Court: District Court, S.D. Florida; September 17, 2018; Federal District Court
Defendant's Motion to Dismiss Plaintiff's Complaint has been granted by the Court after reviewing the motion and relevant records. Plaintiff is a Delaware corporation engaged in e-commerce retail, while Defendant is a Wisconsin corporation that manufactures furniture for retail sales. Their business relationship began in mid-2013, where Plaintiff sold Defendant's products directly to consumers, with orders submitted electronically for fulfillment under an Electronic Commerce Agreement.
In January 2017, Defendant solicited Plaintiff to enhance their partnership by investing in marketing efforts, assuring Plaintiff of increased merchandise and support in return. Throughout 2017, Defendant made multiple requests for Plaintiff to invest in various logistical and technological improvements, including a new shipping relationship and inventory system integration, promising that these investments would yield sufficient returns through expanded product access, discounts, and incentives. By December 2017, Defendant reiterated its demands for continued investment in promotions and technology to capitalize on the anticipated benefits through 2018.
Defendant promised Plaintiff support through 2018 to help recover investments and achieve profitability, collaborate to replicate the success of the 2017 holiday season throughout 2018, and declared that 2018 would be the peak year of their business relationship. In reliance on these promises, Plaintiff invested significant resources in preparing its 2018 offerings, including hiring personnel and enhancing operational systems. On February 13, 2018, Defendant terminated the relationship, citing a change in distribution strategy and asserting that the termination was not due to any actions by Plaintiff. Consequently, Plaintiff claims to have suffered damages due to reliance on Defendant's assurances and the abrupt termination.
The parties are bound by a written E-Commerce Agreement from May 14, 2013, which outlines the sharing of information and advertising materials and is governed by Wisconsin law. Defendant removed the case to court on May 25, 2018, and subsequently filed a motion to dismiss, which was rendered moot following Plaintiff's amended complaint. The amended complaint includes five counts under Florida law: breach of an oral contract or promissory estoppel, fraudulent misrepresentation, negligent misrepresentation, and unjust enrichment. Defendant re-filed a motion to dismiss for failure to state a claim on July 2, 2018, which is currently fully briefed.
To state a claim, Federal Rule of Civil Procedure 8(a)(2) requires a short and plain statement demonstrating entitlement to relief. While allegations in the complaint must be taken as true, legal conclusions are not sufficient. The complaint must include factual content that allows the court to infer liability, meeting the plausibility standard, which necessitates more than just a possibility of unlawful conduct. A claim that only presents facts consistent with liability does not meet this standard, and the determination of plausibility requires a context-specific analysis by the court.
Plaintiff's amended complaint includes one count for breach of contract and four counts for alternative equitable remedies. Defendant seeks dismissal with prejudice on three grounds: 1) the claims are barred by the Agreement's terms, which govern the parties' relationship; 2) the claims violate the Statute of Frauds; and 3) the complaint has significant pleading deficiencies.
Defendant asserts that the Agreement controls the relationship and prohibits the claims based on an alleged oral contract, citing that all transactions are governed by Ashley's Standard Terms and Conditions of Sale. It emphasizes that Defendant has no obligation regarding any purchase order unless an "Acceptance Document" is issued. The Agreement also includes an anti-waiver and merger clause, stating that it supersedes all prior agreements and requires written modification for any changes, indicating that no obligation arises merely from the Agreement’s execution.
Defendant concludes that the Agreement allows termination upon written notice, imposes no obligation to conduct business on unaccepted orders, and prohibits oral modifications. Consequently, all of Plaintiff's claims, which are based on an alleged oral continuation of the business relationship, are deemed invalid. In response, Plaintiff contends that the Agreement is illusory, as it allows Defendant to decide unilaterally when to perform and lacks remedies for breach. However, Plaintiff's argument relies on Florida law, while the Agreement is governed by Wisconsin law.
