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

Filing 859

MEMORANDUM, DECISION, & ORDER AFTER BENCH TRIAL - For the foregoing reasons, the Court finds in favor of Defendant on all of the remaining claims. As discussed in footnote three, Defendant is instructed to complete the electronic record by filing t he remaining trial transcripts on the docket. Thereupon, the Clerk of the Court is directed to enter judgment consistent with these FINDINGS OF FACT AND CONCLUSIONS OF LAW, and to mark this matter CLOSED. So Ordered by Judge Joanna Seybert on 9/22/2015. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
------------------------------------X
SLEEPY’S LLC,
Plaintiff,
-againstSELECT COMFORT WHOLESALE CORPORATION,
SELECT COMFORT RETAIL CORPORATION,
and SELECT COMFORT CORPORATION,

MEMORANDUM, DECISION, &
ORDER AFTER BENCH TRIAL
07-CV-4018(JS)(ARL)

Defendants.
------------------------------------X
APPEARANCES
For Plaintiff:
Andrew W. Singer, Esq.
David J. Kanfer, Esq.
Lewis Donald Prutzman, Esq.
Paul D. Sarkozi, Esq.
Vincent J. Syracuse, Esq.
George Foulke Du Pont, Esq.
Stefanie Marie Ramirez, Esq.
Tannenbaum Halpern Syracuse & Hirschtritt LLP
900 Third Ave.
New York, NY 10022
For Defendants:

Heidi A.O. Fisher, Esq.
Joseph S. Miller, Esq.
Michael J. Bleck, Esq.
Michael K. Gravink, Esq.
Andrew S. Hansen, Esq.
Michelle R. Schjodt, Esq.
Oppenheimer Wolff & Donnelly LLP
45 South Seventh St., Ste 3300
Minneapolis, MN 55402
Joseph S. Androphy, Esq.
Michael Faillace & Associates, P.C.
60 East 42nd St., Ste 2540
New York, NY 10165

SEYBERT, District Judge:
Plaintiff

Sleepy’s

LLC

(“Plaintiff”

or

“Sleepy’s”)

commenced this action against defendants Select Comfort Wholesale

Corporation, Select Comfort Retail Corporation, and Select Comfort
Corporation
seeking,

(collectively

inter

alia,

“Defendant”

damages

resulting

alleged breach of a 2005 sales agreement.

or

“Select

from

Comfort”)

Select

Comfort’s

A bench trial was held

before Judge Thomas C. Platt between March and June of 2012.
Following the first phase of that trial, Judge Platt granted Select
Comfort’s motion for judgment as a matter of law.
Memorandum and Order, Docket Entry 825.)

(Sept. 26, 2012

On February 27, 2015,

the Second Circuit vacated Judge Platt’s order as to a number of
Plaintiff’s

causes

of

action

resolution.

Sleepy’s LLC v. Select Comfort Wholesale Corp., 779

F.3d 191, 193 (2d Cir. 2015).

and

remanded

causes

for

On July 21 and 22, 2015, this Court

heard testimony to complete the trial record.
852-53.)

those

(See Docket Entries

The Court, pursuant to Federal Rule of Civil Procedure

52(a), now issues its findings of fact and conclusions of law.1

After it heard testimony, the Court indicated that it
would receive proposed findings of fact and conclusions of
law from both sides. The Court expressed that it would
not receive reply submissions or other memoranda. Both
Sleepy’s and Select Comfort submitted proposed findings of
fact and conclusions of law. (See Pl.’s Proposed FoF,
Docket Entry 854; Defs.’ Proposed FoF, Docket Entry 855.)
Concurrently, Select Comfort also submitted a “Trial
Brief.” (Docket Entry 856.) In light of the Court’s
instructions, Sleepy’s has requested that Select Comfort’s
trial brief be stricken. (See Sept. 1, 2015 Letter,
Docket Entry 857.) The Court agrees with Sleepy’s
position. Accordingly, it has not considered Select
Comfort’s Trial Brief in reaching these Findings of Fact
and Conclusions of Law. Even if it were to consider it,
however, the Court’s conclusion would not change.
1

2

After considering the evidence offered at trial, the arguments of
counsel, and the controlling law on the issues presented, the Court
finds in favor of Defendant.
FINDINGS OF FACT
Based on the evidence presented, the Court makes the
following findings of fact pursuant to Federal Rule of Civil
Procedure 52(a).2

These findings of fact are drawn from witness

testimony at trial (“Tr.”), the parties’ trial exhibits (labeled
“PX” for Plaintiff’s exhibits and “DX” for Defendant’s), and
undisputed facts submitted by the parties in the Amended Joint
Pre-Trial Order (“PTO”).
I.

The Parties & Products
Sleepy’s is a New York based company that owns a chain

of retail stores that sell mattresses and other sleep products.
(Tr. 74:19-79:8.3)

Between 2005 and 2007, Sleepy’s owned between

To the extent that any of the findings of fact may be
deemed conclusions of law, they shall also be considered
conclusions. Likewise, to the extent that any of the
conclusions of law may be deemed findings of fact, they
shall be considered findings. See Miller v. Fenton, 474
U.S. 104, 113–14, 106 S. Ct. 445, 451, 88 L. Ed. 2d 405
(1985) (noting the difficulty, at times, of distinguishing
findings of fact from conclusions of law).
2

Though the Court has been provided with courtesy copies of the
entire trial transcript, only portions of the transcript are
docketed. (See Docket Entries 779-83, 808-11, 813-16, 835-40.)
To ensure completeness of the electronic record, Defendant is
ORDERED to file the remaining portions of the transcript on the
docket.
3

3

300 and 400 retail stores, which were located mostly throughout
the northeastern United States.4
carries

products

made

by

a

(Tr. 74:23-77:1.)

broad

range

of

Sleepy’s

suppliers,

consistently advertises that they “have them all.”

and

(PX 152; DX

17.5)
Three Sleepy’s executives were heavily involved in the
circumstances that led to this lawsuit: Harry Acker (“Acker”),
Michael Bookbinder (“Bookbinder”) and Ira Fishman (“Fishman”).
Acker is Sleepy’s founder, owner, and CEO.
22.)

(Tr. 87:4-6, 385:15-

Bookbinder was, during the relevant time, Sleepy’s Executive

Vice President of Sales.

(Tr. 74:13-18.)

Bookbinder oversaw both

the sales force and the advertising and marketing department, and
he was responsible for dealing with Sleepy’s suppliers.
77:18-78:7.)

(Tr.

Fishman was Sleepy’s Vice President of Merchan-

dising, and he was responsible for working with vendors to put
together product lineups.

(Tr. 92:14-20.)

Select Comfort is the manufacturer and retail seller of
the Sleep Number bed.

(Tr. 2250:22-2252:9, 2780:10-24.)

In lieu

In 2009, Sleepy’s Inc. assigned all its rights, contracts, and
titles to Sleepy’s LLC. (Tr. 2962:24-2963:5.) For purposes of
these Findings of Fact and Conclusions of Law, the Court uses
the term “Sleepy’s” to refer to both entities, depending on the
relevant timeframe.
4

Throughout these Findings of Fact and Conclusions of Law, the
Court uses “PX” to cite to Plaintiff’s trial exhibits and “DX”
to cite to Defendant’s.
5

4

of metal coils, the Sleep Number bed contains a series of air
chambers that can be inflated or deflated to adjust the firmness.
(Tr. 2780:25-2782:15.)

The air chambers sit atop a solid, rigid

foundation, and they are covered by various layers of foam and
padding, similar to a traditional mattress.

(Tr. 2626:10-2627:5.)

