apply
Georgia law to the state common law claims.
Ocean City Express
Co. v. Atlas Van Lines, Inc., No. 13-1467, 2013 WL 3873235, at
7
*4 n.4 (D.N.J. July 25, 2013) (“It may seem incongruous to apply
New Jersey law and Indiana law in the same action, with New
Jersey law governing the NJFPA claim and Indiana law governing
the good faith and fair dealing claim.
But other courts in this
district have applied two states’ laws to cases involving NJFPA
claims.”); Goldwell of N.J., Inc. v. KPSS, Inc., 622 F. Supp. 2d
168, 193-94 (D.N.J. 2009) (“[T]he Court will respect the . . .
choice of law provisions stipulating that Maryland law shall
govern [the] non-NJFPA claims.”); Stadium Chrysler Jeep, L.L.C.
v. DaimlerChrysler Motors Co., LLC, 324 F. Supp. 2d 587, 594 n.1
(D.N.J. 2004); Harter Equip., Inc. v. Volvo Constr. Equip. N.
Am., Inc., No. 01-4040, 2003 WL 25889139, at *8 (D.N.J. Sept.
24, 2003).
Plaintiff cites Red Roof Franchising, LLC v. Patel, 877 F.
Supp. 2d 124 (D.N.J. 2012), aff’d, 564 F. App’x 685 (3d Cir.
2014); King v. GNC Franchising, Inc., No. 04-5125, 2007 WL
1521253 (D.N.J. May 23, 2007); Winer Motors, Inc. v. Jaguar
Rover Triumph, Inc., 506 A.2d 817 (N.J. Super. Ct. App. Div.
1986); and Instructional Systems, 614 A.2d 124 in arguing New
Jersey law applies.
None of these cases convince the Court that
New Jersey law should apply to the state law claims.
Red Roof Franchising, decided by the undersigned in 2012,
was a case dealing with the NJFPA and a Texas choice of law
provision.
The Court determined that, “[s]ince the franchise
8
[wa]s located in New Jersey, it benefit[ed] from the protections
of the New Jersey Franchise Practices Act.”
130.
877 F. Supp. 2d at
The Court then considered whether the Texas choice of law
provision should govern the common law issues – a separate
inquiry.
Id.
Id. at 131.
At issue was a breach of contract claim.
The Court determined that there was “no true conflict
between Texas law and New Jersey law with regard to breach of
contract,” and the Court thus decided to apply New Jersey law,
i.e., the law of the forum state, due to the absence of a
conflict.
The Red Roof Franchising court thus did not decide
this issue.
The Court need not dwell long on Instructional Systems,
Winer Motors, or King, which have already been examined as to
this issue by the Goldwell court:
In ISI I, . . . the Court was asked to decide whether
the application of the NJFPA applied despite the
existence of a California choice of law provision (the
New Jersey Supreme Court answered affirmatively). ISI
I, 130 N.J. at 341.
It did not answer the different
question of whether an extra-state choice of law
provision may apply to non-NJFPA (i.e., common law)
claims asserted elsewhere in the litigation.
Nor did
Winer Motors . . . – relied upon by the courts in both
ISI I and King – where the issue presented was whether
the NJFPA or a Connecticut analogue applied to a
Connecticut franchisee notwithstanding a New Jersey
forum selection clause . . . . Again, the sole inquiry
was which state’s franchise protection statute applied,
not whether a choice of law provision otherwise governed
existing common law claims.
This Court recognizes that the court in King
applied
New
Jersey
law
to
breach
of
contract
counterclaims brought by a defendant franchisor against
9
New Jersey franchisees despite a Pennsylvania forum
selection clause . . . . However, insofar as King relies
on ISI I and Winer for the proposition that, despite an
alternative forum selection clause, “New Jersey choice
of law jurisprudence clearly holds that the law of the
state in which the franchise has its principal place of
business should apply” inexorably in all respects to all
causes of action, this Court must politely part company
with that decision.
Goldwell, 622 F. Supp. 2d at 194 (citations omitted).
The Court
agrees with the Goldwell court’s interpretation of Instructional
Systems, Winer Motors, and King.
The Court will apply Georgia
law to the non-NJFPA and non-NJCFA claims.
V.
A. New Jersey Franchise Practices Act
Plaintiff argues two violations of the NJFPA: unlawful
termination under N.J.S.A. 56:10-5 and engagement in prohibited
practices under N.J.S.A. 56:10-7(f).
Before reaching the merits
of these claims, the Court must first determine whether
Plaintiff is entitled to the protections of the NJFPA.
“The New
Jersey legislature enacted the NJFPA to remedy the disparity in
bargaining power between franchisors and franchisees by
protecting franchisees against indiscriminate terminations and
nonrenewals.”
Red Roof Franchising, 877 F. Supp. 2d at 137.
“The protections of the NJFPA . . . apply only to a
‘franchise,’” as defined by the statute.
Ocean City Express Co.
v. Atlas Van Lines, Inc., 194 F. Supp. 3d 314, 322 (D.N.J.
2016).
N.J.S.A. 56:10-3 defines a “franchise” as follows:
10
a written arrangement for a definite or indefinite
period, in which a person grants to another person a
license to use a trade name, trade mark, service mark,
or related characteristics, and in which there is a
community of interest in the marketing of goods or
services at wholesale, retail, by lease, agreement, or
otherwise.
“In other words, a franchise under the NJFPA requires the
franchisor’s grant of a license to the franchisee and a
community of interest between the parties in the relevant
market.”
Id.
Further, the NJFPA applies only
to a franchise (1) the performance of which contemplates
or requires the franchisee to establish or maintain a
place of business within the State of New Jersey, (2)
where gross sales of products or services between the
franchisor and franchisee covered by such franchise
shall have exceeded $35,000.00 for the 12 months next
preceding the institution of suit pursuant to this act,
and (3) where more than 20% of the franchisee’s gross
sales are intended to be or are derived from such
franchise.
N.J.S.A. 56:10-4(a).
In sum, “[a] franchise exists under the NJFPA if: (1) there
is a ‘community of interest’ between the franchisor and the
franchisee; (2) the franchisor granted a ‘license’ to the
franchisee; and (3) the parties contemplated that the franchisee
would maintain a ‘place of business’ in New Jersey.”
Cooper
Distrib. Co. v. Amana Refrigeration, 63 F.3d 262, 268-69 (3d
Cir. 1995) (citing N.J.S.A. 56:10-3a, -4a). 2
2
Determining whether
Plaintiff’s Complaint sufficiently pleads gross sales in
excess of $35,000 and that over twenty percent of Plaintiff’s
11
a franchise exists requires not only examination of the
agreement between the parties “but also the parties’ practices
under it.”
Cassidy Podell Lynch, Inc. v. Snydergeneral Corp.,
944 F.2d 1131, 1138 (3d Cir. 1991).
The Court begins with the
New Jersey place of business requirement.
