sales; have monthly and quarterly meetings with Chromagrafx to plan sales strategies and review sales; provide Chromagrafx with leads from Screen's trade shows and reader response cards; and keep Chromagrafx informed of product availability and pricing and product changes." Id. P 46. Screen East finally delivered the Scanner at the end of October 1992. Id. P 47.
In the first counterclaim, Chromagrafx alleges breaches by Screen East based on delay in delivery of the Scanner; defects in the Scanner; and refusal to install appropriate upgrades on the Scanner. Id. PP 50-52. The Scanner is allegedly defective in that it "drops off line in the computer system sporadically." Id. P 51. Chromagrafx also alleges breach of the Authorized Dealer Agreement in that, prior to delivery of the Scanner, Screen East failed to provide access to technical issues; while after delivery, Screen East failed to provide adequate technical assistance, never met to plan sales strategies, and never provided sales and marketing support, sales leads or sales assistance, as it "did to other resellers located in the area." Id. P 49. As a result of the delay in delivery and the Scanners' defects, Chromagrafx "lost the market for the program and suffered great damage." Id. P 53. As a result of the breach of the Authorized Dealer Agreement, Chromagrafx "lost the ability to make sales of the Scanner." Id. P 54.
In its fraud counterclaim, Chromagrafx further alleges that in or about September 1991 Daly "falsely and fraudulently represented to Chromagrafx that the Scanner would be delivered prior to October 30, 1991," resulting in Chromagrafx issuing the purchase order to Screen USA for the Scanner. Id. P 58. At the same time, Daly also allegedly falsely represented to Chromagrafx that "Screen"
would "provide Chromagrafx with technical assistance and servicing on the Scanner both before and after delivery of the Scanner." Id. P 59. Screen USA allegedly knew these representations were false and made them with intent to deceive Chromagrafx and induce it to commit resources to purchase and market the Scanner. Id. P 61. Despite its promise of delivery to Chromagrafx, Screen USA "promised all of the [Scanners] allocated from Japan to this region of the United States to Eastman Kodak Corporation ('Kodak'), for Kodak's retail operation." Id. P 60. Consequently, according to Chromagrafx, Screen USA "had to have known that it could not complete the contract as specified with Chromagrafx." Id. Unaware that these representations were false, Chromagrafx "was induced to rely upon the delivery of the Scanner to complete the development and marketing of the program, already substantially underway with Screen's knowledge and acquiescence and to act as an authorized dealer and a value added reseller of the Scanner under contract terms that Screen never intended to comply with." Id. P 62. Chromagrafx claims that it never would have purchased the Scanner or based the development and marketing of its software program on the Scanner except for the promised October 30, 1991 delivery date and promised technical assistance. Id. P 64. In its words, Chromagrafx claims to have been damaged by this fraud "in terms of an effective loss of the ability to sell the program, loss of credibility and good will, and investment costs." Id.
In its antitrust counterclaim, Chromagrafx alleges that "Screen"
is a distributor of the Scanners, marketing them in interstate commerce. Id. P 67. "Screen" is allegedly "a subsidiary of [a Japanese corporation] which actually manufactures the [Scanners] and which during 1991 and 1992, allocated a set number of Scanners from Japan into the United States." Id. P 68. During the "time in question, Screen took all the Scanners on allocation from Japan and dedicated them to Kodak for Kodak's use in its retail operations in breach of other contractual obligations to Chromagrafx and to others and in preference thereof." Id. P 72. Kodak is an alleged direct competitor of Chromagrafx in the "systems integration business" and in the "general retail market as . . . a reseller of the Scanners." Id. P 73. Chromagrafx claims that Screen's actions were
part of a conspiracy to restrain trade in interstate commerce for the Scanner and a discrimination against Chromagrafx with respect to the timely furnishing of delivery of and services regarding the Scanner in that Screen was, on information and belief, able to deliver the Scanner to Kodak and other customers in preference to Chromagrafx.
Id. P 74. As a result of "Screen's discrimination in furnishing to Chromagrafx the delivery of the Scanner, Chromagrafx was injured in its business and property . . . ." Id. P 75. In addition, Chromagrafx alleges that "Screen East also improperly discriminated in the furnishing of services to Chromagrafx in that it complied with its agreements with competitor resellers of the Scanner and not to Chromagrafx, which impeded Chromagrafx's ability to compete in the interstate resale market for the Scanner." Id. P 76.
