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Zotbelle, Inc. v. Kryolan Corp.

United States District Court, D. Massachusetts

September 23, 2019

ZOTBELLE, INC., Plaintiff,
v.
KRYOLAN CORPORATION and KRYOLAN GmbH, Defendants.

          MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

          ALLISON D. BURROUGHS, U.S. DISTRICT JUDGE

         In this commercial dispute following the underperformance of a make-up retail store, Plaintiff Zotbelle, Inc. (“Zotbelle”), whose President ran the store, alleges that Defendants Kryolan Corporation and Kryolan GmbH (together, “Kryolan”) breached a contract or implied contract that set the terms for the parties’ relationship, breached the implied covenant of good faith and fair dealing, misrepresented information about its intended relationship with Zotbelle, and engaged in unfair and deceptive business practices in violation of Massachusetts General Laws ch. 93A, § 11 (“Chapter 93A”). Currently pending before the Court are Zotbelle’s and Kryolan’s cross-motions for summary judgment. [ECF Nos. 49, 50]. For the following reasons, Kryolan’s motion for summary judgment on all counts of the Amended Complaint and on its cross-claim [ECF No. 50] is GRANTED, and Zotbelle’s motion for partial summary judgment on its Chapter 93A claim [ECF No. 49] is DENIED.

         I. BACKGROUND

         A. Factual Background

         The following facts are uncontroverted pursuant to Federal Rule of Civil Procedure 56 and Local Rule 56.1 unless otherwise stated. Kryolan is a professional makeup brand that has supplied the film, theater, and television industries for over 70 years. [ECF No. 53 (“Kryolan’s Statement of Facts” or “KSOF”) ¶ 3]. Kryolan Corporation is incorporated in California and operates Kryolan’s business in the United States. [KSOF ¶ 4]. Claudia Longo is the Secretary and CEO of Kryolan Corporation. [KSOF ¶ 5]; see [ECF No. 49-2 (“Zotbelle’s Statement of Facts” or “ZSOF”) ¶ 6]. Kryolan Corporation is a wholly-owned subsidiary of Kryolan GmbH, which is incorporated in Germany and managed by Wolfram Langer and two other individuals. [KSOF ¶¶ 3–4; ZSOF ¶ 3].

         Zotbelle is incorporated in Barbados and registered to do business in Massachusetts. [KSOF ¶ 1; ZSOF ¶ 1]. Deborah Blenman is the President of Zotbelle. [KSOF ¶ 2; ZSOF ¶ 2]. Zotbelle’s business relationship with Kryolan dates back to at least 2011. [KSOF ¶ 6; ZSOF ¶ 8]. Ms. Blenman worked as a make-up retailer and sales representative for Kryolan in Barbados and the Caribbean. [KSOF ¶ 6]. She held a B-1 visa in June 2013 that allowed her to temporarily visit the United States but did not permit her to remain in the United States to manage a business or to work for a business. See [KSOF ¶ 40]. Ms. Blenman never obtained a work permit that would have allowed her to be employed in the United States. [KSOF ¶ 41].

         In May 2013, Ms. Blenman expressed interest in opening a Kryolan store in Boston and wrote to Mr. Langer about the business opportunity. [KSOF ¶¶ 7, 11]. On May 14, 2013, Ms. Blenman e-mailed Mr. Langer to confirm the details of a telephone conversation with him. [KSOF ¶ 13]. The email read as follows:

ZOTBELLE is responsible for finding a location of approx.. 700- 800 sq. ft. in good location in Boston for the retailing of KRYOLAN PROFESSIONAL MAKE-UP and Dr. Babor Skin Care Line. (the acquiring of skin care will be arranged through Mr. Langer’s office at Kryolan) Photos are to be captured and sent to Mr. Langer.
ZOTBELLE is responsible for ensuring good floors, walls and electricity in the building. The space should be lease for no less than five years and as a last resort and if absolutely necessary it can be rented under KRYOLAN CORPORATION and sub leased to ZOTBELLE.
KRYOLAN would install the furniture in the space, which is approx.. $60, 000-$50, 000 U.S. and ZOTBELLE is required to pay a 1/3 of this amount after three years, in installments to be determined. Installation of the furniture should take (3) weeks; please confirm.
Product is to be ordered from the San Francisco location and the first delivery can be a maximum of $30, 000 - $40, 000 U.S. to be paid in 12 months. All other orders after this are to be paid in four (4) weeks.
The target date to commence is Oct. 2013 – early next year.
Additional assistance from KRYOLAN is available upon request, within reason and under agreement.
. . . .
[Ms. Blenman] will facilitate the establishing of this store in Boston, however it will not negate from the current business in the Caribbean.

[KSOF ¶ 13].

