Court Opinion

ID: 621156
Source: CourtListenerOpinion
Date Created: 2012-01-20 01:00:39+00
Date Added: 2024-06-11T09:14:30.321324
License: Public Domain

11-3045-cv
Valley Lane Indus. Co. v. Victoria’s Secret Direct Brand Mgmt., L.L.C.

                           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.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan Courthouse, 500 Pearl Street, in the City of New York, on the 19th day
of January, two thousand twelve.

Present:
         ROBERT A. KATZMANN,
         GERARD E. LYNCH,
         DENNY CHIN,
                     Circuit Judges.
________________________________________________

VALLEY LANE INDUSTRIES COMPANY,

           Plaintiff-Appellant,

                  v.                                                   No. 11-3045-cv

VICTORIA’S SECRET DIRECT BRAND MANAGEMENT, L.L.C.,

         Defendant-Appellee.
_______________________________________________

For Plaintiff-Appellant:                 NEAL BRICKMAN, Law Office of Neal Brickman, New
                                         York, N.Y.

For Defendant-Appellee:                  STEPHEN F. HARMON (Matthew J. Aaronson, Arielle
                                         Moskowitz, on the brief), Troutman Sanders LLP, New
                                         York, N.Y.
       Appeal from the United States District Court for the Southern District of New York
(Daniels, J.).

        ON CONSIDERATION WHEREOF, it is hereby ORDERED, ADJUDGED, and

DECREED that the judgment of the district court be and hereby is AFFIRMED.

        Plaintiff-Appellant Valley Lane Industries Company (“Valley Lane”) appeals from the

July 20, 2011 judgment of the district court, granting the motion of Defendant-Appellee

Victoria’s Secret Direct Brand Management, L.L.C. (“Victoria’s Secret”) to dismiss the

complaint in its entirety and denying Valley Lane’s cross-motion for leave to amend its

complaint as futile. On appeal, Valley Lane contends that the district court erred by misapplying

the pleading standard and dismissing its claims for tortious interference with contract, tortious

interference with business relations, and tortious interference with prospective economic

advantage. In the alternative, Valley Lane argues that the district court erred by denying it the

opportunity to amend its complaint. We assume the parties’ familiarity with the facts and

procedural history of this case.

        We review de novo a district court’s grant of a motion to dismiss, “accepting all factual

claims in the complaint as true, and drawing all reasonable inferences in the plaintiff’s favor.”

Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 108 (2d Cir. 2010). In order to state a

claim under Federal Rule of Civil Procedure 12(b)(6), “a complaint must contain sufficient

factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft

v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

(2007)). “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.”

Id.

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       Turning first to Valley Lane’s contention that the district court erred in dismissing its

claim for tortious interference with contract, under New York law, “[t]ortious interference with

contract requires the existence of a valid contract between the plaintiff and a third party,

defendant’s knowledge of that contract, defendant’s intentional procurement of the third-party’s

breach of the contract without justification, actual breach of the contract, and damages resulting

therefrom.” Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 424 (1996). We conclude that

the district court properly dismissed this claim without granting leave to amend because neither

the complaint nor the proposed amended complaint sufficiently alleges the existence of a binding

contract between Valley Lane and third party Yardly Leather Co. Ltd. (“Yardly”). While the

original complaint alleges that Valley Lane “had a long-standing agreement with Yardly to

produce shoes for Defendant and other customers,” J.A. 23, this allegation alone is insufficient to

plausibly plead the existence of a contractual relationship. And while the complaint also alleges

that Valley Lane “asked Yardly to reaffirm the long-running production partnership by accepting

an Exclusive Supply Agreement,” J.A. 14, it nowhere alleges that this offer was ever accepted by

Yardly.

       In an effort to cure deficiencies in the original complaint, the proposed amended

complaint alleges that “[t]he long-standing overarching contract with Yardly was that it would

produce whatever shoes Valley Lane ordered for Defendant and other customers” and that this

“contract has been renewed by Yardly’s performance season-after-season, year-after-year, for

twenty-five years.” J.A. 62.1 Without providing additional factual allegations regarding, inter

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        Valley Lane’s allegation suggests that pursuant to the “overarching contract” between
Valley Lane and Yardly, Yardly must, apparently in perpetuity, fulfill every order it receives
from Valley Lane, regardless of price, and also suggests that while Yardly is obligated to fulfill

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alia, the formation of the contract, the date it took place, and the contract’s major terms, the

proposed amended complaint similarly fails to sufficiently plead the existence of a contract. See

Berman v. Sugo LLC, 580 F. Supp. 2d 191, 202-03 (S.D.N.Y. 2008) (dismissing a breach of

contract counterclaim where the plaintiff failed to allege any of the elements of a contract). We

further note that Valley Lane nowhere alleges that this “overarching contract” was ever put in

writing. While Valley Lane argues that contracts need not be in writing, New York’s Statute of

Frauds provides that “a contract for the sale of goods for the price of $500 or more is not

enforceable by way of action or defense unless there is some writing sufficient to indication that

a contract for sale has been made between the parties and signed by the party against whom

enforcement is sought or by his authorized agent or broker.” N.Y. U.C.C. § 2-201(1) (McKinney

2001). Since Valley Lane alleges the existence of a long-standing agreement covering millions

of dollars in shoes, an oral contract would not suffice.

