United States District Court, E.D. New York
September 2, 2004.
DISCOVER GROUP, INC. and AMERICAN TONER PRODUCTS, INC., Plaintiffs,
LEXMARK INTERNATIONAL, INC., Defendant.
The opinion of the court was delivered by: I. LEO GLASSER, Senior District Judge
MEMORANDUM & ORDER
Before the Court is the motion of defendant Lexmark
International, Inc. ("Lexmark" or "defendant") to dismiss the
complaint of plaintiffs Discover Group, Inc. ("Discover Group")
and American Toner Products. Inc. ("American Toner") for failure
to state a claim upon which relief can be granted. For the
reasons that follow, Lexmark's motion is granted.
Plaintiffs American Toner and Discover Group are New York
corporations engaged in the business of importing and
distributing printer ink cartridges and imaging film rolls for
facsimile machines. (Compl. ¶¶ 1, 6.) American Toner is the
wholly-owned subsidiary of Discover Group. (Compl. ¶ 6.)
Defendant Lexmark, a Delaware corporation with its principal
place of business in Kentucky, develops, manufactures, and sells
laser printers and toner cartridges. (Def. Mem. at 1.) Sortek
International Corporation and Facsimile Paper Connection
Corporation ("Sortek/FPC") are related corporations that are authorized
distributors of Lexmark products.
On July 17, 2001, Lexmark entered into a written Authorized
Dealer Agreement with Discover Group ("Dealer Agreement"), which
authorized Discover Group to purchase products from Lexmark for
marketing to resellers and for Discover Group's "internal use
only in Latin America & the Caribbean with the exception of
Puerto Rico." (Compl. ¶ 9; Patton Aff. Ex. 2.) According to
plaintiffs, authorized distributors such as Sortek/FPC are
entitled to purchase Lexmark products at lower prices than
authorized dealers such as plaintiffs. As a result. Discover
Group purchased Lexmark products from Sortek/FPC, as well as from
Lexmark directly. (Compl. ¶ 11.) Discover Group furnished Lexmark
products to its subsidiary. American Toner. (Compl. 10.)
On March 19, 2002, plaintiff American Toner entered into a
contract with the State of Michigan ("Michigan Contract"),
pursuant to which American Toner became the exclusive supplier of
Lexmark printer toner cartridges to Michigan's Family
Independence Agency. (Compl. ¶ 13.) In order to fulfill the
Michigan Contract, American Toner planned to obtain Lexmark
products from Discover Group, which had purchased them from
Sortek/FPC. (Compl. ¶ 14.) The Michigan Contract provided that
the State of Michigan could cancel the contract "for its
convenience, in whole or part, if the State determines that such
a cancellation is in the State's best interest." (Patton Aff. Ex.
According to plaintiffs, defendant Lexmark had previously
attempted to procure a contract with the State of Michigan.
(Compl. ¶ 15.) Plaintiffs allege that when defendant learned of
American Toner's contract with Michigan, defendant induced the
State of Michigan to discontinue doing business with the
plaintiffs and to breach the Michigan Contract. (Compl. ¶ 16.) Plaintiffs further allege that defendant threatened
Sortek/FPC to cut off all supplies of Lexmark products and revoke
its distributorship agreement if Sortek/FPC continued to provide
Lexmark products to plaintiffs. (Compl. ¶ 17.) According to
plaintiffs, defendant did so in order to render plaintiffs unable
to fulfill the Michigan Contract. (Compl. ¶ 17.) As a result,
Sortek/FPC ceased doing business with plaintiffs and cancelled
all pending orders. (Compl. ¶ 19.)
On April 7, 2003, defendant Lexmark cancelled the Dealer
Agreement with Discover Group and, as a result, American Toner
was unable to fulfill the Michigan Contract. (Compl. ¶¶ 13, 20.)
The State of Michigan subsequently cancelled the Michigan
Contract, which plaintiffs value at $5.569,200.00. (Compl. ¶ 21.)
According to plaintiffs, the efforts by defendant were designed
solely to harm plaintiffs without any justification. (Compl. ¶
24.) Plaintiffs believe that defendant or its distributors have
now begun supplying the State of Michigan with Lexmark products.
