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D.S. AMERICA, INC. v. CHROMAGRAFX IMAGING SYS.

January 19, 1995

D.S. AMERICA (EAST), INC. an Illinois corporation, Plaintiff, against CHROMAGRAFX IMAGING SYSTEMS, INC., a New York corporation, Defendant.


The opinion of the court was delivered by: LEONARD D. WEXLER

 WEXLER, District Judge

 Plaintiff D.S. America (East), Inc. ("Screen East") brings this diversity action against defendant Chromagrafx Imaging Systems, Inc. ("Chromagrafx") alleging claims for breach of contract. In response to the complaint Chromagrafx asserts eight affirmative defenses and three counterclaims -- breach of contract, fraud and antitrust violations. Presently before the Court is Screen East's motion to dismiss Chromagrafx's amended counterclaims pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure and to strike the affirmative defenses pursuant to Rule 12(f) thereof. *fn1"

 I. BACKGROUND

 Chromagrafx asserts counterclaims for breach of contract, fraud, and violation of § 2(e) of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13(e). As for its breach of contract counterclaim, Chromagrafx alleges that it entered into an agreement in September 1991, and issued a purchase order, to purchase the Scanner from a corporation previously doing business as "Screen USA," a predecessor of Screen East or a corporation of which Screen East is a part, see Amended Counterclaim P 26, for delivery no later than October 30, 1991. Id. P 28; see id. P 58. *fn2" Mike Daly ("Daly") of Screen USA had promised Chromagrafx this delivery date prior to the agreement. Id. P 35; see id. P 58. Chromagrafx intended, as Screen USA knew, to use the Scanner to develop a software program specifically and exclusively to run with the Scanner. Id. PP 29 30. Indeed, at the "Seybold Computer Conference" in California in September 1991, Screen USA permitted Chromagrafx to show the software program on a machine in Screen USA's sales booth as Screen USA advertised the software program and Scanner to the public. Id. P 31. In reliance on the promised delivery date and with Screen USA's knowledge, Chromagrafx expended enormous amounts of time and money to develop and market the software program. Id. P 33. Nevertheless, based on conversations between Douglas Wyman ("Wyman") of Chromagrafx and Daly and Kennard Cloud of Screen USA, Screen USA put off the October 1991 delivery with excuses, but assured Chromagrafx that it would deliver the Scanner in 1991. Id. P 36. Sometime in November 1991, Daly told Chromagrafx that the Scanner was aboard the boat "Hyundi Commander," which would be docking in Los Angeles, California, in days. Id. P 37. After investigating this information, Chromagrafx learned that no such boat existed. Id. P 38. In or about January 1992, Screen USA advised Chromagrafx that it could not promise any delivery of the Scanner. Id. P 39. By that time, Chromagrafx had invested heavily in developing and marketing the software program. Id. P 40. Despite approximately 60 responses from the Seybold Computer Conference of persons interested in purchasing the software program, Chromagrafx was forced to tell customers that it could not deliver the program at that time because it could not get a Scanner, causing Chromagrafx to lose credibility and goodwill in the industry. Id. PP 40-42.

 By April 1992, Screen USA still had not delivered the Scanner to Chromagrafx. Sometime that month, according to Chromagrafx, Screen USA was restructured, with the result that Screen East is "either a part of or a successor in part to" Screen USA. Id. P 26. In May 1992, Screen East "specifically 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.'" Id. P 43. In the summer of 1992, Screen East advised Chromagrafx that it would not provide the Scanner unless Chromagrafx became an "authorized reseller" (the "Authorized Dealer Agreement"). Id. P 44. To become an authorized reseller, also referred to as a "value added reseller," Chromagrafx had to "purchase a Scanner: train sales people; develop a marketing plan to both parties' approval, and market the [Scanner]." Id. P 45. In return, Screen East agreed to "provide Chromagrafx with sales and marketing support; assist in closing 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" *fn3" 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" *fn4" 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).

 II. DISCUSSION

 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); ...


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