Royal Pac. Ltd. v. Faith Elec. Mfr. Co.

• Decision Date: 13 June 2018
• Docket Number: 17cv357 MCA/KBM
• Citation: 322 F.Supp.3d 1178
• Parties: ROYAL PACIFIC LIMITED, a New Mexico Corporation, Plaintiff, v. FAITH ELECTRIC MANUFACTURE COMPANY, LTD, a Chinese Corporation, Defendant.
• Court: U.S. District Court — District of New Mexico

322 F.Supp.3d 1178

ROYAL PACIFIC LIMITED, a New Mexico Corporation, Plaintiff,

v.FAITH ELECTRIC MANUFACTURE COMPANY, LTD, a Chinese Corporation, Defendant.

17cv357 MCA/KBM

United States District Court, D. New Mexico.

Signed June 13, 2018

Charles K. Purcell, Charles J. Vigil, Rodey Dickason Sloan Akin & Robb PA, Albuquerque, NM, Garry Wills, Marc Kallish, Roetzel & Andress LPA, Chicago, IL, for Plaintiff.

Frank T. Apodaca, SaucedoChavez PC, Albuquerque, NM, Miles Carlsen, Carlsen Law Corporation, Woodland Hills, CA, for Defendant.

MEMORANDUM OPINION AND ORDER

M. CHRISTINA ARMIJO, Senior United States District Judge

THIS MATTER is before the Court on Plaintiff Royal Pacific Limited's Motion to Dismiss Defendant's Counterclaims [Doc. 13]. The Court has considered the parties' submissions and the relevant law, and is otherwise fully informed. For the following reasons, the Court GRANTS in part and DENIES in part Royal Pacific's Motion.

I. Background

Royal Pacific Limited (Royal Pacific) and Faith Electric Manufacture Company, Ltd. (Faith Electric) entered into a distribution agreement through which Royal Pacific became the exclusive distributor of Faith Electric's products, including ground fault circuit interrupter (GFCI) receptacles, to certain companies. [Doc. 1, ¶¶ 6, 7; Doc. 10, Counterclaim ¶¶ 1, 8] One of these companies was Menard.¹ [Doc. 1, ¶ 10; Doc. 10, Counterclaim ¶ 9] The present matter was initiated by filing of Royal Pacific's Complaint for Declaratory Judgment and Other Relief [Doc. 1], in which Royal Pacific alleges that, in 2016, problems arose with the quality of several of Faith Electric's products, including GFCI receptacles. [Doc. 1, ¶¶ 13–14] Royal Pacific further alleges that it notified Faith Electric, but that Faith Electric failed to remedy the problems and that, because the quality problems "damaged Royal Pacific's reputation and harmed Royal Pacific's business relationship with Menards," Royal Pacific terminated the distribution agreement in March 2017. [Doc. 1, ¶¶ 29, 36] Royal Pacific seeks a declaratory judgment that Faith Electric breached the contract between them and breached the implied warranty of merchantability. [Doc. 1] Faith Electric denies that any of its products were defective and alleges in counterclaims that Royal Pacific breached the agreement, defamed Faith Electric, violated the New Mexico Unfair Practices Act (NMUPA), interfered with Faith Electric's prospective business advantage, and committed prima facie tort. [Doc. 10]

After inviting the parties to clarify the facts supporting jurisdiction, this Court found that the parties are diverse and the amount in controversy is greater than $75,000. [Doc. 33] Hence, this Court has jurisdiction under 28 U.S.C. § 1332.

II. Discussion

Royal Pacific filed an Answer to Faith Electric's Counterclaim I and now moves for dismissal of Counterclaims II through V for failure to state a claim. [Doc. 13, pg. 3; Doc. 14] In its Response to Royal Pacific's Motion , Faith Electric states in a footnote that it "does not oppose dismissal of [the counterclaims for violation of the NMUPA (Count III) and prima facie tort (Count V) ] without prejudice to later refiling them—as and if warranted." [Doc. 21, n.1] It opposes dismissal of its counterclaims for defamation and interference with prospective business advantage. [Doc. 21] After setting out the standard of review, the Court will address the effect of Faith Electric's agreement that counts III and V should be dismissed, then turn to Faith Electric's defamation and interference claims.

A. 12(b)(6) Standard of review

Royal Pacific brings its Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6) and argues that Faith Electric has failed to state a claim. [Doc. 13] Federal Rule of Civil Procedure 8(a)(2) requires a complaint to set out "a short and plain statement of the claim showing that the pleader is entitled to relief." In Bell Atlantic Corporation v. Twombly , 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court held that "to withstand a motion to dismiss, a complaint must have enough allegations of fact, taken as true, ‘to state a claim to relief that is plausible on its face.’ " Kansas Penn Gaming, LLC v. Collins , 656 F.3d 1210, 1214 (10th Cir. 2011) (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). In applying this test, a court accepts as true all "plausible, non-conclusory, and non-speculative" facts alleged in the plaintiff's complaint, Shrader v. Biddinger , 633 F.3d 1235, 1242 (10th Cir. 2011), but does not accept as true any legal conclusions. See Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (stating that "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions"). In short, in ruling on a Rule 12(b)(6) motion, "a court should disregard all conclusory statements of law and consider whether the remaining specific factual allegations, if assumed to be true, plausibly suggest the defendant is liable." Collins , 656 F.3d at 1214.