(Compl. ¶ 22.) Plaintiffs claim that as a result of defendant's
actions, they have sustained severe financial harm. (Compl. ¶
Plaintiffs have filed this suit against defendant for tortious
interference with contract, tortious interference with business
relationships, and prima facie tort. Defendant now moves this
Court to dismiss the complaint for failure to state a claim upon
which relief can be granted.
I. Legal Standard
When deciding a motion to dismiss pursuant to Federal Rule of
Civil Procedure 12(b)(6), the Court must take all allegations in
the complaint as true and draw all reasonable inferences in favor of plaintiffs. Ortiz v. Cornetta, 867 F.2d 146, 149 (2d
Cir. 1989). A complaint should not be dismissed "unless it
appears beyond doubt that the plaintiff can prove no set of facts
in support of his claim which would entitle him to relief."
Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see also
Easton v. Sundram, 947 F.2d 1011, 1014-15 (2d Cir. 1991).
cert. denied, 504 U.S. 911 (1992).
The Court's consideration of a motion to dismiss pursuant to
12(b)(6) is limited to the factual allegations in the complaint,
documents incorporated by reference in the complaint, matters of
which judicial notice may be taken, and documents either in
plaintiffs' possession or of which plaintiffs had knowledge and
relied on in bringing suit. Brass v. Am. Film Tech., Inc.,
987 F.2d 142, 150 (2d Cir. 1993). When a party "introduces matter
extraneous to the pleadings, the Court must convert the motion to
dismiss into a motion for summary judgment or exclude the
extraneous documents from consideration." AIM Int'l Trading,
L.L.C. v. Valcucine S.P.A., 2003 WL 21203503, at *3 (S.D.N.Y.
May 22, 2003).
Plaintiffs argue that this motion should be converted into a
motion for summary judgment because defendant annexed and
referred to exhibits in its motion that were not included in the
original complaint. (See Patton Aff. Ex. 1-3.) When, however,
"`a plaintiff chooses not to attach to the complaint or
incorporate by reference a [document] upon which it solely relies
and which is integral to the complaint' the court may
nevertheless take that document into consideration in deciding
the defendants' motion to dismiss, without converting the motion
into one for summary judgment." AIM, 2003 WL 21203503, at *3
(in suit for tortious interference with contract, dealership
agreement between parties was not extraneous and was incorporated
by reference in the complaint) (quoting Cortec Indus., Inc. v.
Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir. 1991), cert. denied, 503 U.S. 960 (1992)). When a document is
integral to the complaint, a plaintiff is on notice that it might
be considered by the court in a motion to dismiss. See
Cortec, 949 F.2d at 48.
Here, plaintiffs refer in their complaint to the Dealer
Agreement between Lexmark and Discover Group, which they allege
was later cancelled by defendant. (See Compl. ¶¶ 9, 20.) That
agreement is integral to plaintiffs' claim for tortious
interference and is properly considered by the Court on a motion
to dismiss. (See Patton Aff. Ex. 2.) Similarly, the Michigan
Contract forms the basis of plaintiffs' claim for tortious
interference with contract. (See Compl. ¶¶ 13-17, 20-22.)
Attached as Exhibit 1 to the Patton Affidavit, the Michigan
Contract is properly considered by the Court on a motion to
dismiss as well.*fn1
II. Tortious Interference with Michigan Contract*fn2
Parties disagree whether the law of Michigan or New York is
applicable to plaintiffs' claim that defendant tortiously
interfered with the Michigan Contract. A federal court sitting in
diversity must apply the choice-of-law rules of the forum state.
Maryland Cas. Co. v. Cont'l Cas. Co., 332 F.3d 145, 151 (2d Cir. 2003) (citing Klaxon Co. v.
Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). Thus, New
York choice of law jurisprudence determines whether to apply New
York or Michigan law to this cause of action.
"The first step in any case presenting a potential choice of
law issue is to determine whether there is an actual conflict
between the laws of the jurisdictions involved." In the Matter
of Allstate Ins. Co., 81 N.Y.2d 219, 223, 613 N.E.3d 936 (1993).