       In addition to alleging the existence of an overarching contract, the proposed amended

complaint alleges that each order placed by Valley Lane was backed by an individual contract.

Specifically, the proposed amended complaint alleges that since January 6, 1999, Valley Lane

ordered 3,898,334 pairs of shoes from Yardly for delivery to Victoria’s Secret and “[e]very order

[was] backed by an individual contract – approximately 2,907.” J.A. 45. Of course, as noted by

the district court, even assuming that the orders were backed by individual contracts, it would be

“unreasonable to assert that Victoria’s Secret somehow ‘interfered’ with individual contracts that

were already discharged.” Valley Lane Indus. Co. v. Victoria’s Secret Direct Brand Mgmt.,

L.L.C., No. 10 Civ. 5989 (GBD), 2011 WL 3279061, at *3 (S.D.N.Y. July 19, 2011); see also

orders from Valley Lane, Valley Lane is not obligated to place any orders with Yardly.

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Premium Mortg. Corp. v. Equifax Info. Servs., LLC, 583 F.3d 103, 107 n.3 (2d Cir. 2009) (per

curiam) (a tortious interference claim “is, as its name indicates, a tort that encompasses

interfering with an existing contract”). Thus, to establish a tortious interference with contract

claim, Valley Lane would have to sufficiently allege the existence of individual contracts that

were not discharged. While the proposed amended complaint alleges that “three contracts—all

known to the Defendant ([Victoria’s Secret] Purchase Order # 571314, 571317, 571328)—were

not filled because of Defendant’s concerted efforts to get Yardly to become a factory direct

supplier,” J.A. 51, this allegation is insufficient to demonstrate the existence of individual

contracts. Specifically, although this allegation suggests that Victoria’s Secret placed three

orders with Valley Lane, it does not suggest that Valley Lane placed orders with Yardly or,

perhaps more importantly, that Yardly ever agreed to fulfill these orders.

       Moreover, because Valley Lane suggests that the total value of these three contracts “was

in excess of $50,000,” Pl.’s Br. 6, absent any allegation that these contracts were in writing, they

would fail under the Statute of Frauds. Given the deficiencies with both the complaint and the

proposed amended complaint, we conclude that the district court properly dismissed the tortious

interference with contract claim and properly denied Valley Lane’s request for leave to amend as

futile. See In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187, 220 (2d Cir. 2006) (“[W]here

amendment would be futile, denial of leave to amend is proper.”).

       Valley Lane next contends that the district court erred in dismissing its claims for tortious

interference with business relations and tortious interference with prospective economic

advantage without granting Valley Lane leave to amend. As an initial matter, contrary to Valley

Lane’s suggestion, tortious interference with business relations and tortious interference with

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prospective economic advantage are not distinct causes of action. See Catskill Dev., L.L.C. v.

Park Place Entm’t Corp., 547 F.3d 115, 132 (2d Cir. 2008) (noting that tortious interference

with business relations is sometimes referred to “by an alternative name, ‘tortious interference

with prospective economic advantage’”). To state a claim for tortious interference with business

relations, a plaintiff must adequately allege that: “(1) the plaintiff had business relations with a

third party; (2) the defendant interfered with those business relations; (3) the defendant acted for

a wrongful purpose or used dishonest, unfair, or improper means; and (4) the defendant’s acts

injured the relationship.” Id.

       As the New York Court of Appeals observed in Carvel Corp. v. Noonan, 3 N.Y.3d 182

(2004), the third element—which requires that a defendant act with a wrongful purpose or utilize

wrongful means—distinguishes tortious interference with business relations from tortious

interference with contract. Id. at 189-90. In the case of tortious interference with contract, a

plaintiff may recover if she can demonstrate that the “defendant’s deliberate interference

result[ed] in a breach of [the] contract.” Id. at 189. In the case of tortious interference with

business relations, however, the “plaintiff must show more culpable conduct on the part of the

defendant.” Id. at 190. “[A]s a general rule,” in order to satisfy the third element of tortious

interference with business relations, “the defendant’s conduct must amount to a crime or an

independent tort.” Id. “Conduct that is not criminal or tortious will generally be ‘lawful’ and

thus insufficiently ‘culpable’ to create liability for interference with prospective contracts or

other nonbinding economic relations.” Id. There is, however, at least one exception to the

general rule that the defendant’s conduct must be criminal or independently tortious. If the

plaintiff can demonstrate that the “defendant engage[d] in conduct ‘for the sole purpose of

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inflicting intentional harm on plaintiffs,’” then the wrongful means element is satisfied. Id.

