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FOODTOWN v. SIGMA MKTG. SYS.

July 23, 1981

FOODTOWN, a New Jersey Corporation, Plaintiff,
v.
SIGMA MARKETING SYSTEMS, INC. and ARA Services, Defendants



The opinion of the court was delivered by: FISHER

ON RENEWED MOTION TO DISMISS

This case is before me on defendants' renewed motion to dismiss plaintiff's amended complaint based upon the statute of limitations on the grounds that (1) plaintiff has failed to meet the particularity requirements of Fed.R.Civ.P. 9(b) and the fraudulent-concealment doctrine; or (2) in the alternative, plaintiff has failed to establish due diligence and reasonable care in ascertaining the alleged fraud so as to toll the applicable statute of limitations. Pursuant to Fed.R.Civ.P. 12(b), this motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, as matters outside the pleadings have been considered by the court, and the parties have been given reasonable opportunity to present all pertinent material to the court.

 To earn summary decision, a party must merit judgment as a matter of law upon genuinely indisputable material facts. Fed.R.Civ.P. 56(c). Only a clear showing of authentic nondispute will satisfy the Rule 56(c) standard, which demands the absence of triable fact issues. Ely v. Hall's Motor Transit Co., 590 F.2d 62, 66 (3d Cir. 1978). The movant bears this burden. Manetas v. International Petroleum Carriers, Inc., 541 F.2d 408, 413 (3d Cir. 1976). The opposing party receives the benefits of all reasonable doubts and inferences drawn from underlying facts. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038, 97 S. Ct. 732, 50 L. Ed. 2d 748 (1977); Cinema Service Corp. v. Twentieth Century-Fox Film Corp., 477 F. Supp. 174, 175 (W.D.Pa.1979). A disfavored motion, summary judgment should only issue when the movant demonstrates a clear, uncontestable right to judgment, and the opponent is not entitled to judgment under any circumstances. Ledwith v. Douglas, 568 F.2d 117, 119 (8th Cir. 1978). The record must be adequate for determination of the legal questions raised; a deficient factual foundation cannot support summary resolution. 6 Moore's Federal Practice P 56.15 at 609 (2d ed. 1980). The slightest doubt as to the facts precludes granting the motion. Tomalewski v. State Farm Life Insurance Co., 494 F.2d 882, 884 (3d Cir. 1974).

 On October 7, 1980, defendants filed a motion to dismiss the complaint based upon the statute of limitations. In my November 18, 1980, opinion, I held that the four-year statute of limitations period set forth in N.J.S.A. 12A:2-725 applied to the first four counts of plaintiff's complaint. However, I noted that the limitation provisions set forth in that section did not alter the common-law principles regarding the tolling of the statute of limitations, and that defendants' fraudulent concealment of a cause of action would suspend the running of the statute of limitations in this case pursuant to N.J.S.A. 12A:2-725(4). Accordingly, I denied defendants' motion to dismiss and granted plaintiff leave to amend its complaint to meet the particularity requirements of Fed.R.Civ.P. 9(b) and the fraudulent concealment doctrine. I also indicated that upon additional discovery as to the tolling and fraudulent-concealment issues, I would hear defendants' renewed motion to dismiss the complaint.

 On December 2, 1980, plaintiff filed an amended complaint setting forth the particular circumstances of the defendants' alleged overcharges to Foodtown and defendants' course of concealment. *fn1" Plaintiff alleges that under the Agreement between the parties, Foodtown would be charged only Sigma's actual landed costs for the merchandise. Amended Complaint at P 15. While Sigma's landed costs in the Agreement were computed at a duty rate of 36% of the invoice FOB Japan and $ .10 per dozen, on or about April 8, 1975, Sigma allegedly learned from the United States customs duty service that the merchandise would be subject to the lower duty rate of 18% of the invoice FOB Japan and $ .05 per dozen. Amended Complaint at PP 14, 15, 16. The complaint further alleges that commencing in August 1975

 
Sigma, which alone had knowledge that it had paid a duty rate which was approximately 50% lower than the duty rate which was included in the unit prices stated in the Agreement, deliberately concealed this fact from Foodtown despite its obligation under the Agreement to charge Foodtown only its landed costs and to provide Foodtown with verification of its landed costs for the merchandise.
 
Sigma falsely and fraudulently represented to Foodtown Sigma's landed costs for the merchandise by charging Foodtown through the invoices accompanying each delivery at a customs duty rate which was substantially in excess of the rate paid by Sigma upon importation of the merchandise. Sigma falsely and fraudulently represented on the invoices that its landed costs included the higher duty rate of 36% FOB Japan and .10 per dozen, whereas the duty rate actually paid by Sigma was in fact the lower rate of 18% FOB Japan and $ .05 per dozen.

 Amended Complaint at P 18. See also Amended Complaint at PP 17, 19, 20, 21. Foodtown states that in reliance "upon Sigma's reputation, status and position in the importing industry, and upon Sigma's obligations under the Agreement to charge Foodtown only Sigma's actual landed costs for the merchandise ...," Foodtown paid the amounts demanded by Sigma. Amended Complaint at P 23.

 The amended complaint further alleges that in early February 1980, Foodtown first learned of these overcharges as a result of a meeting between its general manager and a former employee of Sigma; the precise amounts of the overcharges were not learned until March 5, 1980. Amended Complaint at PP 25, 26. Foodtown states that

 
Foodtown did not, and could not have, discovered the fact or the amount of the overcharges prior to the meeting of February, 1980 described at Paragraph 25. Sigma alone had knowledge of the overcharges, and Sigma had, since April 1975, deliberately concealed these overcharges from Foodtown and had misrepresented to Foodtown the amount of its landed costs by representing that its landed costs included the higher duty rate, in violation of its obligations under the Agreement.

 Amended Complaint at P 27.

 Plaintiff's amended complaint avers active concealment of the cause of action. Courts have distinguished between this type of fraudulent concealment and the situation where defendant does nothing to conceal his wrong:

 
At least two types of fraudulent behavior toll a statutory period. Bailey v. Glover, 88 U.S. 342, 21 Wall. 342, 22 L. Ed. 636 (1875). In the first type, the most common, the fraud goes undiscovered even though the defendant after commission of the wrong does nothing to conceal it and the plaintiff has diligently inquired into its circumstances. The plaintiffs' due diligence is essential here. Morgan v. Koch, 419 F.2d 993 (7th Cir. 1969); Developments in the Law Statutes of Limitations, 63 Harv.L.Rev. 1177 (1950). In the second type, the fraud goes undiscovered because the defendant has taken positive steps after commission of the fraud to keep it concealed.... Dawson, Fraudulent Concealment and Statutes of Limitations, 31 Mich.L.Rev. 875 (1933). This type of fraudulent concealment tolls the limitations period until actual discovery by the plaintiff. The court in Smith v. Blachley, 198 Pa. 173, 47 A. 985 (1901), aptly stated:
 
The cases which hold that, where fraud is concealed, or, as sometimes added, conceals itself, the statute runs only from discovery, practically repeals the statute pro tanto. Fraud is always concealed. If it was not no fraud would ever succeed. But, when it is accomplished and ended, the rights of the parties are fixed. The right of action is complete. If the plaintiff bestirs himself to inquire, he has ample time to investigate and bring his action. If both parties rest on their oars, the statute runs its regular course. But, if the wrongdoer adds to his original fraud affirmative efforts to divert or mislead or ...

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