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Beth Schiffer Fine Photographic Arts, Inc v. Colex Imaging

March 19, 2012

BETH SCHIFFER FINE PHOTOGRAPHIC ARTS, INC., PLAINTIFF,
v.
COLEX IMAGING, INC., WERNER WADON, AND POLIELETTRONICA, S.P.A., DEFENDANTS.



The opinion of the court was delivered by: Walls, Senior District Judge

OPINION

Plaintiff Beth Schiffer Fine Photographic Arts, Inc. ("Schiffer") brings the present action over its purchase of an allegedly defective photograph processing and printing machine. The Italian manufacturer PoliElettronica, S.p.A. ("PoliElettronica" or "Poli") moves under Federal Rule of Civil Procedure 12(b)(6) to dismiss all of the claims asserted against it in the First Amended Complaint. The Court grants the motion in part to dismiss the breach of contract claim as to defendant PoliElettronica, but denies the motion to dismiss the remaining claims.

FACTUAL AND PROCEDURAL BACKGROUND

Schiffer is a New York corporation that provides professional photographic laboratory services to commercial and professional photographers. First Am. Compl. ¶¶ 10--12. In September 2005, Schiffer purchased a photograph printing and processing machine known as the PoliElettronica LBC 30" Compact LaserLab (the "Poli 2") through defendant Colex Imaging, Inc. ("Colex") for approximately $232,000, including finance charges. Id. ¶¶ 16--21. Colex is a New Jersey corporation that sells and services photographic equipment, both independently and allegedly as a sales representative or distributor for manufacturers. Id. ¶ 4. Werner Waden ("Waden"), incorrectly named as Werner Wadon, is Colex's principal and president. Id. ¶ 6; Answer to First Am. Compl., Affirm. Defenses, and Cross Claim 1. The Poli 2 was manufactured and marketed by Italian corporation PoliElettronica, whose principal place of business is in Italy. First Am. Compl. ¶¶ 7--8, 17. Schiffer alleges that Colex and Waden acted as PoliElettronica's authorized agents, distributors, and representatives in the United States. Id. ¶ 37.

Schiffer claims that the Poli 2 was defective and not suitable for its advertised purpose. In purchasing the machine, Schiffer allegedly relied on the defendants' misrepresentations that the Poli 2 was a "professional grade" machine and that it was a smaller and cheaper version of an earlier photograph processing and printing machine (the "Poli 1") that Schiffer already owned and had used for years without problem. Id. ¶¶ 19--20. Schiffer alleges that the Poli 2 has not worked, except for a few days, since its purchase and that the defendants' attempts to make it perform properly have been limited, ineffective, and unsuccessful. Id. ¶¶ 38, 43. Although the defendants allegedly insisted that the Poli 2 could and would be repaired, Schiffer maintains that the defendants and PoliElettronica's US agent Poli-Pro USA Inc. ("Poli-Pro USA") all undertook repairs in bad faith knowing that they were futile due to serious design flaws. Id. ¶¶ 41--42. All three defendants have now allegedly admitted to Schiffer that the Poli 2 cannot be repaired. Id. ¶ 45. In addition to losing the $232,000 purchase price, Schiffer argues that the company suffered at least $1.5 million in damage to its business and reputation because it was unable to serve clients after it advertised increased capacity and services. Id. ¶¶ 53--54, 66, 77, 85, 94.

Schiffer initially sued Colex, Waden, and PoliElettronica in the Southern District of New York in January 2009, but that court dismissed the case as to PoliElettronica in July 2010 for lack of personal jurisdiction. Beth Schiffer Fine Photographic Arts, Inc. v. Colex Imaging, Inc., No. 09-cv-130, 2010 WL 2835543, at *5 (S.D.N.Y. Jul. 1, 2010). Schiffer voluntarily dismissed the remaining claims against Colex and Waden and re-filed the action here in October 2010. On PoliElettronica's motion to dismiss the initial Complaint, this Court dismissed without prejudice four of the five counts against PoliElettronica in July 2011 for Schiffer's failure to sufficiently plead these claims. Opinion & Order 9, ECF No. 32.

