Dulcette Techs. LLC v. MTC Indus., Inc.

• Decision Date: 27 August 2019
• Docket Number: 060071/2013
• Citation: Dulcette Techs. LLC v. MTC Indus., Inc., 64 Misc.3d 1231(A), 117 N.Y.S.3d 810(Table) (N.Y. Sup. Ct. 2019)
• Parties: DULCETTE TECHNOLOGIES LLC, Plaintiff, v. MTC INDUSTRIES, INC., and Unichem Enterprises, Inc., Defendants.
• Court: New York Supreme Court

64 Misc.3d 1231 (A)

117 N.Y.S.3d 810 (Table)

DULCETTE TECHNOLOGIES LLC, Plaintiff,

v.MTC INDUSTRIES, INC., and Unichem Enterprises, Inc., Defendants.

060071/2013

Supreme Court, Suffolk County, New York.

Decided August 27, 2019

WHITE CIRRITO & NALLY, LLP, 58 Hilton Avenue, Hempstead, NY 11550

KEVIN K. TUNG, ESQ., 136-20 38th Avenue, Suite 3D, Flushing, NY 11354

HARWOOD LLOYD, LLP, 350 Fifth Ave, Suite 3304, New York, NY 10118

James Hudson, J.

"Ex dolo malo non oritur actio "- Fraud never gives a right of action ( Church v. Proctor , 66 F. 240, 244 (1st Cir. 1895) ; Cowper's English Kings Bench Reports p. 343). The matter before us demonstrates that this venerable doctrine is ever viable and applies equally to those who defend an action as well as prosecute it.

The case at bar is an action sounding variously in breach of warranty and fraud. It arose from a contract between the Parties whereby the Plaintiff was to receive a certain quantity of the artificial sweetener known as "Sucralose" from the Defendant. Plaintiff contends that a shipment of the sweetener was adulterated, mislabeled and unfit for human consumption. The Defendant denies this assertion. The differing averments of the Plaintiff and Defendant necessitated a non-jury trial to resolve these issues.

Prior to our analysis of the law and facts, the Court wishes to thank Mr. Cirrito and Mr. Tung for the excellence of their Briefs and their conduct during the trial. Such advocacy as demonstrated by respective Counsel does honor to the profession of law.

Plaintiff's first witness was Doctor Melvin Blum. In addition to being a managing member of the Plaintiff Dulcette Technologies ("Dulcette"), he was qualified as an expert in the field of chemical analysis and the manufacture and distribution of food additives. Dulcette was a distributor of Sucralose, an artificial sweetener. Not a manufacturer itself, Dulcette initially obtained this product via a company named Camlin Fine Chemicals Ltd. ("Camlin"). At one time, Camlin owned 51 (fifty-one) % of the Plaintiff. Over time, Dulcette was unable to procure Sucralose from Camlin and entered into an agreement with the Defendant MTC whereby the latter would supply Dulcette with the Sucralose necessary for its business (Plaintiff's Exhibits 6 and 7). Plaintiff also contracted with the Defendant Unichem Enterprises Inc. ("Unichem") to supply it with Sucralose. MTC did not manufacture its own product. Instead, it received the Sucralose from a Chinese company, ZMC, and forwarded it to the Plaintiff.

The claims against Unichem were dismissed by the Court (Pines J.) by Order dated September 24th, 2013 because of a failure to establish a nexus between Unichem and the State of New York. Accordingly our discussion of salient facts will confine itself to the actions vis-à-vis Dulcette and MTC.

Pursuant to their contract, the Defendant MTC provided Plaintiff with 1,000 kilograms of Sucralose at a cost of $99,000.00. The Plaintiff had a contract to supply Sucralose to Raritan Pharmaceuticals Inc. ("Raritan"), a purveyor of energy drinks. When the Defendant had provided Dulcette with the 1,000 kilograms, Plaintiff delivered it (in 25 kilogram containers) to Raritan. Between August 13th and September 14th, 2012, Dulcette shipped these containers of MTC Sucralose to Raritan. Unichem provided the Plaintiff with 400 kilograms of the sweetener which was forwarded to Raritan. Shortly thereafter, Dulcette received a communication from Raritan that the product was discolored and had an offensive odor. Ultimately, Raritan did not pay for the Sucralose and 10 (ten) % of the containers were returned. Dr. Blum added that Raritan had not done business with Dulcette since the incident. A series of emails (Plaintiff's Exhibit 9) was exchanged between the Parties informing the Defendant of problems with the product and that it had been rejected by the purchaser. Interestingly, neither the Defendant nor the Plaintiff wished to relay this information to the United States Food and Drug Administration ("USFDA").

The transactions between Plaintiff and Defendant were reflected in a series of invoices which contained language stating that a rejection of product had to be made within 7 (seven) days of delivery (Plaintiff's Exhibit 7). Although the rejection was not made in writing, Dr. Blum averred that a telephone call to this effect was made within (7) seven days. A series of e-mails between Dulcette's Vice President, Dr. Luke Verdet and Mr. Giancarlo Denegri of MTC was introduced during Dr. Blum's testimony which evidences the fact that Plaintiff quickly communicated with the Defendant on the rejection of the containers of Sucralose (Plaintiff's Exhibit 9). The Defendant never requested an opportunity to test the contents of the returned containers.

