Opinion
INDEX NO. 507892/2014
06-29-2015
KINGS AUTOMOTIVE HOLDINGS, LLC, Plaintiff, v. WESTBURY JEEP CHRYSLER DODGE, INC., SECURITY AUTO SALES, INC., B&Z AUTO ENTERPRISES, LLC, GARDEN CITY JEEP CHRYSLER DODGE, LLC, MUSSELMAN'S DODGE, INC., FRANKLIN SUSSEX AUTO MALL, INC., EAST HILLS CHRYSLER JEEP DODGE, AND MERRICK DODGE CHRYSLER JEEP OF WANTAGH, Defendants.
NYSCEF DOC. NO. 56 At an IAS Term, Part Comm-1 of the Supreme Court of the State of New York, held in and for the County of Kings, at the Courthouse, at Civic Center, Brooklyn, New York, on the 29th day of June, 2015. PRESENT: HON. CAROLYN E. DEMAREST, Justice.
| The following e-filed papers read herein: | Papers Numbered |
| Notice of Motion/Order to Show Cause/Petition/Cross Motion andAffidavits (Affirmations) Annexed | 23-29 |
| Opposing Affidavits (Affirmations) | 45-47 |
| Reply Affidavits (Affirmations) | 48-52 |
| Affidavit (Affirmation) | |
| Memoranda of Law | 30. 40. 53 |
In this action by plaintiff Kings Automotive Holdings, LLC against defendants Westbury Jeep Chrysler Dodge, Inc. (defendant), Security Auto Sales, Inc., B&Z Auto Enterprises, LLC, Franklin Sussex Auto Mall Inc., East Hills Chrysler Jeep Dodge, and Merrick Dodge Chrysler Jeep of Wantagh (collectively, the defendant dealers) to permanently enjoin the defendant dealers from restraining competition and engaging in deceptive practices and to recover monetary damages of $12.8 million, defendant moves, under motion sequence number one, for an order dismissing plaintiff's action as against it, pursuant to CPLR 3211 (a) (1) and (7), based upon a defense founded upon the documentary evidence and that plaintiff's complaint fails to state a cause of action.
By a partial stipulation of discontinuance dated October 20, 2014, plaintiff discontinued this action, without prejudice, as against defendant Musselman's Dodge, Inc. By a decision and order dated March 11, 2015, the court granted a motion, under motion sequence number two, by defendant Garden City Jeep Chrysler Dodge, LLC to dismiss plaintiff's action as against it to the extent that plaintiff was granted leave to discontinue this action as to it, without prejudice.
BACKGROUND
Plaintiff owns and operates an authorized Chrysler, Dodge, Jeep, RAM (CDJR) motor vehicle dealership at 2286 Flatbush Avenue, in Brooklyn, New York. Defendant and each of the other named defendant dealers in this action are CDJR dealers located outside of Brooklyn. Defendant owns and operates its authorized CDJR motor vehicle dealership at 100 Jericho Turnpike, in Westbury, New York. Both plaintiff and each of these defendant dealers entered into a Sales and Service Agreement (the Dealer Agreement) with Chrysler Group, LLC (CG), which is the manufacturer of Chrysler, Jeep, Dodge, and RAM cars and light trucks. These Dealer Agreements are all virtually identical to each other except for the dealerships involved and their locations. The Dealer Agreement's stated purpose for the relationship established with CG "is to provide a means for the sale and service of specified [CG] vehicles and the sale of CG vehicle parts and accessories in a manner that will maximize customer satisfaction and be of benefit to [the] dealer and CG."
Paragraph 4 of the Dealer Agreement, entitled "Sales Locality," gives each dealer the "non-exclusive right . . . to purchase from CG those new specified CG vehicles that are manufactured for sale within the United States for sale to customers located within the United States and vehicle parts, accessories and other CG products for sale at the dealer's facilities and location described in the Dealership Facilities and Location Addendum," which is incorporated into the Dealer Agreement by reference (emphasis added). Paragraph 4 of the Dealer Agreement further provides that the dealer is to "actively and effectively sell and promote the retail sale of CG vehicles, vehicle parts and accessories in [that] dealer's Sales Locality." The Dealer Agreement defines "Sales Locality" as "the area designated in writing to Dealer by CG from time to time as the territory of Dealer's responsibility for the sale of CG vehicles, . . . vehicle parts and accessories although Dealer is free to sell said vehicle to customers located within the United States wherever they may be located within the United States and vehicle parts and accessories to customers wherever they may be located" (emphasis added). It further provides that the Sales Locality "may be shared with other CG dealers of the same line-make as CG determines to be appropriate."
