DIGITAL WHOLESALE OF NEW YORK, LLC v. AMERICAN EAGLE TRADING GROUP, LLC et al

Filing 15

OPINION filed. Signed by Judge Anne E. Thompson on 9/28/2016. (eaj)

RECEIVED

SEP 2 9 2016

NOT FOR PUBLICATION

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UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
DIGITAL WHOLESALE OF NEW YORK,
LLC alb/a DWNY, LLC,
Civ. No. 16-3487 ·

Plaintiff,

OPINION

v.
AMERICAN EAGLE TRADING GROUP,
LLC, KENNY MANUS a.k.a. KEN MANUS,
KURT MARSHALL, & JOHN DOES 1-10,
Defendants.
THOMPSON, U.S.D.J.
INTRODUCTION

This matter is before the Court upon the partial motion to dismiss brought by Defendants
American Eagle Trade Group, LLC and Kurt Marshall ("Defendants"). (ECF No. 9). Plaintiff
Digital Wholesale ofNew York, LLC ("Plaintiff') opposes via letter to the Court dated
September 19, 2016. (ECF No. 13.) While this is an improper format and date of submission for
filing opposition (Local Rule 7.l(d)), the Court will consider the opposition letter pursuant to its
discretionary powers. The Court has decided the motion based on the written submissions of the
parties and without oral argument pursuant to Local Civil Rule 78.1 (b). For the reasons stated
herein, Defendants' motion will be granted in part and denied in part.
BACKGROUND
This case concerns a contract for the sale of American Eagle merchandise, and
Defendants' alleged breach of that contract. Plaintiffs allegations are as follows: Plaintiff sells
consumer goods on Amazon.com, and provides consulting services to other Amazon sellers.
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(Compl. ~ 5, ECF No. 1). On May 1, 2015, Samuel Cohen, a representative for Plaintiff, met
Defendant Manus, 1 who stated that he was a sales representative for American Eagle. (Id. at~~
6-7). Defendant Manus offered to sell overstocked American Eagle merchandise to Plaintiff that
was brand new and undamaged. (Id at~~ 8-10). On May 29, 2015, Plaintiff purchased $30,750
worth of merchandise from Defendant American Eagle Trading Group. (Id

at~

11). Upon

receipt, Plaintiff discovered the goods were not what Defendant Manus had promised. (Id. at ~
12). Defendant Manus offered to exchange the merchandise for other items, and give Plaintiff a
credit for some of the merchandise. (Id at 13).
On July 16, 2015, Mr. Cohen met with Defendant Manus and Defendant Marshall in
Miami, Florida. (Id at~ 14). Both defendants showed Mr. Cohen Defendant American Eagle
Trading Group's business operations in Miami, thus allegedly demonstrating that Defendant
Manus was an employee or agent of the company. (Id.). Mr. Cohen was shown brand new
merchandise with the original tags intact. (Id

at~

15). That same day, Plaintiff purchased

$123,762.33 worth ofthis new merchandise. (Id at~ 15-16). Defendant Manus followed up
with an email promising that the merchandise was "new and grade A products" and that Plaintiff
would receive a refund for any defective products. (Id at ~ 18). Prior to receipt of the July 16th
order, Plaintiff placed three additional orders totaling $34,550. (Id.

at~

21).

Many of the goods from the July 16th order were sent directly to Plaintiffs consulting
clients, who also sell merchandise on Amazon.com. (See id.

at~~

5, 17, 22). Starting on August

21, 2015, Plaintiff began receiving complaints from clients who received goods from the July
16th order. (Id