In 2000, Select Comfort began partnering with other
mattress retailers to offer a version of the Sleep Number products
in those retail stores.

(Tr. 2616:9-13.)

While Select Comfort

sold its “Core Line” of products in its own retail stores, it
offered the “Personal Preference Line” of products via its retail
partners.

(Tr.

2551:17–2553:3,

2624:9–16.)

The

Personal

Preference Line was designed to complement the Core Line by
offering models that fall between the Core Line models.

(Tr.

105:8-106:11.) The technology and basic components of the Personal
Preference Line products were exactly the same as those of the
Core Line, and they were both covered by the same warranty.
2272:22-2273:24; 2281:4-11.)
differences.

(Tr.

Nonetheless, there were a number of

For example, while the Personal Preference Line

products utilized a one-piece, wooden foundation, the Core Line
products

utilized

2273:17-22;
motivated

a

multi-piece,

2275:14-2276:6.)
by

shipping

polymer

This

concerns;

foundation.

difference

Select

was

Comfort

(Tr.

apparently

shipped

its

products via United Parcel Service, which limited its package sizes
so that a single-piece foundation could not be shipped.
5

(Tr.

2276:7-18.)

Select Comfort’s retail partners, on the other hand,

could utilize a single-piece foundation because they used their
own delivery services.
II.

(Tr. 2275:1-2277:25.)

The Retail Partner Agreement
On January 17, 2005, Sleepy’s approached Select Comfort

about becoming one of Select Comfort’s retail partners.
91:11-92:12.)

(Tr.

After some initial diligence on the part of both

Sleepy’s and Select Comfort, the parties agreed that Sleepy’s would
become a Select Comfort retail partner.
In the Spring of 2005, the parties negotiated a contract
entitled

“Select

Comfort

Corporation

Dealer

Agreement”

“Retail Partner Agreement” or the “Agreement”).

(the

(PX 133.)

The

Retail Partner Agreement, in essence, provided that Sleepy’s would
become an authorized dealer of the Personal Preference Line of
Select Comfort products.

(PX 133; Tr. 367:20-22.)

has two relevant provisions.

The Agreement

Paragraph 4(c) reads as follows:

[Select Comfort will: . . .] Provide warranty
service in accordance with Select Comfort’s
published warranty for all products and
components sold to [Sleepy’s] by Select
Comfort; Each party represents that it shall
not impair, infringe upon or adversely affect
the character, reputation and good will
(collectively the ‘Brand Image’) of the other
party.
(PX 133 ¶ 4(c).)

Paragraph 3(j) reads as follows:

[Sleepy’s will: . . .] Not disparage Select
Comfort or any products distributed through
Select Comfort’s retail stores or any of
6

Select Comfort’s other retail partners and not
interfere with any of Select Comfort retail
store’s relationships with customers or
potential customers.
(PX 133 ¶ 3(j).)
The Retail Partner Agreement became effective on June
17, 2005, and was scheduled to expire on September 30, 2006.
133 at 1 & ¶ 9(a).)

(PX

Although the Agreement stated that its term

could not be extended except by written agreement of the parties-which never occurred--the parties continued to operate under the
terms of the Agreement beyond September 30, 2006.6

(Tr. 296:20-

297:5.)
III. The Disappointing Results of the Retail Partner Agreement
Almost

immediately

after

the

effective

date

of

the

Retail Partner Agreement, Sleepy’s sales figures for the Personal
Preference Line were disappointing.

(Tr. 144:25-145:10.)

The

program never grew to the level that Select Comfort and Sleepy’s
had anticipated.

(Tr. 183:16-19.)

By the second quarter of 2006,

the poor results lead to a series of meetings among members of

Select Comfort contends that notwithstanding the parties’
conduct after September 30, 2006, the Retail Partner
Agreement terminated on that date. (See Def.’s Proposed
FoF at 84-85.) Sleepy’s, on the other hand, insists that
the parties’ conduct extended the Agreement until at least
January of 2007. (See Pl.’s Proposed FoF ¶ 52.) Because
it has no effect on the Court’s analysis, the Court
declines to rule on this issue and instead assumes,
arguendo, that the Retail Partner Agreement was extended
until the April 18, 2007 Wind-Up Agreement.
6

7

Sleepy’s

upper

management

disappointing figures.

to

determine

the

cause

of

the

(Tr. 185:13-188:11.)

By September 2006, Sleepy’s began considering whether
the

disappointing

results

of

their

relationship

with

Select

Comfort were caused by Select Comfort’s disparaging the Personal
Preference Line available at Sleepy’s.7

(Tr. 191:13-192:6.)

To

test that hypothesis, Sleepy’s ordered its managers to perform
“secret

shops”

of

Select

Comfort

retail

stores.

In

these

instances, the Sleepy’s employees were instructed to enter a Select
Comfort retail store, pose as a potential customer, and record the
experience.

In many instances, the secret shopper would tape-

record the interaction, while in other cases she would prepare a
written report of the experience.
On either September 4 or November 4, 2006,8 Anthony Colon
(“Colon”), then a Sleepy’s Regional Manager (Tr. 860:8-9), visited
a Select Comfort store in upper Manhattan (Tr. 863:9-18).

Colon

The Court notes that a more genuine search for the cause of
Sleepy’s disappointing sales figures might have started with more
introspection.
For example, the poor sales figures were quite
likely the result of Sleepy’s failure to advertise the Personal
Preference Line as promised, (Tr. 2640:16-2641:14, 2338:202340:13, 2808:25-2810:8), or of Sleepy’s salespeople denigrating
the Personal Preference Line, (Tr. 411:13-415:11; DX 209).
7

Colon originally testified that this secret shop occurred
on Saturday, September 4, 2006. (Tr. 863:13-14.) Upon
learning that September 4, 2006 was actually a Monday,
Colon acknowledged that the shop may have occurred on
Saturday November 4, 2006. (Tr. 886:22-887:3.)
8

8

alleges that he met with Select Comfort sales representative Don
Ehrman (“Ehrman”), and requested that Ehrman explain to him the
differences

between

a

certain

mattress

from

the

Personal

Preference Line and a mattress from Select Comfort’s Core Line.
(PX 1.22; Tr. 865:17-866:2.) Colon stated that in response, Erhman
expressed five reasons why Select Comfort’s Core Line was better
than the Personal Preference Line: (1) Select Comfort’s mattresses
would be made to order, while those at Sleepy’s were made and
warehoused prior to purchase (Tr. 866:4-9; PX 1.22); (2) the
Personal Preference Line mattress included a wired remote control,
while Select Comfort’s could be wireless (Tr. 866:10-14; PX 1.22);
(3) any problems with the mattress would be easier to resolve at
Select

Comfort

than

at

Sleepy’s

(Tr.

866:24-867:8);

(4)

the

mattress could be returned or exchanged at Select Comfort, but not
at

Sleepy’s

(Tr.

867:9-11;

PX

1.22);

and

(5)

the

Personal

Preference Line had a wood foundation, which meant that the
mattress would not be as comfortable for as long as a Core Line
product (Tr. 867:25-868:4; PX 1.22).9

Overall, the Court found Colon’s testimony to be
unreliable. Among other things, Colon could not recall
the date of the secret shop at issue, (Tr. 886:22-887:3),
and waivered on whether PX 1.22 was an email or some other
document (Tr. 890:4-11). More troublingly, however, Colon
repeatedly insisted that PX 1.22--which is so plainly a
summary of his secret shop that no reasonable person could
argue otherwise--was instead a verbatim recitation of his
shopping experience. (Tr. 884:12-17.) As a result, Colon
insists that throughout the entirety of the roughly
9

9

IV.

