MCM Prods. United States, Inc. v. Botton

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

16 Civ. 1616

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

FILED: September 19, 2016

September 16, 2016

OPINION

APPEARANCES:

Attorneys for Plaintiff

LAW OFFICE OF WILLIAM COUDERT RAND

501 Fifth Avenue, 15^th Floor

New York, NY 10017

By: William Coudert Rand, Esq.

Attorneys for Defendants

BECKER & POLIAKOFF LLP

45 Broadway, 8^th Floor

New York, NY 10006

By: James J. Mahon, Esq.

Vincenzo M. Mogavero, Esq.

Oliver Edwards, VII, Esq.

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 Inc. ("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 conclusions set forth below, the motion of the Plaintiff to 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 complaint in the Supreme Court of the State of New York, County of New York on February 5, 2016 alleging that it had sold and delivered goods to Pure Stores for which it had not been paid $333,489 (Complaint "Compl." at ¶¶ 19, 22.) Defendants on March 2, 2016 removed the action to thiscourt 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 at ¶¶ 1-3.) The Pure Stores have purchased MCM luxury goods, including suit cases and handbags, from MCM since 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 MCMemployees 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 Houston 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 through more than mere competition; they did so by undercutting the prices of MCM goods at the Pure Houston Store by 10% or more. (CC at ¶¶ 20-22.) In some cases the MCM Houston Store discounted 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 July 16, 2015, 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, contingent on four conditions: 1) that MCM ship certain itemsalready ordered but were on credit hold due to the delinquency; 2) that MCM agree to the return of certain 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 ending 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. (CC at ¶ 39.)

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, soliciting business from Pure Denim customers as they left. (CC at ¶ 41.) Employees of the MCM Atlanta store have repeatedly stated to customers that Pure Atlanta carries counterfeit MCM goods and/or defective MCM goods. (CC at ¶ 42.)

The Counterclaims seek damages of $333,489 based on Counterclaim I alleging fraudulent inducement; Counterclaim II breach of contract; Counterclaim III defamation; Counterclaim IV tortious interference with business relations; Counterclaim V breach of the covenant of good faith and fair dealing; Counterclaim VI unfair competition; Counterclaim VII unjust enrichment; and, Counterclaim VIII punitive damages.

The instant motions were taken on submission and marked fully submitted on June 2, 2016.

The Applicable Standard

On a motion to dismiss pursuant to Rule 12(b), all factual allegations in the complaint are accepted as true, and all inferences are drawn in favor of the pleader. Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993). 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, 663 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1964, 167 L. Ed. 2d 929 (2007)). A claim is facially plausible when "the plaintiff pleads 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 allegations must "possess enough heft to show that the pleader is entitled to relief." Twombly, 550 U.S. at 557 (internal quotation marks omitted).

Additionally, while "a plaintiff may plead facts alleged upon information and belief 'where the belief is based on factual information that makes the inference of culpability plausible,' such allegations must be 'accompanied by a statement of the facts upon which the belief is founded.'" Munoz-Nagel v. Guess, Inc., No. 12-1312, 2013 WL 1809772, *3 (S.D.N.Y. Apr. 30,2013) (quoting Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010)); Prince v. Madison Square Garden, 427 F. Supp. 2d 372, 384 (S.D.N.Y. 2006); Williams v. Calderoni, No. 11-3020, 2012 WL 691832, at *7 (S.D.N.Y. Mar. 1, 2012)). The pleadings, however, "must contain something more than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of action." Twombly, 550 U.S. at 555 (citation and internal quotation omitted).

The Court may order a Section 1404(a) transfer of a case filed in the proper venue "[f]or the convenience of parties and witnesses, in the interest of justice . . . to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). A Section 1404(a) motion places the burden of proof on the Defendants and requires Defendants to demonstrate "by a clear and convincing showing that transfer is proper." AGCS Marine. Ins. Co. v. Associated Gas & Oil Co., 775 F. Supp. 2d 640, 645 (S.D.N.Y. 2011). Absent a "clear and convincing showing" that the balance of factors favors Defendant's choice, the Court will not disturb Plaintiff's forum choice. Boehner v. Heise, 410 F. Supp. 2d 228, 241 (S.D.N.Y. 2006).

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, 2013) (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) (court denied transfer)(citing Berman v. Informix Corp., 30 F. Supp. 2d 653, 656 (S.D.N.Y. 1998)). First, the Court determines whether the action could 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 following factors: (1) the weight accorded to Plaintiff's forum choice; (2) the convenience of witnesses; (3) the convenience of the parties; (4) the location of, and ease of access to, relevant documents and sources of proof; (5) the locus of operating facts; (6) the availability of process to compel 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., 325 F.Supp.2d 282, 286 (S.D.N.Y. 2004) (also considering two other factors: (8) the familiarity of eachdistrict with the governing...