1. Place of Business in New Jersey
The NJFPA requires that, for a franchise to exist, the
performance must “contemplate[] or require[] the franchisee to
establish or maintain a place of business within the State of
New Jersey.”
N.J.S.A. 56:10-4(a)(1).
“Place of business” is
defined in N.J.S.A. 56:10-3(f) as follows:
[A] fixed geographical location at which the franchisee
displays for sale and sells the franchisor’s goods or
offers for sale and sells the franchisor’s services.
Place of business shall not mean an office, a warehouse,
a place of storage, a residence or a vehicle, except
that with respect to persons who do not make a majority
of their sales directly to consumers, “place of
business” means a fixed geographical location at which
the franchisee displays for sale and sells the
franchisor’s goods or offers for sale and sells the
franchisor’s services, or an office or a warehouse from
which franchisee personnel visit or call upon customers
or from which the franchisor’s goods are delivered to
customers.
“In other words, the NJFPA requires an actual sales location in
New Jersey at which a ‘substantial level’ of customer marketing
and ‘sales-related [customer] interplay’ occurs, not solely a
gross sales are derived from the purported franchise.
does not contest this.
12
Defendant
center of distribution.”
Ocean City Express, 46 F. Supp. 3d at
509 (alteration in original) (quoting Fischer Thompson
Beverages, Inc. v. Energy Brands Inc., No. 07-4585, 2007 WL
3349746, at *3 (D.N.J. Nov. 9, 2007)).
“In order to survive
dismissal, Plaintiff must therefore allege that selling
constitutes a ‘major activity’ on its premises, ‘involving the
interplay of goods on display, the physical presence of the
customer[,]’ in addition to actual efforts to sell product(s) to
the customer.”
Id. (alteration in original) (quoting Liberty
Sales Assocs., Inc. v. Dow Corning Corp., 816 F. Supp. 1004,
1009 (D.N.J. 1993)).
The Court finds Plaintiff has failed to plead in the
current complaint that selling constitutes a major activity at
the New Jersey place of business.
In Plaintiff’s opposition
brief, it argues:
Here, Lawmen’s New Jersey facility is the hub of its
marketing and sales-related activities as it relates to
Glock products sold to the New Jersey law enforcement
market, which is the largest and most profitable law
enforcement market for Lawmen under the Distribution
Agreement. (Complaint ¶ 1, 92.) Indeed, at Lawmen’s
New Jersey facility – which also serves as its principal
place of business – Lawmen employs its sales and support
personnel
who
display,
order,
and
manage
all
transactions for Glock products for New Jersey law
enforcement agencies under the Distribution Agreement.
(Id.) As such, Lawmen’s New Jersey facility is the exact
type of facility this Court has found to satisfy the
“place of business” inquiry.
Second, while Lawmen does not maintain its FFL and,
in turn, its Glock pistol inventory at its New Jersey
facility, other non-pistol Glock products are kept,
13
offered, and sold from the New Jersey facility to New
Jersey law enforcement agencies under the Distribution
Agreement. (Id.)
The problem with this argument is that those facts are not
pleaded in the Complaint.
Plaintiff relies on paragraphs one
and ninety-two of its Complaint in the argument quoted above.
These paragraphs simply plead that “Lawmen is a New Jersey
corporation and New Jersey licensed distributor of law
enforcement products” and that “Lawmen operates its franchise
‘within the State of New Jersey.’”
(Compl. ¶¶ 1, 92).
In an
uncited portion of the Complaint, it relatedly pleads:
“Plaintiff Lawmen is a New Jersey corporation with its principal
place of business at 7150 Airport Highway, Pennsauken, New
Jersey 08109.
From this facility, Lawmen orders and manages the
pistols it distributes to its customers.”
(Compl. ¶ 9).
On a motion to dismiss, the Court assumes only the veracity
of those facts actually pleaded.
However, because the facts
recited in the brief, if pleaded in good faith, would be
sufficient to make out a plausible claim that the New Jersey
location is the type of sales facility required by the NJFPA and
not merely a distribution site, Plaintiff will be granted leave
to replead this aspect of the Complaint.
Plaintiff will be
granted thirty days to amend its Complaint to assert those facts
necessary to make out a plausible claim that it maintained an
actual sales location in New Jersey at the time the alleged
14
franchise was terminated. 3
The Court finds granting leave to
amend here comports with Federal Rule of Civil Procedure 15(b),
whereby a “court should freely give leave when justice so
requires.”
While the Court assumes that, despite the lack of support
in Plaintiff’s Complaint, Plaintiff has not been disingenuous in
its representations to the Court through its briefing, in
repleading, Plaintiff is reminded of the requirements of Federal
Rule of Civil Procedure 11 – that by filing a pleading with the
Court, an attorney is certifying that “the factual contentions
have evidentiary support or, if specifically so identified, will
likely have evidentiary support after a reasonable opportunity
for further investigation or discovery.”
3
The parties also dispute whether the Distribution Agreement
contemplates or requires a place of business in New Jersey, as
it must for the NJFPA to apply. Section 24 of the Distribution
Agreement states: “The DISTRIBUTOR’s limited non-exclusive
territory will consist of the following area(s): NJ DE PA MD DC
NY.” It states Plaintiff can only sell to the law enforcement
market within these territories. The Court notes that the NJFPA
does not requires a (or the) principal place of business to be
in New Jersey, but rather only that the Distribution Agreement
“contemplates” the establishment or maintenance of “a place of
business” in New Jersey. N.J.S.A. 56:10-4(a)(1). This term of
the Distribution Agreement, the allegations of a prolonged
course of dealing, and the facts alleged which the Court finds
constitute a plausible claim of a community of interest are
sufficient to make a claim that the parties “contemplated” a
place of business in New Jersey.
15
2. Community of Interest Requirement
The Court finds Plaintiff has set forth a plausible claim
that the parties share a community of interest such that the
NJFPA applies.
“[A] community of interest exists when the terms
of the agreement between the parties or the nature of the
franchise business requires the licensee, in the interest of the
licensed business’s success, to make a substantial investment in
goods or skills that will be of minimal utility outside the
franchise.”
Cassidy Podell Lynch, 944 F.2d at 1143.
Thus, “in
order to find a ‘community of interest,’ two requirements must
be met: (1) the distributor’s investments must have been
‘substantially franchise-specific,’ and (2) the distributor must
have been required to make these investments by the parties’
agreement or the nature of the business.”
Cooper Distrib. Co.,
63 F.3d at 269 (citation omitted) (first citing Instructional
Sys., 614 A.2d at 141; and then citing N.J.S.A. 56:10-3a).
“Franchise-specific investments are usually tangible capital
investments, such as a building designed to meet the style of
the franchise, special equipment useful only to produce the
franchise product, and franchise signs.”
Beilowitz v. GMC, 233
F. Supp. 2d 631, 640 (D.N.J. 2002) (citing Instructional Sys.,
614 A.2d at 141).
Further, “[a] community of interest may be
demonstrated by the economic dependence of the alleged
franchisee on the alleged franchisor, as evidenced by a high
16
percentage of the franchisee’s sales of the franchisor’s
products.”
