Spine & Trauma Products of NY, LLC v. ZetrOZ Systems, LLC
Erica L. Prager, J.S.C.
Spine & Trauma Products of NY, LLC,
Plaintiff
-against-
ZetrOZ Systems, LLC, et al.
Defendants
Index No. 602754/2019
THE LAW OFFICE OF STEVEN COHEN, P.C., Carle Place, NY (Mitchell Robert Goldklang, Esquire), for Plaintiff
McManus Ateshoglou Adams Aiello & Apostolakos PLLC, New York, NY (Peter Naber, Partner), for Defendant Client Care RX, Inc.
BEYS LISTON & MOBARGHA LLP, New York, NY (Joshua Donovan Liston, Esquire) for Defendant ZetrOZ Systems, LLC
Relief Sought
Upon the foregoing papers, defendant CLIENT CARE RX, INC. moves for an Order pursuant to CPLR §3212 awarding summary judgment dismissing plaintiff SPINE & TRAUMA PRODUCTS OF NY, LLC’s Verified Complaint as against said defendant.
Background
This action arises out of an alleged breach of, and interference with, an exclusive distribution agreement In its Verified Complaint filed on February 26, 2019 (the "Complaint") plaintiff SPPINE & TRAUMA PRODUCTS. OF NY, LLC (''Plaintiff'’) alleges that on April 1, 2016, Plaintiff and defendant ZetrOZ Systems, LLC (''ZetrOZ") entered into a written Commission and/or Rebate Agreement (the "Agreement'') which gave Plaintiff the exclusive right to distribute ZetrOZ’ s sam ® Professional (‘Sam Pro") medical device within a defined geographic territory. Pursuant to the Agreement, Plaintiff would retain exclusivity for the defined territory so long as it sold a minimum of ten (10) Sam Pro units per month. The Agreement provided for a term of thirty-six (36) months from the effective date (April 1, 2016), so long as the minimum monthly orders were met.
Plaintiff alleges further that in or about April of 2018, ZetrOZ began to manufacture Sam Pro 2.0, which performs the same function as the original Sam Pro, and began to sell the Sam Pro 2.0 in the designated geographic territories assigned to Plaintiff in the Agreement. On or about June 8, 2018, Plaintiff was notified by ZetrOZ that Zetroz was discontinuing sales of Sam Pro as of August 15, 2018, at which time ZetrOZ ceased responding to Plaintiff's order requests. Thereafter, Plaintiff alleges, ZetrOZ retained the services of defendant CLIENT CARE RX, INC. (''CLIENT CARE"), a distributor of durable medical equipment, to sell and distribute the Sam product within Plaintiff's defined territories.
Based upon the foregoing allegations, the Complaint asserts three causes of action: FIRST, against ZetrOZ for breach of contract; SECOND, against CLIENT CARE, for tortious interference with contract; and THIRD, against as yet unknown corporations for tortious interference with contract.
Issue was joined as to defendant CLIENT CARE on May 9, 2019. By Decision & Order dated September 5, 2019 and entered September 10, 2019, this Court (Hon. Steven M. Jaeger) denied ZetrOZ’s pre-answer motion to dismiss pursuant to CPLR .§3211. Issue was joined as to defendant ZetrOZ on October 7, 2019.
Defendant CLIENT CARE now moves for summary judgment dismissing the action against it on the grounds that Plaintiff cannot establish the elements of a claim for tortious interference.
Discussion
CLIENT CARE asserts that it is entitled to summary judgment on the grounds that: (i) Plaintiff cannot establish the existence of valid contract between Plaintiff and ZetrOZ; (ii) the evidence establishes that CLIENT CARE did not have knowledge of the Agreement; (iii) the evidence establishes that CLIENT CARE did not intentionally procure ZetrOZ's purported breach of the agreement.
