Summary
refusing to permit defendant “to effectively amend its pleadings” where “the bulk of the grounds that [defendant relied] on in its summary judgment motion were not articulated, or even hinted at, in its counterclaim”
Summary of this case from Valentine Properties Associates v. United States Dep't of Hous.Opinion
07 CV 3737 (VM).
December 16, 2008
DECISION AND ORDER
Plaintiff RST (2005) Inc. ("RST") brought this action against defendant Research in Motion Limited ("RIM"), alleging breach of contract. RIM counterclaimed, asserting breach of contract and breach of the covenant of good faith and fair dealing. The parties filed cross-motions for summary judgment on RST's claim and on RIM's counterclaims. For the reasons set forth below, the Court GRANTS in part and DENIES in part RST's motions for summary judgment, and DENIES RIM's motions for summary judgment in their entirety.
I. BACKGROUND
The factual summary that follows is based primarily on the following: the Complaint for Breach of Contract and Demand for Jury Trial, dated May 11, 2007 ("Complaint"); Defendant's Counterclaim and Answer, dated July 13, 2007 ("Counterclaim and Answer"); RST's Statement of Undisputed Material Facts, dated June 27, 2008; RIM's Response to RST's Local Rule 56.1 Statement, dated August 7, 2008; RST's Amended Statement of Undisputed Material Facts, dated September 4, 2008; RIM's Local Rule 56.1 Statement, dated June 27, 2008; RST's Response to RIM's Local Rule 56.1 Statement, dated August 7, 2008; Memorandum of Points and Authorities in Support of RST's Motion for Summary Judgment on Its Cause of Action and on RIM's Counterclaims, dated June 27, 2008; Memorandum of Law in Opposition to RST's Motion for Summary Judgment, dated August 7, 2008 ("RIM Opp'n Mem."); RST's Reply Memorandum in Support of Its Motion for Summary Judgment, dated September 4, 2008 ("RST's Reply Mem."); Memorandum of Law in Support of RIM's Motion for Summary Judgment, dated June 27, 2008 ("RIM Opening Mem."); RST's Memorandum in Opposition to RIM's Motion for Summary Judgment, dated August 7, 2008; Reply Memorandum of Law in Further Support of RIM's Motion for Summary Judgment, dated September 4, 2008; and the declarations in support of the motions for summary judgment filed by RST and RIM. Except where specifically referenced, no further citation to these sources will be made.
A. THE RST-RIM AGREEMENT
RST is a corporation created to manage the 2005-2007 tour of the musical group The Rolling Stones. RST holds the rights to The Rolling Stones's trademarks, logos, photographs, images, and other intellectual property. On October 6, 2005, RST and RIM entered into a licensing agreement (the "Agreement") giving RIM the right, for eighteen months (the "Term"), to use certain licensed properties in connection with a limited-edition Blackberry smartphone. These properties included: the trademark THE ROLLING STONES; the trademark of The Rolling Stones logo; the name of the concert tour "A Bigger Bang"; photographs of The Rolling Stones; the front cover album artwork of The Rolling Stones album "A Bigger Bang"; and video clips of The Rolling Stones (collectively, the "Licensed Properties"). RIM agreed to pay RST a $1 million licensing fee, and to spend $5 million in the development, marketing, and promotion of a limited-edition Blackberry smartphone. The Agreement further stipulated that if RIM spent less than $5 million at the end of the Term, it would pay RST the difference between the amount spent and $5 million.
The Agreement stipulated that RIM would have an exclusive licence for the Licensed Properties, within a certain domain:
During the Term, [RST] will not license the use of the Licensed Properties or any other photograph, image, trademark or service mark of or related to [The Rolling Stones] on any other telephone or personal digital assistant (a so-called "PDA"), the packaging thereof, or in any advertising, promotion or publicity of or for any other telephone or PDA. Further, during the Term, [RST] will not authorize any other manufacturer of telephones or PDAs to hold itself out as a sponsor of the Tour and/or of [The Rolling Stones]. For the avoidance of doubt, the foregoing does not prohibit the sale of ringtones and Digital Images by anyone and would not prohibit [RST] from entering into a sponsorship agreement with any wireless carrier and/or with any wireless content aggregator anywhere in the Territory.
