14-2405 MOREFUN CO., LTD. V. MARIO BADESCU SKIN CARE INC.



### UNITED STATES COURT OF APPEALS **FOR THE SECOND CIRCUIT**



## SUMMARY ORDER

**R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT**  **. C**  **ITATION TO A SUMMARY ORDER FILED ON OR AFTER**  **J ANUARY**  **1, 2007,**  **IS PERMITTED AND IS GOVERNED BY F** **EDERAL R** **ULE OF A** **PPELLATE P** **ROCEDURE 32.1** **AND THIS COURT ’**  **S L** **OCAL R** **ULE 32.1.1.**  **W HEN**  **CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT ,**  **A PARTY MUST CITE EITHER**
**THE F** **EDERAL A** **PPENDIX OR AN ELECTRONIC DATABASE (**  **WITH THE NOTATION “**  **SUMMARY ORDER** **”). A**  **PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL**  **. At a stated term of the United States Court of Appeals**  1 **for the Second Circuit, held at the Thurgood Marshall United** 2 **States Courthouse, 40 Foley Square, in the City of New York,** 3 **on the 19 th** **day of December, two thousand fourteen.** 4 5 **PRESENT: DENNIS JACOBS,** 6 **DEBRA ANN LIVINGSTON,** 7 **RAYMOND J. LOHIER, Jr.,** 8 **Circuit Judges**

**.** 9 10 - - - - - - - - - - - - - - - - - - - -X 11 **MOREFUN CO., LTD.,** 12 **Plaintiff-Appellant ,**  13 14 **-v.- 14-2405** 15 16 **MARIO BADESCU SKIN CARE INC.,** 17 **Defendant-Appellee**

**.** 18 - - - - - - - - - - - - - - - - - - - -X 19 20 **FOR APPELLANT:** DANIEL L. BROWN, Sheppard, 21 Mullin, Richter & Hampton LLP, 22 New York, New York. 23 24 **FOR APPELLEE:** EDWARD M. LARKIN (withZachary 25 W. Silverman on the brief ), 26

1Edwards Wildman Palmer LLP, New 1 York, New York. 2 3 Appeal from a judgment of the United States District 4 Court for the Southern District of New York (Schofield, J. ). 5 6 **UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED** 7 **AND DECREED**that the judgment of the district court be 8 **AFFIRMED**

. 9 10 Plaintiff Morefun Co. appeals from the judgment of the 11 United States District Court for the Southern District of 12 New York (Schofield, J. ), granting the motion of defendant 13 Mario Badescu Skin Care Inc . (“MBSC”) to dismiss pursuant to 14 Federal Rule of Civil Procedure 12(b)(6). We assume the 15 parties’ familiarity with the underlying facts, the 16 procedural history, and the issues presented for review. 17 18 We review de novothe grant of a motion to dismiss 19 under Rule 12(b)(6), “accepting as true factual allegations 20 made in the complaint, and drawing all reasonable inferences 21 in favor of the plaintiffs.” Town of Babylon v. Fed. Hous. 22 Fin. Agency , 699 F.3d 221, 227 (2d Cir. 2012). We also 23 apply de novoreview to “both whether a contract is 24 ambiguous, and, when the district court finds a contract 25 unambiguous, its interpretation of the contract.” Bank of 26 N.Y. v. First Millennium, Inc. , 607 F.3d 905, 914 (2d Cir. 27 2010) (internal citations omitted). 28 29 Morefun was the Korean distributor of Mario Badescu 30 Healing Cream, a product of MBSC. After purchasing seven 31 batches of Mario Badescu Healing Cream and distributing it 32 in the Republic of Korea, Morefun learned that one batch 33 (“Batch 372") was tainted with steroids. At great expense 34 to Morefun, the Korean Food and Drug Administration issued 35 an order for the recall and destruction of every unit that 36 had been a part of Batch 372. The parties entered a 37 Settlement Agreement on June 10, 2013, with MBSC agreeing to 38 pay $492,000 and to partially indemnify Morefun in exchange 39 for Morefun’s release of claims “arising from or in 40 connection with [Morefun]’s purchase or sale of the Product 41 from MBSC.” (Settlement Agreement ¶ 4.) The very next 42 month, both Morefun and the Korean public learned that the 43

