NELSON S. ROMÁN, District Judge.
Plaintiff Sidney Frank Importing Co., Inc. ("SFIC" or "Plaintiff") commenced the instant action against Beam Inc. ("Beam") and Cooley Distillery plc ("Cooley") (collectively "Defendants") seeking monetary damages for Cooley's alleged breach of a long-term service contract, Beam's alleged violation of common law unfair competition, and Beam's alleged tortious interference with business relations. Defendant now moves pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Plaintiff's First Amended Complaint ("FAC") for failure to state a claim upon which relief may be granted. Defendant asserts: that under the express terms of the contract, it expired when Plaintiff failed to give written notice to Cooley that it would be extended beyond the initial period; that the unfair competition claim is duplicative of the breach of contract claim; and that Plaintiff fails to sufficiently allege both wrongful conduct and harm for the tortious interference claim. For the following reasons, Defendant's motion to dismiss the complaint is denied.
Plaintiff, a New York corporation, owns and imports a broad line of spirits and other alcoholic beverages. Plaintiff has a proven track record of building brands through substantial investment, savvy marketing, and good relationships with wholesale distributors across the United States. Plaintiff's most notable brand is Jägermeister, for which it secured importing rights in 1974. Jägermeister became the top selling imported liqueur in the United States, thanks to Plaintiff's efforts. In 1997, Plaintiff created Grey Goose vodka. Within seven years, Grey Goose became the world's top ultra-premium vodka, before being sold for $2.3 billion. In 2004, Plaintiff sought to recreate similar success with a new Irish whiskey to market in the U.S., Michael Collins, the subject of the service contract with Cooley at issue in the instant action.
Plaintiff's Michael Collins brand was named for a legendary Irish revolutionary figure who led the struggle for independence from the British in the early 1900s. In 2004, Plaintiff obtained the intellectual property rights to use the Michael Collins name and secured the support of the Collins family. It also began designing and sourcing the bottles and packaging. Plaintiff identified Cooley as the logical choice to produce the brand because of its corporate independence and its utilization of a double distillation process, a point of distinction which Plaintiff desired for its Michael Collins brand. Plaintiff commissioned Cooley to develop both a single malt and a blended Irish whiskey, and the two entered a Product Development Agreement in May 2005. Together the companies worked up detailed specifications for the whiskey, finalized details of bottles, shipping cartons, and other essentials, reviewed the logistics of shipping from Ireland to the U.S., and determined pricing. By November 2005, Plaintiff provided Cooley with a forecast of future demand to ensure that Cooley would have sufficient stock over the years. By December the parties had finalized specifications for the two products.
On January 11, 2006, Plaintiff and Cooley entered into a Services Agreement ("Agreement").
Regarding the duration of the Agreement, Clause 16.1 provided for an initial
(Agreement cl. 16.1.) Termination of the Agreement at the end of a renewal period was allowed either:
(Agreement cl. 16.2.) In the event of a material breach:
(Agreement cl. 16.4.) Recognizing the possibility that Cooley, as the only independent distiller in Ireland, could be the target of acquisition by large conglomerates such as Beam, the parties agreed that:
(Agreement cl. 16.7), and:
(Agreement cl. 19.8). The parties then chose to address waivers of contractual rights:
(Agreement cl. 19.2.) The Agreement "may not be modified except by an instrument in writing signed by the duly authorised representatives of the parties," (Agreement cl. 19.6). Finally, the Agreement "shall be governed by and construed in accordance with Irish law," (Agreement cl. 21.1).
In January 2008, Plaintiff paid the deposit to Cooley that was required in the third year by Clause 6.1. This deposit was applied to numerous purchases of whiskey over the next several years. Allegedly, Cooley executives stated that further deposits and deductions from deposits for demand falling below projections would not be required, owing to the positive relationship of the two companies. In August 2008, Plaintiff inquired as to whether Cooley anticipated pricing changes allowed by the Agreement. After discussions, the parties agreed to an increase in January 2009. Additionally, on September 26, 2008, Plaintiff provided Cooley with revised projections through 2013.
During 2009, Plaintiff and Cooley discussed changing the eight-year single malt to a tenor twelve-year single malt, and they also discussed a possible repackaging to reflect a more traditional bottle of Irish whiskey. In August 2009, Plaintiff decided to overhaul the packaging and to proceed with a ten-year single malt in lieu of the eight-year malt, as discussed. The parties then began detailed discussions regarding pricing and anticipated future demand. In September 2009, after careful deliberations involving Cooley personnel, Plaintiff settled upon specifications for the new ten-year single malt. On September 2, Plaintiff forwarded its 2010 forecast to Cooley.