Chromagrafx asserts the following eight affirmative defenses: (1) Screen East and Screen USA breached "its" contract with Chromagrafx; (2) the Scanner is defective and Screen East has not repaired it or installed appropriate upgrades; (3) Screen East breached its warranty of merchantability and its warranty of fitness for a particular purpose; (4) Screen East and Screen USA breached "their" duty of good faith and fair dealing; (5) Screen East and Screen USA have caused damages to Chromagrafx which far exceed the purchase price of the Scanner; (6) the cost of the trip by Chromagrafx's employee, Brian Hobbs, was supposed to be deducted from the purchase price of the Scanner; (7) Screen East is barred from bringing this action under the doctrines of estoppel and unclean hands; and (8) Screen East and Screen USA breached "its" Authorized Dealer Agreement with Chromagrafx.
Screen East moves to dismiss all of Chromagrafx's counterclaims for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6); to dismiss the fraud counterclaim for failure to plead fraud with particularity pursuant to Fed. R. Civ. P. 9(b); and to strike all of the affirmative defenses pursuant to Fed. R. Civ. P. 12(f).
A. Motion to Dismiss
It is well settled that a complaint should not be dismissed "unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claims which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Maggette v. Dalsheim, 709 F.2d 800, 803 (2d Cir. 1983). Moreover, on a motion to dismiss, all factual allegations of the complaint must be accepted as true and construed favorably to the plaintiff. Cruz v. Beto, 405 U.S. 319, 322, 31 L. Ed. 2d 263, 92 S. Ct. 1079 (1972) (per curiam); Stewart v. Jackson & Nash, 976 F.2d 86, 87 (2d Cir. 1992). These principles apply equally to a defendant's pleading asserting counterclaims.
In opposition to Screen East's motion, Chromagrafx submits matter outside the pleading, namely an affidavit by Wyman attaching various correspondence between Chromagrafx and Screen East or Screen USA. Although, on a motion to dismiss, a district court has discretion to consider matter outside the pleading submitted by the parties if it converts the motion to dismiss into one for summary judgment, see Fed. R. Civ. P. 12(b), the Court will not consider the Wyman affidavit.
1. Breach of Contract Counterclaim
Screen East contends (1) that Chromagrafx fails to allege a sufficient basis for imposing liability on Screen East -- the only named defendant in the Amended Counterclaim -- for Screen USA's breach of the alleged agreement between Chromagrafx and Screen USA; (2) that, in any event, the Equipment Purchase Agreement acts as a novation of the alleged agreement between Chromagrafx and Screen USA, thereby precluding any claim against Screen East for Screen USA's alleged breach; and (3) that any claim for delay in delivery is subject to a disclaimer clause in the Equipment Purchase Agreement limiting damages arising from delay.
In opposition to Screen East's motion to dismiss, Chromagrafx argues that Screen East misconstrues the breach of contract counterclaim. According to Chromagrafx, Screen East assumes that it cannot be liable to Chromagrafx because (1) it delivered the Scanner to Chromagrafx immediately after the parties executed the Equipment Purchase Agreement, and (2) there is no basis upon which to hold it liable for Screen USA's alleged delay in delivery. In this regard, Chromagrafx maintains that the Amended Counterclaim alleges distinct breaches of contract against Screen East for Screen East's -- not Screen USA's -- delay in delivery, Screen East's delivery of defective goods, and Screen East's failure to install appropriate upgrades. Regarding the alleged delay in delivery, Chromagrafx argues that the Amended Counterclaim sufficiently alleges that Screen East "undertook to deliver [the Scanner] to Chromagrafx much earlier than the actual delivery date." Defendant-Counterclaimant's Memorandum of Law, at 2. In this respect, the Amended Counterclaim alleges that in May 1992 Screen East "assumed the obligation to fulfill the terms of Chromagrafx [sic] initial purchase order with Screen USA and promised to deliver the Scanner at Chromagrafx's 'earliest convenience.'" Amended Counterclaim P 43. Nevertheless, Screen East did not actually deliver the Scanner until the end of October 1992, after refusing in the summer of 1992 to provide the Scanner unless Chromagrafx became an authorized reseller. Id. PP 44, 47. Regarding the alleged defect, Chromagrafx alleges that the Scanner is defective in that it "drops off line in the computer system sporadically." Id. PP 50-51. Regarding the upgrades, the complaint alleges, without further explanation, that Screen East "failed to install appropriate upgrades." Id. P 52.
