N.Y. Packaging II v. Intco Med. Indus.
| Decision Date | 03 January 2023 |
| Docket Number | 21-cv-04388 (DG)(SIL) |
| Parties | NEW YORK PACKAGING II, LLC, Plaintiff, v. INTCO MEDICAL INDUSTRIES, INC., Defendant. |
| Court | U.S. District Court — Eastern District of New York |
REPORT AND RECOMMENDATION
Presently before the Court in this diversity-tortious interference with contract and breach of contract action, on referral from the Honorable Diane Gujarati for Report and Recommendation, is Defendant Intco Medical Industries, Inc.'s (“Intco” or “Defendant”) motion to dismiss Plaintiff New York Packaging II, LLC's (“NYP” or “Plaintiff”) Second Amended Complaint for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) and failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (“Fed R. Civ. P.”). See Defendant's Motion to Dismiss (“Defendant's Motion” or “Def Mot.”), Docket Entry (“DE”) [29]. By way of Complaint dated June 28, 2021, later modified by Amended Complaint dated September 13, 2021 and Second Amended Complaint dated May 11, 2022, Plaintiff commenced this action alleging (i) tortious interference with contract, and in the alternative, (ii) breach of contract. See Second Amended Complaint (“SAC”), DE [22]. For the reasons set forth herein, the Court respectfully recommends that Defendant's Motion be granted.
Unless otherwise indicated, the facts set forth herein are taken from the Second Amended Complaint, as well as documents attached as exhibits, and are accepted as true for purposes of the instant motion. Plaintiff NYP is a New York limited liability company, with its principal place of business in New York. SAC ¶ 1. Defendant Intco is a California corporation with its principal place of business in California. Id. at ¶ 2. In or about January 2020, prior to the Covid-19 pandemic, NYP and Intco Medical (HK) Co. Limited (“Intco Parent”)[1]entered into several contracts for the manufacture of various merchandise, including vinyl gloves, and their shipment from China to the United States (the “Contracts”). Id. at ¶ 5. Relevant to this case, the price of vinyl gloves under the Contracts was $10.30 per case for 26,550 cases. See Ex. A to SAC, DE [22-1].
The Contracts also each contained a provision requiring that “[a]ll disputes arising out of the performance of, or relating to this contract, . . . shall be submitted to the China International Economic Trade and Arbitration Commission” (“CIETAC”) in the event such disputes could not be settled through negotiation (the “Arbitration Clause”). Id.; see also SAC ¶ 6. Plaintiff alleges that Intco Parent subsequently informed Plaintiff that Defendant would be performing the services called for by the Contracts and assigned the Contracts to Defendant. SAC ¶ 7. NYP and Intco allegedly further agreed verbally that the Arbitration Clause would be deleted from the Contracts, as part of NYP's agreement to accept the assignment from Intco Parent to Intco. Id. at ¶ 8.
At the beginning of the Covid-19 pandemic, Defendant represented to Plaintiff that while the pandemic would cause slight delays, the manufacturing process would continue. Id. at ¶ 10. In or about late February 2020, however, Intco informed NYP's Chief Executive Officer Jeff Rabiea that it would not be performing under the Contracts due to “pressure and restrictions” implemented by the Chinese Government. Id. at ¶¶ 11-12. Plaintiff thereafter purchased 26,550 cases of vinyl gloves on the open market at fifty dollars per case to meet its commitments to customers. Id. at ¶ 13. Accordingly, NYP alleges that it has been damaged in the amount of $1,054,035 - the difference between the contract price of $10.30 and fifty dollars per case - and incurred an additional air freight fee of $104,460.41, for a total of $1,158,495.41, together with interest and punitive damages to be determined at trial. Id. at ¶¶ 13, 18.
