Distribuidora Industrial De Calzado SA v. Brooks Sports, Inc. et al, No. 2:2018cv00501 - Document 41 (W.D. Wash. 2019)
Court Description: ORDER denying Plaintiff's 36 Motion to Dismiss Defendant Brooks Sports Inc.'s Counterclaim signed by U.S. District Judge John C Coughenour. (TH)
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Distribuidora Industrial De Calzado SA v. Brooks Sports, Inc. et al Doc. 41 THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 9 10 DISTRIBUIDORA INDUSTRIAL DE CALZADO S.A., d/b/a BROOKS RUNNING COSTA RICA, 11 ORDER Plaintiff, v. 12 13 CASE NO. C18-0501-JCC BROOKS SPORTS INC., et al., 14 Defendants. 15 16 This matter comes before the Court on Plaintiff’s motion to dismiss Defendant Brooks 17 Sports Inc.’s counterclaim (Dkt. No. 36). Having thoroughly considered the parties’ briefing and 18 the relevant record, the Court finds oral argument unnecessary and hereby DENIES the motion 19 for the reasons explained herein. 20 I. 21 BACKGROUND Plaintiff and Defendant entered into a Distributor Agreement (the “Agreement”) in 2015. 22 (See Dkt. Nos. 33 at 4, 34 at 3.) The Agreement awarded Plaintiff a five-year term as 23 Defendant’s exclusive distributor in Costa Rica and Guatemala. (Dkt. No. 33 at 30–32.) On June 24 30, 2016, Defendant expanded Plaintiff’s exclusive distribution rights to include Nicaragua, El 25 Salvador, Honduras, Belize, and Ecuador (collectively with Costa Rica and Guatemala, 26 “Plaintiff’s region”). (Id. at 46.) Plaintiff claims it operated four “concept stores” to sell ORDER C18-0501-JCC PAGE - 1 Dockets.Justia.com 1 2 Defendant’s products; Defendant denies this. (Id. at 3; see also Dkt. No. 34 at 2–3.) On June 20, 2017, Plaintiff informed Defendant that Plaintiff’s competitor Harari, Inc. 3 was obtaining Defendant’s products from a different distributor and selling them in Guatemala in 4 violation of Plaintiff’s exclusive distribution rights. (See Dkt. No. 33 at 6.) In 2017, Defendant’s 5 Latin America and Asia Territory Manager Justin Dempsey-Chiam informed Plaintiff that 6 Defendant was considering granting Harari the distribution rights for Panama and Colombia. 7 (Id.; Dkt. No. 34 at 4.) Plaintiff states that it informed Dempsey-Chiam of its reluctance to do 8 business with Harari because of Harari’s history of dishonesty and the likely harms to Plaintiff’s 9 business. (See Dkt. No. 33 at 7.) In November 2017, Defendant announced its decision to make 10 Harari the new exclusive distributor for Panama, the Caribbean, and Colombia. (Id. at 8.) 11 Defendant later terminated the Agreement with Plaintiff and made Harari its exclusive distributor 12 in Plaintiff’s region. (Id. at 11; Dkt. No. 34 at 7.) 13 The Agreement included an annual Minimum Purchase Requirement (“MPR”), defined 14 as “a target for the purchase of Products by [Plaintiff] under this Agreement.” (Id. at 31.) 15 “Products” is defined as “all [Defendant] Brooks-branded products, including footwear, apparel, 16 and accessories.” (Id.) The Agreement quantifies the MPR in “pairs.” (See id. at 30.) 17 On June 20, 2017, Plaintiff sent Defendant an order for 3,018 pairs of Brooks shoes to be 18 delivered in October and November 2017 (the “Order”). (Id. at 8; Dkt. No. 34 at 5.) Over the 19 course of several months, Defendant delayed the Order on five separate occasions, in violation of 20 the Agreement. (Dkt. No. 33 at 8–10.) With the Order still not fulfilled, on January 3, 2018, 21 Defendant terminated Plaintiff for failure to meet its 2017 MPR. (Id. at 48–49.) 22 Plaintiff sued Defendant for breach of contract and breach of implied covenant of good 23 faith and fair dealing. Plaintiff alleges that it met the 2017 MPR and that Defendant failed to 24 comply with the Agreement. (Dkt. No. 33 at 20–26, 31–32, 38–39.) Defendant counterclaimed 25 for breach of contract. (Dkt. No. 34 at 19–20.) Defendant alleges that after it terminated the 26 Agreement, Plaintiff continued to promote, market, and sell Defendant’s products beyond the ORDER C18-0501-JCC PAGE - 2 1 six-month grace period allowed under the Agreement. (Id. at 19.) Defendant also claims that 2 Plaintiff continued to use Defendant’s trademarks, logos, and trade dress in stores and on social 3 media, and failed to “return or destroy” promotional materials. (Id.) Defendant asserts that 4 Plaintiff conducted the breach “in its stores and on social media.” (Id.) 5 Plaintiff moves to dismiss Defendant’s counterclaim because it does not identify: (1) 6 Plaintiff’s stores where alleged breach occurred; (2) the promotional materials allegedly used by 7 Plaintiff in committing the breach; and (3) the form of Defendant’s damages and how the 8 Plaintiff caused such damages. (Dkt. No. 36.) 