Building a Case
On

a

November

6,

2006

conference

call,

Bookbinder,

Acker, and Fishman discussed how the results of Colon’s secret
shop well-positioned them for a potential slander lawsuit against
Select Comfort.

(DX 95.)

Acker opined, “[t]his may be an

enormous, fabulous lawsuit for Sleepy’s to collect damages.”
95 at 4.)

(DX

He went on:
This may be very good because if we start
getting involved in a lawsuit especially in a
class action and it gets publicity it will not
be good for them. This cannot help them at
all in the industry, it won’t mean a thing to
the consumer, but it will for people who want
to do business with him.
Get all of this information to Adam10 and
another law firm, one that specializes in
this. Find out who does this.

(DX 95 at 4.)

Later, Acker demanded a search for more of the same

potential evidence that Colon uncovered:

fifteen to twenty minute interaction, he only uttered the
one or two sentences discussed above. (Tr. 884:18-885:9.)
Notwithstanding that the substance of Colon’s secret shop
was only marginally controverted, the Court finds that the
testimony of Colon is insufficient, as a matter of law, to
carry Plaintiff’s burden with respect to these
allegations, for it is black-letter law that “the trier of
facts is not obliged to believe uncontradicted testimony,
especially if it offends common sense.” Leather’s Best,
Inc. v. Tidewater Terminal, Inc., 346 F. Supp. 962, 965
(E.D.N.Y. 1972). In any event and as discussed more fully
below, Plaintiff’s slander per se claims arising from this
incident fail as a matter of law.
During this time, Adam Blank was Sleepy’s general
counsel. (Tr. 2896:24-2897:10.)
10

10

[Acker]: I want three more shops by area
managers looking for the same thing that Tony
Colon was looking for.
They are telling the consumer that they
are going to have problems with the products
that they sell us.
So they are telling
consumers that a Select Comfort product that
we carry is not only inferior, but also
problematic. Think about that fellas.
[Fishman]: Harry it gets better or worse
depending on how you want to look at it.
[Acker]: Stop the preambles just keep going.
This is a good chance that we can sue this man
personally for defamation and slander. Make
a note that we can sue him.
[Fishman]: Select Comfort said, that we caulk
down the wood foundation, both salespeople
said that buying from Select Comfort is like
buying the original; it would be like buying
a Coach bag from Coach.
But, buying from
somewhere else it would be like buying a copy.
[Acker]: Great Slander, I love it.
(DX 95 at 6.)
Shortly after this conversation, Bookbinder sent an email to Sleepy’s Regional Vice Presidents, Regional Managers, and
Area Managers ordering a “blitz” of secret shops in each Sleepy’s
market area where Select Comfort had stores.
520:23–523:13; DX 295.)

(Tr. 244:6–12,

The instructions for these secret shops

made clear that Sleepy’s was looking for disparaging remarks on
the part of Select Comfort; “we want to know specifically what
Select

Comfort

Says

about

Sleepy’s,”

11

and

“do

they

denigrate

Sleepy’s or the products we sell?” were two of the instructions.
(DX 295.)
Over

time,

Sleepy’s

instructions

regarding

what

information to solicit during the secret shops of Select Comfort
stores grew more specific.
secret

shop

instruction

For example, by January 2007, the

template

included

questions

such

as:

“[d]oes select comfort give reasons why not to buy from their
retail

partner,

example:

do

they

say

anything

regarding

the

‘freshness’ of the product;” “[d]o they denigrate their partner in
any way;” and “[d]oes Select Comfort claim their services or
products are better than their partners.”
V.

(PX 1.61.)

The Secret Shops
In

addition

to

the

secret

shop

conducted

by

Colon

discussed above, the Amended Complaint offers fifteen other secret
shops that each form the basis of a claim for slander per se.
Compl., Docket Entry 326, ¶¶ 66-78, Ex. E.)

(Am.

With the exception of

four instances,11 the Court discusses each individually.
A.

November 5, 2006 - Bay Shore, NY
On November 5, 2006 Deborah Zaffron (“Zaffron”), then a

Sleepy’s District Manager (Tr. 668:17), conducted a secret shop of

Plaintiff abandoned four of those original claims.
(Sept. 26, 2012 Memorandum & Order at 20 n.5.)
11

12

a Select Comfort retail store in Bay Shore, NY (Tr. 692:8-14).12
Zaffron explained that when she inquired as to the difference
between the Personal Preference Line and the Core Line, the Select
Comfort

representative

characteristics:

(1)

offered

“[Sleepy’s]

box

five
springs

distinguishing
were

given

to

Sleepy’s for free [and] Select Comfort would never honor the

Throughout the testimony of Sleepy’s secret shoppers, a
pattern emerged: beyond oral testimony, Sleepy’s offered
almost no primary evidence from those shops. It became
apparent that Sleepy’s could not produce (a) the
instructions for the secret shops, (b) any original notes
from employees that performed the secret shops, (c) any
original recordings of the secret shops, or (d) any
original reports of the secret shops. Instead, Sleepy’s
offered compilations of the secret shop reports that were
not prepared by a testifying witness and--at least on some
occasions--had been altered. (See Tr. 1042:4-23; 1047:91054:1.) Sleepy’s made no attempt to preserve any of this
original evidence; a formal litigation hold was apparently
never instituted, (3122:3-3126:19), and none of the
testifying secret shoppers were told to retain their
original reports or recordings, (Tr. 614:22–615:3, 890:12891:7, 922:24–25, 932:3–8, 947:17–948:10, 951:13–17,
1135:15–19, 1224:18–1225:23, 1270:8–13, 1316:24–1317:1).
In light of the fact that Sleepy’s made no attempt to
retain this primary evidence even though it had clearly
contemplated litigation, Select Comfort moved to exclude
all evidence of the secret shops as a sanction for
Sleepy’s spoliation of relevant evidence. (See Sanctions
Mot., Docket Entry 770.) The Court agrees that Sleepy’s
engaged in egregious, grossly negligent spoliation of
evidence in the face of contemplated litigation justifying
the imposition of sanctions. See West v. Goodyear Tire &
Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999). The Court
declines to impose any sanctions, however, because it
finds that Plaintiff’s claims all fail even when
considering the evidence of which Select Comfort urges
exclusion.
12

13

warranty

of

the

merchandise”

(Tr.

696:22-24);

(2)

Sleepy’s

mattresses were stored in a warehouse (Tr. 697:14-17); (3) “the
box springs that Sleepy’s sold were warped and would break” (Tr.
699:11-13); (4) the foam in the Personal Preference Line mattress
was different (Tr. 701:22); and (5) the wood foundation in the
Personal Preference Line was inferior to Select Comfort’s Core
Line (Tr. 702:13-15).
B.

November 8, 2006 - Deptford Township, NJ
On November 8, 2006, Michael Grinnan (“Grinnan”), then

a Sleepy’s Regional Manager, performed a secret shop of a Select
Comfort store in Deptford Township, New Jersey.
PX 1.38.)

(Tr. 1294:23-25;

When Grinnan asked about the differences between the

Personal Preference Line and Select Comfort’s own line, the Select
Comfort representative explained that “[T]hey’re not the same.
[Select Comfort’s mattresses] don’t have the same materials as the
ones Sleepy’s has. This is better.” (Tr. 1307:18-21.) The Select
Comfort representative compared the Personal Preference Line to
other “knockoffs,” such as those offered on the QVC home-shopping
channel.
C.