Id. at 641.
Plaintiff highlights the following provisions in the
Distribution Agreement to show a community of interest:
•
“DISTRIBUTOR agrees to purchase a minimum of Three
Hundred and Seventy-Five Thousand in U.S. Dollars
($375,000 USD) of product per year from GLOCK.”
(Section 7).
•
“DISTRIBUTOR understands that as a GLOCK Only
DISTRIBUTOR, when doing business with law enforcement
agencies, DISTRIBUTOR will offer and sell only GLOCK
products.” (Section 1).
•
“DISTRIBUTOR agrees not to sell or knowingly transact
business that will result in the sale, transfer and/or
exchange of GLOCK products outside the Law Enforcement
market (i.e. to the commercial market) . . . .”
(Section 8).
•
“DISTRIBUTOR agrees to use best sales efforts to
market GLOCK products.” (Section 7).
•
“DISTRIBUTOR shall maintain at least one certified
GLOCK Armorer on staff at each location subject to
this Agreement.” (Section 25).
The Court finds sufficient evidence of a community of
interest to withstand the Motion to Dismiss.
In Instructional
Systems, the New Jersey Supreme Court found the following
supported a finding of a community of interest: the prohibition
of developing products that would compete with franchisor’s
products, the required maintenance of sales representatives, the
joint representation at conventions, the prohibition from
selling competitive products, the requirement to use “best
17
efforts” to sell franchisor’s products, franchise-specific
investments, the goodwill and contacts that came from twenty
years of persuading customers to choose the franchisor product,
and that ninety-seven percent of revenue came from the sale of
the franchisor’s products.
Instructional Sys., 614 A.2d at 145-
46.
The Court notes that the Complaint pleads that “[f]or 2016,
Lawmen sales that were made pursuant to the Distribution
Agreement constituted 21.5% of Lawmen’s overall business.”
This
is unlike the ninety-seven percent of revenue in Instructional
Systems.
Despite this difference, however, the Court finds at
the motion to dismiss stage it must find Plaintiff is permitted
to present the Court with evidence of a community of interest.
Plaintiff pleads it has a longstanding association with
Defendant of over twenty-five years and has been a “Glock Only”
pistol distributor for at least four years.
Plaintiff has
discontinued its relationships with other manufacturers because
of its relationship with Defendant.
The Distribution Agreement
requires the maintenance of at least one Glock Armorer at each
location subject to the Distribution Agreement.
It further
requires Plaintiff “to use best sales efforts to market GLOCK
products.” 4
Plaintiff has displayed Glock products and
4
The Court finds it appropriate to consider the Distribution
Agreement in deciding this Motion to Dismiss. ”In deciding
18
promotional materials at least at one trade show with
Defendant’s support and approval.
Taking these facts together,
the Court finds Plaintiff has pleaded enough facts make out a
plausible claim that the parties share a community of interest.
3. License Requirement
“The New Jersey Supreme Court has declared that ‘not every
grant of permission to use a trademark in the sale of goods or
services is a “license” within the meaning of the Franchise
Act.’”
McPeak v. S-L Distrib. Co., No. 12-348, 2014 WL 320074,
at *5 (D.N.J. Jan. 29, 2014) (quoting Instructional Sys., 614
A.2d at 138).
Rather, “the ‘hallmark of the franchise
relationship is the use of another’s trade name in such a manner
as to create a reasonable belief on the part of the consuming
public that there is a connection between the trade name
licensor and licensee by which the licensor vouches, as it were,
for the activity of the licensee in respect of the subject of
the trade name.’”
Id. (quoting Neptune T.V. & Appliance Serv.,
Inc. v. Litton Sys., Inc., 462 A.2d 595, 599 (N.J. Super. Ct.
App. Div. 1983)).
“[T]he license contemplated by the Act is one
in which the franchisee wraps himself with the trade name of the
motions to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), courts generally consider only the allegations in the
complaint, exhibits attached to the complaint, matters of public
record, and documents that form the basis of a claim.” Lum v.
Bank of Am., 361 F.3d 217, 221 n.3 (3d Cir. 2004).
19
franchisor and relies on the franchisor’s goodwill to induce the
public to buy.”
Id. (quoting Liberty Sales Assocs., 816 F.
Supp. at 1010).
“When interpreting the NJFPA, a court must
therefore consider not only the parties’ written agreement, but
also their relationship, in order to determine whether a license
exists.”
Id.
“What distinguishes a franchise from an ordinary
distributorship is that the goodwill inherent in the name and
mark attaches to the entire business of the seller, not just to
the goods themselves.”
Liberty Sales Assocs., 816 F. Supp. at
1010.
A manufacturer of branded goods will certainly not
object, and may encourage, a distributor to use its name
or mark to encourage sales. This kind of use does not
turn a distributor or seller of goods into a licensee
for purposes [of] the Act. Rather, it is the obligation
of the franchisee to promote the mark itself, as distinct
from merely using it to make sales, which distinguishes
a license meeting the Act’s requirements from the right
to use a mark that any reseller of goods gets when
purchasing those goods from the owner of the mark.
Id. at 1011.
Plaintiff argues the following allegations in its Complaint
support a finding of a license:
•
Plaintiff “has a written agreement with Glock, the
franchisor, that granted Lawmen a license to market,
promote, demonstrate, and sell Glock products.”
(Compl. ¶ 91).
•
“The Distribution Agreement requires Lawmen as a
condition precedent to the contract to make an initial
purchase of $2,500 in magazines and $500 in parts. It
20
also requires as a condition that Lawmen purchase a
minimum of $375,000 of products from Glock in each
year of the contract.
Lawmen has at all times met
the annual minimum purchase requirements set forth in
the Distribution Agreement.” (Compl. ¶ 18 (citations
omitted)).
•
“Under the Distribution Agreement, Glock is obligated
to sell its products to Lawmen.” (Compl. ¶ 19).
•
“Glock specifically directs how Lawmen markets Glock
products in the Distribution Agreement . . . .”
(Compl. ¶ 20).
•
“The Distribution Agreement . . . sets forth the
manner in which Lawmen may sell Glock products
. . . .” (Compl. ¶ 21).
•
“The Distribution Agreement . . . dictates how Lawmen
may conduct marketing and sales on the internet for
the sale of Glock products . . . .” (Compl. ¶ 22).
•
“The Distribution Agreement . . . requires Lawmen to
meet certain personnel requirements related to Glock
sales . . . .” (Compl. ¶ 23).
•
“Glock controls the sales and marketing functions of
Lawmen by requiring Lawmen personnel to adhere to
‘Rules of Conduct’ in the sale of its goods.” (Compl.
¶ 24).
•
“On June 27 and 28, 2017, Lawmen maintained a display
at the New Jersey Police and Security Expo. This is
one of the region’s largest trade shows. Lawmen was
the largest supplier at this trade show. . . . With
the knowledge, approval, and support of Glock, Lawmen
displayed Glock products and promotional materials at
the New Jersey Police and Security Expo.
