Comprehensive Manufacturing Associates, LLC v. SupplyCore Inc.

Filing 53

DECISION and ORDER. CMA's motion to dismiss Supply Core's counterclaims, Dkt. No. 41 , is DENIED. Signed by Senior District Judge Thomas J. McAvoy on 8/23/2016. (lah)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
---------- --------------------COMPREHENSIVE MANUFACTURING
ASSOCIATES,
Plaintiff,
v.

3:15-CV-835

SUPPLYCORE, INC.,

Defendant.
------------------------------THOMAS J. McAVOY
Senior United States District Judge
DECISION and ORDER
Before the Court is Plaintiff’s motion to dismiss Defendant’s counterclaims. See
dkt. # 41. The parties have briefed the issues and the Court has determined to decide
the matter without oral argument.
I.

BACKGROUND
This matter concerns a contract dispute between two manufacturers. Plaintiff

Comprehensive Manufacturing Associates (“CMA”) brought a breach of contract action
against Defendant SupplyCore, Inc. (“Supplycore”). CMA is a supplier and assembler
of fabricated parts. See dkt. # 16, Amended Complaint, at ¶. SupplyCore, one of
CMA’s customers, specializes in Armed Forces logistics and supply chain
management. Id. at ¶ 8. CMA alleges that SupplyCore breached the parties’ contract
in late 2014 by cancelling purchase orders. Id. at ¶ 33.
After being served with the complaint, SupplyCore brought a motion to dismiss.
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The parties disagreed about the terms of their agreement. CMA argued that the parties
formed a contract in late 2014, obligating SupplyCore to abide by CMA’s contract terms.
SupplyCore disagreed, contending that CMA was bound by SupplyCore’s terms, which
included an agreement to arbitrate. The Court concluded that CMA’s contract terms
controlled the present dispute. See Decision and Order, dkt. # 35.
Plaintiff then filed an Amended Complaint, which seeks $129,315.42 in damages
from the cancelled contracts, as well as interest, attorney’s fees, witness fees and court
costs. See Amended Complaint, dkt. # 16. Defendant answered and raised three
counterclaims: 1) unjust enrichment, 2) recoupment, 3) breach of the implied duty of
good faith and fair dealing. See Answer to Amended Complaint, dkt. # 37 at pp. 12-13.
Plaintiff now moves to dismiss Defendant’s counterclaims pursuant to Federal Rule of
Civil Procedure 12(b)(6). See SupplyCore’s Motion to Dismiss, dkt. # 41.
II.

LEGAL STANDARD
CMA has filed a motion to dismiss SupplyCore’s counterclaims pursuant to

Federal Rule of Civil Procedure 12(b)(6). In addressing such motions, the Court must
accept “all factual allegations in the [Defendant’s counterclaims] as true, and draw all
reasonable inferences in the [Defendant’s] favor.” Holmes v. Grubman, 568 F.3d 329,
335 (2d Cir. 2009). This tenet does not apply to legal conclusions. Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). “Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.” Id. at 678. “To survive a
motion to dismiss, a [counterclaim] must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face.” Id. (quoting Bell Atl. v.
Twombly, 550 U.S. 544, 570 (2007)).
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The Court considers the parties’ contract and related purchase ag reements as
incorporated into the complaint. See SupplyCore’s Motion to Dismiss, dkt. # 41, pp. 166. A complaint is “deemed to include any written instrument attached to it as an
exhibit or any statements or documents incorporated in it by reference.” See Int’l
Audiotext Networks, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995). Further,
in cases where the complaint is “replete with references to the contracts” and where the
parties request “judicial interpretation of [contract’s] terms,” courts look to relevant
documents outside the face of the complaint. See Chambers v. Time Warner, Inc., 282
F.3d 147, n. 4 (2d Cir. 2002).
III.

ANALYSIS
Plaintiff CMA moves to dismiss Defendant Supplycore’s counterclaims. The

Court will address the issues as appropriate.
A.

Breach of Implied Duty of Good Faith and Fair Dealing
i.