(Tr. 1307:22-1308:1.)
January 10, 2007 - Bay Shore, NY
On January 10, 2007, Bob Gorman (“Gorman”), then a

Sleepy’s Regional Manager, performed a secret shop of a Select
Comfort store in Bay Shore, New York. (Tr. 1234:22-1235:3; 1238:39).

When

Gorman

mentioned

that
14

Sleepy’s

carries

a

line

of

mattresses

similar

to

Select

Comfort,

the

Select

Comfort

representative told him that “buying from Sleepy’s is like buying
a knockoff of a Coach bag.”
D.

(Tr. 1243:19-21.)

January 12, 2007 - Manchester, CT
On January 12, 2007, Joseph Kilty (“Kilty”), then a

Sleepy’s District Manager, performed a secret shop of a Select
Comfort store in Manchester, Connecticut. (Tr. 1497:1-2; PX 1.61.)
Sometime during the secret shop, the Select Comfort representative
analogized buying a mattress from the Personal Preference Line to
another shopping experience:
If you go to Home Depot and look at a John
Deere tractor and then go to John Deere and
look at the same tractor, what is the
difference?
The difference is the tractor
sold by Home Depot is cheaper, not exactly the
same product or quality as the one sold by
John Deere itself. This is the same situation
we have with these beds.
(Tr. 1509:8-19.)
Kilty’s

report

specifically

addressed

the

questions

asked in one version of Sleepy’s secret shop instruction template.
(PX 1.61.)

Those questions included: “[d]oes select comfort give

reasons why not to buy from their retail partner, example: do they
say anything regarding the ‘freshness’ of the product;” “[d]o they
denigrate their partner in any way;” and “[d]oes Select Comfort
claim their services or products are better than their partners.”
(PX 1.61.)

15

E.

January 12, 2007 - Queens, NY
On

January

(“Constantinides”),

12,

then

a

2007,

Sleepy’s

Jim
Regional

Constantinides
Sales

Manager,

performed a secret shop of a Select Comfort retail store in Queens,
New York.

(Tr. 559:8-9; 576:2-6.)

Constantinides explained to

the Select Comfort representative that he had seen a Sleep Number
bed at Sleepy’s, and he wanted to know the difference between that
bed and one sold at Select Comfort.

(Tr. 580:22-581:1.)

The

representative explained that “Sleepy’s carried a wood box spring
that could warp and also hold allergens and that their polymer box
was better.

Also, that the Select Comfort mattresses were made to

order and that Sleepy’s would hold the product in the warehouse
for a long period of time.”

(Tr. 581:19-25.)

Constantinides recalls that Bookbinder instructed him to
perform

this

secret

shop.

(Tr.

578:18-24.)

Specifically,

Bookbinder told him to “go into the Select Comfort stores and see
how they were explaining the differences between our product and
their product and see if there were any disparaging remarks.” (Tr.
578:18-24.)

In

light

of

those

instructions,

Constantinides

explained that he went into the Select Comfort store looking
specifically for disparagement.
F.

(Tr. 610:14-16.)

January 14, 2007 - Yorktown Heights, NY
On January 14, 2007, Tyler Asa Pavia (“Pavia”), then a

Sleepy’s District Manager, performed a secret shop of a Select
16

Comfort retail store in Yorktown Heights, New York.

(Tr. 1153:1-

3; 1156:24-1157:3.) At some point during the shop, Pavia mentioned
that he was considering going to Sleepy’s.
Select

Comfort

representative

then

(Tr. 1163:12-23.)

explained

that

The

Sleepy’s

“keep[s] . . . the Select Comfort mattress in the warehouse for
extended

periods

where

they

can

become

stale

and

have

pest

infestation. . . . [I]f a bed sits too long in a warehouse it can
become . . . full of bugs and degraded.”

(Tr. 1175:15-1176:4.)

Additionally, the Select Comfort representative expressed that the
polymer foundation used in the Core Line was superior to the wooden
foundation used in the Personal Preference Line.

(Tr. 1164:2-9.)

Like Kilty, Pavia did not prepare an independent report
of this secret shop.

(PX 1.73.)

Instead, his secret shop report

answers a series of questions put to him by management, including:
“specifically, what did the sales person in the Select Comfort
store above say about the Select Comfort products that Sleepy’s
carries;” “does the Select Comfort salesperson denigrate Sleepy’s
in any way;” and “does the select comfort salesperson make any
statements about Sleepy’s that are untrue or defamatory”.

(PX

1.73.)
G.

January 15, 2007 - Staten Island, NY
On

January

15,

2007,

Joseph

Seth

(“Seth”),

then

a

Sleepy’s District Manager, performed a secret shop of a Select
Comfort retail store in Staten Island, New York.
17

(Tr. 903:7-8;

904:25-905:16.)

When Seth asked what the differences were between

a certain model in the Personal Preference Line and a similarlypriced model from the Core Line, the Select Comfort representative
explained that the polymer foundation was unique to mattresses
sold at Select Comfort, and it was stronger than the foundation
used by Sleepy’s.

(Tr. 913:9-10.)

Prior to conducting the secret shop, Seth received a
list of questions that he was expected to answer.

(DX 34.)

These

questions were similar to those received by Pavia and Kilty, and
included: “does select comfort give reasons why not to buy from
their retail partner, example: do they say anything regarding the
‘freshness’ of the products that you buy from Select versus the
‘freshness’ of the products sold by Sleepy’s (how long the products
may have been ‘on the shelf’”) and “do they denigrate their partner
in any way?”.13

(PX 1.80.)

In light of these questions, Seth

explained that he asked the Select Comfort representative specific
questions in order to obtain the answers.
H.

(Tr. 930:6-11.)

January 16, 2007 - Freehold, NJ
On January 16, 2007, Paul Mahoney (“Mahoney”), then a

Sleepy’s District Manager, performed a secret shop of a Select
Comfort retail store in Freehold, New Jersey.
1912:19-1915:17.)

(Tr. 1895:11-13;

The Select Comfort representative explained

Ironically, Seth answered both of these questions in the
negative. (PX 1.80.)
13

18

that while the Personal Preference Line uses a wood foundation,
Select Comfort’s own line used a polymer base, which was sturdier.
(Tr. 1915:18-17.)
I.

January 16, 2007 - Langhorne, PA
On January 16, 2007, Gerald Petrillo (“Petrillo”), then

a Sleepy’s District Manager, performed a secret shop of a Select
Comfort retail store in Langhorne, Pennsylvania.

(Tr. 807:14-15;

810:17-21;

Select

818:17-819:5.)

When

he

asked

the

Comfort

representative why he should by from Select Comfort rather than
Sleepy’s,

the

representative

responded

that

Select

Comfort’s

plastic foundation was stronger than the one available at Sleepy’s,
and that a Select Comfort mattress would be “fresher” than one
purchased from Sleepy’s.
J.

(Tr. 819:23-820:13; 821:1-22.)

January 17, 2007 - Morristown, NJ
On January 17, 2007, Grinnan performed a secret shop of

a Select Comfort retail store in Morristown, New Jersey.
1333:19-1334:19.)
Comfort

mattress

(Tr.

When Grinnan mentioned having seen a Select
available

at

Sleepy’s,

the

Select

Comfort

representative explained that “[t]he beds that Sleepy’s carried
had an inferior wood foundation.”
K.

(1337:25-1338:1.)

February 6, 2007 - Pottstown, PA
On February 6, 2007, Jacqueline Grumman (“Grumman”),

then a Sleepy’s District Sales Manager, performed a secret shop of
a Select Comfort retail store in Pottstown, Pennsylvania.
19

(Tr.

1458:17-19; 1462:6-1463:7.)

