Prestige Brands Inc. v. Guardian Drug Co.Prestige Brands Inc. v. Guardian Drug Co.
MEMORANDUM DECISION
Plaintiff Prestige Brands Inc. (“PBI”) and its affiliate, plaintiff Blacksmith Brands, Inc. (“Blacksmith”), market and sell over-the-counter healthcare products to retailers. Defendant-third-party plaintiff Guardian Drug Company (“Guardian”) is a drug manufacturer that sold certain healthcare products to plaintiffs. In this action, PBI and Blacksmith assert breach of contract and other claims against Guardian arising from three product recalls involving products supplied by Guardian. With respect to the claims arising out of one of the recalled products, Guardian asserts third-party claims against NuSil Technology LLC (“NuSil”), the producer of that product’s active ingredient.
Before the Court is NuSil’s motion to dismiss the third-party complaint (Doc. # 18). For the following reasons, the motion is GRANTED.
The Court has subject matter jurisdiction pursuant to
BACKGROUND
For purposes of ruling on NuSil’s motion to dismiss, the Court accepts as true all allegations of the third-party complaint, as forth below.
NuSil manufactures a product known as MED-341, which is used in certain anti-gas medications. Between April 2010 and February 2011, Guardian purchased from NuSil three shipments of MED-341, which Guardian used to manufacture “PediaCare® Infant Gas Relief Drops.”
In the spring of 2011, NuSil discovered that certain lots of MED-341 sold by Nusil had been subject to “possible microbial contamination.” Nusil reported its discovery to the Food and Drug Administration,
Guardian contends NuSil agreed, “in accordance with industry standards and practices,” to “defend, indemnify and reimburse Guardian for all of the expenses it incurred in connection with the recall and the recall-related expenses that are recoverable by Guardian’s customers.” According to Guardian:
where parties have not otherwise agreed on how recalls are to be handled and conducted, it is understood in the industry and it is an ‘understood industry practice that when the supplier of an active ingredient requests that its customer initiate and service on its behalf a recall of products that contain a potentially harmful active ingredient, the supplier is responsible for all recall costs that its customer[s] incur[ ]. It makes no sense for Guardian to have agreed to initiate and service on NuSil’s behalf the recall, unless NuSil would make Guardian whole for all costs it incurred.
Guardian does not allege it entered into any written agreement with NuSil.
Guardian subsequently requested that NuSil defend and indemnify Guardian for its recall-related expenses. Instead, NuSil refunded to Guardian the full purchase price of the recalled MED-341. Guardian contends it incurred recall-related damages in excess of the amount refunded by NuSil.
Based on the foregoing, Guardian asserts claims against NuSil for (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) promissory estoppel; (4) unjust enrichment; and (5) indemnification.
DISCUSSION
I. Legal Standard
“The function of a motion to dismiss is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof.” Ryder Energy Distrib. Corp. v. Merrill Lynch Commodities, Inc.,
To survive a Rule 12(b)(6) motion, the allegations in the complaint must meet a standard of “plausibility.” Ashcroft v. Iqbal,
II. Analysis
In support of its motion to dismiss, NuSil has produced purported invoices relating to Guardian’s purchases of MED-341. The invoices list several “Terms & Conditions of Sale,” which include the following provisions relating to Guardian’s ability to maintain a suit against NuSil and where such a suit may be properly brought:
[Guardian]’s exclusive remedy and [NuSilj’s sole responsibility for any claim or cause of action arising under this Agreement is expressly limited to either (1) replacement of all goods shown-to be other than as warranted or (2) refund of the purchase price of all goods shown to be other than as warranted---- In no event may [Guardian] commence any action against [NuSil] with respect to the products after the expiration of eighteen (18) months following the date on which [NuSil] delivers the products.... IN NO EVENT SHALL SELLER BE LIABLE TO PURCHASER, WHETHER IN CONTRACT OR TORT OR FOR BREACH OF STATUTORY DUTY, FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL, OR SPECIAL DAMAGES INCLUDING WITHOUT LIMITATION CLAIMS FOR INDEMNIFICATION, LOST REVENUES AND PROFITS.
Each party further acknowledges that the agreement between the parties has been entered into and shall be performed by [Guardian] in Santa Barbara County, California, and agrees that the exclusive venue for all actions arising under or in connection with these Terms and the order accepted hereby shall be the Superior Court in and for Santa Barbara County, California.
Based on these terms and conditions, NuSil argues (1) NuSil is not liable for any damages in excess of the purchase price of the MED-341, which NuSil has already refunded to Guardian; (2) venue in this District is improper because of the venue selection clause in the terms and conditions; and (3) Guardian’s claims are untimely because Guardian commenced this action more than eighteen months after NuSil’s last shipment of MED-341 to Guardian.
In its opposition papers, Guardian argues that the terms and conditions listed on the invoices are inapplicable because Guardian and NuSil allegedly “entered into a new agreement months after its purchase of product from NuSil concerning the recall Guardian serviced on NuSil’s behalf.” (Guardian Br. at 5).
