MCM Products USA, Inc. v. Botton et al

Filing 34

OPINION. Based on the conclusions set forth above, Plaintiff's motion to dismiss Defendants' Counterclaims is granted in part and denied in part. Defendants' motion to transfer the case to the Northern District of Georgia is denied. It is so ordered. re: 14 MOTION to Dismiss Defendants' Counterclaims filed by MCM Products USA, Inc. 18 CROSS MOTION to Transfer Case Notice of Cross-Motion to Transfer Venue Pursuant to 28 U.S.C. Sec. 1404(a) filed by Brian Botton, Pure Denim Inc., Elizabeth Korn. (Signed by Judge Robert W. Sweet on 9/16/2016) (rjm)

'

'
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

--------------------------------------------x
MCM PRODUCTS USA,

INC.,
Plaintiff,

-against-

16 Civ. 1616

OPINION

BRIAN BOTTON and ELIZABETH KORN, d/b/a
"Pure," "Pure Atlanta," and "Pure Retail
Group," and PURE DENIM INC.,
Defendants.

--------------------------------------------x

USDCSDNY
DOCUMENT
ELECTRONICALLY FILED .

A P P E A RAN C E S:

DOC#:

Attorneys for Plaintiff
LAW OFFICE OF WILLIAM COUDERT RAND
501 Fifth Avenue, 15 th Floor
New Yo rk, NY 10017
By:
William Coudert Rand, Esq.

Attorneys f o r Defendants
BECKER & POLIAKOFF LLP
45 Broadway, Sth Floor
New York , NY 10006
By:
James J. Maho n, Esq.
Vincenzo M. Mogavero, Esq.
Oliver Edwards, VII, Esq.

DATE FILED:

Sweet, D. J.

Plaintiff MCM Products USA, Inc.

("MCM") has moved

pursuant to Rules 12(b) (6) , 8, and 9 Fed. R. Civ . P. to dismiss
the counterclaims of defendants Brian Botton ("Botton") and
Elizabeth Korn ("Korn " ) , d/b/a/ "Pure," "Pure Atlanta," and
"Pure Retail Group," and Pure Denim In c .

("Pure Denim"

collectively "Pure Stores" or the "Defendants"). The Defendants
have cross moved pursuant to U.S.C. § 1404 to transfer this
action to the United States District Court for the Northern
District of Georgia. Based on the conclus i ons set forth below,
the motion of the Plaintiff t o dismiss the counterclaims of the
Defendants is granted in part and denied in part. The cross
motion of the Defendants to transfer this action is denied.

Prior Proceedings

MCM filed its comp laint in the Supreme Court of the
State of New York , County of New York on February 5, 2016
alleging that it had sold and de li vered goods to Pure Stores for
which it had not been paid $333 , 489 (Complaint "Compl." at

<JI<JI

19, 22 . ) Defendants on March 2 , 2016 removed the action to this

1

court on diversity grounds and filed their answer and
counterclaims ("CC") on March 22, 2016 .

The Defendants' CC sets forth the following
allegations:

Defendant Pure Stores sells luxury goods and has
stores in Atlanta and Houston located in malls featuring luxury
goods.

(CC

goods,

including suit cases and handbags, from MCM since

at~~

1-3.) The Pure Stores have purchased MCM luxury

February 2013 and sold them at Defendants' stores.

(CC at

~~

8-

10.)

In October 2014, MCM officer Patrick Valeo ("Valeo")
visited the Atlanta Pure Store, and met Lizabeth Korn ("Korn")
there and Korn asked Valeo whether MCM planned to open a retail
store in Atlanta or elsewhere, and Valeo denied that MCM had any
such plans .

(CC

at~

13.) In February 2015 , Valeo visited the

Houston Pure Store , and Botton asked Valeo if MCM planned to
open a store in Houston or elsewhere, and Valeo denied that MCM
had any such plans.

(CC

at~

14.) In the first week of February

2015 , as a necessary part of planning Pure Stores' usual
wholesale orders for the upcoming season, Korn asked MCM

2

employees whether MCM planned to open its own retail locations
or sell retail goods online, and was told by the MCM employees
that MCM had no such plans, and that she should expect "business
as usual." (CC

at~

15.) On or about March 1, 2015, MCM opened

its own retail store in the multi-level Houston Galleria Mall
(the "MCM Houst on Store").

(CC

at~

16 . )

On or about the same date, MCM began to sell retail
goods through a website, viewable at www.mcmworldwide.com (the
"MCM Website") .

(CC at

~17.)

The opening of the MCM Houston

Store and the MCM website damaged Pure Denim's retail sales
thr ough more than mere competition; they did so by undercutting
the prices of MCM goods at the Pure Houst on Store by 10% or
more.

(CC

20-22.) In some cases the MCM Ho uston Store

at~~

d is counted the retail price of MCM items below the wholesale
price at which MCM had already sold the products to the Pure
Stores.

