Symquest Grp., Inc. v. Canon U.S.A., Inc.

186 F.Supp.3d 257

Symquest Group, Inc., Plaintiff,

v.Canon U.S.A., Inc., Defendant.

CV 15-4200

United States District Court, E.D. New York.

Signed May 16, 2016

GIBBONS P.C., BY: Philip W. Crawford, Esq., Robert C. Brady, Esq., Christopher T. Basilo, Esq., Kevin W. Weber, Esq., One Pennsylvania Plaza, 37th Floor, New York, NY 10119, Attorneys for Plaintiff.

DORSEY & WHITNEY LLP, BY: Richard H. Silberberg, Esq., Christopher George Karagheuzoff, Esq., Dai Wai Chin Feman, Esq., 51 West 52nd Street, New York, NY 10019, Attorneys for Defendant.

MEMORANDUM AND ORDER

WEXLER, District Judge

This diversity action was commenced by the Plaintiff, SymQuest Group, Inc. ("SymQuest"), against the Defendant, Canon U.S.A., Inc. ("Canon"), on July 17, 2015, alleging a number of claims arising from Canon's termination of its Office Imaging Retail Dealer Agreement with SymQuest due to SymQuest's change in ownership. After being denied both a temporary restraining order and a preliminary injunction, SymQuest amended its Complaint on September 30, 2015.

Before the Court is Canon's motion to dismiss all but one claim in SymQuest's First Amended Complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6). SymQuest opposes the motion. For the following reasons, Canon's partial motion to dismiss is granted in its entirety.

BACKGROUND

SymQuest is a full-service office imaging equipment distributor that designs, installs and supports various business technologies pertaining to the flow of information of both electronic and physical communications. (1st Am. Compl. ¶ 1.) Canon is one of the largest manufacturers and distributors of office imaging equipment in the United States, whose products consist primarily of multi-function printers, standard printers, copiers and scanners. (Id. ¶ 5.)

In 1996, SymQuest became a Canon dealer, selling various types of office imaging equipment distributed by Canon. (Id. ¶ 7.) The relationship was not exclusive and since at least 1999, SymQuest has sold products manufactured by Canon's direct competitors as well. (Id.)

On or about February 26, 1999, SymQuest and Canon entered into an "Office Imaging Retail Dealer Agreement" (the "Dealer Agreement"), pursuant to which Canon would sell to SymQuest Canon-brand office equipment and SymQuest would resell that equipment and thereafter perform warranty and service work on that equipment for the end-user. (Id. ¶¶ 11–12.) Pursuant to the Dealer Agreement, SymQuest also agreed to purchase accessories, supplies and spare parts from Canon. (Id. ¶ 13.) The designation as an authorized dealer provided SymQuest with preferential pricing terms and other benefits from Canon. (Id. ¶ 14.)

Under the terms of the Dealer Agreement, SymQuest was required to conduct business and service operations only from authorized sales and service locations, as designated by Canon. (Id. ¶ 15.) The Dealer Agreement also obligated SymQuest to use its best efforts to promote and market Canon-brand office imaging products, including any accessories, supplies and spare parts. (Id. ¶ 16.) SymQuest was further required to maintain a satisfactory inventory of product models and to maintain and operate fully staffed and stocked sales locations. (Id.)

Pursuant to the Dealer Agreement, SymQuest was not permitted to sell any product unless it was able to provide services following the sale of said product. (Id. ¶ 17.) In connection with this requirement, the Dealer Agreement obligated SymQuest to provide a full range of repair equipment for all products that it sold. (Id. ¶ 18.) The Dealer Agreement further required SymQuest to provide Canon original equipment manufacturer ("OEM") parts and supplies to end-users to whom it sold Canon copiers. (Id. ¶ 19.)

The Dealer Agreement also imposed various obligations upon SymQuest with respect to service and maintenance of the Canon-brand products that SymQuest sold. For example, SymQuest was required, at its own expense, to create and maintain a "Service Organization" for the installation, maintenance and repair of Canon products at each authorized location by employing competent service-trained technicians and maintaining an adequate inventory of parts and supplies. (Id. 11 20–21.) The Dealer Agreement required SymQuest to service Canon end-users within four hours of a customer's request. (Id. 22.)