(Declaration in Support of Motion for Summary Judgment ("Stone Decl."), Ex. 3 ¶ 4(a).)
The Agreement also specified that "[RST] has the right to grant the license granted," (id. ¶ 10), that "the Licensed Properties are owned solely and exclusively by [RST] or its licensors," (id.), and that RST "owns or controls all rights in and to the Licensed Properties" (id. ¶ 15(a)). The Agreement further stipulated, "[RIM] will not attack the title of [RST] in and to the Licensed Properties or any copyright or trademark pertaining thereto, nor will [RIM] attack the validity of the license granted hereunder." (Id. ¶ 15(b).)
The Agreement also contained a confidentiality clause, stating that RST and RIM "shall not publicly divulge or announce, or in any manner disclose to any third party, any information or matters revealed to the other pursuant to this Agreement or any of the specific terms and conditions of this Agreement." (Id. ¶ 28.)
B. THE VIRGIN-SANDISK AGREEMENT
Before the Agreement was signed, Virgin Records America ("Virgin Records") entered into a licensing agreement with SanDisk, Inc. ("SanDisk") on September 27, 2005 (the "Virgin-SanDisk Agreement"). The Virgin-SanDisk Agreement allowed SanDisk to use certain Rolling Stones properties, including some of the same properties later licensed to RIM (such as music from the "Bigger Bang" album and still images of The Rolling Stones), in the promotion of a removable flash memory card for use with various electronic devices, including personal computers, mobile telephones, PDAs, and digital cameras. Virgin Records had the right to license the Rolling Stones properties pursuant to an agreement between its parent company, EMI Music ("EMI"), and Promotone B.V. ("Promotone"), a Dutch company that controls Rolling Stones properties. The Virgin-SanDisk Agreement granted SanDisk the exclusive right for a three-year term to manufacture and sell a memory card (the "Gruvi Card") preloaded with the "Bigger Bang" album and other Rolling Stones music.
On the day that the parties executed the Virgin-SanDisk Agreement, SanDisk issued a press release ("the Press Release") with the heading, "Using SanDisk's TrustedFlash Technology, Latest Rolling Stones Album Can Be Played On Smartphones, Palm Devices and Notebook PCS." (Declaration of Gary J. Hacker in Support of Research in Motion Limited's Motion for Summary Judgment ("Hacker Decl."), Ex. 24.) The Press Release referred several times to consumers' ability to use the Gruvi Card in mobile phones and laptop computers, and referred once more to the Gruvi Card's compatibility with PDAs.
C. THE PALM ADVERTISEMENT
On May 13, 2006, a RIM official came across an online advertisement by Palm, Inc. ("Palm"), promoting Palm's offer of a free Gruvi Card with the purchase of a Palm T/X handheld device. The advertisement used some Rolling Stones properties that were the subject of the Agreement, including the trademark THE ROLLING STONES, the trademark of the Rolling Stones logo, a photograph of The Rolling Stones, the name "A Bigger Bang," and the album cover artwork.
In a letter dated June 15, 2006, RIM notified RST that RIM was terminating the Agreement, stating that RST breached the Agreement's exclusivity term when it "granted or . . . permitted the grant of a license of the Licensed Properties . . . in advertising, promotion and/or publicity of Palm, Inc.'s phone/PDA." (Hacker Decl., Ex. 30.)
On June 16 and June 19, 2006, RST sent cease-and-desist letters to SanDisk and Palm. On June 19, 2006, Virgin Records sent a letter to SanDisk stating that SanDisk had violated the Virgin-SanDisk Agreement by authorizing the Palm advertisement. By a letter dated June 19, 2006, RST informed RIM that RST had not authorized the Palm advertisement, and rejected RIM's termination of the Agreement.
The Term ended on April 6, 2007. RIM ultimately did not develop the limited-edition Blackberry contemplated by the Agreement, and did not pay RST the balance of the $5 million that was not spent on developing, promoting, or marketing that product.