On
information and belief, there were approximately
twelve thousand (12,000) attendees at this trade
show.” (Compl. ¶¶ 59-60).
•
“Glock specifically authorized Lawmen’s ability to
bid for the New Jersey Contract. Glock dictated to
Lawmen the price that Glock products must be listed
21
at in Lawmen’s bid for the New Jersey Contract.”
(Compl. ¶ 35).
•
“Glock specifically authorized Lawmen to bid for the
Delaware Contract. Moreover, Glock dictated to Lawmen
the price that Lawmen must list Glock products at in
its bid for the Delaware contract.” (Compl. ¶ 41).
Plaintiff also argues “Lawmen’s longstanding presence in the law
enforcement community and association with Glock (over 25 years)
– including the participation alongside Glock in countless trade
shows, conventions, demonstrations, and other public functions –
point to the deep-rooted and intertwined connection in the
public mind between Glock and Lawmen.”
However, Defendant directs the Court’s attention to the
following sections in the Distribution Agreement:
•
“The relationship of GLOCK to DISTRIBUTOR is that of
an independent contractor.
DISTRIBUTOR will not
represent itself as a GLOCK entity in any agreement
either written or oral.” (Section 11).
•
“DISTRIBUTOR and GLOCK agree that DISTRIBUTOR may use
the official GLOCK logo in its advertising for GLOCK
products.
DISTRIBUTOR agrees to contact GLOCK to
obtain the appropriate logo and use instructions.
This is a limited license and is only granted for the
term of this Agreement.” (Section 15.C).
•
“DISTRIBUTOR agrees to place the official GLOCK
disclaimer on the portion of its website which sells
GLOCK merchandise, or if not feasible, on a Terms and
Conditions page.
The disclaimer is as follows:
DISCLAIMER:
‘GLOCK’
is
a
federally
registered
trademark of GLOCK, Inc. and is one of many trademarks
owned by GLOCK, Inc. or GLOCK Ges.m.b.H.
Neither
[insert company name here] nor this site are
affiliated in any manner with, or otherwise endorsed
by, GLOCK, Inc. or GLOCK Ges.m.b.H.
The use of
‘GLOCK’ on this page is merely to advertise the sale
22
of GLOCK pistols, parts, or components. For genuine
GLOCK, Inc. and GLOCK Ges.m.b.H products and parts
visit www.glock.com.” (Section 15.F).
•
“DISTRIBUTOR agrees to refrain from using GLOCK’s
intellectual property for domain names, names of
companies or social media pages.” (Section 15.G).
Having considered the allegations in Plaintiff’s Complaint
in the light most favorable to Plaintiff, as well as the
provisions of the Distribution Agreement, the Court finds on the
whole that Plaintiff has made a plausible claim of a license as
defined by the NJFPA, largely for the same reasons the Court
finds sufficient facts pleaded to make out a plausible claim of
a community of interest.
The Distribution Agreement clearly “grant[s] Lawmen a
license to market, promote, demonstrate, and sell Glock
products.”
Plaintiff’s status as a “Glock Only” distributor
further shows a connection to the public between Plaintiff and
Defendant, as does the longstanding relationship between the
parties.
The Court reiterates its standard at the motion to
dismiss stage: “[A] district court 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 claims.’”
Twombly, 550 U.S. at 563 n.8 (quoting Scheuer v.
Rhoades, 416 U.S. 232, 236 (1974)).
The Court finds Plaintiff
has made a sufficient allegation of a license at this stage of
the litigation.
23
4. Violations of the NJFPA
The Court easily finds that, if Plaintiff is able to
sufficiently plead a franchise relationship, Plaintiff has
sufficiently pleaded violations of the NJFPA.
N.J.S.A. 56:10-5,
governing unlawful termination, states in pertinent part:
It shall be a violation of this act for any franchisor
directly or indirectly through any officer, agent, or
employee to terminate, cancel, or fail to renew a
franchise without having first given written notice
setting forth all the reasons for such termination,
cancellation, or intent not to renew to the franchisee
at least 60 days in advance of such termination,
cancellation, or failure to renew . . . .
Plaintiff pleads that on July 10, 2017, Glock purported to
unilaterally terminated the Distribution Agreement effective
immediately.
Plaintiff has clearly sufficiently pleaded a
violation of N.J.S.A. 56:10-5.
N.J.S.A. 56:10-7(f) states:
It shall be a violation of this act for any franchisor,
directly or indirectly, through any officer, agent or
employee, to engage in any of the following practices:
. . . [t]o provide any term or condition in any lease or
other agreement ancillary or collateral to a franchise,
which term or condition directly or indirectly violates
this act.
The “Termination” provision of the Distribution Agreement
violates N.J.S.A. 56:10-7(f).
Subsection A provides that “[a]ny
party may terminate this Agreement with thirty (30) days written
notice.”
Subsection B provides that “GLOCK may terminate this
Agreement at any time due to DISTRIBUTOR’s breach of any of the
24
covenants and conditions or any of its obligations under this
contract.
Termination will be effective immediately upon
delivery of written notice to such effect by certified mail.”
Subsection (C) provides: “If DISTRIBUTOR . . . fails to cure any
material breach of this Agreement (including failure to make a
payment when due) within thirty (30) days after written notice,
GLOCK may suspend performance or terminate this Agreement and
exercise any other legal rights or remedies.”
All three of the
termination provisions provide less than sixty days advance
notice.
The Court will dismiss Plaintiff’s NJFPA claims for failure
to plead the New Jersey place of business requirement but will
allow Plaintiff an opportunity to replead.
The Court otherwise
finds Plaintiff’s NJFPA claims sufficiently pleaded.
B. Breach of Contract
Plaintiff argues Defendant “materially breached the
Distribution Agreement by purporting to terminate it
‘immediately’ based on an unauthorized sale, and without
allowing Lawmen to reasonably cure any such breach.”
“In
Georgia, the elements of a breach of contract claim are: ‘(1)
breach and (2) resultant damages (3) to the party who has the
right to complain about the contract being broken.’”
Jenkins v.
BAC Home Loan Servicing, LP, 822 F. Supp. 2d 1369, 1379 (M.D.
25
Ga. 2011) (quoting Norton v. Budget Rent A Car Sys., Inc., 705
S.E.2d 305, 306 (Ga. Ct. App. 2010)).
Plaintiff’s breach of contract claim focuses on Section 19
of the Distribution Agreement, entitled “Termination.”
It
states, in full:
A.
Any party may terminate this Agreement with thirty
(30) days written notice.
A certified letter to
this effect will suffice as notice of either
party’s intent to terminate this Agreement.
B.
GLOCK may terminate this Agreement at any time due
to DISTRIBUTOR’s breach of any of the covenants and
conditions or any of its obligations under this
contract.
Termination
will
be
effective
immediately upon delivery of written notice to such
effect by certified mail.