Additional Terms and Provisions of the Dealer Agreement, in paragraph 11 (a), requires the dealer to "use its best efforts to promote energetically and sell (which includes leasing) aggressively and effectively at retail . . . [CG motor vehicles] . . . to retail customers located within the United States in Dealer's Sales Locality and CG vehicle parts accessories and other CG products and services to customers wherever they may be located." Paragraph 11 (d) (i) of the Additional Terms and Provisions of the Dealer Agreement, entitled "Dealer's Responsibilities," provides that the "Dealer shall conduct its Dealership Operations only from the dealership location and dealership facilities [which are provided for the sale and service of CG products in its Sales Location] and in the manner and at least during the hours usual in the trade in Dealer's Sales Locality." It further provides that the "Dealer shall not . . . either directly or indirectly, establish any place or places of business for the conduct of its Dealership Operations other than at the Dealership Facilities and Dealership Operations located as set forth in the Dealership Facilities and Location Addendum."
Paragraph 11 (a) of the Additional Terms and Provisions of the Dealer Agreement obligates the dealer to "sell at retail the number of new [CG] vehicles necessary to fulfill Dealer's Minimum Sales Responsibility [MSR] for each passenger car line or truck line" that the dealer is authorized to sell. Although a complex formula is set forth in the Dealer Agreement, a dealer's MSR is based upon the ratio of CG vehicles sold to the total number of vehicles in a particular category sold by CG dealers and their competitors in a specified period in the Dealer's Sales Locality, i.e., CG's historical market share in the Sales Locality. If a Sales Locality is shared by more than one dealer, each dealer is assigned a "fair share" of the MSR for that Sales Locality, and has its own "Trade Zone" within the Sales Locality. Plaintiff is assigned the Brooklyn Sales Locality, which it shares with Bay Ridge CDJR; the Brooklyn Sales Locality is thus divided into two Trade Zones, with the Bay Ridge Trade Zone assigned to Bay Ridge CDJR and the Flatlands Trade Zone assigned to plaintiff. Paragraph 28 of the Dealer Agreement sets forth that if a dealer fails to meet its sales obligations, including meeting the MSR, CG may terminate the Dealer Agreement on 60 days' notice, following a 180-day opportunity to cure period, following CG's notification of the dealer's failure to perform.
CG has implemented several incentive programs, including the Volume Growth Program (VGP), that pay dealers on a per-vehicle basis retroactively after a vehicle is sold or leased to a consumer. The VGP pays a qualifying dealer up to $1,150 per vehicle for meeting monthly sales objectives set by CG, which are calculated using formulas based on projected growth over historical sales levels. VGP payments give qualifying dealers a substantial price advantage.
Plaintiff claims that in order to gain a competitive advantage and inflate their sales volumes so as to achieve the VGP sales objectives, thus qualifying for VGP incentive payments, the defendant dealers have engaged in a conspiracy with brokers to sell or lease CDJR vehicles in large volume at cut-rate prices to consumers in the Brooklyn Sales Locality assigned to plaintiff. Plaintiff asserts that in furtherance of this alleged scheme, the defendant dealers consign inventory at cost, or even at a loss, to these brokers, who are then able to sell or lease these vehicles to consumers at a lower price than they would otherwise be able to obtain if they purchased or leased these vehicles directly from plaintiff, as an authorized dealer in this Sales Locality. According to plaintiff, the defendant dealers are willing to lose money on their brokered sales because the resulting sales volumes allow them to obtain the highest price discounts under the VGP and other CG incentive programs. Plaintiff characterizes the use of brokers by the authorized non-Brooklyn dealer defendants as "unlawful grey market brokering activity" and such discount pricing by them as "predatory pricing." Plaintiff alleges that the defendant dealers charge higher prices to their local customers in their respective Trade Zones and Sales Localities that purchase or lease directly from them and that these customers do not receive the advantageous pricing that the customers in Brooklyn who purchase or lease via brokers receive. Plaintiff asserts that the brokers undercut the prices of local authorized dealers, such as plaintiff, who are unable to fairly compete for customers in their own market.
Plaintiff acknowledges that, under the Dealer Agreement, it is expected that dealers will sell to customers outside of their assigned market areas and that it and Bay Ridge CDJR naturally sell into each other's Trade Zones, but that CDJR dealers in Nassau, Suffolk, and the Bronx are being credited with an unusually large number of sales to customers in its Flatlands Trade Zone as a result of using brokers. Specifically, it alleges that in the first four months of 2014, it sold 135 new CDJR vehicles to customers in its Flatlands Trade Zone, and Bay Ridge sold 64 new CDJR vehicles in this Flatlands Trade Zone, whereas defendant sold 88 vehicles in the Flatlands Trade Zone. Plaintiff claims that such sales volume in its Flatlands Trade Zone by defendant, which is a significant distance away (as well as the sales volume in this Trade Zone by the other defendant dealers), could only have come about through "predatory pricing and unfair competition generated by unlawful grey market brokering activity."
