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observing that "[t]he parties have not cited to any case in the New York courts applying the economic loss doctrine to an intentional tort, nor has one been found by the Court."
Summary of this case from EED Holdings v. Palmer Johnson Acquisition Corp.Opinion
02 Civ. 2628 (RWS)
May 21, 2004
MITCHELL D. GOLDBERG, ESQ., OCRS GOLDBERG, LLP, New York, NY, Of Counsel for Plaintiff
KENNETH J. KING, ESQ., WALTER M. LUERS, ESQ., PATTERSON, BELKNAP, WEBB TYLER, New York, NY, Of Counsel for Defendant
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 workstations.
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 relationship.
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 and Compaq both participated in the "VAR (Value Added Resellers) Vision," which was attended by the 500 largest resellers in the United States, in order to promote the CTI/Compaq turnkey solution.
By June 2000, employees of Compaq involved with monitoring reseller activities, had raised concerns internally within Compaq about CTI purchasing directly from Compaq and opined that the CTI account had been set up improperly and that CTI should not be receiving TOSS pricing. The TOSS pricing received by CTI created issues with other Compaq Authorized Resellers and had the effect of permitting CTI to compete with Compaq and other Compaq Authorized Resellers for the sale of Compaq products. In a June 1, 2000 e-mail, a Compaq employee warned the representatives handling the CTI account that "they need to be responsible for any legal ramifications" for setting up CTI as a Compaq Authorized Reseller receiving TOSS pricing. (Zvi Aff., Ex. 5.)
Other internal Compaq documents indicate that by late February or March 2001, Compaq contemplated a transition of the CTI status to "Partner Direct," a designation for the Reseller channel. However, the Compaq sales representatives responsible for the CTI account during this period knew that if Compaq insisted upon converting CTI to "Partner Direct" with its pricing, CTI would cease doing business with Compaq. It was determined internally within Compaq to permit CTI to continue to purchase as a MAD account thereby obtaining the benefits of TOSS pricing until an Original Equipment Manufacturer ("OEM") agreement could be prepared by Compaq, which was expected to occur by the second quarter of 2001. According to Zvi, Compaq employees stated that an OEM agreement would continue the favorable pricing that CTI was obtaining through MAD.
In April 2001, at the annual NAB trade show targeted towards the DCC market, CTI and Compaq promoted, for the first time, the Compaq desktop hardware with the integrated editing software of key vendors such as Avid, Matrox and Pinnacle. The NAB trade show created interest, and, according to Zvi, it was contemplated that CTI would handle the sales leads generated at the trade show.
In May 2001, Compaq advised CTI that Compaq was discontinuing TOSS pricing to CTI due to Compaq's belief that CTI was competing with Compaq distributors in the sale of Compaq products. According to Zvi, CTI "can still buy Compaq products" and the CAR Agreement has neither expired nor been terminated. (King Reply Decl., Ex. 4.) CTI claims, however, that Compaq ceased accepting orders from CTI for the purchase of Compaq products, and Zvi has stated that Compaq abruptly "ceased all business with CTI." (Zvi Aff., ¶ 46.)
An internal Compaq e-mail, dated May 31, 2001, stated: Since an OEM program/contract was imminent, we agreed to leave the current program in place with a plan to migrate to an OEM pricing contract in 2Q. Since the OEM program is on hold, and this has proved to be something other than an OEM play, we need to terminate this agreement immediately and the account team needs to position this with Computech.
(Zvi Aff., Ex. 11.) Compaq has not sent a notice of termination of the CAR Agreement.
After receiving complaints from other Compaq resellers about CTI's practices, on June 19, 2001 Vainu sent an e-mail (the "June 19 e-mail") to certain resellers which referred to CTI and certain other entities as "brokers" of Compaq products improperly engaging in grey market practices and directing the resellers that they "may NOT purchase" Compaq products from these entities. (Zvi Aff., Ex. 12.) Grey marketing, according to Vainu, is the sale of Compaq products to customers without Compaq authorization. Two follow-up e-mails were sent by Vainu on June 20 and 21, 2001 to the same resellers. These e-mails did not mention CTI.
The June 19 e-mail also indicated that CTI was not currently an authorized Compaq reseller, an issue which was addressed and corrected two weeks later by Vainu in another e-mail to those same resellers.
