Jaco Electronics, Inc. v M-Systems, Inc.
Annotate this CaseDecided on August 18, 2004
Supreme Court, Suffolk County
Jaco Electronics, Inc., Plaintiff,
against
M-Systems, Inc., Defendant,
25982-03
NIXON PEABODY LLP
Attorneys for Plaintiff
990 Stewart Avenue
Garden City, New York 11530
WEIL, GOTSHAL & MANGES LLP
Attorneys for Defendant
767 Fifth Avenue
New York, New York 10153
TWOMEY, LATHAM SHEA & KELLEY, LLP
Attorneys for Defendant
33 West Second Street
Riverhead, New York 11901
Elizabeth Hazlitt Emerson, J.
The defendant entered into a non-exclusive distribution agreement in which Reptron Electronics was to distribute some of the defendant's products. The agreement provided that the defendant could change or abandon products at its sole discretion and that the defendant reserved the right to market products directly or through other channels within the territory. The plaintiff subsequently entered into an asset-purchase agreement with Reptron pursuant to which it succeeded to Reptron's rights as a distributor of the defendant's products. Prior to entering into that contract, the plaintiff alleges that it had a meeting with representatives of the defendant who assured the plaintiff that the defendant would continue to use the plaintiff as a distributor in the same capacity as Reptron. The plaintiff alleges that, based upon these representations, it consummated the deal with Reptron and agreed to pay the defendant almost $200,000.00 in receivables owed by Reptron. The plaintiff further alleges that, shortly after the purchase of Reptron was closed, the defendant canceled the plaintiff's rights as a distributor for certain products. The plaintiff then commenced
Index No.: 25982-03
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this action for, inter alia, fraud, prima facie tort and injurious falsehood. The defendant now moves to dismiss the complaint.
In order to establish a cause of action for fraud, the plaintiff must allege a misrepresentation or a material omission of fact which was false and known to be false by the defendant and made for the purpose of inducing the plaintiff to rely upon it, justifiable reliance, and injury (see, Lama Holding Co v Smith Barney, 88 NY2d 413; Adikes v North Fork Bancorporation, 303 AD2d 610 [2d Dept 2003]). Here, the plaintiff alleges that the defendant misrepresented its intentions before the plaintiff purchased the assets of Reptron and paid the outstanding receivables to the defendant. However, the complaint merely alleges that the plaintiff was assured that it would continue as a distributor of the defendant's products "in the same capacity as Reptron." After the purchase, the plaintiff did continue as a distributor under the distribution agreement with the same rights as Reptron. Under the agreement, the defendant had the express right to change products and market products directly or through other channels. The agreement further provided that no modification, amendment, or waiver of rights would be effective unless in writing and signed by both parties. Thus, the plaintiff's allegations are contradicted by the express terms of the contract (see, Manchester Equipment Co v Panasonic Industrial Co., 141 AD2d 616 [2d Dept 1988]; see also, Stone v Schultz, 231 AD2d 707 [2d Dept 1996]). Accordingly, the complaint fails to state a cause of action for fraud.
The elements of a cause of action for prima facie tort are (1) the intentional [*2]infliction of harm (2) causing special damages (3) without excuse or justification (4) by an act or series of acts that would otherwise be lawful (see, Freihofer v Hearst Corp, 65 NY2d 135, 143; Curiano v Suozzi, 63 NY2d 113, 117). There can be no recovery unless malevolence is the sole motive for the defendant's otherwise lawful act (see, Burns Jackson Miller Summit & Spitzer v Lindner, 59 NY2d 314, 333). Here, the complaint alleges that the defendant's statements were made either maliciously or with an intent to harm or were engaged in recklessly. Since the complaint does not allege that the defendant's sole motivation was disinterested malevolence, the prima facie tort cause of action cannot be sustained (see, Burns Jackson Miller Summit & Spitzer v Lindner, supra; Avgush v Town of Yorktown, 303 AD2d 340 [2d Dept 2003]; Hakim v Paine Webber, 261 AD2d 578 [2d Dept 1999]). In addition, special damages are an essential element of both prima facie tort and injurious falsehood and must be pleaded with sufficient specificity (see, DiSanto v Forsyth, 258 AD2d 497 [2d Dept 1999]). In this case, the complaint seeks damages for the entire amount of the asset-purchase agreement with Reptron without any particularity (see, Dembitzer v Chera, 305 AD2d 531 [2d Dept 2003]; Lesesne v Lesesne, 292 AD2d 507 [2d Dept 2002]; Levy v Coates, 286 AD2d 424 [2d Dept 2001]).
Finally, the plaintiff alleges a cause of action for misappropriation and unfair competition. Specifically, the plaintiff asserts that it prepared point-of-sale reports which identified customers to whom the defendant's products were sold along with the quantity and price paid during a particular time period. However, the agreement provided that customer information relating to the marketing of the defendant's products constituted a trade secret of the defendant. Moreover, customer lists are generally not considered confidential information (see, Battenkill Veterinary Equine v Cangelosi, 1 AD3d 856 [3d Dept 2003]; H. Meer Dental Supply Co v
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Page 3
Commisso, 269 AD2d 662 [3d Dept 2000]; WMW Machinery v Koerber, 240 AD2d 400 [2d
Dept 1997]), and the plaintiff has failed to allege how the identity of customers who purchased the defendant's products constituted a trade secret of the plaintiff (see, Precision Concepts v Bonsanti, 172 AD2d 737 [2d Dept 1991]).
Accordingly, the motion to dismiss is granted.
DATED: August 18, 2004
J. S.C.
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