To fulfill its service and maintenance obligations, SymQuest entered into Maintenance Agreements with its customers that lease or purchase Canon products. (Id. ¶ 24.) The Maintenance Agreements are typically for a five-year term and were negotiated based on SymQuest's belief that it would have access to all of the supplies, software and information needed to service Canon products.(Id. ¶¶ 25–26.) SymQuest completes approximately 25,000 service calls per year, of which approximately 14,000 are for Canon products. (Id. ¶ 29.)

In early 2015, SymQuest sought new investors and invited Canon, Xerox, Konica Minolta Business Solutions U.S.A., Inc. ("Konica Minolta") and Kyocera, as well as two private equity firms, to submit formal offers by March 11, 2015. (Id. ¶ 44.) Canon did not make an offer to invest in SymQuest. (Id.) At its Board of Directors meeting on June 1, 2015, SymQuest approved the bid submitted by Konica Minolta for the purchase of 100% of SymQuest's stock, although SymQuest would remain a separate corporate entity. (Id.) SymQuest advised Canon of the stock purchase on June 2, 2015. (Id.)

By letter dated June 9, 2015, Canon terminated the Dealer Agreement, effective immediately. (Id. ¶¶ 45–46.) The termination letter advised SymQuest that it must cease using Canon's name and any reference to its status as an authorized dealer, as well as return all demonstration and loaner equipment, copies of price lists, promotional literature and technical information. (Id. ¶ 46.) The termination letter went on to state that SymQuest would have a one-time opportunity to purchase Canon brand equipment on June 12, 2015 and would thereafter no longer be able to purchase any new equipment from Canon. (Id.) Finally, SymQuest was advised that it would have a one-time opportunity to purchase Canon-brand spare parts and supplies on June 26, 2015 and would thereafter no longer be able to purchase any more Canon-brand parts and supplies. (Id.) SymQuest was required to pay in cash for these one-time purchase opportunities upon placement of the orders and no discounts or rebates were applicable. (Id.)

On June 11, 2015, Canon terminated SymQuest's access to its E–Support, which is Canon's dealer-only website for trained and authorized technicians. (Id. ¶ 47.) That same day, Canon terminated SymQuest's right of entry to several other related web portals, including Canon's License Management Site—where SymQuest activated licenses that it purchased and software already loaded on devices—and Canon's ImageWare Remote, which provides updates on customer's meter reads, equipment error codes and waste toner information. (Id. ¶ 48.)

After the parties participated in a contractually required mediation, Canon temporarily restored SymQuest's access to the web portals. (Id. ¶ 49.) However, at the close of business on July 14, 2015, Canon once again terminated SymQuest's access to E–Support, ImageWare Remote and Canon's License Management Site. (Id. ¶ 50.) Without access to Canon's web portals, SymQuest's ability to service its end-users of Canon products is seriously impaired. (Id. ¶ 51.)

SymQuest commenced the within action on July 17, 2015 with the filing of a Complaint and an Order to Show Cause requesting a preliminary injunction. By Report and Recommendation dated August 7, 2015, Magistrate Judge Locke recommended that SymQuest's application for a preliminary injunction be denied for failure to demonstrate both irreparable harm and a likelihood of success on the merits. After no objections were filed, the Court adopted Magistrate Locke's recommendation by Memorandum and Order dated August 25, 2015. On September 30, 2015, SymQuest amended its Complaint, alleging the following six causes of action: (1) breach of contract; (2) unjust enrichment; (3) breach of the implied covenant of good faith and fair dealing; (4) tortious interference with contract; (5) tortious interference with business relations; and (6) unfair competition. Canon now moves to dismiss all but SymQuest's unjust enrichment claim.

DISCUSSION

I. Legal Standard

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "Facial plausibility" is achieved when the "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). As a general rule, the court is required to accept as true all of the allegations contained in the complaint. See Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ; Kassner v. 2nd Ave. Delicatessen, Inc., 496 F.3d 229, 237 (2d Cir.2007).

However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements ... are not entitled to the assumption of truth." Iqbal, 556 U.S. at 678–79, 129 S.Ct. 1937 (citation omitted); see also Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (stating that the Court is "not bound to accept as true a legal conclusion couched as a factual allegation"). "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations," which state a claim for relief. Iqbal, 556 U.S. at 679, 129 S.Ct. 1937. A complaint that "tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement’ " will not suffice. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 557, 127 S.Ct....