FULLER et al v. PEPSICO, INC. et al
Filing
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MEMORANDUM & ORDER granting in part and denying in part 24 Defendants Motion to Dismiss; Granting that Albert Fuller and IPC Detroit's claims based upon promissary estoppel are Dismissed; Denying all other relief sought. Signed by Judge Peter G. Sheridan on 9/11/2012. (eaj)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ALBERT D. FULLER, CHARLES A. STANZIALE,
JR., and INTEGRATED PACKAGING
CORPORATION-DETROIT,
Civil Action No.:
11-4989 (PGS)
Plaintiffs,
MEMORANDUM & ORDER
v.
PEPSICO, INC. and PEPSI-COLA ADVERTISING
AND MARKETING, INC.,
Defendants.
SHERIDAN, U.S.D.J.
This matter comes before the Court on defendants PepsiCo, Inc. (“PepsiCo”) and Pepsi-Cola
Advertising and Marketing, Inc.’s (“Pepsi AM”) (collectively “Defendants”) motion to dismiss
plaintiffs Albert D. Fuller, Charles A. Stanziale, and Integrated Packaging Corporation-Detroit’s
(“IPC Detroit”) (collectively “Plaintiffs”) Amended Complaint. This Court has jurisdiction over this
matter pursuant to 28 U.S.C. § 1332. For the reasons stated below, Defendants’ motion to dismiss
is granted in part and denied in part.
I
This action arises out of a corrugate box supply agreement (“Supply Agreement”) entered
into by and between Integrated Packaging Corporation of New Jersey (“IPC New Jersey”) and
Defendants. (Am. Compl., Ex. A at 2 [hereinafter Agreement]).1
According to Plaintiffs,
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Defendants argue that the Supply Agreement was only between IPC New Jersey and Pepsi
negotiations for the Supply Agreement began in 2007, when PepsiCo decided to concentrate its
United States corrugate box suppliers into five distinct geographic sectors. (Am. Compl. ¶¶ 19-20).
At that time, Mr. Fuller was President/CEO of three corrugate box suppliers: IPC New Jersey, IPC
Detroit, and IPC Louisiana, LLC. (Id. at ¶ 9). Plaintiffs allege that PepsiCo promised to make IPC
New Jersey the sole corrugate box provider for its Northeast sector provided that IPC New Jersey
materially upgraded its plant and improved its operations. (Id. at ¶¶ 20-21). Plaintiffs further allege
that this promise was made to Mr. Fuller in both his official capacity as head of IPC New Jersey and
IPC Detroit as well as his individual capacity. (Id.).
According to Plaintiffs, IPC New Jersey was subsequently upgraded in accordance with
PepsiCo’s requirements. (Id. at ¶¶ 21, 24). Plaintiffs claim the upgrade cost over $12 million, and
that $10.25 million in financing was advanced by Mr. Fuller and IPC Detroit. (Id. at ¶¶ 21, 24).
On May 1, 2009, the Supply Agreement was executed. (Agreement at 1). Under the Supply
Agreement, IPC New Jersey was made sole corrugate box provider of PepsiCo’s Northeast sector
for an initial term lasting from Jan. 1, 2008 to Dec. 31, 2012. (Agreement §§ 2-3). According to
Plaintiffs, IPC New Jersey successfully performed under the Supply Agreement while Defendants
repeatedly breached. (Am. Compl. ¶¶ 28, 30-39). Plaintiffs allege that as a result of Defendants’
breach, IPC New Jersey was forced to enter into New Jersey state receivership. (Id. at ¶ 44). Since
entering receivership, IPC New Jersey’s interests have been represented by Mr. Stanziale, a party
appointed by the Superior Court of New Jersey as assignee for the benefit of IPC New Jersey’s
creditors. Matter of Integrated Packaging Corp., Dkt. No. 232533 (N.J. Ch. May 06, 2011).
AM. (Supp. Br. at 17). However, by the express terms of the Supply Agreement, Pepsi AM acts “on
behalf of itself [and] its parent.” Agreement at 1.
2
Plaintiffs’ Amended Complaint alleges four separate causes of action. Mr. Stanziale alleges
that Defendants breached the Supply Agreement (Count I), breached the implied duty of good faith
and fair dealing (Count II), and were unjustly enriched (Count III). (Am. Compl. ¶¶ 55-71). Mr.
Fuller and IPC Detroit allege that Defendants are liable to each Plaintiff for the funds directed toward
IPC New Jersey under the equitable theory of promissory estoppel (Count IV). In response to the
Amended Complaint, Defendants moved to dismiss all counts with prejudice. (Dkt. No. 24).
