The opinion of the court was delivered by: McLAUGHLIN, District Judge.
Baker's Aid now moves for summary judgment pursuant to
Fed.R.Civ.P. 56(a) for (i) breach of contract, (ii) breach of
a covenant not to compete and (iii) conversion. Plaintiff also
moves pursuant to Fed. R.Civ.P. 56(b) for summary judgment on
defendants' antitrust counterclaims and defenses.
Defendants cross-move for summary judgment dismissing
plaintiff's cause of action for breach of the covenant not to
compete. Defendant Hussmann also moves pursuant to
Fed.R.Civ.P. 56(b) for summary judgment dismissing all claims
against it, asserting that it neither signed nor assumed the
Manufacturing Agreement, dated June 11, 1985 (the
"Manufacturing Agreement" or "Agreement"). For the reasons
discussed below, plaintiff's motions are granted in part and
defendants' cross-motions are denied.
Plaintiff is a New York corporation with its principal place
of business in Syosset, New York. The verified complaint
alleges that defendant Hussmann, and its wholly-owned
subsidiary, defendant HFC, are Delaware corporations with
their principal places of business in Bridgeton, Missouri.
This Court's jurisdiction is based upon diversity of
This case concerns the design, production and sale of rack
and deck ovens to volume-feeding facilities such as
supermarket chains, restaurants, prisons and hospitals
throughout the United States and Canada. The rack and deck
ovens in issue are large commercial ovens designed for volume
baking. Rack ovens have a single heating chamber in which
objects are placed on rotating racks and heated by fanned air,
creating a roughly uniform temperature. Deck ovens contain
several smaller bottom-heated chambers in which objects are
placed for stationary baking, and each chamber can be heated
to a different temperature.
Baker's Aid is a distributor of rack and deck ovens
manufactured by third parties. From 1977 until 1983, Baker's
Aid purchased ovens manufactured by AB Svenska Bakugnsfabriken
Fristad Sweden ("Sveba"). As a distributor, Baker's Aid
re-sold these ovens under its own name throughout the United
States and Canada. The relationship between Baker's Aid and
Sveba dissolved in 1983 after Sveba replaced the rack and deck
ovens previously sold to Baker's Aid with new models Baker's
Aid found inadequate.
On June 11, 1985 Baker's Aid entered into the Manufacturing
Agreement with Toastmaster, Inc., ("Toastmaster"), then a
division of BIH Food Service Inc. ("BIH"). Under the
Manufacturing Agreement, Toastmaster agreed to reverse
engineer, or copy, the Sveba-made ovens previously purchased
by Baker's Aid. This copying process was to be reduced to a
series of working drawings, prints and specifications
(collectively the "Specifications").
The Manufacturing Agreement also provided that the
Specifications were to become the property of Baker's Aid
after Baker's Aid purchased $1 million worth of Toastmaster
ovens. Other significant provisions of the Manufacturing
Agreement included an agreement on price and a covenant
obligating Toastmaster not to compete with Baker's Aid.
After several months' engineering effort, Toastmaster first
delivered ovens to Baker's Aid in August or September of 1985.
These ovens did not function properly, and several months of
engineering refinement were required. With the technical
assistance of Baker's Aid, Toastmaster eventually developed
On October 31, 1986 Hussmann notified Baker's Aid that it
intended to charge 32% more than the agreed Manufacturing
Agreement price for future deliveries of rack and deck ovens.
Not surprisingly, defendants' attempt to impose a price
increase led to a rapid deterioration of the parties
On January 12, 1987 Baker's Aid notified defendants, in
writing, that it considered the proposed price increase a
breach of their contract. Baker's Aid also objected to
defendants' alleged manufacture of ovens in violation of the
covenant not to compete.
In a letter dated March 3, 1987, Baker's Aid notified
defendants that it considered the Agreement terminated because
of defendants' breach. In the same letter, Baker's Aid pointed
out that it had purchased more than $1 million worth of ovens
from Toastmaster and, therefore, that it was entitled to the
original Specifications and all copies thereof. Shortly
thereafter Baker's Aid brought the instant action.
