Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-2_07-cv-02015/USCOURTS-arwd-2_07-cv-02015-4/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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IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FORT SMITH DIVISION

TEMPUR-PEDIC

INTERNATIONAL, INC. PLAINTIFF

v. Civil No. 07-2015

WASTE TO CHARITY, INC.; 

BROCO SUPPLY, INC.; JACK 

FITZGERALD; ERIC VOLOVIC; 

HOWARD HIRSCH; THOMAS SCARELLO; 

NELSON SILVA; CLOSE OUT 

SURPLUS AND SAVINGS, INC.; 

and ERNEST PEIA DEFENDANTS

MEMORANDUM OPINION & ORDER

Tempur-Pedic International, Inc., (“Tempur-Pedic”) filed

its Complaint (Doc. 1) on February 13, 2007, an Amended

Complaint (Doc. 5) on February 21, 2007, and its Second

Amended Complaint (Doc. 57) on April 13, 2007. Plaintiff

seeks recovery of, or money damages for, 8,000 mattresses,

7,000 slippers, and other related items alleged to have a

value of over $15 million. The products were donated to

Separate Defendant Waste to Charity, Inc. (“WTC”) for

distribution to charitable organizations, but allegedly

misappropriated by Defendants. 

On May 3, 2007, Separate Defendant Close Out Surplus and

Savings, Inc. (“CSS”) filed its Answer to Tempur-Pedic’s

Second Amended Complaint (Doc. 75), and its Amended Answer and

Counter-Claim (Doc. 84) on May 15, 2007. Currently before the

Court is Tempur-Pedic’s Motion to Dismiss the Counter-Claims

(Doc. 100) of Separate Defendant CSS. For the reasons

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reflected herein, the motion to dismiss is GRANTED.

BACKGROUND.

Plaintiff, Tempur-Pedic International, Inc., is in the

business of manufacturing, marketing, licensing, and

distributing mattresses, slippers and other comfort products.

Plaintiff distributes its products only through direct sales

and through specialized, trained, and authorized distributors.

From November 2005, through October 2006, Plaintiff alleges it

donated mattresses, slippers, and pillows for distribution to

the needy. Plaintiff contracted with WTC to distribute the

Goods to various charitable organizations. (Doc. 1, Ex. 1).

The Charitable Donation Agreement provided, “[A]ll

products donated by Tempur-Pedic are not to be resold,

distributed for sale, or otherwise sold for profit in any

venue.” Plaintiff contends the mattresses sent to WTC were

contained in packaging distinguishable from the packaging used

in the ordinary course of business. According to Plaintiff,

rather than the wrapping of mattresses in a hypo-allergenic

cloth and packing in cardboard boxes, the donated mattresses

were individually wrapped in clear plastic and stacked on

wooden pallets. Plaintiff contends this method of packaging

was used exclusively for the mattresses sent to WTC for

distribution to the Katrina-relief charities. Plaintiff

contends the donated pillows and slippers were also distinctly

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packaged. 

Plaintiff contends that beginning in March 2006, the

products were sold by unauthorized dealers in violation of the

contract agreement. Plaintiff contends WTC sold some of the

products to US Warehousing (“USW”), a warehouse operator in

Bowling Green, Kentucky, and contends unauthorized sales were

made in Bowling Green, Kentucky; Nashville, Tennessee; and

Highlands Ranch, Colorado. Separate Defendant Action

Distributers, Inc., (“ADI”) was also sold a portion of the

products. 

In February 2007, after being solicited by Separate

Defendant Eric Volovic, an individual, identified as an

unnamed Informant, met with Separate Defendants Volovic,

Howard Hirsch, Thomas Scarcello, and Nelson Silva, at a

warehouse in Booneville, Arkansas. Prior to the meeting, the

Informant approached the Federal Bureau of Investigation

(“FBI”) at the Fort Smith, Arkansas, office to discuss the

upcoming warehouse meeting. The FBI arrived during the

meeting to conduct an investigation. Tempur-Pedic was unable

to recover the products and thereafter filed its Complaint. 

