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Blue Ribbon Industries, Inc. v. Bowe Textile Cleaning USA

June 26, 2009

BLUE RIBBON INDUSTRIES, INC., PLAINTIFF,
v.
BOWE TEXTILE CLEANING USA, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Rufe, J.

MEMORANDUM & ORDER

Asserting diversity jurisdiction, Plaintiff Blue Ribbon Industries, Inc. ("Blue Ribbon" or "Plaintiff"), filed a civil action Complaint in this Court against Defendants Bowe Textile Cleaning, USA ("Bowe") and Sail Star USA, Inc. ("Sail Star") (collectively, "Bowe").*fn1

The Complaint lists seven state law counts against the defendants. Presently before the Court is Sail Star's revised Motion to Dismiss Plaintiff's Complaint on the ground of claim preclusion, as well as all briefing thereon.*fn2 For the reasons that follow, the Motion will be denied.

I. BACKGROUND

A. Factual Background

1. The Parties' Relationship

Plaintiff Blue Ribbon is a corporation that sells and distributes dry cleaning and laundry equipment.*fn3 Defendant Bowe is a division of Defendant Sail Star engaged in the business of manufacturing and distributing dry cleaning and laundry equipment worldwide. The Bowe "Permac" line of dry cleaning and laundry equipment is considered in the field to be of very high quality.

In 1993, Plaintiff Blue Ribbon became a dealer and distributor for Bowe equipment in the territory of south and central New Jersey. In this capacity, Blue Ribbon marketed, sold, and distributed Bowe laundry and dry cleaning equipment, and installed and serviced it for customers. Plaintiff was not the exclusive dealer or distributor in this territory, but it nonetheless soon became the top distributor of Bowe Permac equipment in the eastern United States.

Blue Ribbon sought an exclusive machines and equipment distributorship from Bowe for several years. After extensive negotiations, on February 1, 2001 it entered into an agreement to be the exclusive dealer and distributor of Bowe machines and equipment for the territory of Delaware, eastern Pennsylvania and southern New Jersey ("Territory"). Blue Ribbon's exclusive distributorship of Bowe machines and equipment was successful for a period of some years.

In February, 2003, after further negotiations, Blue Ribbon and Bowe entered into an agreement for Blue Ribbon also to be the exclusive dealer and distributor for Bowe parts in Pennsylvania, southern and central New Jersey and Delaware.*fn4 As such, from February, 2003, onward, Blue Ribbon was the exclusive distributor and dealer of Bowe machines, parts and equipment in the Territory.

2. Defendants' Alleged Wrongdoing

Blue Ribbon alleges various factual bases for its claims against the defendants. First, in 2004, Bowe introduced a new line of dry cleaning machines known as "Generation 6." Sometime thereafter, Bowe ascertained that the Generation 6 machines had defective back plates that could cause them to leak a hazardous chemical, Perchloroethylene, or to be inoperable. The Generation 6 machines had other problems as well, relating to excessive internal condensation and high moisture content and faulty containment trays. Bowe knew of these defects yet instructed Blue Ribbon to continue selling and servicing the Generation 6 machines while the company worked to resolve the problems through certain re-design efforts. Although the problems identified with Generation 6 machines persist to the present day, Bowe has not implemented a re-design or other solution, and consequently Blue Ribbon has been required to service customers' chronic problems with the machines for several years, at significant financial and reputational cost to its business.

Second, in the latter half of 2005, Jack O'Mara, a Blue Ribbon parts employee, and Brian O'Mara, a Blue Ribbon technician and Jack O'Mara's brother, resigned from the company. Within one month of their resignations, Blue Ribbon's parts sales and distribution business declined sharply, before "completely disappear[ing]."*fn5 Blue Ribbon repeatedly asked Bowe whether it was violating the parties' exclusive parts distribution agreement by selling parts directly or distributing parts through distributors other than Blue Ribbon in the Territory, but Bowe denied that it was doing so. In mid-2006, however, Bowe admitted to Blue Ribbon that it was selling parts in the Territory, both directly to customers and to other distributors, including the O'Mara brothers, who had begun a competing business. Bowe offered Blue Ribbon certain payment on the parts thus sold in violation of the parties' exclusive distribution agreement, but did not cease selling parts to customers or other dealers in the Territory. Since then, Blue Ribbon's parts distribution business has altogether failed.

Third, Bowe sold an add-on feature for its Generation 6 machines and certain other models known as the "Slimsorba." The Slimsorba feature has an environmental protection function, absorbing and so reclaiming solvent in the air, the machine or the clothes cleaned therein. Prior to 2007, none of the states in Blue Ribbon's overall distribution area legally required the use of the Slimsorba feature or similar vapor barriers on dry cleaning equipment. However, it was anticipated in the dry-cleaning industry that such legal requirements soon would be imposed. In 2007, the New Jersey Department of Environmental Protection issued a plan to require vapor barriers on ...


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