When Grumman mentioned that she had

seen

at

a

similar

mattress

Sleepy’s,

the

Select

Comfort

representative explained that “[Select Comfort] was taking the
contract

away

[from

Sleepy’s]

because

Sleepy’s

has

screwed

us . . . the salespeople will lie to you, and they’ll tell you
anything to make a sale.”

(Tr. 1466:24-1467:2.)

“Sleepy’s finds

every loophole . . . the salespeople at Sleepy’s will lie to you
about almost everything.”
VI.

(Tr. 1470:25-1471:2.)

The Zaffron Incident
Although it was not separately pleaded in the Amended

Complaint, the Court received evidence from Zaffron regarding
another secret shopping incident.

This incident merits some

independent discussion.
Zaffron testified that sometime in the spring of 2007 or
2008, a customer visited the Sleepy’s store located in Garden City,
N.Y., to cancel a purchase that he had made earlier that day.
672:5-674:6; 681:22-682:1.)

(Tr.

The customer explained that he had

just visited the Select Comfort retail store nearby, and he learned
that the mattress that he had purchased from Sleepy’s was inferior
to those available at the Select Comfort store.
682:1.)

(Tr. 681:22-

In an effort to save the sale, Zaffron called the Select

Comfort store, and--on speaker phone with the customer present-inquired as to the differences between line of mattresses available
at Sleepy’s and those available at Select Comfort.
20

(Tr. 682:16-

683:14.)

During that conversation, the Select Comfort employee

repeated the derogatory statements, and told Zaffron and the
customer “many negative things about the Select Comfort [bed] that
Sleepy’s sells,” including that the Select Comfort beds at Sleepy’s
were inferior to the beds at the Select Comfort store.
682:16-683:14.)
from Sleepy’s.

(Tr.

The customer ultimately cancelled his purchase
(Tr. 683:15-16.)

VII. The Wind-Up Agreement
On April 18, 2007, the parties negotiated and signed a
Wind-Up Agreement.

(PX 123.)

The parties terminated their

relationship in accordance with that agreement.
CONCLUSIONS OF LAW
Following

remand

from

the

Second

Circuit,

four

of

Plaintiff’s causes of action remain: breach of contract, breach of
the implied covenant of good faith and fair dealing, slander per
se, and unfair competition.
I.

The Court considers each in turn.

Breach of Contract
Plaintiff

first

alleges

that

by

systematically

disparaging the Personal Preference Line, Select Comfort breached
the Retail Partner Agreement.

Specifically, Plaintiff contends

that Select Comfort breached paragraph 4(c), which, in part, reads:
Each party represents that it shall not
impair, infringe upon, or adversely affect the
character,
reputation
and
good
will
(collectively the “Brand Image”) of the other
party.
21

(PX 133 ¶ 4(c).)

At first glance, it seems that the conduct of

which Select Comfort is accused falls squarely within the conduct
prohibited by this broad clause. Such a conclusion, however, would
divorce this phrase from its context, and it is hornbook law that
phrases and clauses of a contract may not be interpreted out of
context. See, e.g., Grachek v. Grachek, 750 N.W.2d 328, 333 (Minn.
Ct.

App.

2008)

(“[L]anguage

in

a

contract

‘should

never

be

interpreted in isolation, but rather in the context of the entire
agreement.’”) (quoting Hydra-Mac, Inc. v. Onan Corp., 450 N.W.2d
913, 916 (Minn. 1990)); George v. Evenson, No. A06-2133, 2007 WL
4303518, at *5 (Minn. Ct. App. Dec. 11, 2007) (“Phrases and
sentences cannot be dissected and read separately and out of
context
(2008).14

with

the

entire

agreement.”),

aff’d,

754

N.W.2d

In its entirety, paragraph 4(c) reads as follows:
[Select Comfort will: . . .] Provide warranty
service in accordance with Select Comfort’s
published warranty for all products and
components sold to Retail Partner by Select
Comfort; Each party represents that it shall
not impair, infringe upon or adversely affect
the character, reputation and good will
(collectively the “Brand Images”), of the
other party.

(PX 133 ¶ 4(c).)

The Retail Partner Agreement is governed by Minnesota
Law. (PX 133 ¶ 11(d).)
14

22

335

Plaintiff would have the Court read Paragraph 4(c) as
imposing on Select Comfort two completely separate obligations:
(1) to provide standard warranty service and (2) to not impair,
infringe upon, etc., Sleepy’s brand image.

This reading is

illogical, however, because it requires the assumption that these
two clauses are in no way related.

A more reasonable reading of

Paragraph 4(c) suggests that the broad language of the second
clause

is

somehow

limited

by

the

first;

that

is,

that

the

obligation of the second clause relates only to the duties that
Select Comfort undertook in the first.

See First State Bank v.

City & Cnty. Bank, 872 F.2d 707, 713 (6th Cir. 1989) (“[I]t is
reasonable to assume that the second clause of the sentence in
question is related solely to the duties enunciated in the first
clause of the sentence, and is not related to some unmentioned or
undisclosed

duty

or

obligation.”);

Slay

Warehousing

Co.

v.

Reliance Ins. Co., 471 F.2d 1364, 1368 (8th Cir. 1973) (“The clause
relating

to

expense

here

is

more

reasonably

related

to

the

investigation and disposition of claims and suits mentioned in the
preceding sentence.” (internal quotation marks omitted)).

By this

reading, the mutual obligation on the parties to not impair the
respective brand image of their counterparts relates solely to the
warranty service provided by Select Comfort in connection with the
Personal Preference Line.

23

Other clauses in the Retail Partner Agreement support a
narrower reading of paragraph 4(c) than Plaintiff urges. Paragraph
3(j) reads as follows:
[Sleepy’s will . . .] Not disparage Select Comfort or
any products distributed through Select Comfort’s retail
stores or any of Select Comfort’s other retail partners
and not interfere with any of Select Comfort retail
store’s relationships with customers or potential
customers.
(PX 133 ¶ 3(j).)

This narrower, one-way disparagement clause in

paragraph 3(j) would be superfluous if one were to read paragraph
4(c) as a broad, mutual non-disparagement clause.

Because a

“contract must be interpreted in a way that gives all of its
provisions meaning,” Current Tech. Concepts, Inc. v. Irie Enters.,
Inc., 530 N.W.2d 539, 543 (Minn. 1995), the existence of Paragraph
3(j) suggests that Paragraph 4(c) is not as broad as Plaintiff
suggests, but is instead limited to Select Comfort’s obligation to
provide warranty service.
At the very least, the language of paragraph 4(c), in
the context of the entire agreement, is ambiguous. See ICC Leasing
Corp. v. Midwestern Mach. Co., 257 N.W.2d 551, 554 (Minn. 1977)
(“A writing is ambiguous if, judged by its language alone and
without resort to parol evidence, it is reasonably susceptible of
more than one meaning.” (citation omitted)).

When a term is

ambiguous, parol evidence may be allowed to determine the intent

24

of the parties.

Caldas v. Affordable Granite & Stone, Inc., 820

N.W.2d 826, 832 (Minn. 2012).
An earlier draft of the Retail Partnership Agreement did
not

have

the

disputed

clause

in

paragraph

4(c).

Sleepy’s,

therefore, expressed its concern that Select Comfort was servicing
any warranty issues on the Personal Preference Line, but was under
no

obligation

satisfaction.

to

service

these

warranties

to

the

customers’

Specifically, in responding to the first clause of

paragraph 4(c), Sleepy’s noted:
Does this representation mean that Select
Comfort will be handling all warranty claims
directly with the customer?
If so, can
Sleepy’s get a representation regarding Select
Comfort’s best efforts to service Sleepy’s
customers insofar as nothing is more important
to Sleepy’s than its reputation.
(DX 10 ¶ 4(c).)

