Summary
In Maddaloni Jewelers the plaintiff alleged that defendants began demanding illegal payments from dealers of its products.
Summary of this case from Trollinger v. Tyson Foods, Inc.Opinion
02 Civ. 6438 (SAS).
June 27, 2003.
Andrew N. Krinsky, Esq., Debra Bodian Bernstein, Esq., Tarter Krinsky Drogin, LLP, New York, NY, Attorneys for Plaintiff.
Stephen F. Ruffino, Esq., Gibney, Anthony Flaherty, LLP, Normian A. Bloch, Esq., Thompson Hine LLP, William M. Brodsky, Esq., Fox Horom Camerini, LLP, New York, NY, Attorneys for Defendant.
OPINION AND ORDER
Maddaloni Jewelers, Inc. ("Maddaloni") is a retail jeweler that brings this action against its jewelry supplier. Maddaloni claims that the supplier demanded illegal payments in exchange for prompt delivery of jewelry and other customary services. After refusing to make the payments, Maddaloni lost business to retailers that complied with the supplier's demands. Defendants move to dismiss Maddaloni's complaint, which seeks damages for RICO violations, Robinson-Patman Act violations, and tortious interference with business relations. For the reasons stated below, the motion is denied in part and granted in part.
Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c) and (d) (2003).
The Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(a), (d), and (e) (2003).
I. BACKGROUND
A. Facts
Maddaloni is a jewelry retailer and Rolex Watch U.S.A., Inc. ("Rolex") is a Rolex watch wholesaler. Second Amended Complaint ("Compl.") ¶¶ 4-5. In May 1996, Maddaloni became an authorized Rolex dealer. Maddaloni's interaction with Rolex was primarily through Rolex's sales representatives. While Maddaloni's initial relationship with Rolex was positive, the relationship began to deteriorate when Lawrence Mazzeo became the Rolex sales representative on Maddaloni's account. Id., ¶¶ 12, 15.
Rolex watches are internationally recognized as a premium, high quality brand of watches.
Maddaloni contends that in early 1997, Mazzeo and Allen Brill, Rolex's Executive Vice-President, began to improperly demand that Maddaloni and other Rolex dealers make illegal payments.Id. ¶¶ 15, 17. In order to insure that Rolex would promptly fill the dealers' orders and provide other necessary services, the dealers were required to make the illegal payments to Mazzeo and Brill. Maddaloni claims that it refused to make the payments, but competing Rolex dealers complied with Mazzeo and Brill's demands. As a result, the compliant dealers received preferential treatment and "Maddaloni began to experience (a) delays in receiving Rolex products, (b) refusals to provide certain needed and desirable Rolex products, (c) the elimination of the support from Rolex that Maddaloni had once enjoyed in the form of cooperative advertising and assistance with promotional activities, and (d) the cutting off of Maddaloni's access to Rolex's customer service department and other individuals in the Rolex building and services customarily available to Rolex dealers." Id. ¶ 19.
Maddaloni claims that it "lost out on hundreds of orders that had been placed by its customers for Rolex watches and were subsequently cancelled by the customers, thereby losing profits, and also lost many valuable customers, who chose to take their business elsewhere after Maddaloni could not deliver on Rolex orders." Id. ¶ 20. In 1999, Maddaloni made a single payment of an unspecified amount to Mazzeo because it feared losing its business by ignoring the demands. Id. ¶ 28. Nevertheless, Maddaloni's relationship with Rolex became worse and on January 29, 2002, Maddaloni was terminated as a Rolex dealer. Id. ¶ 32.
B. Procedural History
On July 3, 2002, Maddaloni commenced this action in New York State Supreme Court, New York County. Defendants moved the action to this Court on August 18, 2002. Following preliminary conferences held before the Court on November 18, 2002, December 17, 2002, and February 4, 2003, Maddaloni filed its Second Amended Complaint on February 13, 2003. The Complaint sets forth the follwing claims: (1) RICO violations against Brill and Mazzeo; (2) Robinson-Patman Act violations against all defendants; (3) tortious interference with business relations against all defendants.