In order to state a claim for tortious interference with contract
under New York law, plaintiffs must demonstrate "the existence of
a valid contract between the plaintiff[s] and a third party,
defendant's knowledge of that contract. defendant's intentional
procurement of the third-party's breach of the contract without
justification, actual breach of the contract, and damages
resulting therefrom." Lama Holding Co. v. Smith Barney Inc.,
88 N.Y.2d 413, 424, 668 N.E.2d 1370 (1996) (quoting Israel v. Wood
Dolson Co., 1 N.Y.2d 116, 120, 134 N.E.2d 97 (1956)). It is
well-settled in New York that "[a] contract terminable at will
cannot be the basis for a tortious interference with contract
claim" because "there can be no breach of contract, a necessary
element for tortious interference with contract, when the
contract may be terminated at will." AIM, 2003 WL 21203503, at
*5 (citing Guard-Life Corp. v. S. Parker Hardware Mfg. Corp.,
50 N.Y.2d 183, 406 N.E.2d 445, 450 (1980); World Wide
Communications, Inc. v. Rozar, 1997 WL 795750, at *7 (S.D.N.Y.
Dec. 30, 1997); Coliniatis v. Dimas, 848 F.Supp. 462, 470
(S.D.N.Y. 1994); Miller v. Mount Sinai Med. Ctr.,
288 A.D.2d 72, 733 N.Y.S.2d 26 (1st Dep't 2001); Snyder v. Sony Music
Entm't, Inc., 252 A.D.2d 294, 299, 684 N.Y.S.2d 235 (1st Dep't
1999); Am. Preferred Prescription, Inc. v. Health Mgmt., Inc.,
252 A.D.2d 414, 417, 678 N.Y.S.2d 1 (1st Dep't 1998)).
The elements of a tortious interference with contract claim
under Michigan law are "(1) the existence of a contract; (2) a breach of the contract; and
(3) instigation of the breach without justification by the
defendant." Goodson v. R.C. Eng'g and Mgmt Servs, Inc., 1997 WL
33344759, at *2 (Mich.Ct.App. June 27, 1997), appeal denied,
458 Mich. 853, 587 N.W.2d 632 (1998). There are two conflicting
lines of authority from the Michigan Court of Appeals regarding
whether an action for tortious interference with contract may be
maintained where the contract is terminable at will. Compare
Dzierwa v. Michigan Oil Co., 152 Mich. App. 281, 393 N.W.2d 610
(Mich.Ct.App. 1986) (an employee cannot bring a claim for
tortious interference with an at will employment contract),
with Feaheny v. Caldwell, 175 Mich. App. 291, 304,
437 N.W.2d 358 (Mich.Ct.App. 1989) (tortious interference with an at-will
contract is actionable because "an at-will employee who enjoys
the confidence of his or her employer has the right to expect
that a third party will not wrongfully undermine the existing
favorable relationship"); see also Environair, Inc. v.
Steelcase, Inc., 190 Mich. App. 289, 295, 475 N.W.2d 366 (Mich.
Ct. App. 1991) (in a non-employment case limiting plaintiff's
recovery to nominal damages because the nature of the
relationship between the parties "was one founded upon a contract
that was terminable at will" and the plaintiff's "mere subjective
expectation of the continuation of the contract could not justify
an expectation any greater"). The Michigan Supreme Court has not
ruled on the issue.
In Stanek v. Greco, 323 F.3d 476, 478-79 (6th Cir. 2003), the
Sixth Circuit Court of Appeals surveyed these conflicting lines
of Michigan cases and found persuasive those cases allowing a
claim for tortious interference where the contract was
terminable-at-will. Although the issue is not settled in
Michigan. "[t]he weight of authority holds that wrongful
interference with contracts terminable at will is actionable,"
Warde v. Kaiser, 887 F.2d 97, 102 (6th Cir. 1989) (interpreting Tennessee law) (citing Prosser and Keeton on
Torts (5th ed. 1984)). "[T]he overwhelming majority of cases
have held that interference with employments or other contracts
terminable at will is actionable, since until it is terminated
the contract is a subsisting relationship, of value to the
plaintiff, and presumably to continue in effect. W. Prosser, Law
of Torts, § 129 at 932-33 (4th ed. 1971); see also
Restatement (Second) of Torts § 766 cmt. g (1979) (a
defendant may not improperly interfere with a contract at will
because "the contract is valid and subsisting" but it may be
considered when determining the damages sustained by plaintiff.)
In light of the actual conflict between Michigan and New York
law, the Court must determine which state's law to apply.