Plaintiff further claims that the brokers, who are not identified and are not parties, are misrepresenting to customers that they are licensed dealers through advertisements and on their websites in order to consummate sales. It points to the fact that the brokers are, for the most part, not licensed by the Department of Motor Vehicles as new motor vehicle dealers, and are acting for the dealers in "satellite sales locations" that are not within their Sales Localities. Plaintiff states that the brokers, who have no overhead costs, meet the customers, handle the paperwork, arrange for the financing, and actually deliver the vehicles to the customers.
Plaintiff also claims that the brokers are "predatorily driving down prices" to the point that it, as an authorized dealer, is unable to be profitable and is being put out of business. It states that due to the use of brokers by the defendant dealers, it has lost sales and profits, has been denied the opportunity to earn price discounts in the VGP and other incentive programs, and is in danger of being put out of business. Plaintiff claims that, while the average CDJR dealer realizes approximately $3,500 gross profit per new vehicle sold or leased at retail, it realized only about $1,000 because of the brokers' activities. It asserts that since it opened in September 2012, it has sold 1,575 new CDJR vehicles and has suffered lost profits of $2,500 per vehicle, totaling nearly $4 million in lost profits, which it seeks to recover from defendants.
Plaintiff alleges that as a result of the defendant dealers' use of brokers to drive down the prices for CDJR vehicles in the Brooklyn Sales Locality, plaintiff is failing to meet the MSR requirements of the Dealer Agreement, thus breaching its Dealer Agreement with CG. Plaintiff asserts that while it has complained to CG about the use of brokers by the defendant dealers in its Brooklyn Sales Locality, CG has not taken any action against the defendant dealers, but, instead, has demanded that plaintiff meet its MSR obligations.
Consequently, on August 27, 2014, plaintiff filed the instant action against the defendant dealers. Plaintiff's complaint alleges four causes of action, consisting of a first cause of action for tortious interference with an existing contract, a second cause of action for violation of General Business Law § 349, a third cause of action for unjust enrichment, and a fourth cause of action for violation of the Donnelly Act (General Business Law § 340, et seq.). On November 18, 2014, defendant filed its instant motion.
DISCUSSION
Tortious Interference With Contract
Plaintiff's first cause of action for tortious interference with an existing contract alleges that plaintiff and each of the defendant dealers are parties to a substantially identical Dealer Agreement with CG, but that defendants are engaged in a scheme to inflate their sales numbers in plaintiff's Trade Zone, making it impossible for plaintiff to satisfy its MSR requirements and achieve VGP sales objectives established by CG. Plaintiff further alleges that the defendant dealers are using brokers to operate "unauthorized satellite sales locations to dump inventory at predatory pricing levels." It asserts that as a result, the defendant dealers are knowingly and intentionally causing it to breach its Dealer Agreement with CG and putting plaintiff under the threat of termination. Plaintiff seeks damages for lost incentives that would have been paid by CG if not for the brokering activity, and for lost profits on both cars sold and lost sales due to the brokering activity by the defendant dealers in the amount of at least $12.8 million.
The elements of a claim for tortious interference with contract are: (1) 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 the third party's breach of that contract without justification; (4) actual breach of the contract; and (5) resulting damages (see Lama Holding Co. v Smith Barney, 88 NY2d 413, 424 [1996]; Kronos, Inc. v AVX Corp., 81 NY2d 90, 94 [1993]).
Plaintiff fails to satisfy these requisite elements since, while it alleges the existence of a contract between it and CG, which it claims is known to defendant, it does not allege that defendant intentionally induced CG to breach the Dealer Agreement. Rather, plaintiff alleges that defendant is causing plaintiff, as opposed to CG, to breach its Dealer Agreement with CG by failing to meet sales quotas. It is been specifically held that a plaintiff's own breach of a contract cannot constitute tortious interference with contract (Lazar's Auto Sales, Inc. v Chrysler Financial Corp., 83 F Supp 2d 384, 391 [SD NY 2000]).
Plaintiff contends, however, that this holding is inapposite to the facts of this case since defendant has rendered its performance impossible by engaging in "an illicit grey market scheme." It claims that defendant's unlawful actions in violation of the Dealer Agreement has rendered it unable to meet CG's performance standards.
This argument is wholly devoid of merit. Defendant is not engaging in any unlawful conduct that is in any way in violation of the Dealer Agreement. As noted, paragraph 4 of the Dealer Agreement, entitled "Sales Locality," unequivocally provides the dealer with a non-exclusive right to sell CG vehicles to customers located anywhere within the United States. The Dealer Agreement does not prohibit selling through brokers, and, notwithstanding the participation of the broker, defendant has presented unrefuted evidence that all sales and leases are directly made from defendant, as the lessor or seller.
While plaintiff relies upon the language in paragraph 11 (d) (i) of the Additional Terms and Provisions of the Dealer Agreement that requires the dealer to conduct its dealership operations only from the identified dealership location and dealership facilities, this paragraph, entitled "Dealer's Responsibilities," refers to the dealer's obligation to CG to maintain such a facility in accordance with CG's standards. Its plain intent is to ensure that the dealer has such a facility, rather than to limit where the dealer may sell or lease CG vehicles, since any such limitation would be contrary to paragraph 4 of the Dealer Agreement, which provides that the dealer may sell or lease CG vehicles to customers anywhere within the United States and that the dealer has a non-exclusive right with respect to its sales locality.
