Court Opinion

ID: 2762933
Source: CourtListenerOpinion
Date Created: 2014-12-19 16:00:33.218056+00
Date Added: 2024-06-11T10:44:04.346101
License: Public Domain

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

                     UNITED STATES COURT OF APPEALS
                         FOR THE SECOND CIRCUIT

                                 SUMMARY ORDER
     RULINGS  BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
     ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL
     RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
     CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER
     THE FEDERAL APPENDIX 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.

 1        At a stated term of the United States Court of Appeals
 2   for the Second Circuit, held at the Thurgood Marshall United
 3   States Courthouse, 40 Foley Square, in the City of New York,
 4   on the 19th day of December, two thousand fourteen.
 5
 6   PRESENT: DENNIS JACOBS,
 7            DEBRA ANN LIVINGSTON,
 8            RAYMOND J. LOHIER, Jr.,
 9                          Circuit Judges.
10
11   - - - - - - - - - - - - - - - - - - - -X
12   MOREFUN CO., LTD.,
13            Plaintiff-Appellant,
14
15               -v.-                                                14-2405
16
17   MARIO BADESCU SKIN CARE INC.,
18            Defendant-Appellee.
19   - - - - - - - - - - - - - - - - - - - -X
20
21   FOR APPELLANT:                        DANIEL L. BROWN, Sheppard,
22                                         Mullin, Richter & Hampton LLP,
23                                         New York, New York.
24
25   FOR APPELLEE:                         EDWARD M. LARKIN (with Zachary
26                                         W. Silverman on the brief),

                                              1
 1                              Edwards Wildman Palmer LLP, New
 2                              York, New York.
 3
 4        Appeal from a judgment of the United States District
 5   Court for the Southern District of New York (Schofield, J.).
 6
 7        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
 8   AND DECREED that the judgment of the district court be
 9   AFFIRMED.
10
11        Plaintiff Morefun Co. appeals from the judgment of the
12   United States District Court for the Southern District of
13   New York (Schofield, J.), granting the motion of defendant
14   Mario Badescu Skin Care Inc. (“MBSC”) to dismiss pursuant to
15   Federal Rule of Civil Procedure 12(b)(6). We assume the
16   parties’ familiarity with the underlying facts, the
17   procedural history, and the issues presented for review.
18
19        We review de novo the grant of a motion to dismiss
20   under Rule 12(b)(6), “accepting as true factual allegations
21   made in the complaint, and drawing all reasonable inferences
22   in favor of the plaintiffs.” Town of Babylon v. Fed. Hous.
23   Fin. Agency, 699 F.3d 221, 227 (2d Cir. 2012). We also
24   apply de novo review to “both whether a contract is
25   ambiguous, and, when the district court finds a contract
26   unambiguous, its interpretation of the contract.” Bank of
27 N.Y. v. First Millennium, Inc., 607 F.3d 905, 914 (2d Cir.
28   2010) (internal citations omitted).
29
30        Morefun was the Korean distributor of Mario Badescu
31   Healing Cream, a product of MBSC. After purchasing seven
32   batches of Mario Badescu Healing Cream and distributing it
33   in the Republic of Korea, Morefun learned that one batch
34   (“Batch 372") was tainted with steroids. At great expense
35   to Morefun, the Korean Food and Drug Administration issued
36   an order for the recall and destruction of every unit that
37   had been a part of Batch 372. The parties entered a
38   Settlement Agreement on June 10, 2013, with MBSC agreeing to
39   pay $492,000 and to partially indemnify Morefun in exchange
40   for Morefun’s release of claims “arising from or in
41   connection with [Morefun]’s purchase or sale of the Product
42   from MBSC.” (Settlement Agreement ¶ 4.) The very next
43   month, both Morefun and the Korean public learned that the

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

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

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

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