Antifun Limited T/A Premium Vape v. Wayne Industries LLC

Background

Antifun Limited T/A Premium Vape alleged that it entered into two agreements with Wayne Industries LLC and Douglas Ruth for the shipment of mango-flavored and other vaping pods. Antifun alleged that it paid $48,000 for a May 2021 order and $93,559.50 for a June 2021 order. It received only half of the May order and none of the June order. Antifun claimed approximately $373,000 in lost revenue and $256,000 in lost profits.

The amended complaint asserted seven counts: breach of contract; breach of express warranty; four fraud claims; and unjust enrichment. The warranty claim was brought against Ruth. The fraud claims were also brought against Ruth, with the ownership-related fraud count additionally asserted against Wayne. The defendants moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), which asks whether the complaint states a legally sufficient claim.

Breach of contract

The court held that the alleged transactions involved goods, so New York’s Uniform Commercial Code governed the contract claim. Antifun plausibly alleged mutual agreement through the parties’ messages, invoices, prior dealings, and payments. The alleged terms included the quantities, prices, shipping information, and payment details for the May and June 2021 orders.

The court also rejected the statute-of-frauds challenge at the pleading stage. The statute of frauds generally requires a sufficient writing for a sale of goods priced above $500. The court found that the invoices and electronic communications plausibly supplied the required writings. Independently, Antifun alleged full payment for both unfilled orders, which supported enforcement to the extent of its performance.

The court further held that Antifun plausibly alleged lost-profit damages. The complaint identified the quantities not delivered, the purchase prices, Antifun’s intended resale of the pods, and approximate revenue and profit losses. The court stated that the defendants could challenge the calculations at summary judgment or trial, but the allegations were sufficient to survive dismissal.

The court also allowed the contract claim against Ruth to proceed. Applying Wyoming law to the issue of disregarding Wayne’s separate legal status, the court found plausible allegations of undercapitalization, commingling of funds, use of Wayne as a shell, and a possible injustice if Ruth were shielded from liability. The court emphasized that the ultimate determination would await factual development.

Express warranty

The express-warranty claim alleged that Ruth falsely represented that he owned the pods. The court treated the theory as potentially involving a warranty of title under the New York Uniform Commercial Code. However, it dismissed the claim because Antifun’s allegation that it relied on the ownership statement when making payment was conclusory. The complaint did not explain why Ruth’s ownership, rather than his ability to obtain the pods from other sources, mattered to Antifun’s decision to pay.

Fraud claims

The court dismissed all four fraud claims for failure to meet Federal Rule of Civil Procedure 9(b), which requires fraud to be pleaded with particular detail, including the statement, speaker, time, place, and reason the statement was fraudulent.

The ownership claim did not identify when or where Ruth allegedly represented that he owned the pods. The alleged representation that Ruth was in good standing with his distributor was not tied to a specific time and place and did not appear in the submitted messages. The claim that Ruth misrepresented his authority to act for Wayne did not identify the statement, its timing or location, or why it was fraudulent; the complaint also did not adequately allege reliance. Finally, the claim concerning allegedly false bank statements sent to MWT failed because the complaint did not allege that Antifun relied on those statements, and reliance by a third party would not satisfy the required element.

Unjust enrichment

The court denied the motion to dismiss the unjust-enrichment claim. Unjust enrichment is an equitable, or fairness-based, theory that may be pleaded as an alternative when the parties dispute whether a contract exists. Because the defendants disputed contract formation and the contract claim was proceeding, Antifun could pursue unjust enrichment as an alternative theory, although it could not ultimately recover twice for the same loss.

Disposition

The court granted the motion to dismiss the amended complaint’s breach-of-express-warranty and fraud claims. It denied the motion to dismiss the breach-of-contract and unjust-enrichment claims. The defendants were ordered to answer the surviving claims by August 5, 2022, and the court stated that it would issue a separate order setting an initial pretrial conference.