A. Choice of Law
As a threshold matter, the Court must determine which state’s laws are applicable to Guardian’s claims. NuSil is a Delaware LLC with its principal place of business in California, and Guardian is incorporated in New Jersey and has its principal place of business there. NuSil argues that — based on the terms and conditions of the invoices — California law applies. Guardian argues that the terms and conditions are inapplicable because the invoices relate to “separate, distinct agreements], which [are] not at issue in th[is] litigation.” Without further explanation, Guardian then applies New York law.
It appears unlikely that New York law applies to Guardian’s claims, as neither Guardian nor NuSil are New York entities, and Guardian does not allege that any relevant events occurred in New York.
B. Breach of Contract
Under New York and California law, “[a] cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiffs performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach.” CDF Firefighters v. Maldonado,
Here, Guardian has failed sufficiently to allege under either New York or California law that NuSil ever consented to enter into a contract with Guardian with respect to the MED-341 recall. Importantly, the third-party complaint does not explicitly allege that NuSil affirmatively agreed to reimburse and indemnify Guardian for its recall-related expenses. Instead, Guardian asserts NuSil’s obligation to indemnify and reimburse Guardian arises from “industry standards and practices,” according to which, “where parties have not otherwise agreed on how recalls are to be handled and conducted, it is understood in the industry ... that when the supplier of an active ingredient requests that its customer initiate and service on its behalf a recall ... the supplier is responsible for all recall costs.” Guardian appears to concede that Guardian and NuSil never “agreed on how recalls are to be handled,” and thus fails to satisfy the first element of a breach of contract claim — the existence of an agreement. See CDF Firefighters v. Maldonado,
In its opposition papers, Guardian summarily states it “entered into a new agreement months after its purchase of product from NuSil concerning the recall Guardian serviced on NuSil’s behalf.” However, Guardian has failed to identify (1) the individuals who negotiated and entered into the agreement; (2) the specific terms of the agreement; or (3) when and where the agreement was made. Having pleaded no specific facts concerning this new, presumably oral contract, and instead making only the conclusory statement that such a contract exists, Guardian has failed to state a plausible breach of contract claim. See Ashcroft v. Iqbal,
C. Implied Covenant of Good Faith and Fair Dealing
Under both New York and California law, “[t]he prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties.” Smith v. City & Cnty. of San Francisco,
Because Guardian has failed sufficiently to allege the existence of a contract between Guardian and NuSil, Guardian necessarily has failed to state a claim for breach of the implied covenant of good faith and fair dealing.
D. Promissory Estoppel
Under both California and New York law, to establish a claim for promissory estoppel Guardian must demonstrate: (1) NuSil made a clear and unambiguous promise; (2) upon which Guardian reasonably relied; and (3) as a result, Guardian was injured. Aceves v. U.S. Bank, N.A.,
Here, Guardian has failed to allege that NuSil made a clear and unambiguous promise to indemnify Guardian for its recall-related expenses. Quite to the contrary, the third-party complaint merely alleges that, “[biased on well known and regarded industry practice, NuSil knew or should have known that by requesting Guardian to initiate and service on its behalf the ... recall, it was indicating its willingness to defend, indemnify and reimburse Guardian for its ... expenses.” These allegations fall far short of successfully pleading a promissory estoppel claim because Guardian does not allege NuSil made any affirmative promise to indemnify and reimburse Guardian, much less “a promise clear and unambiguous in its terms.” Aceves v. U.S. Bank, N.A.,
E. Unjust Enrichment
“There is a split of authority in California whether unjust enrichment is a cause of action. One line of cases identifies the elements of an unjust enrichment claim as one where there is (1) the receipt of a benefit, and (2) the unjust retention of the benefit at the expense of another. The other line of cases identifies unjust enrichment as a ‘general principle’ and not a cause of action.” Cabo Brands, Inc. v. MAS Beverages, Inc.,
F. Indemnification
Finally, Guardian asserts a claim for common law indemnification on the theory that Guardian acted as NuSil’s agent in conducting the recall.
“Agency is the fiduciary relationship that arises when [a principal] manifests assent to [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.” Restatement (Third) Agency § 1.01. “As a general rule, an agent is entitled to indemnification by its principal for losses incurred by the agent in the execution of the agency.” Fid. Mortgage Tr. Serv., Inc. v. Ridgegate E. Homeowners Assn.,
Here, Guardian has failed to allege it was subject to NuSil’s control in conducting the recall. Guardian merely alleges that NuSil requested Guardian recall the products at issue, and Guardian complied. These allegations are insufficient to establish an agency relationship between the two entities, and Guardian has thus failed to state a claim for common law indemnification.
CONCLUSION
Third-party defendant NuSil Technology LLC’s motion to dismiss the third-party complaint is GRANTED.
The Clerk is instructed to terminate the motion. (Doc. # 18).
SO ORDERED.
Notes
. Neither party argues New Jersey law applies.