In the first quarter of 2010, the parties worked intensely on the details of the repackaging. Cooley allegedly played a key role in reviewing artwork and securing bids from outside vendors. In May 2010, the parties discussed and resolved numerous inventory issues, and reviewed Plaintiff's projected future demand. During the summer of 2010, the parties discussed the application of the deposit Plaintiff had made in January 2008.
On January 17, 2011, Plaintiff provided Cooley with a forecast of demand for 2012. Also in January, Plaintiff launched the repackaged Michael Collins throughout the U.S., investing heavily in advertising and promotional events in nine metropolitan markets. As a result, demand for the repackaged product grew substantially. Plaintiff's inventory began to run so low by February 10, 2011, that the following shipment had to be sent via air. By March 2011, sales were up 63% year-to-date. Around that time some of Plaintiff's senior executives travelled to Ireland for a meeting with Cooley, at which the parties discussed the prospect of Plaintiff importing Cooley's brands into the United States. Allegedly, Plaintiff agreed in principle to become the exclusive importer of these brands.
In May 2011, Cooley enlisted Plaintiff's help in fending off an unsolicited acquisition bid by William Grant & Sons Ltd. ("Grant"), one of the three largest producers of Irish whiskey in the world. The possibility of Cooley being acquired troubled Plaintiff because of the threat posed to the success of the Michael Collins brand after having expended so much effort. Plaintiff's counsel wrote to John Teeling,
On July 7, 2011, Plaintiff provided Cooley with a 5-year projection of its anticipated demand for Michael Collins: 196,575 cases. This was in response to a June 18, 2011, communication from Cooley seeking estimates "to allocate current maturing whiskeys and in planning future distillation." (FAC ¶ 198.) Cooley's executives allegedly assured Plaintiff that Cooley could and would meet the projections. After this point, the increased orders of Michael Collins continued. On October 24, 2011, in response to Cooley's request for 2012 projections, Plaintiff supplied an estimate of 28,500 cases of Michael Collins.
As for the success of the Michael Collins brand, Plaintiff alleges that in 2011 Cooley produced and shipped over 10,200 cases of Michael Collins, a 46% increase over 2010. Plaintiff also describes numerous awards that the Michael Collins brand received throughout the years, including the following:
On December 16, 2011, John Teeling of Cooley emailed Plaintiff's CEO, Lee Einsidler, advising that Beam would be announcing a plan to acquire Cooley. Beam made the announcement that day, stating that Cooley, which divided sales among its brands, private labels, and bulk sales to third-parties, had "production capacity to support substantial future growth." (FAC ¶ 220.) On December 20, 2011, Plaintiff again pressed for assurances that Cooley would honor the Agreement, but this time Teeling merely replied that he was out of the office for the holidays. On January 3, 2012, Plaintiff again contacted Teeling, who excused himself from responding due to "integrating [his] new colleagues." (Id. ¶ 226.) On January 12, 2012, after not taking a call from Einsidler, Teeling apologized over email and stated that Einsidler "need[ed] to talk to the Beam people not
(Id. ¶ 236.) Beam further maintained that Cooley had been providing Michael Collins whiskey on an ad hoc basis wherein each purchase order was filled on its own from existing inventory and not under the terms of the Agreement.
According to the FAC, Beam's plan was to promote Cooley's Kilbeggan whiskey, also double-distilled and sharing many characteristics with Michael Collins, at the expense of Michael Collins in order to rival the primacy of Jameson Irish whiskey in the U.S. market. Accordingly, Beam redirected Cooley's production for the exclusive production of Kilbeggan, despite Cooley's contractual commitments. This is allegedly evinced by, inter alia, (a) the fact that imports to the U.S. of Kilbeggan in March 2012 were 20 times greater than in March 2011, (b) a Beam press release on March 15, 2012, stating that Beam expected "to ship more Kilbeggan to the U.S. in March 2012 than the total that was shipped in all of 2011 for all four Cooley brands," (FAC ¶ 292), (c) an April 22, 2012, Irish press report that Cooley cut off another private label, in which a former Cooley director and new Beam marketing director stated they were trying "to create another Jameson ... [and trying] to make sure [they did] not run out of whiskey in three years' time," (Id. ¶ 293), (d) reports in the liquor industry press linking Beam's decision to terminate supply contracts with private labels to its objectives of taking on Jameson, and (e) an April 18, 2012, Irish press report detailing the decision "to increasingly allocate supplies to the Cooley brands from third-party brands," (Id. ¶ 295).