9 II. DISCUSSION 10 A. Motion to Dismiss Legal Standard 11 A claim for relief must include “a short and plain statement of the claim showing that the 12 pleader is entitled to relief; and . . . a demand for the relief sought . . . .” Fed. R. Civ. P. 8(a). A 13 short and plain statement need not include factual minutiae so long as the statement puts a party 14 on fair notice of the claim and its grounds. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 15 A party may move to dismiss for “failure to state a claim upon which relief can be 16 granted.” Fed. R. Civ. P. 12(b)(6). In reviewing a motion to dismiss, the Court accepts all factual 17 allegations as true and views them in the light most favorable to the nonmoving party. Vasquez v. 18 L.A. County, 487 F.3d 1246, 1249 (9th Cir. 2007). To survive a motion to dismiss, a claim must 19 be “plausible” in that the facts pled “allow[] the court to draw the reasonable inference that the 20 [accused party] is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 21 The claim must go beyond a conclusory and “formulaic recitation of the elements of a cause of 22 action.” Twombly, 550 U.S. at 555. A claim cannot be purely speculative, but “may proceed even 23 if . . . recovery is very remote and unlikely.” Id. at 556–57. Determining plausibility is “context- 24 specific” and “requires the reviewing court to draw on its judicial experience and common 25 sense.” Iqbal, 556 U.S. at 679. The plausibility requirement serves to “minim[ize] expenditure of 26 time and money by the parties and the court.” Twombly, 550 U.S. at 558. ORDER C18-0501-JCC PAGE - 3 1 B. Defendant’s Breach of Contract Counterclaim 2 To assert breach of contract under Washington law, a party must prove the existence of 3 “an agreement between the parties, a parties’ duty under the agreement, and a breach of that 4 duty.” Fid. & Deposit Co. of Maryland v. Dally, 201 P.3d 1040, 1044 (Wash. Ct. App. 2009). 5 The Court does not evaluate the contract at issue on a motion to dismiss, for doing so would be 6 “premature.” Harvey v. Centene Mgmt. Co. LLC, 357 F. Supp. 3d 1073, 1085 (E.D. Wash. 7 2018). To achieve plausibility, a party “must allege, at a minimum, the [specific] terms of the 8 contract at issue (whether express or implied), the precise duty that was breached, and the 9 damages which resulted from the breach.” Chelan Cty. v. Bank of Am. Corp., 2014 WL 3101935, 10 slip op. at 1 (E.D. Wash. 2014); see also BP West Coast Prods., LLC v. Shalabi, Case No. C11- 11 1341-MJP, Dkt. No. 64 at 8 (W.D. Wash. 2012). 12 Defendant’s counterclaim asserts sufficient factual allegations that support all elements of 13 a breach of contract claim. It is undisputed that the Parties had a contract under which Plaintiff 14 had a duty, and Defendant points to the specific terms that Plaintiff allegedly breached. (Dkt. 15 Nos. 33 at 30; 34 at 20.) Defendant pled factual allegations from which the Court may 16 reasonably infer that Plaintiff breached the provisions at issue. (Id. at 37; see also Dkt. No. 34 at 17 16–19.) Defendant has plausibly alleged that damages arose from Plaintiff’s alleged breach. 18 Therefore, Defendant has stated a plausible counterclaim for breach of contract. Iqbal, 556 U.S. 19 at 678. 20 21 i. Contradictory Statement Plaintiff contends that Defendant contradicts itself because it initially denied that Plaintiff 22 operated “stores,” and now claims that Plaintiff sold Defendant’s products in Plaintiff’s stores 23 post-termination. (See Dkt. No. 36 at 5–6; see also Dkt. Nos. 33 at 3–4, 22; 34 at 2–3, 13.) 24 Defendant does not completely deny that Plaintiff operated stores: Defendant states a lack of 25 sufficient knowledge or information to answer Plaintiff’s claims regarding store closures, and 26 also distinguishes between Defendant’s characterization of “stores” and Plaintiff’s ORDER C18-0501-JCC PAGE - 4 1 characterization of “concept stores.” (See Dkt. No. 34 at 13; see also Dkt. No. 38 n. 2.) 