United States District Court, D. New Jersey
November 1, 2005.
Re: Engineered Framing Sys., Inc.
Vescom Structures, Inc.
The opinion of the court was delivered by: WILLIAM MARTINI, District Judge
This matter comes before the Court on defendant Vescom
Structures, Inc.'s ("Vescom's") motion to dismiss Counts Three,
Four, Seven and Eight of plaintiff Engineered Framing Systems,
Inc.'s ("EFS's") First Amended Complaint for failure to state a
claim under Federal Rule of Civil Procedure 12(b)(6). Plaintiff
EFS filed an opposition to that motion, as well as a cross-motion
seeking leave to amend its First Amended Complaint. Vescom did
not oppose EFS's motion to amend. There was no oral argument.
Fed.R.Civ.P. 78. For the reasons stated below, defendant's
motion is granted in part and denied in part and plaintiff's
cross-motion is granted. BACKGROUND
EFS is a subcontractor that performs carpenter and laborer
construction work for developers on residential projects. In the
past, EFS contracted with other companies to provide their joist
systems in EFS's designs. Vescom, one of the companies EFS would
contract with from time-to-time, distributes joist systems for
use in residential apartment and condominium construction.
Recently, EFS developed its own proprietary joist system for use
in its designs. As a result, EFS now competes with Vescom for
In 2004, Vescom obtained a judgment in its favor against EFS in
the amount of $577,000. Afterwards, according to EFS, Vescom
began making statements to EFS's customers that disparaged the
quality of EFS's joist systems and suggested that EFS's customers
would have to pay for the judgment via the attachment process.
On March 14, 2005, EFS filed a nine-count Complaint against
Vescom, alleging various causes of action including slander
(Counts One-Four), libel (Count Five), tortious interference with
contractual relations (Count Six), tortious interference with
prospective economic advantage (Count Seven), civil conspiracy
(Count Eight), and RICO violations (Count Nine). Vescom filed a
motion to dismiss all nine counts based on Rules 12(b)(1) and
12(b)(6). EFS opposed that motion and filed a cross-motion to
amend Counts Six-Nine and its jurisdictional allegations. In
response, Vescom filed a motion to strike EFS's cross-motion to
amend. The matter was referred to Magistrate Judge Hedges.
Ultimately, Judge Hedges denied Vescom's motions and granted
EFS's cross-motion to amend because the complaint's deficiencies
could be cured by amendment.
On July 26, 2005, EFS filed an eight count First Amended
Complaint.*fn1 Vescom now seeks to dismiss Counts Three,
Four, Seven and Eight of the First Amended Complaint pursuant to
Rule 12(b)(6). As it did before, EFS opposed that motion and
filed a cross-motion to amend, now seeking to add a ninth count
for product disparagement.
A. Standard of Review
In deciding a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6) all allegations in the complaint must be taken
as true and viewed in the light most favorable to the plaintiff.
Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels &
Casino Resorts, Inc., v. Mirage Resorts Inc., 140 F.3d 478, 483
(3d Cir. 1998). In evaluating a Rule 12(b)(6) motion to dismiss
for failure to state a claim, a court may consider only the
complaint, exhibits attached to the complaint, matters of public
record, and undisputedly authentic documents if the plaintiff's
claims are based upon those documents. Pension Benefit Guar.
Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). If, after viewing the
allegations in the complaint in the light most favorable to the
plaintiff, it appears beyond doubt that no relief could be
granted "under any set of facts which could prove consistent with
the allegations," a court may dismiss a complaint for failure to
state a claim. Hishon v. King & Spalding, 467 U.S. 69, 73
(1984); Zynn v. O'Donnell, 688 F.2d 940, 941 (3d Cir. 1982).
A motion to amend a complaint is governed by Federal Rule of
Civil Procedure 15(a). Rule 15(a) provides that after a
responsive pleading has been served, a plaintiff may amend the
complaint "only by leave of the court or by written consent of
the adverse party." Fed.R.Civ.P. 15(a). Leave is to be "freely
given when justice so requires." Id. The touchstone regarding
whether leave should be granted is "whether the non-moving party
will be prejudiced if the amendment is allowed." Dole v. Arco
Chem. Co., 921 F.2d 484, 488 (3d Cir. 1990). The policy favoring
liberal amendment of pleadings, however, is not unbounded. James
v. Interstate Credit & Collection, Inc., No. 03-1037, 2005 WL
1806486, at *1 (E.D. Pa. July 29, 2005). Rather, "certain factors
which weigh against amendment, including `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.'" Id. (quoting Dole,
921 F.2d at 487).
B. Counts Three and Four (Defamation) & Plaintiff's
Cross-Motion to Amend (Product Disparagement)
Counts Three and Four allege that Vescom made an oral,
defamatory statement to two of EFS's customers. Specifically,
Vescom is alleged to have told those customers that "EFS' joist
system was inferior and not engineeringly proper." (First Am.