         On July 12, 2013, Ms. Longo provided Ms. Blenman with a “Proposal for Kryolan City Boston 31 Saint James St.” [KSOF ¶ 20; ECF No. 51-10]. This document provided for a $20, 000 deposit and a five-year lease with a lease amount of $1, 500 “[p]lus 5% of net Retail Sales or 9.5 % of value of purchased products, whatever is greater, but not less than the agreed annual minimum purchases.” [KSOF ¶ 21; ECF No. 51-10]. Ms. Blenman responded the same day and inquired what the $20, 000 deposit was for. [KSOF ¶ 22]. Mr. Langer explained that Kryolan would bear all the expenses of remodeling the store and equipping it with furniture and that he “[thought] it to be fair that [Ms. Blenman] contribute with a deposit.” [KSOF ¶ 23]. After an additional email exchange, Kryolan reduced the deposit to $17, 000. [KSOF ¶¶ 24–25]. Ms. Blenman testified that, at the time, she “understood [the deposit] . . . was the franchise fee.” [KSOF ¶ 26].

         Kryolan entered into a five-year lease agreement dated August 8, 2013 for the retail store location at 31 St. James Avenue in Boston. [KSOF ¶ 27; ZSOF ¶ 9; ECF No. 51-13]. Kryolan paid for the renovations and furnishing of the store (“Kryolan City Boston”) and supplied the initial inventory. [KSOF ¶ 28]. Kryolan City Boston opened on December 7, 2013. [KSOF ¶ 29; ZSOF ¶ 10].

         Zotbelle alleges that it entered into an agreement with Kryolan before Kryolan City Boston opened on December 7, 2013 concerning “things like marketing, the sales, . . . advertising, technical, . . . information, workshops, ” and that this agreement was not reflected in any writing. [KSOF ¶ 62]. Ms. Blenman understood from these conversations that Kryolan promised to provide marketing and advertising for Kryolan City Boston. [KSOF ¶ 63]. Ms. Longo agreed that she spoke with Ms. Blenman about marketing but recalled discussing general marketing and awareness of the Kryolan brand rather than advertising for the Kryolan City Boston store specifically. See [KSOF ¶ 63].

         On February 4, 2014, Kryolan Corporation and Ms. Blenman executed an “Agreement for operating a retail store named Kryolan City Boston at 31 St. James St., Boston” (“Lease Agreement”), which had been drafted by Ms. Longo and Mr. Langer. [KSOF ¶ 31; ZSOF ¶¶ 11– 12; ECF No. 58 at 5; ECF No. 51-12]. The Lease Agreement required Ms. Blenman to pay a monthly lease payment, a “base payment” of $17, 000, and inventory invoices according to a schedule set by the contract. [KSOF ¶¶ 35–36; ZSOF ¶ 13; ECF No. 51-12]. The Lease Agreement also stated that any sales promotions needed to be authorized by Kryolan and that store personnel were required to follow Kryolan’s dress code. [ZSOF ¶¶ 17–19; ECF No. 51-12]. Neither Zotbelle nor Kryolan GmbH are parties to the Lease Agreement. [KSOF ¶ 33]. Zotbelle argues that it assumed the Lease Agreement and notes that a loan agreement between Zotbelle and Kryolan GmbH states that “ZOTBELLE INC. requests the loan to purchase the initial product supply to operate the Kryolan retail store.” [ECF No. 64 at 10]. There is no evidence in the summary judgment record corroborating an assignment of the Lease Agreement to Zotbelle.

         Ms. Blenman managed and worked at Kryolan City Boston starting in December 2013. [KSOF ¶ 42]. She testified that she did not believe she was “working” in the United States because she was not on the payroll. [Id.]. Zotbelle paid Ms. Blenman’s rent in Boston, her car payment, and her tithes to Family Life Fellowship as business expenses. [KSOF ¶¶ 43–44].

         Zotbelle alleges that Kryolan City Boston was a franchise of Kryolan. [KSOF ¶ 58]. Ms. Blenman does not recall who at Kryolan told her that she would be a franchisee. [Id.]. Zotbelle identifies several references to Kryolan City Boston being a franchise location. See [ZSOF ¶¶ 23–24, 26, 28–29]. On April 1, 2014, a human resources employee at Kryolan wrote in a letter for Ms. Blenman that was intended for U.S. Customs and Immigration Services that Ms. Blenman “is the owner of Zotbelle, Inc., doing business as (DBA) Kryolan City Boston as a franchise owner with four staff members.” [ZSOF ¶ 23; ECF No. 58 at 10]. Ms. Longo testified that Kryolan described Ms. Blenman as a “franchise owner” in the letter in order to “help her . . . get a visa.” [ZSOF ¶ 24]. On November 20, 2014, Ms. Longo, Mr. Langer, and Ms. Blenman corresponded concerning a proposed payment plan for Ms. Blenman to pay amounts due to Kryolan. [ECF No. 49-3 at 59–62]. In that correspondence, Ms. Longo explained that “the $10, 000 is a contribution fee, like you have at franchises.” [ZSOF ¶ 26]. On July 20, 2016, a Kryolan sales manager wrote a colleague and noted in reference to Kryolan City Boston that “one of our open stores that was a franchise suddenly los[t] the franchisee and we are re-opening that location.” [ZSOF ¶ 27]. Ms. Blenman acquired business cards identifying her as a “Franchise Owner, ” but the parties dispute how those cards came to be printed. [ZSOF ¶¶ 28– 29; ECF No. 58 at 14].