RST then filed a complaint in this Court for breach of contract, alleging that RIM had breached the Agreement when it failed to develop the limited-edition Blackberry, and when it did not make the payment required at the end of the Term. RIM filed an answer and a counterclaim for breach of contract and breach of the implied covenant of good faith and fair dealing, alleging that RST allowed Palm to use the Licensed Properties in its advertising campaign, in violation of the Agreement. The parties now cross-move for summary judgment on both actions.
II. LEGAL STANDARD
In connection with a motion under Fed.R.Civ.P. 56, summary judgment is appropriate when the evidence "show[s] that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). A fact is material if it "might affect the outcome of the suit under the governing law."Id. at 248. A factual dispute is genuine where "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id. The role of a court in ruling on such a motion "is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986). The moving party bears the burden of proving that no genuine issue of material fact exists, or that due to the paucity of evidence presented by the non-movant, no rational jury could find in favor of the non-moving party. See Gallo v. Prudential Residential Servs., L.P., 22 F.3d 1219, 1223-24 (2d Cir. 1994). When deciding cross-motions for summary judgment, the standard to be applied "is the same as that for individual summary judgment motions and a court must consider each motion independent of the other." Schultz v. Stoner, 308 F. Supp. 2d 289, 298 (S.D.N.Y. 2004) (internal quotation marks and citation omitted).
III. DISCUSSION
A. RST'S BREACH OF CONTRACT CLAIM
Both parties move for summary judgment on RST's breach of contract claim. The claim is premised on RIM's failure to spend $5 million on developing and promoting a limited-edition Blackberry featuring The Rolling Stones, or to pay RST the balance of the $5 million not expended, as required by the Agreement. The Agreement is governed by New York law. (See Stone Decl., Ex. 3 ¶ 26.)
Although there is no dispute that RIM did not spend $5 million or pay that amount to RST, RIM has asserted as an affirmative defense that RST's material breach of the Agreement relieved RIM of its obligations. See Merrill Lynch Co., Inc. v. Allegheny Energy, Inc., 500 F.3d 171, 186 (2d Cir. 2007) (under New York law, one party's performance under a contract is excused by the other party's material breach). RIM contends that RST materially breached by (1) violating the exclusivity required by the Agreement; and (2) falsely representing that it owned or controlled all of the rights in and to the Licensed Properties. (See RIM Opp'n Mem. at 13-16.) RIM also argues that RST breached the implied covenant of good faith and fair dealing present in all contracts under New York law. (See id. at 16-18.) Finally, RIM asserts several additional affirmative defenses. (See id. at 21-22.)
1. Breach of the Exclusivity Terms
According to the terms of the Agreement, RST would violate the exclusivity provided for in the Agreement (the "exclusivity terms") if RST "license[d] the use of the Licensed Properties . . . on any other telephone or personal digital assistant (a so-called `PDA'), the packaging thereof, or in any advertising, promotion or publicity of or for any other telephone or PDA," or if RST "authorize[d] any other manufacturer of telephones or PDAs to hold itself out as a sponsor of the Tour and/or of [The Rolling Stones]." (Stone Decl., Ex. 3 ¶ 4(a).)
RIM argues that RST breached the exclusivity terms because (1) Virgin Records and SanDisk had already entered into a licensing agreement covering some of the Licensed Properties; (2) The Rolling Stones reviewed and approved the Press Release issued by SanDisk that referred to Palm; and (3) SanDisk and Palm "launched a joint marketing campaign utilizing the same Rolling Stones properties purportedly licensed to RIM on an exclusive basis." (RIM Opp'n Mem. at 14.)
a. The Virgin-SanDisk Agreement
RIM points out that during the negotiations that resulted in the Virgin-SanDisk Agreement, "Rolling Stones representatives were explicitly told that the [Gruvi Card] would be played on mobile devices such as PDAs and mobile phones, that Palm (BlackBerry's biggest competitor at the time) was a `product partner,' and SanDisk planned on instituting joint-marketing campaigns with its product partners, including various handset manufacturers." (RIM Opp'n Mem. at 14 (citing Hacker Decl., Exs. 7, 12, 47 at 101:7-17).) Even viewing these facts in the light most favorable to RIM, the Court finds that the availability of this information to "Rolling Stones representatives" does not amount to a license from RST to Palm, or even a license to SanDisk to permit Palm to use the Licensed Properties. There is no language in the Virgin-SanDisk Agreement authorizing any party other than SanDisk to use Rolling Stones properties. (See Hacker Decl., Ex. 22.) The Virgin-SanDisk Agreement cannot be characterized as extending a license to Palm, and it simply does not authorize Palm to hold itself out as a sponsor of the Bigger Bang tour or of The Rolling Stones. In addition, the flash drive authorized by the Virgin-SanDisk Agreement is certainly not "any other telephone or PDA," nor is SanDisk a "manufacturer of telephones or PDAs." (See Stone Decl., Ex. 3 ¶ 4(a).)
