Advanced Water Techs. Inc. v. Amiad U.S.A., Inc.

ADVANCED WATER TECHNOLOGIES INC., Plaintiff, v. AMIAD U.S.A., INC., Defendant.

18-CV-5473 (VSB)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

September 30, 2019

OPINION & ORDER

Appearances:

Ronald Francis

Ronald Francis Esq.

New York, New York

Counsel for Plaintiff

Courtney Janae Peterson

Noah Weissman

Bryan Cave Leighton Paisner LLP

New York, New York

Counsel for Defendant

VERNON S. BRODERICK, United States District Judge:

Plaintiff Advanced Water Technologies Inc. ("AWT") brings this breach of contract action against Amiad U.S.A., Inc. ("Amiad"), arising out of Amiad's termination of a 2005 contract between the parties designating AWT as the exclusive distributor of Amiad's water filtration products in New York City and the surrounding area. Before me is Amiad's motion to dismiss AWT's complaint for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). Because I find the language of the parties' agreement to be ambiguous, I cannot conclude as a matter of law that Amiad was permitted to terminate the contract under the circumstances presented here. Amiad's motion to dismiss is therefore DENIED.

I. Background¹

Plaintiff AWT is a New York corporation that distributes, installs, and services domestic water filtration systems and products. (Compl. ¶¶ 1, 7.) Defendant Amiad, a California corporation with a principal place of business in North Carolina, manufactures water filtration products. (Id. ¶¶ 2, 9.) On March 31, 2005, AWT and Amiad entered into a one-page contract (the "Agreement," id. Ex. A), pursuant to which AWT was designated as the exclusive distributor for wholesale and retail sales of Amiad's screen filtration products in New York City, as well as Nassau and Suffolk Counties. (Id. ¶ 10.) The Agreement required AWT to "purchase an agreed $ volume from Amiad on an annual basis." (Id. Ex. A.) If AWT did so, "it ha[d] an automatic right of renewal" of the Agreement. (Id.) The Agreement further provided that the sales quota for net purchases of Amiad products for 2005 would be $55,000, and stated that "[t]he annual increase in sales/quota should be a reasonable number and will be jointly agreed between Amiad and AWT." (Id.)

From 2005 through April 2018, AWT purchased water filtration products from Amiad for AWT's customers in the New York City area. (Id. ¶ 16.) AWT's total purchases from Amiad during this time period totaled approximately $4,000,000. (Id.) The parties never agreed to modify the $55,000 annual sales quota set forth in their 2005 Agreement, and between 2005 and 2018, AWT's annual sales always exceeded $55,000. (Id. ¶¶ 15-16.) In 2017, AWT sold approximately $207,000 in Amiad products to New York customers. (Id. ¶ 17.)

On April 13, 2018, Amiad provided notice by letter to AWT that the parties' Agreement was "immediately terminate[d]" based on AWT's failure to pay an overdue balance of$18,085.27. (Id. ¶ 19.) On May 1, 2018, AWT rejected Amiad's purported termination and remitted payment to Amiad in the amount of $17,399.63, representing the total amount AWT believed to be owed to Amiad at the time. (Id. ¶ 21.) Amiad refused to cash AWT's check and rejected AWT's subsequent attempts to reconcile its outstanding balance. (Id. ¶¶ 22-23.)

II. Procedural History

On May 17, 2018, Amiad filed a breach of contract action against AWT in North Carolina's Guilford County Superior Court (the "North Carolina action"), seeking damages for unpaid invoices. See Amiad U.S.A, Inc. v. Advanced Water Techs., Inc., No. 1:18CV520, 2019 WL 1359240, at *1 (M.D.N.C. Mar. 26, 2019). On June 19, 2018, AWT removed the North Carolina action to the United States District Court for the Middle District of North Carolina. Id.