2 Defendant also claims that Plaintiff breached the contract by using its trademarks, logos, and 3 trade dress on social media, claims that are not contradicted elsewhere in Defendant’s answer. 4 (See Dkt. No. 34.) 5 Moreover, a self-induced paradox contained in Defendant’s answer and counterclaim is 6 not fatal to its counterclaim. A party “may state as many claims or defenses as it has, regardless 7 of consistency.” Fed. R. Civ. P. 8(d)(3). The Federal Rules of Civil Procedure do not preclude a 8 party from “filing successive pleadings that make inconsistent or even contradictory allegations . 9 . . .” PAE Gov’t Servs., Inc. v. MPRI, Inc., 514 F.3d 856, 860 (9th Cir. 2007); see also Vernon v. 10 Qwest Commc’ns Int’l, Inc., C08-1516-TSZ, Dkt. No. 65 at 12 (W.D. Wash. 2009) (rejecting 11 “defendants’ argument that plaintiffs' unjust enrichment claim should be dismissed because 12 plaintiffs simultaneously allege that their rights are governed by an express contract,” based on 13 plaintiff’s right to argue in the alternative); see also Fidelitad, Inc. v. Insitu, Inc., 2014 WL 14 5421214, slip op. at 4 (E.D. Wash. 2014) (“At the pleading stage it does not matter that [claims] 15 are potentially inconsistent.”). Thus, a contradiction between Defendant’s answer and 16 counterclaim does not warrant dismissal of Defendant’s counterclaim. 17 18 ii. Failure to Specify Damages Defendant seeks damages “in an amount to be proven at trial.” (Dkt. No. 34 at 20.) So 19 does Plaintiff. (See Dkt. No. 33 at 27.) Such broad claims for damages are permissible under 20 Washington law, and the failure to provide specific damages values at the complaint and 21 counterclaim stage does not justify dismissal. See Harvey v. Centene Mgmt. Co., 357 F. Supp. 3d 22 1073 (E.D. Wash. 2018); see also Larson v. Union Inv. & Loan Co., 10 P.2d 557, 559-60 (Wash. 23 1932) (citing Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555 (1931)) 24 (highlighting a “fundamental” distinction between “cases in which the evidence as to the fact of 25 the damage is uncertain and those in which the fact of damage is clearly established, the 26 uncertainty existing only as to the extent of the damage,” and holding that cases of the latter type ORDER C18-0501-JCC PAGE - 5 1 call for “a more liberal rule [to] be applied in allowing the court or a jury to determine the 2 amount of the damage . . . .”); see also Leopona, Inc. v. Cruz for President, Case No. C16-0658- 3 RSM, Dkt. No. 9 at 7, 13 (W.D. Wash. 2016) (denying defendants’ motion to dismiss, made 4 partially on grounds that plaintiffs could not support their damages claim, because “[t]he amount 5 of damages will require a factual inquiry and determination as to [breach].”). 1 6 In sum, Defendant’s counterclaim consists of a cognizable breach of contract claim 7 supported by sufficient factual allegations to give Plaintiff fair notice of the claim and to satisfy 8 the plausibility standard. An alleged contradiction between Defendant’s answer and counterclaim 9 does not merit dismissal. The lack of factual detail sought by Plaintiff can be addressed through 10 discovery and does not warrant dismissal. 11 III. 12 13 CONCLUSION For the foregoing reasons, Plaintiff’s motion to dismiss Defendant’s counterclaim (Dkt. No. 36) is DENIED. 14 DATED this 6th day of June 2019. 17 A 18 John C. Coughenour UNITED STATES DISTRICT JUDGE 15 16 19 20 21 22 23 24 25 26 1 Plaintiff also argues that dismissal is proper because Defendant failed to specify the stores or promotional materials related to the alleged breach. (See Dkt. No. 36 at 5–6.) Discovery is often a necessary component of factual development and case theory, and parties have a right to discovery. See generally Fed. R. Civ. P. 26; see Doe v. Puget Sound Blood Ctr., 819 P.2d 370, 376 (Wash. 1991). Prior to the Court’s consideration of dismissal, Defendant must be given a “reasonable opportunity to complete discovery and to present necessary factual support for their [claim].” Lucas v. Bechtel Corp., 633 F.2d 757, 758–59 (9th Cir. 1980). Defendant’s failure to identify the stores or materials related to their counterclaim may be remedied with discovery. Such discovery is currently underway and must proceed before considering dismissal. (See Dkt. Nos. 39, 39-2.) ORDER C18-0501-JCC PAGE - 6
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