Synca Direct Inc. v. SCIL Animal Care Company et al
Filing
35
DECISION AND ORDER granting in part Defts' 28 Motion to Dismiss with respect to Pltf's claims for unjust enrichment and conversion; denying in part Defts' 28 Motion to Dismiss in all other respects. Signed by Senior Judge Thomas J. McAvoy on 10/14/15. (sfp, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
---------- --------------------SYNCA DIRECT, INC.,
Plaintiff,
v.
8:15-cv-794
SCIL ANIMAL CARE COMPANY, and
VET NOVATIONS, INC.,
Defendants.
------------------------------THOMAS J. McAVOY
Senior United States Judge
DECISION and ORDER
Plaintiff commenced the instant contract action, alleging that Defendants
tortiously interfered with a contract between Plaintiff and a software developer.
Presently before the Court is Defendants’ motion to dismiss the Plaintiff’s Amended
Complaint. See dkt. # 28. The Court has determined to decide the motion without oral
argument.
I.
BACKGROUND
Plantiff Synca Direct, Inc. (“Synca”), produces software that specializes in
development and marketing for dentists. Plaintiff’s Amended Complaint (“Amended
Complt.”), dkt. # 26 at ¶ 1. Defendant Scil Animal Care Company (“Scil”) is a provider
of veterinary diagnostic equipment. Id. at ¶ 5. At some point after the events in
question, Scil acquired Defendant Vet Novations (“Vet Novations”). Id. at ¶ 6. Vet
Novations was a Canadian corporation. Id.
This case concerns allegations that Defendants interfered with a contract
between Synca and ImageLevel, a software development company that made software
for the medical, dental and veterinary industries. Id. at ¶ 1. In or around 2003 or 2004,
Synca and ImageLevel worked together on a project to improve an ImageLevel
software product for the North American market. Id. at ¶ 7. ImageLevel wrote the code
for the project, while Synca worked to review the existing software, design
improvements and test the results. Id. These efforts were successful, and Synca and
ImageLevel entered into a binding and valid contract (“the Agreement”). Id. at ¶ 8. In
this contract, Synca obtained the perpetual and exclusive right and license to the
resultant software (the “Product”) in North America. Id.
At some point, Defendants contacted Synca to inquire about using the Product
developed by Synca and ImageLevel in the veterinary market. Id. at ¶ 9. In response,
Synca hired two leading veterinary dentists to develop a guide for adapting the Product
to the veterinary market. Id. at ¶ 10. Synca then used that guide to develop a system
for employing the Product in the veterinary market (the “System”). Id. at ¶ 11.
ImageLevel wrote the code. Id. The System involved both hardware and software
elements. Id.
Synca and ImageLevel amended their Agreement on November 2, 2011 to grant
exclusive rights to the Product for the veterinary market. Id. at ¶ 12. The original
Agreement had granted Synca exclusivity for other markets, including the veterinary
market, but the amended Agreement made this exclusivity explicit. Id.
Synca also entered into an agrement with Vet Novations and Scil. Id. at ¶ 13. In
this agreement, Synca granted Vet Novations and Scil an exclusive sublicense to the
Product for the veterinary market. Id. Plaintiff’s Amended Complaint calls this
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agreement the “Sublicense Agreement.” Id. Plaintiff alleges that Vet Novations and
Scil were aware that Synca’s right to sublicense the Product came from Synca’s rights
under the Agreement. Id. Vet Novations and Scil agreed to purchase a minimum of
120 Systems which incorporated the Product annually. Id. The parties renewed this
sublicense in February 2013. Id. In the first two and one-half years after executing the
Sublicense Agreement, the Defendants’ “sales exceeded the annual minimum
guarantees.” Id. at ¶ 14.
In October 2013, Synca’s President, Raymond Monette, spoke with Xavier de
Tracy, ImageLevel’s General Manager. Id. at ¶ 15. De Tracy informed Monette that
ImageLevel and Defendants were attempting to bypass Plaintiff’s role in distributing the
Systems. Id. They claimed that Plaintiff’s prices were too high. Id. Plaintiff alleges
that Larry Cochrane, Defendants’ President, spoke with de Tracy and threatened to
stop purchasing the System form Synca because of its supposed high price. Id. at ¶
16. Cochrane stated that he wished to either purchase the System directly from
ImageLevel or search for another product. Id. Fearing the loss of Defendants’
business, de Tracy reduced the price ImageLevel charged Synca for the software
included in the Product, and Synca agreed to reduce the price charged to Defendants
for the System. Id. The parties amended the Renewed Sublicense Agreement on
January 14, 2014 to reflect the reduced price Defendants would pay Synca for the
System. Id. at ¶ 17.
