SOCAP USA v. S.R.L.

Background

SOCAP USA, Inc. brought the action against 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 based on an October 2019 settlement agreement. The agreement gave SOCAP a five-year exclusive period to sell certain products in New York, Connecticut, and New Jersey; required specified pricing, royalty, recordkeeping, and audit-related obligations; and included mediation procedures for disputes.

SOCAP alleged that, beginning in 2020, the defendants failed to provide the required pricing and records, refused an audit, withheld products, sold products to competitors in SOCAP’s territory, and withheld or deducted royalties. SOCAP also alleged that it sent an April 18, 2023 notice of default and attempted unsuccessful mediation. The action initially included claims for breach of contract, contempt for failure to comply with subpoenas, and costs and attorneys’ fees. The Second Amended Complaint was the operative pleading discussed in this opinion. The opinion states that SOCAP explicitly abandoned its tortious-interference claim; the court therefore addressed only the breach-of-contract claim.

Motion to Dismiss

Sacha Q Project, Inc., Sacha Quarles, and ADB Corp. moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint plausibly states a claim. They argued that SOCAP had not performed its own obligations under the settlement agreement, particularly the procedures in Section 8, and therefore could not pursue its contract claim.

The court accepted the complaint’s factual allegations as true for purposes of the motion and considered the documents attached to or incorporated into the complaint. The court found no dispute that the settlement agreement was a contract. It also treated the contract’s existence as adequately pleaded because the defendants did not substantively challenge that element. The court explained that a breach-of-contract plaintiff must plead a contract, its own performance, the defendant’s breach, and resulting damages.

The court held that SOCAP’s allegation that it had complied with conditions precedent—including sending the notice of default and attempting mediation—was sufficient at the pleading stage. Section 8 did not establish a condition that had to occur before the defendants’ underlying contractual duties arose. Instead, the court determined that the alleged duties concerning the exclusive territory, pricing, and books and records arose directly from the settlement agreement and were not conditional. The court further stated that, even if the procedures were conditions precedent, the defendants had not denied SOCAP’s alleged satisfaction of those conditions with the particularity required by Rule 9(c).

Disposition

The court denied the defendants’ motion to dismiss. The court did not decide whether the alleged breaches actually occurred or whether SOCAP would ultimately prove damages; it ruled only that the breach-of-contract claim could proceed past the pleading stage.

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