While the Carvel court noted the possibility that other exceptions existed, it did not recognize

any additional exceptions:

       [W]e do not decide today[] whether any other exception to the general rule
       exists—whether there can ever be other instances of conduct which, though not a crime
       or tort in itself, was so “culpable” . . . that it could be the basis for a claim of tortious
       interference with economic relations. That is a question we leave for another day,
       because no such egregious conduct was shown here.

Id. at 190-91.

       While Valley Lane argues that both the complaint and proposed amended complaint

adequately plead independently tortious conduct by Victoria’s Secret, we conclude that Valley

Lane’s allegations of independently tortious conduct are woefully inadequate. Valley Lane first

notes that the proposed amended complaint alleges that by “demand[ing] that Valley Lane

provide details on materials, factory costs, and direct factory contact information, camouflaged

as necessary to ensure quality compliance,” Victoria’s Secret conducted a “raid . . . of

proprietary production data in order for [Victoria’s Secret] to eliminate Valley Lane and all of its

future economic opportunity” and thus committed the independent torts of misappropriation of

proprietary information, fraud, and fraud in the inducement. J.A. 70. This allegation alone does

not give rise to the inference that Victoria’s Secret committed fraud or otherwise unlawfully

misappropriated proprietary information. Rather, it suggests that Valley Lane voluntarily

supplied Victoria’s Secret with its proprietary information upon Victoria’s Secret’s request.

       Valley Lane then contends that, in hiring Valley Lane’s shoe designer, Victoria’s Secret

committed the tort of fraudulent inducement. However, the proposed amended complaint utterly

fails to allege facts sufficient to plead fraudulent inducement as it only alleges in conclusory

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fashion that Victoria’s Secret “used deceit, deception and coercion to get what it wanted;

including inducing Valley Lane to allow its top designer to join [Victoria’s Secret] and

demanding Valley Lane reveal its proprietary sourcing and supplier information.” J.A. 45.

Finally, the proposed amended complaint alleges that Victoria’s Secret stole “the value of the

enterprise that the families developed over the last quarter century” and thus committed the torts

of unjust enrichment and misappropriation of good will. J.A. 38. Again, this conclusory

allegation is insufficient to plead tortious conduct.

        We further observe that because all of the aforementioned conduct was directed at Valley

Lane, rather than Yardly, these allegations could not satisfy the wrongful means element even if

they did sufficiently allege tortious conduct. As noted in Carvel, “conduct constituting tortious

interference with business relations is, by definition, conduct directed not at the plaintiff itself,

but at the party with which the plaintiff has or seeks to have a relationship.” 3 N.Y.3d at 192

(emphasis added). Accordingly, Valley Lane’s allegations regarding Victoria’s Secret’s

purportedly tortious conduct also fail because there is no allegation that this conduct—which

was undisputedly directed at Valley Lane—proximately caused Yardly to sever its business

relationship with Valley Lane. See State St. Bank & Trust Co. v. Inversiones Errazuriz Limitada,

374 F.3d 158, 171 (2d Cir. 2004) (to prevail on a tortious interference with business relations

claim, plaintiff must allege “both wrongful means and that the wrongful acts were the proximate

cause of the rejection of the plaintiff’s proposed contractual relations”) (internal quotation marks

omitted).

        Valley Lane then argues that even if it does not sufficiently allege independently tortious

conduct, to the extent that “egregious conduct” can satisfy the wrongful means element, it has

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sufficiently alleged that Victoria’s Secret engaged in egregious conduct. While the New York

Court of Appeals has not yet recognized an egregious conduct exception, Carvel, 3 N.Y.3d at

190-91, even if such an exception did exist, we conclude that Valley Lane’s allegations of

economic pressure are not sufficiently egregious. The proposed amended complaint alleges that

Victoria’s Secret improperly applied economic pressure on Yardly by indicating that it would

not purchase shoes from Yardly unless and until Yardly severed its business relationship with

Valley Lane. Threatening to take one’s business elsewhere cannot itself constitute extreme

economic pressure that would satisfy the wrongful means standard. Given that the factual

allegations in the complaint and proposed amended complaint fail to allege that Victoria’s Secret

acted with a wrongful purpose or utilized wrongful means, the district court properly dismissed

the claims for tortious interference with business relations and tortious interference with

prospective economic advantage and properly denied Valley Lane’s request to amend the

complaint as futile.

       We have considered Valley Lane’s remaining arguments and find them to be without

merit. For the reasons stated herein, the judgment of the district court is AFFIRMED.

                                          FOR THE COURT:
                                          CATHERINE O’HAGAN WOLFE, CLERK

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