C.
If DISTRIBUTOR becomes bankrupt or has a receiver
appointed for a substantial part of its assets, or
fails to cure any material breach of this Agreement
(including failure to make a payment when due)
within thirty (30) days after written notice, GLOCK
may suspend performance or terminate this Agreement
and exercise any other legal rights or remedies.
Plaintiff argues: “Part B, which appears to provide Glock with
the right to terminate the Distribution Agreement at any time
for a breach by Lawmen, directly conflicts with Part C, which
appears to give Glock the right to terminate the Distribution
Agreement only after thirty (30) days written notice of a breach
by Lawmen and an opportunity for Lawmen to cure that breach.”
Defendant argues Plaintiff’s interpretation “violates Georgia’s
rules of contract interpretation and renders Section 19.B.
26
meaningless.” (footnote omitted).
Defendant interprets the
provision as follows:
The terms of the Distributor Agreement are clear and
unambiguous. Glock could: (1) terminate the Distributor
Agreement for any (or no) reason with thirty days’
notice;
(2)
terminate
the
Distributor
Agreement
immediately based on Lawmen’s “breach of any of the
covenants and conditions or any of its obligations”; or
(3) provide Lawmen with written notice of a material
breach and terminate the Distributor Agreement if Lawmen
failed to cure such material breach within thirty (30)
days after written notice.
Under Georgia law,
[t]he construction of contracts involves three steps.
At least initially, construction is a matter of law for
the court. First, the trial court must decide whether
the language is clear and unambiguous. If it is, the
court simply enforces the contract according to its
clear terms; the contract alone is looked to for its
meaning.
Next, if the contract is ambiguous in some
respect, the court must apply the rules of contract
construction to resolve the ambiguity. Finally, if the
ambiguity
remains
after
applying
the
rules
of
construction, the issue of what the ambiguous language
means and what the parties intended must be resolved by
a jury.
Stonegate Bank v. TD Bank, N.A., 596 F. App’x 834, 838 (11th
Cir. 2015) (alteration in original) (quoting City of Baldwin v.
Woodard & Curran, Inc., 743 S.E.2d 381, 389 (Ga. 2013)).
The Court finds this contract language ambiguous, and
certainly lacking in clarity.
Subsection (B) and subsection (C)
appear to contradict each other.
Subsection (C) appears to
assume written notice; subsection (B) assumes no such notice is
required.
The Court must view the contract language in the
27
light most favorable to Plaintiff.
Accordingly, the Court will
allow Plaintiff’s breach of contract claim to proceed. 5
C. Good Faith and Fair Dealing
“In Georgia, ‘[e]very contract implies a covenant of good
faith and fair dealing in the contract’s performance and
enforcement.’”
Ahmed v. Air France-KLM, 165 F. Supp. 3d 1302,
1313-14 (N.D. Ga. 2016) (alteration in original) (quoting Myung
Sung Presbyterian Church, Inc. v. N. Am. Ass’n of Slavic
Churches & Ministries, Inc., 662 S.E.2d 745, 748 (Ga. Ct. App.
2008)).
“There is no independent cause of action for breach of
the covenant of good faith and fair dealing under Georgia law.”
Id. at 1314 (citing Enters. Int’l, Inc. v. Peykan, Inc., 555
S.E.2d 881, 883-84 (Ga. Ct. App. 2001)).
“The implied covenant
cannot be breached independently of ‘the contract provisions it
modifies.’”
Id. (quoting Myung Sung, 662 S.E.2d at 748).
“Thus, to state a claim for breach of the implied duty of good
faith and fair dealing, ‘a plaintiff must set forth facts
showing a breach of an actual term of an agreement.’”
5
Id.
Defendant further argues Plaintiff does not explain how it
could cure a material breach. However, the Complaint pleads
that “Glock has been unwilling to accept any of the reasonable
cures proposed by Lawmen, nor has Glock proposed any cures that
would be acceptable to it.” Plaintiff pleads that Lawmen
President Thomas Hubregsen “offered to provide financial
restitution to any third-party dealer who was harmed by any
breach of the Distribution Agreement and to provide financial
restitution to Glock for any harm caused by any breach of the
Distribution Agreement.”
28
(quoting Am. Casual Dining, L.P. v. Moe’s Sw. Grill, L.L.C., 426
F. Supp. 2d 1356, 1370 (N.D. Ga. 2006)).
“The duty of Good
Faith and Fair Dealing requires that you examine the acts taken
with discretion to determine whether they were arbitrary or
egregious.”
Ahmed, 165 F. Supp. 3d at 1314 (quoting Am. Mgmt.
Servs., LLC v. Fort Benning Family Cmtys., LLC, 774 S.E.2d 233,
246 (Ga. Ct. App. 2016)).
For the same reasons the Court will allow the breach of
contract claim to proceed, the Court will not dismiss
Plaintiff’s claim for breach of the implied covenant of good
faith and fair dealing.
Plaintiff pleads that Defendant’s
reason for terminating the Distribution Agreement is pretextual:
“Glock’s attempt to terminate the Distribution Agreement is due
to its dissatisfaction with the bargain it struck under the
Distribution Agreement.”
It is Plaintiff’s contention that
Defendant was dissatisfied with Plaintiff’s sales figures, which
was the reason behind the termination.
The Court will not
dismiss Plaintiff’s claim for breach of the implied covenant of
good faith and fair dealing.
D. Promissory Estoppel
In Georgia, the elements of promissory estoppel are as
follows: “(1) the defendant made a promise or promises;
(2) the defendant should have reasonably expected the
plaintiffs to rely on such promise; (3) the plaintiffs
relied on such promise to their detriment; and (4) an
injustice can only be avoided by the enforcement of the
promise, because as a result of the reliance, plaintiffs
29
changed
their
position
to
their
detriment
by
surrendering, forgoing, or rendering a valuable right.”
Joseph M. Still Burn Ctrs., Inc. v. AmFed Nat’l Ins. Co., 702 F.
Supp. 2d 1371, 1381 (S.D. Ga. 2010) (quoting Mariner Healthcare,
Inc. v. Foster, 634 S.E.2d 162, 168 (Ga. Ct. App. 2006)).
“An
essential element of a claim of promissory estoppel is that the
defendant made certain promises to the plaintiff.
And, while
the promise need not meet the formal requirements of a contract,
it must, nonetheless, have been communicated with sufficient
particularity to enforce the commitment.”
Id. (quoting Mooney
v. Mooney, 538 S.E.2d 864, 868 (Gt. Ct. App. 2000)).
Paragraph 114 of Plaintiff’s Complaint pleads:
Throughout the course of dealings between the parties,
Glock’s conduct, included (but is not limited to) the
following:
•
Supplying Lawmen with Glock pistols and
products to sell to its customers for over
twenty-five (25) years;
•
Encouraging Lawmen to become a “Glock Only”
dealer;
•
Repeatedly representing Glock’s commitment
to the strategic partnership and dedication
to Lawmen; and
•
Repeatedly
authorizing,
approving,
and
setting pricing for Lawmen’s bids for long
term contracts such as with the State of
New Jersey, Delaware, and Maryland, with
the express or at least implicit agreement
to allow Lawmen to provide Glock products
as required under those contracts and for
their full term.