CSS is a New Jersey corporation with its principal place

of business in New Jersey. CSS is a liquidator that purchases

and sells large volumes of closeout merchandise, both

nationally and internationally. CSS sells its merchandise to

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hundreds of different companies, including at trade shows, and

has been in business for approximately twelve years. CSS

purchases merchandise from various sources, including Action

Distributors, Inc. (“ADI”). CSS contends it purchased

merchandise from ADI without any problems for approximately

twelve years. According to CSS, only about five percent

(“5%”) of CSS’s merchandise comes from ADI. CSS purchased

used mattresses from ADI for approximately five years,

including Tempur-Pedic brand mattresses. CSS has, in the

ordinary course of business, resold used Tempur-Pedic brand

mattresses during this same five year period. 

CSS contends that Tempur-Pedic knew for approximately

five years that CSS purchased and resold used Tempur-Pedic

brand mattresses. On about October 12, 2006, CSS purchased

4,000 used Tempur-Pedic mattresses from ADI. Specifically,

CSS purchased 500 Classic Bed California King Size mattresses,

1,000 Classic Bed King Size mattresses, 1,300 Classic Bed

Queen Size mattresses, 550 Classic Bed Full Size mattresses,

and 650 Classic Bed Twin Size mattresses. CSS contends ADI

advised CSS the mattresses were used foam mattresses that had

been returned to Tempur-Pedic pursuant to Tempur-Pedic’s

policy that a customer could return a purchased mattress for

a full refund. Because the returned mattresses were used,

Tempur-Pedic could no longer sell the mattresses as new,

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according to ADI. CSS contends that some of the mattresses

CSS purchased from ADI were stained or otherwise in disrepair.

CSS paid ADI $500,000 for the used mattresses, which CSS

contends was consistent with other bulk purchases. Broco

Supply agreed to purchase 3,000 of the used mattresses from

CSS for $630,000. (Doc. 84, Ex. 1). CSS contends that Broco

Supply reached an agreement to sell the 3,000 mattresses to

Mattress Mart of Metairie, Louisiana. CSS further contends

that Wes Williams initially represented Mattress Mart in its

discussions with Broco Supply, and that Williams is the person

referred to by Tempur-Pedic as its “Informant.” CSS also

asserts that Tempur-Pedic hired private investigator Keith

Moore to communicate with both Mattress Mart and Williams, and

referred to Moore as its “Consultant” in the Second Amended

Complaint. CSS contends that Mattress Mart, Williams, and

Moore negotiated for, and signed a deal to buy, mattresses

from Broco Supply, but when Moore advised Williams and

Mattress Mart that the mattresses were stolen, the deal fell

through. 

CSS contends that Tempur-Pedic’s claims against CSS are

without merit because the mattresses are not from the donated

set of mattresses, and even if Tempur-Pedic could show that,

CSS would be a bona-fide purchaser. According to CSS, it has

suffered damages because of the preliminary injunction as they

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were prevented from selling mattresses at a February 2007

trade show in Las Vegas, Nevada. 

The Amended Answer with Counter-Claim was filed by CSS

for (1) tortious interference with business expectancies, (2)

tortious interference with CSS-Broco Supply contract, (3)

tortious interference with Broco Supply-Mattress Mart

contract, (4) slander of title, (5) breach of the Broco

Supply-Mattress Mart contract, and (6) punitive damages. 

STANDARD OF REVIEW.

In ruling on a motion to dismiss, the district court must

accept the allegations contained within the complaint as true,

and all reasonable inferences from the complaint must be drawn

in favor of the non-moving party. Hafley v. Lohman, 90 F.3d

264, 266 (8th Cir. 1996). Complaints should be liberally

construed in the plaintiff’s favor and should not be dismissed

for failure to state a claim “unless it appears beyond doubt

that the plaintiff can prove no set of facts in support of

[its] claim which would entitle [it] to relief.” Rucci v.

City of Pacific, 327 F.3d 651, 652 (8th Cir. 2003) (quoting

Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

ANALYSIS.

Tortious Interference with Business Expectancies - Injunction.

CSS contends it had a valid business expectancy to sell

its mattresses in the February 2007 Las Vegas trade show. CSS

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contends that Tempur-Pedic intentionally interfered with its

business by filing for a preliminary injunction to prevent the

sale of mattresses. CSS contends the claims filed by TempurPedic in its lawsuit were brought in bad faith and for an

improper motive. CSS contends that the direct and proximate

result of the interference by Tempur-Pedic resulted in damage

a CSS was unable to realize profits from sales at the trade

show. 

