Joe Hand Promotions, Inc. v. Mills

• Decision Date: 30 July 2008
• Docket Number: Civil Action No. 08-1833 (JEI).
• Citation: 567 F.Supp.2d 719
• Parties: JOE HAND PROMOTIONS, INC., Plaintiff, v. Taylor L. MILLS, et. al., Defendants.
• Court: U.S. District Court — District of New Jersey

567 F.Supp.2d 719

JOE HAND PROMOTIONS, INC., Plaintiff, v. Taylor L. MILLS, et. al., Defendants.

Civil Action No. 08-1833 (JEI).

United States District Court, D. New Jersey.

July 30, 2008.

COPYRIGHT MATERIAL OMITTED

Wayne D. Lonstein, Lonstein Law Office, P.C., Ellenville, NY, for Plaintiff.

Sturm William C. MacMillan, Law Offices of Igor, Haddonfield, NJ, for Defendants.

OPINION

IRENAS, Senior District Judge:

This case began with Plaintiff Joe Hand Promotions, Inc.'s ("Joe Hand") Complaint against Defendants Taylor L. Mills and Taylor's Sports Bar, Grill & Dance Club¹ (collectively, "Taylor's"). Joe Hand asserts that on January 19, 2008, Taylor's showed to its patrons television program "UFC # 80" without purchasing the right to do so from Joe Hand. Joe Hand allegedly holds the exclusive right to distribute the program.²

Taylor's asserts two counterclaims: violation of New Jersey's Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. ("CFA") and common law fraud.³ Those claims arise out of the events that took place immediately preceding the initiation of Joe Hand's suit. Joe Hand presently moves to dismiss the counterclaims pursuant to Fed. R.Civ.P. 12(b)(6). For the reasons stated herein, the Motion will be granted.

I.

On February 15, 2008, Taylor's received a letter from Joe Hand's attorney wherein Joe Hand accused Taylor's of violating Joe Hand's exclusive licensing rights by exhibiting UFC # 80 on January 19, 2008. (Answer at 6, ¶¶ 7-8.) The letter states Joe Hand's intention to sue Taylor's in federal court, explaining, "[i]n this litigation we will be seeking maximum statutory damages ... which may exceed $110,000.00.... This Amount does not include interest and attorneys fees." (Taylor Cert. Ex. A.) The letter goes on to offer settlement as an alternative to litigation, but cautions that if Taylor's does not respond within 14 days, Joe Hand will "commence[ ] legal action ... without further notice to you." (Id.)

Taylor's allegedly responded, through their attorney, by letter dated February 26, 2008 ("February 26th letter"). Taylor's stated that it purchased UFC #80 from Satellite Sales, L.L.C. ("Satellite Sales") and "Direct TV."⁴ (Answer at 6, ¶ 9.) According to Taylor's, it "lawfully obtained the subject program through Satellite Sales, L.L.C, and Direct TV" which it asserts are agents or apparent agents for Joe Hand. (Answer at 5, ¶¶ 2-3; 6, ¶¶ 10-11; 7, ¶ 14.) Thus, Taylor's asserts that it did not infringe Joe Hand's rights or violate federal law.

Despite the response from Taylor's, Joe Hand filed the Complaint on April 15, 2008. Taylor's asserts that Joe Hand filed the Complaint in disregard of the information contained in the February 26th letter. Taylor's further claims that Joe Hand "failed to conduct any investigation into the actions of Direct TV and its agents prior to initiating the suit." (Answer at 6, ¶ 13.)

Based on the theory that Joe Hand knowingly threatened Taylor's with a federal lawsuit in an "attempt[ ] to obtain monies from the defendants which plaintiff knows defendants are not lawfully required to pay and monies which plaintiff knows it is not lawfully entitled to receive," (Answer at 6, ¶ 12.), Taylor's' asserts two claims: violation of New Jersey's Consumer Fraud Act (Counterclaim 1), and common law legal and equitable fraud (Counterclaim 2). Joe Hand moves to dismiss the counterclaims for failure to state a claim upon which relief may be granted.

II.

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a complaint "for failure to state a claim upon which relief can be granted." Fed. R.Civ.P. 12(b)(6). In considering a 12(b)(6) motion, the court will "`accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.'" Phillips v. County of Allegheny, 515 F.3d 224 (3d Cir.2008) (quoting Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n. 7 (3d Cir.2002)). In order to survive a 12(b)(6) motion, the plaintiffs "`[f]actual allegations must be enough to raise a right to relief above the speculative level.'" Id. at 232 (quoting Bell Atl Corp. v. Twombly, ___ U.S. ___, ___ n. 3, 167, 127 S.Ct. 1955, 1965, n. 3, 167 L.Ed.2d 929 (2007)). In sum, "`stating ... a claim requires a complaint with enough factual matter (taken as true) to suggest' the required element." Id. at 234 (quoting Twombly, 127 S.Ct. at 1965).