However, Beam initially represented to Plaintiff that Cooley would continue to produce Michael Collins. To that end, Beam arranged a meeting in Chicago on February 28, 2012, to explore a potential resolution of the issues arising from the takeover of Cooley. At or before this meeting, Beam requested detailed sales, marketing, and advertising information (i.e., route-to-market information), which Plaintiff provided in good faith. The meeting, however, ended abruptly without any progress. As he left, a senior Beam representative handed a previously drafted letter to Plaintiff's CEO Einsidler claiming that Beam encountered "supply challenges... due to demand relative to lack of prior forecasting" such that Beam and/or Cooley would "not be able to support Michael Collins inventory needs long term." (FAC ¶ 252.) This letter was entirely contrary to Cooley's unequivocal representations over the course of several years that it was capable of supplying enough whiskey to meet Plaintiff's needs. The pre-written letter also claimed that Cooley's cost of goods had increased considerably and it would need to increase the price of Michael Collins by 35%.
On March 5, 2012, Plaintiff's counsel wrote to Beam to express surprise at the suddenness with which Beam declared the
Throughout the time the parties discussed the price increase, Beam allegedly interfered with the relationships between Plaintiff and its distributors. Beam represented to distributors Michael Collins as a failed concept not worth their time and resources. For instance, in April 2012 an executive of one distributor-which distributed more than half the Michael Collins sold in the United States-asked Beam about the impact the Cooley acquisition would have on Michael Collins. Beam's representative stated that Michael Collins had no future and was "not a viable brand worthy of the distributor's continued investment and support." (FAC ¶ 282.) The same month, a Beam executive told another distributor, "Basically, it's over for Michael Collins.[][]There is ... no doubt Michael Collins is going away." (Id. ¶ 283.) Allegedly, Beam also sought to destroy the good will Plaintiff had developed with retailers, telling one strong supporter of Michael Collins that she "shouldn't waste her time promoting a brand that will soon be gone." (Id. ¶ 284.) According to the FAC, Beam's efforts succeeded in shattering the confidence distributors and retailers once had in the viability of Michael Collins and caused them to cease carrying the brand, despite the fact that Michael Collins continued to win awards for its quality at the world's most prestigious spirits competitions.
On a motion to dismiss for "failure to state a claim upon which relief can be granted," Fed.R.Civ.P. 12(b)(6), dismissal is proper unless the complaint "contain[s] sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); accord Hayden v. Paterson, 594 F.3d 150, 160 (2d Cir.2010). "Although for the purposes of a motion to dismiss [a court] must take all of the factual allegations in the complaint as true, [it is] `not bound to accept as true a legal conclusion couched as a factual allegation.'" Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. at 679, 129 S.Ct. 1937.
When there are well-pleaded factual allegations in the complaint, "a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. A claim is facially plausible when the factual content pleaded allows a court "to draw a reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678, 129 S.Ct. 1937. Ultimately, determining whether a complaint states a facially plausible claim upon which relief may be granted must be "a context-specific task that
Defendant asserts that the FAC fails to state a claim for breach of contract under Irish law. They contend that the plain language of the Agreement precludes its continuation beyond the initial period because Plaintiff did not provide Cooley written notice as contemplated by Clause 16.1. According to Defendants, after December 31, 2007, no contract existed despite Plaintiff's oral notification that it continued into the first renewal period, and the parties instead proceeded to order and provide Irish whiskey on an ad hoc basis. Defendants further argue that, as no writing was in force after 2007 and as the Agreement disallowed modification except in writing, the statute of frauds precludes Plaintiff's recovery. Plaintiff, on the other hand, asserts that Clause 16.1 is ambiguous since it permits Plaintiff to give written notification of continuation but does not preclude oral extension, that otherwise the doctrines of waiver or estoppel preclude Defendants from invoking their purported contractual right to written notice, and alternatively that an implied contract arose because the parties continued to act as though the Agreement was in force after the initial period expired.
As mentioned previously, under its terms, the Agreement is to be construed in accordance with Irish law. The Court must determine as a matter of law what Irish law is. Fed.R.Civ.P. 44.1. "In determining foreign law, the court may consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence." Id. Typically, courts consider written or oral testimony. See Charles Alan Wright & Arthur R. Miller, 9A Federal Practice & Procedure § 2444, at 344 (3d ed.2008). Plaintiff here provides written expert testimony via affidavit, to which is appended case law and excerpts from treatises. (See generally Affidavit of Declan McGrath.) The Court finds that the expert's testimony accurately describes Irish law.
