Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_14-cv-01223/USCOURTS-azd-2_14-cv-01223-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Adonia Holding GmbH, 

Plaintiff, 

v. 

Adonia Organics LLC, et al., 

Defendants.

No. CV-14-01223-PHX-GMS

ORDER 

 Pending before the Court is the Motion to Dismiss of Defendants Adonia Organics 

LLC, Dr. Marc Franco Tahilian, and Jane Doe Franco. (Doc. 14.) For the following 

reasons, the Motion is denied. 

BACKGROUND 

 This action arises from business disputes between Defendant Adonia Organics 

LLC (“Adonia Organics”), an Arizona limited liability company, and Plaintiff Adonia 

Holding GmbH (“Adonia Holding”), a private company incorporated in Austria. In its 

First Amended Complaint (“FAC”), Adonia Holding alleges that Dr. Marc Franco 

Tahilian, a representative of Adonia Organics, promised Adonia Holding that it could 

become the exclusive dealer of Adonia products in Eastern Europe. Tahilian also 

represented to Adonia Holding that all of Adonia Organics’ resellers in Europe were 

bound by contract to sell only within their predetermined geographic boundaries. 

 In 2013, Adonia Holding and Adonia Organics orally agreed that Adonia Holding 

would be given the exclusive right to sell Adonia products in Serbia, Bosnia, 

Herzegovina, Montenegro, Romania, Poland, the Czech Republic, and Slovakia. 

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 Based on this oral agreement, Adonia Holding traveled to these countries, created 

affiliated companies, registered the products, retained the services of public relations 

companies, advertised, held press conferences, and obtained celebrity endorsements. 

Adonia Holding also bought Internet domains, began creating platforms for online sale of 

Adonia products, and made plans to meet with a pharmacy distributor in Poland. 

 On August 30, 2013, Adonia Holding alleges that it and Adonia Organics entered 

into a written distributorship agreement entitled the Eastern European Reseller 

Agreement (the “Agreement”). The Agreement stated that Adonia Holding would be 

given the exclusive right to sell Adonia products in Eastern Europe “upon its initial 

purchase of ADONIA products” so long as Adonia Holding made “all effort to achieve 

product registration with these Eastern European Countries within 90 days of the signing 

of [the Agreement],”—November 28, 2013. (Doc. 13, Ex. A.) In addition, the Agreement 

required Adonia Holding to order 39,500 units over a 21-day period after obtaining 

product registration in three countries. Adonia Holding registered the products in 

Romania, Poland, and Serbia by the date required. 

 From September through December 2013, Adonia Holding became aware that 

Quad A Concept GmbH (“Quad A”), a Germany-based Adonia products reseller, had 

begun selling Adonia products in Eastern Europe. Quad A directly or through partner 

companies launched several online shops targeted at Eastern Europe, held a press 

conference in Romania, and sold products to customers in Eastern Europe. Adonia 

Holding sent several emails to Adonia Organics requesting intervention, and Adonia 

Organics told Quad A and some of the partner companies to cease and desist. However, 

Adonia Organics did not pursue any legal remedies against Quad A, and after more 

instances of Quad A selling products in Eastern Europe, Adonia Organics did not 

continue to request Quad A to cease. Adonia Organics did make assurances to Adonia 

Holding that it would try to remedy the situation, but Quad A continued to sell Adonia 

products into Eastern Europe. 

 During this same time, Adonia Holding purchased 890 units of product from 

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Adonia Organics. Although Adonia Holding alleges it was ready and willing to purchase 

the full 39,500 units called for in the Agreement, it chose not to because Adonia Organics 

did not ensure Adonia Holding’s exclusivity in Eastern Europe. Doc. 13 at ¶ 55. Adonia 

Holding initiated suit on June 3, 2013, bringing claims of breach of contract, breach of 

the duty of good faith and fair dealing, unjust enrichment against Adonia Organics. In 

addition, Adonia Holding brought claims of fraudulent misrepresentation and consumer 

fraud against Adonia Organics, Dr. Marc Franco Tahilian, and Dr. Tahilian’s wife based 

on their community estate. 

DISCUSSION 

II. Legal Standard 

Rule 12(b)(6) is designed to “test[] the legal sufficiency of a claim.” Navarro v. 

