Great Am. Emu Co. v. E.J. McKernan Co.
| Decision Date | 22 December 2020 |
| Docket Number | NO. 5:20-CV-161-FL,5:20-CV-161-FL |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | GREAT AMERICAN EMU COMPANY, LLC doing business as AEC Consumer Products, Plaintiff, v. The E.J. MCKERNAN CO. doing business as McKernan Packaging Clearing House, Defendant. |
John D. Wooten, IV, Womble Bond Dickinson (US) LLP, Greensboro, NC, Charles A. Burke, Womble Bond Dickinson (US) LLP, Raleigh, NC, for Plaintiff.
James K. Borcia, Tressler LLP, Chicago, IL, Kirsten Elena Small, Nexsen Pruet, LLC, Greenville, SC, for Defendant.
This matter is before the court on defendant's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) (DE 13). Also before the court is plaintiff's motion to strike (DE 21) improper argument in defendant's reply. The motions have been briefed fully, and the issues raised are ripe for ruling. For the following reasons, defendant's motion is granted in part and denied in part, and plaintiff's motion is denied as moot.
Plaintiff commenced this action on April 17, 2020, asserting North Carolina common law and statutory claims arising out of an alleged contract for the supply by defendant of 1.9 million bottles to plaintiff, for its use in bottling its hand sanitizer product. Plaintiff asserts the following claims: 1) breach of contract 2) fraudulent inducement to contract; 3) negligent misrepresentation; 4) breach of implied covenant of good faith and fair dealing; and 5) unfair and deceptive trade practices under N.C. Gen. Stat. § 75-1.1 ("UDTPA"). Plaintiff seeks damages, including punitive, and statutory trebled damages, with costs, and attorney fees.
Defendant filed the instant motion to dismiss on June 15, 2020, on the basis that the complaint fails to state a claim upon which relief can be granted. Plaintiff responded in opposition on July 13, 2020, and defendant replied on July 28, 2020. Plaintiff filed the instant motion to strike improper argument in defendant's reply on July 31, 2020, and defendant responded in opposition to that motion on August 4, 2020.
The facts alleged in the complaint may be summarized as follows.1 Plaintiff is a company with principal place of business, in Fayetteville, North Carolina, engaged in manufacturing and sale of consumer products. It is a leading manufacturer of alcohol-free, fragrance-free, triclosan-free, water-based hand sanitizer, marketed under the label BAC-D® (hereinafter, plaintiff's "hand sanitizer"). Defendant is a company with principal place of business in Reno, Nevada. Prior to the alleged events described in this lawsuit, defendant supplied to plaintiff 1.7-ounce plastic bottles with a pump spray lid for its hand sanitizer product.
In anticipation of the exceptionally high demand for hand sanitizer as the COVID-19 virus spread across the world, plaintiff sought a stable and reliable source of large quantity of plastic bottles available immediately and at regular intervals thereafter. Plaintiff relies upon its ability to obtain plastic bottles quickly and reliably from suppliers such as defendant in order to meet consumer demands, most especially during the COVID-19 pandemic.
On March 10, 2020, plaintiff contacted defendant to discuss the continued availability of its supply of 1.7-ounce bottles and plaintiff's projected surge in consumer demand for plaintiff's hand sanitizer in the near future. This expected surge in consumer demand for plaintiff's hand sanitizer during the COVID-19 pandemic would necessitate a larger-than-usual supply of bottles on a predictable delivery schedule, which plaintiff communicated to defendant.
Defendant communicated to plaintiff that it did not have a sufficient supply to meet the expected demand with the 1.7-ounce bottles. Defendant then informed plaintiff that it had sufficient supply of a similar product—a two-ounce bottle—to meet plaintiff's expected surge in product demand. Plaintiff agreed with defendant that that the two-ounce bottle could serve as a suitable substitute for the 1.7-ounce bottles, and plaintiff calculated that it needed 1.9 million two-ounce bottles for the first month.
Defendant, by and through its assistant sales manager Maria Alexeeva ("Alexeeva") and its sales supervisor Ashlyn Ibia-Bronaugh ("Ibia-Bronaugh"), assured plaintiff that it had sufficient inventory and could completely supply plaintiff's requirement of 1.9 million two-ounce bottles and the corresponding pump spray lids over the course of four weeks. Defendant agreed to be an exclusive supplier to plaintiff of these 1.9 million bottles, to set aside that quantity of bottles specifically and solely to supply to plaintiff, and to deliver to plaintiff 480,000 bottles each week until a total of 1.9 million bottles had been delivered. In exchange for the exclusive and guaranteed availability and delivery of those bottles in weekly installments over the course of four weeks, plaintiff agreed to pay 50% of the total purchase price as a deposit immediately, to submit a credit application to defendant, and to pay the balance of the account "in accordance with industry standard NET30 terms." (Compl. ¶ 12). Defendant agreed to all of these terms.
