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Xiotech Corp. v. Express Data Prods. Corp., ESI, LLC

United States District Court, N.D. New York

April 3, 2014

XIOTECH CORPORATION, Plaintiff,
v.
EXPRESS DATA PRODUCTS CORPORATION, ESI, LLC, and RUDY C. D'AMICO, Defendants

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For Plaintiff: MICHAEL D. PINNISI, ESQ., OF COUNSEL, PINNISI & ANDERSON, Ithaca, New York.

For Express Data Products Corporation and ESI, LLC, Defendants: EDWARD J. FINTEL, ESQ., OF COUNSEL, EDWARD J. FINTEL & ASSOCIATES, Syracuse, New York.

For Rudy C. D'Amico, Defendant: ROBERT A. BARRER, ESQ., OF COUNSEL, HISCOCK & BARCLAY LLP, Syracuse, New York.

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MEMORANDUM-DECISION AND ORDER

Mae A. D'Agostino, U.S. District Judge.

I. INTRODUCTION

Plaintiff Xiotech Corporation commenced this diversity action against Defendants on July 19, 2013, alleging causes of action for breach of contract, fraud, and unjust enrichment. See Complaint, Dkt. No. 1 (" Compl." ). On July 25, 2013, Plaintiff filed a motion for a preliminary injunction and temporary restraining order by order to show cause. See Dkt. No. 5. On July 26, 2013, the Court issued an expedited briefing schedule on Plaintiff's motion for a preliminary injunction and issued a temporary restraining order. See Dkt. No.

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6. On August 1, 2013, Plaintiff moved to modify the temporary restraining order based upon newly discovered information. See Dkt. No. 9. Thereafter, on August 2, 2013, the Court granted Plaintiff's motion to modify the temporary restraining order. See Dkt. No. 12. On August 14, 2013, the Court granted Plaintiff's motion for a preliminary injunction and extended the temporary restraining order pending resolution of this matter. See Dkt. No. 19.

Presently before the Court are Defendant Rudy C. D'Amico's motion to dismiss, see Dkt. No. 10, Defendants Express Data Product Corporation's (" EDP" ) and ESI, LLC's motion to dismiss, see Dkt. No. 20, and Plaintiff's unopposed motion for partial summary judgment, see Dkt. No. 21.

II. BACKGROUND

The Court assumes the parties' familiarity with the background of this case, as detailed in the Court's prior rulings, and will only discuss here those allegations and facts relevant to disposition of the pending motions.

A. The Complaint[1]

Plaintiff Xiotech is a supplier of sophisticated computer data storage equipment. Compl. ¶ 1. Defendants contracted with Plaintiff to be retail resellers of those products. Id. During the time period relevant to this dispute, Defendant D'Amico owned a controlling interest in both EDP and ESI, LLC.[2] Id. ¶ 10. Both Defendants EDP and ESI, LLC operated under the trade names " Express Systems Integration," " ESI," and " Express Systems Integration (ESI); " ESI, LLC is the alter ego of EDP. Id. ¶ ¶ 5-7.

On or about February 16, 2006, Xiotech entered into a contract with EDP and ESI, LLC entitled Domestic Nonexclusive Preferred Reseller Agreement (" Reseller Agreement" ).[3] Id. ¶ 13. The

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Reseller Agreement, which is interpreted in accordance with the Minnesota law, sets forth the terms by which Xiotech could sell goods to EDP and ESI, LLC for resale to their customers. Id. ¶ ¶ 15-16.

For several years following execution of the Reseller Agreement, between February 2006 and May 2013, Defendants submitted purchase orders for certain equipment from Xiotech. Id. ¶ ¶ 1, 17. Pursuant to the Reseller Agreement, Xiotech delivered goods to EDP and ESI, LLC, as set forth in the submitted purchase orders, through June 2013. Id. ¶ 18. Xiotech invoiced EDP and ESI, LLC for each delivery made pursuant to a purchase order, and received payment on those invoices through March 2013. Id. ¶ 19.

In April and May of 2013, EDP and ESI, LLC submitted seven purchase orders to Xiotech for delivery of certain goods (the " Purchase Orders" ). Id. ¶ 21. Thereafter, Xiotech made timely and conforming delivery of all goods listed in the Purchase Orders. Id. ¶ 22. Xiotech then invoiced EDP and ESI, LLC for the goods delivered pursuant to the Purchase Orders (the " Invoices" ). Id. ¶ 23. The Invoices were not paid in full, and the amount owed Xiotech pursuant to the Invoices is $551,167.77, plus late fees. Id. ¶ ¶ 24-28. In May and June of 2013, Xiotech requested payment on the Invoices pursuant to the Reseller Agreement. After initially receiving no response, Defendant D'Amico represented in June 2013, " in part and substance, that [EDP and ESI, LLC] w[ere] insolvent and w[ere] ceasing business." Id. ¶ ¶ 30-32. Xiotech then terminated the Reseller Agreement by letter dated June 26, 2013. Id. ¶ 33.