(CC at

~

24 . )

On Jul y 16, 20 15, Pure Stores owed money to MCM and
accordingly Korn sent an email (the "Offer Email" ) in which she
agreed to make a $150,000 payment on the outstanding and
delinquent receivable through a Pure Denim credit card ,
cont in gent on four conditions: 1) that MCM ship certain items

3

already ordered but were on credit hold due to the delinquency;
2)

that MCM agree to the return of certa in other items "alleged"

to be damaged for credit, 3) that MCM approve the " swap " of
slow-selling goods with other "more current" inventory, and 4)
the "[ c]ontinuation of business as usual in all Pure accounts
currently opened." (CC

at~

29 .) After receiving the Offer

Email, MCM charged the Pure Denim credit card in the amount of
$150 , 000 , but did not ship the items referred to in the Offer
Email and refused to accept and issue credit for the damaged
items referred to in the Offer Email and to carry out the swap
referred to in the Offer Email , and did not continue "business
as usual."

(CC

at~~

29 - 33 . ) On August 13, 2015 , MCM stated to

Defendants that it was end ing their business relationship and
would no longer sell goods to the Pure Stores .

(CC

at~

36.)

On or about November 1 , 2015 , MCM opened a retail
store one floor below the Pure Atlanta Store (the "MCM Atlanta
Store") .

(CC

at~

38 . ) Afterwards , as in Houston,

customers

began coming into the Pure Atlanta Store to return MCM-branded
items after learning that the MCM Atlanta Store and/or MCM
Website was offering precisely the same item at a discount.
at~

39 . )

4

(CC

Between November 1, 2015 and the date of filing of the
counterclaims, MCM interfered with Pure Denim's business at the
Pure Atlanta Store and elsewhere in other ways.

(CC

at~

40.)

MCM employees loitered outside of Pure Retail Locations,
solicit in g business from Pure Denim customers as they le ft .
at

~

(CC

41.) Employees of the MCM Atlanta store have repeatedly

stated to customers that Pure Atlanta carries counterfe i t MCM
goods and/or defective MCM goods .

(CC

at~

42.)

The Counterc laims seek damages of $333,489 based on
Countercla im I alleging fraudulent inducement; Counterc l a im II
breach of contract ; Counterc l aim III defamation ; Counterc laim I V
tort i ous interfer ence with business relations; Counterc l a im V
breach of the covenant of good faith and fair dealing;
Counterclaim VI unfair competition; Counterclaim VII unjust
enrichment ; and , Counterc laim VIII punitive damages .

The inst ant motions were taken on submission and
marked f ully submitted on June 2 , 2016 .

The Applicable Standard

5

On a motion to dismiss pursuant to Rule 12(b) , all
fact u al al l egat i ons in the complain t are accepted as true , and
a l l inferences are drawn in favor of the pleader.
Polar Molecular Corp ., 1 2 F . 3d 1170 , 1 174

Mills v .

(2d Ci r. 1993) .

A

comp l aint mu st contain " suffic i ent fact u al matter , accepted as
true , to ' state a claim to re li ef that is p l aus i b l e on its
face. "'

Ashcroft v.

Iqbal , 556 U. S . 662 ,

663 (2009)

(quoting

Bell Atl . Corp . v . Twomb l y , 550 U. S . 544 , 555 , 127 S . Ct . 1955 ,

1964 , 167 L . Ed . 2d 929 (2007)) . A claim is facially p l ausib l e
when " t h e plaintiff pleads factual content that a l lows the court
to draw the reasonable inference t hat the defendant is liable
for the misconduct al l eged ."
Twombly , 550 U. S . at 556).

Iqbal , 556 U. S . at 663

(quoting

In other words , the factua l

allegations must "possess enough heft to show that the p l eader
is entit l ed to relief ."

Twombly , 550 U. S . at 557

(internal

quotation marks omitted).

Additiona l ly , wh il e " a plaint i ff may p l ead facts
alleged upon i n f ormation and be l ief ' where the be l ief i s based
on factual informat i on that makes the inference of culpabi l ity
p l ausible ,' such al l egations must be ' accompanied by a statement
of the facts upon wh i ch the be l ief is founded .'"
Guess , Inc ., No . 12 - 1312 , 2013 W 1809772 , *3
L

6

Munoz-Nagel v.

(S . D. N. Y. Apr . 30 ,

2013)

(quoting Arista Records, LLC v . Doe 3 , 604 F . 3d 110, 120

(2d Ci r . 2010)) ; Prince v . Madison Square Garden , 427 F. Supp .
2d 372 , 384

(S .D.N. Y. 2006) ; Williams v . Calderoni , No . 11 - 3020 ,

20 1 2 WL 69 1 832 , at *7

(S . D. N. Y. Mar . 1 , 20 1 2)) .

however, " must contain someth ing more than

The p l eadings ,
a statement of

fa cts that mere l y crea te s a suspic i on [of] a legally cognizable
right of action ."

