Matkal LLC v. VG Rush Corp., 18-CV-2833(SJF)(AKT)

CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
Writing for the CourtFEUERSTEIN, District Judge
PartiesMATKAL LLC, d/b/a BLUE POINT, Plaintiff, v. VG RUSH CORP., Defendant. VG RUSH CORP., Third-Party Plaintiff, v. PRICELESS RESOURCE INC. and DASP GROUP LLC, d/b/a SAVEWIZE PREMIUM CLOSEOUTS, Third-Party Defendants.
Decision Date18 April 2019
Docket Number18-CV-2833(SJF)(AKT)

MATKAL LLC, d/b/a BLUE POINT, Plaintiff,
v.
VG RUSH CORP., Defendant.


VG RUSH CORP., Third-Party Plaintiff,
v.
PRICELESS RESOURCE INC. and DASP GROUP LLC,
d/b/a SAVEWIZE PREMIUM CLOSEOUTS, Third-Party Defendants.

18-CV-2833(SJF)(AKT)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

April 18, 2019


ORDER

FEUERSTEIN, District Judge:

I. INTRODUCTION

On or about April 19, 2018, plaintiff Matkal LLC, d/b/a Blue Point ("plaintiff" or "Matkal") commenced this action against defendant VG Rush Corp. ("defendant/third-party plaintiff" or "VG Rush") in the Supreme Court of the State of New York, County of Nassau (the "state court"), seeking, inter alia, actual damages in the amount of four thousand eight hundred sixty-five dollars ($4,865.00) for VG Rush's alleged breach of contract; and consequential damages in an amount of "not less than" two hundred sixty thousand dollars ($260,000.00), (Complaint ["Compl."], ¶¶ 27, 33, 40 and "Wherefore" clause at p. 8), for VG Rush's alleged

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breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of the New York Uniform Commercial Code ("UCC"). On May 11, 2018, VG Rush filed a notice of removal pursuant to 28 U.S.C. § 1441, removing the action to this Court on the basis that this Court has original subject matter jurisdiction under 28 U.S.C. § 1332(a) ("Section 1332(a)") based upon the diversity of citizenship of the parties. (Notice of Removal ["NOR"], ¶ 4).

Issue was joined by the service and filing of an answer on behalf of VG Rush on June 6, 2018. On that same date, VG Rush also filed a third-party complaint against third-party defendants Priceless Resource Inc. ("PRI") and DASP Group LLC, d/b/a Savewize Premium Closeouts ("Savewize") (collectively, "third-party defendants"), asserting claims, inter alia, for equitable or implied indemnity; indemnity under Section 2-312 of the UCC; and damages for third-party defendants' alleged breach of their warranties under Section 2-312 of the UCC.

Savewize filed an answer to the third-party complaint on August 6, 2019. Pending before the Court is PRI's pre-answer motion to dismiss this action pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction or, in the alternative, to dismiss plaintiff's claims for consequential damages pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim for relief. For the reasons set forth below, PRI's motion is denied in its entirety.

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II. BACKGROUND

A. Factual Allegations1

1. The Complaint

Plaintiff "purchases items for resale on Amazon Marketplace, an e-commerce platform owned and operated by Amazon that enables third-party sellers . . . to sell new or used products through Amazon.com." (Compl., ¶ 1).

On August 31, 2017, plaintiff purchased from VG Rush two hundred seventy-eight (278) "'Magformers standard set 30 count products' (item number 63076) (the 'Magformers Products') at a wholesale cost of $17.50 each." (Compl., ¶ 6; see also Id., ¶ 9). According to plaintiff, VG Rush falsely (i) represented to it (A) "that the Magformers Products were authentic products purchased from [PRI], a distributor authorized by Magformers LLC, the manufacturer of the Magformers Products[,]" (id., ¶ 7; see also id., ¶ 31), and (B) "that these products had been picked up directly from [PRI]," (id., ¶ 8); and (ii) warranted to it (A) that "the Magformers Products were authentic and manufactured by Magformers LLC and could be offered for sale as Magformers LLC's products[,]" (id., ¶ 17; see also id., ¶ 31), and (B) that "title would be good, the transfer to [plaintiff] would be rightful, and the goods would be delivered free of the rightful claim of any third person by way of infringement or the like." (Id., ¶¶ 17, 35; see also Id., ¶¶ 18, 36). In purported reliance upon those representations, plaintiff "reasonably believed that the Magformers Products were authentic." (Id., ¶ 8). Plaintiff paid VG Rush a total of four thousand

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eight hundred sixty-five dollars ($4,865.00) for its sale of the Magformers Products. (Id., ¶¶ 10, 23, 26).

Thereafter, plaintiff "offered the Magformers Products for sale through Amazon Marketplace." (Compl., ¶ 11; see also Id., ¶ 32). On September 25, 2017, Magformers LLC filed two (2) complaints with Amazon alleging that plaintiff was selling counterfeit Magformers Products on Amazon Marketplace. (Id., ¶ 12). Although plaintiff disputed Magformers LLC claims, and provided Amazon and Amazon Marketplace with the invoices it had received from VG Rush, "Magformers LLC provided to Amazon Marketplace sufficient proof the . . . Magformers Products were counterfeit." (Id., ¶¶ 12-13). Accordingly, on September 29, 2017, Amazon Marketplace suspended plaintiff's account for thirteen (13) days "on the basis that counterfeit goods had been offered for sale." (Id., ¶¶ 13, 15).

