Reiter Sales, Inc. v Scovill Fasteners, Inc.
Annotate this CaseDecided on September 8, 2005
Supreme Court, Nassau County
REITER SALES, INC., Plaintiff,
against
SCOVILL FASTENERS, INC., Defendant.
2227-05
COUNSEL FOR PLAINTIFF
Esanu, Katsky, Korins & Siger, LLP
605 Third Avenue
New York, New York 10158
COUNSEL FOR DEFENDANT
Bracken & Margolin, LLP
1601 Veterans Memorial Highway
Islandia, New York 11749
Leonard B. Austin, J.
Defendant moves to dismiss the first cause of action on the grounds that it is barred by documentary evidence (CPLR 3211[a][1]); barred by the statute of frauds (CPLR 3211[a][5]) and General Obligations Law §5-701[1]); and/or it fails to state a cause of action (CPLR 3211[a][7]). Defendant also moves to dismiss the second, third and fourth causes of action on the grounds that they fail to state a cause of action (CPLR 3211[a][7]). Finally, Defendant moves to dismiss Plaintiff's demand for exemplary or punitive damages.
BACKGROUND
By a Distributorship Agreement ("Agreement") dated October 9, 1990, Plaintiff, Reiter Sales, Inc. ("Reiter"), became the exclusive distributor for Rau Fasteners, Inc. to United States government agencies, manufacturers of military clothing and equipage items and contractors and subcontractors that manufacture military clothing and equipage. Subsequent to the execution of the Agreement, Defendant, Scovill Fasteners, Inc. ("Scovill"), acquired Rau Fasteners and assumed all of Rau's obligations under the terms of the Agreement.
Paragraph 7.1 of the Agreement provides that its initial term was three (3) years. After the initial three (3) year term, the Agreement would automatically renew for a period of one (1) year unless either party notified the other not later than 180 days prior to the expiration of the term of its intention to terminate the Agreement.
By letter dated March 29, 2001, Scovill notified Reiter that it was terminating the Agreement at the close of business on October 8, 2001. The letter further indicated that acceptance of any orders from Reiter would not be construed as an extension of the Agreement. Scovill further advised Reiter that, as of October 8, 2001, Reiter was to discontinue the use of the Scovill mark in connection with the sale of its products, to
remove all signs and other public displays of the Scovill mark and to advise its customers that Reiter would no longer be the distributor of Scovill products.
The termination of the Agreement was modified by letters sent by Scovill to Reiter dated October 5 and October 10, 2001. The October 5, 2001 letter states that Reiter would remain the sole distributor of Scovill products to Golden Manufacturing ("Golden") and Propper International ("Propper").
Reiter alleges in its complaint that, in or about December 2004, Scovill began to solicit business and sell directly to Golden. Reiter alleges that this a violation of the agreement contained in the October 5 and 10, 2001 letters. Reiter alleges four causes of action based upon this activity; to wit: breach of contract, unjust enrichment, promissory estoppel and negligent misrepresentation. Reiter seeks to recover both compensatory and punitive damages on each cause of action.
DISCUSSION
A. First Cause of Action - Breach of Contract
1.Documentary Evidence
Scovill seeks to dismiss the first cause of action on the grounds that it is barred by documentary evidence; to wit: the March 29, 2001 letter to Reiter terminating the Agreement. CPLR 3211(a)(1). [*3]
A court may dismiss an action based upon documentary evidence only if the documentary evidence conclusively establishes a defense as a matter of law. Leon v. Martinez, 84 NY2d 83 (1994). The documentary evidence must resolve all factual issues and dispose of Plaintiff's claim as a matter of law. Montes Corp. v. Charles Freihofer Baking Co, Inc., 17 AD3d 330 (2nd Dept. 2005); and Berger v. Temple Beth-El of Great Neck, 303 AD2d 346 (2nd Dept. 2003).
In this case, the documentary evidence does not resolve all factual issues. Scovill's March 29, 2001 letter terminating the Agreement was modified by Scovill's letters to Reiter of October 5 and October 10, 2001.
Scovill cancelled the Agreement so that its sales force could market and sell its products directly to the United States government agencies and contractors and subcontractors that manufacture clothing for the military. In connection with the termination of the Agreement, Reiter provided Scovill with a list of the customers to whom it was selling Scovill products.
Scovill's October 5, 2001 letter authorized by Scovill's Marketing Vice President Frank A. Wright ("Wright") states, "Here is the list of customers that we (Scovill) will be calling on directly. I have removed Golden and Propper International and have set both aside for you." This understanding was confirmed by Wright in his October 10, 2005 letter in which he stated, "We want our people active in the market calling on each and every one of the identified prospect save for Golden and Propper that we have set aside for Reiter Sales."
The plain meaning of these letters establishes that Scovill would not be soliciting business from or selling directly to either Golden or Propper. These letters further
establish that Scovill was permitting Reiter to retain Golden and Propper as direct and exclusive customers.
The breach of contract cause of action is based upon the allegation that Scovill violated the terms of the October 2001 letters by selling directly to Golden.
