De v. Sponge-Jet, Inc.

2015 DNH 235

HayJo S.A. de CV v. Sponge-Jet, Inc.

Civil No. 14-cv-196-JD

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

December 23, 2015

ORDER

HayJo S.A. de CV, a Mexican corporation, and its president, Sami Hayek Dominguez, brought suit against Sponge-Jet, Inc. after Sponge-Jet terminated HayJo's distributor agreement and an employee of HayJo left to work for a new company.¹ Sponge-Jet moves for summary judgment. HayJo objects to summary judgment.

Preliminary Matters

Sponge-Jet charges in its reply that HayJo's objection to summary judgment is deficient because it lacks a statement of material facts as required by Local Rule 56.1(b).² Contrary toSponge-Jet's challenge, however, HayJo's objection includes a section titled "Statement of Undisputed Material Facts." That section includes citations to the summary judgment record. Therefore, HayJo complied with Local Rule 56.1.

Sponge-Jet objects generally in a footnote to emails submitted by HayJo in support of its objection that they are in Spanish without English translations. Under Local Rule 5.1(h), "the court will reject documents not in the English language unless translations are furnished." In its objection, HayJo translated some but not all of the emails that were submitted in Spanish, specifically in Exhibits F and G. The court will consider the translated parts of the emails, for purposes of summary judgment, but not the emails provided only in Spanish.

Sponge-Jet requests in a footnote that HayJo's objection be struck for violating the parties' protective order. The issue of sealing confidential documents apparently has been resolved.

Standard of Review

Summary judgment is appropriate when the moving party "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "A genuine dispute is one that a reasonable fact-finder could resolve in favor of either party and a material fact is one that could affect the outcome of thecase." Flood v. Bank of Am. Corp., 780 F.3d 1, 7 (1st Cir. 2015). Reasonable inferences are taken in the light most favorable to the nonmoving party, but unsupported speculation and evidence that "is less than significantly probative" are not sufficient to avoid summary judgment. Planadeball v. Wyndham Vacation Resorts, Inc., 793 F.3d 169, 174 (1st Cir. 2015) (internal quotation marks omitted).

Background

Sponge-Jet manufactures and sells abrasive blasting material used to clean industrial infrastructure. The products are sold globally. To distribute its products, Sponge-Jet makes agreements with independent distributors.

In 2001, Michael Merritt, president of Sponge-Jet, met Sami Hayek, president of HayJo. In 2003, Sponge-Jet appointed HayJo as its distributor in Mexico. Hayek used his contacts in the Mexican oil industry and the government to institute a government standard that required a product that met the specifications of the Sponge-Jet product. He also worked to educate the oil industry about the requirement to use Sponge-Jet products.

Hayek's brother was his business partner at HayJo. Hayek hired Francisco Malagon, Hayek's brother's son-in-law, to be the main sales person at HayJo. Malagon was the only person in thecompany who spoke English and became the main contact with Sponge-Jet. Malagon was made the "commisario" in the company, a position with particular duties under Mexican law.

Sponge-Jet and HayJo entered into a written distributorship agreement in 2007. In 2009, Diego Cavalieri, Sponge-Jet's vice president for Latin American sales, wanted to cancel HayJo's distributorship but Merritt told him to give Hayek a chance. HayJo and Sponge-Jet signed two new distributorship agreements in 2010.

The agreements divided Mexico into two territories, north and south. The terms of the agreements were the same except for the regions covered. Under both agreements, HayJo was "the authorized, Sole non-exclusive distributor of all Sponge-Jet's products designated in Exhibit 'A' ('Products')." Sponge-Jet sold products to HayJo "at such prices and upon such terms and conditions as determined and established by Sponge-Jet." The prices current at that time were provided in "Exhibit C."

Under the agreement, Sponge-Jet also retained the right to sell its products directly to customers in Mexico and promised to "attempt to keep the Distributor informed of such sales." Sometimes Sponge-Jet paid HayJo commissions on the direct sales, but the distributorship agreement did not require payment ofcommissions. HayJo had received awards from Sponge-Jet for its sales.

Cavalieri decided to sell Sponge-Jet products directly to a customer in the north territory, the customer who brought in all the money from the north territory, because he believed that Hayek was not visiting that customer. From that point on HayJo had no sales in the north territory. Because of a lack of sales in the north territory, the agreement for the north territory was terminated in May of 2011.

