RN Wellness, LLC v. Essentials Hero, LLC

• Decision Date: 22 November 2022
• Docket Number: 21-cv-10704 (ALC)
• Parties: RN WELLNESS, LLC, a Delaware limited liability company; THE PERLER GROUP, INC., a New York Corporation, Plaintiffs, v. ESSENTIAL HERO, LLC, a California limited liability company; BRANDON BERNSTEIN, an individual, Defendants.
• Court: U.S. District Court — Southern District of New York

RN WELLNESS, LLC, a Delaware limited liability company; THE PERLER GROUP, INC., a New York Corporation, Plaintiffs,
v.
ESSENTIAL HERO, LLC, a California limited liability company; BRANDON BERNSTEIN, an individual, Defendants.

No. 21-cv-10704 (ALC)

United States District Court, S.D. New York

November 22, 2022

ORDER DENYING, IN PART, MOTIONS TO DISMISS

ANDREW L. CARTER, UNITED STATES DISTRICT JUDGE:

Plaintiffs RN Wellness, LLC (“RN Wellness”) and The Perler Group, Inc. (“TPG”), (hereinafter, “Plaintiffs”) suppliers of personal protective equipment (“PPE”) and COVID-19 testing kits, bring this suit against Essentials Hero LLC, (“EH”) a competitor in the PPE supply market and former supplier to Plaintiffs, and Brandon Bernstein (“Bernstein”), a former employee of TPG. Plaintiffs allege, inter alia, violation of the Defend Trade Secrets Act of 2016. Plaintiffs moves to dismiss Defendant EH's counterclaim for breach of contract for lack of subject of matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure and for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons discussed below, the Plaintiffs' motions are DENIED IN PART.

BACKGROUND

I. Procedural History

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Plaintiffs commenced this action on December 15, 2021, asserting claims for (1) violation of the Defend Trade Secrets Act (18 U.S.C. § 1839) (“DTSA”); (2) misappropriation of trade secrets; (3) breach of contract; (4) breach of the implied covenant of good faith and fair dealing; (5) tortious interference with contract; (6) tortious interference with prospective business relations; and (7) unjust enrichment against Defendants EH and Bernstein. On that same day, Plaintiffs moved for a Temporary Restraining Order (“TRO”) seeking to enjoin Defendants from misappropriating Plaintiffs' trade secrets. ECF No. 8. On December 16, 2021, the Court issued an order granting the TRO and setting a further hearing for cause as to why a preliminary injunction should not issue. ECF No. 12. On January 5, 2022, the Court entered a preliminary injunction as to Defendants and granted Plaintiffs' request for expedited discovery. On January 5, 2022, Defendant EH filed an answer to Plaintiffs' complaint. ECF No. 26. In its answer, Defendant EH filed a counterclaim against Plaintiff RN Wellness asserting a single claim for breach of contract. Id.

On January 14, 2022, Plaintiffs filed a letter for a pre-motion conference in connection with their anticipated motion to dismiss EH's counterclaim under Fed. R. Civ P. 12(b)(1) and Fed.R.Civ.P. 12(b)(6). On January 19, 2022, Defendants filed a response to Plaintiffs' letter. ECF NO. 29. On April 11, 2022, the Court denied the motion requesting a pre-motion conference and granted Plaintiffs leave to file their motion to dismiss and supporting memorandum of law on May 2, 2022 (“Pls' Mot.”). ECF Nos. 32-33. Defendant filed their opposition on May 23, 2022 (“Def.'s Opp.”) and supporting declaration. ECF Nos. 34-35. Plaintiffs' reply was filed on June 6, 2022 (“Pls' Reply”). ECF No. 37. The motion is deemed fully briefed.

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II. Factual Background

The following facts are taken from Defendant's counterclaim and are presumed to be true for purposes of this motion to dismiss. See USAA Cas. Ins. Co. v. Permanent Mission of Republic of Namibia, 681 F.3d 103, 105 n.4 (2d Cir. 2012). EH is a health and wellness online retailer that sells PPE nationwide. EH started selling PPE to Plaintiff RN Wellness in 2020. Through numerous transactions, EH sold over $160,000 in PPE to RN Wellness. On or about August 31, RN Wellness and EH entered into a written agreement whereby (1) EH agreed to allow RN Wellness, to pay money owed since May 2021 through an agreed-upon payment plan; and (2) RN Wellness agreed to pay EH $38,737.62 by September 24, 2021. EH alleges that RN Wellness failed to timely make payments according to the installment schedule and RN Wellness still owes EH $8,816.16.

STANDARD OF REVIEW/LEGAL STANDARD

I. Rule 12(b)(1) Standard

“A motion to dismiss a counterclaim is evaluated under the same standard as a motion to dismiss a complaint.” S & R Dev. Estates, LLC v. Town of Greenburgh, New York, 336 F.Supp.3d 300, 307 (S.D.N.Y. 2018) (quotation marks omitted). “A case 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.” Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). In reviewing a motion to dismiss under Rule 12(b)(1), a court “must take all facts alleged

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in the complaint as true and draw all reasonable inferences in favor of plaintiff, but jurisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it.” Morrison v. Nat'l Australia Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (citation and internal quotation marks omitted). Rather, “[t]he [counter-]plaintiff bears the burden of proving subject matter jurisdiction by a preponderance of the evidence.” Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005). Courts “may consider affidavits and other materials beyond the pleadings to resolve the jurisdictional issue, but [the Court] may not rely on conclusory or hearsay statements contained in the affidavits.” J.S. ex rel. N.S. v. Attica Cent. Schs., 386 F.3d 107, 110 (2d Cir. 2004).

II. Rule 12(b)(6) Standard

When resolving a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court should “draw all reasonable inferences in [the plaintiff's] favor, assume all well-pleaded factual allegations to be true, and determine whether they plausibly give rise to an entitlement to relief.” Faber v. Metro. Life Ins. Co., 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks and citations omitted). Thus, “[t]o survive a motion to dismiss [under Rule 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 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). However, the court need not credit “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Ashcroft, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). The Court's function on a motion to dismiss is “not to

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weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient.” Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985).

DISCUSSION

I. Whether EH's Counterclaim Lacks Original Jurisdiction in Federal Court

Plaintiffs contend that this Court lacks subject matter jurisdiction to adjudicate this counterclaim under both its diversity jurisdiction, 28 U.S.C. § 1332(a), and federal-question jurisdiction, 28 U.S.C. § 1331. EH's counterclaim for breach of contract is a state law claim; therefore, it does not “aris[e] under the...