On or about August 25, 2014, Defendants without warning informed Synca that
they would purchase a replacement for the System and the Product. Id. at ¶ 18. Synca
discovered that Defendants’ replacement for the System and the Product were actually
3
a private-label version of them. Id. at ¶ 19. ImageLevel, either directly or indirectly,
supplied these replacements to the Defendants. Id. Plaintiff alleges that this use of a
substitute product was ‘a clear and intentional violation of Synca’s rights under the
Agreement. Id.
Plaintiff further alleges that Defendants were both “well aware of the existence
of, and Synca’s rights pursuant to, the Agreement.” Id. at ¶ 20. Moreover, Plaintiff
contends, Defendants “intentionally and tortiously interfered with Synca’s contractual
relations with ImageLevel.” Id. at 21. Defendants’ conduct led ImageLevel to seek to
terminate the agreement. Id. Defendants are now receiving profits that should belong
to Plaintiff. Id. at ¶ 22.
Plaintiff’s Amended Complaint raises four Counts. Count One alleges tortious
interference with contractual relations. Count Two alleges Defendants were unjustly
enriched because of their interference. Count Three seeks relief for conversion. Count
Four seeks an injunction that permanently enjoins Defendants from manufacturing and
selling the “Infringing System and Product”; permanently enjoins Defendants from
developing any systems that use the Product in North America without Synca’s written
consent; orders Defendants to produce a list of all sales of the infringing system and
product as a means of facilitating Plaintiff’s damages calculation; orders destruction of
any infringing system and/or products; mandates that Defendants agree not to
infringement on Plaintiff’s rights in the future; and directs Defendants to submit
affidavits of compliance with the Court’s order.
Defendants responded to the Amended Complaint with a motion to dismiss. The
parties have briefed the issues, bringing the case to its present posture.
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II.
LEGAL STANDARD
Defendants have filed a motion to dismiss the Amended Complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6). In addressing such motions, the Court must
accept “all factual allegations in the complaint as true, and draw[] all reasonable
inferences in the plaintiff’s favor.” Holmes v. Grubman, 568 F.3d 329, 335 (2d Cir.
2009). This tenet does not apply to legal conclusions. Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). “Threadbare recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.” Id. at 678. “To survive a motion to
dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face.” Id. (quoting Bell Atl. v. Twombly, 550 U.S.
544, 570 (2007)).
III.
ANALYSIS.
Defendants seek dismissal of each Count of the Amended Complaint on various
grounds, which the Court will address as appropriate.
A.
Tortious Interference with a Contract
Defendants first contend that Plaintiff has failed to state a claim for tortious
interference with a contract. In New York, a claim of toritious interference with a
contract requires “(1) ‘the existence of a valid contract between the plaintiff and a third
party’; (2) the ‘defendant’s knowledge of the contract’; (3) the ‘defendant’s intentional
procurement of the third-party’s breach of the contract without justification’; (4) ‘actual
breach of the contract’; and (5) ‘damages resulting therefrom.’” Kirch v. Liberty Media
Corp., 448 F.3d 388, 401 (2d Cir. 2006) (quoting Lama Holding Co. v. Smith Barney
5
Inc., 88 N.Y.2d 413, 424, 668 N.E. 2d 1370, 1375, 646 N.Y .S. 2d 76, 82 (1996)).
Defendants contend that Plaintiff has failed to allege the third and fourth elements of
such a claim in sufficient factual detail. Plaintiff disagrees.
i.
Breach of Underlying Contract
Defendants first argue that Plaintiff has not alleged that ImageLevel breached or
terminated its agreement with Synca in more than a conclusory fashion; Defendants
argue that “Synca proffers no substantive factual allegations to support its formulaic
recitations.” Defendant’s Brief, dkt. # 28-5 at 11. Plaintiff contends that allegations
that ImageLevel supplied Defendants with a “Private Label Replica” of the System and
that Defendants “conspired with ImageLevel to intentionally have ImageLevel breach
the Agreement” are sufficient to support a claim that ImageLevel breached its contract
with Plaintiff.