Factual Background

This dispute arose when Defendant SupplyCore cancelled four purchase orders
with Plaintiff CMA. SupplyCore originally contracted with CMA to obtain manufactured
parts. See SupplyCore’s Counterclaims, dkt. # 37, at ¶ 1. SupplyCore planned to use
the manufactured parts to fulfill a separate contract with the Defense Logistics Agency
(“DLA”), the largest logistic combat support agency within the Department of Defense.
Id. at ¶ 2. The DLA was not privy to the contract between SupplyCore and CMA.
SupplyCore alleges that during negotiations, and when CMA accepted the purchase
orders in question, “CMA understood that SupplyCore was placing orders in

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connection” with a contract with a federal agency. Id. at ¶ 4. SupplyCore alleges
further that “CMA understood that the federal government could impose certain
inspection requirements on the manufacturers of its parts, and that . . . it would be
required to submit to . . . inspections.” Id. at ¶ 5. SupplyCore alleges that CMA knew
that “SupplyCore believed CMA intended to fulfill all of the obligations attendant to
manufacturing parts in connection with the federal government, including inspection by
[the] DLA.” Id. at ¶ 6.
SupplyCore further alleges that “CMA led SupplyCore to believe that it would
permit federal government agencies to inspect its . . . facility.” Id. at ¶ 10. SupplyCore
made “advance payments” to CMA totaling $91,984.40. Id. at ¶ 11. After accepting
advance payment, CMA refused to allow the Defense Contract Management Agency
(“DCMA”) (the inspection department of the DLA) to inspect its facility, citing “business
supply chain information” and “intellectual property” concerns. Id. at ¶ 14. As a result
of CMA’s refusal, SupplyCore issued a stop-work order to CMA on March 4, 2015. Id.
at ¶ 15. A month later, SupplyCore sent a termination notice to CMA, citing CMA’s
refusal to allow the DCMA inspection “despite leading SupplyCore to believe that it
would [submit to inspection].” Id. at ¶ 18. CMA retained the $91,984.40 in adv ance
payments.
CMA points to several clauses in the parties’ contract that justify its retaining
SupplyCore’s advance payments. In relevant part, the agreement provides that, “[n]o
inspections shall be conducted at CMA or at their vendors.” See Amended Complaint,
dkt. # 16, at ¶ 31. CMA interprets this clause to mean “no inspections means no
inspections,” even by the federal government. “On its face, the ‘INSPECTIONS &
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ACCEPTANCE’ clearly prohibits all inspections at CMA’s premises, whether by
SupplyCore, the U.S. Government or anyone else. ‘No inspections’ means just that.”
See CMA Memorandum of Law (“CMA’s Brief”), dkt. # 48, at 9. SupplyCore contends
that CMA breached the contract when they refused the DLA inspection. CMA replies
that SupplyCore is subject to CMA’s cancellation policy, and that the contract provides
CMA with the right to refuse inspection. The cancellation policy provides that:

CMA provides parts and assemblies that are manufactured to their customer’s
specifications and are thus considered Non-Cancelable Non-Returnable. In the
event of a cancellation of any order by seller for default of purchaser, purchaser
shall be liable for reasonable cancellation costs, including but not limited to . . .
Raw Materials, Non-Cancelable Non-Returnable materials, Tooling and Set-Up
Charges, but said cancellation costs shall be not less than 25% of the total
Purchase Order value . . . In the event of cancellation of any order by purchaser
for non-default of seller, purchaser shall be liable for reasonable cancellation
costs, including but not limited to . . . Raw Materials, Non-Cancelable
Non-Returnable materials, Tooling and Set-Up Charges, but said cancellation
costs shall be not less than 25% of the total Purchase Order value.

CMA’s Memorandum of Law in Reply to SupplyCore’s Opposition, dkt. # 48, at 3. By
virtue of this policy, CMA seeks $129,315.42 in damages
ii.