The documentary evidence is not dispositive with regard to the relationship between Scovill and Reiter regarding solicitation of and sales to Golden and Propper. Since the documentary evidence does not resolve all factual issues as a matter of law or conclusively establish a defense to the action, the motion made pursuant to CPLR 3211(a)(1) must be denied.
2.Stature of Frauds
Scovill also seeks to dismiss the breach of contract claim on the grounds that it is barred by the Statute of Frauds. CPLR 3211(a)(5); General Obligations Law § 5-701(1).
General Obligations Law § 5-701(1) requires that all agreements which are not to be performed within one (1) year must be in writing. Scovill asserts that service contract whereby one party agrees to procure customers or orders on behalf of another must be in writing. See, McCollester v. Chisholm, 104 AD2d 361 (2nd Dept. 1984). However, a party's partial performance of an agreement removes the agreement from the statute of frauds if the Plaintiff's actions are "unequivocally referable" to the agreement. Anostario v. Vincinanzo, 59 NY2d 662 (1983); and Klein v. Jamor Purveyors, Inc., 108 AD2d 344 (2nd Dept. 1985). Reiter asserts that its sale of Scovill products to Golden and Propper [*4]is unequivocally referable to the agreement provided for in the October 2001 letters. Reiter further asserts that where the contract does not contain a definite termination date, the court may inquire into the intent of the parties as to the duration of the contract. Haines v. City of New York, 41 NY2d 769 (1977).
While all the terms of the agreement including the term of the agreement and conditions under which it could be cancelled are not set forth in the October 2001 letters, the full intent of the parties and the terms of the agreement can be determined through discovery. Therefore, at this stage, the court must sustain this cause of action to the extent that it seeks to recover compensatory damages.
3.Failure to State a Cause of Action
Finally, Scovill asserts that the first cause of action fails to state a cause of action. CPLR 3211(a)(7). Scovill argues that the October 2001 letters do not set forth sufficiently specific terms to constitute a contract. See, Fowler v. American Lawyer Media, Inc., 306 AD2d 113 (1st Dept. 2003); and Matter of Sud, 211 AD2d 423 (1st Dept. 1995).
When deciding a motion made pursuant to CPLR 3211(a)(7), the court must accept as true all of the facts alleged in the complaint and any factual affidavits submitted in opposition to the motion. 511 West 232rd Street Owners Corp. v. Jennifer Realty Co., 98 NY2d 144(2002); and Sokoloff v. Harriman Estates Development Corp., 96 NY2d 409 (2001).
The complaint must be liberally construed, and Plaintiff must be given the benefit of every favorable inference. Leon v. Martinez, supra; and Paterno v. CYC, LLC, 8 AD2d 554 (2nd Dept. 2004).
The court must determine if the Plaintiff has a cognizable cause of action, not whether it has been properly plead. Guggenheimer v. Ginzburg, 43 NY2d 268 (1977); and Rovello v. Orofino Realty Co., 40 NY2d 633 (1976). See also, Well v. Yeshiva Rambam, 300 AD2d 580 (2nd Dept. 2002); and Frank v. DaimlerChrysler Corp., 292 AD2d 118 (1st Dept. 2002).
The complaint supplemented by the factual submissions in opposition to the motion provide sufficient facts to sustain a cause of action for breach of contract. The carve out provisions of Scovill's October 2001 letters establish an intent on the part of Scovill to permit Reiter to retain Golden and Propper as an exclusive clients, at least for some period of time. Such a finding is sufficient, at this point of the litigation, to sustain a cause of action for breach of contract.
Thus, the complaint sets forth a claim upon which relief can be granted and the motion must be denied.
B. Second Cause of Action - Unjust Enrichment
A claim for unjust enrichment is based upon quasi-contract. A party may not obtain recovery for unjust enrichment unless the written agreement between the parties has been rescinded, is unenforceable or has been abrogated. Waldman v. Englishtown Sportswear, Ltd., 92 AD2d 833 (1st Dept. 1983).
In order to establish a claim for unjust enrichment, Reiter must establish that it performed services on behalf of Scovill resulting in Scovill receiving a benefit. See, Clark v. Daby, 300 AD2d 732 (3rd Dept. 2002); and Kagan v. K-Tel Entertainment, Inc., [*5]172 AD2d 375 (1st Dept. 1991). In addition, Reiter has to establish that it performed the services at the request of Scovill. Prestige Caterers v. Kaufman, 290 AD2d 295 (1st Dept. 2002); and Lakeville Pace Mechanical, Inc. v. Elmar Realty Corp., 276 AD2d 673 (2nd Dept. 2000).
Reiter's claim is based upon its alleged contract with Scovill whereby Scovill agreed that it would not solicit business directly from Golden and Propper. Without such an agreement, Scovill would be able to solicit business from and sell its products to Golden and Propper.
On the facts presented, Reiter did not perform any services on behalf of Scovill for which Scovill received an uncompensated benefit. Scovill was paid by Golden for products it sold directly to Golden. Reiter was not involved in these transactions. Reiter is entitled to compensation solely to the extent that Scovill sold products to Golden in violation of its contract.