Defendants now move to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants argue that all of the claims are time-barred. In addition, defendants contend that the tortious interference claim and the section 2(a) Robinson-Patman Act claim do not sufficiently state causes of action.
Defendants only challenge the RICO claims on statute of limitations grounds.
II. LEGAL STANDARD
A motion to dismiss should be granted only if "'it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief.'"Weixel v. Board of Educ. of New York, 287 F.3d 138, 145 (2d Cir. 2002) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957) (alterations omitted)). At the motion to dismiss stage, the issue "'is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleading that a recovery is very remote and unlikely but that is not the test.'" Phelps v. Kapnolas, 308 F.3d 180, 184-85 (2d Cir. 2002) (quoting Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998)). A complaint need not state the legal theory, facts, or elements underlying the claim, except in certain instances. Compare Fed.R.Civ.P. 8 with Fed.R.Civ.P. 9. Pursuant to the simplified pleading standard of Rule 8(a), a complaint must only include "a short and plain statement of the claim showing that the pleader is entitled to relief."Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002) (quoting Rule 8(a)(2)).
The task of the court in ruling on a Rule 12(b)(6) motion is "merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Pierce v. Marano, No. 01 Civ. 3410, 2002 WL 1858772, at *3 (S.D.N.Y. Aug. 13, 2002) (internal quotation marks and citations omitted). When deciding a motion to dismiss, courts must accept all factual allegations in the complaint as true, and draw all reasonable inferences in plaintiff's favor.See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). Courts may not consider matters outside the pleadings but may consider documents attached to the pleadings, documents referenced in the pleadings, or documents that are integral to the pleadings. See id. at 152-53.
III. STATUTE OF LIMITATIONS
A. Applicable Statutes of Limitations
Defendants argue that the RICO, Robinson-Patman Act, and tortious interference claims are all time-barred because Maddaloni's cause of action accrued in 1997. These three claims have similar statutes of limitations. Civil RICO actions are subject to a four-year limitations period. See Klehr v. A.O. Smith Corp., 521 U.S. 179, 188-89 (1997); Agency Holding Corp. v. Malley-Duff Assocs., Inc., 483 U.S. 143, 156 (1987). "The limitations period begins to run when the plaintiff discovers or should have discovered the RICO injury." In re Merrill Lynch Ltd. P'ships. Litiq., 154 F.3d 56, 60 (2d Cir. 1998). "[T]his Court recognizes a 'separate accrual' rule under which a new claim accrues and the four-year limitation period begins anew each time a plaintiff discovers or should have discovered a new and independent injury." Id. at 59. Under the separate accrual rule, when a plaintiff is continuously injured by an underlying RICO violation, it may only recover for injuries discovered or discoverable within four years of the time suit is brought. See Binqham v. Zolt, 66 F.3d 553, 560 (2d Cir. 1995)
The statute of limitations for tortious interference with business relations is three years. See N.Y.C.P.L.R. § 214(4) (McKinney 2003); HP Research, Inc. v. Integra Realty, Inc., 685 N.Y.S.2d 43, 43-44 (1st Dep't 1999). Under New York law, a cause of action for tortious interference "accrues at the time the injury is sustained, rather than the date of defendant's alleged wrongful act or the date of discovery of the injury by the plaintiff." Rosemeier v. Schenker Intn'l, Inc., 895 F. Supp. 65, 66 (S.D.N.Y. 1995); see also Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94 (1993).
The statute of limitations applicable to violations of the Robinson-Patman Act is four years. See 15 U.S.C. § 15(b);Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338 (1971). A cause of action under this Act accrues when a defendant commits an act that injures plaintiff's business. See Zenith, 401 U.S. at 338. Where there is an alleged continuing violation, the statute of limitations "has usually been understood to mean that each time a plaintiff is injured by an act of the defendants a cause of action accrues to him to recover the damages caused by that act and that, as to those damages, the statute of limitations runs from the commission of that act." Higgins v. New York Stock Exch. Inc., 942 F.2d 829, 832 (2d Cir. 1991).