Defendant's use of brokers is not inconsistent with paragraph 4 of the Dealer Agreement, as well as with paragraph 11 (d) (i) of the Additional Terms and Provisions of the Dealer Agreement. Joel Sporn, defendant's president, in his affidavit, attests to the fact that defendant has no satellite offices and its sole showroom is at 100 Jericho Turnpike, in Westbury, New York, and that all of the cars it sells or leases are prepared for delivery at its sole service facility at 111 Bond Street, in Westbury, New York. He states that defendant does not consign or place its vehicles under the control of the brokers, but, rather, defendant's inventory remains at all time at its facilities in the Westbury location. He further attests that all new CJDR vehicles that defendant sells or leases come with full factory warranties, that they are sold in CG's authorized distribution chain, and that they are not "grey market." Defendant has supplied the form Lease Agreement it uses, which clearly lists defendant as the dealer. Plaintiff has not refuted such representation with any factual allegations.
Mr. Sporn additionally asserts that defendant competes aggressively with all other CJDR authorized dealers, eight of which are within a 13-mile radius of defendant's location on Long Island, to sell and service CJDR vehicles and to meet and exceed its MSR. He notes that the automobile brokerage business is governed by General Business Law Article 35-B, §§ 736, et seq., which authorizes the use of brokers (who are not registered dealers) by consumers to arrange, assist or effect the purchase of an automobile and is one of the ways that dealers are free to compete if they so choose. He points out that plaintiff could use brokers if it chose to do so, and that there are brokers in defendant's market area that work with dealers in Brooklyn. Thus, defendant has demonstrated that it has not engaged in any tortious conduct with respect to plaintiff's Dealer Agreement with CG. Defendant's selling or leasing of vehicles to consumers through brokers for its own economic benefit and in furtherance of its own Dealer Agreement with CG cannot constitute a tortious interference with plaintiff's Dealer Agreement (see Foster v Churchill, 87 NY2d 744, 750 [1996]).
Moreover, to state a cause of action for tortious interference with contract, the plaintiff must specifically "allege that the contract would not have been breached 'but for' the defendant's conduct" (Burrowes v Combs, 25 AD3d 370, 373 [1st Dept 2006], lv denied 7 NY3d 704 [2006]; see also Schuckman Realty v Marine Midland Bank, 244 AD2d 400, 401 [2d Dept 1997], lv denied 91 NY2d 809 [1998]). "'Although on a motion to dismiss the allegations in a complaint should be construed liberally, to avoid dismissal of a tortious interference with contract claim a plaintiff must support [its] claim with more than mere speculation'" (Ferrandino & Son, Inc. v Wheaton Bldrs., Inc., LLC, 82 AD3d 1035, 1036 [2d Dept 2011], quoting Burrowes, 25 AD3d at 373; see also JJM Sunrise Auto., LLC v Volkswagen Group of Am., Inc., 46 Misc 3d 755, 787 [Sup Ct, Nassau County 2014]). Here, plaintiff's claim that the customers who purchased or leased vehicles from defendant, through brokers at lower prices, would have otherwise purchased or leased them from it, and that it would have then been able to meet its MSR requirements, is speculative.
Thus, plaintiff has failed to state a viable cause of action for tortious interference with contract. Consequently, dismissal of plaintiff's first cause of action is mandated (see CPLR 3211 [a] [7]).
Violation of General Business Law § 349
Plaintiff's second cause of action for violation of General Business Law § 349 alleges that the defendant dealers have engaged in numerous deceptive acts by conspiring with brokers to target consumers and convey the impression that they were purchasing vehicles from licensed dealers, rather than from unauthorized brokers. It further alleges that the brokers are "conspiring" with the defendant dealers and are misrepresenting to consumers that they are licensed dealers or are otherwise part of a legitimate retail source, often through advertisements and on their websites, in order to consummate sales or leases of CDJR vehicles. It asserts that the defendant dealers provide the brokers with dealer forms, title documents, and access to financing, including financing from CG, and that the defendant dealers have little or no contact with the customers, except for reporting the sales to CG for warranty purposes. It further asserts that as a result of these "deceptive acts," consumers have purchased vehicles from brokers in the Brooklyn Sales Locality, rather than from it, causing it significant damages, consisting of lost profits and revenues and the failure to qualify for various discounts and incentives offered by CG. Plaintiff seeks damages of not less than $12.8 million. In addition, it seeks an injunction, enjoining these allegedly deceptive acts.
