Providence Metallizing Co. v. Tristar Products, Inc. et al

Filing 22

OPINION AND ORDER denying 10 Motion to Dismiss. So Ordered by Judge William E. Smith on 06/11/10. (Jackson, Ryan)

UNITED STATES DISTRICT COURT DISTRICT OF RHODE ISLAND ___________________________________ ) ) ) Plaintiff, ) ) v. ) ) TRISTAR PRODUCTS, INC., NEW ) PRODUCTS INTERNATIONAL, INC., ) and BARUCH TAMIR, individually ) and in his corporate capacity ) as an officer of New Products ) International, Inc., ) ) Defendants. ) ___________________________________) PROVIDENCE METALLIZING CO.,

C.A. No. 09-450 S

OPINION AND ORDER WILLIAM E. SMITH, United States District Judge. I. Introduction Plaintiff, Providence Metallizing Co. ("PMC") filed suit against Defendants, Tristar Products, Inc. ("Tristar"), New

Products International, Inc. ("New Products"), and Baruch Tamir ("Tamir") for breach of contract, breach of the implied covenant of good faith and fair dealing, and promissory and equitable estoppel. alleged plating PMC alleges that it struck a deal with Tamir, an of Tristar and New on Products, U.S. coins to to provide gold

agent and

printing

services

commemorate Defendants,

President

Obama's

inauguration

and

election.

according to PMC, reneged on the deal and hired another company instead. Unhappy with this sleight of hand, PMC turned to the For the reasons that follow, the Court

Court for redress.

denies Defendant's motion to dismiss. II. Factual and Procedural Background On November 17, 2008, Tamir contacted Plaintiff's agent, Richard Sugerman, allegedly representing that he was an agent of Tristar and New Products. Tamir claimed he was seeking metal The

finishing and plating services for an immediate rush order.

next day Sugerman emailed Tamir a Price Quotation ("PQ") with a production schedule to run from November 24, 2008, to December 23, 2008. The email noted that a five percent commission was (Pl.'s Am. Compl. Ex. 3 Doc.

added to the prices "as agreed." 17-3.) by 5

The PQ also provided that "a commitment should be made PM today 11/18" and that "[s]ignature by customer

constitutes agreement to the above." Doc. 17-2.)

(Pl.'s Am. Compl. Ex. 2

Keith Mirchandani, a managing director and agent of

Tristar, then called PMC on the telephone and confirmed receipt of the PQ. Plaintiff also alleges that Mirchandani confirmed

Tristar's intention to contract, and that Tamir would follow up. According November to 19th Plaintiff, and 20th, Tamir Tamir accepted and the contract. exchanged On more

Sugerman

emails, which allegedly confirmed the contract.

Thereafter, in

reliance of these exchanges, PMC alleges that it began to ready
2

its plant for production by securing necessary materials and incurring over 470 hours in labor costs. On November 21, 2008, Tamir and Keith Mirchandani arrived at the PMC plant in Rhode Island to meet with Sugerman and to tour and observe the plant. During the tour, it appears that

Sugerman continued to assume that a contract was in place and was not told otherwise. PMC further alleges that it was led to PMC was

believe by Tamir and Mirchandani that a deal was made.

later informed that Tristar would not be using its services. Tristar initially moved to dismiss the Complaint for See

failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6).1 of frauds bars

Tristar argued that (1) the statute claims; (2) no contract formed

Plaintiff's

because there was no acceptance by Tamir; and (3) Plaintiff fails to state a claim for promissory and equitable estoppel.2 After oral arguments, the Court granted Plaintiff an

opportunity to amend the complaint.3

Plaintiff filed a First

1 Both parties rely upon the emails exchanged by Tamir and

Sugerman and the PQ, in the Motion and Opposition, as these documents were attached and incorporated into the First Amended Complaint. Tristar also noted that Plaintiff's claim for breach of good faith and fair dealing cannot survive if the Court concludes that there is no contract between the parties.
Plaintiff also requested more time to conduct discovery. See Theta Prods., Inc. v. Zippo Mfg. Inc., 81 F. Supp. 2d 346, 350 (D.R.I. 1999) (where instead of answering the complaint, the
3

2

3

Amended Complaint and Defendant renewed its motion to dismiss with supplemental memoranda. In its renewed motion, Tristar

addressed choice of law concerns that the Court had raised by text order, repeated its original argument, and argued for the first time that any authority Tamir allegedly had was terminated because Tamir breached his fiduciary duty toward Tristar. and New Products did not join in the motion. III. Analysis At this stage in the proceedings, the Court must accept as true the factual and draw allegations all 83 in Plaintiff's inferences 3 (1st Cir. First in its Amended favor. (citing Tamir

