RBG Mgmt. Corp. v. Vill. Super Mkt., Inc.

692 F.Supp.3d 135

RBG MANAGEMENT CORP., Plaintiff, v. VILLAGE SUPER MARKET, INC., Defendant.

Case No. 1:22-cv-07996 (JLR)

United States District Court, S.D. New York

Signed September 14, 2023

Mark Edward Rizik, Jeffrey L. Kessler, Martin C. Geagan, Winston & Strawn LLP, New York, NY, for Plaintiff.

Cassandra Annemarie Essert, Reynold Lambert, Christopher Steven Porrino, Lauren Elizabeth Van Driesen, Lowenstein Sandler LLP, Roseland, NJ, Gavin J. Rooney, Lowenstein Sandler LLP, New York, NY, for Defendant.

OPINION AND ORDER

JENNIFER L. ROCHON, United States District Judge:

Plaintiff RBG Management Corporation, a New York corporation doing business as Morton Williams Supermarkets ("Morton Williams" or "Plaintiff"), brings this action against Defendant Village Super Market, Inc., a New Jersey corporation ("Village" or "Defendant"), alleging that Village has committed the following torts: (1) tortious interference with a contract; (2) tortious interference with economic relations and prospective economic relations; (3) unfair competition; and (4) unjust enrichment, seeking compensatory and punitive damages, as well as restitution and disgorgement. See ECF No. 1 ("Compl."). Now before the Court is Defendant's motion to dismiss the Complaint in its entirety for failure to state a claim, see ECF Nos. 18 ("Br."), 25 ("Reply"), which Plaintiff opposes, see ECF No. 22 ("Opp."). For the reasons set forth herein, the motion is GRANTED in part and DENIED in part.

BACKGROUND¹

Plaintiff Morton Williams is a grocery business that has operated supermarkets in New York City for over seventy years. Compl. ¶ 14. Part of its "favorable and valuable reputation" in New York comes from its "high-quality grocery products," including "high-quality private-label products," that it has sold since 2008. Id. ¶¶ 14-15. Of its 16 grocery stores, 14 are located in Manhattan. Id. ¶ 15. Defendant Village also operates a supermarket chain, which largely consists of ShopRite grocery stores across New Jersey, Pennsylvania, and Maryland. Id. ¶ 17. Since 2019, Village has operated four "specialty markets" under the name Gourmet Garage, and since 2020, Village has operated five "Fairway Markets," all in Manhattan. Id.

Village is a member of Wakefern Food Corporation ("Wakefern"), a "retailer-owned cooperative that supplies Wakefern Private-Label Products to grocery stores." Id. ¶¶ 1-2, 29. In fact, Village is the "second largest member of Wakefern," owning 12.2% of outstanding stock as of July 31, 2021. Id. ¶ 59. Private-label grocery products are not promoted by third-party manufacturers, but instead are marketed as a grocery store's own product. Id. ¶ 21. According to the Complaint, since the mid-to-late 2000s, consumers have demonstrated a willingness to pay for quality products, rather than seek low prices. Id. ¶ 22. Brand-name manufacturers began to see their profits increase, but given that a large "cut" of the sales went to the brand-name manufacturer, the grocery stores' net profitability on those items decreased. Id. ¶ 23. Grocery stores responded by partnering with suppliers under arrangements where the grocery store would market private-label goods as their own. Id. In Manhattan especially, competition from grocery chains like Trader Joe's and Whole Foods, "whose primary business model is the sale of private-label products," also meant that stores would need to increase their own private-label offerings. Id. ¶ 24. For smaller grocery chains in particular, this meant entering "comprehensive supply contract[s]," and assisting with the promotion and development of a customer base for those products. Id. ¶¶ 25-26. These stores then benefited from having "a well-regarded private-label product line associated with their stores." Id. ¶ 27.

Prior to 2008, Wakefern had not had much success marketing or selling its private-label products in Manhattan. See id. ¶¶ 29-30. In 2008, Morton Williams decided that it needed to sell private-label products and entered into an agreement with Wakefern to sell Wakefern's private-label products under the ShopRite label in its stores. Id. ¶ 28. Morton Williams, at the time, "had an established reputation as an upscale grocery store" in Manhattan, and therefore was in a position to successfully change the perception of Wakefern private-label products (ShopRite products) in the market. See id. ¶¶ 32-33. Between 2008 and 2018, Morton Williams invested "time, money, floor space, and advertising space in promoting" the private-label products, and was able to establish the ShopRite brand as representing high-quality goods at a lower price point than similar brand-name items. Id. ¶ 34. Morton Williams assisted Wakefern's business by providing competitive information about consumer preferences, and by "create[ing] a marketplace for" the private-label products. Id. ¶¶ 35-37. Wakefern's business eventually expanded, and it "upgrad[ed]" its products to include private-label brands "Bowl & Basket," "Paperbird," and "Wholesome Pantry." Id. ¶ 37. Wakefern discussed its approach to these upgrades with Morton Williams, and the two entities "strategized together about how Morton Williams could help promote those products in the coming years." Id. ¶ 38.