It is not clear that it would be appropriate to equate "Rolling Stones representatives" with RST representatives. RST has objected to RIM's use of the term "The Rolling Stones," pointing out that "there is no such legal entity, whether corporate, limited liability company, partnership, or any other juridically recognzed form." (RST's Response to RIM's Local Rule 56.1 Statement at 1.) RIM maintains that the same lawyers represented the entity controlling the rights to the Rolling Stones properties in both the RST-RIM and Virgin-SanDisk negotiations. (See RIM's Opposition Memo at 5 (citing Hacker Decl., Exs. 20, 25).) The extent to which RST officials were involved in or knew of the Virgin-SanDisk negotiations appears to be a disputed material fact that would prevent RIM from prevailing on summary judgment, even if the Court were to find that the Virgin-SanDisk Agreement, the Press Release, or the later Palm advertisement violated the exclusivity terms.
b. The SanDisk Press Release
The Press Release describing the Gruvi Card contained the heading, "Using SanDisk's TrustedFlash Technology, Latest Rolling Stones Album Can Be Played on Smartphones, Palm Devices and Notebook PCS." (Hacker Decl., Ex. 24.) The text of the Press Release indicated that the Gruvi Card could be used in PDAs. (See id.) RIM contends that the Press Release violates the Agreement's exclusivity terms. RIM makes much of deposition testimony by Michael Cohl, the tour promoter for The Rolling Stones who was involved in the creation of the Agreement, that this reference would have amounted to "publicity" for Palm. (See RIM Opp'n Mem. at 8 (citing Hacker Decl., Ex. 43 at 69:2-71:12).) RIM also points out that a publicist for The Rolling Stones was listed on the Press Release as the Rolling Stones contact, and that the publicist reviewed drafts of the Press Release before approving it for dissemination.
Even drawing reasonable inferences against RST on RIM's motion, the Court declines to find that the Press Release constitutes a breach of the Agreement. Even if RST officials had seen and approved the Press Release, the references to the Gruvi Card's compatibility with Palm devices do not amount to "advertising, promotion or publicity," at least not to any degree that would constitute a material breach of the Agreement. The Press Release itself is not a license or authorization to use the Licensed Properties, and it does not constitute evidence of such.
As discussed above, RIM has not established that "Rolling Stones officials" should be equated with RST officials.
c. The "Joint Marketing Campaign"
Finally, RIM maintains that RST breached the exclusivity terms when SanDisk and Palm "launched a joint marketing campaign utilizing the same Rolling Stones properties purportedly licensed to RIM on an exclusive basis." (RIM Opp'n Mem. at 14.) The Court once again declines to find that this venture constitutes licensing activity by RST in violation of the exclusivity terms. Viewing the facts in the light most favorable to RIM reveals no suggestion that RST approved or authorized the SanDisk-Palm marketing campaign, or gave permission to Palm to use the Licensed Properties in any way. RIM contends that SanDisk "promised" during the Virgin-SanDisk negotiations to launch a joint marketing campaign with Palm, and argues that it was "certainly foreseeable" that such a campaign would occur. (RIM Opp'n Mem. at 14-15.) The possibility of a joint campaign between SanDisk and Palm does not mean, however, that RST granted a license to Palm, or that RST agreed to allow SanDisk to authorize third parties to use Rolling Stones properties. The Virgin-SanDisk Agreement does not authorize these activities, and RIM does not point to anything produced during discovery showing that any RST officials or representatives approved the Palm advertisement. The facts concerning RIM's claim that RST breached the exclusivity terms of the Agreement are not in dispute, and RST is entitled to judgment as a matter of law on the exclusivity breach.