General Business Law § 349 declares unlawful all "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state" (General Business Law § 349 [a]). "To successfully assert a claim under General Business Law § 349 (h), a plaintiff must allege that a defendant has engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice" (North State A utobahn, Inc. v Progressive Ins. Group Co., 102 AD3d 5, 11 [2d Dept 2012] [internal quotation marks omitted]; see also Koch v Acker, Merrall & Condit Co., 18 NY3d 940, 941 [2012]; Stutman v Chemical Bank, 95 NY2d 24, 29 [2000]; Amalfitano v NBTY Inc, 2015 NY Slip Op 04077, *2 [2d Dept 2015]).
Thus, a private action to recover damages under General Business Law § 349 "must be predicated on a deceptive act or practice that is 'consumer oriented'" (Gaidon v Guardian Life Ins. Co. of Am., 94 NY2d 330, 344 [1999], quoting Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25 [1995]). "[The] defendant's acts or practices must have a broad impact on consumers at large" (New York Univ: v Continental Ins. Co., 87 NY2d 308, 320 [1995]; see also Amalfitano, 2015 NY Slip Op 04077, *2). General Business Law § 349 "is limited in its application to those acts or practices which undermine a consumer's ability to evaluate his or her market options and to make a free and intelligent choice" (North State Autobahn, Inc., 102 AD3d at 13).
"Whether a representation or an omission, the test is whether the allegedly deceptive practice is 'likely to mislead a reasonable consumer acting reasonably under the circumstances'" (Wilner v Allstate Ins. Co., 71 AD3d 155, 165 [2d Dept 2010], quoting Oswego Laborers' Local 214 Pension Fund, 85 NY2d at 26; see also David v # 1 Mktg. Serv., Inc., 113 AD3d 810, 811-812 [2d Dept 2014]). A plaintiff must also show an actual injury caused by the deceptive act or practice (see Stutman v Chemical Bank, 95 NY2d 24, 29 [2000]; Oswego Laborers' Local 214 Pension Fund, 85 NY2d at 25; Air & Power Transmission, Inc. v Weingast, 120 AD3d 524, 525 [2d Dept 2014]).
Here, while plaintiff predicates this claim on its contention that consumers are given the impression that they are purchasing vehicles from licensed dealers, rather than from "unauthorized" brokers, this is refuted by its own allegations that the brokers do not maintain a properly imaged facility, that they do not maintain significant new vehicle inventory on the ground to display and sell to customers, and that they have no overhead costs. Thus, reasonable consumers, who solely deal with the brokers, would necessarily conclude that they are buying or leasing the CG vehicles through a broker from defendant, who is the authorized automobile dealership shown as the selling dealer or lessor on the paperwork they sign. As explained by Mr. Sporn, all forms are prepared by defendant, not the broker, and all payments to be made by the consumer are set forth in the lease agreement
Furthermore, while plaintiff claims that it has suffered damages by its loss of profits and revenues, General Business Law § 349 "was intended [as] a consumer protection statute" (Teller v Bill Hayes, Ltd., 213 AD2d 141, 145 [2d Dept 1995], lv dismissed in part, denied in part 87 NY2d 937 [1996]). While plaintiff contends that the alleged misrepresentations by the brokers who are acting with defendant may mislead consumers, there is no indication of actual damage to consumers. Plaintiff acknowledges that defendant reports all sales to CG for warranty purposes, and does not allege that the vehicle the consumers purchase or lease is in any way inferior to that which they would purchase through a dealership. Indeed, plaintiff does not allege that the consumers purchasing through the brokers suffer any harm, but, rather, it alleges that they pay discounted prices for their CDJR vehicles.
It is noted that General Business Law § 738 clearly contemplates that the prospective purchaser, who contracts in writing for the services of an automobile broker, will be well-aware that he/she is not contracting with the dealer, but will be provided with the dealer's identity. Moreover, although plaintiff alleges that the brokers are making misrepresentations to the consumers, no broker is named as a party defendant in this action. Notably, General Business Law § 741 prohibits deceptive trade practices by automobile brokers, and, in General Business Law § 742, provides a remedy for consumers who are injured by a violation of that article, which may be enforced by the Attorney General (see Gen Bus L § 743).
The use of brokers is expressly authorized under General Business Law, Article 3 5-B, and an "automobile broker business" is defined in General Business Law § 736 to be "any person who, for a fee, commission or other valuable consideration paid by a consumer offers to provide, provides, or represents that he [or she] will provide a service of purchasing, arranging, assisting or effecting the purchase of an automobile as agent, broker, or intermediary for a consumer." While plaintiff, in its complaint, continuously references the fact that the brokers are not dealers, and are, therefore, "unauthorized," under General Business Law § 736, a broker is not required to be a dealer. Rather, this section provides that an "[a]utomobile broker business" does not include any person registered as a dealer pursuant to article sixteen of the vehicle and traffic law."
Thus, inasmuch as plaintiff has not alleged any materially deceptive representation directed to consumers, and in light of the statutory regulation of brokers, plaintiff has failed to set forth a viable cause of action to recover damages for deceptive business practices under General Business Law § 349 (see Paltre v General Motors Corp., 26 AD3d 481, 483 [2d Dept 2006]). Consequently, plaintiff's second cause of action must be dismissed (see CPLR 3211 [a] [7]).