Dr. Blum admitted that although Raritan did not pay for any of the Sucralose, only four drums were returned to Plaintiff and remain in its possession. Two of the drums were selected at random and subjected to chemical analysis. Ultimately, 400 kilos were returned to Unichem who provided the Plaintiff with a $38,000.00 credit. A container of Sucralose was entered into evidence which the Court, with the Defendant's consent, substituted with photographs so the original could be returned (Plaintiff's Exhibit 10).

In purchasing the Sucralose from the Defendant, Dr. Blum stated that Dulcette relied on information in a document provided by MTC, namely the Certificate of Analysis, hereinafter referred to as the CofA (dated 07/2/2012, Plaintiff's Exhibit 12). The CofA reflects a series of tests on a product required by Federal Regulation (CFR Title 21 Part 172, Plaintiff's demonstrative Exhibits 4 and 5). It must be checked for mold, Staphylococcus as well as E Coli. An analysis without checking for their presence is inadequate and the product would not be considered saleable under the procedures set forth in the Federal Food Codex (Plaintiff's Exhibit 3, Trial transcript p. 33). Testing is usually performed via high performance liquid chromatography ("HPLC"). Plaintiff's Exhibit 5 is a description of the analysis necessary for Sucralose products. (Transcript p. 42).

According to Dr. Blum's testimony, it is standard operating procedure to merely copy the previous company's CofA. (Transcript pps. 43 and 333). However, the MTC CofA and its predecessor had several discrepancies. The purity of the Sucralose on the ZMC certificate was 99.38, on the MTC it was 99.8. The MTC certificate listed the optical rotation as 87.2 degrees, the ZMC certificate listed it as 86.4. Furthermore, the MTC certificate reports the results of organic tests, for E. Coli and Staph infection, and others, which were never actually conducted on the material in question. (Transcript p.80).

Plaintiff also offered a CofA from ZMC (Plaintiff's Exhibit 13) purporting to be a test of the same Sucralose which was the subject of the test related in Plaintiff's Exhibit 11. During Dr. Blum's testimony, a series of documents showing chemical analysis were received into evidence. Plaintiff's, Exhibits 12, 14 and 16 were MTC analysis of containers of Sucralose. Plaintiff's Exhibits 13, 15 and 17 were ZMC analysis, purportedly of the same containers. They were remarkably different. The ZMC analysis did not indicate that testing for yeast, mold, E Coli, Salmonella or Staph infection had been performed. Dr. Blum testified that he would not put a product into the stream of commerce that had been evaluated in such a fashion. (Transcript pp. 55-58).

On cross-examination, Dr. Blum was shown an MTC invoice (Plaintiff's Exhibit 7) and acknowledged language on the document which limited liability unless rejection of non-conforming goods was made within (7) seven days. The witness reiterated that although a written rejection was never made, this had been at Mr. Wang's request and that an oral rejection, communicated via the telephone, had been made within the requisite time period. Dr. Blum did admit, however, that Dulcette had possession of only four drums of the Defendant's Sucralose. (Transcript p. 242).

Mr. Shankar Bhattacharyya then testified for the Plaintiff. After being qualified as an expert in the field of chemical analysis, Mr. Bhattacharyya told the Court that he had performed a high performance liquid chromatography test of a drum containing Sucralose which had been rejected by the Plaintiff's customer, Raritan. (Transcript pp.104-110, Plaintiff's Exhibit 11). The test indicated a purity level of 96 (ninety-six) %. (Transcript p.124). As described by Mr. Bhattacharyya, this 2 (two) % difference is a significant deviation from acceptable levels of purity. Since 98 (ninety-eight) % is the minimum under the Codex (CFR Title 21) this rendered the Sucralose unfit for human consumption. (Transcript p.124). On cross-examination, it was emphasized that the witness had not personally performed the chemical analysis. Instead, he was interpreting his colleague's report. (Plaintiff's Exhibits 11, and 18). The questioning of the witness by Mr. Tung, though a credit to the Lawyer's art, did not disturb the utility of Mr. Bhattacharyya's testimony.

Pursuant to CPLR 3117, the deposition transcript (Plaintiff's Exhibit 19) of Dr. Vin Naya was offered. Dr. Naya is the President of Raritan Pharmacutical, the ultimate bulk customer who desired to use the Sucralose in an energy drink to be supplied to the public. The deposition transcript of Dr. Naya indicated that his Company had ordered Sucralose from the Plaintiff to insure that they would not infringe on the patent for this product. Unfortunately, he discovered quality issues with the delivered product. The Sucralose was discolored and malodorous. Dr. Maya consequently returned a portion of the material to Dulcette. (Transcript pages 14-17).

Plaintiff draws the Court's attention to the Notice to Admit served on the Defendant ( CPLR Sec. 3123 ). In response, Defendant MTC admitted that it had received full payment of $99,330.00 for...