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PAPER CORP. v. SCHOELLER TECH. PAPERS

September 17, 1991

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 56, Fed.R.Civ.P. for summary judgment dismissing the two remaining counts in the Amended Complaint of plaintiff Paper Corporation of the United States ("Paper Corporation"). For the reasons set forth below, the summary judgment motion is denied.

The Parties

Paper Corporation — a division of Paper Corporation of America, Inc. — is a Delaware corporation with its principal place of business in Valley Forge, Pennsylvania. Paper Corporation serves as an independent distributor of paper products.

Schoeller — a wholly owned subsidiary of Felix Schoeller Jr. Gmbh & Company Kg ("FSG") a German Corporation — is a business organization located in Pulaski, New York. Schoeller manufactures high quality special paper that is used by the photographic industry, greeting card manufacturers, and others.

Prior Proceedings

This action, which Paper Corporation commenced on April 13, 1989, arises out of a dispute relating to an alteration in the relationship between the two companies. Paper Corporation's original complaint (the "Complaint") alleged breach of contract, promissory estoppel and tortious interference with business relations.

On May 19, 1989, Schoeller moved, pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss the Complaint. In an opinion of October 11, 1989 ("Schoeller I"), the court dismissed the Complaint, except for that portion of the breach of contract claim which related to sales of greeting card paper to Hallmark. While the court found that the alleged Hallmark agreement came within the scope of the Statute of Frauds as it could not be performed within one year, the court did not dismiss the Hallmark claim at that time because of uncertainty as to whether the agreement as adequately memorialized:

  However, whether these documents [Exhibits 3 and 4
  to the Complaint] constitute a signed writing
  sufficient to satisfy the Statute of Frauds
  regarding Hallmark is a much closer question
  — too close for the court to resolve as a matter
  of law on a motion to dismiss, which requires a
  court to draw all inferences in favor of the
  nonmoving party. Taken together, Schoeller's
  letters could be interpreted at least as a
  commitment to supply Hallmark — through Paper
  Corporation exclusively — greeting card paper
  amounting to 4,000 tons in 1988, 6,000 in 1989, and
  5,000 tons in 1990, 1991, and 1992, respectively.

Schoeller I, 724 F. Supp. 110, 117 (S.D.N.Y. 1989).

On January 11, 1990, Paper Corporation amended its complaint (the "Amended Complaint"). The Amended Complaint alleged breach of contract, fraud, quantum meruit, promissory estoppel, tortious interference with business relations and unfair competition.

Schoeller moved pursuant to Rule 12(b)(6) to dismiss all counts of the Amended Complaint except for Count II, which related to the Hallmark claim described above. In an opinion of July 10, 1990 ("Schoeller II") the court dismissed all the challenged counts of the Amended Complaint with the exception of the quantum meruit claim, which it allowed to be pled in the alternative. Schoeller II, 742 F. Supp. 808, 812 (S.D.N.Y. 1990).

On November 19, 1990, Paper Corporation moved for leave to file a second amended complaint, in which it sought to replead all of the previously dismissed claims, as well as to allege the surviving portions of the Amended Complaint. In an Opinion of March 26, 1991 ("Schoeller III"), 759 F. Supp. 1039, the court denied Paper Corporation leave to amend.

On May 9, 1991, Schoeller filed the instant summary judgment. Oral argument was heard on May 23, 1991, and the motion was considered fully submitted as of that date.

The Facts

The business relationship between Paper Corporation and Schoeller, pursuant to which Paper Corporation acted as the sales agent for Schoeller's greeting card paper (the "greeting card business"), began in 1964 and continued until early 1989, when it was terminated by Schoeller.

As sales agent for Schoeller greeting card paper, Paper Corporation developed substantial business with purchasers of such paper, including Hallmark Cards Inc. ("Hallmark"). Paper Corporation procured orders from Hallmark, purchased paper from Schoeller and resold it to Hallmark to fill such orders. Hallmark would on an annual basis communicate to Paper Corporation its commitment to certain volume requirements over the approaching year, and Paper Corporation would communicate that information to Schoeller. The only manner in which Hallmark ordered Schoeller paper from Paper Corporation was in purchase orders that it submitted to Paper Corporation. Hallmark also relied upon Paper Corporation to resolve quality problems with Schoeller.

Paper Corporation derived no compensation from Schoeller during the course of this business relationship; rather, Paper Corporation's profit consisted of the differential between the price it paid Schoeller for Schoeller paper and the price it charged Hallmark for that paper.

As stated above, Schoeller is a wholly-owned subsidiary of FSG, a German corporation. Before February 1986, FSG had only a 50% interest in Schoeller, with Mead Corporation ("Mead") owning the other half. In February, 1986, Mead sold its interest in Schoeller to FSG.

In the spring of 1987, Hans Michael Gallenkamp ("Gallenkamp"), the chief executive officer of FSG as well as the chairman of the board of Schoeller, and FSG became aware of increased demand for the photographic paper produced by FSG. To fill that demand, FSG management determined to commit Schoeller to producing photographic paper rather than greeting card paper. Gallenkamp accordingly asked Schoeller's then president, Richard O. Gall ("Gall") to arrange for Paper Corporation to announce to its customers, including Hallmark, that Schoeller intended to stop producing greeting card papers. When it later became clear that Schoeller would not be experiencing as much increased demand in the photographic paper business as anticipated, Schoeller management decided that Schoeller would have to attempt reentry into the greeting card business, but would this time produce smaller quantities of greeting card paper. Schoeller asked Paper Corporation to effect reentry.

A Hallmark internal memorandum of July, 1987 reflects Schoeller's commitment to provide certain maximum quantities to Hallmark through 1990, as communicated to Hallmark through Robert F. Fitzgerald ("Fitzgerald"), the President of Paper Corporation.

A letter from Gall of August 24, 1987 sets forth Schoeller's agreement to sell certain maximum volumes to Hallmark through Paper Corporation through 1990.

In June 1988, Gerald Kempner ("Kempner") replaced Gall as President of Schoeller.

In a letter of August 18, 1988, Schoeller advised Paper Corporation of Schoeller's commitment to supply Hallmark with specified quantities of paper, set forth in metric tons, through ...


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