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Kare Distribution, Inc v. Jam Labels and Cards

January 30, 2012

KARE DISTRIBUTION, INC., PLAINTIFF,
v.
JAM LABELS AND CARDS LLC D/B/A A&M CARDS, ARTHUR AARON AND MARC STEINBERG,
DEFENDANTS.



The opinion of the court was delivered by: Wigenton, District Judge.

OPINION

Before the Court is Plaintiff/Counterdefendant Kare Distribution, Inc.‟s ("Kare" or "Plaintiff") Motion for Summary Judgment and Defendants/Counterclaimants Jam Labels and Cards LLC d/b/a A&M Cards ("A&M Cards"), Arthur Aaron ("Aaron") and Marc Steinberg‟s ("Steinberg") (collectively "A&M" or "Defendants") Cross-Motion for Summary Judgment pursuant to Fed. R. Civ. P. 56(c). This Court has jurisdiction pursuant to 28 U.S.C. § 1332(a). Venue is proper pursuant to 28 U.S.C. § 1391. These Motions are decided without oral argument pursuant to Fed. R. Civ. P. 78. For the reasons stated below, this Court grants in part, and denies in part Plaintiff‟s Motion and grants Defendants‟ Cross-Motion.

FACTUAL AND PROCEDURAL BACKGROUND*fn1

Kare is the direct distributor of prepaid phone cards provided by its parent company, Epana Networks, Inc. ("Epana"). (Pl.‟s First Am. Compl. ¶ 8 (hereinafter "Am. Compl.").)

Epana entered the international phone card business in 2002. (Id.) In or about 2004, Aaron and Steinberg formed A&M to provide "small-sized" printing services. (Defs.‟ Answer and Countercl. (hereinafter "Defs.‟ Countercl.") ¶ 10; Saenz Decl. Ex. B, Steinberg Dep. 10:20-18.) For that purpose, A&M entered into a contractual relationship with a small printing company in Pennsylvania, whereby A&M acted as a broker and subcontracted the printing orders they received from their customers. (Defs.‟ Countercl. ¶¶ 10, 11.)

In or about late 2004 or early 2005, Kare and A&M entered into an oral agreement in which A&M agreed to provide printing services for Kare‟s prepaid phone card business. (Defs.‟ Countercl. ¶ 20.) The parties never entered into a formal written agreement; however, the nature of their relationship is evidenced by their course of dealings and communications. (Id.; Am. Compl. ¶ 15.) Kare ordered cards from A&M by sending A&M a purchase order, to which A&M would respond with an invoice. (Am. Compl. ¶ 16.) Kare took ownership of the cards upon receipt of payment for the corresponding invoice by A&M. (Id.) At this time, A&M still subcontracted Kare‟s printing orders to A&M‟s third-party small printing company. (Defs.‟ Countercl. ¶ 21.)

By early 2006, Kare‟s market share and business operations had increased significantly (Id. ¶ 22.) As a result, A&M alleges that Kare, on two separate occasions, advised A&M that it would be unable to continue utilizing A&M as Kare‟s printer unless A&M increased their printing capacity. (Id. ¶¶ 23, 28.) The first occurred in 2006 when Kare required that A&M purchase or lease printing equipment sufficient to service Kare‟s needs. (Id. ¶ 23.) In return, A&M alleges that "Kare[, through Karen Vander*fn2 ("Vander"),] made specific promises and representations that if A&M purchased or leased its own printing equipment sufficient to service Kare‟s needs, Kare would utilize A&M for all of their printing needs - - limited only by A&M‟s capacity to meet Kare‟s requirements." (Id. (emphasis in original); Saenz Decl. Ex. C Steinberg Dep. 207:6-11.) Defendants assert that in an effort to meet Plaintiff‟s printing needs, A&M formed JAM Labels ("JAM"), a phone card and label printing company, because the printing company Defendants were using previously could not meet their printing capacity. (Saenz Decl. Ex. D-1, Aaron Dep. 37:1-4, 38:5-10.) A&M also alleges that, based exclusively on Kare‟s promises, A&M leased additional printing equipment totaling over $750,000. (Defs.‟ Countercl. ¶ 25.)

The second occasion transpired in 2007 when Kare allegedly informed A&M that it required more space to warehouse its cards (after printing but pre-shipping). (Id. ¶ 28.) Consequently, Kare requested that A&M lease a significantly larger facility for its printing and storage operations or Kare would no longer be able to do business with A&M. (Id. ¶ 30.) Additionally, A&M alleges that Kare promised that if A&M consented to its request, Kare would continue to use A&M for all of its printing needs and that any long-term leasehold expenses incurred by A&M would be more than covered by the increased volume in A&M‟s business. (Id.) Accordingly, in April 2007, A&M leased a new 28,500 sq. ft. facility in Jersey City, New Jersey, memorialized by a five (5) year lease terminating in May 2012. (Saenz Decl. Ex. Y; Defs.‟ Countercl. ¶ 31.) Consistent with both of Kare‟s alleged promises, in 2006 and 2007, it is undisputed that Kare continued to use and increase A&M‟s business by sending them virtually all of their printing business. (Defs.‟ Countercl. ¶ 33.)

