International Design Concepts, LLC v. Saks Inc.

• Decision Date: 27 March 2007
• Docket Number: No. 05 Civ. 4754(PKC).,05 Civ. 4754(PKC).
• Parties: INTERNATIONAL DESIGN CONCEPTS, LLC, Plaintiff, v. SAKS INCORPORATED and Saks Fifth Avenue, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

486 F.Supp.2d 229

INTERNATIONAL DESIGN CONCEPTS, LLC, Plaintiff, v. SAKS INCORPORATED and Saks Fifth Avenue, Inc., Defendants.

No. 05 Civ. 4754(PKC).

United States District Court, S.D. New York.

March 27, 2007.

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Donald L. Kreindler, Phillips Nizer LLP, Jeremy David Richardson, New York City, for Plaintiff.

Michael Robert Gordon, Brian David Koosed, Kirkpatrick & Lockhart Preston Gates Ellis, LLP, New York City, for Defendants.

Richard G. Tashjian, Bradley M. Rank, Tashjian & Padian, New York City for Intervenor Plaintiff.

MEMORANDUM AND ORDER

CASTEL, District Judge.

Under a licensing agreement between Apparel Group International ("AGI") and Oscar de la Renta, Ltd. ("Oscar"), AGI was permitted to sell products bearing the Oscar trademark to defendants Saks Incorporated and Saks Fifth Avenue, Inc. (collectively, "Saks"). Saks is alleged to have improperly imposed various chargebacks and improperly taken vendor markdown allowances causing damage to AGI. AGI defaulted on the royalty provisions of its licensing agreements with Oscar and Oscar cancelled AGI's license. AGI subsequently closed its business and, on May 18, 2004, transferred "all assets of the undersigned ...." to HSBC Bank, ("HSBC"), in repayment for a $754,023.77 debt. That same day, plaintiff International Design Concepts, L.L.C. ("IDC"), allegedly acquired from HSBC all assets of AGI in exchange for payment of $751,896.14 to HSBC.

IDC now brings suit against Saks, alleging that the defendants breached their contract with AGI by improperly assessing the various chargebacks and taking illegitimate vendor markdown allowances on goods defendants purchased from AGI. The Second Amended Complaint, ("SAC"), filed by IDC in June 2005, also asserts eight other claims under New York law: common law fraud, tortious interference with prospective business advantage, violation of General Business Law ("G.B.L.") § 349, three claims under sections 2-709(1)(a) and (1)(b) and 2-718 of the New York Uniform Commercial Code ("N.Y.U.C.C."), unjust enrichment and quantum meruit. Plaintiff now seeks leave to withdraw the third count, the claim for tortious interference, and the sixth count to the extent that it relies on N.Y.U.C.C. 2-709(1)(b). The third claim and the referenced portion of the sixth claim are deemed withdrawn.

Discovery was set to close on February 28, 2007. In March 2006, defendants moved to dismiss all claims in the SAC pursuant to Rule 19(a), Fed.R.Civ.P., on the ground that plaintiff failed to join Oscar, an entity defendants view as indispensable and non-diverse. Defendants also moved for judgment on the pleadings under Rule 12(c) or, alternatively, summary judgment under Rule 56, Fed. R.Civ.P. Defendants contend that all tort claims against it should be dismissed because those claims were not validly assigned from AGI to IDC. Defendants also assert that the fraud and G.B.L. § 349 claims fail to state a valid claim for relief. They contend that the N.Y.U.C.C. claims, the fifth, sixth and seventh counts of the SAC, are time-barred. They also assert that plaintiff may not properly pursue a claim based on unjust enrichment or quantum meruit while simultaneously pursuing a claim of breach of contract.

On January 1, 2006, non-party Oscar moved to intervene as a party-plaintiff, pursuant to Rule 24(a) and, alternatively, Rule 24(b), Fed.R.Civ.P. (Docket 73) Oscar is a New York corporation. IDC, an LLC, has two members, both natural persons who are citizens of New York. Defendants are corporations organized under the laws of Tennessee and Massachusetts and have their principal places of business in Alabama. Because Oscar has sought to intervene as a plaintiff, this court's jurisdiction, premised upon diversity of citizenship, would remain intact if the motion is granted.

I will first address Oscar's motion to intervene. I will then consider defendants' motion.

For the reasons explained below, Oscar's motion to intervene is granted. Further, defendants' motion for judgment on the pleadings as to the fourth count is granted. All other relief sought by defendants is denied.

I. Oscar's Motion to Intervene

Non-party Oscar moves to intervene in this action as of right under Rule 24(a) or permissively under Rule 24(b). Plaintiff IDC has opposed Oscar's Rule 24(a) motion for intervention as of right, asserting that Oscar is not a necessary party under Rule 19, Fed.R.Civ.P., that Oscar's motion is untimely and that entry of Oscar into this action will prejudice IDC and compel the court to reopen fact discovery. Further, IDC asserts that permissive intervention under Rule 24(b) is inappropriate as Oscar's motion is untimely and there are no common questions of fact and law. Defendants do not oppose Oscar's motion to intervene.