Block, 250 F.3d 729, 732 (9th Cir. 2001). To survive dismissal for failure to state a claim 

pursuant to Rule 12(b)(6), a complaint must contain more than “labels and conclusions” 

or a “formulaic recitation of the elements of a cause of action”; it must contain factual 

allegations sufficient to “raise a right to relief above the speculative level.” Bell Atl. 

Corp. v. Twombly, 550 U.S. 544, 555 (2007). While “a complaint need not contain 

detailed factual allegations . . . it must plead ‘enough facts to state a claim to relief that is 

plausible on its face.’” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 

2008) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility 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, 556 U.S. 662, 678 

(2009) (citing Twombly, 550 U.S. at 556). Plausibility requires “more than a sheer 

possibility that a defendant has acted unlawfully.” Twombly, 550 U.S. at 555. 

 When analyzing a complaint for failure to state a claim under Rule 12(b)(6), “[a]ll 

allegations of material fact are taken as true and construed in the light most favorable to 

the nonmoving party.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). However, 

legal conclusions couched as factual allegations are not given a presumption of 

truthfulness, and “conclusory allegations of law and unwarranted inferences are not 

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sufficient to defeat a motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 

1998). 

 A. Count One: Breach of Contract 

 1. Choice of Law 

Adonia Organics first claims that the Agreement is governed by the Convention on 

the International Sale of Goods (“CISG”). The CISG provides applicable law for 

contracts for the “sale of goods . . . between parties whose places of business are in 

different states.” United Nations Convention on Contracts for the International Sale of 

Goods art. 1, Apr. 11, 1980, S. Treaty Doc. No. 98-9, 19 I.L.M. 668. It is undisputed that 

the United States and Austria are signatories to the CISG and that Adonia Holding and 

Adonia Organics are, therefore, members of different states. 

 There is very little case law on the applicability of the CISG to distributorship 

agreements. However, all courts that have considered the question have either held or 

suggested that the CISG does not govern distributorship agreements, which entail much 

more than the simple sale of goods.1 See Helen Kaminski Pty., Ltd. v. Mktg. Australian 

Products, Inc., No. 96B46519, 1997 WL 414137, at *3 (S.D.N.Y. July 23, 1997); Viva 

Vino Imp. Corp. v. Farnese Vini S.r.l, No. CIV.A. 99-6384, 2000 WL 1224903, at *1 

(E.D. Pa. Aug. 29, 2000); Amco Ukrservice v. Am. Meter Co., 312 F. Supp. 2d 681, 687 

(E.D. Pa. 2004). At the very least, these cases stand for the proposition that an agreement 

must specify the price or types of goods to be sold before the CISG will apply. See Helen 

Kaminski, 1997 WL 414137, at *3 (“The identification in the Distributor Agreement of 

certain goods—about which there is no claim of breach—is insufficient to bring the 

 

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 Adonia Holding also contends that the CISG is inapplicable because the Agreement contains a choice of law provision stating that Arizona law applies. Adonia Organics relies on a nonbinding case for the proposition that such a broad choice of law 

provision does not provide sufficient evidence of the parties’ intent to opt out of the CISG. See Asante Technologies, Inc. v. PMC-Sierra, Inc., 164 F. Supp. 2d 1142 (N.D. Cal. 2001). The Court finds Asante distinguishable because it concerns a battle of the forms between two competing contracts, each with a separate choice of law provision. In contrast, the present case concerns a single contract with a single choice of law provision, showing a clear intent by both parties to apply Arizona law. Regardless of the parties’ contentions and the reasoning in Asante, the CISG does not apply for the reasons stated in 

this Order. 

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Distributor Agreement within coverage of the CISG.”). Finding no contrary rulings, the 

Court accepts the reasoning of these cases. In the present case, although the Agreement 

does contain a minimum quantity of goods to be purchased by Adonia Holding, it does 

not specify the price of the goods or the types of goods that are to be sold. Because the 

Agreement is not a contract for the sale of goods as envisioned by the CISG, the CISG 

does not apply. 

 Here, Arizona law applies because the Agreement explicitly states that it “shall be 

governed by the laws of the State of Arizona.” (Doc. 13, Ex. A.) Although Arizona courts 

have not yet decided whether the UCC applies to distributorship agreements, the Ninth 

Circuit has held “that Arizona would follow the majority of states and apply the UCC” to 

such agreements. Hibco Supply, Inc. v. Marvin Windows, Inc., 213 F.3d 642 (9th Cir. 