Complaint Aulson v.

reasonable F.3d 1,

Blanchard,

1996)

Leatherman v. Tarrant County N.I. & C. Unit, 507 U.S. 163, 164 (1993) and Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 52 (1st Cir. 1990) (overruled on other grounds by Educadores Puertorriqueños en Accion v. Hernández, 367 F.3d 61, 64 (1st Cir. 2004)). A claim will survive a motion to dismiss when it

"has facial plausibility . . . that allows the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged." (2009).

Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949

The First Amended Complaint must supply enough to push

corporation filed a motion to dismiss, "plaintiff must have an opportunity to obtain an admission from the defendant" that an oral contract existed). Because the Court concludes that Defendant's motion fails on the merits, it need not address this argument.
4

Plaintiff's

claims

past

the

"sheer

possibility"

threshold

to

actually probable or plausible.

Iqbal, 129 S. Ct. at 1949-50.

The choice of law provisions of the forum state, Rhode Island, apply.4 See Crellin Techs., Inc. v. Equipmentlease

Corp., 18 F.3d 1, 4 (1st Cir. 1994). Rhode Island law are consistent

To the extent New York and however, a choice of law

analysis is unnecessary.5

See Levin v. Dalva Brothers, Inc., 459

F.3d 68, 73-74 (1st Cir. 2006) (initial task is to determine whether an actual conflict exists). After reviewing both New York and Rhode Island law, it appears there is no conflict with respect to the central issues, namely whether and/or Inc. v. the statute of frauds applies to See 2d service Theta 349

contracts Products,

what Zippo

constitutes Mfg. Co.,

acceptance. 81 F. Supp.

346,

4

In Rhode Island contract disputes, the Court should apply

the law (1) where the contract was made or (2) the most appropriate state, which is determined by an "interest-weighing approach." Crellin Techs., Inc. v. Equipmentlease Corp., 18 F.3d 1, 5 (1st Cir. 1994). The Rhode Island Supreme Court, however, has also noted, in dicta, that the law of the state where the contract is to be performed may be the appropriate law to govern the suit in some circumstances. Nortek, Inc. v. Molnar, 36 F. Supp. 2d 63, 66 (D.R.I. 1999) (citing to Matarese v. Calise, 305 A.2d 112, 118 n.4 (R.I. 1973)) ("[t]he Rhode Island Supreme Court has stated one caveat to the general rule where the contract was made in one location and intended to be performed in another")).

Plaintiff alleges that Tamir is a New York resident and New Products is a corporation organized and existing under the laws of the State of New York, with a principal place of business at 1 Alpine Court, Chestnut Ridge, New York.
5

5

(D.R.I. 1999) (Pennsylvania and Rhode Island both adopted the UCC and there are no substantive differences in contract law, therefore, no choice of law analysis is necessary). any difference on the other issues are minor and Moreover, of little

consequence at this stage, and until it is established that a contract actually formed. Therefore, the Court is satisfied

that no choice of law analysis is necessary at this time and will simply refer to Rhode Island law. A. Statute of Frauds

As a threshold matter Tristar argues that PMC's claim fails because "the Statute of Frauds . . . provides that a contract for the sale of goods for a price greater than $500 is not enforceable without some writing to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought." Siesta Sol, Inc. v Brooks This

Pharmacy, Inc., 617 F. Supp. 2d 38, 43 (D.R.I. 2007).

rule, however, only applies to contracts for the sale of goods and does not apply to services contracts. Siesta Sol, 617 F.

Supp. 2d at 51 ("the Statute of Frauds was inapplicable because the defendant's of obligation but for was fundamentally for [the not for the

purchase

goods

payment

plaintiff's]

services") (internal quotations and citation omitted). The documents and allegations contained in the First

Amended Complaint indicate that this was primarily a contract
6

for services.

When a contract encompasses both services and

goods, the First Circuit will apply the UCC provisions if the dominant purpose of behind the See contract reflects of Warwick, a sales Inc. v.

transaction

goods.6

Ross-Simons

Baccarat, Inc., 102 F.3d 12, 17 (1st Cir. 1996). PMC specializes in the application of various types of

coatings to objects. contacted "provide supplied. PMC gold in

Moreover, the complaint alleges that Tamir to obtain printing" quotes on to have that Plaintiff would be

order

plating

and

coins

(Pl.'s Am. Compl. Ex. 1 Doc. 17-1.)