Bookbinder acknowledges that the “Brand Image”

clause in Paragraph 4(c) was added in response to this concern.
(Tr. 336:7-337:17.)
In

short,

Plaintiff

contends

that

the

disparaging

conduct alleged breached a clause in the Retail Partner Agreement
that

(1)

appears

next

to

and

logically

limited

by

a

clause

regarding Select Comfort’s obligation to provide warranty service,
(2) renders superfluous a (presumably) bargained-for one-way nondisparagement clause in favor of Select Comfort, and (3) was added
in response to concern that Select Comfort would not properly
service warranties associated with the Personal Preference Line.
25

The Court cannot countenance such a tortured reading of the Retail
Partner Agreement; “in commercial transactions it does not in the
end promote justice to seek strained interpretations in aid of
those who do not protect themselves.”

James Baird Co. v. Gimbel

Bros., 64 F.2d 344, 346 (2d Cir. 1933) (Hand, J.).

Accordingly,

Plaintiff’s breach of contract claim fails.
II.

Breach of the Implied Covenant of Good Faith & Fair Dealing
Alternatively, Plaintiff claims that Defendant’s conduct

breached the implied covenant of good faith and fair dealing that
inheres in contracts under Minnesota law.

The Court disagrees.

The Retail Partner Agreement is subject to the Uniform
Commercial Code,15 which “imposes an obligation of good faith in
[every contract’s] performance and enforcement.”
§ 336.1-304.

Minn. Stat. Ann.

This general obligation, however, does not beget a

separate cause of action.

As the provision’s comments make clear:

“[Section 336.1-304] does not support an independent cause of
action for failure to perform or enforce in good faith.

Rather,

this section means that a failure to perform or enforce, in good
faith,

a

specific

duty

or

obligation

under

constitutes a breach of that contract . . . .”

the

contract,

Minn. Stat. Ann.

See, e.g., Old Country Toyota Corp. v. Toyota Motor
Dists., Inc., 966 F. Supp. 167 (E.D.N.Y. 1997) (holding
that a similar dealership agreement falls under the UCC);
Bonebrake v. Cox, 499 F.2d 951, 959 (8th Cir. 1974)
(same).
15

26

§ 336.1-304 cmt. 1. Accordingly, Plaintiff’s claim for a violation
of the implied covenant of good faith and fair dealing fails. See,
e.g., The Grandoe Corp. v. Gander Mountain Co., No. 11-CV-0947,
2012 WL 3430735, at *2 n.2 (D. Minn. Aug. 14, 2012); Minnwest Bank
Cent. v. Flagship Props. LLC, 689 N.W.2d 295, 303 n.5 (Minn. Ct.
App. 2004) (“The implied covenant of good faith and fair dealing
does not apply to sales contracts.” (citation omitted)).
Plaintiff’s cause of action for breach of the implied
covenant of good faith and fair dealing would fare no better if
the

Agreement

was

subject

to

Minnesota

common

law.

“Under

Minnesota law, every contract includes an implied covenant of good
faith and fair dealing.”

In re Hennepin Cnty. 1986 Recycling Bond

Litig., 540 N.W.2d 494, 502 (Minn. 1995).

But this covenant is

narrowly tailored; “[t]he law does not allow the implied covenant
of good faith and fair dealing to be an everflowing cornucopia of
wished-for legal duties.”

Comprehensive Care Corp. v. RehabCare

Corp., 98 F.3d 1063, 1066 (8th Cir. 1996) (citation omitted).

In

this vein, the implied covenant of good faith and fair dealing may
not be construed to impose obligations “beyond the scope of the
underlying contract.”

Hennepin, 540 N.W.2d at 503.

Instead, the

implied covenant of good faith and fair dealing operates as a gap
filler to address circumstances not contemplated by the parties at
the time of contracting.

RBC Dan Rouscher, Inc. v. Fed. Ins. Co.,

No. 03-CV-2609, 2003 WL 25836278, at *7-9 (D. Minn. Dec. 2, 2005).
27

In light of the fact that the implied covenant of good
faith and fair dealing operates to prohibit certain conduct not
contemplated by the parties, it should not apply to a circumstance
that the parties did contemplate at the time of contracting.

See,

e.g., United States v. Outer Harbor Dock & Wharf Co., 124 F. Supp.
337, 344 (S.D. Cal. 1954) (“[T]here can be no implied covenant
where the subject is completely covered by the contract.”); United
States v. Basin Elec. Power Co-op., 248 F.3d 781, 796 (8th Cir.
2001) (“Since good faith is merely a way of effectuating the
parties intent in unforseen circumstances, the implied covenant
has

‘nothing

to

do

with

the

enforcement

of

terms

actually

negotiated’ and cannot ‘block [the] use of terms that actually
appear in the contract.’” (quoting Cont’l Bank, N.A. v. Everett,
964 F.2d 701, 705 (7th Cir. 1992) (alteration in original)). Here,
the parties contemplated the possibility of product disparagement,
and agreed on a one-way non-disparagement clause in favor of Select
Comfort. Using the implied covenant of good faith and fair dealing
to rewrite this one-way non-disparagement clause to a mutual one
would

work

a

significant

hardship

upon

Select

Comfort,

presumably bargained for that clause’s asymmetry.16

In this case, the Court finds consideration of the
hardship that finding an implied covenant of good faith
and fair dealing would have on Select Comfort is
particularly appropriate. Unlike most agreements where
the parties can be expected to work cooperatively, this
Agreement contemplated competition between Sleepy’s and
16

28

who

Additionally, Minnesota courts require a showing of bad
faith in order to find a breach of the implied covenant of good
faith and fair dealing.

See BP Products N. Am., Inc. v. Twin

Cities Stores, Inc., 534 F. Supp. 2d 959, 966 (D. Minn. 2007)
(collecting cases); Minnwest Bank, 689 N.W.2d at 303 (“To establish
a violation of this covenant, a party must establish bad faith by
demonstrating that the adverse party has an ulterior motive for
its refusal to perform a contractual duty.” (citation omitted)).
Here, the record is devoid of evidence suggesting that Select
Comfort, as a whole, acted in bad faith.
Select

Comfort

salespeople

made

that

Preference Line.

significant

were

accused

(PX 145.)

Indeed, by all accounts,

effort
of

to

discipline

disparaging

the

those

Personal

Thus, Plaintiff’s claim for breach of

the implied covenant of good faith and fair dealing fails for the
independent reason that Plaintiff has failed to demonstrate bad
faith on the part of Select Comfort.

Select Comfort. Implying on Select Comfort a nondisparagement duty would have handcuffed its sales team in
the competition that the Retail Partner Agreement
envisioned. Moreover, a non-disparagement clause in favor
of Sleepy’s may have imposed upon Select Comfort the
additional burden of closely monitoring its commissionbased sales team. The implied covenant of good faith and
fair dealing does not impose obligations such as these,
which are far beyond the scope of the contract. See Teng
Moua v. Jani-King, Inc., 810 F. Supp. 2d 882, 900 (D.
Minn. 2011).
29

III. Slander Per Se
Plaintiff asserts twelve causes of action for slander
per se, each arising from a secret shopping instance discussed in
the Findings of Fact.

(Am. Compl. ¶¶ 66-78, Ex. E.)

But beyond

these individual instances, Sleepy’s contends that the aggregate
of these secret shops says something more; Sleepy’s submits that
it has demonstrated a pattern and practice of slander per se, and
the existence of that pattern and practice begets a broader, more
general cause of action.