Vainu stated at his deposition that he had no particular expertise in the area of grey marketing, that he had been unaware that CTI was receiving TOSS pricing from Compaq, and that he made no effort to speak to CTI's account representatives prior to sending these e-mails as he incorrectly believed that CTI had not been assigned an account representative.
Vainu further testified at his deposition that his sole basis for sending out these e-mails was the fact that CTI was an "authorized reseller who had multiple complaints of actively soliciting sales to other resellers of products below distribution pricing." (King Decl., Ex. 10.)
As a result of these e-mails, according to Zvi, CTI received "[p]robably less than five phone calls." (King Decl., Ex. 7.) He did not identify any sales that CTI lost because of the June 19 e-mail or any customers who cancelled orders.
In addition, according to Zvi, the sales leads that Compaq and CTI generated at the NAB conference were not provided to CTI so CTI was unable to pursue these potential sales. Eyal Shachi, a CTI officer, has testified:
But I would say that every existing Compaq customers we had, we lost their business. Future business we lost with them. I would say close to 100 percent, if not 100 percent, because we would not be able to provide them with the same type of service and pricing and availability that we had before.
(King Aff., Ex. 8.)
Over the course of the Compaq/CTI relationship, CTI purchased several million dollars worth of Compaq products and paid the invoices that it received from Compaq. CTI refused to pay Compaq for goods sold and delivered after Compaq terminated the TOSS discount and the June 19 e-mail was sent. According to Zvi, CTI believed that at the time that Compaq terminated TOSS pricing and discontinued sales to CTI, CTI's claim for damages exceeded the amount of Compaq's unpaid invoices of $594,075.53 for goods sold and delivered.
The Summary Judgment Standard
Summary judgment is granted only if there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); SCS Communications, Inc. v. Herrick Co., Inc., 350 F.3d 329, 338 (2d Cir. 2004); see generally 11 James Wm. Moore, et al., Moore's Federal Practice ¶ 56.11 (3d ed. 1997 Supp. 2004). The court will not try issues of fact on a motion for summary judgment, but, rather, will determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).
"The party seeking summary judgment bears the burden of establishing that no genuine issue of material fact exists and that the undisputed facts establish her right to judgment as a matter of law." Rodriguez v. City of New York, 72 F.3d 1051, 1060-61 (2d Cir. 1995). In determining whether a genuine issue of material fact exists, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Gibbs-Alfano v. Burton, 281 F.3d 12, 18 (2d Cir. 2002). Thus, "[s]ummary judgment may be granted if, upon reviewing the evidence in the light most favorable to the nonmovant, the court determines that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law." Richardson v. Selsky, 5 F.3d 616, 621 (2d Cir. 1993).
A material fact is one that would "affect the outcome of the suit under the governing law," and a dispute about a genuine issue of material fact occurs if the evidence is such that "a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248;see also R.B. Ventures, Ltd. v. Shane, 112 F.3d 54, 57 (2d Cir. 1997). Summary Judgment to Dismiss the Contract Claim Is Granted
CTI's third claim for relief seeks damages for Compaq's breach of the "written CAR Agreement" (Pl. Opp. Mem. at 5) resulting from both the June 19 e-mail to certain authorized resellers of Compaq products and Compaq's alleged refusal to accept any further orders from CTI in the absence of any notice of termination. Compaq has sought to dismiss this claim on the grounds that the CAR Agreement was not breached.
To establish a claim for breach of contract under New York law in this diversity case, a party must prove the following: (1) formation of a contract between the parties; (2) performance by plaintiff; (3) non-performance by defendant; and (4) resulting damages to plaintiff.See Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir. 1994).
According to Compaq, the June 19 e-mail was not a breach of the CAR Agreement as Compaq merely notified its customers that CTI had acted contrary to the terms of the CAR Agreement, which provides that CTI could only purchase through an Authorized Compaq Channel Partner and sell to end users. CTI has disputed that it acted contrary to the terms of the CAR Agreement by selling to other resellers and argues that Compaq, by permitting CTI to purchase Compaq products directly from Compaq rather than through an Authorized Compaq Channel Partner for more than a year, waived the provisions of the CAR Agreement which were the subject of the June 19 e-mail. Even construing the facts in CTI's favor and assuming that Compaq had waived any objections it might have made to CTI's performance under the CAR Agreement prior to the issuance of the June 19 e-mail, CTI has not established that the June 19 e-mail, which labeled CTI a grey market broker and directed certain resellers not to purchase Compaq products from CTI, breached the terms of the CAR Agreement or improperly terminated the CAR Agreement.