2other batches of Mario Badescu Healing Cream were similarly 1 tainted with steroids, prompting a comprehensive recall of 2 the other six batches. Morefun filed this action against 3 MBSC in the U.S. District Court for the Southern District of 4 New York to recover up to $1.7 million, the cost of this 5 comprehensive recall. 6 7 New York law, which governs in this diversity action, 8 provides that “[g]enerally, a valid release constitutes a 9 complete bar to an action on a claim which is the subject of 10 the release.” Centro Empresarial Cempresa S.A. v. Am. 11 Movil, S.A.B. de C.V. , 952 N.E.2d 995, 1000 (N.Y. 2011) 12 (internal quotation marks omitted). This precept gains even 13 more strength when the release is unambiguous: “[w]here 14 . . . the language of a release is clear and unambiguous, 15 the signing of a release is a ‘jural act’ binding on the 16 parties.” Booth v. 3669 Delaware, Inc. , 703 N.E.2d 757, 758 17 (N.Y. 1998) (quoting Mangini v. McClurg , 249 N.E.2d 386, 390 18 (N.Y. 1969)). 19 20 Morefun’s claims are barred by the Settlement 21 Agreement. Morefun agreed that it 22 23 waives all legal or equitable claims both direct and 24 indirect including but not limit ed to the loss of 25 good will which it may have against MBSC arising 26 from or in connection with [Morefun]’s purchase or 27 sale of the Product from MBSC and shall not take any 28 action against MBSC, legal or otherwise, in respect 29 of such purchase and hereby releases and discharges 30 MBSC from any further liability with respect thereto 31 except as has been set forth in Paragraphs 2 32 [regarding the $492,000 payment from MBSC] and 3 33 [regarding indemnification]. 34 35 (Settlement Agreement ¶ 4.) At the outset, the Settlement 36 Agreement defines “Product” as “Mario Badescu Healing 37 Cream.” (Id. ¶ A.) A plain reading of the Settlement 38 Agreement therefore releases MBSC from all claims “arising 39 from or in connection with [Morefun]’s purchase or sale of 40 the Product [meaning Mario Badescu Healing Cream] from 41

3MBSC.” This litigation falls squarely within that 1 unambiguous release. 2 3 Seeking to avoid this conclusion, Morefun contends that 4 the meaning of “Product” is ambiguous, referring 5 alternatively to: (a) Mario Badescu Healing Cream, or (b) 6 the specific batch of product whose recall prompted the 7 settlement. But on the face of the contract, this ambiguity 8 is illusory. While the interpretation of “Product” as 9 “Mario Badescu Healing Cream” finds support in the plain 10 language based on an explicit definition, the alternative 11 interpretation as limited to Batch 372 has no basis in the 12 contract wording: Morefun concedes as much by relying on 13 parol evidence for its narrow reading of “Product.” Parol 14 evidence “is not admissible to create an ambiguity in a 15 written agreement which is complete and clear and 16 unambiguous upon its face.” R/S Assocs. v. N.Y. Job Dev. 17 Auth. , 771 N.E.2d 240, 242 (N.Y. 2002) (quoting W.W.W. 18 Assocs., Inc. v. Giancontieri , 566 N.E.2d 639, 642 (N.Y. 19 1990)). The release unambiguously applies to claims related 20 to Morefun’s purchase or sale of Mario Badescu Healing Cream 21 from MBSC, including the claims in this litigation. 22 23 Morefun further challenges the release by alleging that 24 MBSC defrauded Morefun into signing the Settlement 25 Agreement. A plaintiff can avoid a signed release by 26 “show[ing] that there has been fraud”; however, if the 27 release is broad enough to encompass fraud claims, the 28 plaintiff cannot rely on fraudulent inducement unless “it 29 can identify a separate fraud from the subject of the 30 release.” Centro Empresarial Cempresa , 952 N.E.2d at 1000. 31 In this case, the alleged fraud took the form of MBSC’s 32 assurances (nowhere memorialized in the contract) relating 33 to the skin care product that Morefun had purchased from 34 MBSC. The release, in turn, encompasses all claims relating 35 to Morefun’s purchase of skin care product from MBSC. 36 Therefore, Morefun has not “identif[ied] a separate fraud 37 from the subject of the release” as required under New York 38 law. The fraud allegations are no barrier to enforcement of 39 the release. 40 41

4For the same reason, we agree with the dismissal of 1 Morefun’s claim for rescission of the Settlement Agreement. 2 A release that encompasses fraud claims cannot be rescinded 3 on the basis of the same fraud that is the subject of the 4 release. SeeBellefonte Re Ins. Co. v. Argonaut Ins. Co.
, 5 757 F.2d 523, 527 (2d Cir. 1985). As to the cause of action 6 for indemnification, Morefun does not challenge on appeal 7 the district court’s conclusion that Morefun abandoned the 8 claim as unripe. 9 10 For the foregoing reasons, and finding no merit in 11 Morefun’s other arguments, we hereby **AFFIRM** the judgment of 12 the district court. 13 14 FOR THE COURT: 15 CATHERINE O’HAGAN WOLFE, CLERK 16 17 18

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