Twombly,

550 U.S. at 555 (ci t ation and

internal quotation omitted) .

The Court may o rder a Section 1 404(a) transfer of a
case filed in the proper venue "[f]or the conven i ence of parties
and witnesses , in the interest of justice

. to any ot her

distr i ct or division where it might have been brought ." 28
U. S . C . § 1404(a) . A Section 1404(a) motion p l aces the burden o f
proof on the Defendants and requires Defendants to demonstrate
" by a clear and convincing showing that transf e r is proper ."
AGCS Marine.
2d 640 , 645

Ins . Co . v . Associated Gas & Oil Co. , 775 F. Supp.
(S . D. N. Y. 2011) . Absent a " c l ear and convincing

showing" that the balance of factors favors Defendant ' s choice ,
the Court will not disturb Pl aintiff ' s forum choice . Boehner v .
Heise , 4 1 0 F. Supp . 2d 228 , 241

(S .D. N. Y. 2006) .

7

Courts undertake a two - part inquiry to decide whether
a transfer is proper . Lowe v . Housing Works , Inc. , 2013 U. S .
Dist . Lexis 70813 at 12 (S . D. N.Y . May 15 , 20 1 3)

(court denied

transfer) ; Coast to Coast Fabrics , Inc . v . Exact Change Only
Corp ., 2006 U.S . Dist. LEXIS 14950 , 2006 WL 846716 , at *10

(S.D . N. Y. Mar . 29, 2006)
v.

(court denied transfer) (citing Berman

Informix Corp ., 30 F. Supp . 2d 653,

656 (S.D . N.Y . 1998)) .

First , the Court determines whether the action cou l d have been
brought in the proposed forum . Id . If so , the Court then
determines whether the interest of justice and the convenience
of witnesses make transfer appropriate. Id .

The second part of the inquiry requires the Court to
consider the fo l low i ng f actors :
Plaintiff ' s forum choice ;

(1 ) the we i ght accorded to

(2) the convenience of witnesses ;

the convenience of the parties ;

(4) the location of , and ease of

access to, relevant documents and sources of proof ;
l ocus of operating facts ;

(3)

(5) the

(6) the availability of process to

compel the attendance of unwi ll ing witnesses ;

(7) the relative

means of the parties . D. H. Blair & Co. , Inc . v. Gottdiener , 462
F . 3d 95 , 106 - 107 (2d Cir . 2006) ; Herbert Ltd . Partnership v .
Electronic Arts Inc. , 325 F . Supp . 2d 282 , 286 (S . D. N. Y. 2004)

(also considering two other factors :

8

(8) the familiarity of each

district with the governing law ; and (9)

judicial economy and

the interests of justice) .

The burden is on the moving party to establish that
transfer is warranted and courts in the Southern District have
stated :

That burden is heavy : "unless the balance is
strong l y in favor of defendant , the plaintiff ' s
choice of forum should rarely be disturbed ."

See Paribas Corp. v. Shelton Ranch Corp . , 742 F. Supp . 86
(S . D. N. Y. 1990) refusing to transfer case to Texas where events
at issue occurred in New York , Texas and Florida)
Rackman v.

(citing

Te xas Instruments, Inc., 712 F . Supp . 448 , 450

(S . D. N.Y. 1989)) .

The Motion to Dismiss the Fraudulent Inducement Counterclaim is
Granted in Part and Denied in Part

To state a c l aim for fraudulent inducement under New
York l aw , "there must be a knowing misrepresentation of material
present fact , which is intended to deceive another party and
induce that party to act on it , resulting in injury . " Gosmile,
Inc . v. Levine , 81 A . D. 3d 77 , 915 N.Y.S . 2d 521 , 524
2010).
9

(1st Dep't

To survive a motion to dismiss, Pure Stores must
allege that MCM knew or should have known that their statements
were false. See, e.g., Mandarin Trading Ltd. v. Wildenstein,
N.Y.3d 173, 944 N.E.2d 1104, 1108, 919 N.Y.S.2d 465

16

(N .Y. 2011)

(in a claim for fraudulent misrepresentation, a plaintiff must
allege a misrepresentation or a material omission of fact which
was "false and known to be false");
Inc.,

Johnson v. Nextel Commc 'ns,

660 F.3d 131, 143 (2d Cir. 2011)

(noting that a claim for

fraudulent inducement requires a party to plead "specific facts
as to the fraud,

in clud ing the misleading statements, speaker,

time, place, individuals involved, and specific conduct at
issue") .

Defendants have alleged that MCM employees stated that
they had no intent to open retail stores in Atlanta or Houston,
but have not pled that all of these statements of opinion were
in fact false and made to deceive.