Failing to allege breach of contract is fatal to a tortious interference claim. See,
e.g., Brooklyn Historic Ry. Assn. v. City of New York, 126 A.D.3d 837, 841 (2d Dept.
2015) (dismissing tortious interference claim because plaintiff did not allege a breach,
but only alleged a delay in the performance of the contract); AQ Asset Mgt., LLC v.
Levine, 119 A.D.3d 457, 461, 990 N.Y.S.2d 465, 471 (1 st Dept. 2014) (no tortious
interference claim because plaintiff did not allege breach of contract); AREP FiftySeventh, LLC v. PMGP Assoc., L.P., 115 A.D.3d 402, 402-403, 981 N.Y S.2d 406, 407408 (1st Dept. 2014) (dismissing tortrious interference claim because “plaintiff does not
allege that defendant procured a breach of contract by plaintiff’s contractor.”).
This matter concerns software that Plaintiff’s Amended Complaint alleges Synca
and ImageLevel worked together to create software to sell in the North American
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Market. Amended Complaint at ¶ 7. ImageLevel wrote the code for the software, while
Synca “reviewed the existing software, designed improvements and tested the results.
Id. Once the companies created the Product, ImageLevel and Plaintiff entered in a
“valid and binding contract” that entitled Plaintiff to a “perpetual and exclusive right and
license to” that software in North America. Id. at ¶ 8. After Defendants contacted
Plaintiff about accessing that software for the veterinary market, Plaintiff investigated
adapting the software, and eventually worked with ImageLevel to develop the System
for that market. Id. at ¶¶ 9-11. On November 2, 2011, Synca and ImageLevel
amended their agreement to grant Synca exclusive rights to the new product in the
veterinary market. Id. at ¶ 12. Plaintiff and Defendants also agreed to a contract
making Defendants the exclusive sublicensor of the System. Id. at ¶ 13. That contract
required Defendants to purchase a certain number of Systems per year. Id.
The cost of these materials apparently became an issue, and the parties
eventually renegotiated their agreement to lower costs for Defendants. Id. at ¶¶ 15-17.
Still dissatisfied, Defendants eventually informed the Plaintiff that they had procured a
replacement for the System that Plaintiff had supplied. Id. at ¶ 18. Plaintiff’s Amended
Complaint alleges that the replacement that Defendants procured was actually the
same System that ImageLevel and Plaintiff had created, and was supplied “directly or
indirectly” by ImageLevel to the Defendants. Id. at ¶ 19. Plaintiff contends that this
provision of the System from ImageLevel to Defendants violated Plaintiff’s rights under
the Agreement. Id.
The question here is whether these allegations establish a breach of contract. In
New York, “[t]he essential elements of a cause of action to recover damages for breach
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of contract are the existence of a contract, the plaintiff’s performance pursuant to the
contract, the defendant’s breach of its contractual obligations, and damages resulting
from the breach.” PFM Packaging Mach. Corp. v. ZMY Food Packing, Inc., 16 N.Y.S.
3d 298, 2015 N.Y. App. Div. LEXIS 6711 at *2 (2d Dept. Sept. 16, 2015). T aking all
inferences in the Amended Complaint in the Plaintiff’s favor, the Court finds that Plaintiff
has alleged that Synca and ImageLevel had a contract that granted Plaintiff the
exclusive right to the System in the veterinary market. Plaintiff also alleges that, despite
this exclusive rights granted to Plaintiff, ImageLevel supplied Defendants with that
System and excluded Plaintiff from the process, depriving Plaintiff of income from the
Defendants. The Court finds these allegations, if proved, would demonstrate that
ImageLevel breached its contract with Plaintiff. The contract was for Plaintiff to have
exclusive rights to the system, and ImageLevel bypassed that right and supplied
Defendants with the System directly.
Contrary to Defendants’ claims that these allegations are merely conclusory,
reciting the elements of a breach of contract without providing any facts to demonstrate
a particular breach of contract, the Court finds that Plaintiff has alleged facts sufficient
to demonstrate the particular provisions of the contract and the actions ImageLevel took
that breached that contract. As such, these alleg ations provide sufficient facts to make
the entitlement to relief on this element of the tortrious interference claim plausible.
The motion must therefore be denied in this respect.