In Ireland, "[t]he existence and validity of a contract ... shall be determined by the law which would govern it ... if the contract or term were valid." Rome Convention on the Law Applicable to Contractual Obligations art. 8(1), brought into force by Contractual Obligations (Applicable Law) Act 1991 (Act No. 8/1991) (Ir.), available at http://www.irishstatutebook.ie/ 1991/en/act/pub/0008/print.html. Thus, the choice of law provision must be honored. The proper method of construing contractual provisions is defined by Irish courts, which routinely cite English court decisions and those of other common law jurisdictions as persuasive authority. (McGrath Aff. ¶ 11, at 4.)
According to the Irish Supreme Court, "where the parties are in disagreement as to what a particular provision of a contract means, the task of the court is to decide
Analog Devices B.V. v. Zurich Ins. Co., [2005] 1 I.R. 274, 280-81 (quoting Investors Comp. Scheme Ltd. v. W. Bromwich Bldg. Soc'y, [1998] 1 W.L.R. 896 (H.L.) 912-13 (Lord Hoffman)) (emphasis added);
With respect to business commonsense, "the law ... generally favours a commercially sensible construction ... [which] is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them... [without overly] technical interpretations [or] undue emphasis on niceties of language." Mannai Inv. Co. v. Eagle Star Assurance Co., [1997] 3 All E.R. 352, 372, [1997] A.C. 749 (H.L.) (Lord Steyn), cited in Analog Devices, [2005] 1 I.R. at 281, and in BNY Trust Co. (Ir.) v. Treasury Holdings, [2007] IEHC 271, at ¶ 4.4. The Supreme Court of the United Kingdom also noted that "language used by the parties will often have more than one potential meaning.... [Thus, i]f there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other." Rainy Sky S.A. v. Kookmin Bank, [2011] UKSC 50, [2011] 1 W.L.R. 2900, 2908. However, "[w]here the parties have used unambiguous language, the court must apply it." Id. Thus, a court may not "force upon the words [used] a meaning which they cannot fairly bear.... Particularly in the field of commerce, ... it is essential for [the parties] to be confident that they can rely on the court to enforce their contract according to its terms." Marlan Homes Ltd. v. Walsh, [2012] IESC 23, at ¶ 52(Ir.) (quoting Charter Reinsurance v. Fagan, [1997] A.C. 313 (H.L.) 388 (Lord Mustill)).
The main issue here is whether Clause 16.1 is ambiguous. According to another common law jurisdiction, the State of New South Wales in Australia, ambiguity is present if words have "two or more plausible meanings when the context of the document is taken into account in light of any knowledge any ordinary intelligent reader of the document would bring to the meaning of it." Burns Philp Hardware Ltd. v. Howard Chia Pty Ltd. [1987] 8 NSWLR 642, 657.
The plain language of the Clause, see Rainy Sky, [2011] 1 W.L.R. at 2908, states that "[Plaintiff] may give notice in writing to Cooley either: (a) that this Agreement will terminate on expiry of the Initial Period; or (b) that this Agreement will continue for further successive periods of 6 years," (Agreement cl. 16.1) (emphasis added). Generally, the term "may" is not used to convey a mandatory obligation. See McKillen v. Misland (Cyprus) Invs. Ltd. [2013] EWCA (Civ) 781[98] (Arden, L.J.) ("I do not ... accept the argument that the expression `may' ... means `must.' ... I can only assume that the drafter used the word `may' deliberately."); id. [138] (Moore-Bick, L.J.) (finding no obligation to give notice as the clause in question "is essentially permissive in nature"). The syntax is also instructive, as "may" is used to describe Plaintiff giving notice in writing, and not to describe Plaintiff extending or terminating the Agreement. Thus, by looking to the "ordinary meaning of the words used," Charter Reinsurance v. Fagan, [1997] 3 A.C. 313 (Q.B.) 384 (Eng.), as Defendants desire, Clause 16.1 means that Plaintiff had an option whether to give written notice of continuation or termination, not that Plaintiff had an option to continue or terminate but was required to do so in writing. However, as the Agreement should be read as a whole, see Igote Ltd. v. Badsey Ltd., [2001] 4 I.R. 511, 518(Ir.), further analysis is required.