The counterc laim must satisfy the heightened pleading
standard for fraud claims required by Rule 9(b) of the Federal
Rules of Civil Procedure. To satisfy that standard, a complaint
must "allege facts that give rise to a strong inference of

10

fraudulent intent ." Acito v . IMCERA Group , 47 F.3d 47 , 52
Cir . 1995). More specifical l y , it "must:

(1)

specify the

statements that the plaintiff contends were fraudulent,
identify the speaker ,

(2d

(2)

(3) state where and when the statements

were made , and (4) explain why the statements were fraudu l ent ."
Lerner v . Fleet Bank, N.A. , 459 F . 3d 273 , 290 (2d Cir . 2006)
(internal quotation marks omitted) ; Rombach v . Chang , 355 F. 3d
164, 172

(2d Cir. 2004)

(dismissing fraud claims under Rule 9(b)

because "nothing in the complaint explains with adequate
specificity how those statements were actually false or
misleading ." ) .

Here, Pure Stores has not identified all the speakers,
and fails to identify specifically "where and when the
statements were made" or " why they are fraudulent." Lerner v.
Fleet Bank, N . A ., 459 F.3d at 290 . For this reason , the
fraudulent inducement c l aim with respect to the website is
dismissed . Defendants a ll ege that " MCM employees " denied that
they planned to open stores or sell merchandise online . However ,
Defendants failed to identify the alleged source of this
statement and such an unattributed statement cannot form t h e
basis of a fraudulent inducement claim . See , Schlenger v . Fid.
Emp 'r Servs . Co . , LLC , 785 F. Supp . 2d 317 , 352

11

(S.D . N. Y. 201 1 )

("Plaintiffs failure to name individuals, identify detailed
statements, or identify particular dates makes clear that as
pleaded this c laim lacks the specificity required by Rule 9.");
City of Omaha v. CBS Corp ., No. 08 Civ. 10816 (PKC) , 2010 WL

1029290, at *10 (S.D.N .Y. Mar. 16, 2010)

("[P]laintiffs cannot

rest on their say-so in asserting that statements are
fraudulent; they must explain why"

(internal cita tion omitted)).

There are several statements that Defendants allege
are examples of fraudulent inducement.

First, Defendants have

alleged that in October 2014 in Atlanta, Valeo intentionally
misrepresented that MCM had no plans to open a store in Atlanta.
(CC

at~~

1 3-14.) This allegation does not adequately allege

scienter because MCM applied for a building permit for the
construction of its retail store in Atlanta on July 1, 2015 ,
more than 8 months after the al leged fraudulent denial of a plan
to open a store and MCM did not actually open the Atlanta store
unti l November 1, 2015 , approximately one year after the alleged
fraudulent denial.

(CC

at~

27 . ) Defendants' presumption that

plans for the store i n Atlanta were in place in October 2014
more than 8 months before plans for an Atlanta store were filed
does not sufficiently plead scienter.

12

On the other hand, Defendants' allegation that in
February 2015 , Valeo visited the Houston store and fraudulently
stated that MCM had no plans to open a Houston store

(CC at

~

14) does state an adequate claim . In this case , the Houston
store allegedly opened less than one month later on March 1 ,
2015.

(CC at

~

16). MCM could not reasonably have planned ,

rented , stocked, and set up a retail store in less than one
month. Unlike other statements, the speaker , time , and place are
all identified in this allegation and it therefore survives a
motion to dismiss . Lerner v . Fleet Bank, N.A.,

459 F . 3d at 290.

Therefore the fraudulent inducement counterclaims are
dismissed for all alleged statements, except for the February
2015 statement regarding the Houston store.

The Motion to Dismiss the Breach of Contract Claim is Denied

Defendants have alleged that Korn sent an Offer Email
in which she agreed to make a $150,000 . 00 payment through a Pure
Denim credit card, contingent on four conditions: 1) that MCM
ship certain items already ordered ; 2) that MCM agree to the
return of certain other damages items for credit , 3) that MCM
finally approve the "swap" of slow-selling goods with others ,

13

and 4)

the "[c]ontinuation of business as usual in all Pure

acco unt s currently ope ned."

(CC

at~

20 . )

Upon receipt of this offer, MCM accessed the Pure
Denim credit card , and charged the $ 1 50 , 000 i dentified in the
Offer Email.

(CC at

~~

29-30). After receiving payment , MCM

refused to abide by the cond i t i ons upon which the offer was
made .

(CC

at~

56 . )

The issue is whether the $150 , 000 offer constituted
accord and sa t isfaction as a new contract discharging any
obl i gations under the or i ginal contract . In New York , "[T]he
acceptance of a check in full settlement of a disputed
unliquidated c l aim wi thout reservat i on operates as an accord and
satisfaction

." Complete Messenger & Trucking Corp . v.

Merrill Lynch Money Markets, Inc.,
N. Y. S . 2d 794

169 A.D.2d 609 ,

611 , 565

(1st Dep ' t 1991). However , these agreements are

on l y enforceable when "the person receiving the check has been
clearly informed that acceptance of the amount offered will
settle or discharge a legitimately disputed unl i quidated c l aim ."