B. NMUPA Unfair Practices Act (Count III) and Prima Facie Tort (Count V)

Faith Electric does not oppose dismissal of its claims for violation of the NMUPA² and prima facie tort. [Doc. 21, pg. 4, n.1] However, it asks that the Court dismiss these counts "without prejudice" so that it can later refile them "as and if warranted." [Doc. 21, pg. 4, n.1] Royal Pacific opposes dismissal without prejudice and argues in its Reply that, instead, dismissal should be "with prejudice" because Faith Electric is unable to rectify the failings inherent in these counts in any subsequent pleading. [Doc. 27, pg. 1–2]

Faith Electric's statement could be construed as a voluntary dismissal of Counts III and V under Federal Rule of Civil Procedure 41(a)(1), which provides that "the plaintiff may dismiss an action without a court order by filing ... a notice of dismissal before the opposing party serves either an answer or a motion for summary judgment." Here, so long as the Court does not consider evidence outside of Faith Electric's counterclaims, Royal Pacific's Motion to Dismiss would not be converted to a motion for summary judgment, and thus would not prevent a voluntary dismissal under Rule 41(a). When a claim is dismissed pursuant to this rule, "the dismissal is [generally] without prejudice." Fed. R. Civ. P. 41(a).

However, our Tenth Circuit has stated that there is "no authority ... to support the contention that Rule 41(a) applies to dismissal of less than all claims in an action." Gobbo Farms & Orchards v. Poole Chem. Co., 81 F.3d 122, 123 (10th Cir. 1996). Here, Faith Electric agrees to the dismissal of only two of its five claims. Hence, Rule 41(a) does not apply. "Instead, a [p]laintiff who wishes to dismiss some claims, but not others, should do so by amending the complaint pursuant to Rule 15." Carskadon v. Diva Int'l, Inc. , No. 12-CV-01886-RM-KMT, 2013 WL 1876784, at *2 (D. Colo. May 3, 2013) ; see 9 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2362 (3d ed. 2008).

The Court will therefore construe Faith Electric's statement in the Response as a request for leave to amend its complaint. See Southcrest, L.L.C. v. Bovis Lend Lease, Inc. , No. 10-CV-0362-CVE-FHM, 2011 WL 1793388, at *4 (N.D. Okla. May 11, 2011) (stating that "[i]n cases where a plaintiff has attempted to use the Rule 41 mechanism to dismiss fewer than all claims against a defendant, courts convert the faulty Rule 41 motion into a Rule 15 motion to amend"). Under Rule 15(a)(2), leave to amend a complaint should be "freely given." Fed. R. Civ. P. 15(a)(2). It is within the Court's discretion, however, to deny leave to amend a pleading based upon "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and] futility of amendment." Foman v. Davis , 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). A motion to amend a complaint is futile if, notwithstanding the amendment, the complaint "would be subject to dismissal." Jefferson County Sch. Dist. No. R–1 v. Moody's Investor's Servs., Inc., 175 F.3d 848, 859 (10th Cir. 1999). Royal Pacific argues that amendment of the counterclaims would be futile, and hence, the Court should dismiss them with prejudice. [Doc. 27] Because Faith Electric stated its assent to dismissal of the claims in its Response , it did not address Royal Pacific's arguments as to whether dismissal should be with or without prejudice. [Doc. 21]

The Court will grant Faith Electric leave to amend its complaint. Royal Pacific's motion to dismiss will thus be denied as moot as to the prima facie tort and NMUPA claims. Should Faith Electric move for leave to reassert such claims in the future, the Court will consider the parties' arguments as to prejudice and futility of such an amendment upon full briefing at that time.

C. Defamation (Count II)

Royal Pacific argues that Faith Electric's defamation claim should be dismissed because Faith Electric "does not identify any defamatory statements and [therefore] does not allege the prima facie elements of a claim for defamation under New Mexico law." [Doc. 13, pg. 3] Faith Electric counters that it, "consistent with the notice pleading standard of Rule (8)(a)(2), alleges more than sufficient facts to support its defamation claim." [Doc. 21, pg. 4]

"Generally, the elements of a defamation action include: a defamatory communication, published by the defendant, to a third person, of an asserted fact, of and concerning the plaintiff, and proximately causing actual injury to the plaintiff."

Newberry v. Allied Stores, Inc. , 1989-NMSC-024, ¶ 16, 108 N.M. 424, 773 P.2d 1231 ; see UJI 13–1002(B). In addition, the plaintiff must show that "the defendant knew the communication was false or negligently failed to recognize that it was...