The Court will consider the "matrix of fact" surrounding the execution of the Agreement. See Analog Devices, [2005] 1 I.R. at 281. Such consideration must be limited to allegations of "the factual background known to the parties at or before the date of the contract, including [allegations] of the `genesis' and objectively the `aim' of the transaction." O'Neill v. Ryan (No. 3), [1992] 1 I.R. 166, 189 (H.Ct.) (quoting Prenn v. Simmonds, [1971] 1 W.L.R. 1381 (H.L.) 1385 (Lord Wilberforce)). The Court will disregard expressions of the parties' subjective intent. Analog Devices, [2005] 1 I.R. at 281.
Here, facts alleged in the FAC demonstrate an objective aim of creating a long-term services contract. (See FAC ¶¶ 53-60.) In 2004, Plaintiff and Cooley agreed to work together to develop a new Irish whiskey brand for marketing in the United States. They worked hand in hand to develop the drinks, containers, labels, and other necessities for the new brand, and Plaintiff provided forecasts for future demand of the whiskey. Plaintiff and Cooley memorialized their intent to develop the Michael Collins brand in a product development agreement dated May 9, 2005. (Id. ¶ 56; Agreement Recital A.) Plaintiff also alleges that a long-term services agreement with a product supplier is routine practice when developing a new brand. (FAC ¶ 61.)
Certain provisions of the Agreement corroborate the objective aim of creating a long-term relationship governed by the Agreement. Recital B of the Agreement expresses the commercial purpose: for Plaintiff "to engage Cooley to provide various distillation, manufacturing, blending, bottling, labelling, and packaging services in connection with" the new Michael Collins brand of Irish whiskey. Clauses 5.1 and 5.2 contemplate the provision of initial and medium term forecasts of demand-six years for the blended Irish whiskey and ten years for the malt whiskey-by Plaintiff to Cooley, which forecasts are set forth in Schedule 1. Clause 5.4 expresses Cooley's agreement to reserve enough liquid whiskey to meet 120% of both the initial and medium-term forecasts, and to "produce such quantities ... as [Plaintiff] may from time to time order in accordance with the Initial Forecast and each Annual Forecast...."
Having considered the factual background, the Court turns to the provision in question and the Agreement as a whole. See Analog Devices, [2005] 1 I.R. at 281; Igote Ltd., [2001] 4 I.R. at 518. The language of Clause 16.1 does not address what would happen if Plaintiff gives oral notice or no notice whatsoever. Thus, Defendants aver that neither course of action was acceptable. However, as previously noted, Clause 16.1 uses the permissive term "may" instead of the mandatory "shall." See McKillen, [2013] EWCA (Civ) 781[98].
Other provisions of Clause 16, labeled "Commencement and Termination," also use "may" instead of "shall." Their terms memorialize an intent that the Agreement continue in force long-term, as they allow either party to terminate the agreement in certain situations.
As to the nature of obligations in the Agreement more generally, certain provisions clearly require mandatory adherence by using the term "shall," (e.g., cl. 15.1 ("[Plaintiff] shall provide Cooley with all necessary information, support and cooperation that may be reasonably required to enable Cooley to carry out its obligations."); cl. 7.1 ("Cooley shall notify [Plaintiff] and/or its designated shipping agent forthwith on completion of a Supply Order that it is ready for collection.")), while others using "may" give one party or another the option to take certain actions but do not require the particular actions, (e.g., cl. 3.4(a) (after first year of first Renewal Period, "Cooley may increase the Fees upon no less than one hundred and twenty (120) days' prior written notice to [Plaintiff] ...."); cl. 12.2 ("[Plaintiff] has disclosed, and may throughout the duration of this Agreement continue to disclose, to Cooley information to enable Cooley to provide the Services under this Agreement.")).
Similarly, Clause 16.1 itself uses "shall" twice in the first sentence, yet the parties chose "may" to describe Plaintiff's obligation to provide written notice of continuation. This word choice is puzzling if the parties truly meant that Plaintiff shall give notice in writing that the Agreement will continue, considering that the objective aim was to produce a new Irish whiskey which was viable long-term, O'Neill v. Ryan (No. 3), [1992] 1 I.R. at 189, and that only Plaintiff was given the power to determine Michael Collins was not viable.
As to provisions referencing Clause 16.1, Defendants point to Clause 3.4 as clearly indicating that the only means by which the Agreement could be extended was through written notice:
However, in setting forth the effects of termination at the expiry of a contractual period, Clause 17.2 suggests the opposite — that written notice was the only means by which the Agreement could be terminated at the end of 2007:
These conflicting provisions do not sufficiently clarify the mandatory or permissive nature of Plaintiff's obligation to furnish written notice of continuation.