As discussed below, Sleepy’s position is

flawed for a host of reasons.
A.

Legal Standard
The elements of a cause of action for slander under New

York law17 are “(i) a defamatory statement of fact, (ii) that is
false, (iii) published to a third party, (iv) ‘of and concerning’
the plaintiff, (v) made with the applicable level of fault on the
part

of

the

speaker,

(vi)

either

causing

special

harm

or

constituting slander per se, and (vii) not protected by privilege.”
Albert v. Loksen, 239 F.3d 256, 265-66 (2d Cir. 2001) (footnotes
and citations omitted).

Additionally, there are four categories

Where the parties are domiciled in different states,
“[n]ormally, the applicable rule of decision will be that of the
state where the [tort] occurred.” Neumeier v. Kuehner, 31 N.Y.2d
121, 128, 286 N.E.2d 454, 458, 335 N.Y.S.2d 64 (1972). Here, most
of the secret shops took place in New York, and neither party has
claimed applicability of an alternative. Accordingly, the Court
applies New York law to Plaintiff’s tort claims.
17

30

of defamatory statements where special damages need not be shown
(collectively

“slander

per

se”):

statements

“(i)

charging

plaintiff with a serious crime; (ii) that tend to injure another
in his or her trade, business or profession; (iii) that plaintiff
has a loathsome disease; or (iv) imputing unchastity to a woman.”
Liberman v. Gelstein, 80 N.Y.2d 429, 435, 605 N.E.2d 344, 347, 590
N.Y.S.2d 857 (1992).
B.

Individually Actionable Slanders
Under New York defamation law, “publication is a term of

art. . . .

A defamatory writing is not published if it is read by

no one but the one defamed.

Published it is, however, as soon as

read by any one else.”

Ostrowe v. Lee, 256 N.Y. 36, 38, 175 N.E.

505

C.J.).

(1931)

(Cardozo,

On

this

basis

Plaintiff’s claims for slander per se fail.
instances

pleaded

in

the

Amended

Complaint,

alone,

all

of

In all of the
the

allegedly

defamatory statement was made only to Sleepy’s representatives,
and the Court saw no evidence suggesting that any other individual
overheard any of the twelve instances of disparagement.

See

Fashion Boutique of Short Hills v. Fendi USA, Inc., No. 91-CV4544, 1998 WL 259942, at *5 (S.D.N.Y. May 21, 1998) (statements
made

to

plaintiff’s

agents

cannot

disparagement claims).

31

support

slander

and

Indeed, the Court heard direct evidence18 of only one
instance of publication: when Zaffron called a Select Comfort
employee in the presence of a potential customer.
VI. at 20.)

(See supra Part

Nonetheless, a claim of slander per se arising from

this incident would still fail because Sleepy’s consented to the
publication of those allegedly defamatory remarks.
Where the publication occurs with the consent of the
defamed party, an action for defamation does not lie.
Sleepy’s LLC, 779 F.3d at 199.

See, e.g,

The consent given need not be

unequivocal or affirmative; “in some circumstances, a person’s
intentional eliciting of a statement she expects will be defamatory
can constitute her consent to the making of the statement.”

Id.;

see also Schaefer v. Brookdale Univ. Hosp. & Med. Ctr., 18 Misc.
3d 1142, 859 N.Y.S.2d 899 (Sup. Ct. 2008) (finding that plaintiff

Sleepy’s offered the hearsay testimony of other Sleepy’s
individuals who explained that a customer had told them
that a Select Comfort representative had disparaged the
Personal Preference Line to them, but this evidence is
insufficient to establish publication. First, it is
admissible only as evidence of the customers’ states of
mind, not as to whether a Select Comfort employee actually
defamed the Personal Preference Line to them. See
Sleepy’s, 779 F.3d at 204. Second, as discussed more
fully at infra Part III.C, the comments made to these
customers--as told secondhand by the Sleepy’s witnesses-were not slander per se; the comments all criticized a
mattress from the Personal Preference Line, not Sleepy’s
itself. Third, there is no evidence connecting any of
these allegedly published instances of defamation to those
instances alleged in the Complaint and discussed in these
Findings of Fact and Conclusions of Law.
18

32

had

consented

publication

to
of

the

defamatory

information

statement

that

he

by
“had

demanding

the

reason

to

anticipate . . . would not be positive), aff’d, 888 N.Y.S.2d 122,
66 A.D.3d 985 (2d Dep’t 2009); Hirschfeld v. Inst. Inv’r, Inc.,
260 A.D.2d 171, 688 N.Y.S.2d 31 (1st Dep’t 1999) (plaintiff’s
sending a letter requesting a written statement of the reason for
her termination was consenting to the publication); LeBreton v.
Weiss, 256 A.D.2d 47, 680 N.Y.S.2d 532 (1st Dep’t 1998) (plaintiff
had two individuals contact defendant under the pretense of being
landlords and had them make certain inquiries to which defendant
responded by making the defamatory statements upon which the action
was premised).
Although New York’s highest court has offered little
guidance on the rationale for the rule that consent to publication
bars a defamation claim, the rule seems at least in part motivated
by a desire to preclude a plaintiff from intentionally eliciting
a defamatory response for the purpose of decoying the defendant
into a lawsuit.

Restatement (Second) of Torts § 583 (1977), cited

with approval in LeBreton, 256 A.D.2d at 47, 680 N.Y.S.2d at 532.
As such, the Second Circuit has observed:
[I]t appears . . . that New York’s standard
[for
when
a
plaintiff
consents
to
a
publication] would be along the following
lines: When a plaintiff sues for defamation
based on a statement . . . the more evidence
[that] supports the proposition that the
plaintiff elicited the statement with a high
33

degree of certainty that it would be
defamatory, for the purpose of enabling a
lawsuit, the stronger the defendant’s case for
deeming the statement consented to, thus
barring the claim.
Sleepy’s LLC, 779 F.3d at 199.
Here, Sleepy’s had every reason to suspect that the
comments

that

Zaffron

solicited

salesperson would be disparaging.

from

the

Select

Comfort

The customer with whom Zaffron

spoke immediately prior to the call told her as much.

Moreover,

Sleepy’s had undertaken a mission to gather ammunition for a future
lawsuit

against

“love[d]”

Select

hearing

disparagement.

Comfort.

the

extent

Acker
of

even

Select

stated

that

Comfort’s

he

alleged

In light of this aim, Sleepy’s inquiry cannot be

considered an “honest inquiry or investigation.”

Restatement

(Second) of Torts § 584 (1977) (stating that the honest inquiry
exception to the consent rule does not apply where the publication
is invited for the purposes of decoying the defendant into a
lawsuit).

In short, because the evidence shows that Sleepy’s was

both virtually certain that its inquiry would elicit allegedly
slanderous statements and substantially motivated by the desire to
bolster

a

publication

contemplated
of

these

lawsuit,

allegedly

Sleepy’s
defamatory

consented

to

statements.

the
See

Sleepy’s LLC, 779 F.3d at 199.19

Though it need not visit the issue, the Court suspects
that even if Plaintiff’s other claimed instances of
19

34

C.

Pattern and Practice of Defamation
Sleepy’s

submits

that

aside

from

the

individually

actionable slanders, it has established that Select Comfort has
engaged in a pattern and practice of slander per se, and, in light
of that pattern and practice, Sleepy’s is entitled to general
damages. (See Pl.’s Proposed FoF ¶ 53 (“Here, because the evidence
shows

a

pervasive

pattern

and

practice

of

disparagement

and

defamation going well beyond the specific defamatory statements
proven,

damages

are

not

limited

to

the

damage

to

Sleepy’s

reputation solely in the eyes of those to whom specific defamatory
statements were made.”).)

