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Marci's Fun Food, LLC v. Shearer's Foods

October 8, 2010

MARCI'S FUN FOOD, LLC, PLAINTIFF,
v.
SHEARER'S FOODS, INC. AND POPPEE'S POPCORN, INC., DEFENDANTS.



The opinion of the court was delivered by: Cathy Bissoon United States Magistrate Judge

Magistrate Judge Bissoon*fn1

MEMORANDUM AND ORDER

I. MEMORANDUM

Plaintiff, Marci's Fun Food, LLC, brings this action against Defendants, Shearer's Foods, Inc. ("Shearer's") and Poppee's Popcorn, Inc. ("Poppee's"), alleging that Defendants violated the Lanham Act, violated the Pennsylvania Uniform Trade Secrets Act, misappropriated equipment and trade secrets, engaged in unfair competition, breached contractual obligations, breached the duty of good faith and fair dealing, tortiously interfered with business relationships and committed acts of fraud and intentional and negligent misrepresentation when they induced Plaintiff to enter into an agreement for the production of its famous kettle corn product, then terminated the agreement but continued to produce Plaintiff's kettle corn as their own product and did not return Plaintiff's equipment as required by the agreement.

Presently before this Court for disposition are two motions to dismiss, one submitted by Shearer's (Doc. 8) and the other by Poppee's (Doc. 25). For the reasons that follow, the motions will be granted with respect to Counts II, III, V, VI and X, and denied with respect to Counts I, IV, VII, VIII, IX, XI and XII.

Facts

Plaintiff is a corporation with its principal place of business in Moon Township, Pennsylvania that, from 1999 to 2007, manufactured a food product labeled "MARCI'S OLD FASHIONED KETTLE KORN" that was famous as a food, brand and product throughout Ohio and Western Pennsylvania. (Compl. ¶¶ 1, 5.) Plaintiff states that, in development of this product, it perfected an idea for a food manufacturing process that was original, unique, exclusive, not in the public domain, and kept secret. Plaintiff made a great and substantial investment of time, effort and money in creating and developing the kettle corn and in building a distribution network for it. (Compl. ¶¶ 6-7.) Plaintiff's kettle corn was distributed throughout Western Pennsylvania and Ohio and had a well established customer base. (Compl. ¶ 8.)

In December, 2006, Shearer's approached Plaintiff and initiated negotiations to produce the kettle corn on Plaintiff's behalf. On or about December 12, 2006, Plaintiff and Shearer's entered into a Mutual Confidentiality and Non-Disclosure Agreement (the "Confidentiality Agreement") in which Shearer's, among other things, agreed to maintain confidentiality and not disclose Plaintiff's confidential information, which was defined as: business plans, prospects, operations, financial structure, ideas, product formulations, and production processes, which (i) is disclosed by [Plaintiff] or its affiliates to [Shearer's] or its affiliates, indicating its confidential or proprietary nature, or (ii) is developed during the relationship between the parties and, if disclosed to [Plaintiff's] competitors, would give or increase the advantage of the [Plaintiff's] competitors over the [Plaintiff] or diminish the [Plaintiff's] advantage over its competitors. (Compl. ¶ 12 & Ex. 1 ¶ 1.)

Thereafter, Shearer's attempted to make the kettle corn on its own equipment, but failed to make a kettle corn product that met Plaintiff's standards of quality with respect to process, food quality, labeling and packaging. Shearer's then approached Plaintiff to propose purchasing the equipment Plaintiff had used to make the product and an oral contract was formed to sell the equipment to Shearer's for an amount over $60,000.00. (Compl. ¶¶ 13-15.)

On April 17, 2007, the parties entered into a Production Agreement, wherein Shearer's would produce kettle corn for Plaintiff and Plaintiff would then sell the product to its previously well-established list of wholesalers and retailers. (Compl. ¶ 16 & Ex. 2.) Thereafter, Shearer's produced the kettle corn product at the North Ridgeville, Ohio plant that had previously been owned and operated by the corporate entity known as Poppee's, but which had been purchased by Shearer's in 2006. Poppee's was then operating as a wholly-owned subsidiary of Shearer's. (Compl. ¶¶ 9, 17.) Plaintiff alleges that Poppee's repeatedly, deliberately and intentionally ignored its advice and admonitions regarding product quality and packaging and labeling errors. (Compl. ¶ 18.)

Sometime after April 2007, Shearer's sold the subsidiary entity that produced the kettle corn at the Ridgeville, Ohio location, thereby essentially reconstituting the corporate and/or business entity that operated as "Poppee's" or a similar name, prior to its purchase by Shearer's in 2006. Plaintiff asserts that, as a result of this transaction, Poppee's assumed the duties, rights, responsibilities and obligations that Shearer's had assumed under the Confidentiality Agreement and the Production Agreement and that Shearer's remained liable in its own right under these agreements. (Compl. ¶¶ 20-21.) Plaintiff further contends that Poppee's assumed a contractual duty to make kettle corn of food quality and packaging and labeling standards previously set by Plaintiff with its production (Compl. ¶ 22), and that the "sale and purchase of the POPPEE'S subsidiary essentially reconstituted POPPEE'S into its pre-SHEARER'S purchase form thus utilizing the same principals and employees that it had prior to its purchase by SHEARER'S, also incorporating the additional MARCI'S equipment into its production facility." (Compl. ¶ 23.)