Wisconsin and Florida law are aligned regarding illusory contracts, defined as agreements conditional on factors solely controlled by the promisor, rendering them unenforceable. In the case presented, Plaintiff contends that the Agreement facilitating transactions between Plaintiff and Defendant is illusory because it grants Defendant the unilateral option to accept Purchase Orders and delineates that no obligation arises until Defendant receives an acceptance document. Defendant, in its motion to dismiss, asserts it has no obligation to engage in any transactions not expressly accepted. While Defendant acknowledges certain incidental obligations, these do not bind it until it chooses to accept an order. The Court sides with Plaintiff, concluding the Agreement is illusory since Defendant's performance hinges entirely on its own discretion. Consequently, the Agreement is unenforceable, allowing Plaintiff's claims to proceed.
Regarding the statute of frauds, the Court must ascertain which state's statute applies. Given the diversity jurisdiction of the case, Florida's substantive law and choice of law rules will govern the determination.
The Eleventh Circuit Court of Appeals established a "three-step" test for choice of law issues: first, identify the nature of the legal problem (e.g., contracts, torts, property); second, determine the choice of law rule applicable in Florida for that issue; and third, apply the chosen rule to the facts to ascertain which state's substantive law governs. In this context, the validity of an oral agreement and whether a breach of contract claim is barred by the statute of frauds are treated as contract issues. Florida follows the lex loci contractus doctrine, meaning the law of the state where the contract is made governs its validity and obligations. A contract is considered made where the final act necessary to complete it occurs, with oral contracts deemed "made" where the agreement is reached. Performance-related issues are governed by the law of the state where the contract is to be performed.
In this case, the dispute revolves around the validity of an oral agreement made on December 7, 2017, at the Plaintiff's unspecified "facilities." The Plaintiff is a Delaware corporation with its principal place of business in Broward County, Florida, and the Defendant also claims those facilities are located in Broward County. Both parties agree that Florida’s statute of frauds applies to the claims. Florida's statute of frauds requires that agreements not performable within one year must be in writing and signed to be enforceable. The Supreme Court of Florida has ruled that the statute applies only if full performance is impossible within a year; if full performance can be completed within that timeframe, the statute does not apply.
Defendant contends that the oral contract made on December 7, 2017, which specifies performance over "the full 2018 calendar year," violates the statute of frauds, necessitating a written agreement. Plaintiff argues that there were four distinct contracts formed at various times in 2017, each involving investments in exchange for discounts and incentives that would allow recoupment within one year. However, Defendant asserts that even if multiple agreements are considered, all include terms that extend performance into 2018, making it impossible for the contracts to be fully performed within one year. Consequently, the statute of frauds precludes Plaintiff's breach of contract claims.
Plaintiff's assertion of having fully performed the agreements is also rejected, as each contract's terms require ongoing performance throughout 2018. The court notes that full performance could potentially exempt an agreement from the statute of frauds, but in this case, the ongoing obligations negate that possibility.
Additionally, Plaintiff pleads promissory estoppel as an alternative claim, but Florida law clarifies that promissory estoppel does not serve as an exception to the statute of frauds. Thus, both the breach of contract claims and the promissory estoppel claim are barred under the statute of frauds.
In DK Arena, Inc. v. EB Acquisitions I, LLC, the court held that the application of the Statute of Frauds is a legislative prerogative, and the doctrine of promissory estoppel cannot circumvent its requirements. Consequently, the plaintiff's claim for promissory estoppel is barred. The plaintiff's complaint includes allegations of fraudulent and negligent misrepresentation in Counts Three and Four. Although these claims have different elements, Florida law stipulates that both are barred by the statute of frauds if they essentially seek damages for breach of an oral agreement. The court determined that these counts are attempts to indirectly recover for breach of contract, as indicated by the plaintiff's alternative pleadings suggesting a lack of an existing contract. The court found that the plaintiff's claims arose from alleged false statements made by the defendant regarding the continuation of their business relationship throughout 2018, asserting that the defendant either knew these statements were false or was negligent in making them. Ultimately, the court concluded that Counts Three and Four are merely indirect claims for breach of contract and are therefore barred by the statute of frauds. Any tort claims attempted by the plaintiff are also dismissed as derivative of the oral contract.
