Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D.N.J.: Tort claims crumble in baked goods distribution suit, (Feb 9, 2016)

By Michael Menzhuber, J.D., LL.M.

A motion to dismiss various tort claims against a bakery company, which had exercised its rights under a distribution agreement to deny an independent operator’s sale of its route to a third-party and then purchased the route at a lower price, was granted by the federal district court in Camden, New Jersey. The court granted the motion after determining that the operator’s tort claims were insufficiently pleaded (Dando v. Bimbo Food Bakeries Distribution, LLC, February 8, 2016, Hillman, N.).

Robert Dando entered into a distribution agreement with Bimbo Foods Bakeries Distribution, LLC, which granted him an exclusive right to sell the company’s bakery products on a specific route area in New Jersey. The agreement also provided that, if Dando decided to sell his route, Bimbo had the right to approve the sale and the right of first refusal.

Sometime after entering into the agreement, Dando notified Bimbo of his intention to sell the route to a third-party for $289,900. After Bimbo informed him that the price was too high, Dando sought approval to sell the route for $210,000. Bimbo then exercised its right to buy, which Dando alleged deprived him of a $79,900 profit.

Dando filed a two-count complaint against Bimbo which asserted various contractual, quasi-contractual and tort claims under state law. After Bimbo’s motion to dismiss—on the basis that Dando’s claims were entirely barred by his participation and subsequent release of claims in a Fair Labor Standards Act (FLSA) class action—was denied, Bimbo renewed its motion to dismiss.

Failure to state a claim. Bimbo argued that Dando failed to state a claim for breach of the implied covenant of good faith and fair dealing, tortious interference, unfair restraint of trade or competition, franchise licensing unfair practice, and unjust enrichment. Additionally, Bimbo argued that Dando failed to meet the standard for pleading fraud. The court agreed after determining that Dando failed to state a claim for:

(1) breach of the implied covenant of good faith and fair dealing because he did not allege that Bimbo did not have the contractual right to approve the sale or a right of first refusal or that Bimbo’s decision to exercise these rights arose from a bad motive;

(2) tortious interference, unfair restraint of competition, and unjust enrichment because he did not allege that Bimbo was not permitted to exercise its contractual rights or that it exercised these rights unreasonably;

(3) unfair restraint of trade because he did not provide any New Jersey case law supporting an independent tort claim of unfair restraint of trade;

(4) franchise licensing unfair practice because he failed to cite a statute to support his claim and, to the extent he alleged a violation of the New Jersey Franchise Practices Act (NJFPA), he insufficiently pleaded this claim; and

(5) fraud because he failed to plead all four elements of a common law fraud claim, including what material misrepresentation Bimbo made to him.

Tort claims. The court determined that Dando’s tort claims in Count II—which were based on allegations that Bimbo sold products to one of Dando’s customers in his geographic territory without providing Dando with the proceeds—were the same tort claims that he asserted in Count I. The Count II tort claims were therefore dismissed as insufficiently pleaded.

The case is No: 14-2956 (NLH/JS).

Attorneys: Terrance J. Bennet for Robert Dando. Michael J. Puma and Courtney Wirth Griffin (Morgan, Lewis & Bockius) for Bimbo Food Bakeries Distribution, LLC; Bimbo Food Bakeries Distribution, Inc.; Bimbo Bakeries USA, Inc.

Companies: Bimbo Food Bakeries Distribution, LLC; Bimbo Food Bakeries Distribution, Inc.; Bimbo Bakeries USA, Inc.

Cases: FranchisingDistribution NewJerseyNews