Ephoca Inc. v. Olimpia Splendid USA, Inc.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
EPHOCA INC., )
)
Plaintiff, )
)
v. ) C.A. No. N23C-08-142 CEB
)
OLIMPIA SPLENDID USA, INC., )
)
Defendant. )
Submitted: December 1, 2023
Decided: February 20, 2024
ORDER
Upon Consideration of Defendant Olimpia Splendid
USA, Inc.’s, Motion to Dismiss,
DENIED
William E. Gamgort, Esquire, Elise K. Wolpert, Esquire, Young Conaway Stargatt
& Taylor, LLP, Wilmington, Delaware. Attorneys for the Plaintiff.
Joseph B. Cicero, Esquire, Thomas A. Youngman, Esquire, Chipman Brown Cicero
& Cole, LLP, Wilmington, Delaware. Attorneys for the Defendant.
BUTLER, R.J.
BACKGROUND
1. The Complaint
According to the Complaint, Plaintiff Ephoca, Inc. (“Ephoca”) manufactures
large scale commercial heating, ventilation, and air conditioning (“HVAC”) systems
throughout the United States. Defendant Olimpia Splendid USA, Inc. (“Olimpia”)
also manufactures HVAC systems and also sells throughout the USA, thus putting
Plaintiff and Defendant in direct competition with one another. Adding to that, both
companies are subsidiaries of different parent companies, both parents are residents
in Italy.
Ephoca claims that Olimpia, through its representatives, made false and
defamatory representations about Ephoca’s HVAC products to at least two entities
with whom Ephoca had business and that Olimpia made these representations
knowing about Ephoca’s business relationships and knowing the statements were
false.
Included with the Complaint are two exhibits: one is a letter from an attorney
for Ephoca to Olimpia accusing its sales representatives of advising an Ephoca
customer of delays in shipping Ephoca products and suggesting that the customer
switch to Olimpia’s products. The other is from Olimpia denying that its sales force
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has done any such thing but assuring Ephoca that it will remind its sales force not to
do so.
Ephoca says that because of these false statements, Ephoca was forced to lower
its contract price with these two buyers by some $200,000, which does not include
its losses to other industry purchasers as yet unknown. Ephoca brings claims of
“trade libel,” “tortious interference with contract” and “tortious interference with
prospective business opportunities.”
2. The Motion to Dismiss
Olimpia moves to dismiss. Olimpia urges that Plaintiff’s claims are too vague
to pass muster under existing pleading standards. While Olimpia points out many
such examples, the gist is that Plaintiff did not plead its case with sufficient
particularity, or clarity, or specificity to be sustainable. Olimpia’s legal analysis goes
no deeper than that – it feels the complaint is dismissible on its face for insufficiency
of the allegations in the pleading.
Another unusual feature of Olimpia’s motion to dismiss is the inclusion of the
affidavit of Diego Stefani, the “executive director of sales & marketing” for Olimpia
who swears to certain appended emails and agreements attached to the motions to
dismiss show that the “representative” accused of these disparagements is not
employed by, or an agent of, Olimpia. The exhibits do seem to suggest that there
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was a person who expressed concerns with Ephoca’s timely delivery of its products
and suggested a switch to Olimpia. The affidavit avers that this person is not an
employee or agent of Olimpia, but rather a “sales engineer” for a company called
Air Treatment Corporation. Olimpia’s affidavit attests to an attached “Sales
Representation Agreement” with Air Treatment Corporation that, Olimpia
apparently feels, absolves it of any liability for this whole misunderstanding. Could
this be the representor of the representations that Ephoca feels libeled Ephoca in its
business dealings? Maybe so.
Or maybe not. It is too early to tell. Ephoca opposes the motion to dismiss
but does not concede Olimpia’s supposition that Air Treatment made the
representations. Rather, Ephoca says Olimpia is attempting to hold this Complaint
to a Rule 9 standard of detail, when it should be judged by the lesser requirements
of Rule 8. More importantly, Ephoca argues that a motion to dismiss must be judged
by the four corners of the Complaint and the Court may not consider the extraneous
matters introduced by the defense’s affidavit and accompanying exhibits.