In support of its argument that no valid contract existed at the time CLIENT CARE commenced doing business with ZetrOZ, CLIENT CARE asserts that the exclusivity provisions of the Agreement were rendered inoperative pursuant to the terms of the Agreement, when Plaintiff failed to meet the minimum monthly order volume in May 2016, July 2016, August 2016, and November 2016. Accordingly, CLIENT CARE argues, ZetrOZ opened up the designated territory to other distributors, starting with the retention of non-party Mii Supply in or about December of 2016. It was not until 2017 that James Morton, who would ultimately form CLIENT CARE, was contacted by Jim Molinaro, a Vice President at ZetrOZ, to distribute products for ZetrOZ. Thus, by the time James Morton or CLIENT CARE began to sell ZetrOZ's product, there was no longer a valid exclusivity agreement between ZetrOZ and Plaintiff. Moreover, CLIENT CARE was not formed until approximately August of 2018, and did not enter into an agreement with ZetrOZ until after ZetrOZ terminated its relationship with Plaintiff.
In support of its argument that CLIENT CARE did not have knowledge of the Agreement, CLIENT CARE cites the deposition testimony of James Morton, in which Mr. Morton states that prior to the subject litigation, (i) neither Mr. Morton nor CLIENT CARE were advised or otherwise made aware of Plaintiff's exclusive right to sell ZetrOZ products within the designated territory; (ii) neither ZetrOZ nor Mr. Molinaro advised Mr. Morton or CLIENT CARE that ZetrOZ had an agreement with Plaintiff; and (iii) neither Mr. Morton nor CLIENT CARE were advised by Plaintiff that Plaintiff had an exclusive right to sell the Sam Pro in the designated territory.
In addition, CLIENT CARE cites the deposition testimony of Stanislav Ochildiyev a/k/a Steve Oche, Plaintiff’s sole principal, in which Mr. Oche states: (a) that he did1not know whether CLIENT CARE was aware of the Agreement, (b) that plaintiff never informed CLIENT CARE about the Agreement, and (c) that Plaintiff never sent any letters or had any conversations with CLIENT CARE advising it of the Agreement.
As to its assertion that CLIENT CARE did not intentionally procure ZetrOZ's purported breach of the Agreement, CLIENT CARE notes the absence of any evidence of such conduct on the part of CLIENT CARE. CLIENT CARE cites the deposition testimony of Mr. Morton in which Mr. Morton states that the initial contact between him and Mr. Molinaro was made by Mr. Molinaro - that Mr. Molinaro contacted him to sell Sam products. In addition, CLIENT CARE cites the deposition testimony of Robert Butler, the Controller of ZetrOZ, in which Mr. Butler confirms that Mr. Molinaro initiated talks with Mr. Morton to retain him as a distributor, that CLIENT CARE never asked ZetrOZ to cease doing business with Plaintiff or Mr. Oche, and that there was no conduct on the part of CLIENT CARE that caused ZetrOZ to stop doing business with Plaintiff or Mr. Oche.
CLIENT CARE notes, as well, that to the extent that ZetrOZ breached the Agreement, it did so prior to its retention of CLIENT CARE, when it contracted with Mii Supply in December of 2016. Thus, CLIENT CARE argues, no conduct on the part of CLIENT CARE could be said to have induced the breach.
On the issue of the validity of the Agreement, Plaintiff argues that the monthly minimum purchase requirement was never enforced by ZetrOZ, and therefore it was· waived. At no time did ZetrOZ give notice of termination of the exclusivity provision, or of the Agreement as a whole. Rather, ZetrOZ continued to accept orders from Plaintiff. In the period from September 2016 through August 2017, Plaintiff notes, Plaintiff not only met, but exceeded the minimum 10-unit requirement. Plaintiff argues that ZetrOZ, by its conduct, ratified the Agreement and waived any right to terminate it. In Plaintiff's view, ZetrOZ cannot simultaneously benefit from the Agreement and treat the Agreement as terminated without notice to Plaintiff.