On or about February 11, 2008, Shearer's notified Plaintiff that it was canceling the Production Agreement. (Compl. ¶ 24.) Plaintiff alleges that, after this cancellation, Poppee's continued to produce a kettle corn product for sale and distribution by Shearer's that was identical to Plaintiff's product but had a different label and packaging.*fn2 The product was identical in that it bore the same food qualities and essential product identity as that produced by Plaintiff prior to its substandard production by Poppee's. Plaintiff alleges that these actions "caused, continue to cause confusion and mistake, and have deceived purchasers and the public that 'MARCI'S OLD FASHIONED KETTLE KORN' is the defendants' own product." (Compl. ¶ 25.) Plaintiff further alleges that these actions constituted a breach of the Confidentiality Agreement (because Shearer's revealed Plaintiff's confidential information to Poppee's); a breach of paragraph 8 of the Production Agreement (because the production compromised Plaintiff's business strategies, plans, inventions, discoveries and trade secrets); and a breach of paragraph 7 of the Production Agreement (because upon cancellation, Shearer's and Poppee's were under a duty to return the equipment Shearer's had previously purchased from Plaintiff to produce the kettle corn). (Compl. ¶¶ 26-28.)

Plaintiff alleges that it was deprived of its equipment and cut off from distributing its products and as a result its brand name has been destroyed, causing it to suffer pecuniary loss. (Compl. ¶ 29.) Plaintiff further alleges that, from the very beginning of negotiations between the parties, Shearer's never bargained in good faith and sought to destroy and injure the "MARCI'S OLD FASIONED KETTLE KORN" brand name. (Compl. ¶ 30.) Plaintiff alleges that the cancellation letter also breached the Production Agreement by failing to allow sufficient time to meet the 2008 Purchase Commitments set forth as Exhibit B thereunder. (Compl. ¶ 31.)

Finally, Plaintiff alleges that:

In the alternative, defendant POPPEE'S['] aforementioned deliberate, intentional act of ignoring the admonitions and/or direction of MARCI'S with regard to product quality and labeling and packaging errors created poor product quality and lead [sic] directly to lower orders from MARCI'S['] previously established customers, and directly sabotaged "MARCI'S OLD FASHIONED KETTLE KORN" brand name.

The [CONFIDENTIALITY AGREEMENT] and [PRODUCTION] AGREEMENT at issue were made, without good faith, under fraudulent and deceitful circumstances, consisting of promises the defendants never intended to keep, with the intent to produce plaintiff MARCI'S to enter into said contracts to its detriment; as such, said contracts are unconscionable and are contracts of adhesion, and any terms, including but not limited to the statute of limitations and damages, that limit plaintiff's recovery beyond what it is legally entitled must be deleted from said contracts and otherwise held unenforceable, and all other terms interpreted and enforced in a light that is most favorable to the plaintiff. (Compl. ¶¶ 32-33.)

Procedural History

Plaintiff filed this action on February 11, 2010. Jurisdiction is based on the federal question presented by the Lanham Act claims, 28 U.S.C. §§ 1331 and 1338(b),*fn3 which constitute Count VII ("passing off"), Count VIII (false advertising), Count IX (violation and/or usurpation of common law trademarks) and Count X (dilution by blurring or tarnishment). The complaint also contains state law claims for misappropriation (Count I), breach of contract (Count II), breach of the duty of good faith and fair dealing (Count III), intentional misrepresentation, fraud and deceit (Count IV), negligent misrepresentation (Count V), tortious interference with a business relationship (Count VI), unfair competition/unjust enrichment under Pennsylvania common law (Count XI) and violation of the Pennsylvania Uniform Trade Secrets Act, 12 Pa. C.S. §§ 5301-08 (Count XII). On April 12, 2010, Shearer's filed a motion to dismiss (Doc. No. 8) and also a motion to transfer (Doc. No. 10). On May 12, 2010, Poppee's filed a motion to dismiss (Doc. No. 25) and a motion to change venue (Doc. No. 26), which adopted the arguments made by Shearer's in its motions.*fn4

Standard of Review

The Supreme Court has recently stated that:

Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." As the Court held in [Bell Atlantic Corp. v.] Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 [(2007)], the pleading standard Rule 8 announces does not require "detailed factual allegations," but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. Id., at 555, 127 S.Ct. 1955 (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)). A pleading that offers "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." 550 U.S., at 555, 127 S.Ct. 1955. Nor does a complaint suffice if it tenders "naked assertion[s]" devoid of "further factual enhancement." Id., at 557, 127 S.Ct. 1955.

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Id., at 570, 127 S.Ct. 1955. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id., at 556, 127 S.Ct. 1955. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.'" Id., at 557, 127 S.Ct. 1955 (brackets omitted).

Ashcroft v. Iqbal, 556 U.S. __, 129 S.Ct. 1937, 1949 (2009).

The Court of Appeals for the Third Circuit has stated that:

To decide a motion to dismiss, courts generally consider only the allegations contained in the complaint, exhibits attached to the complaint and matters of public record.... [In addition,] a court may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document.

Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993) (citations omitted). Thus, the two agreements, which are attached to the complaint and referenced therein, may be considered without ...


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