Sleepy's LLC v. Select Comfort Wholesale Corp.
2015 U.S. App. LEXIS 3034
| 2d Cir. | 2015Background
- Sleepy’s, LLC sues Select Comfort in federal court after dissolution of their Dealer Agreement and Wind-Up; Sleepy’s asserts breach, disparagement, implied covenant, unfair competition, and slander per se.
- The Dealer Agreement required first quality merchandise and non-disparagement; term expired September 30, 2006, with possible extension only via termination/waiver.
- Sleepy’s alleged disparagement by Select Comfort sales staff during 2005–2007, supporting a breach of § 4(c).
- The Wind-Up Agreement (April–May 2007) allowed routine product removal and continued fulfillment of Sleepy’s orders for a period, under specific terms.
- The district court granted judgment on partial findings (2012) dismissing several contract claims and the slander per se claim; Sleepy’s appeals, challenging the interpretation of expiration/termination and evidentiary rulings.
- On appeal, the court vacated some dismissals and remanded for further proceedings, including reanalysis of contract extension and disparagement claims under a proper interpretation of the agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of §4(a) first quality merchandise | Sleepy’s argues §4(a) requires non-inferiority to Sleepy’s own products. | Select Comfort contends term standard is generic “first quality” and Sleepy’s failed to show inferior merchandise. | Affirmed dismissal of §4(a) breach claim. |
| Breach of §4(c) non-disparagement and contract extension | Contract could be extended by conduct beyond expiration; disparagement during extension breaches §4(c). | Expiration with no waiver prevents extension; no breach after expiration. | Vacated dismissal; remand to reconsider under proper contract interpretation. |
| Unfair competition and implied covenant after expiration | Implied duty to refrain from unfair competition persists with extended term. | Claims depend on pre-expiration conduct under the contract. | Vacated dismissal; remand for reconsideration. |
| Slander per se consent and Zaffron claim | Some statements were actionable and not merely hyperbolic; consent should not bar all claims. | Elicited statements may constitute consent; several statements were not facts. | Vacated judgment; remand to evaluate consent and whether statements conveyed facts; remand on Zaffron claim. |
Key Cases Cited
- Gross v. New York Times Co., 80 N.Y.2d 146 (N.Y. 1992) (defamation analysis prioritizes overall context over hypertechnical parsing)
- Park Knoll Assocs. v. Schmidt, 59 N.Y.2d 205 (N.Y. 1983) (whether statements are capable of being proven true or false; context matters)
- Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc., 314 F.3d 48 (2d Cir. 2002) (evidence of routine practice; use in defamation context)
- Herman Schwabe, Inc. v. United Shoe Mach. Corp., 297 F.2d 906 (2d Cir. 1962) (trial court discretion in admitting evidence of statements under risk of insincerity)
- Bolander v. Bolander, 703 N.W.2d 529 (Minn. Ct. App. 2005) (contract continuation by conduct after term; implied extension)