TECHNOLOGY CONSORTIUM, INC. v. DIGITAL COMMUNICATIONS, ASSOCIATES

• Decision Date: 21 February 1991
• Docket Number: No. CV 90-1721.,CV 90-1721.
• Parties: The TECHNOLOGY CONSORTIUM, INC., Plaintiff, v. DIGITAL COMMUNICATIONS ASSOCIATES, INC., the Racal Corporation and RDN, Inc., Defendants.
• Court: U.S. District Court — Eastern District of New York

757 F. Supp. 197

The TECHNOLOGY CONSORTIUM, INC., Plaintiff, v. DIGITAL COMMUNICATIONS ASSOCIATES, INC., the Racal Corporation and RDN, Inc., Defendants.

No. CV 90-1721.

United States District Court, E.D. New York.

February 21, 1991.

Shlimbaum, Shlimbaum & Jablonski by Lark J. Shlimbaum, Islip, N.Y., for plaintiff.

Latham & Watkins by Neil J. Gelfand, New York City, for defendant Digital.

Sullivan & Cromwell by William R. Norfolk, New York City, for defendants Racal and RDN Inc.

MEMORANDUM AND ORDER

WEXLER, District Judge.

Plaintiff, The Technology Consortium, Inc. ("TTC" or "plaintiff"), a New York Corporation, brings this action based on, inter alia, breach of contract, defamation, fraud, and intentional inteference with economic advantage. Named as defendants are Digital Communications Associates, Inc. ("DCA"), Racal Corporation ("RACAL") and RDN, Inc. ("RDN"). Plaintiff seeks monetary relief and punitive damages from defendants, as well as costs, disbursements and attorneys fees. Jurisdiction is premised on diversity of citizenship, pursuant to 28 U.S.C. § 1332(a), inasmuch as TCC is a New York corporation, DCA is a Georgia corporation, and both RACAL and RDN are Delaware corporations. Presently before the Court are DCA's motion to dismiss, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, as well as plaintiff's motion to amend the complaint pursuant to Rule 15(a) of the Federal Rules of Civil Procedure. After a brief statement of the background facts, the Court will address the parties' motions.

BACKGROUND

According to plaintiff, TTC had been a sales representative for DCA, and to that end was given an exclusive sales territory. The contract between TCC and DCA could be terminated by DCA without cause only on eighteen months notice to plaintiff. In fact, DCA apparently gave eighteen months notice of termination on December 2, 1988, but on January 4, 1990, after only thirteen months, nevertheless advised plaintiff that it had sold certain assets to RDN, a subsidiary of RACAL, and could no longer accept plaintiff's orders as a sales representative. According to plaintiff, the reason for the eighteen month provision in the contract was to give plaintiff time to obtain and build a new line of products to sell to its customers. During this eighteen month period it was agreed that full commission would be paid to plaintiff for all products sold in plaintiff's territory, and DCA additionally agreed not to contact plaintiff's customers without plaintiff's consent.

According to plaintiff, despite the above-described contractual provisions, since January 4, 1990, one or more of the defendants have contacted plaintiff's customers, within plaintiff's exclusive sales territory, and transacted sales of DCA's products. Defendants have also allegedly made discrediting and damaging statements about plaintiff to plaintiff's customers, thereby damaging or destroying business relationships developed by plaintiff over the course of its agreement with DCA. A specific example cited by plaintiff occured after January 1990, when Brian Fitzgerald, who was an employee of DCA and is now employed by either DCA, RACAL or RDN, personally visited Wang Financial Information Systems ("Wang"), one of plaintiff's most lucrative customers, and "represented to Wang that plaintiff had stopped selling DCA's products, that plaintiff had not been giving Wang the best financial deals possible and that larger discounts would be available to Wang because plaintiff was no longer involved...." See Proposed Amended Complaint, para. 20.

The original complaint, in five counts, sought relief on the following bases: (1) breach of contract and defamation based on the assertion that DCA breached its contract with TTC in that it did not give eighteen months notice. In addition, defendants contacted plaintiff's customers without plaintiff's permission in violation of the contractual agreement. As to the defamation claim, plaintiff alleges that defendant contacted plaintiff's customers and represented to them that plaintiff did not give them the best deals possible, causing plaintiff to lose its customers; (2) breach of contract based on plaintiff's allegation that defendant owes to plaintiff commission for sales made in its exclusive sales territory within the eighteen month period; (3) intentional interference with contract, wherein plaintiff alleges that defendants RDN and RACAL interfered with DCA's contractual relationship with plaintiff; (4) intentional interference with economic advantage, based on the allegation that one or more of the defendants intentionally interfered with plaintiff's prospective economic advantage with its customers, through "wrongful means," in order to harm plaintiff; and (5) misrepresentation and fraud.