2000); see also Paulson, Inc. v. Bromar, Inc., 775 F. Supp. 1329, 1333 (D. Haw. 1991) 

(“[T]here seems to be a clear precedent in most other jurisdictions that the UCC does 

apply to distributorship agreements.”). Arizona’s version of the UCC will, therefore, 

apply to Adonia Holding’s contract claim. 

 2. Sufficiency of the Contract Claim 

Adonia Organics asserts that the FAC should be dismissed based on the fact-based 

argument that Plaintiffs never qualified with the quantity of purchases required by the 

contract’s exclusivity terms. While normally such arguments are not appropriately 

asserted on motions to dismiss, the FAC apparently asserts a claim for anticipatory 

breach rather than for actual breach. Plaintiff apparently admits that it never ordered the 

ultimate quantity required for exclusivity, but it does assert that it was ready, willing, and 

able to do so. It alleges that it did not do so because Defendants were unable to provide 

them with exclusivity “upon [their] initial purchase of ADONIA products” and were 

unable to continue to ensure exclusivity for any future purchases as promised. (Doc. 13 at 

4.) It, therefore, placed no such orders and sued for anticipatory breach. “To bring an 

action for the breach of [a] contract, the plaintiff has the burden of proving the existence 

of the contract, its breach and the resulting damages.” Graham v. Asbury, 112 Ariz. 184, 

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185, 540 P.2d 656, 657 (1975) (citing Lorden v. Snell, 39 Ariz. 128, 4 P.2d 392 (1931)). 

A.R.S. § 47-2610 states that an aggrieved party may “suspend his own performance” of a 

contract when the other party “repudiates the contract with respect to a performance not 

yet due” and when “the loss of [performance]” will substantially impair the value of the 

contract to the other.” In addition, A.R.S. § 47-2609 allows a party to suspend 

performance if doing so would be “commercially reasonable” after “in writing 

demand[ing] adequate assurance of due performance.” 

 Taking the allegations in Adonia Holding’s FAC as true, it has adequately pled the 

existence of the Agreement, its repudiation, and the resulting damages. The FAC 

concedes that Adonia Holding suspended its purchase of 39,500 units of Adonia product. 

However, it also alleges that it did so only after Adonia Organics did not ensure the 

exclusivity of the Eastern European Markets. Under Arizona law, “to recover damages 

for anticipatory breach, the injured party need only show that he had the ability to 

perform his own obligations under the agreement.” United California Bank v. Prudential 

Ins. Co. of Am., 140 Ariz. 238, 283, 681 P.2d 390, 435 (Ct. App. 1983). In addition, 

although Adonia Organics did give assurances in some instances that it would pursue 

legal remedies against Quad A, it did not give assurances as to all of Adonia Holding’s 

complaints about Quad A’s encroachment into Eastern Europe. Adonia Holding has, thus, 

adequately pled that it was entitled to suspend its performance of the Agreement pursuant 

to both A.R.S. § 47-2610 for Adonia Organics’ anticipatory repudiation and A.R.S. § 47-

2609 for Adonia Organics’ refusal to give adequate assurances. 

B. Count Two: Breach of Good Faith and Fair Dealing 

 Adonia Organics’ contends that Adonia Holding’s breach of the duty of good faith 

and fair dealing claim should be dismissed because its breach of contract claim is 

insufficient. See Rawlings v. Apodaca, 151 Ariz. 149, 153, 726 P.2d 565, 569 (1986) 

(“The essence of [the duty of good faith and fair dealing] is that neither party will act to 

impair the right of the other to receive the benefits which flow from their agreement or 

contractual relationship.”). Because Adonia Holding has sufficiently pled a contract 

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claim, its breach of good faith and fair dealing claim is also sufficient. Adonia Organics’ 

Motion to Dismiss is, therefore, denied as to Count Two. 

C. Count Three: Unjust Enrichment 

 Adonia Organics next claims that Adonia Holding’s unjust enrichment claim 

should be barred by the economic loss rule (“ELR”). The ELR is a common law rule, 

adopted by Arizona courts, which limits plaintiffs from seeking tort remedies in addition 

to “contractual remedies for purely economic loss from [defendants’] alleged failure to 

adequately perform [their] promises under [a contract].” Cook v. Orkin Exterminating 

Co., 227 Ariz. 331, 335, 258 P.3d 149, 153 (Ct. App. 2011); see also Salt River Project 

Agric. Improvement and Power Dist. v. Westinghouse Elec. Corp., 143 Ariz. 368, 694 

P.2d 198 (1984) (adopting the ELR in Arizona); Flagstaff Affordable Hous. Ltd. P’ship v. 