Even if the joint marketing campaign did violate the Agreement, RST would once again encounter a disputed fact in showing that "the Rolling Stones representatives" are the same as RST officials.
2. Ownership or Control of the Licensed Properties
RIM also argues that RST materially breached the Agreement when it falsely represented that it "own[ed] or control[led] all rights in and to the Licensed Properties." (Stone Decl., Ex. 3 ¶ 15(a).) However, RST points out that the Agreement stipulates that RIM "will not attack the title of [RST] in and to the Licensed Properties or any copyright or trademark pertaining thereto, nor will [RIM] attack the validity of the license granted hereunder." (Id. ¶ 15(b)(iii).)
These arguments raise various issues of contract interpretation that will preclude summary judgment for either party, because interpretation of ambiguous contract language is an issue of fact. See, e.g., Echelon Intern. Corp. v. America W. Airlines, Inc., 85 F. Supp. 2d 313, 317 (S.D.N.Y. 2000) ("interpretation of the ambiguous contract falls to the finder of fact"). The requirement that RIM refrain from attacking RST's title requires clarification. RIM's claim that RST did not own or control all of the rights to the Licensed Properties is essentially an argument that RST did not have exclusive ownership or control of those rights; RIM does not allege that RST did not have any ownership or control of those rights. It is not clear that this claim constitutes an attack on RST's title within the meaning of the Agreement, and neither party has addressed this issue. In addition, the parties have not presented arguments as to the continuing applicability of the restriction on attacking title; the Agreement is no longer in force and it is possible that RIM would no longer be precluded from making this argument, if it ever was.
Furthermore, Virgin Records had the right to license at least some of the Licensed Properties pursuant to a contract between EMI and Promotone ("the EMI-Promotone Contract"), but the relationship between Promotone and RST has yet to be established. RST argues that the EMI-Promotone Contract provides that Virgin Records's use of the Rolling Stones properties is subject to the approval of The Rolling Stones. (See RST's Reply Mem. at 9.) The Court has been provided with a heavily redacted copy of this contract, dated April 1, 2003, which appears to concern only the "master recordings" of The Rolling Stones. (See Hacker Decl., Ex. 2 at 1.) The EMI-Promotone Contract also refers to an agreement between EMI and Musidor B.V. ("Musidor"), in which Musidor licensed its ROLLING STONES "trademark and tongue logo" to EMI "solely for the purpose of manufacturing and distributing phonograph records as provided by" that agreement. (Id. at 52.)
Although the parties make no mention of Musidor in their supporting memoranda for their summary judgment motions, there was apparently also an agreement between Musidor and an entity called RST Concerts, Inc. ("RST Concerts"), dated May 1, 2004, in which Musidor granted RST Concerts "certain exclusive rights in connection with" The Rolling Stones musical group and "trade marks and logos connected therewith and the names and likenesses of certain members thereof," (Hacker Decl., Ex. 3 at 1), but "only in connection with the Tour." (Id. at 4.) RST Concerts subsequently assigned these rights to RST (2005) Inc., the plaintiff here. (See Hacker Decl., Ex. 4.) All of these circumstances still leave the exact legal or business relationship between RST and The Rolling Stones very unclear. The extent of RST's control of the Licensed Properties, given Virgin Records's ability to license certain Rolling Stones properties, requires further factual development. This claim involves genuine issues of material fact that prevent either party from receiving judgment as a matter of law.
3. Breach of the Implied Covenant of Good Faith and Fair Dealing
RIM argues that even if RST's conduct does not constitute a breach of "an express duty under the [Agreement]," RST has breached the implied covenant of good faith and fair dealing. (RIM Opp'n Mem. at 16.) As discussed more fully below in the Court's consideration of RIM's counterclaim for breach of the implied covenant of good faith and fair dealing, this argument cannot succeed. It is duplicative of RIM's argument that RST breached the Agreement. See, e.g., ICD Holdings S.A. v. Frankel, 976 F. Supp. 234, 243-44 (S.D.N.Y. 1997) ("A claim for breach of the implied covenant will be dismissed as redundant where the conduct allegedly violating the implied covenant is also the predicate for breach of contract of an express provision of the underlying contract.").
