On December 11, 2013, Justice Schmidt of the Kings County Commercial Division issued a decision in Corona Treasures LLC v. Star Home Designs, LLC, 2013 NY Slip Op. 52294(U), denying in part a motion to dismiss because of factual questions regarding whether some defendants were “sellers” for purposes of the UCC.
Corona Treasures arose from the breakdown of an agreement by the plaintiff to purchase merchandise from India. Some of the defendants (Universal, the Indian defendant who was the underlying seller, did not join them) moved to dismiss on the ground that because the agreement concerned the sale of goods, UCC § 2-725(1)’s 4-year statute of limitations applied instead of the 6-year limitations period for breach of contract actions. In opposition, the plaintiff asserted that the only “seller” in the relationship was Universal, and that the movants were intermediaries who were paid to facilitate or arrange the plaintiff’s relationship with Universal.
The court found that, because there were issues of fact as to whether the movants were “sellers,” they had not carried their initial burden of establishing that the statute of limitations had expired:
In the first instance, moving defendants rely too heavily on a single allegation in the complaint (paragraph 7) to claim the status of sellers, to the exclusion of other allegations that suggested that they acted in another capacity, i.e., as some kind of intermediary for the alleged seller. Tellingly, the moving defendants do not dispute [the plaintiff’s] assertion, supported by documentary evidence, that he purchased the goods directly from Universal and that the payments that were made to moving defendants were not for the goods themselves but were essentially a finder’s fee . . . . If anything, moving defendants appear to assiduously avoid describing the nature of their relationship with Universal.
The court did dismiss the plaintiff’s conversion claims—finding no factual issue that the three-year statute of limitations applied and had run—and fraud claims—because none of the alleged representations were “collateral or extraneous to the terms of the agreement.”
This opinion reminds practitioners that, even though an action may concern the “sale of goods,” the provisions of Article 2 of the UCC may not apply to every party or cause of action, and complaints should be drafted with this consideration in mind.