CTI also claims that Compaq breached the CAR Agreement by terminating the Agreement "without complying with the termination provision set forth in the CAR Agreement" (Pl. Opp. Mem. at 9.) CTI bases its claim on Zvi's assertion that in or around May 2001 "Compaq ceased accepting orders from CTI for the purchase of Compaq products." (Zvi Aff., ¶ 36.) As CTI has recognized, however, the CAR Agreement was not applicable to the purchases made by CTI directly from Compaq. (See Pl. Opp. Mem. at 8.) Accordingly, whether Compaq ceased accepting direct orders from CTI for the purchase of Compaq products is irrelevant to whether Compaq breached the CAR Agreement.
Moreover, as Compaq notes, in an earlier affidavit submitted by CTI in opposition to Compaq's motion to dismiss CTI's complaint, Zvi stated that the CAR Agreement "has never been terminated by Compaq." (King Reply Decl., Ex. 4.) At his July 14, 2003 deposition, Zvi confirmed that the CAR Agreement had never been terminated by Compaq ( id., Ex. 8) and testified that "up to this point, we can still buy Compaq products" as the CAR Agreement "never expired or [was] terminated by Compaq." (Id., Ex. 8, at 207-08.)
The Second Circuit has held that:
[A] party may not create an issue of fact by submitting an affidavit in opposition to a summary judgment motion that, by omission or addition, contradicts the affiant's previous deposition testimony. If a party who has been examined at length on deposition could raise an issue of fact simply by submitting an affidavit contradicting his own prior testimony, this would greatly diminish the utility of summary judgment as a procedure for screening out sham issues of fact. Thus, factual issues created solely by an affidavit crafted to oppose a summary judgment motion are not genuine issues for trial.Haves v. New York City Dep't of Corr., 84 F.3d 614, 619 (2d Cir. 1996) (internal quotation marks and citations omitted). In light of Zvi's previous statements that the CAR Agreement continues to be in effect, CTI may not now create a genuine issue of fact by asserting that the Agreement has been terminated by Compaq's refusal to accept direct orders from CTI.
As no genuine issue of material fact exists here, Compaq is entitled to summary judgment dismissing CTI's breach of contract claim. Summary Judgment to Dismiss the Fraud Claim Is Denied
CTI's first claim for relief seeks damages based on Compaq's alleged misrepresentations to CTI that Compaq would enter into an agreement with CTI that properly characterized the nature of the relationship between Compaq and CTI, including by the establishment of an OEM agreement to continue the favorable TOSS pricing that CTI was then obtaining. According to CTI, the representations were false and Compaq never intended to perform at the time it made them. CTI claims that, in reliance on these representations, it assisted Compaq in establishing a presence for Compaq products in the DCC market. Compaq has sought summary judgment dismissing CTI's fraud claim on the grounds that statements of future occurrences or forecasts are not actionable, that CTI has not shown fraudulent intent, and that CTI, as a sophisticated investor, could not have reasonably relied on Compaq's representations. On reply, Compaq has also argued that CTI's fraud claim merely repeats CTI's previously dismissed claim for a breach of an oral contract.
Under New York law, "the essential elements of a common law fraud claim include `a material, false representation, an intent to defraud thereby, and reasonable reliance on the representation, causing damage to the plaintiff.'" Turtur v. Rothschild Registry Int'l, Inc., 26 F.3d 304, 310 (2d Cir. 1994) (quoting Katara v. D.E. Jones Commodities, Inc., 835 F.2d 966, 970-71 (2d Cir. 1987)); see also Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 784 (2d Cir. 2003) (setting forth elements of a claim of fraudulent misrepresentation); Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994); Murray v. Xerox Corp., 811 F.2d 118, 121 (2d Cir. 1987). "The New York Court of Appeals has recognized that `a statement of present intention is . . . a statement of a material existing fact, sufficient to support a fraud action.'" Warner Theatre Assocs. Ltd. P'ship v. Metro. Life Ins. Co., 149 F.3d 134, 136 (2d Cir. 1998) (quoting Channel Master Corp. v. Aluminium Ltd. Sales, Inc., 4 N.Y.2d 403, 407, 176 N.Y.S.2d 259, 262, 151 N.E.2d 833, 835 (1958)).