With this argument, RIM appears to be asserting breach of the implied covenant as an affirmative defense. RIM did not articulate this affirmative defense in its answer, but a motion for summary judgment may be regarded as a motion to amend the pleadings if a party is asserting an unpleaded affirmative defense. See Block v. First Blood Assocs., 988 F.2d 344, 350-51 (2d Cir. 1993) (affirming district court's consideration of motion for summary judgment containing unpleaded affirmative defense as a motion to amend under Fed.R.Civ.P. 15(a)).
4. RIM'S Remaining Affirmative Defenses
In addition to material breach by RST, RIM has asserted several other affirmative defenses to RST's breach of contract claim: failure to state a claim; waiver, estoppel, and/or laches; unclean hands and inequitable conduct; and no cognizable injury by RST.
a. Failure to State a Claim
RIM argues that RST has failed to state a claim for breach of contract, but does not elaborate beyond this bare assertion. RST has clearly alleged that RIM failed to pay RST $5 million at the end of the Term, as required under the Agreement. RIM's motion for summary judgment on this affirmative defense is denied, and RST's motion for summary judgment on this affirmative defense is granted.
b. Waiver, Estoppel and/or Laches
Waiver applies as a successful affirmative defense only if the plaintiff intentionally and knowingly waived its right to recovery. See Onanuga v. Pfizer, Inc., 369 F. Supp. 2d 491, 499 (S.D.N.Y. 2005) (waiver "must be clear, unmistakable, and without ambiguity"). RST responded to RIM's June 15, 2006 letter repudiating the Agreement by a letter dated June 19, 2006, rejecting RIM's termination of the Agreement and stating that it expected RIM to fully perform. (See Stone Decl., Ex. 41.) RST filed its breach of contract claim approximately one month after the Term ended. RST clearly has not waived its claim.
RIM's affirmative defense of laches is similarly unavailing. Laches "bars a plaintiff's equitable claim where he is guilty of unreasonable and inexcusable delay that has resulted in prejudice to the defendant." Ivani Contracting Corp. v. City of New York, 103 F.3d 257, 259 (2d Cir. 1997). Laches cannot be a defense to a legal action for damages if the action was commenced within the statute of limitations period. See id. (citing United States v. Mack, 295 U.S. 480, 189 (1935)). The statute of limitations for a breach of contract action in New York is six years, see New York Civil Practice Law Rules § 213, and this action was filed within one month of the breach alleged by RST. Laches is therefore not available to RIM as an affirmative defense.
Nor can RIM succeed on its equitable estoppel affirmative defense. "[E]quitable estoppel is a principle or an affirmative defense that serves to stop another party from denying a material fact." Readco, Inc. v. Marine Midland Bank, 81 F.3d 295, 301 (2d Cir. 1996). Equitable estoppel may be used to "prevent the enforcement of rights which would work fraud or injustice upon the person against whom enforcement is sought and who, in justifiable reliance upon the opposing party's words or conduct, has been misled into acting upon the belief that such enforcement would not be sought." Id. (internal citation and quotation marks omitted).
To prevail on its equitable estoppel defense, RIM must show that RST (1) engaged in conduct which amounts to a false representation or concealment of material facts; (2) intended that such conduct would be acted upon by RIM; and (3) knew the real facts. See Aetna Cas. Sur. Co. v. Aniero Concrete Co., Inc., 404 F.3d 566, 607 (2d Cir. 2005). RIM must also show that it (1) lacked knowledge of the true facts; (2) relied upon RST's conduct; and (3) prejudicially changed its position. See id.
It appears that RIM asserted equitable estoppel as an affirmative defense out of an abundance of caution, and not because there are facts to support a finding that it was misled into taking the course of action that prompted RST to sue. RIM does not allege that it made the decision not to pay RST the $5 million due at the end of the Term (thus changing its position to its prejudice) in reliance on a false representation by RST. In this regard, RIM alleges only that RST made false representations during the negotiations prior to the signing of the Agreement. (See RIM's Opp'n Mem. at 21-22.) Equitable estoppel is not the appropriate affirmative defense in this situation.
