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Kancor Americas, INC. v. ATC Ingredients, Inc.

United States District Court, E.D. Virginia, Alexandria Division

February 25, 2016

KANCOR AMERICAS, INC., et al., Plaintiffs,
v.
ATC INGREDIENTS, INC., Defendant.

MEMORANDUM OPINION AND ORDER

Gerald Bruce Lee United States District Judge

This matter is before the Court on Plaintiffs Kancor Americas, Inc. ("Kancor Americas") and Kancor Ingredients, Ltd. ("Kancor India") (collectively as "Plaintiffs or Kancor")'s and Defendant ATC Ingredients, Inc. ("Defendant")'s Cross Motions for Summary Judgment under Federal Rule of Civil Procedure 56 (Docs. 119, 111). This is a suit brought by spice suppliers Kancor Americas and Kancor India against ATC Ingredients, Inc. ("ATC"), an entity engaged to sell Kancor spices in the United States. Kancor asserts that it had a sales agreement with ATC to distribute Kancor spices to customers for a commission fee that was negotiated between Kancor and ATC. Kancor asserts that under the sales agreement, it would send an invoice to ATC for each transaction, and ATC would collect the spice customer sales price, deduct ATC's commission fee and handling costs, and hold or remit the left over balance or "margins" back to Kancor. Kancor asserts, among other things, that ATC breached its contract by failing to remit "margins" to Kancor. Conversely, ATC denies it has a supplier sales contract with Kancor India, or any obligation beyond transaction invoices, and ATC argues it had no contractual duty to remit the "margins." ATC argues that Kancor is liable for joint venture, tortious interference, and other claims.

There are nine issues before the Court. The first issue is whether Plaintiffs' claims for breach of contract (Count I), unjust enrichment (Count II), and conversion (Count III) are time-barred by the statute of limitations. The Court GRANTS Plaintiffs' motion and DENIES Defendant's motion as to Defendant's statute of limitations defense because the Court finds that Plaintiffs' claims for breach of contract, unjust enrichment, and conversion (Counts I, II, and III, respectively) are not time-barred.

The second issue is whether, by refusing to pay Plaintiffs monies allegedly owed, Defendant breached any contractual obligation to Plaintiffs (Count I). The Court DENIES Plaintiffs' and Defendant's motions as to Plaintiffs' claim for breach of contract (Count I) because a genuine issue of material fact exists with respect to whether a valid contract existed concerning Defendant's alleged obligation to surrender the "margins" to Plaintiff Kancor Ingredients, Ltd.

The third issue is whether Plaintiffs are entitled to assert a claim of unjust enrichment against Defendant where no express agreement existed for Defendant to remit to Plaintiffs the margins (Count II). The Court DENIES Plaintiffs' and Defendant's motions as to Plaintiffs' claim for unjust enrichment (Count II) because a genuine issue of material fact exists with respect to whether an express or oral agreement existed for Defendant to remit the "margins" to Plaintiff Kancor Ingredients, Ltd. that would result in Defendant withholding more than the negotiated amount.

The fourth issue is whether Defendant wrongfully interfered with Plaintiffs' property rights under the theory of conversion (Count III). The Court DENIES Plaintiffs' and Defendant's motions as to Plaintiffs' claim for conversion (Count III) because a genuine issue of material fact exists as to whether the "margins" were part of an identifiable fund to which Plaintiff is entitled.

The fifth issue is whether the parties were involved in a joint venture as opposed to an agent-client relationship (Counterclaim II - specific performance, Counterclaim III - breach of contract, Counterclaim IV - unjust enrichment). The Court GRANTS Plaintiffs' motion and DENIES Defendant's motion as to Defendant's claims of specific performance (Counterclaim II), breach of contract (Counterclaim III), and unjust enrichment (Counterclaim IV) relating to the alleged joint venture because (1) Defendant has not come forward with evidence showing a genuine issue of material fact as to a joint venture relationship between the parties, (2) the Virginia Statute of Frauds bars Defendant's joint venture claims, and (3) Defendant's joint venture claims are time-barred.

The sixth issue is whether Defendant has provided any evidence of its trade secrets, Plaintiffs' misappropriation of said trade secrets, or any resulting damages (Counterclaim VI). The Court GRANTS Plaintiffs' motion and DENIES Defendant's motion as to Counterclaim VI, Defendant's trade secret claim, because Defendant has not provided any evidence of its trade secrets, evidence of Plaintiffs' misappropriation of said trade secrets, or evidence of any resultant damages.

The seventh issue is whether Plaintiffs tortiously interfered with Defendant's business expectancy (Counterclaim VII). The Court GRANTS Plaintiffs' motion and DENIES Defendant's motion as to Counterclaim VII, Defendant's claim for tortious interference with its business expectancy, because Plaintiff Kancor Ingredients, Ltd. is a party to the contract and cannot interfere with its own contract.