Unjust Enrichment
Plaintiff's third cause of action for unjust enrichment alleges that the defendant dealers' conspiracy with its broker partners undercuts the market for CDJR vehicle sales in the Brooklyn Sales locality. It further alleges that, as a result of the allegedly illegal agreements with brokers, the defendant dealers were able to artificially increase total sales volumes and receive incentives from CG as a result of their agreements with brokers, which resulted in their reaping a windfall at plaintiff's expense. It seeks damages for lost sales and lost profits and an amount equal to the CG incentives that it otherwise would have earned.
In addressing the viability of plaintiff's allegations, the court notes that ""'[t]he theory of unjust enrichment lies as a quasi-contract claim'"" and contemplates "'an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties'" (Georgia Malone & Co., Inc. v Rieder, 19 NY3d 511, 516 [2012], quoting IDT Corp. v Morgan Stanley Dean Witter & Co., 12 NY3d 132, 142 [2009], rearg denied 12 NY3d 889 [2009], quoting Goldman v Metropolitan Life Ins. Co., 5 NY3d 561, 572 [2005]). "An unjust enrichment claim is rooted in 'the equitable principle that [one] sh[ould] not be allowed to enrich [it] self unjustly at the expense of another'" (Georgia Malone & Co., Inc., 19 NY3d at 516, quoting Miller v Schloss, 218 NY 400, 407 [1916]). "Thus, in order to adequately plead such a claim, the plaintiff must allege 'that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered'" (Georgia Malone & Co., Inc., 19 NY3d at 516, quoting Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 182 [2011] [brackets and internal quotation marks omitted]).
Here, as alleged, defendant has not reaped any windfall from an "illegal activity" as claimed by plaintiff. As discussed above, defendant has not engaged in any illegal conduct (see General Business Law article 3 5-B), and cutting prices to increase business is not illegal, but "the very essence of competition" (see Matsushita Elec. Indus. Co., Ltd. v Zenith Radio Corp., 475 US 574, 594 [1986]). It is also legally permissible to offer different prices to consumers in different geographic areas (see State of New York v Mobil Oil Corp., 38 NY2d 460, 464 [1976]; NCJ Cleaners, LLC v ALM Media, Inc., 48 AD3d 766, 767 [2d Dept 2008]).
As alleged in the complaint, defendant was not unjustly enriched at plaintiff's expense since the benefits of any sales or leases equitably belong to the dealer who generates them, rather than to the dealer in closest geographic proximity to the customer. The proximity of some of defendant's customers to plaintiff does not give plaintiff any rights to the fruits of defendant's work. Thus, the mere fact that a customer may live in Brooklyn does not entitle plaintiff to the profits from a sale or lease generated by defendant, even if accomplished by using brokers.
Plaintiff's allegations fail to support a claim that it had any entitlement to the benefit conferred (see JJM Sunrise Auto., LLC, 46 Misc 3d at 789). There is no duty or obligation requiring defendant to pay plaintiff the revenues which it worked to earn since defendant's only relationship with plaintiff is as a competitor. Therefore, contrary to plaintiff's allegations, it is not contrary to equity and good conscience to permit defendant to retain the profits which plaintiff seeks to recover in this action.
Moreover, "a plaintiff cannot succeed on an unjust enrichment claim unless it has a sufficiently close relationship with the other party" that could have caused reliance or inducement (Georgia Malone & Co., Inc., 19 NY3d at 516). That is, in order to assert a claim of unjust enrichment, there has to be a sufficient connection between plaintiff and defendant to show that plaintiff had a reasonable expectation that it was going to receive the money claimed from defendant (see id.). Based on the facts pleaded, the complaint fails to present a sufficient connection between plaintiff and defendant to form the basis of an unjust enrichment claim. Plaintiff and defendants had no dealings with each other, and any alleged connection between defendant's earnings on leases to Brooklyn residents through brokers and any alleged lost sales by plaintiff is "simply too attenuated" to support an unjust enrichment claim (Sperry v Crompton Corp., 8 NY3d 204, 216 [2007], affg 26 AD3d 488 [2d Dept 2006]; see also Georgia Malone & Co., Inc., 19 NY3d at 517-518). Thus, dismissal of plaintiff's third cause of action is required (see CPLR 3211 [a] [7]).
Violation of the Donnelly Act
Plaintiff's fourth cause of action for violation of the Donnelly Act (General Business Law § 340, et seq.) alleges that each of the defendant dealers, together with their broker co-conspirators, has engaged in a contract, agreement, arrangement, and combination in unreasonable restraint of trade and commerce in the pricing and sale of CDJR vehicles in the Brooklyn Sales Locality which violates the Donnelly Act. It further alleges that the markets impacted by the defendant dealers' anti-competitive activity are the markets for new CDJR vehicles in the Brooklyn Sales Locality, as well as the Sales Localities of the defendant dealers. Plaintiff asserts that by consigning vehicles to brokers for sale in Brooklyn at "predatory" prices, the defendant dealers and their broker partners have artificially reduced prices of CDJR vehicles in the Brooklyn Sales Locality and artificially raised the price of CDJR vehicles in other Sales Localities.