Morton Williams and Wakefern had entered into supply agreements since 2008, and, in 2019, they agreed to a longer-term supply agreement ("2019 Supply Agreement"). Id. ¶¶ 39, 44. The 2019 Supply Agreement provided that Wakefern would pay Morton Williams a "Private Label Fund" and warranted that its private-label goods would meet particular specifications. Id. ¶ 46. The 2019 Supply Agreement extended until May 6, 2024, with automatic renewals for twelve-month periods thereafter, unless either party terminated under the grounds set forth in the agreement. Id. ¶ 47.

The 2019 Supply Agreement provided that "[t]he Categories" of goods "included in [the] Agreement . . . are set forth in Appendix 1, which may be amended by the Parties from time to time to add additional Categories." 2019 Supply Agreement § 1(c). It also defined the term "Product(s)" to mean "those products set forth in Appendix 1 as Wakefern may amend from time to time," and "Wakefern Product(s)" as "each and every product sold or offered for sale by Wakefern included in any Category, including without limitation, new goods or products as may be introduced from time to time." Id. §§ 1(e), 1(g). The agreement further provided that "Wakefern may, in its sole discretion, accept or reject any order." Id. § 4(b).

Since that agreement was signed, Morton Williams contends that - even in the face of the COVID-19 pandemic, which caused many consumers to leave Manhattan - the profitability of the private-label products significantly increased. Id. ¶ 41; see id. ¶ 42 (discussing private-label products when Morton Williams was ranked as one of the "5 Best Supermarkets in New York"); see also id. ¶ 49 (alleging that "[w]ith Wakefern's Private-Labels Products having been popularized in Manhattan through the promotional efforts of Morton Williams, and associated in customers' minds with Morton Williams, both Wakefern and Morton Williams were well placed to keep profiting from this surge in consumer demand for high-end private-label grocery products in Manhattan").

After Village acquired the Gourmet Garage and Fairway Market stores in Manhattan in 2019 and 2020, Morton Williams alleges that the stores began to compete for business due to the proximity of Village's stores to Morton Williams's stores. See Compl. ¶¶ 51-54. Village's stores, however, struggled throughout the COVID-19 pandemic, and Village decided to abandon the previous private-label products that Fairway sold. Id. ¶¶ 55-56. Village further knew that Wakefern's supply arrangement with Morton Williams "was thriving and sales were growing." Id. ¶ 57. As a significant member of Wakefern, Village was also supplied with Wakefern's ShopRite private-label products. Id. ¶ 59. Morton Williams, a healthy - and threatening - competitor of Village, was not a member of Wakefern. Id. ¶ 59; see id. ¶¶ 57-58, 62 (discussing competitive threat). Morton Williams alleges that Village exerted direct influence over Wakefern via shareholder voting power, its presence on Wakefern's Board of Directors and committees, and because Village provided so much funding to Wakefern. Id. ¶¶ 60-61 (alleging that Village must purchase a minimum of 85% of its product requirements from Wakefern). Using this influence, Village allegedly caused Wakefern to breach the 2019 Supply Agreement by refusing to supply further private-label products to Morton Williams. Id. ¶ 63.

Morton Williams alleges that it learned of this breach on February 21, 2022, when a representative from Wakefern met with Morton Williams. Id. ¶¶ 64, 66. At the meeting, the senior Wakefern representative "abruptly announced . . . that Morton Williams had 90 days to stop buying Wakefern Private-Label Products and that, after that date, Wakefern would no longer accept Morton Williams' orders for those products." Id. ¶ 66. When pressed, the Wakefern representative "explained that Wakefern had been compelled [to make this decision] by Village" when it decided to stop selling the Fairway private-label products, and did not want to compete with Morton Williams in its sale of the same Wakefern private-label products. Id. ¶¶ 68-69. The representative also said that the Wakefern Board of Directors, on which Village's Co-President, Nicholas Sumas, is a member, voted to stop selling the Wakefern private-label products to Morton Williams "at Village's behest." Id. ¶ 70.

Morton Williams contends that this decision breached the 2019 Supply Agreement. Id. ¶ 71. It further alleges that, but for Village's "exercise of . . . pressure" over the Wakefern Board, the 2019 Supply Agreement would have continued, and Morton Williams would have continued to purchase the Wakefern private-label products indefinitely. Id. ¶¶ 71-72. Despite "repeated efforts" to proceed with...