30
Defendant argues the existence of an undisputedly valid
contract warrants dismissal of this claim.
“Where parties enter
into a contract with bargained for consideration, the terms of
which include the promises alleged in support of a promissory
estoppel claim, promissory estoppel is not available as a
remedy.”
Am. Casual Dining, 426 F. Supp. 2d at 1371.
Thus,
“[w]hen neither side disputes the existence of a valid contract,
the doctrine of promissory estoppel does not apply, even when it
is asserted in the alternative.”
Id.
Defendant argues this
statement of the law requires dismissal of Plaintiff’s
promissory estoppel claim.
However, the promises Plaintiff
pleads form the basis of this claim are not terms of the
Distribution Agreement.
Nevertheless, the Court finds
Plaintiff’s promissory estoppel claim must fail.
First, none of the promises Plaintiff pleads were
“communicated with sufficient particularity to enforce the
commitment.”
Joseph M. Still Burn Ctrs., 702 F. Supp. 2d at
1381 (quoting Mooney, 538 S.E.2d at 868).
For instance, the
Court fails to see how “[e]ncouraging Lawmen to become a ‘Glock
only’ dealer” could constitute a promise that this Court could
enforce.
Further, “promissory estoppel . . . ‘applies to
representations of past or present facts and not to promises
concerning the future, especially where those promises concern
unenforceably vague future acts.’”
31
Bridges v. Reliance Tr. Co.,
422 S.E.2d 277, 280 (Ga. Ct. App. 1992) (quoting Reuben v. First
Nat’l Bank, 247 S.E.2d 504, 507 (Ga. Ct. App. 1978)); see also
Discrete Wireless, Inc. v. Coleman Techs., Inc., 422 F. App’x
777, 782 (11th Cir. 2011) (“Promissory estoppel does not apply
to a promise that is vague, indefinite, or of uncertain
duration.”).
None of Plaintiff’s pleaded “promises” that could
be implied from the Complaint’s allegations are definite
representations of past or present facts.
Rather, they
precisely concern “unenforceably vague future acts.”
Bridges, 422 S.E.2d at 280.
See
The Court will dismiss Plaintiff’s
promissory estoppel claim.
E. Equitable Estoppel
“Equitable estoppel is not recognized as an independent
cause of action under Georgia law.”
Casamayor v. BAC Home Loans
Servicing, LP, No. 12-1522, 2013 WL 12247700, at *11 (N.D. Ga.
Feb. 1, 2013), adopted by 2013 WL 12247837 (N.D. Ga. Feb. 25,
2013).
“Absent a proper legal claim, a plaintiff cannot recover
simply by establishing the elements of equitable estoppel.”
Id.
(quoting Marshall v. King & Morgenstern, 613 S.E.2d 7, 11 (Ga.
Ct. App. 2005)).
In a footnote, Plaintiff argues: “Glock appears to
assert . . . that there is no valid and independent cause of
action for equitable estoppel under Georgia law.
This is yet
again another misapplication of the law on Glock’s part.”
32
(Pl.
Br. 25 n.6 (citation omitted)).
Plaintiff then cites Kirkland
v. Pioneer Machinery, Inc., 534 S.E.2d 435 (Ga. Ct. App. 2000)
for the proposition “that there is an equitable estoppel cause
of action under Georgia law.”
(Pl. Br. 25 n.6.)
However,
Kirkland states: “Estoppel . . . is not a cause of action under
Georgia law. . . .
Without some proper legal cause of action,
establishing all the elements of equitable estoppel will not
entitle plaintiff to relief.”
534 S.E.2d at 437 (quoting Wilson
v. Keheley & Co., 341 S.E.2d 245, 246 (Ga. Ct. App. 1986)).
Defendant’s brief states: “Glock cited to Kirkland as support
for the assertion that Lawmen claims to be a misapplication of
the law, and it directly supports Glock’s proposition.
Lawmen
has not only incorrectly accused Glock of misapplying the law,
it has blatantly misrepresented the holding of Kirkland.”
Reply Br. 9 (footnote omitted)).
The Court agrees.
(Def.
As “Georgia
law treats equitable estoppel as an affirmative defense and not
as a cause of action,” nVision Global Tech. Sols., Inc. v.
Cardinal Health 5, LLC, 887 F. Supp. 2d 1240, 1273 (N.D. Ga.
2012), the Court will dismiss Plaintiff’s claim for equitable
estoppel.
F. Tortious Interference with Business Relations and Tortious
Interference with Contractual Relations
A claim for tortious interference with business
relations, under Georgia law, contains four elements:
33
1)
improper action or wrongful conduct by the
defendant without privilege;
2)
the defendant acted purposely and with malice
with the intent to injure;
3)
the defendant induced a breach of contractual
obligations or caused a party or their parties
to discontinue or fail to enter into an
anticipated business relationship with the
plaintiff; and
4)
the defendant’s tortious conduct proximately
caused damage to the plaintiff.
SHM Int’l Corp. v. Guangdong Chant Grp., Inc., No. 14-1446, 2016
WL 4204553, at *6 (N.D. Ga. June 29, 2016) (quoting Gordon
Document Prods., Inc. v. Serv. Techs., Inc., 708 S.E.2d 48, 53
(Ga. Ct. App. 2011)).
The elements of a tortious interference
with contract claim are similar:
To recover under a theory of tortious interference with
contractual relations, a plaintiff must establish that
the
defendant
(1)
acted
improperly
and
without
privilege; (2) acted purposely and with malice with the
intent to injure; (3) interfered with a third party’s
then existing contractual rights and relations; and (4)
caused the plaintiff financial injury.
Britt/Paulk Ins. Agency v. Vandroff Ins. Agency, 952 F. Supp.
1575, 1583 (N.D. Ga. 1996).
The Court finds both of these claims must fail because
Defendant is not a “stranger” to the state contracts.
“To
sustain a claim for tortious interference with contractual or
business relations, a plaintiff must establish that the
defendant is a ‘stranger’ to the business relationship or
34
contract.”
Id. at 1583, 1584 (“Georgia law requires that a
plaintiff show that the defendant is a ‘stranger’ to the
business and contractual relations at issue in order to prevail
on tortious interference with business and contractual relations
claims.”).
“In fact, this is an essential element of tortious
interference with business and contractual relations claims.”
Id.
“In the context of a tortious interference claim, the term
‘stranger’ has been interpreted broadly by Georgia courts.”
Id.
Georgia courts have held that a defendant is not a
“stranger” to a contract or business relationship when:
(1) the defendant is an essential entity to the purported
injured relations; (2) the allegedly injured relations
are inextricably a part of or dependent upon the
defendant’s contractual or business relations; (3) the
defendant would benefit economically from the alleged
injured relations; or (4) both the defendant and the
plaintiff are the parties to a comprehensive interwoven
set of contracts or relations.