Accordingly, the Court finds that Clause 16.1 is ambiguous. The clause has at least two plausible meanings when accounting for the entire document and the objective facts known to the parties at the time the Agreement was executed. Defendant's statute of frauds argument — that no enforceable writing exists because Plaintiff failed, due to the express terms of Clause 19.6, to modify the Agreement orally by notifying Cooley of the intent to continue the relationship — is unavailing. See Statute of Frauds 1695, 7 Wm. 3, c. 12, § 2(Ir.), available at http://irish statutebook.ie/1695/en/act/pub/0012/print. html. Therefore, the motion to dismiss the breach of contract claim as against Cooley must be denied. Plaintiff's arguments concerning waiver,
New York courts have recognized two theories of unfair competition claims: "palming off" and misappropriation. See ITC Ltd. v. Punchgini, Inc., 9 N.Y.3d 467, 476, 850 N.Y.S.2d 366, 880 N.E.2d 852 (2007). Palming off is the sale of goods of one manufacturer as those of another. Id. Misappropriation, the theory which Plaintiff asserts here, "`concerns
To state a claim for the misappropriation theory of unfair competition, a plaintiff must allege "that the defendant: (1) `misappropriated the plaintiff[]'s labors, skills, expenditures, or good will'; and (2) `displayed some element of bad faith in doing so.'" Barbagallo v. Marcum LLP, 820 F.Supp.2d 429, 446 (S.D.N.Y. 2011) (quoting Abe's Rooms, Inc. v. Space Hunters, Inc., 38 A.D.3d 690, 692, 833 N.Y.S.2d 138 (2d Dep't 2007)). Likelihood of confusion by the public is not an essential element in a misappropriation-based unfair competition claim. Beverage Mktg. USA, Inc. v. S. Beach Beverage Co., 20 A.D.3d 439, 439, 799 N.Y.S.2d 242 (2d Dep't 2005) ("We disagree ... that likelihood of confusion is an essential element of [a bad faith misappropriation] unfair competition claim."); see also Flexitized, Inc. v. Nat'l Flexitized Corp., 335 F.2d 774, 782 (2d Cir.1964) (acknowledging that extension of unfair competition tort by New York courts "resulted in the granting of relief in cases where there was no fraud on the public"); Astroworks, Inc. v. Astroexhibit, Inc., 257 F.Supp.2d 609, 620 (S.D.N.Y.2003) (finding allegation of consumer deception unnecessary for misappropriation theory); cf. Am. Footwear Corp. v. Gen. Footwear Corp., 609 F.2d 655, 664 (2d Cir.1979) (acknowledging that trademark infringement claims under Lanham Act and state law both consider "the likelihood that the consuming public will be confused as to the source of the allegedly infringing product").
Plaintiff asserts it has property rights to the whiskey supplies which Cooley produced according to Plaintiff's specifications — developed under Plaintiff's direction and at considerable expense — regarding taste, color, alcohol content and consistency. (Pl.'s Br. 19 (citing FAC ¶¶ 57, 60, 64-65, 130).) The supply of premium whiskey distilled to Plaintiff's specifications allegedly afforded Plaintiff a clear competitive advantage. (Pl.'s Br. 20 (citing FAC ¶ 53 (double distillation method was a point of differentiation for Michael Collins brand)).) Beam allegedly violated Plaintiff's property right by misappropriating the whiskey supplies for use in the Kilbeggan brand, (see FAC ¶ 312), seeking "in bad faith to gain an unfair economic advantage over [Plaintiff]," (id. ¶ 314).
Defendants assert that the unfair competition claim is duplicative of the breach of contract claim since Kilbeggan is Cooley's brand, Cooley remains a distinct legal entity, and Plaintiff admitted at a conference that its property right in the whiskey arose by contract. However, the FAC alleges that Beam acquired the Kilbeggan brand as part of the Cooley acquisition. (FAC ¶ 25.) The Court must take that factual allegation as true for the purposes of this motion. Moreover, Plaintiff is not necessarily precluded from bringing a separate unfair competition claim. See Cargill, Inc. v. Sears Petroleum & Transp. Corp., 388 F.Supp.2d 37, 70-71 (N.D.N.Y.