RIM's motion for summary judgment on its affirmative defenses of waiver, laches, and equitable estoppel is denied. RST's motion for summary judgment on these grounds is granted.
c. Unclean Hands and Inequitable Conduct
RIM's affirmative defense of unclean hands is also unavailing, because "[u]nclean hands is an equitable defense to equitable claims." Aetna Cas., 404 F.3d at 607 ("Because [the plaintiff] seeks damages in an action at law, [the defendant] cannot avail itself of unclean hands as a defense."). RIM points to an unpublished case from this jurisdiction that seems to allow the defense of unclean hands in a legal action, Insurance Co. of N. Am. v. Milberg Weiss Bershad Specthrie Lerach, No. 95 Civ. 3722, 1996 WL 520902 (S.D.N.Y. Sept. 12, 1996), but that court relied on a case in which the Court of Appeals for the Second Circuit considered and rejected on the merits an unclean hands defense in a legal action, without considering whether the defense was available in a legal action. See Mallis v. Bankers Trust Co., 615 F.2d 68 (2d Cir. 1980). This Court will follow the rule limiting the unclean hands defense to equitable actions as clearly articulated and supported in Aetna Cas., 404 F.3d at 607. RIM's motion for summary judgment on its affirmative defense of unclean hands is denied. RST's motion for summary judgment on this ground is granted.
d. No Cognizable Injury
RIM maintains that RST has suffered no cognizable damages because RST breached the Agreement. This argument is apparently based on the principle that "[a]n essential element of any claim for breach of contract is cognizable injury." Great Lakes Chem. Corp. v. Pharmacia Corp., 788 A.2d 544, 549 (Del.Ch. 2001) (dismissing contract claim where "[n]othing in the complaint links the alleged breach and the claimed injury."). RST has alleged that it did not receive the $5 million due to it at the end of the Term because of RIM's breach. (See Complaint at 3.) This allegation satisfies the cognizable injury requirement. RIM's motion for summary judgment on its affirmative defense of lack of cognizable injury is denied. RST's motion for summary judgment on this ground is granted.
B. RIM's COUNTERCLAIMS FOR BREACH OF CONTRACT AND BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING
The Court now turns to the cross-motions for summary judgment on RIM's counterclaims. Although the analysis from the first set of cross-motions largely applies to these cross-motions as well, the Court must specify, as a threshold matter, which grounds RIM may rely upon in its motion for summary judgment on its counterclaims.
In its memorandum of law supporting its motion for summary judgment, RIM argues that the Virgin-SanDisk Agreement, the negotiations leading up to that agreement, the Press Release announcing it, and the later advertisement by Palm "clearly and unequivocally demonstrate a breach" of the Agreement. (RIM Opening Mem. at 19.) RIM also argues that RST breached the provision in the Agreement representing that RST "owns or controls all rights in and to the Licensed Properties," and that RST breached the confidentiality provision of the Agreement when it disclosed the existence of the Agreement in its June 2006 cease-and-desist letters to SanDisk and Palm. (See id. at 20.)
Many of these claims were not set forth in the original counterclaim filed by RIM. In that document, RIM alleged, "RST has breached the License Agreement and/or the implied covenant of good faith and fair dealing by permitting the Licensed Property to be used by Palm in its advertising campaign for its telephone/PDA and/or by falsely representing that RST `owns and controls all rights in and to the Licensed Properties.'" (Counterclaim and Answer ¶ 6.) The counterclaim specifies that both causes of action (for breach of contract and for breach of the covenant of good faith and fair dealing) are premised upon a specific act by RST: "By permitting the use of the Licensed Properties by Palm in its advertising campaign for the Palm T/X PDA (including the SanDisk GRUVI card) and/or falsely representing that RST `owns and controls all rights in and to the Licensed Properties,' RST has breached the License Agreement," (id. ¶ 18); "By the acts, practices, and omissions described above, RST breached the covenant of good faith and fair dealing and deprived RIM of the benefits it was entitled [to] under the License Agreement." (Id. ¶ 21.)