Id.
With regard to all three state contracts, the Complaint
pleads that Defendant specifically authorized Plaintiff to bid
on the contracts and that Defendant dictated the price its
products had to be listed at in the bids.
In opposition to this
Court applying the stranger doctrine, Plaintiff argues:
Glock’s tortious interference . . . extended well beyond
the specific law enforcement contracts and business
relationships that Glock claims to which it was
connected.
Rather, Glock interfered with Lawmen’s
business relationships outside of the Distribution
Agreement, outside of the State Contracts, and outside
of any sale of Glock products. Although Glock may have
contacted these entities in regards to Lawmen’s
35
relationship with Glock, the effect of Glock’s actions
and the harm to Lawmen’s business reputation and future
dealings with the various law enforcement entities
extends far beyond this relationship. Thus, Lawmen has
sufficiently set forth a claim for tortious interference
with contract and/or business relations against Glock,
a stranger to Lawmen’s contracts and business relations
outside of the sale of Glock products.
(Pl. Br. 28).
The Court finds Plaintiff’s factual averments
insufficient and Plaintiff’s argument unconvincing.
The
Complaint clearly demonstrates that Defendant “is an essential
entity” to the state contracts and Plaintiff’s relationship with
the law enforcement agencies it sells to.
It is further clear
to this Court that “the allegedly injured relations are
inextricably a part of or depend upon” Plaintiff’s Distribution
Agreement with Defendant.
The Court will dismiss this claim.
G. Breach of Fiduciary Duty
“To state a claim for breach of fiduciary duty, a plaintiff
must plead the following three elements: ‘(1) the existence of a
fiduciary duty; (2) breach of that duty; and (3) damage
proximately caused by the breach.’”
Edelen v. Campbell Soup
Co., No. 08-299, 2008 WL 11324064, at *14 (N.D. Ga. Sept. 25,
2008) (quoting SunTrust Bank v. Merritt, 612 S.E.2d 818, 822
(Ga. Ct. App. 2005)), adopted by 2008 WL 11337304 (N.D. Ga. Dec.
10, 2008).
“Under Georgia law, a fiduciary duty is established
where the parties enjoy a confidential relationship.”
Id.
A relationship is “deemed confidential whether arising
from nature, created by law, or resulting from
36
contracts, where one party is so situated as to exercise
a controlling influence over the will, conduct, and
interest
of
another
or
where,
from
a
similar
relationship of mutual confidence, the law requires the
utmost good faith, such as the relationship between
partners, principal and agent, etc.”
Id. at *13 (quoting O.C.G.A. § 23-2-58).
Plaintiff’s Complaint pleads:
130. All of Lawmen’s Glock franchise revenues flow from
the sale of Glock products.
131. As the manufacturer of Glock products, Glock is the
sole source of Glock products for Lawmen. Glock is
therefore in a dominant position as it relates to
Lawmen’s viability as a going concern.
132. As the sole source of Glock’s products for Lawmen,
Glock has a duty to exercise reasonable care in
providing sufficient amount of Glock products to
Lawmen in order for Lawmen to meet its customer
demands and to remain a viable business operation.
While Georgia law is clear that a fiduciary duty can arise from
a contract, Plaintiff’s allegations fail to plead a fiduciary
duty imposed on Defendant through its business relationship with
Plaintiff, even if such relationship constitutes a franchise
relationship.
See Prince Heaton Enters. v. Buffalo’s Franchise
Concepts, Inc., 117 F. Supp. 2d 1357, 1365 (N.D. Ga. 2000)
(“Under Georgia law, a franchisor does not generally owe a
fiduciary duty to its franchisees.”).
this claim.
37
The Court will dismiss
H. Fraud and Negligent Misrepresentation
“To assert a claim for fraud under Georgia law, [a
plaintiff] ‘must show (i) a false representation or omission of
a material fact; (ii) scienter; (iii) intention to induce the
party claiming fraud to act or refrain from acting; (iv)
justifiable reliance; and (v) damages.’”
Rosen v. Protective
Life Ins. Co., 817 F. Supp. 2d 1357, 1375 (N.D. Ga. 2011)
(quoting TechBios, Inc. v. Champagne, 688 S.E.2d 378, 380 (Ga.
Ct. App. 2009)).
In most circumstances, actionable fraud cannot be
predicated on a promise contained in a contract because
fraud generally cannot be predicated on statements that
are in the nature of promises as to future events, and
to hold otherwise, any breach of contract would amount
to fraud.
However, an exception to this rule exists
where a promise as to future events is made with a
present intent not to perform or where the promisor knows
that the future event will not take place.
Id. (quoting TechBios, 688 S.E.2d at 380-81).
Plaintiff’s Complaint pleads “Glock made fraudulent
misrepresentations to Lawmen in order to induce Lawmen into the
Distribution Agreement and for Lawmen to engage in a full-scale
effort to market, promote, advertise, and sell Glock’s products
to law enforcement agencies in the designated territories.”
(Compl. ¶ 138).
It further pleads “Glock’s fraudulent
misrepresentations included, but are not limited to,
representing to Lawmen that Lawmen would be and remain the
38
exclusive distributor of Glock products to law enforcement
agencies in the designated territories.”
(Compl. ¶ 139).
Federal Rule of Civil Procedure 9(b) states: “In alleging
fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.”
The sole
allegation as to a fraudulent representation asserted with any
degree of specificity is that Defendant represented that
Plaintiff would remain an exclusive distributor of its products
to law enforcement agencies within Plaintiff’s territories.
Plaintiff alleges this was intended to “induce Lawmen into the
Distribution Agreement and for Lawmen to engage in a full-scale
effort to market, promote, advertise, and sell Glock’s products
to law enforcement agencies in the designated territories.”
However, even this statement fails to sufficiently “state with
particularity the circumstances constituting fraud or mistake.”
“To satisfy this standard, the plaintiff must plead or allege
the date, time and place of the alleged fraud or otherwise
inject precision or some measure of substantiation into a fraud
allegation.”
Cir. 2007).
Frederico v. Home Depot, 507 F.3d 188, 200 (3d
Plaintiff has not satisfied this burden.
For the same reason, the Court will also dismiss
Plaintiff’s negligent misrepresentation claim.
See Travelers
Indem. Co. v. Cephalon, Inc., 620 F. App’x 82, 85 (3d Cir. 2015)
(providing that where a “theory sounds in fraud,” including a
39
negligent misrepresentation claim, a plaintiff’s “pleadings must
satisfy the ‘stringent’ Rule 9(b) requirements for
particularity.”).
I. Unjust Enrichment
“Unjust enrichment is an equitable concept that applies
when there is no actual legal contract, but yet there has been a
benefit conferred for which there deserves to be some
compensation given to the party delivering the benefit.”