New Products,

allegedly, was to supply the coins to Tristar, who would then ship them to Plaintiff to have finished. Significantly, the

coins were neither produced nor owned by Plaintiff, and title to the coins never passed between the parties. Because this was not a contract for the sale of goods and PMC's role was limited to gold plating,7 Tristar's argument that the UCC applies must be rejected; therefore, the Statute of Frauds does not mandate dismissal of Plaintiff's claims.

A sale is defined as "the passing of title from the seller to the buyer for a price" and "goods" include "all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale." R.I. Gen. Laws §§ 6A-2-105(1) and 2-106; ITT Corp. v. LTX Corp, 926 F.2d 1258, 1266 (1st Cir. 1991).

6

The gold used to coat the coins and the boxes used for shipping are only incidental materials to the services that would be provided.
7

7

B.

Contract Formation

Next, Tristar contends that even if Tamir was an agent of Tristar, no contract formed for two reasons: (1) Tamir's email does not constitute a "definite and seasonable expression of acceptance," see Superior Boiler Works, Inc. v. R.J. Sanders, Inc., 711 A.2d 628, 633 (R.I. 1998) (defining acceptance per the UCC in the context of a sale of goods contract); and (2) Tamir's alleged authority terminated once he breached the duty he owed to Tristar. Tristar allegations argues of for a narrow characterization one that is of PMC's to

contract

formation,

limited

analyzing whether Tamir's email is valid acceptance.

But this

constrained reading of the First Amended Complaint, in effect, asks the Court to draw inferences in favor of the Defendant, which, of course, the Court may not do. "To form a valid

contract, each party to the contract must have the intent to promise or be bound." Smith v. Boyd, 553 A.2d 131, 133 (R.I.

1989) (citing J. Koury Steel Erectors, Inc. v. San-Vel Concrete Corp., 387 A.2d 694, a 697 (R.I. has 1978)). been In formed, general, this in

determining

whether

contract

Court

"shall look to an external interpretation of the party's or parties' intent as manifested by action." Id. "[S]o long as

the evidence does not point unerringly in a single direction but is capable of supporting conflicting inferences, the question of
8

whether a contract has been formed between two parties is a question of fact to be determined by the factfinder." 18 F.3d at 7 (applying Rhode Island law). Simply put, the question of whether the parties conduct formed a contract cannot be resolved upon a motion to dismiss because there are plausible conflicting inferences that may be drawn from the alleged facts. Plaintiff claims that after Crellin,

receiving the price quotation, "Tamir accepted the contract, on behalf of Tristar." is not altogether (Pl.'s Am. Compl. Doc. 17 ¶ 14.) incorrect that one interpretation Tristar of the

emails could support that the agreement between Tamir and PMC was limited to Tamir's commission. It is equally plausible,

however, that Tamir accepted the full alleged contract once a revised PQ was sent, or that Tamir accepted the whole deal

before the revised PQ, or perhaps even that Tamir counteroffered by adding the term that included his fee, which Sugerman

accepted.8 At this juncture, true, the Court must accept of all the well-pled deal as

allegations

8

as

and

Tamir's

acceptance

adding terms may still constitute acceptance or become a counteroffer depending on the circumstances. See Ardente v. Horan, 366 A.2d 162, 165 (R.I. 1976) ("An acceptance which is equivocal or upon condition or with a limitation is a counteroffer and requires acceptance by the original offeror before a contractual relationship can exist. However, an acceptance may be valid despite conditional language if the acceptance is clearly independent of the condition.") (internal quotations and citation omitted).
9

Indeed,

Defendant's Plaintiff

agent, has

is

one its

plausible claim

interpretation. the realm of

Thus, mere

pushed

beyond

speculation, alleging enough to survive Tristar's motion. C. Breach of Fiduciary Duty

In its renewed motion Tristar argues for the first time that no contract formed because Tamir breached his fiduciary duty when he negotiated a five percent fee for brokering the deal.9 scope In response, Plaintiff asserts that issues of authority, of authority, and whether a breach of fiduciary duty

terminated the agency relationship, are all questions of fact, which cannot be determined on a motion to dismiss.10 The First Circuit has said that "affirmative defenses . . . may be raised in a motion to dismiss an action for failure to state a claim." Blackstone Realty LLC v. F.D.I.C., 244 F.3d