Id.

(c iti ng Merrill Lynch Realty/Carll Burr, Inc.

v . Skinner , 63

N. Y. 2d 590 , 596 , 483 N. Y. S . 2d 979 , 473 N.E.2d 229 (1984) ,

rearg.

denied , 64 N. Y. 2d 885 , 487 N. Y. S . 2d 1029, 476 N. E.2d 1008) .

14

On the pleadings with the limited record before the
Court , it is not clear whether Defendants "clearly informed"
Plaintiff that this offer would sett l e a d i sputed un l iquidated
claim . Further discovery on the communications surrounding this
Offer will demonstrate whether there was valid accord and
satisfaction . Therefore , the motion to dismiss is denied.

The Moti on to Di smiss the Defamation Counterc1aim is Granted

Defendants allege that Plaintiff ' s employees defamed
Defendants by stating that their merchandise was counterfeit and
defective . To state a claim for defamation , a plaintiff "must
allege (1) a false statement about the pla i ntiff,

(2) published

to a third party without authorization or privilege ,

(3) through

fault amounting to at least negligence on [the] part of the
publisher ,

(4)

that either constitutes defamation per se or

caused ' special damages .' " Thai v . Cayre Group, Ltd . , 726 F.
Supp.2d 323, 329 (S.D.N . Y. 2010). A complaint alleging
defamation must give the defendant "'sufficient notice of the
commun i cations complained of to enable him to defend himself. '"
Ford v. Clement , 834 F . Supp. 72, 78

(S.D . N. Y. 1993)

(quoting

Kelly v. Schmidberger, 806 F . 2d 44, 46 (2d Cir. 1986)) . Under

15

this standard, "a pleading is sufficient only if it 'adequately
identifies the purported communication, and an indication of who
made the statement, when it was made, and to whom it was
communicated .'" Amar v. Hillcrest Jewish Ctr. , No. 05-CV-03290
(RRM)

(RML), 2008 U. S . Dist. LEXIS 108180, 2009 WL 891795, at *7

(E.D.N.Y. Mar. 31 , 2009)

(quoting Camp Summit of Summitville,

Inc. v . Visinski, No. 06 Ci v. 4994, 2007 U.S. Dist. LEXIS 28496 ,

2007 WL 1152894, at *10 (S .D.N. Y. Apr. 16, 2007)).

A defamation or slander claim "is only sufficient if
it adequately identifies the purported communication, and an
indication of who made the communication, when it was made, and
to whom it was communicated ." Thai,

726 F.Supp.2d at 329

(quoting Scholastic, Inc. v. Stouffer, 124 F.Supp.2d 836 , 849
(S.D.N.Y. 2000)). A complaint that sufficiently alleges the
occurrence of a false statement of fa ct must nevertheless be
dismissed if it fails to also allege "who," "when," and "t o
whom" the alleged defamatory statements were made. Reeves v .
Cont 'l Equities Corp . of Am., 767 F. Supp. 469, 473

1991); see also Krepps,

588 F.Supp.2d at 484

(S.D .N.Y.

(noting that

failure to identify allegedly defamatory and slanderous
statements were too generalized and , as such, insufficient to

16

state a c l aim) ; see also , Nowak v. EGW Home Care, Inc ., 82 F.
Supp. 2d 101 , 113 (W.D . N. Y. 2000) .

Here , the counterclaim for defamation alleges that an
unidentified MCM employee to l d an unidentif i ed customer of
Defendants that the MCM goods sold by Defendants were
counterfeit and defective.

(CC

at~~

41 - 42 . ) However , this

defamation al l egation is d i smi ssed because i t fails

(a) to

allege the name of the employee (or any facts identifying the
employee) who a l leged l y made the statements ;

(b)

to allege the

names of the customers who heard the alleged defamatory
statements; and (c) does not a l lege the date , time or specific
location of the al l eged defamatory statement . Reeves v . Cont ' l
Equities Corp . of Am. , 767 F . Supp . at 473 (dismissing a
defamation claim because the Plaintiff did not spec i fy "who made
the comments nor to whom they were made " nor when they
occurred) . For these reasons , the defamation c l aim is dismissed .

The Motion to Dismiss the Tortious Interference Counterclaim is
Granted

Pure Denim al l eges that MCM commi tted tortious
interference by lowering retail prices for goods at MCM store
locations in the same malls in Atlanta and Houston as Pure

17

Stores in order to undercut Pure Goods' prices. "T o state a
claim for tortious interference with business relations under
New York Law,

four cond iti ons must be met:

business relations with a third party;

(i) the plaintiff had

(i i ) the defendants

interfered with those business relations;

(iii ) the defendants

acted for a wrongfu l purpose, or used dishonest, unfair or
improper means; and (iv) the defendants' acts injured the
relationship." Scutti Enters., LLC. v . Park Place Entm't Corp .,
322 F.3d 211 , 215 (2d Cir . 2003)

( internal citations omitted).