As part of their argument here, Defendants contend that Plaintiff has already
admitted that Synca cannot demonstrate a breach of the underlying contract and
cannot now amend the pleading to state such a claim. Defendants’ brief quotes
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extensively from a pre-motion conference held between the parties and the Hon.
Richard J. Sullivan in the Southern District of New York. See Exh. B to Defendants’
Motion, dkt. # 28-3. Plaintiff originally filed this action in that District, but Judge Sullivan
determined that the Northern District of New York was the proper venue for the case.
At the conference, held prior to his decision to transfer the case to this district, Judge
Sullivan also discussed with the parties the merits of the underlying action, including
whether Plaintiff’s Complaint could survive a motion to dismiss. Judge Sullivan
expressed skepticism about whether Plaintiff had stated a claim, and Defendants’ brief
quotes from the transcript to underscore this point and to argue that Plaintiff is bound by
a supposed statement from its counsel that the Complaint did not allege a breach of
contract against ImageLevel.
The Court finds this argument unpersuasive. Judge Sullivan did not issue a
ruling on the matter, and Plaintiff has since filed an Amended Complaint. As this is a
motion to dismiss and is to be decided on the pleadings, Judge’s Sullivan’s opinion
about an earlier version of the Complaint is entirely immaterial to the issue before the
Court. Defendants’ position is particularly unavailing in that Plaintiff’s original complaint
did not contain a claim for tortious interference with a contract. Instead, Count One of
that Complaint alleged tortious interference with prospective economic advantage,
sometimes denoted as tortious interference with prospective business relations in New
York.1 See dkt. # 1; Catskill Dev., L.L.C. v. Park Place Entm’t Corp., 547 F.3d 115, 132
1
Indeed, the passage cited by the Defendants as proof that Plaintiff has already
admitted that no breach of contract occurred came in the context of a discussion about
whether Plaintiff had alleged tortious interference with a contract or tortious interference
with prospective business relations, where Plaintiff did not need to plead a breach of
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(2d Cir. 2008) (noting that tortious interference with business relations has the
“alternative name” of “‘tortious interference with prospective economic advantage”)
(quoting Booz-Allen & Hamilton, Inc., 280 F.3d 209, 214 (2d Cir. 2004))
In New York, a claim of tortious interference with prospective business relations
requires a showing of: “(1) business relations with a third party; (2) the defendant’s
interference with those business relations; (3) the defendant acted with the sole
purpose of harming the plaintiff or used dishonest, unfair or improper means; and (4)
injury to the business relationship.” Nadel v. Play-by-Play Toys & Novelties, Inc., 208
F.3d 368, 382 (2d Cir. 2000). A tortious interference with prospective business
relations claim does not require Plaintiff to plead a breach of contract, as breach is not
an element of that claim. Counsel did not need to press the issue of breach to make
out a claim under the earlier contract, and only needed to plead some sort of business
relationship. Pleading tortious interference with contractual relations does not require
contradictory facts, but simply additional facts, as that claim requires not just business
relations, but contractual ones. Moreover, the issue with the allegations in the original
contract to prevail. See dkt. # 28-3 at 9-10. The discussion centered around whether
Plaintiff had adequately alleged tortious conduct, acting with dishonest intent and using
unfair and improper means. Id. at 10-11. Such discussion focused on the most
important issue, as “[i]n order to prevail on a claim of tortious interference with
prospective contractual relations a plaintiff must establish that the defendant interfered
with ‘business relations existing between plaintiff and a third party, either with the sole
purpose of harming the plaintiff or by means that are dishonest, unfair or in any other
way improper.’” Italian & French Wine Co. v. Negociants U.S.A., 842 F.Supp. 693, 701
(W.D.N.Y. 1993) (quoting PPX Enterprises v. Audio Fidelity Enterprises, 818 F.2d 266,
269 (2d Cir. 1987)). “If the defendant’s interference is intended, ‘at least in part, to
advance its own competing interests, the claim will fail unless the means employed
include criminal or fraudulent conduct.’” Id. (quoting PPX Enterprises, 818 F.2d at
269)).