Compaq claims that any statements made regarding giving CTI a special status "were merely forecasts into the future about what might happen" (Def. Mem. at 15), and as such are not actionable. It is well established that "`[m]ere unfulfilled promissory statements as to what will be done in the future are not actionable'" as fraud. Philips Credit Corp. v. Regent Health Group, Inc., 953 F. Supp. 482, 520 (S.D.N.Y. 1997) (quoting Brown v. Lockwood, 76 A.D.2d 721, 731, 432 N.Y.S.2d 186, 194 (2d Dep't 1980)). However, a failure to perform promised future acts can serve as the basis for a fraud claim where a party establishes that there was an intent not to perform existing at the time that the promise was made. See Cohen, 25 F.3d at 1172; Murray, 811 F.2d at 121; Dooner v. Keefe, Bruyette Woods, Inc., 157 F. Supp.2d 265, 279 (S.D.N.Y. 2001).
In order to establish such a fraudulent intent, a party must demonstrate facts above and beyond mere non-performance. See Brown, 76 A.D.2d at 732-33, 432 N.Y.S.2d at 194-95; see also Greenberg v. Chrust, 198 F. Supp.2d 578, 583 (S.D.N.Y. 2002) ("[Plaintiff's] allegation that the representations were false at the time they were made does not save the claim" nor can fraud be established "by mere allegations that a party failed to perform a promise adequately.").
The gravamen of CTI's claim is that Compaq misrepresented on multiple occasions that CTI would achieve a status that would enable it to continue the discounts it was receiving and made those promises without the intent to fulfill them. As found above, Compaq did contemplate such a re-categorization of CTI's status. CTI has relied on an August 16, 2000 e-mail (the "August 16 e-mail") by a Compaq sales employee, Joanne Sommers ("Sommers"), to establish that Compaq did not intend to fulfill its promise to enter into the promised OEM agreement. The August 16 e-mail, addressed to a CTI employee, states:
These are the prices as is. This is the configuration ELI wanted. If you change anything I will need to go back and get new TOSS Pricing. These configurations come with both Windows 95/98 and NT 4.0. This is a great deal that no one can touch. If I go back to get new pricing they will wonder what is going on?
(Zvi Aff., Ex. 6.) According to CTI, the August 16 e-mail demonstrates that the TOSS pricing CTI received was being concealed from other employees at Compaq and thus shows a specific intent on the part of Compaq not to honor its promise to CTI to establish an agreement whereby Compaq would continue to provide to CTI the special discounted pricing known as TOSS.
Although the temporal connection between the August 16 e-mail allegedly demonstrating Compaq's fraudulent intent and the representations made to CTI by Compaq appears somewhat attenuated, whether the August 16 e-mail establishes Compaq's fraudulent intent with respect to the misrepresentations alleged is a question of fact. Summary judgment cannot be granted where a reasonable jury could conclude that statements were made with a present intent to deceive. See, e.g., Joseph Victori Wines, Inc. v. Vina Santa Carolina S.A., 933 F. Supp. 347, 355 (S.D.N.Y. 1996). Here, it is alleged that Sommers' concealment of the special discounts she gave to CTI is evidence of such an intent which a reasonable jury could find establishes a present intent to deceive. Accordingly, whether Compaq personnel made the representations that Compaq would enter into an agreement with CTI assuring CTI continued discounts knowing those representations to be false, is a genuine issue of material fact.
Contrary to Compaq's suggestion, the fraud claim is not redundant or duplicative of the previously dismissed claim of breach of an oral agreement, as CTI has not merely added an allegation of fraudulent intent but has established sufficient facts to create a factual issue as to whether such intent existed.
Compaq has also contended that summary judgment is warranted because CTI cannot establish that it reasonably relied on the statements made by Compaq prior to the execution of the CAR Agreement. Compaq argues that any representations made to CTI about whether CTI would be permitted to sell to other resellers or receive discounts "in perpetuity" were belied by the express terms of the CAR Agreement. (Def. Mem. at 17.)
As set forth above, CTI's fraud claim is predicated on the representations that Compaq intended to enter into an agreement with CTI that properly characterized the nature of the relationship between the parties which would continue the TOSS pricing offered to CTI. In other words, CTI's fraud claim is not, or at least is not simply, a claim of fraudulent inducement to execute the CAR Agreement. What is at stake here is whether CTI committed effort and resources to developing a presence for Compaq products in the DCC market in reliance on Compaq's representations that a formal agreement reflecting the ongoing business practice between Compaq and CTI was being prepared.