The business relations need not be a formal contract , but may be
a " continuing business or other customary relationship." Hannex
Corp. v. GMI , Inc.,

140 F.3d 194, 205 (2d Cir . 1998) . "Al ong

with demonstrating wrongful means, a plaintiff must also
establish that the wrongful acts were the proximate cause o f the
rejection of the plaintiff's proposed contractual relations."
Jabbour v. Albany Med. Ctr ., 237 A.D.2d 787, 790,

862

654 N.Y.S.2d

(3d Dep ' t 1997).

In this case , Pure must prove that MCM opening stores
in the same mall with reduced prices to interfere with existing
customers , "was not 'lawful' but 'more cu lpable'

. the

defendant's conduct must amount to a crime or an independent
tort."

Carvel Corp . v. Noonan , 3 N.Y.3d 182, 190, 818 N.E. 2d

18

1100, 785 N.Y.S.2d 359 (2004).

The Counterclaim Defendants have

not proved that the actions MCM took interfered with Pure's
business in a manner other than demonstrating "normal economic
self-interest" in order to "reverse a period of business
declines and make itself more profitable ."

Id .

The important

distinction between economic self -i nterest and tortious
interference with business relationships is that in this case
MCM "was not acting solely to hurt [Pure Stores] ."

Id.

The Motion to Dismiss the Breach of Covenant of Good Faith and
Fair Dealing is Granted

Defendants' counterclaim for breach of covenant of
good faith and fair dealing is precluded by the breach of
contract claim . Harris v. Provident Life and Acc. Ins . Co., 310
F . 3d 73 , 80 - 81 (2d Cir . 2002)

("New York law does not recognize

a separate cause of action for breach of the implied covenant of
good faith and fair dealing when a breach of contract claim ,
based on the same facts,

is also pled."). See, e.g ., Goldblatt

v . Englander Commc ' ns, LLC, No. 06 Civ. 3208, 2007 WL 148699, at
*5 (S.D.N . Y. Jan . 22 , 2007)

(collecting cases) .

The counterclaim seeks damages for MCM's failure to
provide the items in the " Offer Email ." These are the damages

19

sought by the breach of contract claim which is based on the
"Offer Email." Counterclaim Defendants also allege breach of the
covenant of good faith and fair dealing for "contracts for the
purchase of goods ," but this statement is conclusory and does
not sufficiently state the terms of these alleged contracts.
at i

67 . )

(CC

In fact , Counterclaim Defendants make c l ear that this

allegation is about the Offer Email when it alleged in the count
for breach of good faith and fair dealing that "MCM ' s breach of
the agreement memorialized in the Offer Email has deprived Pure
Denim of the benefit of other contracts for the sa l e of goods
between the parties ." (CC at i

70 . )

The Counterclaim is therefore precluded by the breach
of contract claim since both concern t h e same factual
allegations about the Offer Email .

The Motion to Dismiss the Common Law Unfair Competition
Counterclaim is Granted

Pure claims that MCM engaged in unfair competition by
acting in bad faith and "falsely disparage[ing] both the goods
sold by Pure Denim and Pure Denim's business in general." (CC at
i

73 . ) This allegation falls short of the basic "factual content

that allows the court to draw the reasonable inference that the

20

defendant is liable for the misconduct alleged. " Iqbal,
at 663

(quoting Twombly,

556 U.S.

550 U. S. at 556) .

Under New York law , an unfair competition claim
encompasses a broad range of unfair practices . See American
Footwear Corp.

v. Gen'l Footwear Co ., 609 F.2d 655,

662

(2d Cir.

1979). Although the law of unfair competition is "a broad and
flexible doctrine " that has been described as "a form of
commercial immorality," its reach is not without limits. Roy
Export Co . Establishment v. Columbia Broadcasting Sys. ,

672 F.2d

1095 , 1105 (2d Cir. 1982). "[T]he essence of an unfair
competition claim is that the defendant has misappropriated the
labors and expenditures of another and has done so in bad
faith ." Coca-Cola North America v . Crawley Juice, Inc. , Nos . 09
CV 3259

(JG)

(RML)

I

09 CV 3260 (KAM) (RML)

I

09 CV 3279 (ERK) (RML)

2011 U. S . Dist . LEXIS 52813 at *6 (E.D.N.Y . May 17 , 2011)
(internal quotation marks and citations omitted) ; see Luv n'
Care, Ltd. v. Mayborn USA, Inc.,

2012)

898 F. Supp. 2d 634

(S . D.N.Y .

("a plaintiff asserting an unfair competition claim under

New York common law must also show that defendant acted in bad
faith"); Computer Associates, Inc. v . Simple . com, Inc.,
Supp. 2d 45, 53 (E.D.N.Y. 2009)

621 F.

(holding that a plaintiff must

show more than commercial unfairness).

21

I

"The tort is not all-encompassing .

