Sleepy's LLC v. Select Comfort Wholesale Corporation et al

Filing 688

MEMORANDUM AND ORDER: DENYING the 452 Motion in Limine to Exclude All Evidence of Secret Shops After Termination of the Dealer Agreement Because it is not Relevant to Plaintiff's Claims. (see M & O for additional details). Ordered by Stephen G. Crane, Special Master on 2/28/2012. c/m by ecf. (Mahon, Cinthia)

FILED

IN CLERK'S OFFICE
DISTRICT COURT E 0 N y

*

*

FZ3 2 8 Z012
LONG ISLAND OFFICE

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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SLEEPY'S, LLC,
Plaintiff,

MEMORANDUM & OJmER

07 CV 4018 (TCP)

-against-

(ARL)

SELECT COMFORT WHOLESALE CORPORATION,
SELECT COMFORT RETAIL CORPORATION and
SELECT- COMFORT CORPORATION,
Defendants.

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Stephen G. Crane, Special Master
The undersigned, having been appointed Special Master pursuant
to Fed. R. Civ. P. 53(a) (1) (C) by order dated and filed January 10,
2012, of the Hon. Thomas C. Platt, United States District Judge, and
having heard oral argument on January 24

and 30,

renders the following decision on the Defendants'
All

Evidence

of

Secret

Shops

After

2012,

hereby

Motion to Exclude

Termination

of

the

Dealer

Agreement Because it is not Relevant to Plaintiff's Claims.
For the following reasons the defendants' motion is DENIED.
The defendants claim that the contract terminated by way of
expiration on September 30, 2006, before any of the secret shops was
conducted.

consequently, they argue that evidence of these post-

termination secret shops is not relevant to the Plaintiff's claims.
They contend that, even if relevant, the prejudice outweighs the
probative value of these reports,

and introduction of the shop

evidence will burden the court, confuse the issues and unnecessarily

1

lengthen the trial.
The defendants acknowledge at p. 6 of their moving memorandum
that

the court

already found

issues

agreement was extended by conduct.

of

fact

They say,

as

to whether

however,

the

that the

court skipped a critical step in its analysis, to wit: the language
of the Dealer Agreement in §9(e) which specifically provides that
conduct after termination "will not be construed as a waiver of the
termination of this Agreement or as an extension or continuation of
the term of this Agreement beyond the period specified in the notice
of termination; any such termination of this Agreement may only be
waived by an express written waiver of termination signed by the
terminating party."
Because the agreement terminated on September 30, 2006, not to
be

extended by conduct,

posit the defendants,

the

secret shops

conducted beginning in November, 2006, are irrelevant to any breach
of the Dealer Agreement.

As a backup, the defendants claim that if

the agreement was extended by conduct, no basis exists to extend it
beyond

January

11,

2007,

when

the

defendants

reiterated

the

expiration in September and that they did not intend to extend the
contract.

Beyond the breach of contract

claim,

the defendants

extend their argument to the plaintiff's breach of good faith and
fair dealing and unfair competition claims.
The plaintiff contends that the continuation of the contract
has already been litigated before District Judge Platt.

The court

previously denied the defendants' motion to dismiss and their motion
2

for summary judgment finding issues of fact as to the extension of
the agreement; and, there is no justification to revisit the issue.
The plaintiff also observes that the Wind-Up Agreement dated April
18, 2007, between the same parties provided that they would operate
in

accordance

agreement.

with

the

terms

and

conditions

of

the

previous

If the fact be found that the agreement terminated on

September 30, 2006, the plaintiff contends that the secret shops are
relevant

to

support

an

inference

that

disparagement

had

been

Moreover,

occurring since the beginning of the relationship.

it

argues that the shops are relevant to the claim for breach of the
implied

covenant

of

good

faith

and

fair

dealing

for

the

same

At this point in its argument the plaintiff

inferential reason.

raises the notion that some contract, if only for the sale of the
beds, was surely in effect throughout the relationship to support
this implied covenant.

Finally, it contends that the secret shops

are relevant to the unfair competition claim because the defendants
were engaged in a

scheme to misappropriate plaintiff's efforts,

through a policy of disparagement, to redirect consumers to purchase
from Select Comfort stores rather than Sleepy's.

Misappropriation

as unfair competition is a tort independent of the contract.
The defendants reply.

They note the plaintiff's failure to

debate the contractual argument.

Thus, they remind the court that

the parties'

conduct could not extend the agreement.

plaintiff's

argument

based

on

the

Wind-Up

They find

Agreement

to

be

disingenuous because that agreement only refers to the plaintiff's,
3

not defendants'

1

obligation to operate according to the terms of the

prior agreement.

Insofar as the plaintiff argues the existence of

a new contract for the sale of beds,

the defendants observe that

none was pleaded, and such a new contract would violate the statute
of frauds.

Finally, the defendants take issue with the plaintiff's

notion that,

even if the agreement had expired before the secret

shops were conducted, they are relevant.

Evidence of events after

the expiration of the agreement could not affect prior sales citing
Fashion

Boutique

of

Short

Hills,

Inc.

v

Fendi

USA.

Inc.,

75

F.Supp.2d 235 1 239 (SONY 1999).
The

entirety

of

this

motion

is

foreclosed

by

the

court's

earlier determination that triable issues exist as to the extension
of the Dealer Agreement beyond its expiration on September 30, 2006.
As noted in two prior orders,
2012 1

if

the

defendants

dated February 8 and February 21,

seek reconsideration

they

should do

so

before Judge Platt who has not referred such motion to me for the
relief requested in this motion.

The undersigned has no reason to

decide the merits of the argument made before the District Judge on
two prior occasions, and does not reach the other arguments that are
alternatives to the extension-by-conduct theory.
therefore, DENIED.
SO ORDERED.

Dated: February 27 1 2012
Central Islip, New York

4

The motion is,

PROOF OF SERVICE BY E-Mail
Re: Sleepy's, LLC vs. Select Comfort Wholesale Corporation, .et al.
Reference No. 1425010485

I, Virginia Corvey, not a party to the within action, hereby declare that on February 28,2012
served the attached Memorandum & Order re Defendants' Motion to Exclude All Evidence of Secret Shops

After Termination of the Dealer Agreement on the parties in the within action by electronic mail at New
York, NEW YORK, addressed as follows:

Mr. Rpbert :Cebay
Ms. Cinthia L. Mahon
United States District Court
Eastern District ofNew York
Long Island Courthouse I 00 Federal Plaza
Central Islip, NY 11722
Tel: [phone]
Email: [e-mail]
[e-mail]
Parties Represented:
Hon. Platt
I declare under penalty ofpetjury the foregoing to be true and correct. Executed at New York,

NEW YORK on February 28, 2012.

[e-mail] ADDRESS