B. Maddaloni's Claims Are Not Time-Barred
Maddaloni's claims are not time-barred because Maddaloni alleges that defendants' actions caused separate and independent injuries over a five-year period. Contrary to defendants' argument, not all of Maddaloni's causes of action accrued in 1997 when the illegal payments were first demanded. Defendants' conduct resulted in continuous violations, creating multiple causes of action. First, Maddaloni alleges that "[f]rom 1997 until Maddaloni was unjustly terminated as a Rolex dealer in January 2002, customer after customer that placed Rolex orders with Maddaloni cancelled the orders because the orders were taking too long to fill, and the customers were able to get the products, usually with irregularly low discounts and immediate or speedy delivery, from [Rolex dealers that made illegal payments to Mazzeo and Brill]." Compl. ¶ 24. Each order that Maddaloni lost was an injury to a separate business relationship between Maddaloni and an existing customer, creating a new cause of action.
Furthermore, Maddaloni contends that the injuries to its business changed and escalated over the years. Maddaloni alleges that "[a]s time went on in 1999, Rolex's treatment of Maddaloni continued to worsen. . . . Maddaloni was advised that it was not to make any calls to anyone in the Rolex building and not to go to or enter the building. Rolex also discontinued sending display items or any other advertising and related promotional support to Maddaloni, although such support was provided to competitors of Maddaloni." Id. ¶ 30. Finally, Maddaloni suffered the ultimate injury in 2002, when it was terminated as a Rolex dealer because of its refusal to pay Brill and Mazzeo. As a result, Maddaloni has adequately alleged injuries that occurred within the statute of limitations for each claim.
Nevertheless, some of Maddaloni's claims are time-barred. For example, Maddaloni alleges that in 1997 it lost the profitable business of Marty Cohen as a result of defendants' scheme. Id. ¶ 21. The statute of limitations has run on claims based on this injury, as Maddaloni knew of this injury more than four years before filing its original complaint on July 3, 2002. In sum, Maddaloni may bring: RICO and Robinson-Patman claims for injuries he discovered or should have discovered four years before filing the original complaint and tortious interference claims for injuries sustained three years before filing the original complaint.
IV. TORTIOUS INTERFERENCE CLAIM
The Complaint sufficiently alleges facts necessary for a tortious interference with business relations claim. Under New York law, the elements of a tortious interference with business relations claim are: "(1) there is a business relationship between the plaintiff and a third party; (2) the defendant, knowing of that relationship, intentionally interferes with it; (3) the defendant acts with the sole purpose of harming the plaintiff, or, failing that level of malice, uses dishonest, unfair, or improper means; and (4) the relationship is injured."Goldhirsch Group, Inc. v. Alpert, 107 F.3d 105, 108-09 (2d Cir. 1997). As the Supreme Court has emphatically reiterated, the purpose of pleadings is merely to put the adverse party on notice of the claims against it. See Swierkiewicz, 534 U.S. at 512. A plaintiff need not plead his claim in exhaustive detail, nor must he plead the elements of a particular claim.See id.
Maddaloni sufficiently puts defendants on notice of its tortious interference claim. The Complaint alleges that "[a]s a result of the problems Maddaloni experienced in receiving Rolex products and support from Rolex, Maddaloni lost out on hundreds of orders that had been placed by its customers for Rolex watches." Compl. ¶ 20. Maddaloni also describes a specific customer who routinely spent a minimum of $100,000 per year in its store, but cancelled orders with Maddaloni because the products were not delivered timely and Maddaloni was not authorized to provide substantial discounts, unlike its competitors. See id. ¶ 21. Moreover, Maddaloni alleges that "[d]efendants were aware that Maddaloni had on-going relationships with customers . . . [and] intentionally and improperly interfered with [these] relationships." Id. ¶¶ 65-66. At this early stage of the proceedings the pleadings are sufficient. Therefore, defendants' motion to dismiss this claim is denied.