The eighth issue is whether Plaintiffs breached the purported distribution and resale agreements (Counterclaim I) or its implied covenant of good faith and fair dealing owed to Defendant (Counterclaim V). The Court GRANTS Plaintiffs' motion and DENIES Defendant's motion on Defendant's claim for breach of contract as to the purported distribution and resale agreements (Counterclaim I) and on Defendant's claim that Plaintiffs breached their duty of good faith and fair dealing (Counterclaim V) because Defendant presents no evidence of the contract or of Plaintiffs' duty or breach.

The ninth issue is whether Plaintiffs' Amended Complaint states a claim for prayer for punitive damages. The Court GRANTS Defendant's motion as to Plaintiffs' prayer for punitive damages because punitive damages are not available for breach of contract claims.

I. BACKGROUND

A. The Parties

Plaintiff Kancor Americas, Inc. ("Kancor Americas") is a company organized and existing under the laws of New Jersey (Doc. 76). Kancor Americas is a wholly owned subsidiary of Kancor India. Id. Plaintiff Kancor India is a company organized and existing under the laws of India with its principal place of business in India. Id. Kancor India manufactures spices, spice extracts, essential oils, mints, menthol, and other commodities for import and sale throughout the world. Id.

Defendant ATC Ingredients, Inc. ("ATC") is a company organized and existing under the laws of Virginia with its principal place of business in Virginia. Id.

B. Plaintiff Kancor and Defendant ATC's business relationship

In or around 2006, Kancor India and ATC began their business relationship (Doc. 76). Kancor India entrusted ATC with its name, reputation, resources, and products. Id. Kancor India offered trainings to ATC both in business and in products, and Kancor India accompanied ATC on visits to clients. Id. Throughout their business relationship, ATC served as a sales agent for Kancor India's spices and other goods. Id. Before any sale was made, customers would work with Kancor India to ensure that the spices and other goods they sought to order met the specifications that they desired. Id. To meet these specifications, Kancor India used its extensive experience and resources to engineer the desired spices and other goods. Id.

During their eight-year business relationship, the parties agreed upon a course of business dealings (Doc. 76). Kancor India set the final prices of the spices and other goods for the customer, and ATC did not have the right to quote a price to the customer. Id. Customers would then pay ATC, and in turn, ATC would pay Kancor India the amount of the invoice less a commission. Id. The parties set Defendant's sales commission on a case-by-case basis for each transaction (Doc. 147). ATC's commission plus several handling charges were deducted from the final price (Doc. 173). The difference that ATC received from the customer would serve against these charges. Id.

Kancor India directly instructed ATC on which customers to pursue for the sale of Kancor India' products (Doc. 147). ATC always disclosed to Kancor India complete details regarding customers (Doc. 120). At no point was there any explicit agreement between Kancor India and ATC to form a joint venture (Doc. 76).

C. Decline of Kancor India and ATC's business relationship

In or around 2009, ATC began to seek to secure larger accounts and customers (Doc. 76). ATC began working with third-party vendors in addition to working with Kancor India. Id. Kancor India management agreed to a non-exclusive relationship. Id. Thereafter, ATC dealt with these third-party vendors for specific products and stopped doing business with Kancor India with respect to these products. Id. Around that time, ATC also developed a relationship with Kancor India's sister company, VKL Seasoning Pvt. Ltd. ("VKL"). Id. However, when Olam International ("01am") acquired VKL in November 2011, Olam decided it would no longer work with ATC. Id. ATC then began to work with a number of Kancor India's competitors. Id. Fearing that ATC would leak information about Kancor India's customers and business strategy, Kancor India reduced its business dealings with ATC. Id.

D. Kancor Americas, Inc. Is Formed

On November 6, 2013, Kancor Americas was launched and incorporated with its headquarters in Morristown, New Jersey (Doc. 76). Kancor Americas established a number of warehouses around New Jersey. Id. Some of the spices for transactions at issue were shipped from these warehouses to customers who purchased Kancor spices through ATC. Id.

E. Legal Actions and Allegations

Plaintiffs Kancor India and Kancor Americas allege that Defendant ATC owes Plaintiffs roughly $650, 000 (Doc. 76). Plaintiffs now bring this lawsuit alleging three claims. First, under Count I, Plaintiffs allege that by refusing to pay Kancor India the "margins, "[1]Defendant breached its contractual obligations to Kancor India. Id. Second, under Count II, Plaintiffs assert an unjust enrichment claim against Defendant because Defendant would be unjustly enriched if allowed to keep the "margins" or proceeds. Id. Third, under Count III, Plaintiffs argue that Defendant withheld funds from Kancor India under the theory of conversion. Id.