Construed in a light most favorable to Chromagrafx, the Amended Counterclaim adequately states a claim against Screen East for breach based on delay in delivery and defect in the Scanner. However, the conclusory allegation that Screen East "failed to install appropriate upgrades," id. P 52, does not sufficiently allege a breach on this basis, particularly since there are no allegations as to the existence, nature or extent of any obligation by Screen East to "install upgrades" or whether that promise was oral or written. Chromagrafx is granted permission to amend its counterclaim with respect to the allegation in paragraph 52 within 30 days from the date of this order.
To the extent Chromagrafx attempts to hold Screen East liable for any breach by Screen USA, particularly for delay in delivery, this Court agrees with Screen East's contention that paragraphs 26 and 43 of the Amended Counterclaim are not a sufficient basis for holding Screen East liable for Screen USA's delay. Chromagrafx's claim that Screen East "specifically assumed the obligation to fulfill the terms of Chromagrafx initial purchase order with Screen USA," Amended Counterclaim P 43, does not support a finding that Screen East assumed Screen USA's liability to Chromagrafx under the purchase order. Similarly, Chromagrafx's conclusory allegation that Screen East is "either a part of or a successor in part to" Screen USA as a result of a restructuring does not, of itself, provide a sufficient basis for finding Screen East liable for Screen USA's alleged breach. See, e.g., Seetransport Wiking Trader Schiffarhtsgesellschaft MBH & Co. v. Navimpex Centrala Navala, 989 F.2d 572, 580 (2d Cir. 1993); Lumbard v. Maglia, Inc., 621 F. Supp. 1529, 1534-35 (S.D.N.Y. 1985); see generally William M. Fletcher, Fletcher Cyclopedia of the Law of Private Corporations P 7122, at 231 (Stephen M. Flanagan et al. eds., perm. ed. 1990). Because it appears conceivable, at least at this stage of the action, that there may be a basis for Chromagrafx to hold Screen East liable for Screen USA's alleged breach, Chromagrafx is granted the right to amend its counterclaim within 30 days of this order to allege such a basis.
As for Screen East's defense of novation (i.e., that the Equipment Purchase Agreement acts as a novation of the agreement between Chromagrafx and Screen USA, thereby precluding any claim against Screen East based on Screen USA's alleged breach), it is well established that whether a novation exists depends on the parties' intention. See Northville Industries Corp. v. Fort Neck Oil Terminals Corp., 100 A.D.2d 865, 474 N.Y.S.2d 122, 125 (2d Dep't 1984), aff'd, 64 N.Y.2d 930, 488 N.Y.S.2d 648, 477 N.E.2d 1102 (N.Y. 1985); see also Trans Orient Marine v. Star Trading & Marine, Inc., 736 F. Supp. 1281, 1283 (S.D.N.Y. 1990), aff'd in part and rev'd and remanded in part, 925 F.2d 566 (2d Cir. 1991). The parties' intention as to whether the Equipment Purchase Agreement was intended to supersede the alleged agreement between Chromagrafx and Screen USA, and extinguish any alleged existing liability of Screen USA thereunder, cannot be determined as a matter of law at this stage of the action. Accordingly, Screen East's motion to dismiss on this ground is denied without prejudice to renewal following discovery.
As for Screen East's defense that the parties agreed to a limitation on damages resulting from delay in delivery, a disclaimer clause, in small print on the back of the Equipment Purchase Agreement, provides in relevant part:
Notwithstanding any provision contained in this Purchase Agreement to the contrary, [Screen East] shall not be responsible or liable to [Chromagrafx] for any loss or damage resulting from [Screen East's] delayed performance in shipment and delivery of the [Scanner] for any reason, including loss of income and/or profits, incidental, special and consequential damages.