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Konica Minolta Business Solutions, U.S.A., Inc. v. Allied Office Products

December 27, 2006

KONICA MINOLTA BUSINESS SOLUTIONS, U.S.A., INC., PLAINTIFF,
v.
ALLIED OFFICE PRODUCTS, INC. ET AL., DEFENDANTS.



The opinion of the court was delivered by: Judge Graham

This matter is before the Court on the joint Motion of Plaintiff-Counterclaim Defendant Konica Minolta Business Solutions, U.S.A., Inc. ("KMBS") and Third-Party Defendant Gary Ell ("Ell") to: 1) dismiss the Third-Party Complaint filed by Defendants-Third-Party Plaintiffs Allied Office Products, Inc. ("Allied") and Jon McCarthy ("McCarthy") (collectively, "Defendants"); 2) dismiss certain counterclaims contained in Defendants' Joint Counterclaim against KMBS; and, 3) dismiss or stay Defendants' remaining counterclaims pending arbitration ("Motion to Dismiss") (Doc. 13). Defendants filed their opposition to the Motion (Doc. 16). KMBS and Ell filed a Reply Brief supporting their Motion (Doc. 18). Finally, Defendants moved for leave to file a Sur-Reply Brief, which was granted (Doc. 19).

Since the briefing of the Motion to Dismiss, McCarthy filed for Chapter 13 Bankruptcy in this District; consequently KMBS's claims against him on the Guarantee and for unjust enrichment have been stayed pursuant to 11 U.S.C. § 362(a)(1). The Court gave the parties the opportunity to submit memoranda with respect to whether they sought to have the remaining claims and counterclaims stayed pending the resolution of McCarthy's bankruptcy proceedings.

Defendants requested that the Court stay all other claims and counterclaims in this matter due to McCarthy's bankruptcy proceedings, provided that the Court first rule on the pending Motion to Dismiss, as the Court's ruling may be dispositive of some or all of Defendants' counterclaims and third-party claims (Doc. 27). Defendants requested that if the Court grants the Motion to Dismiss, it not stay the proceedings so that they may appeal the Court's ruling or proceed to arbitration, and if the Court denies the Motion to Dismiss it stay all proceedings pending the resolution of McCarthy's bankruptcy proceeding. KMBS and Ell ask that all other pending claims and counterclaims be stayed pending the resolution of McCarthy's bankruptcy proceedings.

For the following reasons, the Motion to Dismiss is GRANTED IN PART AND DEFERRED IN PART. The Court dismisses the Third-Party Complaint against Ell without prejudice, dismisses Allied's 1999 counterclaims with prejudice, and stays Allied's 2004 counterclaims pending arbitration. The Court will defer ruling on whether to stay Mr. McCarthy's defamation counterclaim pending further briefing from the parties. The remaining claims, i.e. KMBS's claims against Allied, are hereby stayed pending the resolution of McCarthy's bankruptcy proceedings.

I. Procedural History

KMBS is a New York corporation with its principal place of business in New Jersey, formed through the merger of Minolta Co., Ltd. and Konica, Inc., in 2003. Ell has been employed by Minolta since 1998 and by KMBS after the 2003 merger. He is an Ohio resident.

Allied is an Ohio corporation with its principal place of business in Ohio. McCarthy is the majority shareholder and CEO of Allied and is an Ohio resident.

Both KMBS and Allied sell or distribute office equipment and accessories including copy machines. The nexus of the parties' relationship is that at certain times relevant to the parties' claims, Allied has been an authorized dealer of products manufactured or distributed by KMBS by virtue of a "dealer agreement."

A. KMBS's Complaint

KMBS lists four causes of action in its Complaint (Doc. 1). First, KMBS alleges Allied failed to pay and is in default on a Promissory Note ("the Note"), executed on or about December 22, 2004, by McCarthy as the President of Allied in the amount of $89,574.06. (Pl.'s Compl. ¶¶ 7-12, Ex. A.) According to the Complaint, the Note was entered into to cover outstanding account receivables that Allied owed to KMBS.

Second, KMBS alleges that Allied and KMBS continued to do business after McCarthy executed the Note, but Allied did not pay on this outstanding account ("the Account") and owes an additional $5,029.89 on top of what Allied owes on the Note. (Pl.'s Compl. ¶¶ 13-16, Ex. B.)

Third, KMBS alleges that McCarthy executed an unconditional personal guarantee ("the Guarantee") in his individual capacity and guaranteed prompt payment of all of Allied's indebtedness to KMBS, including but not limited to the principal, interest and costs on the Note and the Account such that the amount McCarthy owes on the Guarantee is $94,603.95. (Pl.'s Compl. ¶¶ 17-23, Ex. C.) Fourth, KMBS claims Defendants have been unjustly enriched by their failure to pay monies owed to KMBS. (Pl.'s Compl. ¶¶ 24-28.)