Compl. ¶¶ 26, 33). Vescom seeks to dismiss Counts Three and Four
on the basis that they fail to state a cause of action for
defamation. Vescom argues that the statement cannot constitute
defamation because it concerns EFS's product, not its reputation,
and as such is properly categorized as product disparagement. EFS
responds that the statements are actionable under both defamation
and product disparagement. As a result, EFS opposes dismissal of
Counts Three and Four, and seeks to amend its complaint to add a
count for product disparagement. The Court agrees with plaintiff
and finds that the statement can support claims for defamation
and product disparagement.
"As a general rule, a statement is defamatory if it is false,
communicated to a third person, and tends to lower the subject's
reputation in the estimation of the community or to deter third
persons from associating with him." Lynch v. New Jersey Educ.
Ass'n, 735 A.2d 1129, 1135 (N.J. 1999) (citing Restatement
(Second) of Torts §§ 558, 559 (1977)).*fn2 As a cause of
action, defamation "affords a remedy for damage to one's
reputation." Diary Stores, Inc. v. Sentinel Publishing Co.,
516 A.2d 220, 224 (N.J. 1986). By contrast, product disparagement
"consists of the publication of matter derogatory to the
plaintiff's title to his property, or its quality, or to his
business in general, or even to some element of his personal
affairs, of a kind calculated to prevent others from dealing with him or otherwise
to interfere with others to his disadvantage." C.R. Bard, Inc.
v. Wordtronics Corp., 561 A.2d 694, 696 (N.J.Super.Ct. Law
Div. 1989). Unlike defamation, "[p]roduct disparagement protects
injured plaintiffs, corporate or individual, by compensating them
for pecuniary harm caused by false statements about their
products." Diary Stores, 516 A.2d at 237 (Garibaldi, J.,
Although defamation and product disparagement are separate
causes of action that provide remedies for different types of
injuries, a statement may be actionable under both theories.
Concerning this very issue, the New Jersey Supreme Court has said
The two causes may merge when a disparaging statement
about a product reflects on the reputation of the
business that made, distributed, or sold it. If, for
example, a statement about the poor quality of a
product implies that the seller is fraudulent, then
the statement may be actionable under both theories.
Diary Stores, 516 A.2d at 224; see also Mayflower Transit, LLC
v. Prince, 314 F. Supp. 2d 362
, 377 (D.N.J. 2004) (stating that
a statement may be actionable under both product disparagement
and defamation). Justice Garibaldi, in her concurring opinion in
Diary Stores, agreed that under the proper circumstances, a
statement that disparages one's products may also be defamatory:
"[D]efamation is found only where the imputation
fairly implied is that the plaintiff is dishonest or
lacking in integrity, or that he is deliberately
perpetrating a fraud upon the public by selling a
product which he knows to be defective." Thus, unless
the disparaging statement explicitly imputes to the
corporation fraud, deceit, dishonesty, or
reprehensible conduct in relation to the product,
courts will not deem a merely critical statement to
Diary Stores, 516 A.2d at 237-38 (Garibaldi, J., concurring)
(internal citations omitted).
Consequently, the issue is whether the statement not only
criticizes EFS's joist system, but casts a negative light on
EFS's reputation as well. The Court finds that it does. The
statement asserts that EFS's products are "not engineeringly
proper." That assertion goes beyond criticizing EFS's products
and implies that EFS was dishonest in selling joists that could
not meet some undisclosed standard. Thus, the statement is
susceptible to a defamatory interpretation and, therefore, Counts
Three and Four will not be dismissed.
Moreover, as defendant acknowledges, the statement criticizes
EFS's products. Thus, it comes as no surprise that EFS now seeks
to amend its complaint to add a count for product disparagement.
As stated above, the touchstone of determining whether to allow a
motion to amend is whether the non-movant will be prejudiced.