Count Five of the Plaintiff's complaint alleges unjust enrichment under Florida law. A claim for unjust enrichment is equitable and not governed by the statute of frauds, as established in Kolski ex rel. Kolski. The elements required to prove unjust enrichment include: (1) the plaintiff provided a benefit to the defendant; (2) the defendant accepted and retained the benefit; and (3) it would be inequitable for the defendant to keep the benefit without compensating the plaintiff, according to Porsche Cars N. Am. Inc.
The Defendant seeks dismissal of the unjust enrichment claim, arguing that the complaint fails to specify any benefits unjustly accepted or retained, especially after the termination of their relationship. The Defendant contends that there are no allegations indicating that the Plaintiff was unpaid during their relationship, thus warranting dismissal under Federal Rule of Civil Procedure 12(b)(6). In response, the Plaintiff asserts that it adequately pled all elements, claiming it conferred benefits through marketing and promoting the Defendant's products, which the Defendant allegedly acknowledged as successful.
However, the Court agrees with the Defendant, stating that the Plaintiff has not sufficiently demonstrated inequity in the Defendant retaining the benefit. The Court highlights that the Plaintiff's assertion that consumers remember the marketing efforts after the relationship ended does not plausibly indicate that the Defendant continues to benefit from the marketing, nor is there evidence of increased sales or that the Defendant has not compensated the Plaintiff for the marketing services. Consequently, the Court concludes that the Plaintiff has failed to state a valid claim for unjust enrichment and cannot amend the claim, as it cannot allege any tangible benefits wrongfully retained by the Defendant.
Non-payment of accepted orders was not clearly articulated in the Plaintiff's Amended Complaint. The Court granted the Defendant's Motion to Dismiss, ruling that re-pleading the claims would be futile, thus dismissing them with prejudice. The Court considered an Agreement central to the Plaintiff's claim, which was not challenged for authenticity. Although the Plaintiff argued that the Agreement's terms do not bar its claims, the Court deemed the Agreement illusory, noting it did not provide a remedy for breach, particularly concerning lost profits. However, the Agreement does offer remedies for defective parts, countering the illusory argument.
The Court emphasized the necessity of conducting a separate choice-of-law analysis for each claim, applying Florida law to the tort claims of fraudulent and negligent misrepresentation. Using the "significant relationships test" from the Restatement (Second) of Conflicts of Laws, the Court determined that Florida law applies due to the Plaintiff's reliance on the Defendant's representations in Florida, the location of meetings, and the headquarters of both parties. Consequently, Florida’s statute of frauds applies to the Plaintiff's tort claims, consistent with the treatment of the contract claims.
The statute of frauds serves as an affirmative defense that can only be invoked in a motion to dismiss if the complaint clearly demonstrates its applicability. In this case, the complaint indicates that the agreement was formed in Las Vegas, Nevada, making Nevada law and its statute of frauds relevant to the breach of contract claim. Both Nevada's and Florida's statutes are similar, with oral contracts fully performable within one year not falling under the statute's purview. The court's analysis focuses on whether the alleged oral agreement can be performed within a year; however, the complaint suggests there is a single contract encompassing all discussions from January to December 2017. This contract includes specific obligations from both parties: OJC's commitments to set up shipping services, integrate systems, update listings, and market products, in return for Ashley's promises to maintain their business relationship and provide support through 2018. The plaintiff asserts that all conditions precedent have been met and that the defendant materially breached the contract by terminating their business relationship. Should the court find no contract exists, the plaintiff alternatively claims promissory estoppel. The plaintiff's response to the motion to dismiss reaffirms the existence of one oral contract, underscoring mutual assent and essential terms, and contends that performance is contemplated beyond the one-year statute of limitations due to the commitments extending through the end of 2018.