Plaintiff alleges, inter alia, that in addition to the four thousand eight hundred sixty-five dollars ($4,865.00) it paid for the counterfeit Magformers Products, it lost approximately twenty thousand dollars ($20,000.00) per day, or an amount "in excess of" two hundred sixty thousand dollars ($260,00.00), as a result of the thirteen (13)-day suspension from Amazon Marketplace. (Compl., ¶¶ 15, 24-27, 33).

According to plaintiff, VG Rush rejected its demand for VG Rush to provide it with "a full refund for the Magformers Products and compensation of the $20,000 loss per day [it] suffered as a result of its 13-day suspension from Amazon Marketplace, totaling $260,000." (Compl., ¶¶ 19-20, 37-38).

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2. The Third-Party Complaint

VG Rush alleges, inter alia, (a) that it purchased the Magformers Products from PRI,2 (Third-Party Complaint ["TPC"], ¶¶ 3, 18, 33, 42, 50); (b) that PRI had previously purchased the Magformers Products from Savewize, (id., ¶¶ 3, 19, 32, 41, 49); (c) that both third-party defendants "have knowledge about the chain of title and provenance of the Magformers Products that [it] does not possess[,]" (id., ¶ 3; see also id., ¶¶ 28, 37); and (d) that the sale of the Magformers Products by both third-party defendants were "made subject to Section 2-312 of the [UCC]," pursuant to which the sales were "subject to express warranties that the Magformers Products were conveyed with good title, were free of any rightful claim by any third person of infringement, and were rightfully transferred." (Id., ¶¶ 3, 29, 46, 54). According to VG Rush, it did not furnish either third-party defendant with any specifications regarding the Magformers Products. (Id., ¶ 20).

VG Rush further alleges that after plaintiff informed it of the charge by Magformers LLC that the Magformers Products plaintiff was selling on Amazon Marketplace were counterfeit, inter alia, (a) it made inquiries to both PRI and Savewize "about the provenance and chain of title of the Magformers Products[,]" (TPC, ¶¶ 21-22); (b) PRI told it that it had bought the Magformers Products from Savewize and assured it "that the Magformers Products were genuine goods that were not counterfeit," (id., ¶ 21; see also id., ¶ 36); and (c) "Savewize refused to tell

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[it] from whom [Savewize] had purchased the products, but . . . assured [it] that the Magformers Products were genuine goods that were not counterfeit." (Id., ¶ 22; see also Id., ¶ 36). According to VG Rush, it then informed plaintiff, based upon its conversations with PRI and Savewize, "of its understanding that the Magformers Products were genuine goods." (Id., ¶ 23).

B. Procedural History

On or about April 19, 2018, plaintiff commenced this action against VG Rush in the state court, seeking, inter alia, actual damages in the amount of four thousand eight hundred sixty-five dollars ($4,865.00) for VG Rush's alleged breach of contract (first cause of action), (Compl., ¶ 26); and consequential damages in an amount of "not less than" two hundred sixty thousand dollars ($260,000.00), (id., ¶¶ 27, 33, 40 and "Wherefore" clause at p. 8), for VG Rush's alleged breach of contract (first cause of action), breach of the implied covenant of good faith and fair dealing (second cause of action), and violation of the UCC (third cause of action). On May 11, 2018, VG Rush filed a notice of removal pursuant to 28 U.S.C. § 1441, removing the action to this Court on the basis that this Court has original subject matter jurisdiction under 28 U.S.C. § 1332(a) based upon the diversity of citizenship of the parties. (NOR, ¶ 4).

Issue was joined by the service and filing of an answer on behalf of VG Rush on June 6, 2018. On that same date, VG Rush also filed a third-party complaint against PRI and Savewize, asserting claims, inter alia, for equitable or implied indemnity of "any award against it," as well as for "all fees, expenses, and costs it incurs in defending against Matkal's claims or in bringing the[] third-party claims," (first cause of action), (TPC, ¶ 39); for indemnity under Section 2-312

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of the UCC of "any award against it," as well as for "all fees, expenses, and costs it incurs in defending against Matkal's claims or in bringing the[] third-party claims" (second cause of action), (id., ¶ 47); and to recover "any damages resulting from [third-party defendants'] breaches" of their express warranties under Section 2-312 of the UCC, including "payment of any award or sums that VG Rush is ordered to pay to Matkal on Matkal's claims in this action, and payment of any fees, expenses, and costs that VG Rush incurs in defending against Matkal's claims or in bringing the[] third-party claims" (third cause of action). (Id., ¶ 55). VG Rush contends, inter alia, that even though it "understands that the Magformers Products were genuine and authentic[,]" to the extent that it is found to be liable to plaintiff, "any and all of that liability should be borne by [PRI] and Savewize[,]" (TPC, ¶ 27; see also id., ¶¶ 38-39), since, inter alia, in contrast to third-party defendants,...

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