at~

22). The quality of the goods was not the same as what Mr. Cohen saw in

Miami nor what Defendant Manus had promised. (Id). The goods were damaged and

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Defendant Manus has not yet appeared in this action.
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unsellable, and Plaintiff consequently had to refund all of its consulting clients and pay for the
return shipping costs. (Id at, 23). Due to these problems, all defendants agreed to take back
the merchandise and fully refund Plaintiff. (Id. at, 27).
Plaintiff returned all of the merchandise to Defendant American Eagle Trading Group's
warehouse in Passaic, New Jersey. (Id at, 28). Defendant Manus and other employees
accepted the merchandise. (Id at if 29). Defendant Manus promised to give Plaintiff's driver a
bill of lading for the merchandise, as required by law, but instead kept him waiting for several
hours before promising to email the bill of lading at a later date. (Id at if 30). Defendant Manus
never sent the bill of lading. (Id).
Plaintiff never received repayment of the $186,962.33 it paid for the returned
merchandise. (Id at , 31 ). Plaintiff believes that Defendant Manus sold the merchandise at a
public liquidation sale. (Id). Plaintiff additionally believes that Defendant Manus was
previously indicted on June 4, 2015 for several counts including theft by unlawful taking,
receiving stolen property, and fencing. (Id. at, 32). Plaintiff believes that Defendant Manus
was engaged in receiving and selling stolen goods as early as 2012. (ld at if 34). Plaintiff
therefore believes that defendants Kurt Marshall and American Eagle Trading Group knew or
should have known about Defendant Manus' alleged criminal activities prior to allowing him to
receive Plaintiffs merchandise at the Passaic warehouse. (Id. at, 35). Lastly, Plaintiff alleges
that defendants Kurt Marshall and American Eagle Trading Group worked in conjunction with
Defendant Manus and participated in his taking of Plaintiffs returned merchandise and selling it
without refunding Plaintiff. (Id. at , 36).

PROCEDURAL IDSTORY
Plaintiff filed a complaint against the defendants in New Jersey state court on March 21,
2016. (ECF No. 1). Defendants Kurt Marshall and American Eagle Trading Group removed the
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case to this Court on June 16, 2016. (Id.). On August 8, 2016, defendants Kurt Marshall and
American Eagle Trading Group filed a partial motion to dismiss with a request for an extension
of time to answer the remaining portions of Plaintiffs complaint. (ECF No. 9). This motion is
presently before the Court. Defendants filed a reply brief on August 31, 2016. (ECF No. 11 ).
Plaintiff filed an opposition letter on September 19, 2016 (ECF No. 13) accompanied by an
amended opinion (ECF No. 12), which "voluntarily temov[ed] ... Counts Six, Seven, Eight, and
Nine as against American Eagle and Kurt Marshall, as well as Count Eleven as against all
Defendants" (ECF No. 13).
DISCUSSION
I.

Procedural Issues

On August 31, 2016, Defendants asked the Court to grant the partial motion to dismiss
without reaching the merits because it was unopposed. While a court may grant an unopposed
motion without reaching the merits, this Court declines to do so.
In its opposition letter on September 19, 2016, Plaintiff stated that it voluntarily removed
Counts Six, Seven, Eight, and Nine as to American Eagle Trading Group and Kurt Russell, and
Count Eleven as to all Defendants. (ECF No. 13).· Plaintiff provided an amended complaint to
that effect.
A plaintiff may file an amended complaint under two circumstances: 1) within 21 days of
original filing, prior to any answer being filed, 2) within 21 days of a responsive pleading or
Rule 12(b), (e), or (t) motion, or 3) with written consent of the opposing party or leave of the
court. (Fed. R. Civ. P. 15(a)).
In this case, Plaintiff seeks to amend its complaint of its own initiative, 42 days after
Defendants filed their motion to dismiss and prior to any ruling by the Court or leave from the
Court to file an amended complaint. There is no basis for this action nor justification offered.
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Thus, Plaintiffs Amended Complaint (ECF No. 12) is dismissed and the Court addresses
Plaintiffs original complaint (ECF No. 1-1).

II.

Motion to Dismiss

A motion under Federal Rule of Civil Procedure l2(b)(6) tests the sufficiency of a
complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). The defendant bears the burden
of showing that no claim has been presented. Hedges v. United States, 404 F.3d 744, 750 (3d
Cir. 2005). When considering a Rule 12(b)(6) motion, a district court should conduct a threepart analysis. See Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). "First, the court must
'take note of the elements a plaintiff must plead to state a claim.'" Id (quoting Ashcroft v. Iqbal,
56 U.S. 662, 675 (2009)). Second, the court must accept as true all of a plaintiffs well-pleaded
factual allegations and construe the complaint in the light most favorable to the plaintiff. Fowler
v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009); see also Connelly v. Lane Const.
Corp., No. 14-3792, 2016 WL 106159 (3d Cir. Jan. 11, 2016). However, the court may

disregard any conclusory legal allegations. Fowler, 578 F.3d at 203. Finally, the court must
determine whether the "facts are sufficient to show that plaintiff has a 'plausible claim for
relief."' Id. at 211 (quoting Iqbal, 556 U.S. at 679). If the complaint does not demonstrate more
than a "mere possibility of misconduct," the complaint must be dismissed. See Gelman v. State
Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009) (quoting Iqbal, 556 U.S. at 679).

Defendant seeks to dismiss six of Plaintiffs fourteen counts under Federal Rule of Civil
Procedure 12(b)(6). The Court will address each challenged count below.
A.