The Second Circuit has stated that "[t]he proper test of reliance in a fraud case is not `reasonable' reliance, it is `justifiable' reliance, a clearly less burdensome test." Gordon Co. v. Ross, 84 F.3d 542, 546 (2d Cir. 1996). However, both the Second Circuit and the New York courts appear to use standards of "reasonable reliance" and "justifiable reliance" interchangeably in adjudicating fraud claims. Compare Indep. Order of Foresters v. Donald, Lufkin Jenrette, Inc., 157 F.3d 933, 940 (2d Cir. 1998) (reasonable reliance); Harsco Corp. v. Segui, 91 F.3d 337, 342 (2d Cir. 1996) (same); Talansky v. Schulman, 2 A.D.3d 355, 361, 770 N.Y.S.2d 48, 54 (1st Dep't 2003) (same); Gizzi v. Hall, 300 A.D.2d 879, 880, 754 N.Y.S.2d 373, 376 (3d Dep't 2002) (same), with Dallas Aerospace, 352 F.3d at 784 (justifiable reliance); Lazard Freres Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1541 (2d Cir. 1997) (same); Cerabono v. Price, — A.D.3d —, 775 N.Y.S.2d 585, 585 (2d Dep't 2004) (same);164 Mulberry St. Corp. v. Columbia Univ., 4 A.D.3d 49, —, 771 N.Y.S.2d 16, 23 (1st Dep't 2004) (same). See also John St. Leasehold v. F.D.I.C., No. 95 Civ. 10174 (JGK), 1996 WL 737196, at *7 n. 4 (S.D.N.Y. Dec. 24, 1996) (collecting cases employing either standard). Regardless of the standard employed, "in order to establish the existence of a fraud the plaintiff must demonstrate that there was some basis for it to have relied on the misrepresentations."Crigger v. Fahnestock Co., Inc., No. 01 Civ. 7819 (JFK), 2003 WL 22170607, at *7 (S.D.N.Y. Sept. 18, 2003) (discussing interchangeability of standards). The question of whether or not reliance was justifiable or reasonable is ordinarily a question of fact to be determined at trial. See, e.g., Stratford Group, Ltd, v. Interstate Bakeries Corp., 590 F. Supp. 859, 865 (S.D.N.Y. 1984).
According to CTI, its reliance on Compaq's representations was warranted since CTI received TOSS pricing on every order which it placed with Compaq and various Compaq employees assured CTI at different times that a new agreement which more accurately represented the nature of the relationship between Compaq and CTI would be prepared by Compaq. It is undisputed that CTI received special pricing on Compaq products for more than a year. The grant and continuation of this special pricing raises a factual issue as to whether CTI was justified in relying on the Compaq representations that an agreement would be created regarding the continuation of such special pricing.
Moreover, during the period from March 2000 through June 2001, 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.
Whether this resulted from reliance on the representations or simply an opportunity to conduct profitable business at the time or in the future is a factual issue which must be construed in CTI's favor in this summary judgment context. Accordingly, Compaq's request for summary judgment on the first claim for relief must be denied. The Economic Loss Doctrine Does Not Bar Recovery
Compaq has also asserted that summary judgment on CTI's fraud claim must be granted as the economic loss doctrine bars recovery by CTI.
New York's economic loss rule restricts plaintiffs "who have suffered `economic loss,' but not personal or property injury, to an action for the benefit of their bargain. If the damages are the type remedial in contract, a plaintiff may not recover in tort." Carmania Corp., N.V. v. Hambrecht Terrell Int'l, 705 F. Supp. 936, 938 (S.D.N.Y. 1989). While "[t]he general rule under New York law is that economic loss is not recoverable under a theory of negligence or strict liability,"American Tel. Tel., Co. v. New York Human Resources Admin., 833 F. Supp. 962, 982 (S.D.N.Y. 1993) (collecting cases), it is not clear that this same rule extends to tort claims sounding in fraud brought under New York law. The parties have not cited to any case in the New York courts applying the economic loss doctrine to an intentional tort, nor has one been found by the Court. See also In re Ford Motor Corp. Vehicle Paint Litig., No. MDL 1063, 1997 WL 539665, at *6-7 (E.D. La. Aug. 27, 1997) (stating that "this Court has found no New York authority applying the economic loss doctrine to an action for fraud" and observing that "New York courts commonly permit fraud claims seeking recovery for economic injuries to proceed") (collecting cases). In the absence of any articulation to the contrary by the New York courts, the economic loss doctrine will not be presumed to extend to fraud claims and, thus, will not bar CTI's fraud claim here. But cf. Shred-It USA, Inc. v. Mobile Data Shred, 222 F. Supp.2d 376, 379 (S.D.N.Y. 2002) (invoking, inter alia, the economic loss doctrine to dismiss a fraud claim but citing only to authority applying the doctrine to strict liability and negligence);Orlando v. Novurania of America, Inc., 162 F. Supp.2d 220, 226 n. 2 (S.D.N.Y. 2001) (commenting that the New York courts have not expressly stated that the economic loss rule does not apply to intentional torts but, seemingly taking this silence to mean that the economic loss rule affirmatively applies, dismissing a fraud claim as "barred by New York's economic loss rule").
