2016 WL 5349785
E.D.N.Y.2016Background
- Canon, a New York corporation and exclusive U.S. wholesaler of Canon-brand equipment, contracts with independent authorized retail dealers under standardized Dealer Agreements that include a New York choice-of-law clause and a one-year limitations carve‑out for suits "for payment of the purchase price of the products."
- Canon administers a Canon Strategic Marketing Plan (CSMP) that awards monetary credits to dealers for placing multiple units with identified large end‑user (CSMP) customers; dealers document placements by serial number and seek credits from Canon.
- Canon alleges four dealers (Cavin’s, Élan, Zeno, Lioce) submitted false documentation claiming placements with CSMP customers to obtain unearned CSMP credits and thereby avoid paying full purchase prices; Canon sought audits, some refused, one partial audit revealed over $2 million in credits.
- Canon brought breach of contract and common‑law fraud claims against each dealer and statutory consumer‑protection claims under North Carolina, Nevada, and Florida laws in three of the actions.
- Defendants moved to dismiss under Fed. R. Civ. P. 9(b), 12(b)(1), and 12(b)(6), arguing the one‑year contractual limitations bar most breach claims, that fraud claims are duplicative of contract claims, and that the New York choice‑of‑law clause forecloses the out‑of‑state consumer‑protection claims.
- The court denied dismissal of the breach claims (finding factual issues about whether the CSMP credits fall within the "payment of the purchase price" carve‑out), dismissed the fraud claims as duplicative of contract claims, and dismissed the state consumer‑protection claims based on the enforceable New York choice‑of‑law provision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Dealer Agreements’ one‑year limitations bar Canon’s breach claims | Canon: CSMP credits effectively reduce purchase price; recouping unearned credits is payment of purchase price, so carve‑out applies | Defendants: Credits are rewards/credits for future purchases; dispute is not for payment of purchase price, so one‑year bar applies | Denied dismissal: factual record required to decide whether credits fall within the carve‑out; cannot decide on pleadings |
| Whether Canon’s common‑law fraud claims survive alongside breach claims | Canon: Dealers misrepresented placements; also asserts superior knowledge creating separate duty to disclose | Defendants: Fraud is duplicative of contract breach; no separate duty or extraneous misrepresentation | Dismissed: fraud duplicates contract claim; no separate legal duty or collateral misrepresentation adequately pleaded |
| Whether out‑of‑state consumer‑protection claims can proceed despite New York choice‑of‑law clause | Canon: state UDTP statutes reflect fundamental public policies of their states and should apply | Defendants: Parties agreed to New York law; clause is enforceable and precludes bringing NC/NV/FL statutory claims | Dismissed: New York choice‑of‑law enforced; plaintiff did not show application of NY law violates fundamental public policy or that other states have materially greater interest |
| Pleading standard and consideration of contract documents on motion to dismiss | Canon: factual allegations suffice under Twombly/Iqbal; Dealer Agreements incorporated | Defendants: ask dismissal based on contract terms and limitations | Court applied Rule 12(b)(6) standards, considered the Dealer Agreements, and allowed breach claims to proceed but dismissed fraud and statutory claims |
Key Cases Cited
- Cleveland v. Caplaw Enters., 448 F.3d 518 (2d Cir. 2006) (pleading standard and inferences on motion to dismiss)
- Nechis v. Oxford Health Plans, 421 F.3d 96 (2d Cir. 2005) (Rule 12(b)(6) standards)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (two‑pronged plausibility framework)
- Subaru Distributors Corp. v. Subaru of Am., Inc., 425 F.3d 119 (2d Cir. 2005) (courts may consider documents integral to the complaint)
- Clark‑Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382 (N.Y. 1987) (tort requires duty independent of contract)
- Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13 (2d Cir. 1996) (fraud must be collateral/extraneous or show separate duty/special damages)
- Welsbach Elec. Corp. v. MasTec N. Am., Inc., 7 N.Y.3d 624 (N.Y. 2006) (enforcement of contractual choice‑of‑law clauses)
- Hartford Fire Ins. Co. v. Orient Overseas Containers Lines (UK) Ltd., 230 F.3d 549 (2d Cir. 2000) (apply chosen law absent public policy violation)