Count III - Breach of the Implied Covenant of Good Faith and Fair Dealing

Evety contract governed by New Jersey law contains an implied covenant of good faith
and fair dealing. Black Horse Lane Assoc., L.P. v. Dow Chem. Corp., 228 F.3d 275, 288 (3d Cir.
2000). The implied covenant of good faith and fair dealing requires that "neither party shall do
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anything which will have the effect of destroying or injuring the right of the other party to
receive the fruits of the contract." Id. Furthermore, the implied covenant "is an independent
duty and may be breached even where there is no breach of the contract's express terms." Id To
state it most broadly, a "plaintiff may be entitled to relief under the covenant [of good faith and
fair dealing] if its reasonable expectations are destroyed when a defendant acts with ill motives
and without any legitimate purpose." DiCarlo v. St. Mary Hosp., 530 F.3d 255, 267 (3d Cir.
2008) (quoting Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 864 A.2d
387, 396 (2005) (alteration in original)).
However, a plaintiff may not pursue a claim for a breach of the implied covenant of good
faith and fair dealing ifthe claim is duplicative of the plaintiffs breach of contract claim.

Intervet, Inc. v. Mileutis, Ltd., No. 15-1371, 2016 WL 740267, at *5 (D.N.J. Feb. 24, 2016);
Cambridge Mgmt. Grp., LLC v. Robert A. Kosseff & Associates, P. C., No. 05-3402, 2007 WL
2084895, at *4 (D.N.J. July 18, 2007).
Here, Plaintiff alleges that Defendant failed to provide new, Grade-A merchandise with
tags and failed to reimburse Plaintiff for the amount paid when Plaintiff returned the goods to
Defendant. This appears to be a breach of contract claim. In that case, Count Three, the claim
for breach of the covenant of good faith and fair dealing, would be duplicative of the breach of
contract claim and would be dismissed.
However, there appears to be a factual dispute about whether the contract stated that
Defendant was to provide"new," "first quality," "Grade-A" merchandise, and whether there was
a reimbursement mechanism for the cost· of the goods if Defendant failed to provide appropriate
quality merchandise. (ECF No. 13 at 6). If the terms that merchandise must be "new," "first
quality," and "Grade A" were not included in the contract, or the reimbursement mechanism was
not included in the contract, Plaintiff might not have a breach of contract claim because the

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Defendant had not breached the express terms of the contract. In that case, Plaintiff would have
a non-duplicative claim for a breach of covenant of good faith and fair dealing.
Thus, due to the outstanding factual dispute between parties, construing the law and facts
in the light most favorable to the plaintiff, the motion to dismiss Count Three must be denied.

B.

Counts VI and VII - RICO and Racketeering
The RICO statute was passed to "undermin[e] organized crime's influence upon

legitimate businesses" and respond to "the need to protect the public from those who would run
organizations in a manner detrimental to the public interest." Cedric Kushner Promotions, Ltd

v. King, 533 U.S. 158, 165 (2001); see also Prudential Ins. Co. ofAm. v. Bank ofAm., Nat.
Ass 'n, 14 F. Supp. 3d 591, 614 (D.N.J. 2014), reconsideration granted in part, No. CIV.A. 131586 SRC, 2014 WL 2999065 (D.N.J. July 2, 2014) (finding that both the Third Circuit and the
New Jersey Supreme Court have held consistently that the NJRICO statute should be interpreted
in conformity with the federal RICO statute). RICO cases "are big cases and the defendant
should not be put to the expense of big-case discovery on the basis of a threadbare claim." In re
Ins. Brokerage Antitrust Litig., 618 F .3d 300, 3 70 (3d Cir. 2010) (citing Limestone Dev. Corp. v.
Viii. ofLemont, 520 F.3d 797, 803 (7th Cir. 2008)). Thus, the complaint must include "enough
factual matter (taken as true) to suggest each required element of the claim alleged ... before
allowing a potentially massive factual controversy to proceed." Id. (citing Phillips v. County of
Allegheny, 515 F.3d 224, 234 (3d Cir. 2008)).

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A RICO claim requires proof of four elements:
( 1) the existence of an enterprise affecting interstate commerce; (2) that
Defendants were employed by or associated with the enterprise; (3) that the
Defendants participated, directly or indirectly, in the conduct or affairs of the
enterprise; and (4) that the Defendants participated through a pattern of
racketeering activity that must include the allegation of at least two (2)
racketeering acts.