Plaintiff further asserts that licensed authorized dealers, such as itself, who market and sell CDJR vehicles in Brooklyn, are unable to compete with the "grey market" brokers who receive inventory at below cost from the defendant dealers in furtherance of this anti-competitive scheme. It alleges that the defendant dealers' activities are a per se violation of the Donnelly Act. It states that it has suffered damages by reduced sales, reduced profits, and an inability to qualify for CG's incentive programs as a result of the defendant dealers' alleged restraint on competition.
Plaintiff also states that local consumers that purchased vehicles directly from the defendant dealers in their own Sales Localities were damaged by being forced to purchase vehicles at higher prices than paid by customers who purchased through brokers, and that consumers that purchased vehicles from the brokers were also damaged because they thought they were purchasing vehicles through a legitimate retail stream. It claims that the brokers, who are not licensed dealers, do not have the proper bonds secured or warranty services to serve the needs of their customers, and that the customers are unwittingly purchasing vehicles in the grey market. It seeks compensatory damages of not less than $ 12.8 million, plus treble damages pursuant to § 340 (5) of the Donnelly Act, and an injunction barring the scheme between the defendant dealers and their broker partners, which it claims has resulted in a restraint on trade of CDJR vehicles in the Brooklyn Sales Locality and the Sales Localities of the defendant dealers.
The Donnelly Act, New York's anti-trust statute, codified in General Business Law § 340, governs price fixing and anti-competitive activity, and is intended to further the protection of the Sherman Act to citizens of New York (see Lennon v Philip Morris Cos., 189 Misc 2d 577, 583 [Sup Ct, NY County 2001]). The Donnelly Act is "designed to protect competition and redress anticompetitive effects of a variety of unlawful business practices," and is "not [a] general prohibition[] of all types of activity which may result in economic harm to any individual business" (Associates Capital Services Corp. of New Jersey v Fairway Private Cars, Inc., 590 F Supp 10, 13 [ED NY 1982]).
The Donnelly Act provides, in pertinent part, as follows:
"1. Every contract, agreement, arrangement or combination whereby
A monopoly in the conduct of any business, trade or commerce or in the furnishing of any service in this state, is or may be established or maintained, or whereby
Competition or the free exercise of any activity in the conduct of any business, trade or commerce or in the furnishing of any service in this state is or may be restrained or whereby
For the purpose of establishing or maintaining any such monopoly or unlawfully interfering with the free exercise of any activity in the conduct of any business, trade or commerce or in the furnishing of any service in this state any business, trade or commerce or the furnishing of any service is or may be restrained, is hereby declared to be against public policy, illegal and void." (Gen Bus L § 340[1]).
"A party asserting a violation of the Donnelly Act is required to (1) identify the relevant product market; (2) describe the nature and effects of the purported conspiracy; (3) allege how the economic impact of that conspiracy is to restrain trade in the market in question; and (4) show a conspiracy or reciprocal relationship between two or more entities" (Newsday, Inc. v Fantastic Mind, 237 AD2d 497, 497 [2d Dept 1997]; see also Yankees Entertainment and Sports Network, LLC v Cablevision Systems Corp., 224 F Supp 2d 657, 678 [SD NY 2002]; Great Atlantic & Pacific Tea Co. v Town of East Hampton, 997 F Supp 340, 352 [ED NY 1998]). The failure to allege any one of these elements is fatal to the claim (see Watts v Clark Assoc. Funeral Home, 234 AD2d 538, 538 [2d Dept 1996]; Constant v Hallmark Cards, 172 AD2d 641, 642 [2d Dept 1991]; Primo Constr. v Swig Weiler & Arnow Mgt. Co., 160 AD2d 379, 380 [1st Dept 1990]).
"In order properly to plead a conspiracy, the plaintiff must do more than make a 'bare bones' allegation that such a conspiracy exists" (Beyer Farms v Elmhurst Dairy, 142 F Supp 2d 296, 300-301 [ED NY 2001], affd 35 Fed Appx 29 [2d Cir 2002]). "Conclusory allegations of conspiracy are legally insufficient to make out a violation of the Donnelly Act" (Yankees Entertainment & Sports Network, LLC, 224 F Supp 2d at 678; see also Sands v Ticketmaster-N.Y., Inc., 207 AD2d 687, 688 [1st Dept 1994], lv denied 85 NY2d 904 [1995]). The complaint must allege facts to support the existence of a conspiracy (see Great Atlantic & Pacific Tea Co., 997 F Supp at 352).