A duty not to misappropriate the whiskey supplies existed, however, only if Plaintiff had a property right in those supplies, based on Plaintiff's own efforts in creating the Michael Collins specifications. See, e.g., Astroworks, 257 F.Supp.2d at 619 (alleged proprietary and confidential idea as counterclaimant's property); Demetriades v. Kaufmann, 698 F.Supp. 521, 527 (S.D.N.Y.1988) (design features of building interior as designer's property until building sold); cf. Gen. Sec., Inc. v. APX Alarm Sec. Solutions, Inc., 647 F.Supp.2d 207, 213-14 (N.D.N.Y.2009) (noting no authority cited for proposition that prior acquisition of customers constitutes property right or commercial advantage). Defendants assert that the "whiskey supplies"-which Plaintiff alleges should have been allocated to Plaintiff and other private labels, (see FAC ¶ 304)-were merely "unbranded bulk liquid product" that Cooley distilled for use in Kilbeggan and multiple private labels, (Defs.' Br. 14). Thus, at that time the liquid was allegedly misappropriated, only Cooley had expended any labor, skill, expertise, or talent. (Defs.' Reply 10.) Defendants imply that the unbranded liquid had not yet undergone some final processing to conform it to Plaintiff's specifications for Michael Collins. Defendants, however, essentially ask the Court to determine when during the distillation process Cooley would have followed Plaintiff's specifications, a question of fact not appropriately addressed on a motion to dismiss. See Astroworks, 257 F.Supp.2d at 619 (denying motion to dismiss and leaving unresolved whether ideas were actually proprietary). Regardless, the FAC clearly states that Beam misappropriated whiskey "that Cooley already had distilled according to [Plaintiff]'s specifications," (FAC ¶ 6), and "set aside and aged for [Plaintiff]'s use," (id. ¶ 279). Thus, the FAC satisfies the first element of unfair competition: misappropriation of Plaintiff's labor and expenditures.
The second element of bad faith is also adequately alleged. Beam abruptly ended price negotiations after securing Plaintiff's route-to-market information to jump-start its entry into the U.S. Irish whiskey market using Plaintiff's information.
Accordingly, the motion to dismiss the unfair competition claim must be denied.
The FAC includes a claim against Beam for tortious interference with business relations. Allegedly, in April 2012 Beam intentionally misrepresented to Plaintiff's distributors that Michael Collins was not a viable brand to disrupt Plaintiff's supply chain by convincing those distributors to cease purchasing whiskey from Plaintiff and selling it to retailers. Plaintiff asserts that Michael Collins was, in fact, extremely viable, since sales increased each year-2011 being exceptionally good after the rollout of the new labels — and since both whiskeys continued to win awards in 2012 after Beam acquired Cooley and interfered with Plaintiff's distributor relations.
Under New York law, to state a claim for tortious interference with business relations, a plaintiff must allege that "(1) the plaintiff had business relations with a third party; (2) the defendant interfered with those business relations; (3) the defendant acted for a wrongful purpose or used dishonest, unfair, or improper means; and (4) the defendant's acts injured the relationship." Catskill Dev., L.L.C. v. Park Place Entm't Corp., 547 F.3d 115, 132 (2d Cir.2008). Defendants here argue that dismissal of the claim is proper since Plaintiff fails to adequately allege the third and fourth elements.
Where, as here, there exists no legally binding contract between the plaintiff and the third party with whom the plaintiff has business relations, the requirement of showing wrongful means is more stringent than for the similar cause of action known as tortious interference with contract. Concerning this distinction,
Carvel Corp. v. Noonan, 3 N.Y.3d 182, 189-90, 785 N.Y.S.2d 359, 818 N.E.2d 1100 (2004) (emphasis added) (quoting NBT Bancorp Inc. v. Fleet/Norstar Fin. Grp., Inc., 87 N.Y.2d 614, 621, 641 N.Y.S.2d 581, 664 N.E.2d 492 (1996)) (internal quotation marks omitted); accord Valley Lane Indus. Co. v. Victoria's Secret Direct Brand Mgmt., L.L.C., 455 Fed.Appx. 102, 105-06 (2d Cir.2012). The standard is more exacting because courts must balance a plaintiff's expectation in establishing a contractual relationship against the "competing interest of the interferer," Catskill Dev., 547 F.3d at 132 (quoting Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 191, 428 N.Y.S.2d 628, 406 N.E.2d 445 (1980)), and the broader interest of "fostering healthy competition," id. (citing NBT Bancorp, 87 N.Y.2d at 623, 641 N.Y.S.2d 581, 664 N.E.2d 492). By requiring more culpable conduct, "[t]he implication is that, as a general rule, the defendant's conduct must amount to a crime or an independent tort" because other
