AMERICAN CLASSIC SPECIALTIES CORP. v. FRIENDLY'S ICE CREAM CORP.

Thursday, February 28, 2002

Supreme Court

Nassau County

Justice Austin

AMERICAN CLASSIC SPECIALTIES CORP. v. FRIENDLY’S ICE CREAM CORP. ” Motion by Defendants Friendly Ice Cream Corp. (“ Friendly’s”) and Wards Ice Cream Co. (“Wards”) for an order: (i) granting summary judgment dismissing the first, third, sixth, seventh, eighth and ninth causes of action in the amended complaint in Action #1 and (ii) granting Friendly’s motion for summary judgment on its second counterclaim in Action #1 for an account stated is determined as provided herein.

Initially, the Court holds that the proposed amended complaint in Action #1, having been served without leave of the Court or a stipulation signed by all parties, is a nullity. Thus, Ward’s is not a party to Action #1. This motion will be considered as being addressed to the first amended complaint in Action #1; not the proposed second amended complaint.

This is an action, inter alia, for fraud and breach of contract. Plaintiffs’ first cause of action (sounding in fraud) alleges that in or about October, 1995, Friendly’s approached and solicited Plaintiffs, American Classic Specialties Corp. (“American Classic”), Sunburst Ice Cream Corp. (“Sunburst”), West Rock Ice Cream Corp. (“West Rock”), and other affiliated wholesale ice cream distributors to become a Friendly exclusive distributor of Friendly’s Non-Traditional Ice Cream Products “in all non-traditional locations in Nassau [County] and Suffolk County, such as Plaintiffs’ Long standing and new institutional customers.”

Further to its solicitation of Defendants, in November, 1995, Friendly’s provided Plaintiffs with a credit application. Thereafter, Friendly’s scheduled numerous meetings and prepared or promised Letters of Intent and Letters of Commitment, in furtherance of the Exclusive Distribution Agreement. Simultaneously, Friendly’s directed Plaintiffs to provide it with confidential customer information of Plaintiffs’ long standing and new institutional customers. Plaintiffs claim that this was done under the fraudulent pretext that a collaborative, joint effort was required, among the Plaintiffs and Friendly’s, to introduce friendly’s non-traditional ice cream products to Plaintiffs’ long standing and new institutional customers.

Plaintiffs, contend that they were unaware of Friendly’s scheme to steal, and directly solicit and sell to Plaintiffs’ long standing and established institutional customers. Such customers, in good faith, were introduced to the Friendly’s sales force by Plaintiffs. Thereafter, Plaintiffs allege, in August, 1996, after using their confidential customer information to familiarize and establish its line of ice cream products in Plaintiffs’ long standing and new institutional customers, Friendly’s terminated Plaintiffs’ exclusive distribution rights, under the pretext of dissatisfaction with displays fabricated by All Star Parts & Vehicles, Inc. (“All Star”). As a result, Friendly’s selected another ‘exclusive distributor’ to sell and distribute ice cream product to Plaintiffs’ customers.

With respect to damages, Plaintiffs allege that they were damaged in the sum of at least $215,000.00 lost profits for the year 1996-97, and each year thereafter; plus, at least $1 million in lost future profits. They also seek an award of punitive damages in the sum of at least $5 million and counsel fees of not less than $50,000.00. They also seek anticipated annual loss of gross profits in the sum of at least $150,000.00 yearly, at least $150,000.00 to recoup moneys expended in promoting of Defendants’ products and at least $104,000.00 damages, annually, based upon loss of sales of related products.

Plaintiffs seek to recover the exact same damages in connection with their third cause of action (tortious interference with contract); their sixth cause of action (unjust enrichment); their seventh cause of action (breach of fiduciary duty); their eighth cause of action (unfair competition and misappropriation of trade secrets); and their ninth cause of action (misappropriation of trade secrets and unfair trade practices).

Plaintiffs’ second cause of action (breach of contract) seeks similar, but not identical damages. In this cause of action, Plaintiffs allege that in or about January, 1996, they entered into an exclusive distribution agreement with Friendly’s under which Plaintiffs were given the exclusive rights to sell and distribute Friendly’s non-traditional ice cream products to all non-traditional locations in Nassau and Suffolk Counties. Plaintiffs claim that Friendly’s improperly terminated the Exclusive Distribution Agreement, refused to sell Friendly’s ice cream products to them and directly or indirectly sold Friendly’s products to Plaintiffs’ customers, without Plaintiffs’ permission, knowledge or consent.

Friendly’s has asserted four counterclaims, but seeks summary judgment only as to its second counterclaim based upon an account stated. Friendly’s alleges that Plaintiffs are indebted to Friendly’s in the amount of $40,630.33 for certain ice cream and food product in accordance with a certain book of accounts that Plaintiffs refused to pay any portion of said accounts although payment thereof has been duly demanded.