Jenkins, 822 F. Supp. 2d at 1377 (citing Renee Unlimited, Inc.
v. City of Atlanta, 687 S.E.2d 233, 238 (Ga. Ct. App. 2009)).
“In other words, ‘[a]n unjust enrichment theory does not lie
where there is an express contract.’”
White v. Wachovia Bank,
N.A., 563 F. Supp. 2d 1358, 1371 (N.D. Ga. 2008) (alteration in
original) (quoting Pryor v. CCEC, Inc., 571 S.E.2d 454, 456 (Ga.
Ct. App. 2002)).
Plaintiff’s Complaint pleads: “Glock has been unjustly
enriched by Lawmen’s purchase of inventory under the
Distribution Agreement.”
(Compl. ¶ 145).
It further pleads:
“Glock has been unjustly enriched by substantial investments and
marketing efforts made to grow the Lawmen/Glock partnership.”
(Compl. ¶ 147).
Here, it is undisputed that a valid legal
contract existed between Plaintiff and Defendant, which is fatal
to Plaintiff’s claim.
However, Plaintiff argues Defendant has
been unjustly enriched through Plaintiff’s state contracts,
40
which are separate from the Distribution Agreement and to which
Defendant is not a party.
However, Defendant is correct that
Plaintiff’s only allegations as to the basis for its unjust
enrichment claim relate to benefits Defendant incurred under the
Distribution Agreement.
In any event, an unjust enrichment claim based on the state
contracts still fails, as “[a] claim for unjust enrichment is
not a tort, but an alternative theory of recovery if a contract
claim fails.”
Wachovia Ins. Servs. v. Fallon, 682 S.E.2d 657,
665 (Ga. Ct. App. 2009) (quoting Tidikis v. Network for Med.
Commc’ns & Research, LLC, 619 S.E.2d 481, 485 (Ga. Ct. App.
2005)).
As Plaintiff is attempting to “assert[] unjust
enrichment as a separate tort and not an alternative theory of
recovery for a failed contract, this claim fails as a matter of
law.”
See id.
The Court will dismiss Plaintiff’s claim for
unjust enrichment.
J. Violation of the New Jersey Uniform Commercial Code
Plaintiff’s Complaint alleges violations of N.J.S.A. 12A:1203 and N.J.S.A. 12A:2-306.
This Court finding Georgia state
law governs this action, and Plaintiff having provided no sound
reason otherwise, the Court finds any claims under these
provisions must fail. 6
The Court has also assumed throughout the
6
The Distribution Agreement’s choice of law provision
specifically states that the Georgia UCC provisions govern.
41
course of this Opinion that common law applies to the
Distribution Agreement.
If Plaintiff contends the UCC applies,
the Court will allow Plaintiff to replead any corollary UCC
claims under Georgia law, subject to the Court revisiting its
decision on Plaintiff’s common law claims.
K. Violation of the New Jersey Consumer Fraud Act
The Court will dismiss Plaintiff’s NJCFA claim.
As a
preliminary matter, the Court does not find the Distribution
Agreement’s choice of law provision waived Plaintiff’s right to
assert a cause of action under the NJCFA.
“[A] contractual
choice of law will not be upheld where application of the law
would be contrary to the public policy of New Jersey.
The NJCFA
is a clear and fully articulated statement of fundamental public
policy by the legislature of New Jersey.”
2007 WL 3511301, at *13.
Prescription Counter,
“The importance of the consumer
protection policy manifested by the NJCFA has led the courts to
apply New Jersey law, even though other choice of law rules
pointed elsewhere.”
Id.
Applying the NJCFA, the Court finds Plaintiff’s claim must
be dismissed.
Plaintiff’s Complaint pleads the NJCFA applies
because Plaintiff “purchased merchandise (i.e. Glock products)
from Glock.”
The NJCFA is intended to protect consumers who
purchase “goods or services generally sold to the public at
large.”
Id. at *14 (quoting Cetel v. Kirwan Fin. Grp., Inc.,
42
460 F.3d 494, 514 (3d Cir. 2006)).
“Products and services that
are purchased for consumption or use in the course of business
are covered by the NJCFA.”
Id. at *15.
“On the other hand,
goods or services that are never consumed or used in the course
of business, such as products purchased at wholesale for resale,
franchises, and designs are not covered by the NJCFA.”
Id.;
accord Stockroom, Inc. v. Dydacomp Dev. Corp., 941 F. Supp. 2d
537, 544 (D.N.J. 2013) (“Many cases where a business-to-business
transaction is deemed to be outside the scope of NJCFA involve
wholesalers and distributors.
In those circumstances, the
distributor cannot sue the wholesaler under the NJCFA because
the distributor is not a ‘consumer’ as that word is commonly
understood.”).
To the extent Plaintiff is seeking to apply the NJCFA to
this action based on the distributorship or franchise being the
good sold, the Third Circuit has held that “even where
franchises or distributorships are available to the public at
large in the same sense as are trucks, boats or computer
peripherals, they are not covered by the Consumer Fraud Act
because they are businesses, not consumer goods or services.
They never are purchased for consumption.”
J & R Ice Cream
Corp. v. Cal. Smoothie Licensing Corp., 31 F.3d 1259, 1274 (3d
Cir. 1994).
Although the New Jersey Superior Court, Appellate
Division has criticized the holding in J & R, see Kavky v.
43
Herbalife Int’l of Am., 820 A.2d 677 (N.J. Super. Ct. App. Div.
2003), “the majority of courts in this district have followed
the Third Circuit’s interpretation of the NJCFA.”
Kumon N. Am.,
Inc. v. Timban, No. 13-4809, 2014 WL 2812122, at *10 (D.N.J.
June 23, 2014); accord Carrow v. Fedex Ground Package Sys., No.
16-3026, 2017 WL 1217119, at *5 (D.N.J. Mar. 30, 2017) (stating
that, while “[s]ome recent decisions by the New Jersey Appellate
Division have rejected the restrictive interpretation in J & R,”
the Third Circuit decision “is binding on this Court”).
This
claim will be dismissed.
VI.
The Court will grant Defendant’s Motion to Dismiss as to
Count I (NJFPA), Count II (NJFPA), Count V (promissory and
equitable estoppel), Count VI and VII (tortious interference
claims), Count VIII (breach of fiduciary duty), Count IX (fraud
and negligent misrepresentation), Count X (unjust enrichment),
Count XI (violation of the New Jersey Uniform Commercial Code),
and Count XII (violation of the NJCFA).
The Court will deny
Defendant’s Motion to Dismiss as to Count III (breach of
contract) and Count IV (breach of the implied covenant of good
faith and fair dealing).
The Court will grant Plaintiff thirty
days to replead its NJFPA claim to sufficiently assert facts to
satisfy the New Jersey place of business requirement and to
44
plead any of its UCC claims under Georgia law.
An appropriate
Order will be entered. 7
Date: June 29, 2018
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
7
The Court will not award attorneys’ fees to either party at
this time.
45
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