In Carvel Corp., the New York Court of Appeals recognized one exception to the general rule "where a defendant engages in conduct `for the sole purpose of inflicting intentional harm on plaintiffs.'" 3 N.Y.3d at 190, 785 N.Y.S.2d 359, 818 N.E.2d 1100 (quoting NBT Bancorp Inc. v. Fleet/Norstar Fin. Grp. Inc., 215 A.D.2d 990, 628 N.Y.S.2d 408 (3d Dep't 1995), aff'd 87 N.Y.2d 614, 641 N.Y.S.2d 581, 664 N.E.2d 492 (1996)). However, the court left for another day the question of whether any other exception exists. Id. at 190-91, 785 N.Y.S.2d 359, 818 N.E.2d 1100. The court then identified other "more culpable" conduct discussed in earlier cases, explaining that an interferer would not be held liable "so long as `the means employed are not wrongful.'" Id. at 191, 785 N.Y.S.2d 359, 818 N.E.2d 1100 (quoting Guard-Life, 50 N.Y.2d at 191, 428 N.Y.S.2d 628, 406 N.E.2d 445); see also Restatement (Second) of Torts § 768, quoted in Guard-Life, 50 N.Y.2d at 191 n. 3, 428 N.Y.S.2d 628, 406 N.E.2d 445. The court explained that such "`[w]rongful means' include physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure; they do not, however, include persuasion alone although it is knowingly directed at interference with the contract." Carvel Corp., 3 N.Y.3d at 191, 785 N.Y.S.2d 359, 818 N.E.2d 1100 (quoting Guard-Life, 50 N.Y.2d at 191, 428 N.Y.S.2d 628, 406 N.E.2d 445 (citing Restatement (Second) of Torts §§ 767 cmt. c, 768 cmt. e)); accord Lader v. Delgado, 941 F.Supp.2d 267, 272 (E.D.N.Y.2013); cf. Rockland Exposition, Inc. v. Alliance of Auto. Serv. Providers of N.J., 894 F.Supp.2d 288, 333 (S.D.N.Y.2012) (quoting Lombard v. Booz-Allen & Hamilton, Inc., 280 F.3d 209, 214-15 (2d Cir.2002)) ("[M]ethods sufficiently wrongful to be deemed tortious under New York law ... include physical violence, fraud, misrepresentation, civil suits, criminal prosecutions and some degree of economic pressure.").
Essentially, the parties disagree whether the misrepresentations alleged in the FAC are sufficient to satisfy the "wrongful means" element of the claim.
Defendants additionally argue that the allegations of wrongful conduct are conclusory and should be disregarded under Twombly and Iqbal. See, e.g., Dejesus v. HF Mgmt. Servs., LLC, 726 F.3d 85, 86, 89-90 (2d Cir.2013) (FLSA overtime claim insufficient where plaintiff alleged working more than 40 hours per week during "some or all weeks" of employment); Susskind v. Ipco Hosp. Supply Corp., 49 A.D.2d 915, 915, 373 N.Y.S.2d 627 (2d Dep't 1975) ("Conclusory allegations, such as those under review, that a defendant `wrongfully, knowingly, intentionally, maliciously' interfered with the consummation of a contract are clearly insufficient."). However, the fact that Plaintiff describes specific instances of conduct, i.e., statements made by Beam representatives to two distributors and one retailer allegedly supportive of Michael Collins whiskey, (FAC ¶¶ 282-284), belies Defendants' argument. In light of the details provided in the FAC (though certainly interspersed with conclusory language), and in light of the multiple cases making allowance for misrepresentations to satisfy the "wrongful means" element, the Court finds that the FAC alleges sufficient facts satisfying this element.
Defendants assert that Plaintiff fails to sufficiently allege it was actually harmed by any purported wrongful interference. According to Defendants, Plaintiff asserts "only generalized injuries" while the factual predicate showing proximate causation is also insufficient. (Defs.' Br. 12.) For support, Defendants rely on Ritani, LLC v. Aghjayan, 880 F.Supp.2d 425 (S.D.N.Y.2012), wherein a jewelry maker alleged tortious interference by a former-executive-turned-competitor "motivated solely by malice and/or to inflict injury." Id. at 451. Aside from the obvious difference in the type of wrongful means used, Ritani is also distinguishable because the asserted injury was merely a breakdown of negotiations with a potential customer from whom "it [was] likely that [the plaintiff] would have obtained the financial benefit" of an initial contract and ongoing business with the purchaser. Id. at 452.
Accordingly, the motion to dismiss the tortious interference claim against Beam must be denied.
For the reasons stated above, Defendant's motion to dismiss the Complaint is DENIED. Defendants are directed to file an answer within 30 days of the date of this order. The Clerk of Court is respectfully requested to terminate the motion (Doc. 17).
SO ORDERED.