Although Defendant hotly contests the allegation that Tamir is an agent of Tristar, as previously discussed the Court must accept all well-pled allegations as true. Plaintiff sufficiently alleges the agency of Tamir in the First Amended Complaint.
10

9

PMC also takes issue with Defendant raising a "new" ground

for dismissal upon its "renewed" motion to dismiss, arguing that Defendant has acted "beyond the scope of this Court's directive." (Pl.'s Supp. Mem. Doc 20 p. 3.) The Court, however, disagrees that Tristar contravened its directive. The Court permitted PMC to amend its pleading, and thereby offer new allegations in support of its claims. Once the shape of the complaint changed, logically, so did the shape of Tristar's motion to dismiss. There is nothing improper with Tristar offering a new argument after reading the new allegations in the First Amended Complaint. This is especially true here, because PMC had ample opportunity to respond in its supplemental brief.
10

193, 197 (1st Cir. 2001) (citing Keene Lumber Co. v. Leventhal, 165 F.2d 815, 820 (1st Cir. 1948)). Dismissal can be achieved

for failure to state a claim on the basis of an affirmative defense; however, the facts establishing the defense "must be clear `on the face of the plaintiff's pleadings[,]' [and] review of the complaint, together with any other documents

appropriately considered under Fed. R. Civ. P. 12(b)(6), must `leave no doubt' that the plaintiff=s action is barred by the asserted defense." Tristar argues Id. (internal citations omitted). that before the alleged contract formed,

Tamir forfeited his authority to act as Tristar's agent because Tamir breached his fiduciary duty by negotiating a five percent fee. Tristar his bears the burden duty of by demonstrating negotiating the that fee Tamir with

breached Plaintiff.

fiduciary

See Greene v. Rhode Island, 398 F.3d 45, 49 (1st

Cir. 2005) (movant bears burden with affirmative defense). An agent who breaches his fiduciary duty loses his

authority to bind the principal.

See Restatement (Second) of

Agency § 112 (1958); Jerlyn Yacht Sales, Inc. v. Wayne R. Roman Yacht Brokerage, Estates "the 950 Dev. F.2d 60 (1st 754 Cir. N.E.2d 1991); 184 Sokoloff (N.Y. if, v.

Harriman Indeed,

Corp., of an

2001). without

authority

agent

terminates

knowledge of the principal, he acquires adverse interests or if he is otherwise guilty of a serious breach of loyalty to the
11

principal."

Shurgard Storage Centers, Inc. v. Safeguard Self

Storage, Inc., 119 F. Supp. 2d 1121, 1125 (W.D. Wash. 2000) (quoting Restatement (Second) of Agency § 112 (1958)). Tristar's argument is premature. It is not clear on the

face of the pleadings that Tamir's fee constitutes a breach of duty. Tristar's reliance upon Twenty First Century LPI v.

LaBianca, 19 F. Supp. 2d 35, 40-41 (E.D.N.Y. 1998) and the other cases cited in its brief, is misplaced. First Century was only able to conclude The court in Twenty that a breach of

fiduciary duty occurred upon the undisputed facts in the summary judgment record. See id. at 38-39. Moreover, in that case, the

Court had an added benefit because the civil matter only moved forward after the criminal matter, arising from the same facts, was resolved. Id. at 39. Nothing on the face of the pleadings

clearly indicates that a breach of fiduciary duty occurred here; therefore, Tristar has not met its burden for dismissal on the basis of its affirmative defense. D. Promissory and Equitable estoppel

The Court can quickly dispose of Tristar's final argument concerning promissory and equitable estoppel. Defendant argues

that Plaintiff fails to allege "any action . . . purposefully designed to induce PMC to act" and, therefore, has failed to allege reasonable or justifiable reliance. with this characterization of
12

The Court disagrees Amended Complaint.

the

First

Plaintiff

has

sufficiently

alleged

that

it

relied

upon

the

representations made by Tristar's agents, Tamir and Mirchandani, and that a deal was struck where PMC was asked to act quickly. PMC further alleges it received telephone calls from Tamir and Mirchandani, email. and Tamir made further representations through

PMC also alleges that it relied upon the actions of

Tamir and Mirchandani, who both met with Sugerman and toured the Plaintiff's plant in Rhode Island. Therefore, Tristar's motion

to dismiss Plaintiff's promissory and equitable estoppel claims must be denied. IV. Conclusion For the reasons set forth above, Tristar's Motion to

Dismiss is DENIED.

IT IS SO ORDERED:

/s/ William E. Smith
William E. Smith United States District Judge Date: June 11, 2010

13