Facts

In September 2004, a sprinkler malfunctioned at a warehouse owned by plaintiff Unical Enterprises Inc. As a result, the warehouse's inventory of cordless phones suffered water damage. Plaintiff had an insurance policy with defendant American Insurance Co. Defendant paid the claim. It then hired defendant Stoner & Co. to discard the damaged items. However, defendant Stoner sold the inventory.

Plaintiff thereafter sued defendants, claiming breach of contract. It also alleged negligence, breach of the covenant of good faith and fair dealing, negligent interference with economic relations, unfair competition, and breach of fiduciary duty. Defendant American moved to dismiss the claims, which was granted.

Plaintiff then filed an amended complaint for negligence only against defendant Stoner, and a breach of contract claim only against defendant American. It alleged negligent interference with economic relations and unfair competition against both defendants.

Stoner then filed a Third Party Complaint against American, which was also dismissed.

PLAINTIFF'S CONTENTIONS:
The policy with defendant American forbid the sale of salvaged goods in the retail market. By doing so, defendants engaged in unfair competition.

DEFENDANTS' CONTENTIONS:
Because plaintiff only sold new items, there was no competition between the salvaged items and plaintiff's products. Further, the goods defendant sold were deemed outdated technology. Moreover, plaintiff could not prove its assertion that warranty labeled items were sold.

Damages

Plaintiff sought $2,000,000 in loss of goodwill and reputation, $950,000 in lost sales, in addition to punitive damages and attorney fees.

Result

The court granted defendant American's motion to dismiss. The case against defendant Stoner went forward. The parties eventually settled for $25,000.