Since the second cause of action fails to state a claim upon which relief can be granted, it must be dismissed.
C. Third Cause of Action - Promissory Estoppel
"The elements of promissory estoppel are : a clear and unambiguous promise; a reasonable and foreseeable reliance by the party to whom the promise is made; and an injury sustained by the party asserting the estoppel by reason of his reliance." Ripple's of Clearview, Inc. v. Le Harve Assoc., 88 AD2d 120, 122 (2nd Dept. 1982). See also, Rogers v. Town of Islip, 230 AD2d 727 (2nd Dept. 1996).
In order to recover on a claim for promissory estoppel, the Plaintiff must establish a substantial change in position resulting in an unconscionable injury. Gary Powell, Inc. v. Mendel/Borg Group, Inc., 237 AD2d 407, (2nd Dept. 1997); and D & N Boening, Inc. v. Kirsch Beverages, Inc., 99 AD2d 522, (2nd Dept. 1984). Reiter has not plead or established either a substantial change in position or an unconscionable injury resulting from the actions of Scovill. Reiter has lost business and income as a result of Scovill's action. However, even under the provisions of the Agreement, Scovill could terminate Reiter's exclusive right to sell to Golden and Propper on 180 days notice prior to the anniversary date. The termination of the Agreement most certainly put Reiter on notice that Scovill was then going to directly solicit business from and sell product in the market and to the customers previously reserved to Reiter. Reiter had no reasonable expectation that Golden and Propper would remain its customers in perpetuity. If Reiter wanted to retain it rights to sell Scovill products to Golden and Propper, it could and should have obtained a written agreement defining the rights and obligations of the parties. Id.
Since the complaint fails to set forth a claim for promissory estoppel, the third cause of action must be dismissed.
D. Fourth Cause of Action - Negligent Misrepresentation
This cause of action is premised upon the allegation that Scovill represented to Reiter that it would not sell to Reiter's direct customers.
The Plaintiff in an action for negligent misrepresentation must establish a special relationship giving rise to an obligation to convey correct information. Saunders v. AOL Time Warner, Inc., 18 AD3d 216 (1st Dept. 2005); and Andres v. LeRoy Adventures, [*6]Inc., 201 AD2d 262 (1st Dept. 1994). In the commercial realm, liability will be imposed for negligent misrepresentation only when the Defendant has unique or specialized expertise or where the Defendant is in a special position of trust or confidence such that the Plaintiff justifiably relied upon the Defendant's representation. Fresh Direct, LLC v. Blue Martini Software, Inc., 7 AD3d 487 (2nd Dept. 2004).
In this case, a special relationship does and did not exist between Reiter and Scovill. The relationship between Scovill and Reiter was contractual. Therefore, Reiter has failed to plead an essential element of a cause of action for negligent misrepresentation. This pleading deficiency is not remedied by the affidavits submitted in opposition to the motion. Therefore, the cause of action for negligent misrepresentation must be dismissed.
E. Punitive Damages
The ad damnum clause of complaint contains a demand for exemplary and punitive damages.
The only cause of action to survive the motion to dismiss is the cause of action for breach of contract.
Punitive damages are awarded to punish a Defendant who engages in morally reprehensible conduct and to deter the Defendant and others from engaging in similar conduct. Walker v. Sheldon, 10 NY2d 401 (1961).
Punitive or exemplary damages are recoverable in a breach of contract action only to vindicate a public right. New York Univ. v. Continental Ins. Co., 87 NY2d 308 (1995); and Rocanova v. Equitable Life Assur. Soc., 83 NY2d 603 (1994). To recover damages in a breach of contract action, Plaintiff must establish that the Defendant engaged in conduct involving "evil and reprehensible motives" or that the Defendant's actions show "wanton dishonesty as to imply criminal indifference to civil obligations." Walker v. Sheldon, supra at 404-5.
Plaintiff cannot recover damages for breach of a private agreement even if the Defendant breached the agreement wilfully and without justification. Cross v. Zyburo, 185 AD2d 967 (2nd Dept. 1992); and J.G.S., Inc. v. Lifetime Cutlery Corp., 87 AD2d 810 (2nd Dept. 1982).
In this case, Reiter seeks to recover damages arising out of Scovill's breach of a private agreement. No public rights are at issue or will be vindicated in this action. Therefore, even if Reiter is successful on its first cause of action, it will not be entitled to recover punitive damages.
Accordingly, it is,
ORDERED, that the Defendant's motion to dismiss the complaint is granted to the extent of dismissing the second, third and fourth causes of action and denied as to the first cause of action; and it is further,
ORDERED, that Defendant's motion to strike Plaintiff's demand for punitive damages is granted; and it is further,
ORDERED, that Defendant shall serve its answer to the first cause of action within twenty (20) days of service of a copy of this order with Notice of Entry; and it is further
ORDERED, that counsel for the parties are directed to appear for a Preliminary [*7]Conference on October 17, 2005 at 9:30 a.m.
This constitutes the decision and Order of the Court.
Dated: Mineola, NY _____________________________
September 8, 2005 Hon. LEONARD B. AUSTIN, J.S.C.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