Analysis

SupplyCore’s first counterclaim alleges that CMA breached the implied duty of
good faith and fair dealing by refusing to allow the DCMA to inspect its manufacturing
facility. SupplyCore alleges that “CMA breached this obligation when it unreasonably
refused to allow the DCMA, which was not a party to its agreement with SupplyCore, to
inspect its manufacturing facility, even though CMA’s unreasonable refusal in this
regard frustrated SupplyCore’s rights to the benefits of the agreement.” See
SupplyCore’s Answer, dkt. # 37 at ¶ 31. SupplyCore argues that the inspections and
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acceptance provision of the contract only applies to purchasers, and does not cover
third parties – in this case the DCMA. SupplyCore points to the lack of language in the
contract referencing third parties as evidence for the claim that the contract does not
bind the DCMA. Further, in its counterclaim, SupplyCore points to alleged
“understandings” between the parties and alleges that CMA led SupplyCore to believe
that CMA would allow inspections. Id. at ¶ 10. CMA responds by construing the term
“no inspections” generally, and points to the plain language and the lack of reference to
third parties as evidence of a straightforward categorical prohibition of on-site
inspections. Further, CMA invokes the parol evidence rule to block the admission of
evidence suggesting that there were any alleged “understandings” between the parties
with respect to third-party inspections.
The present dispute raises two discrete but interrelated questions based
primarily on the interplay between the parol evidence rule and interpretation of the
contract’s integration clause. First, the Court must determine whether the contract in
this case is ambiguous with respect to third-party inspections. If not ambiguous, the
Court must determine whether the contract prohibits third-party inspections, or whether
by its silence it does not alter the obligations of third-parties with respect to the
agreement between SupplyCore and CMA. Second, if the contract does not reference
the prospect of third-party inspections, the Court must determine the extent to which the
contract’s integration clause bears on SupplyCore’s ability to bring in extrinsic evidence
of the “understandings.” Finally, the Court must determine the extent to which the
alleged “understandings,” as pled by SupplyCore, implicate its ability to survive CMA’s
motion to dismiss.
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Under New York Law, which controls the present dispute, “if a contract is
unambiguous on its face, the parties’ rights under such a contract should be determined
solely by the terms expressed in the instrument itself.” See Travel Co., Ltd. v. Pan
American World Airways, Inc., 944 F.2d 983, 987-88 (2d Cir. 1991). T his “parol
evidence rule” generally bars interpretation of the contract using “extrinsic evidence as
to terms that were not expressed or judicial views as to what might be preferable.” Id.
at 988 (citing Metropolitan Life Ins. Co., v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d
Cir. 1990); see also W.W.W. Associates, Inc. v. Giancontieri, 77 N.Y.2d 157, 163
(1990) (“[i]t is well settled that extrinsic and parol evidence is not admissible to create
an ambiguity in a written agreement which is complete and clear and unambiguous
upon its face.”). Although parol evidence cannot be admitted to create an ambiguity, a
party may use parol evidence to explain the meaning of an ambiguous provision. See
Investors Ins. Co. of America v. Dorinco Reinsurance Co., 917 F.2d 100, 104 (2d Cir.
1990). “Whether a contract’s terms are ambiguous is a question of law decided by the
court.” See Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 573 (2d Cir.
1993). “An ambiguous term is one about which reasonable minds could differ.” Id.
In cases where the contract is not ambiguous but the writing omits important
contract provisions, courts consider extrinsic evidence to determine the intent of the
parties even if the contract contains an integration clause. See Lee v. Joseph E.
Seagram & Sons, Inc., 552 F.2d 447, 451 (2d Cir. 1977) (“[c]ertain oral collateral
agreements, even though made contemporaneously, are not within the prohibition of
the parol evidence rule.”). “[T]he overarching question is whether, in the context of the
particular setting, the oral agreement was one which the parties would ordinarily be
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expected to embody in the writing.” Id. Further, “in more complex situations, in which
customary business practice may be more varied, an oral agreement can be treated as
separate and independent of the written agreement even though the written contract
contains a strong integration clause.” Id. at 451-52. “As is sometimes the case, a
detailed and ratified contract—even one that attempts to provide for innumerable
contingencies, to anticipate disputes and to preempt litigation—may yet be silent as to a
question that later becomes critical. Reliance upon extrinsic evidence then becomes
perfectly appropriate.” See Bank of New York Trust Co., N.A. v. Franklin Advisers, Inc.,
726 F.3d 269, 281 (2d Cir. 2013) (citing British Int’l Ins. Co. Ltd. v. Seguros La
Republica, S.A., 342 F.3d 78, 82 (2d Cir. 2003) (applying New York law).
In this case, the parties dispute the scope and m eaning of the contract’s
inspections and acceptances provision. The provision provides that:

No inspections shall be conducted at CMA or at their vendors. The purchaser
shall inspect and accept any products delivered immediately after purchaser
receives and/or takes custody of such products. In the event the products do not
meet the drawings, designs, and/or specifications, the purchaser shall notify
CMA of such noncompliance in writing and give CMA a reasonable opportunity
to correct any such noncompliance. If the purchaser does not allow CMA
reasonable opportunity to correct noncompliances, the purchaser assumes all
responsibility for the product including the original purchase price and additional
costs incurred by purchaser to correct the noncompliances. The purchaser shall
be deemed to have accepted any products delivered and to have waived any
such noncompliance in the event a written notification that the products delivered
do not comply with the drawings, design, and/or specifications, is not received by
CMA within 10 business days after the purchaser takes Title of the products
delivered.