On August 19, 2011, Schiffer filed its First Amended Complaint reasserting claims against PoliElettronica and the other defendants for breach of contract, breach of implied warranties, fraud, and a violation of the New Jersey Consumer Fraud Act, N.J. Stat. Ann. §§ 56:8-1 et seq. ("NJCFA"). Colex and Waden brought a cross-claim on September 23, 2011 against PoliElettronica for liability arising from any alleged misrepresentations. Answer to First Am. Compl., Affirmative Defenses, and Cross Claim ¶ 112. On September 9, 2011, PoliElettronica again moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) on the grounds that the First Amended Complaint fails to sufficiently plead the claims against it and that the dispute is subject to forum selection clauses in the Poli 2's product manual that requires litigation in Italy. This motion is decided without oral argument pursuant to Federal Rule of Civil Procedure 78(b).

STANDARD OF REVIEW

In deciding a motion to dismiss for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6), the court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 306 (3d Cir. 2007). Under Federal Rule of Civil Procedure 8(a)(2), the complaint need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." At the same time, the complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). As a result, the complaint must contain more than "bare-bones allegations" or "threadbare recitals of the elements of a cause of action." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Iqbal, 129 S.Ct. at 1949). The plaintiff must allege "enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element." Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008).

DISCUSSION

The Court grants in part and denies in part defendant PoliElettronica's motion to dismiss. The Court grants the motion to dismiss the breach of contract claim against PoliElettronica because the First Amended Complaint does not plausibly allege the existence of a contract between the parties. Based on this finding, the Court denies the motion to dismiss based on forum selection clauses in the product manual because there is no indication that they are enforceable here. The Court also denies the motion to dismiss the remaining claims for breach of implied warranty, violations of the NJCFA, and common law fraud because the First Amended Complaint is sufficient to state plausible claims under New Jersey law and the alleged facts are sufficient to support the application of New Jersey law at this stage.

I.Allegations of a Contract Between Schiffer and PoliElettronica

Two arguments in the motion to dismiss turn on the extent to which an enforceable contractual relationship existed between the parties. PoliElettronica moves to dismiss the breach of contract claim on the grounds that Schiffer fails to adequately allege a contract between the two parties. Mot. to Dismiss 15--16. At the same time, PoliElettronica moves to dismiss all the claims against it by seeking to enforce forum selection clauses designating an Italian forum that were included in the product manuals delivered with the Poli 2. Id. at 5--7. The Court previously found that Schiffer's initial Complaint did not sufficiently allege that a contractual relationship existed between Schiffer and PoliElettronica because it did not adequately allege that Colex and Waden were acting as PoliElettronica's agents in the sale of the Poli 2. Opinion & Order 5--6. Because the First Amended Complaint fails to correct the deficiencies in this alleged agency relationship, the Court grants the motion to dismiss the breach of contract claim as to PoliElettronica. The Court similarly denies PoliElettronica's motion to dismiss the remaining claims under the forum selection clauses because there is no indication at this stage that they are enforceable under any contractual relationship between the parties.

a.Colex and Waden as Agents of PoliElettronica

The alleged contractual relationship supporting the breach of contract claim relies on Schiffer's allegations that Colex and Waden were functioning as PoliElettronica's agents in the sale of the Poli 2. The First Amended complaint states that Colex and Waden were PoliElettronica's "authorized agents, distributors, and representatives" in the United States that had actual or apparent authority to "act, speak for, and bind" the company. First Am. Compl. ¶ 37. To support this claim, the First Amended Complaint generally alleges that PoliElettronica "authorized and permitted" Colex and Waden to act on its behalf in these matters "through its conduct and communications." Id. It also alleges that Colex and Waldon "at all relevant times held themselves out to be" agents of PoliElettronica. Id. The Court finds that Schiffer does not plausibly allege that Colex and Waden functioned as PoliElettronica's agents acting on its behalf in the sale of the Poli 2 with either actual or apparent authority to bind the company.

