Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

COMPUTECH INTERNATIONAL, INC. v. COMPAQ COMPUTER CORP.

May 21, 2004.

COMPUTECH INTERNATIONAL, INC., Plaintiff, -against- COMPAQ COMPUTER CORPORATION, Defendant


The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge

OPINION

Defendant Compaq Computer Corporation ("Compaq") has moved under Rule 56, Fed.R. Civ. P., to dismiss the amended complaint of plaintiff Computech International, Inc. ("CTI") and for summary judgment on its counter-claims against CTI. For the reasons set forth below, the motion is granted in part and denied in part.

  This dispute arises out of the effort of Compaq as supplier, and CTI as buyer to establish a commercial relationship starting in late 1999 and extending into the summer of 2001. During this period CTI purchased a substantial quantity of Compaq products. The relationship was complicated by Compaq's acronymically challenged sales policies and its desire to develop a new market for its products. The failure to resolve these competing policies terminated the relationship and generated this action.

 Prior Proceedings

  In March 2002, CTI filed a complaint against Compaq seeking to enforce an agreement with respect to purchasing Compaq products at discount, damages for fraud, trade libel, negligent misrepresentation and a breach of good faith and fair dealing in New York State Supreme Court, County of New York. On April 5, 2002, Compaq removed the action to this Court. Thereafter, Compaq moved to dismiss and by opinion of October 24, 2002 (the "October Opinion") CTI was granted leave to file an amended complaint alleging fraud, libel and breach of contract. The remaining causes of action were dismissed. See Computech Int'l, Inc. v. Compaq Computer Corp., No. 02 Civ. 2628 (RWS), 2002 WL 31398933 (S.D.N.Y. Oct. 24, 2002).

  Discovery proceeded and the instant motion was heard-and marked fully submitted on February 4, 2004.

 The Facts

  The facts as set forth below are contained in the parties' Local Civil Rule 56.1 statements and affidavits, and are not in dispute except as noted. They do not constitute findings of fact by the Court.

  CTI is an integrator of video editing workstations and has sold its products in the Digital Content Creation ("DCC") market. In and before 2000, CTI purchased equipment from IBM as a distributor, and that relationship continues to this day. Since 1997, CTI has offered to both resellers and end users preconfigured, "turnkey" video editing systems using IBM computer work-stations. In 1998, Compaq lagged behind, among others, IBM and Intergraph in terms of market share in the DCC market.

  In the latter part of 1999, or the early part of 2000, CTI and Compaq entered into discussions concerning sales of Compaq products in the DCC market. CTI advised Compaq of the importance to CTI of establishing a direct relationship between CTI and Compaq, which included CTI working with Compaq technical employees to develop a turnkey product for the DCC market, marketing of the product, and purchasing Compaq products.

  According to Eric Vainu ("Vainu"), a Reseller Sales Consultant for Compaq, direct purchases through Compaq were limited to end users for their immediate, direct use and were not for resellers. These direct purchase relationships were referred to by Compaq as "MAD" (Major Account Direct). A "MAD" had to have a minimum of several thousand employees.

  Compaq decided to permit CTI to purchase directly from Compaq rather than from an authorized Compaq distributor referred to as an Authorized Compaq Channel Partner. Under Compaq's pricing structure, an Authorized Compaq Channel Partner received pricing referred to by Compaq as "US1." The Compaq sales force undertook that the pricing afforded to CTI would be lower than US1. On March 3, 2000, CTI signed the Compaq Authorized Reseller Agreement (the "CAR Agreement" or the "Agreement") and obtained a Compaq identification number. CTI signed the CAR Agreement in order to become authorized to purchase and sell Compaq products.

  The CAR Agreement provided that CTI, as a Compaq Authorized Reseller, could only purchase through an Authorized Compaq Channel Partner. It was terminable at will upon thirty days notice and terminable for cause upon thirty days notice to cure. Under the terms of the CAR Agreement, CTI could only resell to end users the Compaq products it bought, and CTI had to provide Compaq with monthly sales figures. There was no mention of pricing or discounts in the CAR Agreement. Members of the Compaq sales force were aware that CTI would be selling Compaq products to other than end users in addition to end users, and anticipated that the CAR Agreement would be replaced by a different contractual relation-ship.

  Compaq sales representatives tried to obtain management approval that CTI be given a status that would enable it to continue to be eligible for TOSS discounts. CTI requested an agreement with respect to discounts because there was no written agreement that promised to CTI it would receive TOSS discounts on a regular basis, rather than on the then-existing ad hoc basis. On March 23, 2000, CTI became a Compaq Authorized Reseller and began purchasing Compaq products directly from Compaq. The products made available to CTI for purchase from Compaq included storage devices, PDAs, hard drives, tape drives and servers.

  CTI's purchases were made according to a special pricing arrangement, which Compaq referred to internally as Targeted Opportunity Sales Strategy ("TOSS"). Pursuant to Compaq's sales procedures, TOSS pricing was available only to end users, on a case-by-case basis, based upon the quantity of the purchase and the ability to compete.

  CTI received TOSS pricing on all of its purchases. The CAR Agreement contained no provision with respect to TOSS pricing, and there was no written agreement between Compaq and CTI regarding TOSS discounts, which were given on a case-by-case basis. CTI was the only Compaq Authorized Reseller receiving TOSS discounts and purchasing directly from Compaq through the MAD program.

  On May 23, 2000, Molly Connolly, a Compaq salesperson in the New York area, sent an e-mail (the "May 23 e-mail") stating that it was intended "to have CTI become a Compaq customer and NOT be sold to as a reseller," and stating further:
CTI will require a lower than US1 price for guaranteed 500 units/quarter. In order for CTI to receive 21 day price guarantees, lower than US1 and direct purchasing from Compaq, they need to become a Compaq customer, since we cannot legally offer these to resellers. Then again, not many resellers are willing to guarantee moving 2,000 units of workstations!
(Affidavit of Eli Zvi, dated Nov. 18, 2003 (Zvi Aff."), Ex. 3.)

  Eli Zvi ("Zvi"), CTI's director of sales and marketing, stated that the CAR Agreement was a temporary expedient since the CAR Agreement contemplated sales through an Authorized Compaq Channel Partner, a provision which was not enforced by Compaq. Compaq also did not require CTI to identify the end users to whom sales were to be made under the CAR Agreement.

  Certain of the "ship to" addresses contained on Compaq's invoices set forth the names of customers that were resellers. The May 23 e-mail stated that CTI would sell to resellers.

  During the period from approximately March 2000 through June 2001, CTI sought to integrate Pinnacle Systems or Matrox hardware and Adobe software with the Compaq desktop in order to create a turnkey product for an end user in the DCC market. During this time, CTI devoted key employees, almost exclusively, to integration of the Compaq computer products with component parts and software so that the integrated product was suitable for marketing to the industry, rented additional space in its premises, purchased equipment used for testing and supporting Compaq based solutions, and attended trade shows with Compaq and other key software vendors, such as Pinnacle Systems, Matrox and Avid, to promote the solution integrated by CTI to Compaq hardware for the DCC market. CTI ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.