Design Alliance, Inc., 223 Ariz. 320, 326, 223 P.3d 664, 670 (2010). There are, however, 

no cases extending application of the ELR to unjust enrichment, which is a quasi-contract 

remedy. See Murdock-Bryant Const., Inc. v. Pearson, 146 Ariz. 48, 53, 703 P.2d 1197, 

1202 (1985) (“[A] party may be liable to make restitution for benefits received, even 

though he has committed no tort and is not contractually obligated to the plaintiff.”). In 

the present case, because there is no compelling reason to extend the ELR beyond where 

Arizona courts have applied it, Adonia Holding’s unjust enrichment claim is not barred. 

Adonia Organics’ Motion to Dismiss is, therefore, denied as to Count Three. 

 D. Count Four: Fraudulent Misrepresentation 

Adonia Organics next contends that Adonia Holding’s fraudulent 

misrepresentation claim should be barred by the ELR. There is some debate about 

whether the ELR bars fraud claims. See KD & KD Enterprises, LLC v. Touch 

Automation, LLC, No. CV-06-2083-PHX-FJM, 2006 WL 3808257, at *2 (D. Ariz. Dec. 

27, 2006) (refusing to apply the ELR to fraud claims; QC Const. Products, LLC v. 

Cohill’s Bldg. Specialties, Inc., 423 F.Supp.2d 1008, 1015–16 (D. Ariz. 2006) (applying 

the ELR to fraud claims). However, even if the ELR bars such claims when they are pled 

in conjunction with contract claims in general, application of the ELR to Adonia 

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Holding’s fraudulent misrepresentation claims at the motion to dismiss stage is 

premature. Adonia Holding has not yet provided evidence to support its contract claim. 

Adonia Organics’ Motion to Dismiss is, therefore, denied as to Count Four. 

 E. Count Five: Consumer Fraud 

Unlike fraudulent misrepresentation, the ELR does not apply to consumer fraud 

claims under Arizona law. See Shaw v. CTVT Motors, Inc., 232 Ariz. 30, 33, 300 P.3d 

907, 910 (Ct. App. 2013) (“Arizona's economic loss rule does not apply to private causes 

of action under the [Consumer Fraud Act].”). A.R.S. § 44–1522 governs consumer fraud 

claims, and, under this statute, any person is prohibited from engaging in deceptive or 

unfair activities “in connection with the sale or advertisement of any merchandise.” There 

has been no analysis by Arizona courts of whether § 44–1522 applies to distributorship 

agreements like that in the present case. 

 Although the Ninth Circuit, construing Arizona law, has stated that § 44–1522 

does not apply to distributorship agreements, see Sutter Home Winery, Inc. v. Vintage 

Selections, Ltd., 971 F.2d 401, 407 (9th Cir. 1992), the present case involves more than a 

simple distributorship agreement. Throughout the FAC, Adonia Holding refers to itself as 

a reseller of Adonia products. In addition, Adonia Holding alleges that it purchased 

products from Adonia Organics. These allegations suffice to support a claim of deceptive 

or unfair activities “in connection with the sale or advertisement of any merchandise” 

under A.R.S. § 44–1522. See Nicholas Homes, Inc. v. M & I Marshall & Ilsley Bank, 

N.A., No. CV09-2079-PHX-JAT, 2010 WL 1759453, at *4 (D. Ariz. Apr. 30, 2010) 

(distinguishing Sutter Home Winery and refusing to dismiss a consumer fraud claim 

under A.R.S. § 44–1522 in a case involving a distributorship agreement when the 

agreement was “induced by [the defendant’s] allegedly deceptive advertising”). Adonia 

Organics’ Motion to Dismiss is, therefore, denied as to Count Five. 

CONCLUSION

 Adonia Holding has sufficiently pled all of the claims in its FAC, including the 

claims raised against Dr. Tahilian, which implicate his community estate. 

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IT IS THEREFORE ORDERED that the Motion to Dismiss of Defendants 

Adonia Organics LLC, Dr. Marc Franco Tahilian, and Jane Doe Franco (Doc. 14.) is 

DENIED. 

 Dated this 16th day of December, 2014. 

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