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Complaint identified by Judge Sullivan had to do with whether Plaintiff had properly pled
tortious conduct by the Defendants. The pleading requirement is different for the claim
pled as Count One in the original Complaint than for the claim pled as Count One in the
Amended Complaint.2
Nevertheless, Defendants argue that the Court must accept certain statements
made by Plaintiff’s counsel at the conference and conclude that Plaintiff has admitted
that no breach of contract by ImageLevel occurred. For this proposition, Defendants
cite to Colliton v. Cravath, Swaine & Moore LLP, No. 08cv400, 2008 U.S. Dist. LEXIS
74388 (S.D.N.Y. Sept. 24, 2008). In Colliton, a disbarred attorney sued his former law
firm, alleging in part that the firm breached the parties’ employment contract by failing to
pay promised bonuses. Id. at * 4-5. Plaintiff lost his job with the law firm after his arrest
for statutory rape and patronizing a prostitute. Id. at * 7. The defendant argued that
plaintiff could not prevail on his contract claims because his “failure to disclose his
criminal behavior at the time he was hired constitute[d] fraud, given his ethical duties as
an attorney,” and New York law permits a party to “unilaterally rescind a contract that
was induced by fraud.” id. at * 12. In response to this argument, which defendant
raised “in a pre-motion letter to [the] Court,” plaintiff, proceeding pro se, filed an
amended complaint that altered the facts alleged in the original complaint to report that
most of his time was spent in non-attorney activities and that he had breached no
ethical duty required of lawyers. Id. at *18. The court found this amendment “a
transparent attempt by plaintiff to amend his pleading in order to avoid a dispositive
2
See footnote 1 above.
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defense raised by” defendant. Id. at * 19. Under circumstances where “a ‘plaintiff
blatantly changes his statement of the facts in order to respond to the defendant[‘s]
motion to dismiss . . . [and] directly contradicts the facts set forth in the original
complaint,’ a court is authorized ‘to accept the facts described in the original complaint
as true.’” Id. at *19 (quoting Wallace v. New York City Dep’t of Corr, No. 95 Civ. 4404,
1996 U.S. Dist. LEXIS 22368 (E.D.N.Y. Oct. 9, 1996)). The Court also imposed
sanctions pursuant to Federal Rule of Civil Procedure 11, finding that plaintiff had
amended his original, verified complaint “in a transparent attempt to plead around the
legal defenses presented by Cravath in its pre-motion letter to” the court. Id. at * 37.
The Court found that plaintiff had “‘concocted’” facts in order to avoid a defense, and
that this justified sanctions. Id. at * 38 (quoting Levine v F.D.I.C., 2 F.3d 476, 479 (2d
Cir. 1993)).
This case is different. Plaintiff’s Amended Complaint does not plead any
blatantly contradictory facts in order to avoid a legitimate defense to a claim raised by
the Defendants. Instead, Plaintiff’s Amended Complaint relies on essentially the same
facts concerning the business relationships between the parties and ImageLevel and
the conduct of the Defendants and then offers a new legal theory as to the source of
Defendants’ liability. Judge Sullivan’s concern with the claims in the original Complaint
appeared to have more to do with Plaintiff’s pleading of the maliciousness of
Defendants’ conduct than with the existence of business relations in the case. Indeed,
proving that ImageLevel breached the contract may actually add a complication not
present in the interference-with-prospective relations claim. Plaintiff did not attempt to
change the facts to avoid a weakness in the original Complaint by insisting that a
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breach of contract occured and counsel’s statement to the formerly presiding Judge do
not bind the Plaintiff to the claims in the original Complaint.
This case also does not present the same situation as Palm Beach Strategic
Income v. Stanley P. Salzman, 2011 U.S. Dist. LEXIS 46867 (E.D.N.Y. May 2, 2011),
also cited by the Defendants. In that case, a court had dismissed a second amended
complaint in a diversity action, finding that Plaintiff had not properly pled diversity. Id. at
*5. Rather than re-plead diversity, the plaintiff filed a new action that alleged RICO
violations, invoked federal subject-matter jurisdiction and named new defendants. Id.
The Court noted that plaintiff “devised, after three years of litigation and three prior
complaints, that its breach of contract and negligence claims were really RICO
violations that entitled it to assert federal question jurisdiction.” Id. The Court found
that this new action “appeared, on its surface, as nothing more than a transparent
attempt to evade the Court’s prior orders and to manufacture subject matter
jurisdiction.” Id. at *7. The Court had earlier granted a motion to dismiss without
prejudice, finding that plaintiff lacked standing to enforce the contract that was at the
heart of the parties’ dispute. Id. at *9. Rather than seeking to cure any deficiency in
the previous complaint, however, the amended complaint instead “allege[d] breach of
an entirely different underlying contract” which had been “attached to the original”
complaint “but disregarded in three subsequent complaints[.]” Id. at *10. The amended
complaint did not attempt “to explain this striking discrepancy.” Id. at *11. Instead, the
plaintiff simply argued that the Court should ignore the previous pleadings and evaluate
the amended complaint in the second action, since “‘[a]n amended pleading
supersedes prior pleadings and the prior pleadings are of no legal effect.’” Id. at *14.