See Contract as Attached to CMA’s Motion to Dismiss, dkt. # 41, Exhibit C.
SupplyCore contends that the provision does not speak to, and thus does not apply to,
8

third-party government inspections. In the alternative, SupplyCore contends that the
provision is at least ambiguous. The Court agrees at the very least that this provision is
ambiguous and may be interpreted by external evidence. While CMA is correct that “no
inspections” means “no inspections,” this principle is limited by the plain text of the
contract only to purchasers with whom CMA has contracted, as indicated by the
provision’s repeated reference to “purchasers.” Further, it is not clear from the
provision—as is argued by CMA—that the “inspections” in question refer to on-site
inspections of CMA’s facilities. Rather, a natural reading of term “inspections” in this
context suggests that this provision applies to inspections of the purchased final
product, not CMA’s facilities. As such, the alleged “understandings” between the two
parties are admissible to determine the full scope of the parties’ obligations with respect
to third-party inspections. To the extent that CMA argues that the parol evidence rule
blocks these “understandings” from consideration, CMA’s argument is without merit.
SupplyCore alleges certain “understandings” between the parties as part of the
contract negotiation. For purposes of this motion, the Court assumes the truth of those
allegations. First, SupplyCore alleges “CMA knew that SupplyCore believed CMA
intended to fulfill all of the requirements attendant to manufacturing parts in connection
with the [DLA contract], including submitting to inspections by DLA from time to time.”
See SupplyCore’s Counterclaims, dkt. # 37 at ¶ 6. Second, “at the time CMA accepted
SupplyCore’s orders, it did not intend to perform its obligations as a subcontractor on a
[DLA contract], but did not inform SupplyCore of this fact.” Id. at ¶ 9. Third, “CMA led
SupplyCore to believe that it would permit federal government agencies to inspect its
manufacturing facility.” Id. at ¶ 10. Fourth, “CMA accepted . . . SupplyCore’s advance
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payment with the knowledge that the orders related to the [DLA contract] which could
require CMA to permit the federal government to inspect its manufacturing operations.”
Id. at ¶ 12. Lastly, SupplyCore alleges that “CMA breached [the obligation of good
faith] when it unreasonably refused to allow DCMA . . . to inspect its manufacturing
facility.” Id. at ¶ 31.
Every commercial contract in New York contains an implied covenant of good
faith and fair dealing. “New York law implies such a covenant in all contracts.” Security
Plans, Inc. v. CUNA Mut. Ins. Soc., 769 F.3d 807 (2d Cir. 2014) (citing 511 W.232nd
Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153, 746 N.Y.S.2d 131, 773
N.E.2d 496, 500 (2002)). Pursuant to this principle, “neither party shall do anything
which will have the effect of destroying or injuring the right of the other party to receive
the fruits of the contract.” Moran v. Erk, 11 N.Y.3d 452, 456, 872 N.Y.S.2d 696, 901
N.E.2d 187, 190 (2008).
The Court has found that these allegations with respect to the pre-breach
representations and understandings are not barred by the parol evidence rule for the
purposes of this motion. The alleged understandings are admissible at this stage to
more clearly define the inspections provision. SupplyCore has alleged that CMA
refused on-site inspection by the DMCA, which destroyed “the right of the [SupplyCore]
to receive the fruits of the contract.” Moran, 11 N.Y.3d at 456. SupplyCore has also
alleged that CMA led SupplyCore to believe that CMA would allow inspections.
Assuming the truth of these alleged understandings and representations, the Court
finds that SupplyCore has stated sufficient factual matter to survive a motion to dismiss.
The Court will deny CMA’s motion to dismiss in this respect.
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B.

