Opinion ID: 743069
Heading Depth: 3
Heading Rank: 1

Heading: Gidatex and Filippini

Text: 39 Appellants allege that Filippini, Raffaele's father-in-law, induced appellants into settling their 1994 Litigation and accepting the Gidatex Agreement in order to terminate the distributorship on fraudulent grounds and thereby supplant the Campaniello companies' distributorship with direct solicitations within appellants' exclusive territories. Three items can be identified which could be said to sustain an inference of such a fraudulent intent--the performance of at least one sale in the Campaniello companies' exclusive sales area, the thwarting of the Campaniello companies' attempts to conduct business in New York and the creation of a shell corporation with minimal capital. We address each of these assertions. 40 Preliminarily, we attribute little significance to the fact that Filippini is Raffaele's father-in-law considering that appellants never disclaimed prior knowledge of this fact; it was never alleged to be an omission withheld from appellants. 41 Appellants allege that [o]n or about April 11, 1995, Simon Vainstein, an architect from Caracas, Venezuela, (one of plaintiffs' exclusive territories), visited the defendants' display at the Super Studio in Milan show where defendants solicited and secured an order for about LIT 140,000,000. Am. Compl. p 103(f). This fact allegedly supports appellants' claim that the appellees wanted to cut the Campaniello companies out of the North/South America market for their furniture. The relevance of this sale, however, is undermined by the fact that it occurred eleven days after the nine-month temporary distributorship expired and one day after Filippini verbally terminated the Gidatex agreement; appellants have not alleged any specific instance of Gidatex soliciting sales in the Campaniello companies' exclusive territory during the period of their distributorship. Furthermore, according to the allegation, this sale occurred while the South American architect was in Italy at the appellees' display at a furniture show. Given these circumstances, appellants cannot extrapolate from this single sale that appellees wanted to supplant the Campaniello companies' sales system with direct solicitation in North and South America. 42 Appellant alleges that after July 7, 1994 Gidatex conducted its business in a manner designed to frustrate the Campaniello companies' ability to meet its minimum purchase requirements. Appellants allege that Gidatex, inter alia, shipped inferior and defective merchandise, discontinued manufacturing two-thirds of its furniture line, offered only inferior quality fabrics and discontinued advertising of the Saporiti line in the United States. Am. Compl. p 103. Normally, allegations of mere nonperformance under a contract do not provide strong evidence of fraudulent intent. See Murray v. Xerox Corp., 811 F.2d 118, 122 (2d Cir.1987). In such circumstances, fraudulent intent may only be inferred when a defendant violates an agreement so maliciously and so soon after it is made that his desire to do so before he entered into the agreement is evident. Powers v. British Vita, P.L.C., 57 F.3d 176, 185 (2d Cir.1995). On its face, the allegations here do not rise to a level of maliciousness. Gidatex did not refuse to perform the contract or in any other way repudiate, but simply did not perform well. We hesitate to find that merely ailing performance can be found malicious enough to support a claim of fraud, especially where Saporiti Italia, a poorly performing company, had recently declared bankruptcy because of faltering performance and a depressed market. See Ouaknine v. MacFarlane, 897 F.2d 75, 81 (2d Cir.1990) (finding allegations of breach of contract sufficient to support scienter only where [i]t is difficult to imagine how such events could have occurred if the defendants who controlled them had not actually intended to defraud). Thus, we do not find that Gidatex's poor performance of the contract supports an allegation of fraudulent intent. 43 Appellants also allege that [u]pon information and belief ... the defendants withheld and failed to disclose to plaintiffs that: a) defendant Gidatex was a mere shell with no more than $12,000 of capital and had no financial ties with defendant Filippini's successful operating company. Am. Compl. p 93(a). Allegations of fraud cannot ordinarily be based 'upon information and belief,' except as to 'matters peculiarly within the opposing party's knowledge.'  Luce v. Edelstein, 802 F.2d 49, 54 n. 1 (2d Cir.1986) (citation omitted). Even if Gidatex's financial status was peculiarly within appellees' knowledge, appellants have failed to provide a statement of facts upon which the belief is founded. The unsupported nature of the allegation weighs against finding it indicative of fraudulent intent. 44 Given the ambiguous nature and suspect import of each of the three factual assertions, the allegations, even taken together, are insufficient to raise a strong inference of fraudulent intent. 3