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Posted: November 11, 2017

Court Allows Contract Claim Based on Defendant’s Alleged Control of Contracting Party

On October 24, 2017, Justice Bransten of the New York County Commercial Division issued a decision in Shawmut Woodworking & Supply, Inc. v. 3 BP Property Owner LLC, 2017 NY Slip Op. 32318(U), allowing a breach of contract claim to go forward against a party that did not sign the contract based on the defendant’s alleged control of the contracting party, explaining:

Shawmut alleges that Asics exercised actual authority over Windsor by and through the terms of the Master Retailer Agreement. Shawmut further alleges that a doctrine of actual authority exists which would impute liability upon Asics for Windsor’s default. . . .

While the use of the phrase doctrine of actual authority is unclear, this court’s duty is to accord the facts and claims of the complaint every favorable inference. The court may rely upon factors other than the complaint to determine whether the Plaintiff has adequately, if not artfully, pled a claim.

Here, Shawmut states with specificity that Asics directly communicated with both Shawmut and Windsor, Asics was supplied with design details by Shawmut, and specifically exercised control over the project by approving the design, layout, features, and overall look of the store. Asics was believed to have also controlled the costs of construction by increasing costs and creating change orders.

Shawmut’s Director of Business Development, James Scarpone further supplied an Affidavit in relation to this motion to dismiss. This affidavit stated that representatives of Asics visited the site to observe the progress of construction. Scarpone later flew to Asics headquarters in Irvine, California to discuss additional work for the New York Store with representatives of both Asics and Windsor. Scarpone believed Asics controlled the decision-making process for the design, approval, and funding of the work.

Shawmut further alleges in its complaint that Asics exercised authority over Windsor by and through the terms of the Master Retailer Agreement. . . . The MR Agreement outlines that all of the Asics’ brand stores owned and operated by Windsor were to be operated to Asics’ specifications, standards, and in accordance with Asks operating procedures. Asics was to train Windsor and Windsor’s store managers, and have access to the stores systems. Asics was also granted the right to assume and manage any of Windsor operated Asics brand stores in the event the MR Agreement was terminated, as well as hold a security interest in all goods, inventory, equipment, fixtures, furniture, and improvements now or hereafter situated on or relating to the operation of any store, and to all property bearing Asics’ Trademarks and all proceeds therefrom.

This court must accept the allegations of the complaint as true. The essence of Plaintiff’s claim against Asics is that Asics abused Windsor’s corporate autonomy through the constraints of the MR Agreement and that this abuse is the basis for liability against Asics. Together, the Second Amended Complaint, the Scarpone Affidavit, and the Master Retailer Agreement state a claim that is based upon the total control Asics was able to, allegedly, assert over Windsor.

Given that the standard on a 3211(a)(7) motion to dismiss is to determine whether Plaintiff has plead a legal claim, and Plaintiff has pled a claim based upon Asics’ apparent control over Asics’ brand stores operated by Windsor the dismissal of this claim is not appropriate at this time. Shawmut should be given the opportunity to prove its claim that Asics’ controlled the decision-making process for design, approval, and funding of the work.

(Internal quotations and citations omitted).

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