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Re-Source America, Inc. v. Corning Inc.

March 26, 2008

RE-SOURCE AMERICA, INC., PLAINTIFF,
v.
CORNING INCORPORATED, DEFENDANTS.



The opinion of the court was delivered by: Charles J. Siragusa United States District Judge

DECISION AND ORDER

INTRODUCTION

This action arises from the termination of a business relationship between defendant Corning, Inc. ("Defendant"), a manufacturer of optical fiber and cable, and plaintiff Re-source America, Inc. ("Plaintiff"), a company which recycles packaging and shipping materials. Now before the Court is Defendant's motion [#41] to dismiss portions of Plaintiff's Second Amended Complaint [#39], and Plaintiff's cross-motion to file the Second Amended Complaint nunc pro tunc, and to file a Third-Amended Complaint [#46]. For the reasons that follow, the Court denies Defendant's application to dismiss and grants Plaintiff's application to file its Third Amended Complaint.

BACKGROUND

Unless otherwise noted, the following background facts are taken from Plaintiff's First Amended Complaint [#16-8]. This action arises from a business relationship that existed between the parties, during the period 1993 through May 31, 2006. At all relevant times, Defendant manufactured optical fiber cable, which it packaged on spools or in other types of packaging that could be recycled and reused. In or about 1993, Plaintiff developed a patented system for recycling such packaging materials. Subsequently, the parties discussed forming a business relationship, in which Defendant would essentially purchase recycled packaging materials from Plaintiff. In 1994 Plaintiff opened a facility in North Carolina to recover and refurbish packaging materials at Defendant's Wilmington, N.C. plant. Plaintiff subsequently opened similar facilities in the United Kingdom and in Germany to serve Defendant's manufacturing operations in those locations.

In August 2000, the parties executed their only written agreement, covering the period August 1, 2000 through July 31, 2003. Significantly, the agreement contained a New York forum- selection and choice-of-law provision. (Agreement ¶ 14). Following the expiration of the written agreement*fn1 , the parties continued to do business on essentially the same terms contained in the written contract.

Toward the end of 2001, the worldwide market for Defendant's product declined sharply, which threatened to cause Plaintiff "serious operating losses."(Amended Complaint [#16-8] ¶ 55). In response, the parties orally agreed that Defendant would advance payments to Plaintiff, which Plaintiff would repay once the market for optical fiber rebounded. According to Plaintiff, the parties agreed that once the market improved, Plaintiff could repay the debt incrementally, and that Defendant would buy enough of Plaintiff's product so that Plaintiff would be able to pay off the advances and be profitable. (Id. at ¶ 58).

In 2004 consumer demand for Defendant's fiber cable resumed, and Defendant sought repayment of the advanced monies. However, according to Plaintiff, Defendant reneged on its promise to allow Plaintiff to repay the advanced monies gradually. Instead, Plaintiff alleges, Defendant withheld payments on work Plaintiff performed until Plaintiff agreed to an accelerated repayment schedule. Additionally, Defendant unilaterally demanded 13% interest on the advances. To soften the blow, Plaintiff contends, Defendant led Plaintiff to believe that the parties' business relationship would continue after the monies were repaid. However, Plaintiff maintains that Defendant had already decided to terminate its relationship with Plaintiff, and that the promise of future business was a ploy designed to ensure that Plaintiff would repay its debt. Relying on Defendant's representations, Plaintiff agreed to the accelerated payments, and repaid the entire amount in late 2005. Then, almost immediately thereafter, Defendant notified Plaintiff that it was terminating the parties' business relationship, effective May 31, 2006.

On July 28, 2006, Plaintiff commenced the subject action in the United States District Court for the District of New Jersey. On September 5, 2006, Plaintiff filed an Amended Complaint [#16-8].*fn2 The Amended Complaint purported to state three separate causes of action. The first was for breach of the written contract, in which Plaintiff sought to recover costs associated with a decline in the demand for Defendant's cable and the subsequent closing of Plaintiff's operations in Europe. The second claim was for "fraud in the inducement, misrepresentation and breach of oral contract," in which Plaintiff alleged that Defendant improperly "imposed a 13% self-proclaimed 'interest' penalty" on the monies that it advanced to Plaintiff between 2001 and 2004.

The third claim of the Amended Complaint, entitled "bad faith and intentional business torts," alleged, essentially, that between 2004 and 2006, Defendant orally misled Plaintiff into believing that the parties' business relationship would continue indefinitely, even though Defendant actually intended to terminate the relationship once Plaintiff repaid the advances. With regard to Corning's alleged oral misrepresentations, Plaintiff maintained, in relevant part:

[Plaintiff] was justifiably led to believe and did reasonably [sic] that it would enjoy an ongoing relationship with Corning after repayment and into the foreseeable future. . . .

[I]n reliance on Corning's promise of a continuing relationship, [Plaintiff] elected not to pursue Corning [for monies that Plaintiff believed it was owed under the written contract]. [Plaintiff's] forbearance was in exchange for warranties and promises of a relationship with Corning that would continue beyond the period of the prepaid losses.

***

***

Corning's promise of future business . . . was a ruse designed to elicit [Plaintiff's] compliance with Corning's dictates, and to recover the prepaid ...


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