See Dole, 921 F.2d at 488. Here, it does not appear that Vescom will be prejudiced if the Court permits
EFS to amend its complaint. Vescom has had notice of the factual
underpinnings of the new count because it relies on the same
factual allegations set forth in Counts Three and Four, including
the statement that EFS's products are inferior and not
engineeringly proper. Further, there is no suggestion that EFS
has moved to amend in bad faith or for a dilatory motive. Indeed,
Vescom does not oppose EFS's motion. Accordingly, EFS will be
granted leave to file a Second Amended Complaint that includes
the additional count of product disparagement.
C. Count Seven (Tortious Interference with Prospective
Vescom seeks to dismiss Count Seven for failure to state a
claim. Specifically, Vescom argues that EFS has failed to plead a
prospective economic advantage that EFS had a reasonable
expectation of obtaining. EFS counters that it has adequately
pleaded its tortious interference with prospective economic
advantage claims in view of the lenient notice pleading standard
required by Fed.R.Civ.P. 8.
To establish a claim for tortious interference with prospective
economic advantage, a plaintiff must demonstrate: "(1) that
plaintiff had a reasonable expectation of an economic benefit or
advantage; (2) that defendant knew of plaintiff's expectancy; (3)
that defendant wrongfully and intentionally interfered with this
expectancy; (4) a reasonable probability that but for defendant's
wrongful interference, plaintiff would have realized the economic
benefit; and (5) that plaintiff was injured as a result of
defendant's conduct." Coast Cities Truck Sales, Inc. v. Navistar
Int'l Transp. Corp., 912 F. Supp. 747, 771 (D.N.J. 1995) (citing
Printing Mart-Morristown v. Sharp Elecs. Corp., 563 A.2d 31
(N.J. 1989)). A reasonable expectation of an economic advantage
cannot be predicated on a past business relationship. See
Printing Mart-Morristown, 563 A.2d at 39 ("Printing Mart's
nine-year business relationship would not in itself form the
basis of a prospective economic relationship (that fact looks
only to the past instances in which contracts were satisfactorily
performed). . . ."). Instead, plaintiff must allege specific
prospective economic opportunities, e.g., prospective customers
or contracts, that were interfered with by Vescom. See Storis,
Inc. v. Gers Retail Sys., Inc., No. 99-4400, 1995 WL 337100, at
*5 (D.N.J. May 31, 1995); Lucas Indus., Inc. v. Kendiesel,
Inc., No. 93-4480, 1995 WL 350050, at *9 (D.N.J. June 9, 1995).
Here, Count Seven alleges that EFS interfered with five
different prospective business opportunities by making defamatory
statements about it and its products. Two of these business
opportunities are sufficiently pleaded to withstand Vescom's
motion to dismiss. With regard to the first opportunity, EFS
asserts that it had an ongoing business relationship with Century
21 Construction ("Century 21") and Sharp Management ("Sharp") in
connection with the Raritan Town Center Project. (First Am.
Compl. ¶ 57). EFS was given a letter of intent to work on that
project, but as a result of Vescom's defamatory statements,
Century 21 and Sharp terminated the relationship and plaintiff
lost the project. (Id. at ¶¶ 26, 62(e)). With regard to the
second opportunity, which involved Century 21, plaintiff asserts
that as a result of Vescom's defamatory statements, Century 21
removed it "from consideration as a designer of a project known
as the Tenafly project, thereby forcing Plaintiff EFS to bid for Century
21's work with its own design." (Id. at ¶ 62). Ultimately,
plaintiff was not awarded the project. (Id. at ¶ 33). In those
two situations, plaintiff's previous business relationship with
Century 21 and Sharp, combined with the letter of intent or
pending bid to work on particular projects, provided plaintiff
with protectable economic advantages. See Printing
Mart-Morristown, 563 A.2d at 39 ("Once Printing Mart received an
invitation to bid, its pursuit of the printing contract was
entitled to protection from unjustifiable interference."). As
such, plaintiff has sufficiently pleaded that Vescom has
interfered with prospective contracts for purposes of stating a
claim for tortious interference with economic advantage. Thus,
Count Seven will not be dismissed in its entirety.
However, as for the other three business opportunities, Vescom
is correct that they fail to state a claim. For each of those
opportunities, EFS merely asserts that because of Vescom's
defamatory statements, "Plaintiff EFS' future prospective
economic relations [with certain companies] will be significantly
disrupted." (First Am. Compl. ¶¶ 62(b), (c), (d)). EFS, however,
fails to identify any specific prospective economic advantage
that was disrupted. Put differently, EFS presumes that yet to be
identified advantages will be interfered with at some future
point in time. That allegation is insufficient under the law.