V. ROBINSON-PATMAN ACT CLAIMS
Maddaloni brings claims under sections 2(a), 2(d), and 2(e) of the Robinson-Patman Act. Each section of the Robinson-Patman Act prohibits a specific type of conduct which violates the antitrust laws. Section 2(a) prohibits a seller from discriminating in price among its purchasers. See United Magazine Co. v. Murdoch Magazines Distribution, Inc., No. 00 Civ. 3367, 2001 WL 1607039, *2 (S.D.N.Y. Dec. 17, 2001). Sections 2(d) and 2(e) prohibit a seller from discriminating in the provision of services and facilities to purchasers who buy commodities for resale. See 15 U.S.C. § 13(d), (e).
Maddaloni's section 2(a) claim must be dismissed because the Complaint does not allege price discrimination. Price discrimination is the "selling of the same kind of goods cheaper to one purchaser than to another." Federal Trade Commission v. Anheuser-Bush, Inc., 363 U.S. 536, 549 (1960) (citation omitted). To establish a section 2(a) claim, a plaintiff must show: "(1) that seller's sales were made in interstate commerce; (2) that the seller discriminated in price as between the two purchasers; (3) that the product or commodity sold to the competing purchasers was of the same grade and quality; and (4) that the price discrimination had a prohibited effect on competition." George Haug Co. v. Rolls Royce Motor Cars, Inc., 148 F.3d 136, 141 (2d Cir. 1998) (emphasis added).
Defendants' alleged scheme did not involve a supplier selling its products at different prices to purchasers. Instead, the scheme involved a supplier that refused to provide the same services to its purchasers. More specifically, Rolex refused to fill or promptly fill Maddaloni's orders and provided preferential treatment to certain dealers. See Compl. ¶ 17, 19. In addition, Rolex did not authorize Maddaloni to give substantial discounts to its customers, unlike other dealers. Such conduct is not prohibited under section 2(a) because these claims do not allege that Rolex charged different prices to the dealers for its products.
The dealers apparently paid Rolex full price for the products and then offered discounts to retail customers. These discounts helped to attract more customers.
Maddaloni does not dispute that dealers who paid the bribes and received preferential treatment paid the same wholesale price for Rolex products as Maddaloni. See Defendants' Brief in Support of Motion to Dismiss at 9; Maddaloni's Brief in Opposition to Motion to Dismiss ("Maddaloni Br.") at 13. Maddaloni posits a new argument in its opposition brief, stating that because it made one illegal payment to Rolex in 1999, it "may have paid more for watches purchased from Rolex than other Rolex dealers," at that time. Maddaloni Br. at 13. However, this argument fails because Maddaloni alleges that its competitors were also making illegal payments to Rolex. As a result, there was no price discrimination. See Compl. ¶¶ 21, 24, 27.
Even if Maddaloni claims that its initial refusal to pay bribes resulted in it paying less for products than the compliant dealers, this is not price discrimination because Maddaloni was not injured as a result of paying lower prices. It was injured by defendants' preferential treatment of other dealers which is prohibited under sections 2(d) and 2(e).
Although Maddaloni's claims do not constitute price discrimination, the allegations concerning preferential treatment given to certain dealers fall under sections 2(d) and 2(e). See United Magazine, 2001 WL 1607039 at *6-7 (holding "that practices barred by § 2(d) or § 2(e) may not give rise to a [claim under other sections of the Robinson-Patman Act]");see also Kirby v. P.R. Mallory Co., Inc., 489 F.2d 904, 910 (7th Cir. 1973) ("The alleged violations in this case are properly exclusively subsumed under §§ 2(d) and 2(e), rather than § 2(a)."). Accordingly, Maddaloni has adequately alleged its claims under sections 2(d) and 2(e), but not under section 2(a). As a result, the price discrimination claim is dismissed.
VI. CONCLUSION
For the foregoing reasons, defendants' motion to dismiss is partially granted. Maddaloni's claim under section 2(a) of the Robinson-Patman Act is dismissed. A conference is scheduled for July 11, 2003 at 4:30 p.m. The Clerk is directed to close this motion.
SO ORDERED.