In a tort claim, such a this, New York applies the "greater
interest test," under which "controlling effect is given to the
law of the jurisdiction which, because of its relationship or
contact with the occurrence or the parties has the greatest
concern with the specific issue raised in the litigation." See
Robins, 923 F. Supp. at 465 (citing Babcock v. Jackson,
12 N.Y.2d 473, 481, 191 N.E.2d 279 (1963)). Where, as here, the
parties are domiciled in different states and the issue is the
standard governing defendant's conduct, "the place or location of
the tort is determinative." Weizmann Inst. of Sci. v. Neschis,
229 F.Supp.2d 234, 249 (S.D.N.Y. 2002). Because tortious
interference with contract is a conduct-regulating tort, this
Court must look to the locus of the tort to determine which
jurisdiction's law should apply. See Hidden Brook Air. Inc. v.
Thabet Aviation Int'l Inc. 241 F.Supp.2d 246, 277 (S.D.N.Y.
The court in Hidden Brook, 241 F.Supp.2d at 277, analyzed
whether to apply the law of New York or Quebec in a cause of
action for tortious interference with contract where the
plaintiff was domiciled in Massachusetts and the defendant in
Kansas. Plaintiff argued that it had sustained damages in New York and therefore that New York law
should apply, while the defendant argued that Quebec law should
apply. The court wrote:
In this case, the site where Hidden Brook suffered
damages due to Raytheon's allegedly tortious conduct
determines the locus of the tort. That is because,
"when `the defendant's . . . conduct occurs in one
jurisdiction and the plaintiff's injuries are
suffered in another, the place of the wrong is
considered to be the place where the last event
necessary to make the actor liable occurred.'" Frink
Am. Inc. v. Champion Mach. Ltd., 48 F.Supp.2d 198,
205 (N.D.N.Y. 1999) (emphasis omitted) (quoting
Schultz, 65 N.Y.2d at 195, 491 N.Y.S.2d at 90,
480 N.E.2d at 679). The tort of tortious interference
with contract requires that the plaintiff suffer
damages, which is the last event that would render a
putative tortfeasor liable.
Id. at 277; see also Weizmann, 229 F.Supp.2d at 249-50.
Regarding the defendant's assertion that Quebec law should apply,
the court wrote, "neither party to the tortious interference with
contract claim . . . is domiciled in Quebec . . . Thus even were
the parties' domiciles relevant to the choice of law analysis,
this factor would in no way counsel application of Quebec law."
Id. at 277 n. 15. The court determined that the plaintiff
sustained damages either in New York or in Massachusetts, its
principal place of business. Id. at 278. Because the laws of
these states were not in conflict, the court did not go on to
decide whether to apply New York or Massachusetts law. Id.
Here, plaintiffs are New York corporations and citizens of New
York State. Although they had a contract with the State of
Michigan, the last event that would have rendered Lexmark liable
was plaintiffs' alleged suffering of damages. According to
plaintiffs, they sustained financial injuries and damages in an
amount not less than $5,569,200 based on the cancellation of the
Michigan Contract. The financial injury that plaintiffs allege
was suffered by plaintiffs where they reside and do business, in
New York. Neither the alleged action of defendant nor the alleged damages suffered by plaintiffs occurred in Michigan. New
York has the greater interest in regulating this conduct and
thus. New York law should apply.
Plaintiffs do not dispute that the Michigan Contract was
terminable by the State of Michigan. Because contracts
terminable-at-will may not form the basis of a tortious
interference with contract claim in New York, this claim must be
dismissed. See AIM, 2003 WL 21203503, at *5.
III. Tortious Interference with Business Relations*fn3
To state a claim for tortious interference with business
relations, plaintiffs must allege that "(1) there is a business
relationship between the plaintiff and a third party; (2) the
defendant. knowing of that relationship, intentionally interferes
with it; (3) the defendant acts with the sole purpose of harming
the plaintiff, or, failing that level of malice, uses dishonest,
unfair, or improper means; and (4) the relationship is injured."
Goldhirsch Group. Inc. v. Alpert, 107 F.3d 105, 108-09 (2d Cir.
1997). Improper means include "physical violence, fraud or
misrepresentation, civil suits and criminal prosecutions, and
some degrees of economic pressure; they do not, however, include
persuasion alone although it is knowingly directed at
interference with the contract." NBT Bancorp Inc. v.