See Storis, Inc., 1995 WL 337100, at *5 (dismissing tortious
interference claim for failure to plead a specific prospective
economic advantage that was lost as a result of the defendant's
actions). Accordingly, plaintiff's claims of tortious
interference with prospective economic advantage concerning BNE
Associates, LLC, Thirteenth Street Development, LLC, Jewel
Contracting Co., March, Associates, Inc., and Jerald Development
Group are dismissed for failure to state a claim.
D. Count Eight (Attempted Civil Conspiracy)
Count Eight asserts that Vescom attempted to engage in a civil
conspiracy with EFS by requesting that EFS file a false
affidavit. Vescom moves to dismiss Count Eight on the basis that
there is no cause of action for attempted civil conspiracy and
EFS fails to state a cause of action for civil conspiracy. EFS
argues, without any support, that attempted civil conspiracy, or
"solicitation" as EFS now refers to it, is an independent cause
of action. (See Pl.'s Opp'n Br. at 7). The Court agrees with
defendant and finds that there is no right of action for
attempted civil conspiracy.
To establish a cause of action for civil conspiracy in New
Jersey, a plaintiff must show "a combination of two or more
persons acting in concert to commit an unlawful act, or to commit
a lawful act by unlawful means, the principal element of which is
an agreement between the parties to inflict a wrong against or
injury upon another, and an overt act that results in damage."
Morgan v. Union County Bd. of Chosen Freeholders, 633 A.2d 985,
998 (N.J.Super.Ct. App. Div. 1993), certif. denied,
640 A.2d 850 (N.J. 1994). Significantly, the "gist of the claim is not the
unlawful agreement, `but the underlying wrong which absent the
conspiracy, would give a right of action." Id. (quoting Board
of Educ. v. Hoek, 138 A.2d 633 (N.J. 1962)). Here, however, there is no dispute that there was no
conspiracy. As Count Eight alleges, Vescom solicited EFS's
participation in a conspiracy. It asked EFS "to file a false
Affidavit alleging that Defendant Vescom is owed $40,000.00 on
the Roseland Properties. . . ." (First Am. Compl. ¶ 62). But EFS
refused to file such an affidavit. As a result, the parties never
entered into an agreement that could give rise to a conspiracy.
Thus, Count Eight asserts only that Vescom is liable for
attempted civil conspiracy.
The Court, however, is not aware of and has been unable to
locate a cause of action for attempted civil conspiracy.
Moreover, plaintiff has failed to identify the basis for its
assertion that such a cause of action exists. Indeed, it appears
unlikely that the New Jersey Supreme Court would recognize such a
cause of action. If, as the New Jersey Supreme Court has stated,
the "gist" of a civil conspiracy is the "underlying
wrong,"*fn3 what is the basis for recognizing a cause of
action based on an attempted civil conspiracy? In an attempted
conspiracy, as alleged by plaintiff, there is no underlying wrong
resulting from a combination of two or more persons acting
pursuant to an agreement to injure another. Instead, plaintiff's
cause of action rests solely on the allegation that Vescom
solicited its participation in a fraudulent scheme. (See Pl.'s
Opp'n Br. at 7 ("Accordingly, the allegations, if proven, would
demonstrate Vescom's improper solicitation of EFS to engage in [a
conspiracy].")). This by itself does not appear to be sufficient
because plaintiff can attribute no injury to the solicitation.
Rather, any injury allegedly suffered by plaintiff was the result
of Vescom's independent and unilateral actions. (See First Am.
Compl. ¶ 63 ("Since Plaintiff EFS and its president John Hildreth
have not signed said Affidavit, Defendant Vescom has gone to
Plaintiff EFS' customers attempting to have said customers stop
doing business with Plaintiff EFS by means of slander, liable,
defamation and tortious interference as set forth above in the
Amended Complaint.")). Accordingly, Count Eight fails to state a
cognizable cause of action and, therefore, is dismissed.
For the reasons stated above, Vescom's motion to dismiss is
granted in part and denied in part. As to Counts Three and Four,
the motion is denied. In Count Seven, the tortious interference
with prospective economic advantage claims concerning BNE
Associates, LLC, Thirteenth Street Development, LLC, Jewel
Contracting Co., March, Associates, Inc., and Jerald Development
Group are dismissed; otherwise, as to Count Seven, the motion is
denied. Further, Count Eight, which attempts to state a claim for
attempted civil conspiracy, is dismissed. Moreover, EFS's
cross-motion to amend the complaint to add a product
disparagement count is granted.
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