Here, while "the Donnelly Act mandates that there be a conspiracy or reciprocal relationship between two or more legal entities before liability can be found" (Creative Trading Co. v Larkin-Pluznick-Larkin, Inc., 136 AD2d 461, 462 [1st Dept 1988]; see also Saxe, Bacon & Bolan, P.C. v Martindale-Hubbell, Inc., 710 F2d 87, 90 [2d Cir 1983]; Abe's Rooms, Inc. v Space Hunters, Inc., 38 AD3d 690, 692 [2d Dept 2007]), plaintiff has failed to set forth a conspiracy or reciprocal relationship necessary to allege a violation of the Donnelly Act. Plaintiff does not allege any agreement between defendant and any other defendant dealer. Defendant's acts of selling or leasing vehicles through brokers, to whom it may pay fees, constitute unilateral independent acts which are not unlawful (see Michelman v Clark-Schwebel Fiber Glass Corp., 534 F2d 1036, 1042 [2d Cir 1976], cert denied 429 US 885 [1976]; Continental Guest Servs. Corp. v International Bus Servs., Inc., 92 AD3d 570, 573-574 [1st Dept 2012]). Plaintiff's mere "addition of a conclusory allegation as to the effect of a described practice (here effecting restraint of trade) cannot operate, of course, to bring a one-sided practice which is outside the scope of the statute within its proscription" (State of New York v Mobil Oil Corp., 38 NY2d 460, 464 [1976]).
Plaintiff's allegations of a conspiracy are wholly conclusory in nature. There are no facts alleged in the complaint to support plaintiff's conspiracy charges (see LoPresti v Massachusetts Mut. Life Ins. Co., 30 AD3d 474, 475 [2d Dept 2006]; Sands, 207 AD2d at 688).
Moreover, plaintiff has failed to sufficiently allege how the economic impact of the purported conspiracy does or could restrain trade in the market in question. To recover under the Donnelly Act, a plaintiff is required to establish that the defendants' actions had an actual adverse effect on competition in the market and not simply that such actions harmed one competitor (see Capital Imaging Assocs., P.C. v Mohawk Valley Medical Assocs., Inc., 996 F2d 537, 547 [2d Cir 1993], cert denied 510 US 947 [1993]; LoPresti, 30 AD3d at 475; Rubin v Nine West Group, Inc., 1999 WL 1425364, *6 [Sup Ct, NY County 1999]). Although plaintiff may have lost profits and revenue, the injury alleged is not cognizable under the Donnelly Act since it does not allege an injury to competition in the market, but, instead, alleges a mere loss of profits and revenue by one competitor (see Beyer Farms, 142 F Supp 2d at 304; Korshin v Benedictine Hosp., 34 F Supp 2d 133, 137-138 [ND NY 1999]; Watts, 234 AD2d at 538). There is no law prohibiting defendant from acting in its own economic interest where no unlawful conspiracy in restraint of trade is properly alleged.
Although plaintiff alleges that defendant has engaged in predatory pricing, "[p]redatory pricing is a means by which 'a single firm, having a dominant share of the relevant market, cuts its prices in order to force competitors out of the market, or perhaps to deter potential entrants from coming in'" (Virgin Atlantic Airways Ltd. v British Airways PLC, 257 F3d 256, 266 [2d Cir 2001], quoting Matsushita Elec. Indus. Co., Ltd., 475 US at 584 n 8 [1986]). Plaintiff does not allege that defendant has a dominant share of the market for CDJR vehicles (see Progressive Milk Co., Ltd. v Luna, 126 AD2d 247, 250 [1st Dept 1987]). In fact, there are at least 10 competing authorized CJDR dealers on Long Island within a 15-mile radius of defendant, and defendant is at least 20 miles away from plaintiff, with numerous dealers between defendant's location and plaintiff's location. Indeed, plaintiff acknowledges that defendant, as an isolated dealer, does not have a dominant share of the market or the market power to restrain trade in the Brooklyn Sales Locality, but it argues that all defendants conspiring with brokers is a restraint on competition. This argument is unavailing since, as noted above, no agreement between the defendant dealers is alleged, and consumers can seek out brokers providing discounts in various locations. Thus, the use of brokers does not constitute a restraint of trade, but actually encourages competition in the market. On the other hand, to exclude the use of brokers and limit competitors to specific localities, as plaintiff seeks to require in this action, would limit and restrain competition (see U.S. v General Motors Corp., 384 US 127, 146 [1966]).
Consequently, plaintiff's failure to allege a conspiracy or reciprocal relationship between defendant and other dealers or an anticompetitive effect on the market is fatal to its Donnelly Act claim. Dismissal of plaintiff's fourth cause of action is, therefore, required (see CPLR 3211 [a] [7]).
CONCLUSION
Accordingly, defendant's motion for an order dismissing plaintiff's complaint as against it is granted.
This constitutes the decision and order of the court.
ENTER,
/s/
J. S. C.