On the issue of whether CLIENT CARE had knowledge of the Agreement and intentionally procured its breach, Plaintiff highlights the direct and “close" personal relationship between Mr. Molinaro of ZetrOZ and Mr. Morton of CLIENT CARE as circumstantial evidence permitting the inference that Mr. Morton must have known about the Agreement and had something to do with its breach.
Plaintiff cites Mr. Morton's deposition testimony wherein he States that Mr. Molinaro contacted him personally while he was employed by another company to sell ZetrOZ' s Sam product· in 2017, and that starting in October 2017·, Mr. Morton, acting as a sole proprietor, sold Sam product pursuant to a verbal agreement he had with Mr; Molinaro/ZetrOZ.
In addition, Plaintiff cites the testimony of Mr. Morton wherein he states that sometime in late 2018, Mr. Morton entered into another verbal agreement with Mr. Molinaro, while the latter was still employed by ZetrOZ and without ZetrOZ 's consent, wherein Mr. Molinaro was retained by Mr. Morton as a sales representative to promote CLIENT CAEE's product line, including ZetrOZ and other products. Mr. Morton's testimony indicated his belief that Mr. Molinaro was ultimately fired from ZetrOZ as a result of this agreement.
Based upon the above testimony, and what counsel depicts as a dearth of records provided by CLIENT CARE in response to Plaintiff’s discovery demands, counsel argues that the relationship between Mr. Molinaro and Mr. Morton, and in particular, the surreptitious nature of their business dealings, raises issues of fact as to what Mr. Morton/CLIENT CARE knew about the Plaintiff's Agreement and what Mr. Morton/CLIENT CARE did to further their interests.
It is well settled that the elements of a cause of action for tortious interference with a contract are “(l) the existence of a valid contract between the plaintiff and a third party, (2) the defendant's knowledge of that contract, (3) the defendant's intentional procurement of a third-party's breach of that contract without justification, and (4) damages;'' Nagan Const., Inc. V.. Monsignor McClancy Mem'l High Sch., 117 A.D.3d 1005, 986 N.Y.S.2d 532 (2d Dept. 2014).
Upon careful review of the parties' submissions, the Court finds that CLIENT CARE has met its initial burden to demonstrate entitlement to judgment as a matter of law. See Alvarez v. Prospect Hosp., 68 N.Y.2d 320 (1986); Gesuale v. Campanelli & Associates, P.C., 126 A.D.3d 936 (2dDept. 2015), At minimum, CLIENT CARE offers. sufficient evidence to establish prima facie, that it had no knowledge of the Agreement between ZetrOZ and Plaintiff, and that it took no action to procure a breach of that Agreement. The burden thus shifts to Plaintiff to raise an issue of fact warranting a trial. See 1d.
The opposition fails to meet this burden. Viewing the evidence in the light most favorable to Plaintiff, and giving Plaintiff the benefit of every· favorable inference (see Giraldo v. Twins Ambulette Service, Inc., 96 A.D.3d 903 [2nd Dept. 2012]), the Court nonetheless finds that Plaintiff fails to present sufficient evidentiary facts or materials to rebut the plaintiff’s prima facie showing. See Barrett v Hudson Valley Cardiovascular Associates, P.C., 91 AD3d 691 (2d Dept. 2012). The inferential leap urged by Plaintiff – that in view of the close relationship between Mr. Molinaro and Mr. Morton, CLIENT CARE must have known about the Agreement and done something to induce its breach – requires inordinate speculation, and is unsupported by the record presented. Summary Judgment is not defeated by "mere conclusions, expressions of hope or unsubstantiated allegations or assertions.'' Zuckerman v City of New York, 49N.Y.2d 557 (1980).
In view of the foregoing determination, the Court need not reach the issue as to the validity of the Agreement at the time of its purported beach
Conclusion
The Court has considered the remaining contentions of the parties and finds that they do not require discussion or alter the detem1ination here in.
Based upon the foregoing, it is ORDERED, that CLIENT CARE's motion for summary judgment dismissing the action as against CLIENT CARE is granted.
Any requests for relief not specifically addressed herein are denied.
This constitutes the Decision and Order of this Court