Unjust Enrichment and CMA’s Liquidated Damages Clause

SupplyCore’s second counterclaim alleges unjust enrichment by virtue of CMA
retaining SupplyCore’s advance payments. SupplyCore alleges that “SupplyCore
conferred a benefit upon CMA by making advance payments . . . to CMA,” and that
“CMA . . . accepted, and retained the benef it of the advance payments, despite the fact
that it did not provide to SupplyCore any of the goods ordered.” See dkt. #37 at ¶ 21.
CMA responds by arguing that CMA has retained the advance payments because
SupplyCore breached the parties’ contract, and is subject to the contract’s cancellation
policy. See Motion to Dismiss, dkt. # 41-2 at 13. SupplyCore counters that CMA’s
cancellation policy is unenforceable under New York law because the contract allows
CMA to “have its cake and eat it too.” See Memorandum of Law, dkt. # 46 at 7-8.
SupplyCore contends that the contract impermissibly allows CMA to choose between
liquidated damages at 25% of total purchase price or actual damages. The cancellation
policy provides that:

CMA provides parts and assemblies that are manufactured to their customer’s
specifications and are thus considered Non-Cancelable Non-Returnable. In the
event of a cancellation of any order by seller for default of purchaser, purchaser
shall be liable for reasonable cancellation costs, including but not limited to
Finished Goods, Work In Process, Raw Materials, Non-Cancelable
Non-Returnable materials, Tooling and Set-Up Charges, but said cancellation
costs shall be not less than 25% of the total Purchase Order value. In the event
of cancellation of any order by purchaser for non-default of seller, purchaser
shall be liable for reasonable cancellation costs, including but not limited to
Finished Goods, Work in Process, Raw Materials, Non-Cancelable
Non-Returnable materials, Tooling and Set-Up Charges, but said cancellation
costs shall be not less than 25% of the total Purchase Order value. In the event
of a cancellation of any order by purchaser for default of seller, purchaser shall
not be held liable for any cancellation costs and seller shall not accept any
penalties from purchaser.
11

Contract as Attached to CMA’s Motion to Dismiss, dkt. # 41, Exhibit C. (Emphasis
added).
To recover under an unjust enrichment theory, three elements must be met.
First, the defendant must be enriched. Second, the defendant must be enriched at
plaintiff’s expense. Third, equity and good conscience must militate against permitting
defendant to retain what plaintiff seeks to recover. Briarpatch Ltd. V. Phoenix Pictures,
Inc., 373 F.3d 296, 306 (2d Cir. 2004). SupplyCore argues that CMA has retained
advance payments and been unjustly enriched through an illegal liquidated damages
clause. This unjust enrichment claim depends on whether the liquidated damages
clause is enforceable under New York law.
“It is commonplace for contracting parties to determine in advance the amount of
compensation due in case of a breach of contract. See United Air Lines, Inc. v. Austin
Travel Corp., 867 F.2d 737, 740 (2d Cir. 1989). Further, a “liquidated damages clause
generally will be upheld by a court, unless the liquidated amount is a penalty because it
is plainly or grossly disproportionate to the probable loss anticipated when the contract
was executed.” Id. “Liquidated damages are not penalties if they bear a ‘reasonable
proportion to the probable loss and the am ount of actual loss is incapable or difficult of
precise estimation.” Id. (citing Leasing Service Corp v. Justice, 673 F.2d 70, 73 (2d Cir.
1982). “Whether the sum stipulated represents a liquidation of the anticipated
damages or a penalty is a question of law, with due consideration for the nature of the
contract and the attendant circumstances.” U.S. Fidelity and Guar. Co. v. Braspetro Oil
Services Co., 369 F.3d 34, 71 (2d Cir. 2004) (citing J.R. Stevenson Corp. v. County of
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Westchester, 113 A.D. 2d 918, 920-21, 493 N.Y.S. 2d 819 (2d Dep’t 1985). The party
attempting to avoid enforcement has the burden of showing that a liquidated damages
clause is a penalty. See JMD Holding Corp. v. Congress Financial Corp., 4 N.Y.3d
373, 380, 828 N.E.2d 604, 795 N.Y.S.2d 502 (2005). Lastly, “when evaluating a
liquidated damages provision, a court must also give due consideration to ‘whether the
parties were sophisticated . . . represented by counsel . . . [and whether] the contract
was negotiated at arms-length.’” L & L Wings, Inc. v. Marco-Destin Inc., 756 F.Supp.2d
359 (S.D.N.Y. 2010); AXA Inv. Manages UK Ltd. v. Endeavor Capital Management
LLC, 890 F.Supp.2d 373 (S.D.N.Y. 2012).
In this case, CMA’s cancellation policy gives CMA a choice between accepting
actual damages or 25% of the contract price. SupplyCore alleges that this choice is
unenforceable under New York law. The Court agrees. The question here is not
whether the 25% floor is a reasonable prediction of damages—it very well might
be—but rather whether the choice afforded to CMA to choose between liquidated or
actual damages is too indefinite to satisfy the basic purpose of liquidated damages.
Liquidated damages fix the damages owed in the event of a breach. Courts generally
uphold liquidated damages negotiated between sophisticated parties who choose to
contract away future disputes over damages. Here, CMA’s liquidated damages clause
provides CMA a choice between collecting fixed damages (25% of total purchase order)
or pursuing litigation to determine damages. A liquidated damages clause is designed
to dispense with such actions. The clause here allows CMA to pursue actual damages
if 25% of the contract price is insufficient. The Court agrees with SupplyCore. The
existence of such a choice and CMA’s ability to “have its cake and eat it” defeats the
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purpose of a liquidated damages clause, and as such, is unenforceable under New
York law.
Jarro Bldg. Industries Corp. v. Schwartz, 54 Misc.2d 13, 18, 281 N.Y.S.2d 420
(N.Y. App. Term 1967) expresses this principle. There, the court found that “the
underlying purpose [of a liquidated damages clause] is to permit parties to look to the
future, anticipate that there may be a breach and make a settlement in advance. This
implies two things; (1) that the amount specified be a fixed amount and (2) that both
parties be bound to that amount.” Id. In Jarro Bldg, the clause in question stated that
“[plaintiff can] collect 30% of the total consideration herein named as liquidated
damages for the breach of said contract, or sue at law for such damages.” Id. The
court found that the existence of such a choice defeated the purpose of liquidated
damages.
Stock Shop, Inc. v. Bozell and Jacobs, Inc., 126 Misc.2d 95, 481 N.Y.S. 2d 269
(N.Y. App. Div. 1984), applied a similar principle in refusing to enforce a liquidated
damages clause. The clause in Stock Shop operated similarly to the clause in question
in the present matter, setting a $1,500 minimum in liquidated damages in the event of
damage to plaintiff’s property. The court in Stock Shop, citing Jarro, found that the
$1,500 minimum provided the plaintiff with the same sort of impermissible choice
between a fixed damages number or actual damages. Id.; see also Dalston Const.
Corp v. Wallace, 26 Misc.2d 698, 214 N.Y.S.2d 191, 193 (Supreme. Ct. Nassau Cty.
1960) (finding a minimum damages percentage to be unenforceable). The Southern
District of New York has also applied the same principle in finding unenforceable a
“choice” liquidated damages clause. See Hulko v. Connell, No., 83-cv-7760, 1988 WL
14

