Hadami, S.A. v. Xerox Corp.
272 F. Supp. 3d 587
S.D.N.Y.2017Background
- Hadami (Paraguayan reseller formed by Chung) alleges Xerox (New York corp.) orally promised Hadami exclusivity as a reseller of low‑volume Xerox office machines in Paraguay; Hadami closed its prior business and invested in selling Xerox products.
- From 2009–2014 Hadami obtained letters from Xerox identifying it as an authorized reseller; Hadami later discovered other low‑priced "grey market" sellers (e.g., Alternativa, EAG) submitting authorization letters and winning government bids.
- Hadami informed Xerox; Xerox repeatedly told Hadami it had not authorized those sellers and promised to intervene; Hadami, encouraged by Xerox, spent ~$215,000 litigating against the grey market bidders and won some challenges.
- Hadami later alleges Xerox in fact authorized or supported those grey market resellers (including issuing authorization letters and entering an agreement with Alternativa), benefitting from increased sales while misleading Hadami.
- In 2014 Xerox sent three letters to Hadami: two appointing Hadami as an authorized reseller and an undated "Bridge Program" letter labeling Hadami a non‑exclusive authorized reseller (one copy later produced signed by Xerox). Hadami sued asserting breach of contract, breach of implied covenant, gross negligence, fraud, and tortious interference.
- On Xerox’s Rule 12(b)(6) motion, the court accepted the complaint’s factual allegations as true for pleading purposes and applied New York law (per the parties/agreements).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of alleged 2009 oral exclusivity agreement | Hadami: an oral exclusivity agreement existed making it the exclusive low‑volume Xerox reseller in Paraguay | Xerox: the oral agreement is unenforceable under the statute of frauds or, if terminable at will, its conduct cannot breach it | Court: Oral agreement fails — either terminable at will (no breach) or of indefinite duration and barred by statute of frauds (dismissed) |
| Breach of 2014 Undated Letter (contractual obligations) | Hadami: Xerox breached specific duties in the Undated Letter (sales plans, training, notice of policies) | Xerox: allegations are conclusory and lack factual specificity to show breach | Court: Dismissed — allegations are conclusory and insufficient to state a breach |
| Breach of implied covenant of good faith and fair dealing | Hadami: Xerox acted in bad faith and frustrated Hadami’s expected benefits under agreements | Xerox: no enforceable contract for implied covenant or the 2014 letters disavow exclusivity | Court: Dismissed — no viable underlying contract/exclusivity and allegations duplicate contract claims |
| Fraud based on misrepresentations about support for grey market sellers | Hadami: Xerox repeatedly represented it was not authorizing grey market sellers; Hadami relied and incurred litigation costs; those statements were false because Xerox authorized/supporting those sellers | Xerox: fraud duplicative of contract claims and fails Rule 9(b) particularity | Court: Denied as to fraud — pleadings sufficiently allege material false statements, reasonable reliance, damages, and facts giving rise to strong inference of intent; fraud survives Rule 9(b) |
| Gross negligence | Hadami: Xerox owed a duty not to cause harm and acted with reckless disregard by supporting grey market | Xerox: no independent duty beyond contract; negligence claims are not cognizable for contractual performance | Court: Dismissed — no independent duty alleged; claim arises from contractual relationship |
| Tortious interference with prospective economic advantage | Hadami: Xerox intentionally interfered with Hadami’s relationships (e.g., Paraguayan government) using dishonest means | Xerox: no wrongful conduct directed at third parties; conduct aimed at increasing sales, not harming Hadami | Court: Dismissed — insufficient allegations of wrongful targeted conduct or improper means toward specific third parties |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (legal conclusions not entitled to assumption of truth)
- Eternity Glob. Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168 (elements of fraud and application of Rule 9(b))
- Acito v. IMCERA Grp., Inc., 47 F.3d 47 (requirements for pleading scienter/strong inference of fraud)
- Lerner v. Fleet Bank, N.A., 459 F.3d 273 (methods for establishing fraudulent intent)
- Maricultura Del Norte v. World Bus. Capital, Inc., 159 F. Supp. 3d 368 (fraud cannot simply duplicate breach of contract claims)