II
On a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil
Procedure 12(b)(6), the Court is required to accept as true all allegations in the complaint and all
reasonable inferences that can be drawn therefrom, and to view them in the light most favorable to
the non-moving party. See, e.g., Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009); Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007); Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380,
1384 (3d Cir. 1994). A complaint should be dismissed only if the alleged facts, taken as true, fail
to state a claim. Iqbal, 129 S. Ct. at 1950. While a court will accept well-pled allegations as true for
the purposes of the motion, it will not accept bald assertions, unsupported conclusions, unwarranted
inferences, or sweeping legal conclusions cast in the form of factual allegations. Iqbal, 129 S. Ct.
at 1949; see also Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). As the
Supreme Court has recently held, “[w]hile 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.” Twombly, 500 U.S. at 555 (internal citations and
quotations omitted); see also Iqbal, 129 S. Ct. at 1949-50.
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III
A. Breach of Contract
To properly allege a breach of contract claim, a plaintiff must allege (1) the existence of a
contract, (2) the plaintiff’s performance under the contract, (3) the defendant's breach of that
contract, and (4) resulting damages. JP Morgan Chase v. J.H. Electric, 69 A.D.3d 802, 803 (NY
App. Div. 2010).2 In their motion to dismiss the complaint, Defendants advance four arguments.
First, Defendants claim that the Supply Agreement was not an agreement to make IPC New Jersey
a sole corrugate box provider of PepsiCo’s Northeast sector. Supp. Br. at 13-14. This argument is
belied by the agreement itself, and therefore rejected. See Agreement § 3.3 Second, Defendants claim
that Plaintiffs failed to allege that Defendants violated the Supply Agreement. Supp. Br. at 11-12.
Importantly, this second argument is premised upon the first. See Supp. Br. 11-14. In the second
argument, Defendants merely claim that because the Supply Agreement was not a sole service
agreement, Plaintiffs’ assertion that Defendants awarded business to alternate box companies cannot
constitute a breach. Id. For obvious reasons, this argument must also fail. Third, Defendants seek
to interject evidence that IPC New Jersey breached the contract and that Defendants’ response to the
breach conformed with the Supply Agreement’s terms. Id. at 13-14. As the Court is required on a
motion to dismiss to accept all of the allegations in a complaint as true, Ashcroft v. Iqbal, 129 S. Ct.
2
The Supply Agreement is governed by the laws of New York state. Agreement § 18.
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On a motion to dismiss, in addition to the complaint’s allegations, courts may consider
exhibits to the complaint, documents referred to in the complaint or integral to the claim, and items
appearing in the record of the case. Buck v. Hampton Twp. School Dist., 452 F.3d 256, 260 (3d Cir.
2006) (citing 5B Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure § 1357 (3d
ed. 2004). The Supply Agreement is integral to the claim and was attached to the Amended
Complaint.
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1937, 1949-50 (2009), and as Plaintiffs allege that they did not breach the Supply Agreement, Am.
Compl. ¶ 28, such evidence is better left for discovery. Finally, Defendants argue that Plaintiffs
cannot allege “resulting damages” because the Supply Agreement forestalls Defendants’ liability for
“lost profits or any indirect, incidental, special, punitive, exemplary or consequential damages of any
kind, howsoever.” Supp. Br. (citing Agreement § 12). However, the Supply Agreement specifically
allows for Defendants’ liability in the event of Defendants’ gross negligence or willful misconduct.
Agreement § 12. As Plaintiffs’ allegations could constitute willful misconduct, Defendants’
argument is without merit. See Am. Compl. ¶¶ 30-38; see also Kalisch-Jarcho, Inc. v. New York, 58
N.Y.2d 377, 385 (1983). Thus, Defendants’ motion to dismiss Plaintiffs’ breach of contract claim
is denied.
B. Breach of Implied Duty of Good Faith and Fair Dealing
Under New York law, all contracts imply a covenant of good faith and fair dealing. 511 W.
232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153 (2002). The covenant embraces
the pledge that “neither party shall do anything which will have the effect of destroying or injuring
the right of the other party to receive the fruits of the contract.” Dalton v. Educ. Testing Serv., 87
N.Y.2d 384, 389 (1995). However “[t]o sustain a breach of the implied covenant claim, the claimant
must allege and show that the other party ‘exercised a [contractual] right malevolently, for its own
gain as part of a purposeful scheme designed to deprive [claimant] of the benefits’ under the
contract.” Wilmington Trust Co. v. Strauss, No. 601192-2003, 2006 WL 3076611 at *8 (N.Y. Sup..
Oct. 30, 2006) (J. Fried) (citing Richbell Info Svcs., Inc. v. Jupiter Partners, L.P., 309 A..D.2d 288,
302 (1st Dept 2003)).
Defendants argue that Plaintiffs’ breach of the implied duty of good faith and fair dealing
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claim fails as a matter of law because Plaintiffs neglected to allege that Defendants engaged in ‘a
malevolent, purposeful scheme.’ Supp. Br. at 10. However this argument is directly contradicted
by the Amended Complaint, and is therefore denied. Am. Compl. ¶¶ 30-39.
