SOCAP USA v. S.R.L.

Background

SOCAP USA, Inc. sued So.Cap S.R.L., SHE S.R.L., SHE USA, Inc., SHE Hair Pro a/k/a SHE Hair Extensions, Alain Hair Extensions Co., Sacha Q Project, Inc., Sacha Quarles, Antonio Di Biase, and ADB Corp. SOCAP alleged breach of contract and tortious interference. The case concerns a 2019 settlement agreement that gave SOCAP a five-year exclusive period to sell certain hair-extension products in New York, Connecticut, and New Jersey. The agreement also addressed product pricing, sales in SOCAP’s territory, royalties, recordkeeping, audits, notice of breach, and mediation.

SOCAP alleged that, beginning in 2020, defendants failed to provide the most favorable prices, accurate records and invoices, audit access, certain products, and required royalties, and sold products to competitors in SOCAP’s territory. The defendants who filed this motion were Sacha Q Project, Inc., Sacha Quarles, and ADB Corp. SOCAP later abandoned its tortious-interference claim, so the court addressed only the breach-of-contract claim.

Motion to Dismiss

The defendants argued that SOCAP failed to perform its obligations under the settlement agreement, particularly the agreement’s notice, cure, and mediation provisions. Under the federal pleading rules, a complaint must allege enough facts to make a claim plausible, and a court generally accepts the complaint’s factual allegations as true when deciding a motion to dismiss. The court could also consider documents attached to or incorporated into the complaint, including the settlement agreement.

The court found no dispute that the settlement agreement was a contract. It also noted that the defendants did not substantively challenge the alleged breach, damages, or existence of the contract. The central issue was whether SOCAP adequately alleged its own performance.

The court explained that a condition precedent is an act or event that must occur before a contractual duty arises. Federal Rule of Civil Procedure 9(c) allows a plaintiff to allege generally that conditions precedent were satisfied; a party denying that satisfaction must do so with particularity. SOCAP alleged that it complied with the agreement’s lawsuit-related requirements by sending an April 18, 2023 notice of default and attempting unsuccessful mediation.

The court held that this general allegation was sufficient at the motion-to-dismiss stage. It further held that the agreement’s Section 8 procedures were not conditions that had to occur before the defendants’ underlying contractual duties arose. Instead, the duties concerning territory, pricing, and accurate books and records arose from the agreement itself. The court also stated that, even if the procedures were conditions precedent, the defendants had not denied SOCAP’s alleged satisfaction with the particularity required by Rule 9(c).

Disposition

The court denied the defendants’ motion to dismiss. This ruling allowed SOCAP’s breach-of-contract claim to proceed; it did not decide whether defendants ultimately breached the agreement or whether SOCAP will recover damages.

The court separately noted that So.Cap S.R.L., SHE S.R.L., SHE USA, Inc., SHE Hair Pro a/k/a SHE Hair Extensions, and Alain Hair Extensions Co. had not been served. It ordered SOCAP to properly serve those defendants within 30 days of the opinion and order. If SOCAP does not do so, the court may dismiss the action without prejudice as to those unserved defendants. The clerk was directed to terminate the pending motion.