The bulk of the grounds that RIM now relies on in its summary judgment motion were not articulated, or even hinted at, in its counterclaim, and the Court will not permit RIM to effectively amend its pleadings by considering the new claims for relief presented in the RIM summary judgment motion. Although federal pleading standards are fairly liberal and require only that the defendant be put on notice of the claim, see In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 415 F. Supp. 2d 261, 270 (S.D.N.Y. 2005), RIM specified in its answer only that RIM's underlying causes of action arose when RST allegedly permitted Palm to use the Licensed Properties in an advertising campaign, and when RST falsely represented that it "owns or controls all rights in and to the Licensed Properties." RST was thus given notice that RIM would argue that two particular incidents gave rise to the counterclaim's causes of action.
As grounds for RIM's counterclaims, the Court will therefore consider only the Palm advertisement and RST's allegedly false representation that it "owns or controls all rights in and to the Licensed Properties." Although this determination may seem in apparent tension with the Court's consideration of all of RIM's arguments in the context of RST's motion for summary judgment, cross-motions for summary judgment are to be evaluated separately and individually. See Schultz, 308 F. Supp. 2d at 298.
In RIM's answer to RST's complaint, RIM raised the affirmative defense, "Plaintiff is in material breach of the License Agreement." (Counterclaim and Answer at 8.) This allegation was sufficiently broad to allow the Court to consider all of RIM's arguments about RST's alleged breach of contract in the context of RST's motion for summary judgment. If RIM had used less restrictive language articulating its counterclaims, the Court would be able to consider all of the arguments RIM now presents.
1. Breach of Contract
To prevail on summary judgment for its breach of contract claim, RIM must demonstrate that there is no genuine issue of material fact that the Palm advertisement was, in fact, a licensing of the Licenced Properties by RST. For the reasons stated above in the Court's analysis of RIM's arguments for summary judgment on RST's breach of contract claim, the Court finds that the Palm advertisement does not constitute a breach of the exclusivity terms. Summary judgment for RST on this ground is therefore granted, and RIM's motion for summary judgment on this ground is denied.
However, as discussed above, there are disputed issues of material fact concerning RST's ownership and control of the Licensed Properties. For the reasons stated above, both motions for summary judgment on this aspect of RIM's counterclaim for breach of contract are denied.
2. Implied Covenant of Good Faith and Fair Dealing
In addition to breach of contract, RIM counterclaims that RST breached the implied covenant of good faith and fair dealing. This claim is based upon the same facts underlying the breach of contract claim: "By the acts, practices, and omissions described above, RST breached the covenant of good faith and fair dealing and deprived RIM of the benefits it was entitled [to] under the License Agreement." (Counterclaim and Answer ¶ 21.) The breach of the implied covenant of good faith and fair dealing is therefore duplicative of the breach of contract claim and must be dismissed. See Harris v. Provident Life and Accident Ins. Co., 310 F.3d 73, 80 (2d Cir. 2002) (upholding the district court's dismissal of an implied covenant claim on the grounds that it was duplicative of a breach of contract claim); see also ICD Holdings, 976 F. Supp. at 243-44 ("A claim for breach of the implied covenant will be dismissed as redundant where the conduct allegedly violating the implied covenant is also the predicate for breach of contract of an express provision of the underlying contract."). RIM points to the decision in Xpedior Creditor Trust v. Credit Suisse First Boston (USA) Inc., 341 F. Supp. 2d 258, 272 (S.D.N.Y. 2004), in which the court allowed an implied covenant claim to proceed alongside a claim for breach of contract. Given the numerous cases in this district that have come to the opposite conclusion, see In re Adelphia Commc'n Corp., Bkcy No. 02-41729, 2007 WL 2403553, at *8 n. 53 (Bankr. S.D.N.Y. Aug. 17, 2007) (collecting cases), this Court declines to follow Xpedior, RIM's claim for breach of the implied covenant of good faith and fair dealing is dismissed.
III. ORDER
For the reasons discussed above, it is herebyORDERED that the counterclaim (Docket No. 11) of defendant Research in Motion Limited ("RIM") for breach of the covenant of good faith and fair dealing is DISMISSED; it is further
ORDERED that the motions (Docket No. 21) for summary judgment of plaintiff RST (2005) Inc. are GRANTED in part and DENIED in part; and it is further
ORDERED that RIM's motions (Docket No. 22) for summary judgment are DENIED.
SO ORDERED.