This Court has diversity jurisdiction over this matter under 28 U.S.C. § 1332.

B. Defendants' Counterclaims and Third-Party Complaint

Defendants filed a Joint Answer and "Joint and Several Counterclaim and Joint and Several Third-Party Complaint" (Doc. 3). In a subsection entitled "Facts Common to All Claims," Defendants allege that Allied was a dealer of office products manufactured or distributed by KMBS pursuant to a series of "Dealer Agreements" between the parties, including a 1999 Dealer Agreement*fn1 ("1999 Dealer Agreement") (Defs.' Ans., Counterclaim, and Third-Party Compl., Ex. 1) and a 2004 Dealer Agreement ("2004 Dealer Agreement") (Id. at Ex. 2). Allied and KMBS were also parties to other written agreements including: the Major Account Program Representative Agreement ("MAP Agreement") (Id. at Ex. 3), the National Account Pricing Proposal Agreement ("NAPP Agreement") (Id. at Ex. 4), and the Hilliard Church of Christ Agreement (Id. at Ex. 5). Allied alleges counterclaims for breach of contract, tortious interference, and defamation. McCarthy also alleges a counterclaim for defamation.

1. Breach of Contract

a. 1999 Dealer Agreement Allied maintains that it notified "Konica" on or about

November 15, 1999, that a competitor had sold, delivered, and installed a copier within Allied's exclusive sales and maintenance territory in violation of the 1999 Dealer Agreement. "Konica" allegedly failed to compensate Allied or take action against the competitor in violation of the 1999 Dealer Agreement. Defendants attached a copy of the "notice" McCarthy faxed to Fred Slavin of Minolta on November 15, 1999, as Exhibit 6 to their Answer, Counterclaim, and Third-Party Complaint.

b. 2004 Dealer Agreement

Allied claims that KMBS breached the 2004 Dealer Agreement by sending a certified letter to McCarthy on or about June 9, 2005, informing him that Allied breached the 2004 Dealer Agreement by allegedly failing to meet the annual Sales Quota set forth in the 2004 Dealer Agreement (Defs.' Ans., Countercl., and Third-Party Compl., Ex. 7) and through the actions of KMBS representatives who allegedly informed Allied's customers that Allied was no longer an authorized Konica dealer. Defendants attached a letter from Allied's counsel dated July 8, 2005 describing in more detail KMBS's alleged breach. This letter, incorporated into the Counterclaim and Third-Party Complaint as Exhibit 8, states that around June 1, 2005, Ell introduced an Allied competitor to an Allied customer and advised Allied's customer that Allied was no longer an authorized Konica Minolta dealer and that the competitor would be handling the account going forward.

Allied then asserts that KMBS further violated the 2004 Dealer Agreement by accelerating all payments due under the Note on December 7, 2005, as a result of KMBS's wrongful termination of the 2004 Dealer Agreement, and by terminating Allied's "cash with order discount" on September 9, 2005. (Defs.' Ans., Countercl., and Third-Party Compl., Ex. 9.)

Finally, Allied maintains that before and after Allied's counsel sent its July 8, 2005 letter to KMBS, KMBS and Ell intentionally and maliciously took action to violate the rights "guaranteed to Allied under the 2004 Dealer Agreement," the MAP agreement, the NAPP agreement, and the Hilliard Church of Christ Agreement.

2. Tortious Interference

a. 1999 Claim

Allied alleges that KMBS interfered with its existing and prospective business relationships and business opportunities by refusing to take action after the November 15, 1999 notification of the competitor's sale and installation of a Konica Minolta product in Allied's sales territory.

b. 2004 Claims

Allied claims that after KMBS wrongfully declared that Allied breached the 2004 Dealer Agreement, KMBS took "certain actions" against Allied that deprived it of its contractual rights to service and maintain equipment leasing agreements with the Hilliard Church of Christ under the MAP and Hilliard Church of Christ Agreements and consequently interfered with its relationships with the Hilliard Church of Christ.

Allied then claims that it was a party to at least thirty separate equipment leasing agreements with Micro Electronics, Inc. ("Micro Electronics"), and that those agreements were subject to the terms and conditions of the NAPP Agreement. Allied claims that KMBS and Ell tortiously interfered with the existing Micro Electronics agreements and Allied's future business relationship with Micro Electronics.

Finally, Allied asserts that in the spring of 2005, Tim McElfresh ("McElfresh") told Ell he was considering going back to work at Allied, to which Ell allegedly replied that McElfresh should avoid Allied and McCarthy and that KMBS had pulled accounts from Allied. Ell also allegedly told McElfresh that Allied was having financial problems and that KMBS intended to terminate Allied as an authorized dealer. McElfresh, allegedly based on Ell's information, decided against working for ...


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