In some of the other jurisdictions where the economic loss doctrine has been recognized, intentional torts such as fraud have been excepted from the doctrine's reach. See, e.g.,Geneva Pharm. Tech. Corp. v. Barr Labs., Inc., 201 F. Supp.2d 236, 287 (S.D.N.Y. 2002) ("[I]ntentional torts, such as fraud, are not subject to the economic loss doctrine.") (applying New Jersey law);Orlando v. Novurania of America, Inc., 162 F. Supp.2d 220, 226 n. 2 (S.D.N.Y. 2001) (noting that jurisdictions such as Connecticut have refused to apply the economic loss rule to intentional torts).
The economic loss doctrine should not be confused with the well established principle that, under New York law, a cause of action for fraud generally does not arise where the fraud alleged relates to a breach of contract. See, e.g., Shred-It USA, 222 F. Supp.2d at 379; Salvador v. Uncle Sam's Auctions Realty, Inc. ex rel. Passonno, 307 A.D.2d 609, 611, 763 N.Y.S.2d 360, 362 (3d Dep't 2003); River Glen Assocs., Ltd, v. Merrill Lynch Credit Corp., 295 A.D.2d 274, 275, 743 N.Y.S.2d 870, 871 (1st Dep't 2002);Bazerman v. Edwards, 295 A.D.2d 115, 115, 742 N.Y.S.2d 822, 822 (1st Dep't 2002). CTI has not asserted that Compaq's breach of the CAR Agreement was fraudulent, nor is this a case where a plaintiff merely has reiterated a breach of contract claim in terms of fraud. Rather, CTI has alleged damages suffered as a result of Compaq's representation that it would enter into a written contract with CTI that properly characterized the nature of the relationship between the parties and that would formalize discount pricing, as a consequence of which CTI committed resources and effort to its detriment. CTI's fraud claim does not arise out of a breach of contract and thus may not be deemed redundant. See, e.g., Wallach Marine Corp. v. Donzi Marine Corp., 675 F. Supp. 838, 841 (S.D.N.Y. 1987) (declining to dismiss a fraud claim where "there is an alleged affirmative misrepresentation independent of a breached contract term which distinguishes this pleading from those that simply reiterate a contract breach cast in terms of fraud").
Summary Judgment To Dismiss the Libel Claim Is Denied
Compaq has contended that summary judgment is warranted to dismiss the libel allegation, the second claim for relief, as the statements contained in the June 19 e-mail were true and CTI did not suffer any damages as a result of the e-mail.
Under New York law, a plaintiff must establish five factors to recover on a libel claim:
(1) a written defamatory statement of fact concerning the plaintiff;
(2) publication to a third party;
(3) fault (either negligence or actual malice, depending on the status of the libeled party);
(4) falsity of the defamatory statement; and
(5) special damages or per se actionability (defamatory on its face).Celle v. Filipino Reporter Enterprises Inc., 209 F.3d 163, 176 (2d Cir. 2000); see also Meloff v. New York Life Ins. Co., 240 F.3d 138, 145 (2d Cir. 2001).
Compaq's defense of truth is not sufficient to warrant summary judgment here. CTI has contended that it was not a broker of grey market products and its actions were known and condoned by Compaq. Moreover, the circumstances set forth above suggest that the requirement in the CAR Agreement to sell only to end users was knowingly waived by Compaq, a waiver further suggested by the facts that all of CTI's purchases were made through Compaq as opposed to an Authorized Compaq Channel Partner, as contemplated by the CAR Agreement, and that no request was made that CTI provide any information pertaining to its customers or identify any of its end users. Contrary to the statements contained in the June 19 e-mail, CTI was an authorized reseller of Compaq equipment at the time of the e-mail's issuance. Drawing all inferences in CTI's favor, a genuine factual issue exists as to whether the statements contained in the June 19 e-mail were true or false, precluding summary judgment.