Hollis-Arrington v. PHH Mortg. Corp., 205 Fed.Appx. 48 (3d Cir. 2006) (interpreting 18
U.S.C.A. § 1962(c)).
An "enterprise" is a "single entity that was formed for the purpose of working together,
that is, acting in concert." In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 370 (3d Cir. 2010)
(citing Elsevier Inc. v. W.HP.R., Inc., 692 F.Supp.2d 297, 307 (S.D.N.Y.2010)). To establish
liability under section 1962(c), "one must allege and prove the existence of two distinct entities:

(1) a "person"; and (2) an "enterprise" that is not simply the same ''person" referred to by a
different name." Cedric Kushner Promotions, Ltd v. King, 533 U.S. 158, 161 (2001). Where a
company and its contractors were allegedly engaged in racketeering activity, the RICO person
and RICO enterprise were identical and the RICO claim dismissed. Zavala v. Wal-Mart Stores,

Inc., 447 F. Supp. 2d 379, 383 (D.N.J. 2006), affd sub nom. Zavala v. Wal Mart Stores Inc., 691
F.3d 527 (3d Cir. 2012).
In this case, Plaintiff alleges that defendants Kurt Marshall and American Eagle Trading
Group knew or should have known about Defendant Manus' alleged criminal activities, worked
in conjunction with Defendant Manu~, and participated in Defendant Manus' taking of Plaintiffs
returned merchandise and selling it without refunding Plaintiff. Plaintiff argues this is sufficient
to constitute racketeering and a RICO enterprise. However, these allegations, even if presumed
true, do not amount to organized crime of the type targeted by the RICO statute. Furthermore,
the Plaintiff did not allege a RICO enterprise distinct from the persons of Kurt Marshall, Manus,

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and American Eagle Trading Group. Thus, the enterprise is the satne as the person, and the
RICO claim must be dismissed. The Court need not reach the other substantive requirements of
a RICO claim. Counts Six and Seven must be dismissed.

C.

Count VIII - Respondeat Superior
The doctrine of respondeat superior does not provide an independent cause of action

under New Jersey law. Rowan v. City ofBayonne, 474 F. App'x 875, 879 n.3 (3d Cir. 2012)
(citing Carter v. Reynolds, 175 N.J. 402, 815 A.2d 460, 463 (2003)). Therefore, because

respondeat superior is a theory of liability and not an independent cause of action, Count Eight
is dismissed.

D.

Count IX - Aiding and Abetting
The Third Circuit has clearly and unequivocally rejected a civil RICO aiding and abetting

claim. Pennsylvania Ass'n ofEdwards Heirs v. Rightenour, 235 F.3d 839, 844 (3d Cir.2000).
Thus, Plaintiffs cause of action for aiding and abetting RICO violations fails and Count Nine is
dismissed.

E.

Count XI- Violation of New Jersey Fraud Act NJSA 56:8-1
The New Jersey Consumer Fraud Act ("CF A") protects consumers from unconscionable

and fraudulent practices in the marketplace. Mickens v. Ford Motor Co., 900 F. Supp. 2d 427,
435 (D.N.J. 2012). To state a claim under the CFA, a consumer must allege: "(l) unlawful
conduct by the defendant; (2) an ascertainable loss by the plaintiff; and (3) a causal connection
between the defendant's unlawful conduct and the plaintiff's ascertainable loss." Id (quoting

Payan v. GreenPoint Mortgage Funding, 681 F. Supp. 2d 564, 572 (D.N.J. 2010)). Furthermore,
it "is well-settled law that one must be a "consumer" in order to sue under this Act, and that
commercial resellers ... do not qualify as "consumers." Conte Bros. Auto. v. Quaker State-Slick

50, Inc., 992 F. Supp. 709, 716 (D.N.J.), affd sub nom. Conte Bros. Auto. v. Quaker State-Slick
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50, Inc., 165 F.3d 221 (3d Cir. 1998). A consumer is "one who uses (economic) goods, and so
diminishes or destroys their utilities" and one who is not a consumer "cannot sue as a consumer
of goods under NJCFA." Windsor Card Shops, Inc. v. Hallmark Cards, Inc., 957 F. Supp. 562,
567 (D.N.J. 1997).
Plaintiff is a seller of consumer goods on Amazon.com and consultant who sells goods to
other entities who sell on Amazon.com. Therefore, Plaintiff does not use the economic goods or
act as a consumer; it is a commercial reseller that does not qualify as a consumer and cannot sue
under this Act. Therefore, Count Eleven is dismissed.

CONCLUSION
For the reasons discussed above, Defendant's motion will be granted in part and denied
in part, and Plaintiffs amended complaint dismissed. A corresponding order follows.

~·~~
rnoMPso~
ANNE E.

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