Smart Shoppers NYC LLC v. Tylers Coffee LLC

Background

Smart Shoppers NY LLC sued Tylers Coffee LLC doing business as Tylers Acid-Free Coffee and also known as Tylers Coffees®, Liftted Coffee LLC, Resineater420 LLC, Tyler Ornstein, and Doug Harding. The claims were for breach of contract, unjust enrichment, and fraud.

According to the First Amended Complaint, Plaintiff and Defendants discussed an arrangement under which Plaintiff would become the exclusive Amazon distributor for Tylers Coffee and products from two new companies. Plaintiff also alleged that it loaned Defendants $150,000 through three $50,000 charges, paid $250,000 toward an order of coffee products, and never received the products or repayment. The alleged agreements were not formally signed, and the complaint did not attach them.

Defendants moved to dismiss the First Amended Complaint in its entirety under Federal Rules of Civil Procedure 12(b)(2), 12(b)(3), and 12(b)(6). These rules address personal jurisdiction, improper venue, and failure to state a legally sufficient claim.

Personal Jurisdiction

The court held that it had personal jurisdiction over all Defendants and therefore denied the motion under Rule 12(b)(2). The court found that Defendants had purposefully engaged in business connected to New York by soliciting Plaintiff’s distribution services, agreeing to deliver products to Plaintiff in New York, seeking loans and investments, and communicating with Plaintiff about the transactions. The court also found the required connection between those New York activities and Plaintiff’s claims. It concluded that exercising jurisdiction was consistent with constitutional fairness requirements.

Venue and Transfer

The court denied Defendants’ motion to dismiss for improper venue under Rule 12(b)(3). It concluded that substantial events related to each claim occurred in New York. For the contract claim, the court relied on negotiations involving New York, expected performance in New York, and payments sent from New York. For unjust enrichment, the court considered Defendants’ solicitation of Plaintiff’s investment and distribution business in New York. For fraud, the court considered communications sent to New York that allegedly contained misleading statements.

The court also denied Defendants’ request to transfer the case to Arizona. Although the action could have been filed there, Defendants did not provide clear and convincing evidence establishing that transfer would better serve the convenience of the parties and witnesses or the interests of justice.

Rule 12(b)(6) Rulings

The court dismissed Count I, the breach-of-contract claim, without prejudice in its entirety. As to the alleged Exclusive Agreement, Plaintiff described only the alleged exclusive-distribution obligation and did not provide important terms such as duration, price, or how performance would occur. The court also found that Plaintiff had not adequately alleged that Defendants intended to be bound by that agreement or that another distributor breached the exclusivity arrangement.

As to the alleged Partnership Agreement, Plaintiff acknowledged that proposed agreements were negotiated but never signed. Plaintiff did not allege the agreement’s terms, whether Defendants intended not to be bound until signing, or what Defendants were required to perform. The court concluded that the allegations did not show a binding contract.

As to the alleged Loan Agreement, Plaintiff did not provide terms such as an interest rate, payment schedule, collateral, duration, or consequences of default. The court also found no adequately alleged breach because the money was to convert into investments only after execution of the partnership documents, and Plaintiff alleged that those documents were never executed.

The court dismissed Count II, the unjust-enrichment claim, without prejudice in its entirety. It dismissed the portion concerning the alleged loans because Plaintiff treated the Loan Agreement as a contract covering the same subject. It dismissed the portion concerning the $250,000 product order because Plaintiff described the order as a contract and could not use unjust enrichment to bypass a contract claim.

The court dismissed Count III, the fraud claim against the Individual Defendants, without prejudice. Plaintiff did not identify the alleged false statements with the detail required by Rule 9(b), including what was said, who said it, when and where it was said, and why it was fraudulent. The court also held that the fraud allegations were duplicative of the contract claims because they concerned the same alleged promises and contractual obligations.

Disposition

The court stated that Defendants’ motion to dismiss was DENIED, in part, and GRANTED, in part. The First Amended Complaint was dismissed in its entirety without prejudice. Plaintiff was granted leave to file a second amended complaint by February 12, 2024. The court stated that failure to timely file would result in the claims dismissed without prejudice being dismissed with prejudice. Defendants were directed to respond or state their intention to file another motion by March 4, 2024.