Under Arkansas law, in order to state a claim for

tortious interference with business expectancy, CSS must

allege: (1) the existence of a business expectancy; (2)

Tempur-Pedic’s knowledge of that expectancy; (3) intentional

interference inducing or causing termination of the

expectancy; and (4) resultant damage to CSS. Brown v. Tucker,

330 Ark. 435, 439-440 (1997); Hunt v. Riley, 322 Ark. 453, 458

(1995). “For an interference to be actionable, it must be

improper.” Hunt, 322 Ark. at 458. Tempur-Pedic contends that

CSS made only two factual allegations and neither are adequate

to support its claim for tortious interference. 

Tempur-Pedic contends that CSS failed to name the

specific trade show where it might have sold mattresses.

Tempur-Pedic contends that CSS sells various products,

including ceiling fans, flooring tiles, apple juice and

toasters. CSS has not demonstrated that Tempur-Pedic’s filing

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for an injunction was improper. CSS failed to demonstrate a

particular business contract or expectancy, and consequently

failed to demonstrate damages. See Hunt, 322 Ark. at 458. 

The standard requires CSS to allege more than conclusory

statements of contractual relationships or business

expectancies. The Court finds Tempur-Pedic’s motion to

dismiss should be granted as to CSS’s counterclaim for

tortious interference with business expectancies. 

Tortious Interference with CSS-Broco Supply Contract. 

CSS contends it contracted to sell 3,000 mattresses to

Broco Supply. CSS contends that Tempur-Pedic knew of the

contract, and through its agents incorrectly told Mattress

Mart that CSS and Broco Supply did not hold valid title to the

mattresses. CSS contends the result was that Mattress Mart

did not perform its agreement to purchase mattresses from

Broco Supply, and Broco Supply did not perform its agreement

to purchase mattresses from CSS. CSS also contends TempurPedic encouraged Mattress Mart to contract with Broco Supply

under false pretenses. 

Under Arkansas law, CSS must allege: (1) the existence of

a valid and enforceable agreement; (2) Tempur-Pedic’s

knowledge of that agreement; (3) intentional interference

inducing or causing termination of that agreement; (4)

resultant damage to CSS; and (5) that the conduct of TempurCase 2:07-cv-02015-RTD Document 113 Filed 07/27/07 Page 8 of 14 PageID #: <pageID>
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Pedic was “improper.” Shellnutt v. Laird, 359 Ark. 516

(2004). 

Tempur-Pedic contends no valid and enforceable agreement

existed between CSS and Broco as evidenced by the counterclaim

of Broco Supply (Doc. 28) wherein Broco Supply alleges that

“contingent upon the purchase agreement between Broco and

[Tempur-Pedic] a conditional sale of the product was made

between Broco and CSS for $630,000.” Tempur-Pedic also points

out that the counter-claim states that Broco Supply “would

have been deemed” a bona fide purchaser upon completion of the

agreement, an indication that the deal was not complete. 

Tempur-Pedic contends that CSS has not sufficiently

alleged the second factor - knowledge of the agreement - and

CSS’s claim must also fail on this point. Tempur-Pedic

contends there was no communication of the existence of any

agreement from any of the Separate Defendants. Tempur-Pedic

contends that knowledge has not been sufficiently alleged, and

CSS is unable to maintain its claim for intentional

interference with the contract. 

The Court agrees that CSS has failed to properly allege

knowledge of its agreement. Damages cannot be certain because

no definite contract was in existence. Tempur-Pedic’s motion

to dismiss this portion of the counterclaim is granted. 

Tortious Interference with Broco Supply-Mattress Mart

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Contract. 

CSS contends that Broco Supply contracted to sell 3,000

mattresses to Mattress Mart which Broco Supply had agreed to

purchase from CSS making CSS a third-party beneficiary of the

contract between Broco Supply and Mattress Mart. CSS

reiterates the same facts and legal arguments as set forth

above. 

Tempur-Pedic contends there was no valid or enforceable

agreement, because the invoice referred to by CSS is not an

agreement. See, e.g. Morrison v. Blanda, 226 Ark. 514, 519

(1956)(holding an invoice is not a contract itself). TempurPedic contends the invoice is nothing more than a statement of

the terms of the purchase agreement in the event that the

option to purchase the mattresses was exercised. See Whitson

v. Tinkle, 1999 WL 172162, at *2-3 (Ark. App. 1999)(dismissing

contract claim where there was offer but no acceptance and

holding that, “the parties’ partial performance failed to

overcome the general principle that, without an offer and

acceptance, there can be no contract”). 