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The court found that “in a typical case, a prior inconsistent pleading should not trump
the Court’s obligation under Rule 12(b)(6) to accept a complaint’s allegations as true.”
Id. at *17. Contradictions may be acceptable, for instance, in those instances where “a
plaintiff may acquire new information through discovery, or its own investigation, that
fundamentally alters its theory of the case.” Id. at *17-18. The facts of the case,
however, led the court to a different conclusion. Id. at *18. Plaintiff changed its theory
only after two years of litigation, and after drafting three complaints and opposing a
motion to dismiss. Id. Moreover, the court had granted a motion to dismiss based on
plaintiff’s factual representations, which the amended complaint contradicted; this
created “estoppel problems.” Id. In addition, the plaintiff’s behavior in the litigation and
retention of respected counsel also made clear to the court that plaintiff had
strategically manipulated the facts in an attempt to avoid judgment. Id. at *20-21.
Plaintiff’s conduct in Palm Beach Strategic Income represented an attempt to
avoid the pleading rules and manipulate the requirements of jurisdiction by ignoring the
facts and claims pled in earlier complaints. The court, while recognizing the right of a
plaintiff to file an amended that contradicted a previous one, rejected this obvious
attempt to manipulate the facts and avoid the legal consequences created by the
previous action. Defendants’ attempt to equate a statement by counsel made in a
preliminary proceeding with such egregious conduct is unpersuasive. Nothing in
Plaintiff’s litigation of this matter counsels the same result. The Court will deny the
motion in this respect too.
ii.
Defendants’ Conduct
Defendants next argue that, even if Plaintiff had pled a breach of contract,
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Plaintiff has not properly alleged that Defendants intentionally procured that breach, or
that Defendants’ conduct was the “but for” cause of the breach. Instead, Defendants
insist, Plaintiff has merely alleged that Defendant’s conduct led to a breach. Such
allegations, Defendants claim, are insufficient to support a tortious interference claim.
In a tortrious interference claim “a defendant must induce or intentionally procure
a third-party’s breach of its contract with the plaintiff and not merely have knowledge of
its existence.” Beecher v. Feldstein, 8 A.D.3d 597, 598, 780 N.Y.S. 2d 153, 154 (2d
Dept. 2004); see also, 24/7 Records, Inc. v. Sony Music Entm’t, Inc., 429 F.3d 39, 47
(2d Cir. 2005) (“tortious interference claim requires proof that the defendant
intentionally procured the breach of contract”). This element requires a showing that
“‘there would not have been a breach but for the activities of defendants.’” Watts v.
Jackson Hewitt Tax Serv., 675 F.Supp.2d 274, 282 (E.D.N.Y. 2009) (quoting Innovative
Networks, Inc. v. Young, 978 F.Supp. 167, 180 (S.D.N.Y. 1997)); see also, Ferrandino
& Son, Inc. v. Wheaton Bldrs., Inc., LLC, 82 A.D.3d 1035, 1036, 920 N.Y .S. 2d 123,
125 (2d Dept. 2011) (plaintiff must allege that breach would not have occurred but for
defendants’ conduct). Still, “[t]he key inquiry ordinarily . . . is whether the interference
was ‘without reasonable justification’ or, put differently, was ‘improper.’” Jews for Jesus,
Inc. v. Jewish Community Relations Counsel, 968 F.2d 286, 292 (2d Cir. 1992) (quoting
Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 189-90, 428
N.Y.S.2d 628 (1980)). In determining whether interference was justified, courts may
look to factors such as: “the nature of the defendant’s conduct, the defendant’s motive,
the interests of the plaintiff with which the defendant interferes, the interests defendant
seeks to advance, the social interests at stake, the proximity of the defendant’s conduct
15
to the interference, and the relations between the parties.” Id. Such allegations must
contain sufficient factual content to “warrant future proceedings,” and mere conclusory
allegations of tortious conduct do not suffice. ECOR Solutions, Inc. v. Malcolm Pirnie,
Inc., No. 02cv1103, 2005 U.S. Dist. LEXIS at *10 (N.D.N.Y. July 29, 2005).