In its reply to Ephoca’s answer, Olimpia reiterates how little it thinks of
Ephoca’s Complaint and in particular, its lack of attention to what specific facts,
representations, to whom, about what are alleged in the Complaint. If Ephoca feels
it has been besmirched, when and where, Olimpia wants to know, did that happen
and who did the besmirching?
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DISCUSSION
1. The Pleading Standard
Olimpia expends much energy complaining that the Complaint is fatally pled
in that its allegations are vague, general, and insufficient. But Super. Ct. Civ. R. 8(a)
gives the Complainant a wide berth at the stage of initial pleading. Rule 8 provides
that a claim is sufficient if it contains “a short and plain statement of the claim
showing that the pleader is entitled to relief.”1 The only exception to that is found
in Rule 9 when “pleading special matters.”2 Special matters include “fraud,
negligence, mistake, condition of mind.”3 None of the counts in Plaintiff’s
Complaint are allegations of fraud, negligence, or mistake. Thus, Plaintiff’s
Complaint is sufficient if it is a short and plain statement of the claim.
Moreover, the standard for survival of a Complaint in the face of a motion to
dismiss is quite low.4 The Court must 1) accept as true all factual allegations of the
Complaint,5 2) credit even vague allegations in favor of sustaining the Complaint,
1
Super. Ct. Civ. R. 8(a).
2
Super. Ct. Civ. R. 9(b).
3
Id.
4
See Spence v. Funk, 396 A.2d 967, 968 (Del. 1978) (“The test for sufficiency is a
broad one, that is, whether a plaintiff may recover under any reasonably conceivable
set of circumstances susceptible of proof under the complaint.” (internal citations
omitted)).
5
Page v. Oath, Inc., 270 A.3d 833, 842 (Del. 2022).
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so long as they give Defendant notice of the claim,6 3) draw all reasonable inferences
in favor of the Complaint,7 and 4) deny dismissal if recovery on the claim is
reasonably conceivable.8 “The complaint ordinarily defines the universe of facts
from which the trial court may draw in ruling on a motion to dismiss.”9 Affirmative
defenses may not be considered10 and matters submitted outside the Complaint –
such as an affidavit of Defendant’s executive – may only be considered when it is
“integral to Plaintiff’s claim and incorporated into the Complaint,”11 which this
affidavit is not. The affidavit here is submitted as if to emphasis the rightness of
Plaintiff’s claim; it is not integral to the complaint.
2. The Claims
The defense cites to the Court various decisions concerning defamation, fair
debt collections practices and civil rights suits to support its position that the
allegations of this Complaint are deficient. But the cases cited are not persuasive,
6
Central Mortg. Co. v. Morgan Stanley Mortg. Cap. Holdings LLC, 27 A.3d 531,
535 (Del. 2011).
7
Ramunno v. Cawley, 705 A.2d 1029, 1034 (Del. 1998).
8
Kofron v. Amoco Chemicals, Corp., 441 A.2d 226, 227 (Del. 1982).
9
Malpiede v. Townson, 780 A.2d 1075, 1082 (Del. 2001).
10
See Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 657 (3d Cir. 2003) (Except in
cases where Complaint reveals existence of affirmative defense that mandates
dismissal, “affirmative defenses should be raised in responsive pleadings, not in pre-
answer motions brought under Rule 12(b).”).
11
Windsor I, LLC v. CWCapital Asset Management, LLC 283 A.3d 863, 873 (Del.
2020) (internal citations omitted).
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or even relevant to the question whether Plaintiff has lodged a short and plain
statement putting the Defendant on notice of claims for tortious interference or trade
libel.
