United States District Court, D. Utah
ADVANCED COMFORT TECHNOLOGIES, INC., d/b/a INTELLIBED, a Utah corporation, Plaintiff,
LONDON LUXURY, LLC, a New York limited liability company, Defendant.
MEMORANDUM DECISION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT'S MOTION TO DISMISS
N. PARRISH UNITED STATES DISTRICT COURT JUDGE.
the Court is Defendant's Motion to Dismiss
Plaintiff's Complaint (ECF No. 14). For the reasons set
forth below, the motion is GRANTED IN PART and DENIED IN
a contract case. Plaintiff Advanced Comfort Technologies,
Inc. d/b/a/ intelliBED (“Intellibed”) entered
into a Non-Circumvention Agreement (the
“Agreement”) with Defendant London Luxury, LLC.
Under the Agreement, London Luxury agreed to use “best
efforts” to market Intellibed mattresses to Mattress
Firm, Inc., a third-party retailer. In exchange, Intellibed
agreed to pay London Luxury a finder's fee. About two
months after signing, the deal soured. Intellibed claims that
London Luxury misrepresented its relationship with Mattress
Firm, among other things. Intellibed also claims that London
Luxury did not use “best efforts” to market
Intellibed mattresses to Mattress Firm. Intellibed now wants
out of the Agreement. So it brought the following causes of
action against London Luxury: (1) fraud/fraud in the
inducement, (2) breach of contract, (3) breach of the implied
covenant of good faith and fair dealing, and (4) breach of
fiduciary duty. London Luxury has moved to dismiss
is the inventor and manufacturer of a gel mattress called Gel
Matrix. Compl. ¶ 6. London Luxury is a manufacturer and
distributor of home products with a sourcing arm that markets
third-party products, including mattresses, to retailers.
Compl. ¶ 7.
to February 2017, Intellibed was searching for a marketing
partner that could introduce the Gel Matrix mattress to
Mattress Firm, a third-party retailer. Compl. ¶ 10.
Intellibed was introduced to London Luxury. Compl. ¶ 10.
During initial discussions, Intellibed told London Luxury
about its desire to market the Gel Matrix mattress to
Mattress Firm. Compl. ¶ 11. London Luxury's
president, Steve Schwartz, expressed a desire to work with
Intellibed in an exclusive relationship. Compl. ¶ 11.
Mr. Schwartz told Intellibed that London Luxury had a
longstanding relationship with Mattress Firm. Compl. ¶
11. And he told Intellibed that he thought that London Luxury
could get the Gel Matrix mattress into Mattress Firm
showrooms. Compl. ¶ 11.
on these discussions, the parties met on February 13, 2017.
Compl. ¶ 12. Intellibed representatives traveled to
London Luxury headquarters and spoke with representatives
from London Luxury. Compl. ¶ 13. Intellibed stated that
it needed a partner that (a) would have significant influence
with Mattress Firm, particularly with its buyers and those
who would control product distribution, (b) had a significant
and longstanding business relationship with Mattress Firm
such that it would have both the connections and the know-how
to get Intellibed's products placed, and (c) would give
Intellibed the best possible chance to successfully place its
mattresses with Mattress Firm. Compl. ¶ 13.
London Luxury's qualifications, Intellibed asked detailed
questions. Compl. ¶ 14. Intellibed asked about (a) the
magnitude of London Luxury's annual revenues, (b) the
magnitude of London Luxury's business with Mattress Firm,
and (c) London Luxury's relationship with Mattress Firm
and its influence and connection with Mattress Firm. Compl.
response, London Luxury's CEO Marc Jason and its
president Mr. Schwartz represented that:
a) London Luxury's annual revenues were in the high nine
figures, not quite a billion;
b) Approximately one quarter of London Luxury's annual
revenues stemmed from work with Mattress Firm;
c) London Luxury was the largest single accessory provider to
Mattress Firm, shipping products to thousands of Mattress
Firm locations every week; and
d) London Luxury was a major influencer with Mattress Firm,
and it had the best relationships of any potential partner
with the highest and most senior people and key
decision-makers at Mattress Firm.
Compl. ¶ 15.
Jason and Mr. Schwartz also told Intellibed that London
Luxury had a longstanding relationship with Columbia
Sportswear Company and that London Luxury had success in
selling Columbia-branded pillows to Mattress Firm. Compl.
¶ 16. London Luxury suggested that it could use the Gel
Matrix mattress to offer a Columbia-branded mattress. Compl.
¶ 16. London Luxury claimed that it could
“immediately incorporate” the Gel Matrix mattress
into a line of Columbia-branded products that would be
marketed to Mattress Firm. Compl. ¶ 16.
