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PAPER OF U.S. v. SCHOELLER TECH. PAPERS

July 10, 1990

PAPER CORPORATION OF THE UNITED STATES, PLAINTIFF,
v.
SCHOELLER TECHNICAL PAPERS, INC., DEFENDANT.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

Defendant Schoeller Technical Papers, Inc. ("Schoeller") has moved pursuant to Rule 12(b)(6), Fed.R.Civ.P. to dismiss the amended complaint of plaintiff Paper Corporation of the United States ("Paper Corporation"). This is yet another round in the litigation between the sales representative, Paper Corporation, and the manufacturer, Schoeller, arising out of an alteration in the relationship between them. Both parties are well advised, and based upon the prior proceedings, the submissions of the parties' and the reasons set forth below, the motion to dismiss is granted in part and denied in part.

Prior Proceedings

By an opinion of October 11, 1989 (the "Opinion") Schoeller's prior motion to dismiss the complaint of Paper Corporation was granted in part and denied in part. 724 F. Supp. 110. The Opinion described the parties, the facts, and the controversy, and those matters need no repetition or alteration here. Familiarity with the Opinion is assumed.

Since the filing of the Opinion, discovery has proceeded and on January 11, 1990 Paper Corporation filed its Amended Complaint. Schoeller moved to dismiss by the instant motion which was heard and submitted on April 13, 1990.

The Amended Complaint

The Amended Complaint sets forth eight claims for relief. The First alleges that Schoeller breached its agreement to sell greeting card papers and nonphotographic "polycoated" paper exclusively to and through Paper Corporation so long as such customers continued purchasing such products and/or so long as Schoeller continued to manufacture such products. The second and third claims allege that Schoeller breached a contract to supply Hallmark and Fasson, respectively, exclusively through Paper Corporation. The fourth claim alleges fraud in the inception and performance of the alleged contracts. The fifth claim seeks relief under the quasi-contract theory of quantum meruit. The sixth cause of action sets forth promissory estoppel. The seventh alleges tortious interference with business relations, and the eighth alleges unfair competition.

The First and Third Breach of Contract Claims Are Barred by the Statute of Frauds

The Opinion dismissed the original complaint's breach of contract claim (except insofar as it related to Hallmark) on the ground that Schoeller's alleged agreement to deal exclusively through Paper Corporation as long as customers introduced to Schoeller by it continued to place orders, came within the prohibitions of the New York Statute of Frauds, G.O.L. § 5-701(a)(1), and that none of the writings attached to plaintiff's pleading (other than those referred to Hallmark) satisfied the statute's writing requirement, citing North Shore Bottling Co. v. C. Schmidt & Sons, Inc., 22 N.Y.2d 171, 292 N YS.2d 86, 239 N.E.2d 189 (1968) and noting that North Shore was inapplicable because:

  There, the defendant retained the power to
  terminate the contract within one year by ceasing
  to distribute beer in the New York metropolitan
  area.

Paper Corporation now asserts:

  [Paper Corporation] and Schoeller are parties to a
  binding and enforceable contract whereunder
  Schoeller undertook contractual commitments,
  inter alia, to sell all of its greeting card paper
  to [Paper Corporation], and to continue to sell its
  products, including both "greeting card" and
  nonphotographic "polycoated" paper, through [Paper
  Corporation] to

  customers secured by [Paper Corporation] for such
  products so long as such customers continued
  purchasing such products and/or so long as
  Schoeller continued to manufacture such products.
  Schoeller could have terminated the contract at
  any time prior to making specific commitments for
  specific quantities to specific customers, by
  ceasing to manufacture the paper products
  purchased by [Paper Corporation]. However, under
  the express and implied terms of the contract, and
  in accordance with the implied covenant of good
  faith and fair dealing, Schoeller was prohibited
  from selling its products directly to [Paper
  Corporation]s' existing customers absent [Paper
  Corporation]'s consent.

Notwithstanding this allegation, both the original and Amended Complaint, in virtually identical language, contend that:

  In or about 1986, Michael Gallenkamp, [at that
  time] the President of Schoeller Kg, promised
  [Paper Corporation] that Schoeller would continue
  to sell products in the greeting card market
  through [Paper Corporation] for a minimum of an
  additional eight to ten years.

¶ 17 of the original complaint; ¶ 36 of the amended complaint.

The significant aspect of North Shore for these purposes is that the alleged agreement for the distributorship, which took the arrangement out of the Statute of Frauds, itself contained the reservation that Paper Corporation now seeks to establish by the custom and practice of the trade, namely, that the manufacturer reserved the right to go out of business.

That distinction is critical here. Were the position taken by Paper Corporation adopted, the Statute of Frauds would effectively be gutted, for particularly in today's world every company faces the possibility of discontinuing some or all of its business. The Paper Corporation argument does too much, and the Amended Complaint fails to come within the North Shore exception.

Under its third claim, Paper Corporation alleges that Schoeller breached an agreement "to supply Fasson, through [Paper Corporation] exclusively, with nonphotographic polycoated paper sufficient to fill Fasson's orders." (Amended Complaint, ¶ 81).

After reviewing the documents attached as exhibits to the original complaint, the Opinion stated that none sufficed to memorialize an agreement between Schoeller and ...


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