75012, at *2 (S.D.N.Y. July 14, 1988) (citing Jarro, and Dalston Const.) Hulko provided
that:
It is generally held that liquidated damages provisions giving the beneficiary the
option of retaining the liquidated amount and also claiming damages at large is
invalid and unenforceable, lest the beneficiary be permitted “to have his cake
and eat it too.” To avoid that unacceptable result, in order for a liquidated
damage provision to be valid both parties must be bound to the liquidated
amount.

Id.; see also CIT Group/Commercial Services, Inc. v. Holladay-Tyler Printing Corp., No.
94-cv-6642, 1995 WL 702343, at *3 (S.D.N.Y. Nov. 29, 1995) (applying the same
principle).
CMA’s motion is denied with respect to this claim. The Court finds CMA’s
cancellation policy unenforceable under New York law. Therefore, assuming the truth
of SupplyCore’s allegations, and making reasonable inferences in SupplyCore’s favor,
Supplycore has stated a claim for unjust enrichment and motion will be denied in this
respect.
C.

Recoupment
SupplyCore’s last counterclaim alleges a right of recoupment for the $91,984.40

worth of advance payments that CMA retained after SupplyCore cancelled purchase
orders. CMA responds by arguing that SupplyCore does not have any “actionable
claims” against CMA, and as such, are prohibited from asserting any right of
recoupment. However, SupplyCore has sufficiently pled two actionable claims against
CMA. Therefore, CMA’s motion to dismiss SupplyCore’s recoupment will be denied.
IV.

CONCLUSION

15

For the reasons stated above, CMA’s motion to dismiss SupplyCore’s
counterclaims, dkt. # 41, is hereby DENIED.

Dated:August 23, 2016

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