Defendants also argue that Plaintiffs’ breach of the implied duty of good faith and fair dealing
claim is duplicative. Reply Br. at 10-11. Under New York law, “a cause of action alleging breach
of the implied covenant of good faith and fair dealing must be dismissed if it is merely duplicative
of a breach of contract claim.” Refreshment Mgmt. Servs., Corp. v. Complete Office Supply
Warehouse Corp., 933 N.Y.S.2d 312, 315 (App. Div. 2d Dept. 2011). In response to Defendants’
argument, Plaintiffs urge that the Amended Complaint includes facts “that are wholly different from
and supplement to the facts underlying [the] breach of contract claim. Sur-Reply Br. at 1.
Specifically, Plaintiffs quote from Count II of Plaintiff’s Amended Complaint, which states:
“PepsiCo and/or Pepsi AM usurped IPC New Jersey’s business opportunities, made unfair and
inaccurate comments about its performance, and undercut IPC New Jersey’s contract with its own
supplier by entering into its own contract with that supplier.” Id. at 2 (citing Am. Compl. ¶ 64).
Plaintiffs also identify several allegations in the Amended Complaint that, according to Plaintiffs,
are not part of the action for breach of contract. Id. at 3-5
At this early stage of the proceedings and in an abundance of caution, the Court has
determined that (1) at least some of the allegations Plaintiffs cite in their sur-reply brief, including
references to undercutting supplier contracts, are separable from Plaintiffs’ breach of contract claim;
and (2) after discovery, the Court will be in a better position to determine if Plaintiff’s second cause
of action is duplicative. See, e.g., Genna v. Sallie Mae, Inc., 11 Civ. 7371 (LBS), 2012 WL 1339482,
at *2-3 (S.D.N.Y., Apr. 17, 2012). Thus, the Court denies Defendants’ motion to dismiss as to this
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claim.
C. Unjust Enrichment
To establish a claim for unjust enrichment, “a plaintiff must show that defendant received
a benefit and that retention of that benefit would be unjust.” VRG Corp. v. GKN Realty Corp., 135
N.J. 539, 554 (1994) (citing Assocs. Commercial Corp. v. Wallia, 211 N.J. Super. 231, 243 (App.
Div. 1986)). Importantly, recovery for unjust enrichment is only available “when there [is] no
express contract providing for remuneration.” Caputo v.Nice-Pak Prods., Inc., 300 N.J. Super. 498,
507 (App. Div. 1997).
Defendants allege that the Supply Agreement precludes Plaintiffs’ unjust enrichment claim.
Supp. Br. 17-18. According to Defendants, “the Supply Agreement is the operative document which
governs the relationship between [Defendants] and IPC New Jersey.” Id. Plaintiffs challenge this
assertion, claiming that the Amended Complaint alleges investment of significant funds and
provision of numerous services outside of the scope of the Supply Agreement for which it was never
compensated. Opp’n Br. at 20 (citing Am. Compl. ¶¶ 68-69). Taking all of the allegations in
Plaintiffs’ Amended Complaint as true, the Court has determined that Plaintiffs’ claim for unjust
enrichment is cognizable. As explained in the Court’s discussion of Plaintiffs’ second claim,
discovery will ultimately reveal whether Plaintiffs’ alleged provision of funds and services was
beyond the ambit of the Supply Agreement.
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D. Promissory Estoppel
The elements of a promissory estoppel claim under New Jersey law are: (1) a clear and
definite promise; (2) made with the expectation that the promisee will rely on it; (3) the promisee
in fact reasonably relies on the promise with (4) definite and substantial detriment as a result of
the reliance. Toll Bros., Inc. v. Board of Chosen Freeholders of the County of Burlington 194
N.J. 223, 253 (2008)(quoting Lobiondo v. O’Callaghan, 357 N.J.Super. 488, 499 (2003)).
Plaintiffs Mr. Fuller and IPC Detroit allege that Defendants failed to fulfill specific
promises of awarding IPC New Jersey with a contract as well as expected business opportunities.
However, as explained above, Defendants awarded IPC New Jersey such an agreement. (see
generally Agreement). To the extent that Mr. Fuller and IPC Detroit allege that they suffered an
“indefinite and substantial detriment,” the detriment is a result of Defendant’s alleged breach of
the Supply Agreement, not the Defendants’ alleged breach of the promise to enter said
agreement. Thus, Mr. Fuller and IPC Detroit’s promissory estoppel claims as pleas are
insufficient, and Defendant’s motion to dismiss these claims is granted.
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ORDER
For the reasons set forth above,
IT IS on this 11th day of September, 2012
ORDERED that Defendants’ motion to dismiss (Dkt. No. 24) is granted in part such that
Albert Fuller and IPC Detroit’s claims based upon promissary estoppel (Amended Complaint,
Count IV) are dismissed. All other relief sought is denied.
s/Peter G. Sheridan
PETER G. SHERIDAN, U.S.D.J.
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