February 13 meeting, Mr. Jason told Intellibed that it needed
to quickly sign a contract because London Luxury was meeting
with Mattress Firm's CEO on February 20. Compl. ¶
17. He told Intellibed that it needed to sign a contract
before the meeting if London Luxury was going to present the
Gel Matrix mattress to Mattress Firm. Compl. ¶ 17.
According to Intellibed, there was never any meeting
scheduled. Compl. ¶ 19. London Luxury allegedly lied
about the meeting to get Intellibed to sign a contract.
Compl. ¶ 19.
February 21, the day after the purported meeting, London
Luxury and Intellibed executed a Non-Circumvention Agreement
(the “Agreement”). Compl. ¶ 20. The parties had
allegedly agreed to the terms of the Agreement before the
“meeting.” Compl. ¶ 20. Under the Agreement,
London Luxury agreed to use its “best efforts” to
market Intellibed gel mattresses to Mattress Firm. ECF No.
14-2 at 2. London Luxury also agreed not to “market any
other ‘gel matrix' mattress product to [Mattress
Firm].” ECF No. 14-2 at 2. The Agreement does not
prohibit London Luxury from marketing any other class of
goods. See ECF No. 14-2 at 2.
the Agreement, Intellibed agreed “not to directly or
indirectly contact or initiate contact with [Mattress Firm]
or any officers, directors, shareholders, consultants,
attorneys, employees, agents or other affiliates of [Mattress
Firm] at any time or for any purpose, unless such approval is
specifically granted in writing by [London Luxury].”
ECF No. 14-2 at 1. Intellibed also agreed that it would
notify London Luxury “within 24 hours” in the
event that it was contacted by Mattress Firm. ECF No. 14-2 at
1. If Intellibed entered into a business relationship with
Mattress Firm within a set amount of time, Intellibed agreed
to pay London Luxury a finder's fee. ECF No. 14-2 at 2.
The Agreement contains a merger clause: “This Agreement
constitutes the entire agreement between the parties hereto
regarding the transactions contemplated herein.” ECF
No. 14-2 at 2.
March 13, less than a month after the parties signed the
Agreement, Intellibed and London Luxury representatives met
with Mattress Firm in Houston, Texas (the “Houston
meeting”). Compl. ¶ 25. At the Houston meeting,
London Luxury presented mattresses and accessories to
Mattress Firm. Compl. ¶ 26. London Luxury presented the
Gel Matrix mattress, but it also showed a competing foam
mattress in one of the main presentation rooms. Compl. ¶
26. The Gel Matrix mattress was not featured in the main
presentation room. Compl. ¶ 26. London Luxury also used
the competing foam mattress as its proposed Columbia-mattress
product. Compl. ¶ 26.
Firm representatives asked London Luxury representatives
whether London Luxury had licensing rights from Columbia to
market a Columbia-branded mattress. Compl. ¶ 27. London
Luxury admitted that it did not have those rights. Compl.
¶ 27. London Luxury had not told Intellibed that it did
not have the rights to license a Columbia-branded mattress,
and London Luxury did not tell Intellibed that it discussed
this issue with Mattress Firm. Compl. ¶ 28.
alleges that at the Houston meeting a London Luxury
representative told a Mattress Firm executive that if
Mattress Firm did not like the Gel Matrix mattress, Mattress
Firm would “never have to talk to Intellibed
again.” Compl. ¶ 29. Intellibed also alleges that
London Luxury invited Mattress Firm to visit the
manufacturing facilities of the company that produced the
competing foam mattress days after the Houston meeting.
Compl. ¶ 30. London Luxury never invited Mattress Firm
to tour the Intellibed facilities, according to Intellibed.
Compl. ¶ 31.
alleges that London Luxury made a number of false
representations about its business. Specifically, Intellibed
has learned or on information and belief maintains:
a) London Luxury's annual revenues are significantly
lower than the high hundreds of millions;
b) London Luxury is not only not the largest single accessory
provider to London Luxury, it is not even one of the top
three accessory providers;
c) London Luxury does not have a strong relationship with the
key decision-makers and buyers at Mattress Firm and was not
uniquely or specifically situated to affect Mattress
Firm's purchasing decisions;
d) London Luxury does not have licensing rights to market
Columbia-branded mattresses; and
e) London Luxury did not have a meeting set with Mattress
Firm's CEO for February 20.
Compl. ¶ 32. Intellibed alleges that its affiliation
with London Luxury was detrimental to its ability to market
the Gel Matrix mattress to Mattress Firm. Compl. ¶ 33.