Plaintiff insists that the allegations in the Amended Complaint are sufficiently
specific to support a claim of tortious interference. Plaintiff points to allegations that
Defendants, who knew that Plaintiff had exclusive rights to the product in North
America, were dissatisfied with the price the Plaintiff charged. Plaintiff also alleges that
ImageLevel and the Defendants had attempted to get around this exclusive right and
that Defendants had threatened not to purchase the product because of the high price.
Instead, Plaintiff alleges, Defendants threatened to purchase the system from a
competitor unless ImageLevel sold it directly to them. ImageLevel eventually sold the
system directly to Defendants, ignoring the exclusivity contained in the contract
between Plaintiff and ImageLevel. Plaintiff contends that these allegations permit the
Court to infer “that Defendants attempted, by improper means, to obtain the Product
and System from ImageLevel directly at a lower price, resulting in ImageLevel’s breach
of the agreement.” Plaintiff’s Brief, dkt. # 29 at 8.
Making all inferences in the Plaintiff’s favor, the Court concludes that Plaintiff has
alleged facts sufficient to plausibly infer that Defendants engaged in improper behavior
that Defendants knew would induce ImageLevel to breach the company’s contract with
Plaintiff. “‘An actor intentionally procures a breach of a third party’s contract even
where the breach is incidental to the actor’s independent purpose and desire but know n
to him to be a necessary consequence of his action.’” Bertuglia v. City of New York, 839
16
F.Supp.2d 703, 729 (2012) (quoting St. John’s Univ. v. Bolton, 757 F.Supp.2d 144, 173
(E.D.N.Y. 2010) (internal quotation marks omitted)). The Court reads the Complaint to
allege that Defendants, who purchased a considerable number of the Systems that
Plaintiff sold, used their influence with ImageLevel to demand lower prices and
convince the company to breach its contract with Plaintiff and sell Systems directly to
Defendants. Defendants, according to the Amended Complaint, were aware of the
contractual relationship between ImageLevel and the Plaintiff. Even if Defendants had
a legitimate purpose in securing lower prices, Defendants had to know that seeking the
system directly from ImageLevel would have the result of breaching the contract.
Defendants therefore induced ImageLevel to cut out Plaintiff and sell directly to
Defendants. Without Defendants’ threats, ImageLevel would have had no cause to
breach the contract, as Defendants would have purchased the system through the
Plaintiff, likewise benefitting ImageLevel. Using the standard articulated by the
Defendants, their conduct was the “but-for” cause of ImageLevel’s conduct, and Plaintiff
has alleged that Defendants procured ImageLevel’s breach. Highland Capital Mgmt.
LP v. Schneider, 198 Fed. Appx. 41, 46 (2d Cir. 2006) (tortious interference occurs
when defendant “prevailed upon” contracting party to breach). The motion will be
denied in this respect as well.
B.
Declaratory and Injunctive Relief
Defendants next argue that Plaintiff’s claims for declaratory and injunctive relief
must be dismissed. Defendants’ argument here is premised on Plaintiff’s alleged failure
to state a claim for tortious interference with a contract. Defendants argue that
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“because Plaintiff failed to allege any viable claims, its claim for declaratory and
injunctive relief must fail as well.” The Court has determined that Plaintiff has stated a
claim for tortious interference with a contract. Since the basis of Defendants’ motion
with respect to these claims does not apply, the Court will deny the motion in reference
to these claims as well.
C.
Unjust Enrichment and Conversion
Defendants also seek dismissal of Plaintiff’s unjust enrichment and conversion
claims. Plaintiff does not oppose this portion of Defendants’ motion. The Court will
therefore grant the motion as to these claims as unopposed.
IV.
CONCLUSION
For the reasons stated above, the Defendants’ motion to dismiss the Complaint,
dkt. # 28, will be GRANTED IN PART and DENIED IN PART, as follows:
1.
The motion will be GRANTED with respect to Plaintiff’s claims for
unjust enrichment and conversion; and
2.
The motion will be DENIED in all other respects.
.
IT IS SO ORDERED
Dated:October 14, 2015
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