ATC asserts seven causes of action in its counterclaim and third-party complaint. First, under Counterclaim I, ATC asserts that Kancor India breached its 2006 and 2009 agreements with ATC for distribution and resale (Doc. 19). Second, under Counterclaim II, ATC alleges that the 2006 and 2009 Agreements created a joint venture between Kancor India and ATC for the distribution, resale, and marketing of Kancor products in the United States, and ATC requests that the Court order Kancor India to comply with the purported joint venture agreement. Id. Third, under Counterclaim III, ATC asserts that Kancor India breached the joint venture agreement. Id. Fourth, under Counterclaim IV, ATC alleges that Kancor India was unjustly enriched when it failed to reconcile inventory issues and repay ATC for items it allegedly removed from ATC's inventory. Id. Fifth, under Counterclaim V, ATC asserts that Kancor India breached its duty of good faith and fair dealing toward ATC when it interfered with ATC's customer relationships, reduced ATC's discount below 5%, converted ATC's inventory for its own benefit, transferred the sale of its products in the United States to Kancor Americas, and failed to issue to ATC the 10% ownership in Kancor Americas. Id. Sixth, under Counterclaim VI, ATC asserts that Kancor India misappropriated trade secrets from ATC, shared them with Kancor Americas, and continues to use ATC's trade secrets. Id. Seventh, under Counterclaim VII, [2] ATC alleges that Kancor India tortuously interfered with ATC's business expectancy when it conveyed ATC's trade secrets to Kancor Americas and intentionally interfered with ATC's customer relationships. Id.

Plaintiffs argue that their Motion for Summary Judgment should be granted for four reasons (Doc. 120). First, Plaintiffs argue that the Court should grant summary judgment on Defendant's Joint Venture claims for specific performance (Counterclaim II), breach of contract (Counterclaim III), and unjust enrichment (Counterclaim IV), because no meeting of the minds occurred between the Parties regarding the formation of a joint venture. Id. Second, Plaintiffs argue that the Court should grant summary judgment on Defendant's Trade Secret claim (Counterclaim VI) because Defendant cannot establish the existence of any trade secrets, misappropriation, or damages relating to said misappropriation. Id. Third, Plaintiffs argue that the Court should grant summary judgment on Defendant's tortious interference claim (Counterclaim VII) because Defendant cannot establish the first three elements of tortious interference. Id. Fourth, Plaintiffs argue that the Court should grant summary judgment on Defendant's Breach of Contract (Counterclaims I) and Breach of Good Faith and Fair Dealing claims (Counterclaim IV) because Defendant has not pointed to any agreement to show that Kancor India is responsible for Defendant's leftover inventory and because Defendant cannot prove its inventory damages. Id.

In response, Defendant brings a cross Motion for Summary Judgment seeking damages and specific performance (Doc. 111). In addition to the counter arguments asserted against Plaintiffs' claims, Defendant also asserts that its Motion for Summary Judgment should be granted for four additional reasons (Doc. 112). First, Defendant alleges that Plaintiffs' claims for specific performance (Counterclaim II), breach of contract (Counterclaim III), and unjust enrichment (Counterclaim rV) are barred because the parties were engaged in a joint venture. Id. Second, Defendant alleges that Plaintiffs misappropriated Defendant's trade secrets (Counterclaim VI). Id. Third, Defendant alleges that Plaintiffs tortiously interfered with Defendant's business expectancy (Counterclaim VII). Id. Fourth, Defendant alleges that Plaintiffs breached the purported distribution and resale agreements (Counterclaim I) and breached their duty of good faith and fair dealing (Counterclaim V). Id.

II. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 56, the Court must grant summary judgment if the moving party demonstrates that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c) (2013).

In reviewing a motion for summary judgment, the Court views the facts in a light most favorable to the nonmoving party. Boitnott v. Corning, Inc., 669 F.3d 172, 175 (4th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., Ml U.S. 242, 255 (1986)). Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003) (citations omitted). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008) (quoting Anderson, Ml U.S. at 247-48).

A "material fact" is a fact that might affect the outcome of a party's case. Anderson, Ml U.S. at 248; JKC Holding Co. v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). Whether a fact is considered to be "material" is determined by the substantive law, and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, Ml U.S. at 248; Hooven-Lewis v. Caldera, 249 F.3d 259, 265 (4th Cir. 2001).

A "genuine" issue concerning a "material" fact arises when the evidence is sufficient to allow a reasonable jury to return a verdict in the nonmoving party's favor. Resource Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 635 (4th Cir. 2005) (quoting Anderson, Ml U.S. at 248). Rule 56(e) requires the nonmoving party to go beyond the pleadings and by its own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324(1986).