March 2017, sometime after the Houston meeting, a Mattress
Firm representative advised Intellibed not to attend a second
meeting that was scheduled between London Luxury and Mattress
Firm. Compl. ¶ 34. When Intellibed asked why, the
Mattress Firm representative told Intellibed that London
Luxury had a negative impact on Intellibed's ability to
negotiate with Mattress Firm. Compl. ¶ 34.
alleges that London Luxury has done little if anything to
market the Gel Matrix mattress since the Houston meeting.
Compl. ¶ 35. Intellibed also learned that Mattress Firm
entered into a pilot agreement with Purple, a direct
competitor of Intellibed, to sell Purple's competing gel
mattress. Compl. ¶ 36. The deal “could be worth
millions of dollars.” Compl. ¶ 36. Intellibed
believes that it lost the ability to secure a comparable deal
because of London Luxury's poor relationship with
Mattress Firm. Compl. ¶ 36.
alleges that London Luxury knowingly made certain false
representations during its initial meeting with Intellibed.
Compl. ¶ 37. London Luxury allegedly made these
representations to get Intellibed to sign the Agreement.
Compl. ¶ 37. If London Luxury had not made those
representations, Intellibed would not have signed the
Agreement and it would be in a better position to market the
Gel Matrix mattress. Compl. ¶ 38. Intellibed also
alleges that it “performed its obligations under the
Agreement.” Compl. ¶ 51.
1, 2017, Intellibed filed a complaint against London Luxury.
The complaint states four causes of action: (1) fraud/fraud
in the inducement, (2) breach of contract (in the
alternative), (3) breach of the covenant of good faith and
fair dealing (in the alternative), and (4) breach of
fiduciary duty. Compl. ¶¶ 40-62. Intellibed asks
the Court to rescind the Agreement based on the alleged
misrepresentations or, in the alternative, to award damages
in excess of $75, 000. Compl. at 15-16. London Luxury has
moved to dismiss the complaint.
Whether Subject Matter Jurisdiction Exists
Luxury contends that the Court lacks subject matter
jurisdiction over this case because the $75, 000
amount-in-controversy requirement is not satisfied.
See 28 U.S.C. § 1332(a). Specifically, London
Luxury argues that Intellibed's damages are too
speculative to satisfy the amount-in-controversy requirement
and that Intellibed's rescission claim is essentially
worthless in determining whether the amount-in-controversy
requirement has been satisfied. London Luxury misunderstands
the amount-in-controversy requirement.
federal subject matter jurisdiction is challenged based on
the amount in controversy, the plaintiff must show
“that is does not appear to a legal certainty”
that he or she cannot recover the jurisdictional amount.
Woodmen of World Life Ins. Soc'y v. Manganaro,
342 F.3d 1213, 1216 (10th Cir. 2003) (quoting Watson v.
Blankinship, 20 F.3d 383, 386 (10th Cir. 1994)). Put
simply, unless it is legally certain that less than
$75, 000 is at issue, the jurisdictional challenge fails.
legal certainty standard is very strict.” Id.
As such, “it is difficult for a dismissal to be
premised on the basis that the requisite jurisdictional
amount is not satisfied.” Id. “There is
a strong presumption favoring the amount alleged by the
plaintiff.” Id. “Generally, dismissal
under the legal certainty standard will be warranted only
when a contract limits the possible recovery, when the law
limits the amount recoverable, or when there is an obvious
abuse of federal court jurisdiction.” Id. at
actions seeking declaratory or injunctive relief, “the
amount in controversy is measured by the value of the object
of the litigation.” Hunt v. Wash. St. Apple Adver.
Comm'n, 432 U.S. 333, 347 (1977). Accordingly,
“in cases where a plaintiff seeks to rescind a
contract, the contract's entire value, without
offset, is the amount in controversy.” Rosen
v. Chrysler Corp., 205 F.3d 918, 921 (6th Cir. 2000)
(emphasis added); see also Pyskaty v. Wide World of Cars,
LLC, 856 F.3d 216, 224 (2d Cir. 2017) (holding that
plaintiff's “rescission claim supplies a sufficient
basis for subject-matter jurisdiction, ” despite the
fact that her claimed damages “fell well below”
the amount-in-controversy requirement).
the amount-in-controversy requirement is satisfied. The Court
need only look to the fraud claim to reach this conclusion.
Intellibed seeks to rescind the Agreement, so the Court looks
to the value of Agreement to determine the amount in
controversy. The exact value of the Agreement is uncertain
because the finder's fee turns on prospective sales. The
parties could make millions, or nothing. Regardless, the
Court cannot conclude that it is a “legal
certainty” that the value of ...