. the New York

Court of Appeals in rejecting the notion that unfair competition
is equivalent to the amorphous term commercial unfairness has
stated that misappropriation of another's commercial advantage
is a cornerstone of the tort." Computer Associates, Inc.,
Supp. 2d at 53

621 F.

(internal quotation marks and citations omitted).

Notably, to act in "bad faith," one must exploit some
"commercial advantage which belonged exclusively to [another]."

LoPresti v. Mass. Mut. Life Ins. Co ., 30 A.D.3d 474, 820
N.Y.S. 2d 275, 277

(2d Dep't 2006) .

Her e the factual allegations are that Plaintiff acted
in bad faith and "falsely disparaged" Defendants. These
allegations fall well short of bad faith as required for this
claim and instead are conc lus ory . At worst, Counterclaim
Defendants c laims are commercial unfairness, which the Court of
Appeals has held is not sufficient for a cla im of unfair
compet ition.

Defendants reference the Georgia Deceptive Trade
Statute in their brief, but Defendants did not plead a claim
under that statute, but instead under common law unfair

22

competition .

(CC at '3!'3! 73 - 75 . ) For those reasons , the

Counterclaim for common l aw unfair competit i on is dismissed .

The Motion to Dismiss the Unjust Enrichment Counterclaim is
Granted

"The basic elements of an unjust enrichment claim in
New York require proof that

(1) defendant was enriched,

(2)

at

plaintiff ' s expense , and (3) equity and good conscience militate
against permitting defendant to retain what plaintiff is seeking
to recover . " Briarpatch Ltd., L. P. v . Phoenix Pictures, Inc . ,
373 F . 3d 296 , 306 (2d Cir . 2004) .

In this case , Counterclaim Defendants merely recite
the elements of the cause of action for unjust enrichment
stating in part , "MCM has nonetheless received a financial
benefit from the defamatory,

fraudulent,

and unethical behavior"

receiving a financial benefit at Pure Denim ' s expense and that
equity and good conscious require restitution .

(CC at '3!'3! 77-79.)

This allegation is insufficient because under Iqbal a claim must
contain "factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged . " Iqbal , 556 U.S . at 663

(quoting Twombly ,

550 U. S. at 556) . In other words, the factual al l egations must

23

"posse s s enough heft to show that the pleader is entitled to
relief . " Twombly , 550 U. S. at 557

(internal quotation marks

omitted) . This claim merely restates the e l ements of the cause
of action and falls well short of the heft needed to show the
Counterclaim Defendant is entitled to relief .

In New York courts " look to see if a benef i t has been
conferred on the defendant under mistake of fact or law , if the
benefit stil l remains with the de f endant , i f there has been
otherwise a change of position by the defendant , and whether the
defendant ' s conduct was tortious or fraudu l ent. " Paramount Film
Distributing Corp . v . State , 30 N. Y. 2d 4 1 5 , 421 , 285 N. E . 2d 695 ,

334 N. Y. S.2d 388 (1972) . Even in the light most favorable to the
non-mov i ng Counterc l a i m Defendants , the unsubstantiated
defamation claim has not conferred a benefit on Plaintiff that
demonstrates tort i ous or fraudulent conduct sufficient to
support a cla i m for unjust enrichment .

The Motion to Dismiss the Punitive Damages Counterclaim is
Granted

Counterclaim Defendants brought a c l aim for punitive
damages , but this cla i m i s dismi ssed because there is no
separate claim for pun i tive damages recognized under New York
24

law . Melvin as Administratrix of the Estate of Rashad McNulty,
v. County of Westchester , Case No . 14-CV- 2995 (KMK) , 2016 WL
1254394 , at *24

(S . D.N . Y. March 29 , 2016)

(D i smissing claim for

punitive damages because "there is no separate claim for
punitive damages re cognized under New York law" ) ; see a l so Weir
Metro Ambu-Serv . , Inc . v.
1 982)

Turner , 442 N. E . 2d 1268 , 1268

(N . Y.

("[P]unitive damages may not be sought as a separate cause

of action ." ).

Punitive damages is a l so not a cla i m recognized under
Texas or Georgia Law. Stanissis v . DynCorp Int'l LLC, 2015 U. S .
Dist . LEXIS 172412 at * 37 - 38

(N.D . Tex. Dec . 29 , 2015)

(" A

cause of action for punitive damages cannot be brought as a
stand - alone claim ." ) ; Smith v. Copeland , 2010 U. S . Dist . LEXIS
51157 , at * 33 (N . D. Ga . May 21 , 2010)

(find i ng that punitive

damages are not a separate cause of action in Georgia) .

Since there is no separate claim for punitive damages
under the laws of New York , Texas , or Georgia , the separate
counterclaim for punitive damages is dismissed.

The Motion to Transfer this Action to the Northern District of
Georgia is Denied

25

MCM's cho i ce of forum is entitled to deference. "[A]
plaintiff's choice of forum is presumptively entitled to
substantial deference," Gross v. BBC, 386 F.3d 224, 230

(2d Cir.

