449 F.Supp.3d 449
D.N.J.2020Background
- Siemens and Diversified Protection Systems, Inc. (DPS, Inc.) executed three Distributor Agreements for California territories (Anaheim, Fremont, San Diego) requiring minimum aggregate sales and containing a forum-selection clause and limitation of liability provisions.
- Siemens sent a February 7, 2018 cure letter and a March 9, 2018 termination notice; Red Hawk (successor-in-interest to DPS LLC/DPS, Inc.) alleges Siemens thereafter interfered with DPSI’s business and customers by notifying contractors that DPSI could not supply materials.
- DPS LLC (later identified as successor-in-interest) sued in California; Siemens removed and obtained transfer to the District of New Jersey per the agreements’ forum-selection clause; Red Hawk filed an Amended Complaint in this Court asserting multiple claims.
- Red Hawk’s Amended Complaint pleads: breach of contract; breach of implied covenant of good faith and fair dealing; unjust enrichment; tortious interference with contract and prospective economic advantage; fraud; fraudulent misrepresentation; and defamation.
- Siemens moved to dismiss under Rules 12(b)(1), 12(b)(6), and to strike under Rule 12(f); the Court considered whether Red Hawk had Article III standing as successor-in-interest and addressed applicability of the economic-loss doctrine, pleading sufficiency, and the jury demand/punitive damages requests.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing | Red Hawk is successor-in-interest to DPS LLC/DPS, Inc. and thus holds contract rights | Red Hawk lacks rights because agreements were with DPS, Inc.; acquisition without Siemens’s consent breached the agreements so cannot create standing | Court found public conversion filing + pleadings adequate; Red Hawk has standing; Siemens’ counterclaim-based factual argument inappropriate at this stage |
| Breach of contract (failure to provide products vs. false statements) | Siemens refused to supply products and made false statements to DPSI customers causing loss | Siemens relied on cure/termination letters and contractual rights to justify withholding and termination | Claim may proceed for alleged failure to provide products; claim based on false statements to customers dismissed for failure to identify a contractual provision supporting that theory (Red Hawk may re-plead) |
| Breach of implied covenant of good faith and fair dealing | Siemens acted in bad faith by undermining DPSI’s cure efforts and making misleading statements, depriving DPSI of expected benefits | Conduct is duplicative of breach claim and governed by contract | Court allowed the claim to proceed as non-duplicative under a liberal reading—economic-loss doctrine not a bar to this claim |
| Unjust enrichment | Alternative to contract claim: Siemens obtained benefits (e.g., subcontract award) unfairly | Contract governs parties’ rights; no benefit was conferred on Siemens by Red Hawk | Dismissed for failure to allege a benefit conferred on Siemens with expected remuneration or that retention would be inequitable |
| Tortious interference (contract & prospective advantage) | Siemens contacted DPSI’s customers and prospective customers, causing loss independent of the Distributor Agreements | Economic-loss doctrine and contract terms control; claims are intrinsic to the contract | Claims survive dismissal at this stage; Court finds allegations plausibly plead interference extrinsic to contractual duties |
| Fraud and fraudulent misrepresentation | Siemens misrepresented the cure/termination process and intended not to honor the cure period, inducing detrimental reliance | Alleged misrepresentations relate to contract performance and are barred by economic-loss doctrine | Dismissed: claims are fraud in performance (not inducement) and thus barred by economic-loss doctrine |
| Defamation | Siemens made false statements to general contractors that DPSI could not provide materials, harming reputation | Economic-loss doctrine applies; alternatively, statements were privileged or insufficiently pleaded | Court allowed defamation claim: alleged statements are tortious and extrinsic to the contract; pleading is sufficiently particular for now; qualified privilege is premature |
| Motion to strike jury demand and punitive damages | Plaintiff requested jury and punitive damages for tort claims | Siemens argued Plaintiff waived jury via the agreements and punitive damages barred by contract limits | Court granted Red Hawk’s motion to withdraw jury demand (jury demand stricken); punitive-damages request not stricken (available for defamation; limitation-of-liability and unconscionability issues are factual and premature) |
Key Cases Cited
- In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997) (documents integral to the complaint may be considered on a motion to dismiss)
- Constitution Party of Pa. v. Aichele, 757 F.3d 347 (3d Cir. 2014) (distinguishing facial and factual Rule 12(b)(1) attacks; pleading accepted as true on facial attack)
- Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764 (3d Cir. 2013) (scope of materials courts may consider on Rule 12(b)(6) motions)
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (plaintiff bears burden to plead standing)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleadings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must state a plausible claim)
- Black Horse Lane Assocs., L.P. v. Dow Chem. Corp., 228 F.3d 275 (3d Cir. 2000) (elements and nature of implied covenant of good faith and fair dealing)
- Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210 (2005) (breach of implied covenant framework under New Jersey law)
- Travelers Indem. Co. v. Dammann & Co., Inc., 594 F.3d 238 (3d Cir. 2010) (economic-loss doctrine overview under New Jersey law)
- Mangan v. Corporate Synergies Grp., Inc., 834 F. Supp. 2d 199 (D.N.J. 2011) (defamation pleading standards and qualified privilege considerations)