As part of the exclusive supply agreement reached between the parties, plaintiff informed defendant that any failure to deliver the contracted goods on the promised delivery schedule would damage plaintiff in the form of lost profits due to an inability to continue its production and sales efforts. According to the complaint, defendant was therefore fully aware of and accepted that failure to deliver the contracted goods at the scheduled intervals would damage plaintiff in the form of lost revenues and lost profits, and the inevitability of such damages in the event of a failure to timely supply all 1.9 million bottles was explicitly contemplated as part of the contract between the parties.
Defendant agreed that it had all of these bottles available so as to avoid any disruption in sales of plaintiff's hand sanitizer product, and defendant acknowledged its understanding that the timely supply of these bottles was essential to plaintiff's ability to meet an increase in demand for hand sanitizers like plaintiff's hand sanitizer in view of the developing COVID-19 pandemic. Defendant conveyed to plaintiff that it was ready, willing and able to supply the entire 1.9 million order of contracted bottles notwithstanding the increased market demand for such bottles caused by the COVID-19 pandemic. Based on the assurances of defendant, through Ibia-Bronaugh and Alexeeva, plaintiff adapted its manufacturing and bottling capabilities and updated its marketing materials to accommodate the change to the available two-ounce bottle size from defendant.
To memorialize the agreement reached between the parties, plaintiff submitted a purchase order (hereinafter, the "purchase order") to defendant on March 12, 2020, for 1,900,000 two-ounce plastic bottles and the corresponding 1.9 million pump spray lids. The agreed upon prices for these goods were $0.068 per two-ounce white bottle and $0.125 per white pump spray lid, for a total purchase order of $366,700.00. Said purchase order is attached as Exhibit A to the complaint. Plaintiff completed the 50% deposit payment to defendant via wire transfer executed on March 13, 2020, as depicted in a wire transfer confirmation attached as Exhibit B to the complaint. Plaintiff's president, Tammy Claussen ("Claussen"), contacted Alexeeva on March 13, 2020 to confirm the availability of the contracted goods as well as to confirm the agreed upon delivery schedule over the agreed-upon four week period beginning with the first shipment scheduled on March 20, 2020. Defendant communicated to Claussen, as per emails attached as Exhibit C to the complaint, that defendant would ship 480,000 of the contracted goods on each of the following dates: March 20, 2020; March 27, 2020; April 3, 2020; and defendant would ship the balance of the total order of 1.9 million units, or 460,000 contracted goods, on April 13, 2020.
As of the date of filing of the complaint, defendant has never sent a full shipment of the contracted goods as agreed upon by the parties. At that time, defendant had only made partial deliveries of the contracted goods, never a full delivery of the contracted goods, and approximately one-half of the contracted goods were undelivered despite defendant's earlier assurances that all contracted goods were available and would be delivered within the first month after the purchase order. Plaintiff became concerned by April 3, 2020, when defendant had failed to provide any full shipments as promised and continued to fall behind on delivery of the contracted goods.
Plaintiff reached out to defendant's general manager, Jim Lemmons ("Lemmons"), who allegedly falsely claimed that plaintiff did not have any priority rights in the contracted goods and stated that defendant was choosing to fulfill orders from other customers first ahead of plaintiff. Plaintiff has not received the third or fourth deliveries of the contracted goods and is owed the outstanding delivery of these missing goods.
In subsequent conversations, defendant allegedly informed plaintiff that for an additional price above the price already agreed upon by the parties, defendant would ship to plaintiff the remainder of the contracted goods for which plaintiff had already paid valuable consideration to guarantee availability and delivery within a four-week period. According to the complaint, defendant is "profiteering from the increased demand for the contracted goods in the COVID-19 pandemic by withholding deliveries previously guaranteed" to plaintiff under an existing exclusive supply contract to instead sell the contracted goods to other customers at a significantly inflated price. (Id. ¶ 20). Alternatively, according to the complaint, if defendant is not profiteering by...
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