Fleet/Norstar Finan, Group. Inc., 87 N.Y.2d 614, 621,
664 N.E.2d 492 (1996) (quoting Guard-Life Corp., 50 N.Y.2d at 193-94,
406 N.E.2d 445). As compared to the tort of tortious interference
with contract, "[w]here there has been no breach of an existing contract, but only interference with prospective
contract rights . . . plaintiff must show more culpable conduct
on the part of the defendant." Id. at 621. Particularly where
parties are competitors, "it may excuse [defendant] from the
consequences of interference with prospective contractual
relationships, where the interference is intended at least in
part to advance the competing interest of the interferer, no
unlawful restraint of trade is effected, and the means employed
are not wrongful." Guard-Life, 50 N.Y.2d at 190-91,
406 N.E.2d at 448-49.
Plaintiffs claim that defendant interfered with their future
business relations with Sortek/FPC and the State of Michigan by
threatening to cut off Sortek/FPC's supply of goods and revoke
its distributorship agreement. Beyond these conclusory
allegations, however, plaintiffs fail to demonstrate that
defendant's sole motive was to harm plaintiffs. To the
contrary, plaintiffs' complaint describes defendant's previous
attempt to procure a contract with the State of Michigan "for its
own benefit" as well as defendant's supplying the State of
Michigan with products following the cancellation of the Michigan
Contract. (Compl. ¶¶ 15, 22.) See H & R Indus., Inc. v.
Kirshner, 899 F.Supp. 995, 1009 (E.D.N.Y. 1995) ("even if the
interference was intended, if defendant acted in part to advance
his own interests the claim must fail"). Defendant was plainly
competing with plaintiffs for the State of Michigan's toner
cartridge business and was not motivated solely, if at all, by a
desire to harm plaintiffs.
Moreover, defendant's threat to revoke Sortek/FPC's
distributorship agreement and to deprive it of supplies was not
wrongful. See Photographic Imp. & Distrib. Corp. v. Elgeet
Optical Co. Inc., 122 N.Y.S.2d 215, 216, 282 A.D. 223 (1st Dep't
1953) (defendants' statement to mutual distributors that
defendants would not sell to them if they continued to sell
plaintiffs' products "does not amount to malicious
interference. . . . It appears to be only a matter of business policy and selection of customers on defendants' part,
which however it may be criticized, does not amount to
illegality"). Because defendant did not act with the sole purpose
of harming plaintiffs, or use dishonest, unfair, or improper
means, defendant's motion to dismiss this cause of action is
IV. Prima Facie Tort
A cause of action in prima facie tort consists of four
elements: "(1) intentional infliction of harm, (2) causing
special damages. (3) without excuse or justification. (4) by an
act or series of acts that would otherwise be lawful." Silverman
v. City of New York 2001 WL 218943, at *9 (E.D.N.Y. Feb. 2,
2001) (Glasser, J.) (quoting Curiano v. Suozzi, 63 N.Y.2d 113,
117, 469 N.E.2d 1324 (1984)). In order to state a cause of action
for prima facie tort, "special damages must be alleged with
sufficient particularity to identify actual losses" and "round
sums without any attempt at itemization are insufficient." Id.
at *10 (internal quotations omitted). Here, plaintiffs' complaint
for this cause of action requests "unspecified damages." (See
Compl. at 8.) This is insufficient to state a cause of action for
prima facie tort insofar as it fails to plead special damages.
See Curiano, 63 N.Y.2d at 117, 469 N.E.2d 1324.
Furthermore, "there is no recovery in prima facie tort unless
malevolence is the sole motive for defendant's otherwise lawful
act." Burns Jackson Miller Summit & Spitzer v. Lindner,
59 N.Y.2d 314, 333, 451 N.E.2d 459 (1983). As discussed above, the
complaint alleges that defendant was acting, at least in part, to
further its own economic interests. (See Compl. ¶¶ 15, 22.)
Because plaintiffs' complaint fails to allege special damages or
malevolence, the cause of action for prima facie tort is
Defendant's motion to dismiss pursuant to Fed.R. Civ. P.
12(b)(6) is granted in full and plaintiffs' complaint dismissed
in its entirety.