A party alleging fraud "must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). A plaintiff must "state the circumstances of the alleged fraud with sufficient particularity to place the defendant on notice of the `precise misconduct with which [it is] charged.'" Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir.2007) (quoting Lum v. Bank of Am., 361 F.3d 217, 223-24 (3d Cir.2004)). Plaintiffs can satisfy the requirements of Rule 9(b) by "pleading the 'date, place or time' of the fraud, or through `alternative means of injecting precision and some measure of substantiation into their allegations of fraud.'" Lum, 361 F.3d at 224 (quoting Seville Indus. Mack Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir.1984)). A plaintiff must also "allege who made a representation to whom and the general content of the misrepresentation." Id. The heightened pleading standards of Rule 9(b) apply to claims of fraud brought under New Jersey law. Frederico, 507 F.3d at 200.

III.

A.

Taylor's claims that Joe Hand violated the CFA by selling to Taylor's, through its alleged agents, UFC # 80, and then attempting to intimidate Taylor's into paying money to Joe Hand, ostensibly to settle what Joe Hand knew to be a meritless claim arising out of the broadcast of the program at Taylor's. Joe Hand argues that the allegations of the Counterclaim are insufficient as a matter of law. The Court agrees because the CFA does not apply to the factual scenario alleged.

The CFA prohibits

[t]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation ... in connection with the sale or advertisement of any merchandise or real estate....

N.J.S.A. 56:8-2 (emphasis added). As the New Jersey Supreme Court has explained, "[t]he Consumer Fraud Act, originally enacted in 1960, is aimed basically at unlawful sales and advertising practices designed to induce consumers to purchase merchandise or real estate." Daaleman v. Elizabethtown Gas Co., 77 N.J. 267, 270, 390 A.2d 566 (1978)(emphasis added). The Court continued, "the legislative concern was over sharp practices and dealings in the marketing of merchandise and real estate whereby the consumer could be victimized by being lured into a purchase through fraudulent, deceptive or other similar kind of selling or advertising practices." Id. at 271, 390 A.2d 566 (emphasis added).⁵

The counterclaim's allegations make clear that Joe Hand's allegedly fraudulent conduct, embodied in the February 15th letter,⁶ did not induce Taylor's to purchase anything. Instead, the letter was allegedly a threat to sue Taylor's if it did not pay Joe Hand a settlement. Thus the fraudulent conduct alleged was not done "in connection with" the sale or advertisement of merchandise, and the CFA does not apply.

The only alleged sale of merchandise is the purchase of UFC #80 from Joe Hand's alleged agent.⁷ However, Taylor's does not allege that Joe Hand's fraudulent conduct induced it into purchasing the program. All of Taylor's fraud allegations stem from Joe Hand's February 15th letter, which was sent well after Taylor's had purchased UFC #80. Joe Hand's letter was merely a product of the parties' subsequent dispute over a previous sale of merchandise. Therefore it was not made in connection with a sale of merchandise.

This interpretation of the CFA's "in connection with" clause is consistent with precedent. The plaintiffs in Castro v. NYT Television filed a CFA claim against the Jersey Shore Medical Center and Meridian Health System (the "medical defendants"), as well as several media outlets (the "media defendants"), after the media defendants, with the permission of the medical defendants, filmed the plaintiffs for a television show called "Trauma: Life in the ER." 370 N.J.Super. 282, 287-88, 851 A.2d 88 (App.Div.2004). The plaintiffs alleged that "the media defendants fraudulently represented that they were medical professionals in order to gain access to plaintiffs for videotaping and then fraudulently induced plaintiffs to execute consents to the videotaping." Id. at 295, 851 A.2d 88. The court reasoned that the plaintiffs' claims did not come within the scope of the CFA, because the plaintiffs failed to "allege any fraud in connection with" the only consumer transaction involved in the case—the "medical defendants' sale of hospital services" to the plaintiffs. Id. The court emphasized that the plaintiffs did not allege that the medical defendants committed fraud in order to induce the plaintiffs into purchasing or retaining the medical defendants' services. The court noted that the

[p]laintiffs do not allege, for example, that defendants made misrepresentations which induced them to seek admittance to Jersey Shore rather than to another hospital or to remain at Jersey Shore after their initial emergency treatment.

Id. Despite the plaintiffs' allegations of an ongoing consumer relationship, the court concluded that the plaintiffs

do not state claims under the CFA for any deception, fraud or misrepresentation "in connection with" the sale of merchandise or services, because defendants' alleged statements and actions were not "made to induce [plaintiffs] to ... purchase" medical services at Jersey Shore.

Id. (quoting Gennari v. Weichert Co. Realtors, 148 N.J. 582, 607, 691 A.2d 350, 366 (1997)) (emphasis added).

Consistent with Castro, the Court concludes...