III. ANALYSIS

The Court grants in part and denies in part Plaintiffs' Motion for Summary Judgment and Defendant's Motion for Summary Judgment for numerous reasons. First, the Court finds that Plaintiffs' claims for breach of contract (Count I), unjust enrichment (Count II), and conversion (Count III) are not time-barred by the statute of limitations. Second, there is a genuine issue of material fact as to the existence of a contract between the parties for the "margins" or proceeds (Count I). Third, a genuine issue of material fact exists as to Plaintiffs' claim that Defendant was unjustly enriched (Count II) because no express agreement existed for Defendant to remit the margins. Fourth, Plaintiffs have not provided sufficient evidence that Defendant held Kancor India's monies in trust (Count III). Fifth, the parties were not involved in a joint venture; they merely had an agent-client relationship (Counterclaim I - specific performance) (Counterclaim II - breach of contract) (Counterclaim III - unjust enrichment). Sixth, Defendant has not provided any evidence of its trade secrets, evidence of Plaintiffs' misappropriation of said trade secrets, or evidence of any resulting damages (Counterclaim VI). Seventh, Plaintiffs did not tortiously interfere with Defendant's business expectancy (Counterclaim VII). Eighth, Defendant presents no evidence of the breach of the purported distribution and resale agreements (Counterclaim I) or of Plaintiffs' implied covenant of duty of good faith and fair dealing owed to Defendant (Counterclaim V). Finally, the Court denies Plaintiffs' prayer for punitive damages because punitive damages are not available for breach of contract claims.

A. Plaintiffs' Claim is Not Time-Barred

1.Defendant's continuing breach theory is inapplicable

The Court denies Defendant's claim that Plaintiffs' causes of action for breach of contract (Count I), unjust enrichment (Count II), and conversion (Count III) are time-barred by the statute of limitations because each potential breach constitutes a separate and distinct occurrence that could give rise to separate claims.

Virginia Code § 8.01-246(4) provides a three-year statute of limitations for breach of any unwritten contract, express or implied, and Virginia Code § 8.01-243(B) provides a five-year statute of limitations for conversion. Under Virginia law, the right of action is "deemed to accrue and the prescribed limitation period shall begin to run from the date . . . when the contract occurs." Va. Code. Ann. § 8.01-230. In order to calculate the date from which the limitation shall run, the Court must first determine whether there was one breach or a series of breaches, as evidenced by the facts of the case. Am. Physical Therapy Assoc, v. Fed'n of State Bds. of Physical Therapy, 628 S.E.2d 928, 929 (Va. 2006). The party raising the statute of limitations as an affirmative defense must prove that the other party's claims are time barred. Heirs of Roberts v. Coal Processing Corp., 369 S.E.2d 188, 190 (Va. 1988).

Under the continuing breach theory, "[w]hether the [defendant's actions constituted a single continual breach ... or a series of separate breaches . . . depends upon the relevant facts." Hunter v. Custom Bus. Graphics, 635 F.Supp.2d 420, 431 (E.D. Va. 2009). The continuing breach theory applies where "the wrongful act is of a permanent nature and . . . produces 'all the damage which can ever result from it. . . .'" Hampton Roads Sanitation Dist. v. McDonnell, 360 S.E.2d 841, 843 (Va. 1987). If so, "the entire damages must be recovered in one action." Id. However, "if the wrongful acts are not continuous and 'occur only at intervals, each occurrence inflicts a new injury and gives rise to a new and separate cause of action.'" Am. Physical Therapy Assoc, 360 S.E.2d at 844 (quoting Norfolk v. W. Ry. Co. v. Allen, 87 S.E. 558 (Va. 1915)).

Plaintiffs assert three claims against Defendant for breach of contract (Count I), unjust enrichment (Count II), and conversion (Count III) (Doc. 76). At the time of the breach, Defendant allegedly failed to remit the margins on its very first sale of product to client Wild Flavors (Doc. 112).

Defendant argues that Plaintiffs' claims are time-barred (Doc. 112). Defendant argues that under the continuing breach theory, regardless of which statute of limitation applies, either Virginia Code § 8.01-246(4)'s three-year statute of limitations for breach of any unwritten contract, express or implied, or Virginia Code § 8.01-243(B)'s five-year statute of limitations for conversion, Plaintiffs' claims are time-barred as the alleged breach occurred in late 2006 or early 2007, roughly eight years ago. In other words, Defendant argues that for the purpose of calculating the statute of limitations, the first alleged breach is the only breach, and Plaintiffs' claims are therefore untimely.

The Court, however, finds that each breach constitutes a separate and distinct occurrence that gives rise to separate claims (Doc. 147). See also Hampton Roads, 360 S.E.2d at 843 (1987) (holding that the continuing breach theory is inapplicable and premature in circumstances where harm can still occur). The evidence shows that Plaintiffs set Defendant's sales commission on a case-by-case basis for each transaction (Doc. 147). Plaintiffs seek to recover monies that Defendant has allegedly withheld in these separate transactions (Doc. 147). There were numerous sales to customers over several years. The first alleged breach could not have caused and did not cause "all the ...


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