After reviewing the evidence in a light most favorable to

CSS, the Court can only conclude that a prima facie case has

not been pled. The allegations of CSS are too attenuated and

the counterclaim fails to include sufficient facts for the

Court to conclude a valid contract existed. The Court finds

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the mere conclusion that Tempur-Pedic intentionally interfered

with arrangements between Broco Supply and Mattress Mart to be

untenable and it warrants dismissal. Tempur-Pedic’s motion to

dismiss this claim is also granted. 

Slander of Title. 

CSS contends it holds good title to the mattresses it

purchased from ADI in October 2006. CSS contends TempurPedic, through its agents, incorrectly told Mattress Mart and

Williams that CSS did not hold proper title to the mattresses.

CSS contends this caused Mattress Mart to forego its agreement

with Broco Supply which in turn damaged CSS. 

Under Arkansas law, “slander of title is an action based

on malicious publication of a false matter that disparages the

title to property.” Fleming v. Cox Law Firm, 363 Ark. 17, 20

(Ark. 2005). Even though malice may be inferred from

knowingly false statements made by the speaker, malice may not

be so inferred if the speaker is making a “bona fide claim of

title . . . .” Id. In an action for slander of title,

plaintiff must prove the defendant acted maliciously in

uttering words in question. Sinclair Refining Co. v. Jones

Super Service Station, 188 Ark. 1075 (Ark. 1934). The Court

finds any publications made by Tempur-Pedic were bona fide

claims of title to the property, and malice is accordingly not

within the claim of CSS. 

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The Court finds a prima facie case is not supported in

the counterclaim of CSS, and accordingly the motion to dismiss

is GRANTED on this point. 

Breach of the Broco Supply-Mattress Mart Contract. 

CSS contends that Broco Supply contracted to sell 3,000

mattresses to Mattress Mart, but that this did not occur

because of the intentional interference by Tempur-Pedic.

Further, CSS contends that Mattress Mart was actually the

agent of Tempur-Pedic because Tempur-Pedic paid the down

payment on the 3,000 mattresses, and therefore CSS argues that

Tempur-Pedic essentially breached the agreement with Broco

Supply. Tempur-Pedic contends it is not an actual party to

the agreement, that no valid contract existed, and that CSS

cannot bring a tortious interference claim and a breach of

contract claim for the same agreement. 

Under Arkansas law, “although a plaintiff may not recover

for the same act in both contract and tort, and must

ultimately choose among remedies sought, it is not wrong for

concurrent allegations to be pursued.” Albright v. Southern

Farm Bureau Life Ins. Co., 327 Ark. 715, 719 (Ark. 1997).

Accordingly, the Court finds it permissible for CSS to bring

both a contract and tort claim for the same action by TempurPedic. However, the Court finds CSS failed to establish its

breach of contract claim. CSS has not demonstrated that

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Tempur-Pedic was a party to the contract or that Tempur-Pedic

has express obligations thereunder. CSS has not shown that

Tempur-Pedic violated those obligations, or that damages

resulted from any violations. See Williams v. Black Lumber

Co., 275 Ark. 144 (1982). Where conclusions of law are pled

alone, absent any stated factual basis, the complaint is

insufficient. Id. 

As CSS failed to show Tempur-Pedic was a party to the

alleged contract, and, moreover, because the Court has

determined no contract existed between CSS and Broco Supply,

the motion to dismiss CSS’s claim on this point is GRANTED. 

Punitive Damages. 

CSS contends Tempur-Pedic knew or should have known its

conduct with CSS would result in damages, and it continued

such conduct in disregard for the consequences from which

malice may be inferred. CSS also contends that Tempur-Pedic

pursued a course of conduct towards CSS for the purpose of

causing damage, and accordingly CSS should be awarded damages.

The Court has found that CSS failed to establish its

prima facie case as to any of its causes of action and the

request for punitive damages is moot. 

CONCLUSION.

Accordingly, for the reasons reflected herein, the motion

to dismiss (Doc. 100) the counterclaim is GRANTED, and the

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counterclaim of CSS (Doc. 84) is DISMISSED WITH PREJUDICE. 

Additionally, the Court finds the Motion to Dismiss Broco

Supply’s counterclaim (Doc. 50) is DENIED as MOOT. 

IT IS SO ORDERED this 27th day of July, 2007. 

/s/ Robert T. Dawson 

HONORABLE ROBERT T. DAWSON

UNITED STATES DISTRICT JUDGE 

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