Compaq has claimed that summary judgment should be granted dismissing CTI's libel claim because CTI has not established any damages. However, it is well established that compensable injury is "presumed if the defamatory statement falls within a category of libel per se."Meloff, 240 F.3d at 145; see also Weldy v. Piedmont Airlines, Inc., 985 F.2d 57, 61-62 (2d Cir. 1993). A written statement that "`tends to disparage a person in the way of his office[,] profession or trade'" is libel per se. Davis v. Ross, 754 F.2d 80, 82 (2d Cir. 1985) (quoting Nichols v. Item Publishers, 309 N.Y. 596, 600, 132 N.E.2d 860, 862 (1956) (emphasis in original)); see also Kforce, Inc. v. Alden Personnel, Inc., 288 F. Supp.2d 513, 516 (S.D.N.Y. 2003) ("It has long been the law in New York that a defamatory statement that is a direct attack upon the business, trade or profession of the plaintiff is considered defamation `per se', and therefore actionable without any proof of special damages.") (quoting Yesner v. Spinner, 765 F. Supp. 48, 52 (E.D.N.Y. 1991)) (internal quotation marks omitted); Liberman v. Gelstein, 80 N.Y.2d 429, 435, 590 N.Y.S.2d 857, 860-61, 605 N.E.2d 344, 347-48 (1992) (holding that statements "that tend to injure another in his or her trade, business or profession," inter alia, are slander per se). Compaq's attempt to require CTI to establish damages at this juncture is inappropriate. In Perks v. Town of Huntinqton, 251 F. Supp.2d 1143 (E.D.N.Y. 2003), the court held that summary judgment could not be granted on a libel per se claim based on a failure to enumerate damages, as "a lack of itemized special damages does not doom [a] libel claim. . . ." Id. at 1166.
Accordingly, in light of the allegation that the matter contained in the June 19 e-mail disparaged CTI's business reputation, CTI is not required to establish damages at this stage of the litigation and Compaq's request for summary judgment to dismiss the libel claim for failure to prove damages is denied.
Whether any such damages will equal the amount of the partial summary judgment granted below for goods sold and received is, of course, a factual issue. Realistically, it would appear without deciding that the final balance may well be in Compaq's favor even if all of CTI's claims are established at trial.
Summary Judgment on the Counterclaims is Granted
CTI does not dispute any of the material facts regarding the amount that CTI owes to Compaq on the goods sold and received. CTI received the benefit of the value of those goods. Compaq is therefore entitled to judgment on its counterclaims in the amount of $594,075.53.See, e.g., Austin Travel Group, Inc. v. Karson, 142 A.D.2d 539, 540, 530 N.Y.S.2d 212, 213 (2d Dep' t 1988) (reversing denial of summary judgment on counterclaim for breach of contract).
Summary judgment may be granted on those claims notwithstanding any purported claim CTI might have. "Offset claims do not bar summary judgment on promissory notes or other payment obligations, unless such obligations and the offset claims involve contractually `dependent' promises." Pereira v. Cogan, 267 B.R. 500, 507 (Bankr. S.D.N.Y. 2001); see also Greenblatt v. Prescription Plan Servs. Corp., 783 F. Supp. 814, 823 (S.D.N.Y. 1992) ("[W]here a counterclaim presents an independent, unliquidated claim and presents no issue of fact as to the plaintiff's claim, the entry of summary judgment on plaintiff's claim is not only proper but is required.") (internal quotation marks and citation omitted). As in Greenblatt, CTI's claims are not related to whether CTI owes Compaq money for goods CTI admits it received and resold.
For these reasons, Compaq is granted summary judgment for $594,075.53 on its counterclaims.
Conclusion
For the reasons stated above, Compaq's motion under Rule 56, Fed.R.Civ.P., to dismiss CTI's amended complaint and for summary judgment on its counterclaims against CTI is granted in part and denied in part. If either party desires certification of the claims adjudicated to date pursuant to Federal Rule of Civil Procedure 54(b), a motion to that effect shall be brought within ten (10) days of the entry of this opinion and order.
It is so ordered.