I. RETENTION OF THE SPECIFICATIONS
Plaintiff asserts that defendants' retention and use of the
Specifications is both a breach of contract and a tortious
conversion*fn1 of plaintiff's property. As previously noted,
the Manufacturing Agreement provides that the Specifications
become the "property of Baker's Aid" upon its purchase of $1
million worth of Toastmaster ovens. Defendants agree —
enigmatically — that because such purchase has occurred,
Baker's Aid is "give[n] the Specifications and the right to use
them." (Def.Mem. at 67).
Despite this concession, defendants contend that they are
entitled to produce ovens based on the Specifications.
Defendants' position is principally based on the absence of an
express provision in the Manufacturing Agreement prohibiting
their use of the Specifications.
Contracts generally must be interpreted so as to effectuate
the intentions of the parties. Hunt Ltd. v. Lifschultz Fast
Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989). If a
contract is unambiguous, interpretation of such contract is a
question of law. Id. Thus, as a threshold matter, this Court
must determine whether the Manufacturing Agreement is
ambiguous. Pantone, Inc. v. Esselte Letraset, Ltd.,
878 F.2d 601, 605 (2d Cir. 1989). The Manufacturing Agreement phrase,
"property of Baker's Aid", is ambiguous if such phrase:
is one capable of more than one meaning when
viewed objectively by a reasonably intelligent
person who has examined the context of the entire
integrated agreement and who is cognizant of the
customs, practices, usages and terminology as
generally understood in the particular trade or
Id. at 606 (quoting Eskimo Pie Corp. v. Whitelawn Dairies,
Inc., 284 F. Supp. 987, 994 (S.D.N.Y. 1968)) (applying New York
In addition to the plain meaning of the contract, the notion
that defendants retained any interest in the Specifications is
contradicted by Toastmaster's further agreement to execute any
documents necessary to transfer ownership of the
Specifications to Baker's Aid (A.51).*fn2 Accordingly, I
conclude that Baker's Aid acquired the exclusive right to
possession and use of the Specifications upon its purchase of
$1 million worth of Toastmaster ovens. It follows, of course,
that defendants are not entitled to retain or use the original
Specifications or any copies thereof.
Plaintiff maintains that defendants' retention and use of
the Specifications also constitutes a conversion. Under New
York law, conversion is defined as "any unauthorized exercise
of dominion or control over property by one who is not the
owner of the property which interferes with and is in defiance
of a superior possessory right of another in the property."
Atlanta Shipping Corp. v. Chemical Bank, 818 F.2d 240, 249 (2d
Cir. 1987) (quoting Meese v. Miller, 79 A.D.2d 237, 242, 436
N YS.2d 496, 500 (4th Dep't 1981)). In this case the property
allegedly converted is a copy of the Specifications. Defendants
argue that because they have furnished plaintiff with a copy of
the Specifications, they have discharged all their obligations
and are free to keep a copy and do whatever they wish with it.
(Def.Mem. at 67). Merely to state the argument demonstrates its
In Traveltown, Inc. v. Gerhardt Inv. Group, 586 F. Supp. 256
(N.D.N.Y. 1984), plaintiff was deprived of a copy of its
blueprints, although it had another copy. The Traveltown court
recognized this deprivation as a conversion, while limiting
plaintiff's recovery to nominal damages absent a showing that
defendant used or profited from the converted blueprints. Id.
In the instant case HFC admits retaining a copy of the
Specifications. (Def.Mem. at 67). As in Traveltown, this is a
conversion. The extent to which defendants used or profited
from the Specifications is an issue for trial.
II. THE COVENANT NOT TO COMPETE
At the insistence of Baker's Aid, the following covenant not
to compete was included in the Manufacturing Agreement:
Toastmaster, BIH Foodservice, and all Divisions
of BIH Foodservice are for a period of ten (10)
years subsequent to the termination of this
Agreement, for any reason, specifically
prohibited from soliciting, distributing,
manufacturing, selling or causing to be sold to
Baker's Aid customers, any rack type ovens or a
deck oven based on the specifications or any
reasonable facsimile thereof and further they
shall not directly or indirectly sell,