(CN) - Toys R Us, already on the hook for millions after a woman broke her neck on a water slide it sold, must face contract claims from the slide's Chinese designer, a federal judge ruled.
Hong Kong-based toy designer Manley Toys entered into a vendor agreement with Toys R Us in 2004.
Two years later, a 29-year-old mother died while using a Banzai Falls inflatable pool slide recently purchased from Toys R Us via Amazon. Robin Aleo had been sliding down, head first, when the slide bottomed out, causing her to hit her head on the edge of the pool. Unable to move or breathe with a broken neck, Aleo died the next day at a hospital.
In 2011, a jury reportedly ordered Toys R Us to pay Aleo's survivors $18 million in punitive damages, plus $2.6 million for lost income and pain and suffering.
It found that Toys R Us failed to test the in-ground pool slide for compliance with federal safety standards.
Amazon.com and the manufacturer SLB Toys USA both settled before trial.
Toys R Us allegedly concluded that its vendor agreement entitled it to offset the judgment by withholding $1 million from money that it owed Manley under the vendor agreement.
Manley said it objected and eventually reached a holdback agreement that required Toys R Us to deposit $1.7 million into an offset account, plus 5 percent of its purchases from Manley, until finalization of the judgment.
Manley then sued Toys R Us in New Jersey, claiming that Toys R Us failed to make any payments for goods sold and delivered.
Toys R Us moved to dismiss, and Manley moved for a writ of attachment against the retailer's property in New Jersey.
U.S. District Judge Katharine Hayden denied both motions Tuesday, though she barred Manley from advancing certain claims.
"Manley's fraud claim is '[s]pecifically' premised on the allegation that TRU breached the holdback agreement," Hayden wrote. "The claim thus fails to set forth additional facts would plausibly establish that TRU lacked the intent to honor the agreement at the time of or prior to its execution. 'Mere nonperformance of a promise is insufficient to show that a promisor had the requisite intent not to perform.'
"Moreover, in alleging that unnamed TRU employees made representations on an undisclosed date that only possibly support an intent never to perform, the claim lacks the precision and particularity that Rule 9(b) requires."
Manley can still advance its claim for breach of contract.
"TRU's assertion that Manley failed to plead that it had provided security for the Aleo judgment is inaccurate," Hayden wrote. "It would appear from the complaint that the core purpose of, and obligations undertaken in, the holdback agreement concerned Manley's agreement to provide a source of funds that 'TRU may utilize . . . to satisfy the judgment.'"
The court also preserved claims to recover the value of the goods Manley shipped.
"Manley has sufficiently pled that it shipped goods to TRU in expectation of payment in accordance with the terms of the holdback agreement, that it has not yet been paid for those goods, that it demanded payment from TRU, and that there is an account stated between them," the 13-page opinion states.
Hayden also declined to dismiss Manley's claim for quantum meruit.
"Manley has pled that TRU promised to pay a set percentage for goods, that goods were shipped in reliance on that promise, and that TRU failed to make any payment," the judge wrote. "Such allegations are all that Rule 8 requires."
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