         On June 30, 2014, Kryolan advised Ms. Blenman that she had failed to pay Kryolan Corporation for the initial purchase of inventory and proposed new terms for paying the debt. [KSOF ¶ 48]. Ms. Blenman argues that she was unable to pay the debt because “there are a few factors that are out of my control” including “a great need for advertising, ” which she said she was told was “handled by the marketing department in Germany.” [ECF No. 64 at 18–21].

         When Ms. Blenman did not make the inventory payments, Kryolan GmbH offered a loan in December 2014 to avoid a default under the Lease Agreement. [KSOF ¶ 49]. On December 18, 2014, Zotbelle and Kryolan GmbH entered into a loan for $63, 010.37 (“Loan Agreement”), which provided for monthly payments. [KSOF ¶¶ 50–51; ZSOF ¶ 36]. Zotbelle failed to make the required payments due under the Loan Agreement and therefore defaulted on the Loan Agreement and the Lease Agreement. [KSOF ¶¶ 53–54]. The parties dispute the reason for Zotbelle’s failure to comply with the terms of the Lease and Loan Agreements. [ECF No. 64 at 18–21].

         On June 22, 2016, Kryolan terminated the Lease Agreement for failure to pay rent, failure to pay for inventory by defaulting on payments due under the Loan Agreement, and failure to fulfill a contractual obligation to purchase a minimum of $100, 000 and $140, 000 during 2014 and 2015, respectively. [KSOF ¶ 55; ZSOF ¶ 38]. Ms. Blenman testified that she had not paid the rent in April, May, and June 2016, that she had failed to make payments due under the Loan Agreement, and that she did not purchase the required amount of annual inventory. [KSOF ¶ 56]. Ms. Blenman states that she did not have the “necessary support that [she and Kryolan City Boston] needed in order to generate the sales . . . to make the payments to Kryolan.” [Id.]. Zotbelle confirmed that it owes $56, 781 plus interest to Kryolan. [KSOF ¶ 57]. Ms. Blenman claims to have invested $34, 000 Barbados dollars into the Boston store. [KSOF ¶ 60].

         After terminating the Lease Agreement, Kryolan took over operation of the Kryolan City Boston store. [KSOF ¶ 68]. The store was closed in June 2018 because it was not profitable. [KSOF ¶ 68]. Concerning Ms. Blenman’s ongoing business in Barbados, Kryolan Corporation also required Zotbelle to pay cash for Kryolan products and demanded that Zotbelle pay an additional 25% or a minimum of $500 on top of each product order.[1] [ZSOF ¶ 39]. There is no written agreement between Zotbelle and Kryolan requiring it to sell product to Zotbelle in Barbados. [KSOF ¶ 72].

         B. Procedural History

         On July 5, 2017, Zotbelle initiated this action against Kryolan Corporation in the Superior Court of Suffolk County. [ECF No. 4-1]. On August 1, 2017, Kryolan Corporation removed the case to this Court, and on August 31, 2017, it answered the complaint. [ECF Nos. 4, 12]. On December 15, 2017, Zotbelle filed an Amended Complaint. [ECF No. 29 (“Am. Compl.”)]. Kryolan Corporation answered the Amended Complaint on January 5, 2018. [ECF No. 31]. Kryolan GmbH answered the Amended Complaint on March 27, 2018 and asserted a counterclaim for breach of the Loan Agreement. [ECF No. 36]. Zotbelle answered the counterclaim on April 5, 2018. [ECF No. 43]. On November 12, 2018, Zotbelle moved for partial summary judgment and Kryolan cross-moved for summary judgment on all counts and its counterclaim. [ECF Nos. 49, 50]. Both motions have been fully briefed. See [ECF Nos. 49-1, 52, 59, 63, 67].

         II. LEGAL STANDARD

         Summary judgment is appropriate where the movant demonstrates that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A fact is material if its resolution might affect the outcome of the case under the controlling law.” Cochran v. Quest Software, Inc., 328 F.3d 1, 6 (1st Cir. 2003). “A genuine issue ...


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