As set forth above, Plaintiff commenced this action against Defendant by way of Complaint dated June 28, 2021 in the Supreme Court of the State of New York, Nassau County. See Complaint, DE [1-1]. On August 5, 2021 Defendant removed this action to this Court on diversity jurisdiction grounds pursuant to 28 U.S.C. § 1332(a). See Notice of Removal, DE [1]. NYP filed its Amended Complaint on September 13, 2021, see Amended Complaint, DE [9], which Defendant moved to dismiss on November 19, 2021. See Defendant's Motion to Dismiss for Failure to State a Claim, DE [13]. In denying that motion, Judge Gujarati granted NYP leave to further amend its complaint, and Plaintiff did so on May 11, 2022. See Order dated April 25, 2022, DE [21]; see also SAC. Defendant moved to dismiss the SAC based on a lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) and for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) on July 22, 2022. See generally Def. Mot. Judge Gujarati referred Defendant's Motion to this Court for Report and Recommendation on October 28, 2022. See October 28, 2022 Referral Order. For the reasons set forth below, the Court respectfully recommends that Defendant's Motion be granted without prejudice to a future demand for arbitration.
“It is axiomatic that federal courts are courts of limited jurisdiction and may not decide cases over which they lack subject matter jurisdiction.” Lyndonville Sav. Bank & Tr. Co. v. Lussier, 211 F.3d 697, 700 (2d Cir. 2000). To that end, “[d]etermining the existence of subject matter jurisdiction is a threshold inquiry, and a claim is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.” Morrison v. Nat'l Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008). In deciding a motion to dismiss for lack of subject matter jurisdiction, “a court must accept as true all material factual allegations in the complaint and refrain from drawing inferences in favor of the party contesting jurisdiction.” U.S. ex rel. Phipps v. Comprehensive Cmty. Dev. Corp., 152 F.Supp.2d 443, 449 (S.D.N.Y. 2001).
Nevertheless, where subject matter jurisdiction is challenged, a court “may consider materials outside the pleadings, such as affidavits, documents and testimony.” Id.; see also All. For Envtl. Renewal, Inc. v. Pyramid Crossgates Co., 436 F.3d 82, 89, n.8 (2d Cir. 2006) (“The presentation of affidavits on a motion under Rule 12(b)(1) . . . does not convert the motion into a motion for summary judgment under Rule 56.”). District courts may consider these outside materials “to weigh the evidence and satisfy itself as to the existence of its power to hear the case.” Core Care Health Services, Inc. v. Shalala, No. 98-cv-5812, 1999 WL 124419, at *1 (E.D. Pa. Mar. 4, 1999) (quotations omitted).
Courts in the Second Circuit have observed that “there is a lack of clarity in the case law . . . as to what procedural mechanism should be employed by courts evaluating the enforceability of an arbitration agreement,” Fed.R.Civ.P. 12(b)(1), Fed.R.Civ.P. 12(b)(6), or Section 4 of the Federal Arbitration Act (the “FAA”).[2]Alfonso v. Maggies Paratransit Corp., 203 F.Supp.3d 244, 247, n. 2 (E.D.N.Y. 2016); see also Barrows v. Brinker Rest. Corp., 36 F.4th 45, 49, n. 6 (2d Cir. 2022) (). In accordance with other courts in this Circuit, the Court declines to opine on the correct procedural mechanism where, as here, the result would be the same under any of the available procedures. See e.g., Jordan-Rowell v. Fairway Supermarket, No. 18-cv-01938 (VEC) (DF), 2019 WL 570709, at *10 (S.D.N.Y. Jan. 16, 2019), report and recommendation adopted, No. 18-CV-1938 (VEC), 2019 WL 568966 (S.D.N.Y. Feb. 12, 2019) ( that Plaintiff's claims could be dismissed under Rule 12(b)(1), Rule 12(b)(6) or the FAA); Fed. Inc. Co. v. Metropolitan Transportation Authority, No. 12-cv-3425, 2018 WL 5298387, at *3 (E.D.N.Y. Oct. 25, 2018) (declining to address the question of which procedure applies where the outcome would be the same under any of them); Greene v. Am. Bldg. Maint., No. 12-cv-4899, 2013 WL 4647520, at *2, n. 2 (E.D.N.Y. Aug. 28, 2013) (same). Further, the Court is not required to construe the motion as a motion to compel arbitration under the FAA where - as in this case - the moving party neither sought an order compelling arbitration nor indicated an intention to seek arbitration. See Nicosia v. Amazon.com, Inc., 834 F.3d 220, 230 (2d Cir. 2016).
To survive a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), a complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1940 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1960 (2007)). A claim is considered plausible on its face “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949. Nevertheless, a pleading “that offers only ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.'” Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. at 1965). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. at 1966).
In deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(6) “a court must ‘accept all allegations in the complaint as true and draw all...
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