By its motion to amend the complaint, plaintiff seeks to withdraw the fraud claim, as well as plead the remaining four original counts with more specificity. To that end, in the amended complaint, plaintiff seeks to add facts to support its defamation and tortious interference with economic advantage claims.

By its motion to dismiss, DCA challenges the complaint on a number of grounds. First, it is asserted that the cause of action for intentional interference with prospective economic advantage does not state a claim because it does not allege that DCA sold its network business to RACAL for the sole purpose of harming TTC. Even with regard to the amended complaint, DCA contends that plaintiff still fails to state a claim, in that plaintiff has conceded that DCA did not sell its network business for the "sole purpose" of harming TTC, and further, that the two examples of "wrongful conduct" cited by plaintiff, i.e., the breach of contract and the alleged contact with plaintiff's customers, fail as a matter of law.

Second, DCA argues that the fraud claim cannot stand because "New York courts hold that a fraud claim does not arise when the only alleged fraud relates to a breach of contract," and, further, that the fraud claim was not pleaded with the particularity required by Rule 9(b) of the Federal Rules of Civil Procedure. Third, it is asserted that plaintiff's defamation claim should be stricken for failure to state a claim, or alternatively that TTC should be required to provide a more definite statement, pursuant to Rule 12(e) of the Federal Rules of Civil Procedure. More particularly, DCA contends that plaintiff fails to plead which defendant made the alleged discrediting statements, to whom the statements were made, and the content of the statements.

Even with regard to the proposed amended complaint, DCA reiterates its position that plaintiff fails to state a claim for defamation based on the failure to plead which defendant made the alleged discrediting statement and the content thereof. In addition, defendant contends that plaintiff fails to specifically plead that the alleged discrediting statements were actually false.

DISCUSSION

A. Plaintiff's Motion to Amend

A party's request to amend its pleading "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a); Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962); Richardson Greenshields Securities, Inc. v. Lau, 825 F.2d 647, 653 n. 6 (2d Cir.1987). As the standard implies, leave to amend is to be granted liberally. In point of fact, "refusal to grant leave must be based on a valid ground." Ronzani v. Sanofi S.A., 899 F.2d 195, 198 (2d Cir.1990) (citation omitted). It is to be further noted that one of the more common uses of Rule 15(a) amendments is "to correct insufficiently stated claims or defenses." See 6 C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 1474 at 529 (1990).

Turning to plaintiff's motion, the Court notes that the complaint names several defendants, and even if DCA's motion to dismiss were granted, plaintiff should be permitted to amend in light of the fact that there are multiple defendants. See generally id. Furthermore, plaintiff does not seek to add any new or additional claims, but rather by the amended complaint seeks to plead the intentional interference with prospective economic advantage and the defamation claims with more specificity. Accordingly, plaintiff's motion to amend the complaint, pursuant to Rule 15(a) of the Federal Rules of Civil Procedure, is granted. The Court repeats that as a result of the amended complaint, plaintiff's fraud claim is withdrawn. Having granted the motion to amend, the Court turns to address DCA's motion to dismiss.

B. Defendant's Motion to Dismiss

On a motion to dismiss, the allegations of the complaint must be accepted as true, Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 1081, 31 L.Ed.2d 263 (1972), and the complaint must be construed in a light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). "Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test." Id. Furthermore, a complaint cannot be dismissed for failure to state a claim unless it appears, beyond a doubt, "`that the plaintiff can prove no set of facts in support of a claim which could entitle him to relief.'" Dahlberg v. Becker, 748 F.2d 85, 88 (2d Cir.1984) (citations omitted), cert. denied, 470 U.S. 1084, 105 S.Ct. 1845, 85 L.Ed.2d 144 (1985). With these principles in mind, the Court turns to assess the sufficiency of plaintiff's claims.

Intentional Interference with Economic Advantage

With respect to plaintiff's cause of action for intentional interference with economic advantage, the amended complaint alleges that:

After January, 1990, Defendants or one or more of them, by Brian Fitzgerald, who was at one time employed by Defendant DCA and is now employed by one or more Defendants, personally visited Wang Wang Financial Information Systems and represented to Wang that Plaintiff had stopped selling Defendant DCA's products, that

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