In or about September 2008, Kare restructured its management team due to the loss of several executives and, in September 2008, placed Jay Adams ("Adams") in charge of its relationship with A&M. (Am. Compl. ¶ 19.) After reviewing A&M‟s pricing, Adams concluded that Kare could negotiate a better rate. (Id.; Defs.‟ Countercl. ¶ 36.) Consequently, around October 2008, Kare advised A&M that A&M would have to reduce its costs, among other things, in order to continue their business relationship. (Am. Compl. ¶ 27; Defs.‟ Countercl. ¶ 37, Saenz Decl. Ex. D-2, Aaron Dep. 245:15-22.) Ultimately, after a period of negotiation during which the parties continued their business relationship, Kare and A&M were unable to reach a final agreement regarding A&M‟s pricing. (Am. Compl. ¶¶ 31-32; Defs.‟ Countercl. ¶ 39.) The parties terminated their relationship in February 2009. (Am. Compl. ¶ 15.) Thereafter, Kare immediately requested the return of all warehoused cards. (Id. ¶ 37; Defs.‟ Countercl. ¶ 40.) A&M refused. (Am. Compl. ¶ 37.)

Accordingly, on March 4, 2009, Kare initiated this action. On March 24, 2009, Kare filed its First Amended Complaint ("FAC"), seeking damages for (1) Conversion, (2) Replevin, (3) Breach of Contract, (4) Unjust Enrichment, (5) Tortious Interference with Contract, (6) Breach of the Duty of Good Faith and Fair Dealing, and (7) Fraud. On May 15, 2009, Defendants answered the FAC and filed Counterclaims for (1) Estoppel, (2) Breach of Contract, (3) Breach of the Duty of Good Faith and Fair Dealing, (4) Economic Duress, (5) Fraudulent Inducement, and (6) Violation of the New Jersey Consumer Fraud Act ("NJCFA"), N.J. Stat. Ann. § 56:8-1 et seq.

On June 11, 2009, Kare filed a Motion to Dismiss A&M‟s economic duress, fraudulent inducement and NJCFA claims and to strike Aaron and Steinberg as counterclaimants from all Counts. (Docket Entry No. 23). Subsequently, on June 22, 2009, A&M filed a Cross-Motion to Dismiss Kare‟s claims against the Individual Defendants. (Id. at 27). On October 8, 2009, this Court granted Kare‟s Motion to Dismiss A&M‟s counterclaims for fraudulent inducement and violation of the NJCFA. This Court also concluded that although A&M‟s allegations did not support a claim for economic duress, it would grant Defendants "leave to amend their claim for economic duress for the limited purpose of detailing the circumstances under which they agreed to Kare‟s request to lower their prices."*fn3 Kare Distrib., 2009 U.S. Dist. LEXIS 94600, at *19, *29. However, the Court denied Kare‟s motion to strike Aaron and Steinberg as counterclaimants. Id. at *29. Additionally, it denied A&M‟s Cross-Motion to Dismiss the claims against the Individual Defendants. Id.

Subsequently, A&M returned the warehoused cards after Kare paid $10,000 to cover the cost of the return. (Docket Entry No. 122). As a result, on August 24, 2011, Kare filed a stipulation of dismissal with prejudice as to its replevin, unjust enrichment, and tortious interference claims. (Id.).

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The "mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247--48 (1986). A fact is only "material" for purposes of a summary judgment motion if a dispute over that fact "might affect the outcome of the suit under the governing law." Id. at 248. A dispute about a material fact is "genuine" if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The dispute is not genuine if it merely involves "some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

The moving party must show that if the evidentiary material of record were reduced to admissible evidence in court, it would be insufficient to permit the non-moving party to carry its burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Once the moving party meets its initial burden, the burden then shifts to the non-movant who must set forth specific facts showing a genuine issue for trial and may not rest upon the mere allegations, speculations, unsupported assertions or denials of its pleadings. Shields v. Zuccarini, 254 F.3d 476, 481 (3d Cir. 2001). "In considering a motion for summary judgment, a district court may not make credibility determinations or engage in any weighing of the evidence; instead, the non-moving party‟s evidence "is to be believed and all justifiable inferences are to be drawn in his favor.‟" Marino v. Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004) (quoting Anderson, 477 U.S. at 255).

The nonmoving party "must present more than just "bare assertions, conclusory allegations or suspicions‟ to show the existence of a genuine issue." Podobnik v. U.S. Postal Serv., 409 F.3d 584, 594 (3d Cir. 2005) (quoting Celotex Corp., 477 U.S. at 325). Further, the nonmoving party is required to "point to concrete evidence in the record which supports each essential element of its case." Black Car Assistance Corp. v. New Jersey, 351 F. Supp. 2d 284, 286 (D.N.J. 2004). If the nonmoving party "fails to make a showing sufficient to establish the existence of an element essential to that party‟s ...


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