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Starin Marketing, Inc. v. Swift Distribution, Inc.

United States District Court, N.D. Indiana.

August 22, 2016




         This matter is before the Court on the Defendant’s Motion to Dismiss Plaintiff’s Complaint [ECF No. 12], filed on April 20, 2016. On January 21, 2016, the Plaintiff, Starin Marketing, Inc., filed a two-count Complaint [ECF No. 4] against the Defendant, Swift Distribution, Inc., d/b/a Ultimate Support Systems. On February 23, 2016, the case was removed to federal court, pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. The Defendant then moved to dismiss the Complaint, pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), asserting that the Court lacks subject matter jurisdiction over the claim for declaratory judgment and the Complaint fails to state a claim upon which relief may be granted. On May 18, 2016, the Plaintiff filed its Response to the Defendant’s Motion to Dismiss [ECF No. 22]. On May 31, 2016, the Defendant filed its Reply in Support of its Motion to Dismiss [ECF No. 24]. On July 19, 2016, the Court heard oral argument on the Defendant’s Motion to Dismiss. With this matter now being fully briefed, the Defendant’s Motion to Dismiss is granted in part and denied in part.


         The Plaintiff is an Indiana corporation that markets and delivers, among other things, audio systems and equipment through its brand development services and procurement programs. (Compl. ¶ 1, ECF No. 4.) The Defendant is a California corporation “in the business of wholesaling sound systems and equipment.” (Id. ¶ 2.) Given the compatibility of their businesses, the parties entered into an Amended and Restated Fulfillment and Distribution Agreement (the “Agreement”) on August 7, 2014. (Id. ¶ 3.)

         Under the Agreement, the Plaintiff “purchase[d] goods from [the Defendant], and [was] responsible for warehousing the goods, managing the inventory of the goods, [and] fulfillment of orders from [the Defendant’s] customers.” (Id. ¶ 4.) The Defendant “reconcile[d] and reimburse[d] [the Plaintiff] for costs of the goods sold to [the Defendant’s] customers, together with interest thereon” and paid the Plaintiff a fixed monthly fee based on the value of monthly commissioned sales. (Id. ¶ 5.) Section 2.A.i.d., located in the portion of the Agreement titled “[Plaintiff] Obligations, ” stated that the Plaintiff shall:

Maintain sufficient operating capital via dedicated credit facility, or otherwise, in order to support [the Plaintiff’s] purchasing and inventory obligations for this Agreement. The Parties acknowledge that, as of the Effective Date, such obligations may not exceed Four Million Two Hundred Thousand Dollars ($4, 200, 000). If, at any time during the Term, [the Defendant] requests that [the Plaintiff] increase operating capital and overall inventory levels to support [the Defendant’s] sales growth, but [the Plaintiff] is unable or unwilling to accommodate such request, [the Defendant] may terminate this Agreement upon written notice to [the Plaintiff], and without penalty. (Compl. Ex. A, at 4, ECF No. 4)

         On January 21, 2016, the Plaintiff filed a lawsuit against the Defendant alleging two counts: First, that after entering into the Agreement, the Defendant allegedly breached Section 2.A.i.d. when it “shipped goods to [the Plaintiff], without [the Plaintiff’s] consent, in an amount which . . . exceeded the $4.2 million limitation on purchasing and inventory obligations” and forced the Plaintiff to purchase those excess shipments, (Compl. ¶ 11), and when it “failed to make timely reimbursement and interest payments to” the Plaintiff. (Id. ¶¶ 11-12.) Second, that the Plaintiff seeks a declaratory judgment because it “retains significant inventory which [the Plaintiff] has purchased from [the Defendant] in conformity with [the Plaintiff’s] fulfillment obligations under the Agreement, and which [the Plaintiff] desires to re-label and resell in order to mitigate the damages resulting from [the Defendant’s] breaches of the Agreement.” (Id. ¶¶ 13-17.)


         Rule 12(b)(1) provides that a party may assert the defense of lack of subject matter jurisdiction by motion. Fed.R.Civ.P. 12(b)(1). “Subject-matter jurisdiction is the first question in every case, and if the court concludes that it lacks jurisdiction it must proceed no further.” Illinois v. City of Chi., 137 F.3d 474, 478 (7th Cir. 1998). When considering a motion to dismiss for lack of subject matter jurisdiction, a court must accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff. Alicea-Hernandez v. Catholic Bishop of Chi., 320 F.3d 698, 701 (7th Cir. 2003).

         Similarly, when reviewing a complaint attacked by a Rule 12(b)(6) motion, a court must accept all of the factual allegations as true and draw all reasonable inferences in favor of the plaintiff. Erickson v. Pardus, 551 U.S. 89, 93 (2007). The complaint need not contain detailed facts, but surviving a Rule 12(b)(6) motion “requires more than labels and conclusions . . . . Factual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).

         When a party seeking dismissal under Rule 12(b)(6) submits documents with its motion to dismiss, courts can either ignore the documents or convert the motion to one for summary judgment. Fed.R.Civ.P. 12(d); Tierney v. Vahle, 304 F.3d 734, 738 (7th Cir. 2002); Venture Ass’n Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993). Here, both Parties filed affidavits from various company employees and exhibits of company emails, but questions exist regarding the validity and scope of those documents on issues unrelated to the Agreement. Therefore, the Court does not find it appropriate to convert the Defendant’s Motion to Dismiss to one for summary judgment at this time. The Court disregards those additional documents submitted by the Parties and confines its analysis to the Complaint and the documents referenced in and attached to the Complaint. See Fed. R. Civ. P. 10(c) (“A copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.”).


         This Court has subject matter jurisdiction over the case because the matter in controversy exceeds the sum or value of $75, 000.00 and is between citizens of different states. 28 U.S.C. § 1332. This Court has the authority to grant declaratory relief pursuant to 28 U.S.C. § 2201.

         A. ...

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