Sleepy’s argument fails both on the

facts and as a matter of law.
Sleepy’s correctly asserts that general damages are
available

for

proposition,

instances
asks

the

of

slander

Court

to

per

se,

conclude

then,
that

from

the

that

alleged

denigration was so pervasive and widespread that Sleepy’s need not
show

any

sequittur.

specific

instance

of

slander.

But

that

is

a

non

The availability of general damages does not absolve

Sleepy’s from having to prove a specific slander claim.

Fashion

Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48, 62
n.3 (2d Cir. 2002).

The Court disagrees with Sleepy’s suggestion

slander per se had been published, those claims would
nonetheless be barred for the same reasons that any claim
arising out of the Zaffron incident is.
35

that New York law supports a claim of “general slander per se”
where a pattern of denigration is shown.

As an initial matter,

the Court notes that it has not been presented with, nor has it
independently
supports

uncovered

Plaintiff’s

jurisprudence.

any

case

proposed

from

any

jurisdiction

understanding

of

that

defamation

Moreover, it is black letter law that a claim of

slander requires proof of the slanderous statement, see Evans v.
Waldo, No. 04-CV-0566, 2006 WL 2689819, at *2 (E.D.N.Y. Sept. 18,
2006) (requiring “the exact slanderous words allegedly spoken”
(citation omitted)), and finding liability based on a general
pattern of slander, without reference to a specific statement,
would vitiate that requirement.
Plaintiff’s suggestion that New York slander law would
support a finding of liability based on a pattern and practice of
disparagement may be based on Federal Rule of Evidence 406.

Rule

406 states:
Evidence
of
a
person’s
habit
or
an
organization’s
routine
practice
may
be
admitted to prove that on a particular
occasion the person or organization acted in
accordance with the habit or routine practice.
The court may admit this evidence regardless
of whether it is corroborated or whether there
was an eyewitness.
FED. R. EVID. 406.

But Rule 406 does not purport to alter the

substantive elements of a cause of action.

Shady Grove Orthopedic

Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 407, 130 S. Ct.

36

1431, 1442, 176 L. Ed. 2d 311 (2010).

Thus, proof of a specific

slanderous statement is still required.

In any event, Rule 406

contemplates the routine practice evidence as tending to show a
course of action “on a particular occasion.”

FED. R. EVID. 406.

Here, Plaintiff offers no particular occasion, instead insisting
that the Court find liability based on the practice alone.

The

Court declines to do so.
But even if New York law would espouse the new “general
slander per se” suggested by Plaintiff, the Court concludes that
Plaintiff has not produced sufficient evidence to show a pattern
or practice of slander per se.

Instead, the evidence shown

demonstrated that in the majority of the secret shops performed,
Select

Comfort’s

comments

were

limited

to

how

the

Personal

Preference Line was inferior to the Core Line, and it is well
settled

that

disparaging

statements

about

an

organization’s

product do not constitute slander per se. See, e.g., Drug Research
Corp. v. Curtis Pub. Co., 7 N.Y.2d 435, 440, 166 N.E.2d 319, 322,
199 N.Y.S.2d 33 (1960) (“The rule is that, if a product has been
attacked, the manufacturer may recover in a cause of action for
libel, providing he proves malice and special damages as well as
the falsity of the criticism.”); Angio-Med. Corp. v. Eli Lilly &
Co., 720 F. Supp. 269, 274 (S.D.N.Y. 1989) (“Language which merely
disparages a product is not actionable unless special damages are
pleaded and it appears that such damage is a natural and immediate
37

consequence

of

the

disparaging

statements.”);

Alternative

Electrodes, LLC v. Empi, Inc., 597 F. Supp. 2d 322, 338 (E.D.N.Y.
2009) (“In any event, plaintiff only has alleged disparaging
statements about its product, and the amended complaint does not
contain allegations regarding business methods or the integrity of
the Company itself.

Therefore, special damages must be alleged to

sufficiently plead a claim for business disparagement.”).

Only in

one or two instances did Select Comfort’s comments arguably rise
to an actionable slander per se, (see Tr. 1265:8-9 (“Sleepy’s
doesn’t

have

the

greatest

reputation”),

1467:1-2

(Sleepy’s

“salespeople will lie to you, and they’ll tell you anything to
make a sale”)), and that is insufficient to establish a routine
pattern or practice.
Accordingly, for all these reasons, Plaintiff’s slander
per se claims fail.
IV.

Unfair Competition
Plaintiff also brings a claim for unfair competition

under New York law.

For the following reasons, Plaintiff’s unfair

competition claim fails.
Although a claim of unfair competition under New York
law encompasses a broad range of unfair practices, Am. Footwear
Corp. v. Gen. Footwear Co., 609 F.2d 655, 662 (2d Cir. 1979), the
doctrine’s reach is not without limits, Carson Optical, Inc. v.
Prym Consumer USA, Inc., 11 F. Supp. 3d 317, 328 (E.D.N.Y. 2014).
38

Though it is “broad” and “flexible,” id., the New York Court of
appeals has refused to broaden the tort of unfair competition to
include every instance of “commercial unfairness.”

Ruder & Finn

Inc. v. Seaboard Sur. Co., 52 N.Y.2d 663, 671, 422 N.E.2d 518,
522, 439 N.Y.S.2d 858 (1981).

Instead, it is limited to cases

where one has misappropriated the skill, expenditures, and labor
of another.

See id.; Cue Pub. Co. v. Kirshenberg, 22 Misc. 2d

188, 189, 198 N.Y.S.2d 993, 996 (1960) (noting that while there
are many definitions of unfair competition, “[t]his is nothing but
a convenient name for the doctrine that no one should be allowed
to sell his goods as those of another” (internal quotation marks
and citations omitted)).
competition

will

not

lie

As a consequence, a claim for unfair
absent

the

defendant’s

bad

faith

misappropriation of a commercial advantage belonging exclusively
to the plaintiff.

Ruder, 52 N.Y.2d at 671, 422 N.E.2d at 522;

LoPresti v. Mass. Mut. Life Ins. Co., 30 A.D.3d 474, 476, 820
N.Y.S.2d 275, 277 (2006); Saratoga Vichy Spring Co. v. Lehman, 625
F.2d 1037, 1044 (2d Cir. 1980) (collecting cases).
Here,

the

Court

finds

that

Select

Comfort

did

misappropriate the skill, expenditures, or labor of Sleepy’s.

not
By

all accounts, Select Comfort’s sales representatives sought to
distance their own products from those of the Personal Preference
Line; they endeavored to maximize their own competitive advantage,
not

usurp

Sleepy’s.

Plaintiff’s
39

claim

that

Select

Comfort

improperly

denigrated

the

Personal

Preference

Line

to

the

advantage of Select Comfort may constitute a product disparagement
claim, but it is not a claim for unfair competition.

See Gucci

Am., Inc. v. Duty Free Apparel, Ltd., 277 F. Supp. 2d 269, 275
(S.D.N.Y. 2003) (similarly distinguishing an unfair competition
claim from a product disparagement claim).
Accordingly, Plaintiff’s unfair competition claim fails.
CONCLUSION
For the foregoing reasons, the Court finds in favor of
Defendant on all of the remaining claims. As discussed in footnote
three, Defendant is instructed to complete the electronic record
by

filing

the

remaining

trial

transcripts

on

the

docket.

Thereupon, the Clerk of the Court is directed to enter judgment
consistent with these Findings of Fact and Conclusions of Law, and
to mark this matter CLOSED.

SO ORDERED.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:

September
22 , 2015
Central Islip, New York

40