A. Trade Libel
The Restatement (Second) of Torts defines “Liability for Publication of
Injurious Falsehood” as liability attaching for statements that are false and result in
pecuniary loss when the publisher “intends for publication of the statement to result
in harm to the interests” of another when he knows that the statement “is false or
acts in reckless disregard of its truth or falsity.”12
This general principal is refined further with respect to trade libel. Liability
attaches so long as the publisher “should recognize as likely to result in pecuniary
loss to the other through the conduct of a third person in respect to the other’s
interests in the property.”13
Defendant does not dispute that the Complaint puts it on notice of the nature
of the claim. The Defendant is so well aware of the claim that it mounts a defense
on the merits of the claim in its motion. Defendant argues that 1) the Complaint
does not identify the specific libelous statement(s), 2) Defendant cannot be liable
12
Restatement (Second) of Torts § 623A.
13
Restatement (Second) of Torts § 626.
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because it did not make the statement – by referencing facts outside the Complaint,
3) does not explain what the truth is (as opposed to the falsity, as alleged), and 4)
Plaintiff unilaterally lowered its price on goods and has not proven that lowering
prices was caused by the allegedly libelous statements.
A savvy reader would recognize many of these arguments to be ones we might
expect on a motion for summary judgment, or in front of a jury, not a motion to
dismiss, as they rely on facts and assumptions not set forth in the Complaint. The
Plaintiff need only put the Defendant on notice, it need not lay out its whole case in
the Complaint. There will be time enough for that once discovery has concluded.
B. Tortious Interference
Counts 2 and 3 are related: tortious interference with contractual relations and
tortious interference with prospective business opportunities. So, Count 2 is about
existing business and Count 3 is about future business, but both presume that
Defendant is guilty of tortious conduct that interfered with each.
Defendant argues that tortious interference with contractual relations requires
that Plaintiff plead a breach of an actual contract and identification of the breached
clause(s). Plaintiff urges that a breach is alleged insofar as Plaintiff was “compelled”
to accept less than the full contract price in order to avoid losing the contract
altogether. Read liberally, as we must, the allegation is that the other contracting
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party forced a concession on Plaintiff that Plaintiff was only required to accept
because of Defendant’s tortious conduct. Whether that is true or not remains to be
fleshed out, but the Court is constrained not to dismiss the Complaint where Plaintiff
has sufficiently put forward a claim that the contract had to be altered, if for no other
reason, than to mitigate the losses caused by Defendant’s tortious interference.
As to the tortious interference with prospective gain claim, Defendant again
faults Plaintiff for failing to identify the who/when/where/how/why it lost
prospective business. But it is not up to Plaintiff to do so in its initial Complaint.
Plaintiff correctly recites in its response that Plaintiff has a right to compete in the
marketplace with the Defendant and the determination of whether its statements
were “unjustified is a fact-intensive question that cannot be resolved on a motion to
dismiss.”14
Plaintiff recites in its Complaint that it was in negotiations with a purchaser
of Plaintiff’s products when the identified buyer forced Plaintiff to lower the contract
price because of the false statements by Defendant. That does not, of course, make
any of this demonstrably true. Defendant should (and will) have the opportunity to
depose the relevant parties, examine the relevant documents, and put Plaintiff to the
test of proving it. But Defendant cannot short circuit that process with a motion to
14
Pl.’s Answering Br. ⁋ 30; see Bandera Master Fund LP v. Boardwalk Pipeline
Partners, LP, 2019 WL 4927053 at *25-27 (Del. Ch. Oct. 7, 2019).
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dismiss that challenges virtually all of Plaintiff’s factual allegations. That is what
we have trials for. Rather, each allegation must be assumed to be true for purposes
of the instant motion – Defendant’s frustration with that presumption
notwithstanding.
CONCLUSION
For the reasons set forth above, the Defendant’s motion to dismiss Plaintiff’s
Compliant is DENIED. Defendant shall file an Answer to the Complaint. A trial
availability letter shall issue from the Court immediately thereafter.
IT IS SO ORDERED.
/s/ Charles E. Butler
Charles E. Butler, Resident Judge
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