" By reselling the goods without paying for them, Defendants kept as unlawful profit the full retail value of the goods." Id. ¶ 1. Xiotech alleges that Defendants fraudulently induced it into supplying the goods at issue with misrepresentations regarding Defendants' ability and intention to pay for them. Id. At no time prior to their receipt of the goods purchased pursuant to the Purchase Orders, did Defendants indicate or represent that EDP and ESI, LLC were insolvent, at risk of insolvency, or unable to pay for the goods. Id. ¶ ¶ 34-36. Xiotech alleges, upon information and belief, that: Defendants knew EDP and ESI, LLC would be unable and did not intend to pay for the goods when the Purchase Orders were submitted, id. ¶ ¶ 37-38; D'Amico caused EDP and ESI, LLC to issue the Purchase Orders in order to " net hundreds of thousands of dollars by reselling Xiotech products without paying Xiotech for them," id. ¶ 40; Defendants affirmatively misrepresented the financial condition of EDP and ESI, LLC around the time the Purchase Orders were issued in order in induce Xiotech to deliver the goods, id. ¶ 41; Defendants intentionally withheld material information regarding the financial condition of EDP and ESI, LLC around the time the Purchase Orders were issued, id. ¶ 42; and D'Amico personally enriched himself by causing EDP and ESI, LLC to conduct business in this manner, id. ¶ 43.

In its first claim for relief for breach of contract, Xiotech alleges that EDP and ESI, LLC failed to make payments to it under the Reseller Agreement and are therefore liable for the unpaid amount of the Invoices, plus late fees and other expenses. Xiotech does not allege that Defendant D'Amico was a party to the Reseller Agreement, that Defendant D'Amico breached the Reseller Agreement, or that Defendant D'Amico is liable to Xiotech for breach of contract. Id. ¶ ¶ 45-50.

Xiotech alleges in its second claim for fraud that Defendants made material misrepresentations and omissions, which Xiotech

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reasonably relied upon, and Xiotech thereby suffered damages. Such damages include, without limitation, the unpaid amount of the Invoices, plus late fees and other expenses. Xiotech also seeks punitive damages for Defendants' fraudulent conduct. Id. ¶ ¶ 51-71.

As to Xiotech's third claim for relief for unjust enrichment, Xiotech alleges that ESI, LLC and EDP received goods pursuant to the Purchase Orders and have not paid for those goods. Xiotech further alleges that it would be unjust for EDP and ESI, LLC to retain those goods, or any proceeds derived from the sale of those goods. Xiotech also alleges that D'Amico should be caused to return any goods in his possession and to disgorge all proceeds obtained from the sale of those goods. Id. ¶ ¶ 72-79.

B. Undisputed Facts[4]

Xiotech is a corporation organized and in good standing under the laws of the State of Minnesota that conducts business as a distributor of computer equipment. Statement of Material Facts of Xiotech Corporation in Support of its Motion for Partial Summary Judgment re Breach of Contract, Dkt. No. 21-1 (" Xiotech SOMF" ) ¶ 1. EDP is a corporation organized under the laws of the State of New York, which sometimes operated under the name " ESI Express Systems Integration." Id. ¶ 2. On or about February 16, 2006 Xiotech and EDT entered into the Reseller Agreement. Id. ¶ 3; see also Dkt. No. 21-5.

Pursuant to the Reseller Agreement, EDP delivered the following Purchase Orders to Xiotech for delivery of the goods:

P.O. Number

P.O. Date

P.O. Amount

73862

04/04/2013

$71,590.60

73870

04/05/2013

$23,733.24

73921

04/30/2013

$1,400.04

73932

05/02/2013

$98,486.98

73933

05/02/2013

$98,486.98

73934

05/02/2013

$147,661.47

73952

05/08/2013

$111,040.18

73989

05/28/2013

$422.52

Xiotech accepted the Purchase Orders, and made timely and conforming delivery of all goods contracted for. Id. ¶ ¶ 5-6. EDP received payments totaling $596,844.93 from its customers for the goods Xiotech shipped pursuant to the Purchase Orders. Id. ¶ 8. Thereafter, Xiotech delivered the following Invoices to Express Data for the goods it delivered pursuant to the Purchase Orders:

Invoice Number

Invoice Date

Invoice Amount

INV 000 271670

04/09/2013

$71,590.60

INV 000 271713

04/12/2013

$23,055.00

INV 000 272060

04/30/2013

$1,400.04

INV 000 272107

05/03/2013

$98,486.98

INV 000 272108

05/03/2013

$147,661.47

INV 000 272109

05/03/2013

$98,486.98

INV 000 272223

05/10/2013

$111,040.18

INV 000 272464

05/28/2013

$437.52

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Id. ¶ 9.

Pursuant to the Reseller Agreement, EDP was obligated to pay the full amount of the Invoices within 30 days of their receipt. Id. ¶ 11; see also Reseller Agreement ¶ 12.A (" Reseller's payment obligations are as stated on Xiotech's invoices and Reseller agrees to pay the full invoiced amount, without setoff or deduction, within the time period stated on such invoice." ) EDP delivered a partial payment of $991.00 against INV 000 271713, but did not deliver any other payments against the Invoices. Id. ¶ 12-13.

On June 26, 2013, effective that day, Xiotech terminated the Reseller Agreement. Id. ¶ 14. All money due to Xiotech by EDP became due and payable immediately upon the effective date of the termination pursuant to the Reseller Agreement. Id. ¶ 15; see also Reseller Agreement ΒΆ 9(i) (" any money due Xiotech by Reseller shall become payable immediately upon the effective date of termination or cancellation" ). EDP delivered notice to ...


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