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Schur International v. Miller

United States District Court, Ninth Circuit

June 5, 2013

SCHUR INTERNATIONAL A/S, a Denmark Corporation, Plaintiff,
v.
ROBERT MILLER, an individual, Defendant.

ORDER

WILLIAM Q. HAYES, District Judge.

The matter before the Court is the Motion to Dismiss filed by Defendant Robert Miller. (ECF No. 6).

PROCEDURAL BACKGROUND

On November 13, 2012, Plaintiff Schur International A/S initiated this action with a Complaint against Defendant Robert Miller "for breach of written representation that Defendant made to [Plaintiff] in a written settlement agreement." (ECF No. 1 at ¶ 1).

On January 9, 2013, Defendant filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 6). On February 5, 2013, Plaintiff filed an opposition (ECF No. 7), and on February 8, 2013, Defendant filed a reply (ECF No. 8).

ALLEGATIONS OF THE COMPLAINT

Schur Marketing & Technologies, U.S.A., Inc. ("SMT"), the company of which Defendant was formerly President and CEO, was a manufacturer and distributer of ice and water vending machines that did business at several retailers, including Ralphs. Those retailers provided locations for SMT vending machines in exchange for commissions on the vending machine sales. Id. at ¶ 7. "Originally, SMT's legal name was Bottle Water Vending, Inc., which was both owned and run by [Defendant]." Id. at ¶ 8.

"In 2008, Bottle Water Vending, Inc. entered into a written debt financing agreement with [Plaintiff], through which [Plaintiff] became 45% owner of Bottle Water Vending, Inc. The Company's name was changed to SMT on March 12, 2008." Id. "Following the transaction with [Plaintiff], Defendant... was 55% owner, as well as President and CEO, of SMT." Id.

I. Defendant enters contract with Ralphs

In 2009, Defendant, "as President and CEO, negotiated and signed a contract with Ralphs on behalf of SMT." Id. at ¶ 9; see also id., Exh. A (copy of contract).

Per the contract, Ralphs would provide locations for SMT's vending machines at a large number of its grocery stores in exchange for a commission on water sales for a three-year period from January 1, 2010, through December 31, 2012.

In the contract, SMT guaranteed Ralphs that it would exceed the revenue of the prior vendor whose place it had taken in the grocery stores. SMT guaranteed that it would exceed the revenues of the prior vendor by 15% in the first year of the contract. It also guaranteed that revenues would increase 5% each subsequent year. Ralphs agreed to provide [Defendant] of SMT with the prior vendor's 2009 revenue figures so that the guarantee could be calculated once SMT had begun to perform under the contract. Ralphs has stated to representatives of [Plaintiff] that it did, in fact, provide such revenue figures to [Defendant] at that time.

Under the terms of the contract, the first year for purposes of comparison commenced when all machines had been installed. Because all machines were installed by the end of Q1 2010, the comparison period was April 2010 to March 2011.

Per the contract, if SMT failed to meet its guaranteed revenue increases for a particular year, it was obligated to pay Ralphs the difference as a guarantee. The amount owed was calculated by multiplying the shortfall in revenues by the amount of commissions Ralphs would have made on the sales that should have been made. Under the terms of the contract, SMT was required to compensate Ralphs for any shortfalls by April 30th of the following year.

Id. at ¶¶ 9-12.

II. Defendant failed to provide accurate revenue figures

"When SMT's CFO Duke Bushong asked [Defendant] to provide the previous vendor's 2009 revenue figures so that he could calculate the amount owed under the guarantee to Ralphs, [Defendant] told him that Ralphs had not sent him the official figures, but that the previous vendor's 2009 revenue was $4.1 million." Id. at ¶ 13. Defendant told Bushong "that he would provide him with the official numbers as soon as Ralphs sent them." Id.

Bushong repeatedly asked [Defendant] for the previous vendor's 2009 revenue figures. [Defendant] maintained that Bushong should use the $4.1 million figure for purposes of his calculations. Because the revenue that SMT began actually producing annually under the contract was close to $4.1 ...

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