Under Rule 24(a), intervention as of right is mandated when all of the following conditions are met: (1) the motion is timely; (2) the applicant asserts an interest relating to the property or transaction that is the subject of the action; (3) the applicant is so situated that without intervention, disposition of the action may, as a practical matter, impair or impede the applicant's ability to protect its interest; and (4) the applicant's interest is not adequately represented by the other parties. See United States v. Pitney Bowes, Inc., 25 F.3d 66, 70 (2d Cir.1994). "If a party is riot `necessary' under Rule 19(a), then it cannot satisfy the test for intervention as of right under Rule 24(a)(2)." MasterCard Int'l. Inc. v. Visa Int'l Service. Ass'n Inc., 471 F.3d 377, 389-90 (2d Cir.2006).

I conclude that even if Oscar were not a necessary party under Rule 19, permissive intervention is appropriate under Rule 24(b). Accordingly, I need not determine whether intervention as of right under Rule 24(a) is warranted. See Gulf Underwriters Ins. Co. v. The Hurd Ins. Agency, 2004 WL 2935794, *2 n. 3 (D.Conn. Dec. 16, 2004)(concluding that permissive intervention is appropriate and that the "more difficult question" of intervention under Rule 24(a) need not be reached); State of New York v. Reilly, 143 F.R.D. 487, 489 (N.D.N.Y.1992) ("Having granted the [intervenors] motions for permissive intervention, there is no need for the court to decide whether or not these applicants are entitled to intervention of right pursuant to Rule 24(a)(2).").

Permissive intervention under Rule 24(b) is discretionary. See In re Bank of N.Y. Derivative Litig., 320 F.3d 291, 300 (2d Cir.2003). In considering whether permissive intervention is warranted, I have considered a range of factors, including "the nature and extent of the intervenors' interests," and to what, if any, degree those interests are "adequately represented by other parties," as well as "whether parties seeking intervention will significantly contribute to [the] full development of the underlying factual issues in the suit and to the just and equitable adjudication of the legal questions presented." H.L. Hayden Co. of New York, Inc. v. Siemens Med. Sys., Inc., 797 F.2d 85, 89 (2d Cir. 1986). While there are some overlapping interests between Oscar and plaintiff, Oscar has an interest sufficiently distinct as licensor that its interests are not adequately represented by IDC alone.

I have also considered the timeliness of Oscar's motion, including the "(a) the length of time [Oscar] knew or should have known of [its] interest before making the motion; (b) prejudice to existing parties resulting from [Oscar's] delay; (c) prejudice to [Oscar] if the motion is denied; and (d) [the] presence of unusual circumstances militating for or against a finding of timeliness." United States v. New York, 820 F.2d 554, 557 (2d Cir.1987). While I acknowledge that considerable time has elapsed prior to the filing of the motion by Oscar, no significant prejudice to the existing parties ought to result. I anticipate that any reopening of discovery will be relatively brief. I am convinced that through attentive case management, any prejudice can be minimized.

Oscar's entrance will contribute to the full development of factual issues as well as efficient adjudication of all parties' interests. As noted, defendants have no objection to the permissive joinder. For the aforementioned reasons, I conclude that permissive intervention under Rule 24(b) is appropriate and Oscar's motion is granted. Having concluded that Oscar may intervene, I need not consider defendants' motion to dismiss under Rule 19, Fed. R. Civ. P., which argues that there has been a failure to join an indispensable party, Oscar. (1/25/07 Letter of Defendants' Counsel)

II. Saks's Motion for Judgment on the Pleadings under Rule 12(c)

Defendants assert that the second and fourth counts, asserting claims of common law fraud and violation of G.B.L. § 349, should be dismissed as they are tort claims which were not properly assigned to IDC, and therefore IDC has no standing to assert them. Alternatively, Saks contends that the second and fourth counts fail to state a claim.

I. Standard on a Rule 12(c) Motion

In considering Saks's motion for judgment on the pleadings under Rule 12(c), Fed.R.Civ.P., I have employed the same legal standard as applicable under a motion to dismiss. See Desiano v. Warner-Lambert & Co., 467 F.3d 85, 89 (2d Cir. 2005). As with a Rule 12(b)(6) motion, Rule 12(c) motions are limited to the facts alleged in the complaint and must be converted into a motion for summary judgment if the court considers materials outside the pleadings. Rule 12(c), Fed. R.Civ.P. However, as with a Rule 12(b)(6) motion, the court may, without converting the motion into a motion for summary judgment, consider documents relied on or incorporated by reference in the complaint. Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir.1995) (per curiam) (quoting Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir.1991)). "Even where a...