The New Jersey Supreme Court has explained that an "agency relationship is created when one person (a principal) manifests assent to another person (an agent) that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act." N.J. Lawyers' Fund for Client Prot. v. Stewart Title Guar. Co., 1 A.3d 632, 639 (N.J. 2010) (quoting Restatement (Third) of Agency § 1.01 (2006)). An agent acts under actual authority "when, at the time of taking the action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal's manifestations to the agent, that the principal wishes the agent so to act." Id. (quoting Restatement (Third) of Agency § 2.01). The agent's actual authority encompasses acts which the principal has expressly authorized as well as those that the principal has impliedly authorized. Sears Mortg. Corp. v. Rose, 634 A.2d 74, 79 (N.J. 1993). Implied authority can be inferred from the specific circumstances of the principal's relationship with the agent based on "the nature or extent of the function to be performed, the general course of conducting the business, or from particular circumstances in the case." Id. (quoting Carlson v. Hannah, 78 A.2d 83, 88 (N.J. 1951)). The court must look to the factual relationship between the parties and should not rely exclusively on any statement attempting to define the relationship. Id.

To determine whether Colex and Waden had actual authority to bind PoliElettronica, the Court must look to evidence of mutual assent for Colex and Waden to enter into sales contracts on its behalf and under its control. The First Amended Complaint asserts that "Schiffer purchased a Poli 2 from Poli through its distributor, supplier, agent, and/or representative Colex, and Waden personally." First Am. Compl. ¶ 21. More specifically, Schiffer cites the Declaration of Paola Menegatti for the proposition that PoliElettronica "sold its products, including the Poli 2, to Colex knowing that Colex was purchasing such products for ultimate resale and purchasing such product for resale against pending orders." Id. ¶ 22, Ex.B. Schiffer's First Amended Complaint explains as background that this equipment is "not bought by distributors in bulk to be resold in the retail setting such as in the automobile industry," but is "purchased by distributors only against firm customer orders, such as the one Schiffer placed in this case," because each machine "costs hundreds of thousands of dollars." Id. ¶ 25.

Where a distributor receives goods from a manufacturer for resale to a third party, as alleged here, the distributor is not necessarily acting as the manufacturer's agent. Instead, the question of whether the distributor is acting as an agent of the manufacturer or as an independent buyer "depends upon whether the parties agree that his duty is to act primarily for the benefit of the one delivering the goods to him or is to act primarily for his own benefit." Restatement (Second) of Agency § 14J. To this end, the court should consider the nature of the relationship between parties, the course of the negotiations, and the specific terms of the transactions. See id. § 14J cmt. b (identifying several factors bearing on a distributor's relationship with a manufacturer, including whether the distributor gets legal title and possession of the goods, whether the distributor also sells the goods of another manufacturer, the extent to which the distributor can profit from setting the resale price at a higher level than the price paid to the manufacturer, and whether the distributor assumes risk of loss or the risk that the resale transaction will not be completed).

The facts alleged regarding the sale of the Poli 2 do not plausibly support the claim that Colex was acting on PoliElettronica's behalf or under its control, but instead suggest that Colex was acting primarily for its own benefit as an independent dealer. The First Amended Complaint explains that, at the outset, Waden "became aware that Schiffer was looking for an additional professional printer/processor, and urged Ms. Schiffer to allow him and Colex to find a professional grade printer/processor that would meet Schiffer's specific business needs and requirements." First Am. Compl. ¶ 15. Although Schiffer purchased the Poli 2, Colex also sold equipment from other manufacturers. Id. ¶ 4. The First Amended Complaint itself is silent as to the terms under which PoliElettronica provided the Poli 2 to Colex, but the attached Declaration of Paola Menegatti outlines some of the details of this relationship that Schiffer argues "creates genuine issues of material fact as to the existence of an agency relationship" requiring further discovery. Opp'n to Mot. to Dismiss 25. See First Am. Compl. ¶ 22. Instead, the Menegatti Declaration further supports a finding that discovery is unlikely to reveal any evidence to support a finding that Colex was conducting business on PoliElettronica's behalf. PoliElettronica initially submitted the Menegatti Declaration in the initial action in the Southern District of New York to support its motion to dismiss for lack of personal jurisdiction. See Beth ...


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