2004) , which "is even stronger where the chosen forum is also
the plaintiff's home." Atl. Recording Corp . v.

Inc.,

603 F. Supp. 2d 690 ,

698

Project Playlist,

(S.D.N.Y. 2009). Where a

significant connection exists between the chosen forum and the
underlying events, further deference is warranted to a
plaintiff's forum choice . Boehner,

410 F. Supp. 2d at 241.

The Court should consider the following factors:
the weight accorded to Plaintiff's forum choice ;
convenience of witnesses;

(2)

(1)

the

(3) the conven ience of the parties;

(4) the location of , and ease of access t o , relevant documents
and sources of proof;

( 5) the locus of operating facts;

( 6)

the

avai lability of process to compe l the attendance of unwilling
witnesses;

(7)

the relative means of the parties. D.H. Blair &

Co ., Inc. v . Gottdiener , 462 F.3d 95, 106-107

(2d Cir. 2006) ;

Herbert Ltd. Partnership v. Electronic Arts Inc.,
282 , 286 (S .D.N.Y. 2004)

325 F.Supp.2d

(also considering two other factors:

(8)

the familiarity of each district with the governing law; and

(9)

judicial economy and the interests of justice).

26

First, MCM's chosen forum is New York and that weighs
in favor of denying the transfer motion.

Second, the convenience of the witnesses is balanced
since the inconvenience of Defendants' witnesses upon trial in
New York is balanced by the inconvenience of MCM's witnesses of
trial in Georgia. Defendants admit in their opposition brief
that several MCM witnesses would need to travel to Atlanta from
New York.

No compelling reason has been established in favor of

transfer relating to witnesses.

Third, the convenience of the parties does not weigh
in favor of the transfer because Plaintiff's headquarters is
located in New York and Pure Stores is a North Carolina
corporation with their principal place of business in Atlanta.
Transferring the action would be more convenient for Defendants,
but less convenient for Plaintiff. Therefore, no compelling
reason has been established to transfer for the parties.

Fourth, the documents for trial are located both in
New York and Atlanta.

Plaintiff's documents are located in New

York and Defendants' documents are in Atlanta. Further, courts
have found that the "[t]he location of relevant documents is

27

I

largely a neutral factor in today's world of faxing,

scanning,

and e-mailing documents." Am. S.S. Owners Mut.

& Indem.

Ass'n v. Lafarge N. Am., Inc.,

Prat.

474 F. Supp. 2d 474,

484

(S.D.N.Y. 2007). This factor is balanced and does not weigh in
favor of transfer.

Fifth, the locus of operative facts is neutral.

While

there were more facts in Atlanta in the Counterclaims, many of
the claims centered in Atlanta were dismissed.

The dispute

about defamation having to do with offering lower prices and
negatively describing the quality of Pure Stores clothes took
place in Atlanta.

Defendants allegedly came to New York several

times to purchase goods.

After dismissing many of the

counterclaims that took place in Atlanta this factor is also
fairly balanced with a slight edge to Atlanta because some facts
relating to the contract disputes in Plaintiff's complaint are
in Atlanta, such as goods Pure Stores and any invoices.

Sixth, there are witnesses in both New York and
Atlanta, none of which have already indicated they will require
a subpoena to appear.

This factor does not weigh in favor of

either party.

28

•

Seventh, the parties are both commercial business
persons.

The parties dispute whether MCM is slightly or

significantly larger.

MCM does have 200 stores in 35 countries,

but Pure Stores is also a corporation with stores in multiple
states in the United States.

Given the relative size of the

parties this factor slightly favors transfer.

Eighth, the familiarity of each district with the
governing law cautions against transfer.

The Plaintiff's claims

to recover for the goods delivered to Defendants for which no
payment was made are governed by New York law. Defendants'
breach of contract counterclaim also is governed by New York
law. This factor favors denial of the motion to transfer.

Ninth,

judicial economy and interest of justice favors

denial of transfer to Georgia since this court has become
familiar with the issues presented and

~an

provide a disposition

as expeditiously as the parties' desire. This factor favors
denial of the motion.

Overall, three factors weigh in favor of denying the
motion to transfer and two factors weigh in favor of transfer.
Most importantly, the Plaintiff chose New York as the forum and

29

.
benefits from the presumption of "substantial deference" for his
original choice of forum.

Gross v. BBC, 386 F.3d at 230.

There

is also no substantial interest weighing in favor of transfer .
Therefore, the motion to transfer the case is denied.

30

4j

'
Concl.usion

Based on the conclusions set forth above , Plaintiff ' s
motion to dismiss Defendants ' Counterclaims is granted i n part
and denied in part.

Defendants ' motion to transfer the case to

the Northern District of Georgia is denied.

It is so ordered .

New York , fY
September/~ , 2016
U . S . D.J .

31