At the same time, Cavalieri was looking for another distributor to sell Sponge-Jet products in Mexico. He asked Malagon at HayJo to send him names of companies in Mexico that were distributors of other products and said he wanted to interview them. He did not tell Malagon directly that he intended to hire another distributor to replace HayJo.

Malagon recommended David Andrade, whose company was Cajona Maniemento, C.A. Andrade was a good friend of Malagon, and Malagon's father was Andrade's godfather. By May of 2011, Cavalieri had met with Andrade and Malagon to discuss having Andrade become Sponge-Jet's distributor. Cavalieri instructed a Sponge-Jet employee to pay Malagon directly for a sale instead of paying HayJo. In June of 2011, Cavalieri, Andrade, and Malagon called on a customer of HayJo, which resulted in anorder that was placed in December of 2011. HayJo was not informed of that sale.

In July of 2011, Cavalieri sent Malagon and Andrade a distributorship agreement that included some of HayJo's south territory. Malagon and Andrade asked why they did not get all of HayJo's territory, and Cavalieri responded that the division of the territory was to protect HayJo's contracts and advised them to be patient. In August, Cavalieri referred a customer or a potential distributor to Malagon and Andrade and told them to "take care of it."

In October of 2011, Sponge-Jet sent HayJo notice that it was terminating the remaining distributorship agreement, for the south territory. HayJo states that the termination was effective on January 20, 2012, and Sponge-Jet cites the effective date as January 3, 2011.

HayJo and Hayek brought suit against Sponge-Jet in May of 2014, alleging claims of breach of contract, Count One; unjust enrichment, Count Two; aiding and abetting breach of fiduciary duty, Count Three; and breach of the duty of good faith and fair dealing, Count Four. Hayek has stipulated to dismissal of his claims, making Sponge-Jet's motion for summary judgment on his claims moot.

Discussion

Sponge-Jet moves for summary judgment on all of HayJo's claims. In support, Sponge-Jet contends that it properly terminated the distributorship agreements so that no breach occurred; that the distributorship agreements preclude the unjust enrichment claim; that the aiding and abetting claim is untimely, barred by the economic loss doctrine, and is legally unsupportable; and that the breach of the duty of good faith and fair dealing is duplicative of the breach of contract claim. HayJo apparently concedes its unjust enrichment claim but objects to the motion for summary judgment on all other grounds.

A. Unjust Enrichment

In a footnote, HayJo states that "[b]ecause [it] acknowledges and admits that the contract between the parties was valid and enforceable, there is no need for HayJo to press its undue enrichment claims at this time." Failure to contest a ground raised in support of summary judgment results in waiver. See Grenier v. Cyanamid Plastics, Inc., 70 F.3d 667, 678 (1st Cir. 1995); see also Cooper v. Lew, 2015 WL 7568382, at *5 (N.D. Ill. Nov. 24, 2015) (citing Bruce v. Ghosh, 2015 WL 1727318, at *14 (N.D. Ill. Apr. 13, 2015). Therefore, HayJo has waived objection to summary judgment on the unjust enrichment claim.

B. Breach of Contract

HayJo alleges that it entered contracts in 2003 and 2010 with Sponge-Jet through which HayJo was the exclusive distributor of Sponge-Jet products in Mexico. HayJo further alleges that "[b]y using Mr. Malagon as Sponge-Jet's distributor in Mexico, Sponge-Jet breached the agreement." That breach, HayJo alleges, caused damages in excess of $75,000.

Sponge-Jet moves for summary judgment on the breach of contract claim primarily on the ground that Sponge-Jet terminated both distributorship agreements pursuant to the terms of the agreements. As HayJo points out, the breach of contract claim does not allege a breach based on termination of the agreements. Therefore, Sponge-Jet moves for summary judgment on a claim that was not pleaded and is denied for that reason.³

Sponge-Jet also asserts that it is entitled to summary judgment on the claim that is pleaded, arguing that it did not breach the distributor agreement by engaging Malagon, a HayJo employee, to provide recommendations of other companies to replace HayJo as distributor because the distributor agreement did not prohibit it from using the distributor of its choiceafter terminating HayJo. But again, HayJo does not allege that breach occurred based on termination.

HayJo alleges that Sponge-Jet breached the agreement by engaging Malagon before termination, while HayJo was still the distributor and Malagon was working for HayJo. Sponge-Jet addresses termination of the agreements but not the alleged breaches that occurred before termination. Therefore, Sponge-Jet has not shown that it is entitled to judgment as a matter of law on the claim that is pleaded in the complaint.⁴

C. Aiding and Abetting Breach of Fiduciary...