156 F. Supp. 3d 569
M.D. Penn.2016Background
- IMAX (Plaintiff) leased a 3D IMAX projection system to The Capital Center/Whitaker Center (Defendant) under a lease originally from 1996, amended multiple times, with a 2004 Amendment extending the term to Sept. 8, 2019.
- The Agreement required annual maintenance fees and a monthly minimum rent (greater of 7% box office or $75,000); it contained an acceleration clause on default, a conspicuous-seeming disclaimer of implied warranties, and an integration clause.
- The 2004 Amendment included an upgrade (Quick Turn Reel Unit) and a provision allowing Defendant to lease future IMAX digital projection technology at market-equivalent pricing.
- Defendant stopped making payments (maintenance fee and minimum rent) in 2014; IMAX notified default, demanded cure, repossessed the system after no cure, and terminated the Agreement, demanding accelerated rent for remaining term.
- Defendant counterclaimed and defended by alleging mutual mistake, frustration of purpose, that IMAX could not seek accelerated rent while in possession, and that the warranty disclaimer was not conspicuous. IMAX moved for judgment on the pleadings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Mutual mistake | No mutual mistake; alleged error concerns future events (film technology), not a present fact | Entered 2004 Amendment expecting system would play Hollywood 3D throughout term; new technology made system obsolete | Court: No mutual mistake — Defendant’s claim depends on future prediction; Agreement contemplated upgrades, so mistake doctrine fails |
| Frustration of purpose | Purpose not frustrated; parties anticipated upgrades and Defendant continued using system long after amendment | Purpose (to show Hollywood 3D) frustrated by later digital technology making system unusable for that goal | Court: Frustration inapplicable — no unexpected intervening event; contract contemplated future tech changes |
| Repossession and acceleration of rents | IMAX may accelerate minimum rent per contract despite possession because Defendant voluntarily returned system and IMAX did not accept surrender; court not asked to award double recovery | IMAX in possession so cannot accelerate rent or get both possession and accelerated rent | Court: IMAX may seek acceleration of Minimum Rent; repossession here does not show acceptance of surrender. But IMAX may not accelerate the annual maintenance fee (not covered by acceleration clause and would cause unjust enrichment) |
| Disclaimer of implied warranties | Disclaimer is conspicuous and valid, barring implied warranty claims | Disclaimer insufficiently conspicuous; Defendant relied on implied warranty of fitness for playing Hollywood movies | Court: Disclaimer enforceable (boldface and standalone paragraph); counterclaim for breach of implied warranty fails |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard for plausibility under Rule 12)
- Sikirica v. Nationwide Ins. Co., 416 F.3d 214 (3d Cir. 2005) (Rule 12(c) standard: view pleadings in non-movant's favor)
- Mele v. Federal Reserve Bank of New York, 359 F.3d 251 (3d Cir. 2004) (judgment on the pleadings standard)
- DiCarlo v. St. Mary Hosp., 530 F.3d 255 (3d Cir. 2008) (procedural standards for motions on pleadings)
- M. Leff Radio Parts, Inc. v. Mattel, Inc., 706 F. Supp. 387 (W.D. Pa. 1988) (mistake claim premised on expected future production is a prediction, not a voiding mutual mistake)
- Finkle v. Gulf & W. Mfg. Co., 744 F.2d 1015 (3d Cir. 1984) (lessor’s remedies: repossession vs. acceleration and risk of double recovery)
- Onal v. BP Amoco Corp., 275 F. Supp. 2d 650 (E.D. Pa. 2003) (acceptance of surrender requires conduct adverse to lessee’s possessory rights)
- Hornberger v. General Motors Corp., 929 F. Supp. 884 (E.D. Pa. 1996) (factors supporting conspicuousness of a disclaimer)