AWT filed its Complaint in this Court on June 18, 2018, alleging that Amiad—not AWT—had breached the Agreement by terminating the contract despite AWT having satisfied all of its obligations under the Agreement, thereby triggering AWT's automatic right of renewal for 2018. (See Compl. ¶¶ 24-28.) On September 28, 2018, Amiad filed its motion to dismiss the Complaint, (Doc. 12), along with a memorandum of law, (Doc. 15), and supporting declarations with exhibits, (Docs. 13, 14). Amiad asserts that AWT fails to state a claim upon which relief may be granted and argues, in the alternative, that the Complaint should be dismissed in favor of the North Carolina action, pursuant to the "first-filed" rule. (See generally Doc. 15.) On November 5, 2018, AWT filed its opposition to Amiad's motion, (Doc. 19), also accompanied by a supporting declaration with exhibits, (Doc. 20). Amiad filed its reply on November 26, 2018, (Doc. 23). On April 3, 2019, AWT filed a notice of supplemental authority indicating that the North Carolina action had been dismissed for lack of personal jurisdiction over AWT. (Doc. 24.)

III. Legal Standard

To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain 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 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim will have "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. This standard demands "more than a sheer possibility that a defendant has acted unlawfully." Id. "Plausibility . . . depends on a host of considerations: the full factual picture presented by the complaint, the particular cause of action and its elements, and the existence of alternative explanations so obvious that they render plaintiff's inferences unreasonable." L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 430 (2d Cir. 2011).

In considering a motion to dismiss, a court must accept as true all well-pleaded facts alleged in the complaint and must draw all reasonable inferences in the plaintiff's favor. Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007). A complaint need not make "detailed factual allegations," but it must contain more than mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Iqbal, 556 U.S. at 678 (internal quotation marks omitted). Finally, although allegations contained in a complaint are assumed to be true, this tenet is "inapplicable to legal conclusions." Id.

A complaint is "deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference." Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002) (citation omitted). Where a document is not incorporated by reference, "the court may nevertheless consider it where the complaint relies heavily upon its terms and effect, which renders the document 'integral' to the complaint." Id. at 153 (internalquotation marks omitted). Finally, a court may consider any matters that are subject to judicial notice, including publicly filed documents. Cortec Indus., Inc. v. Sum Holdings L.P., 949 F.2d 42, 47 (2d Cir. 1991).²

IV. Discussion

A. Breach of Contract

Amiad argues that AWT fails to state a breach of contract claim because (1) in the absence of a 2017 sales quota, Amiad was permitted discontinue AWT's exclusive distribution right for 2018; and (2) AWT materially breached the Agreement by failing to timely pay Amiad's invoices, thereby permitting Amiad to terminate the contract. Neither argument entitles Amiad to dismissal at this early stage of the litigation.

1. Applicable Law

Under New York law,³ a plaintiff claiming a breach of contract must allege: "(i) the formation of a contract between the parties; (ii) performance by the plaintiff; (iii) failure of defendant to perform; and (iv) damages." Orchard Hill Master Fund Ltd. v. SBA Commc'nsCorp., 830 F.3d 152, 156 (2d Cir. 2016) (citation omitted). A court's primary objective in interpreting a contract "is to give effect to the intent of the parties as revealed by the language of their agreement." Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 232 F.3d 153, 157 (2d Cir. 2000); see also Greenwich Capital Fin. Prods., Inc. v. Negrin, 903 N.Y.S.2d 346, 348 (1st Dep't 2010) (courts are bound to construe the terms of a contract "in a manner that accords the words their fair and reasonable meaning, and achieves a practical interpretation of the expressions of the parties" (internal quotation marks omitted)).

A district court may dismiss a breach of contract claim at the motion-to-dismiss stage only where "the terms of the contract are unambiguous." Orchard Hill, 830 F.3d at 156. A contract is ambiguous "if its terms could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Chesapeake Energy Corp. v. Bank of N.Y. Mellon Tr. Co., 773 F.3d 110, 114 (2d Cir. 2014) (internal quotation marks omitted). There is no ambiguity "where the contract language has a definite and precise meaning." Id.

2. Application

The parties' Agreement provides, in pertinent part:

AWT must purchase an agreed $ volume from Amiad on an annual basis; if AWT does not do so, Amiad may elect to continue or discontinue the exclusive nature of the distribution agreement. The annual increase in sales/quota should be a reasonable number and will be jointly agreed between Amiad and AWT. If AWT meets the quota, it has an automatic right of renewal, subject to continued creditworthiness, continuing and responsible efforts to sell Amiad filtration, and responsible maintenance of equipment it has sold. The sales quota/target for NET purchases of Amiad products is US $55,000 in FY 2005 (i.e. January 1 - December 31, 2005).

(Compl. Ex. A.) Given that the parties never...