Xerox State & Local Solutions, Inc. v. Xchanging Solutions USA, Inc. et al
Filing
63
OPINION AND ORDER. Because "there is no genuine dispute as to any material fact" and Xchanging "is entitled to judgment as a matter of law," Fed. R. Civ. P. 56(a), defendants' motion for summary judgment dismissing plaintiff& #039;s amended complaint (Dkt. No. 53) is granted. The clerk will enter judgment accordingly, with each party to bear its own costs and disbursements. So ordered. re: 53 MOTION for Summary Judgment filed by Xchanging Solutions Limited, Xchanging Solutions USA, Inc. (Signed by Judge Louis L. Stanton on 10/19/2016) (rjm)
ORIGINAL
SONY
DOCUMENT.
ELECTRONICALLY FILED
DOC
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
XEROX STATE & LOCAL SOLUTIONS, INC.
f/k/a ACS STATE & LOCAL SOLUTIONS,
INC.,
13 Civ. 3472 (LLS)
Plaintiff,
OPI~ION
- against -
& ORDER
XCHANGING SOLUTIONS (USA), INC.
f/k/a ALBION, INC. and XCHANGING
SOLUTIONS LIMITED f/k/a CAMBRIDGE
SOLUTIONS LIMITED,
Defendants.
Plaintiff Xerox State & Local Solutions, Inc.'s ("Xerox")
1
amended complaint seeks indemnification from defendants
Xchanging Solutions (USA), Inc.
("Xchanging USA")
Solutions Limited ("Xchanging Ltd.")
3
2
and Xchanging
(collectively "Xchanging")
for losses resulting from Xchanging's breach of representations
and warranties.
Xchanging moves for summary judgment to dismiss Xerox's
claim as time barred. For the reasons that follow, the motion is
granted.
BACKGROUND
Xerox is incorporated in New York. Dkt. No. 59 ~ B.1, Exh.
1. Its principal place of business is in Dallas, Texas. Dkt. No.
56 Exh. A9. Xchanging and Xerox entered into an Asset Purchase
1 Formerly known as ACS State & Local Solutions,
Inc.
z Formerly known as Albion, Inc.
J Formerly known as Cambridge Solutions Limited.
-1-
Agreement
("APA") dated January 22, 2007, and an amendment dated
56~
April 25, 2007. Dkt. No.
1, Exh. A1 at 2, 244. Through the
APA Xerox purchased Xchanging's rights and obligations under a
contract with the Tennessee Department of Human Services
("Tennessee Contract") to design and construct a computer
software application referred to as the Vision Integration
Platform ("VIP"). Id.
~
3. The APA provides that it is to be
"governed by, and construed in accordance with, the laws of the
State of New York." Id.
~
2, Exh. A1 at 68.
In a Disclosure Schedule attached to the APA, Xchanging
provided a description of the VIP's status and progress and
estimated, among other things, the project end date to be in May
2009, and future cost to be incurred $14,086,931. Id. ~ 4, Exh.
A1 at 226. Xchanging's Closing Month Financial Baseline,
attached to the amendment, provided an updated description of
the VIP's status and progress and estimated the project end date
to be in December 2009, and future cost to be incurred
$14,221,587. Id. Exh. A1 at 277-78. The APA represented that the
information in the Disclosure Schedule and in the Closing Month
Financial Baseline was "accurate and complete." Id. ~~ 4-5, Ex.
A1 at 37. Additionally, in a Bring Down Certificate dated April
25, 2007, Xchanging certified that the representations and
warranties made in the APA continued to be "true and correct."
Dkt. No. 59 ~ B.5, Exh. 2. The representations and warranties
-2-
were to survive the closing and expire on the thirtieth day _
after the applicable statute of limitation. Dkt. No. 56
~~
12-
14, Exh. A1 at 60, 17, 11.
According to Xerox, the parties agreed to a final purchase
price on October 9, 2007 in the sum of $30,866,333. Dkt. No. 59
~
B.9, Exh. 3. Xerox claims that it relied on the
representations and warranties in the APA and in the Bring Down
Certificate in agreeing to the price it paid for the Tennessee
Contract. Amend. Compl.
(Dkt. No. 18)
~~
30-31.
Xerox alleges that as of July 15, 2013, the project was
still not completed and that Xerox's total expenditure on the
VIP was nearly $100,000,000. Id. ~~ 39-40.
In the APA, Xchanging agreed to indemnify Xerox for any
loss, regardless of whether or not such loss related to third
party claims, arising out of or resulting from any breach or
inaccuracy of the representations in the Disclosure Schedule or
the Closing Month Financial Baseline. Dkt. No. 56 ~ 15, Exh. A1
at 61. Indemnification under the APA is the sole and exclusive
remedy for any breach of the representations and warranties made
in the APA.
Id.
~
16, Exh. A1 at 63.
On May 22, 2013, Xerox commenced this action by filing a
two-count complaint against Xchanging for indemnification and
breach of contract. Dkt. No. 1. On July 15, 2013, Xerox amended
its complaint, alleging only one count for indemnification
-3-
(thereby mooting Xchanging USA's then pending partial motion to
dismiss the breach of contract count). Dkt. No. 18.
The amended complaint alleges that the information in the
Disclosure Schedule and in the Closing Month Financial Baseline
was neither accurate nor complete, and that Xchanging is,
therefore, in breach of the representations and warranties it
made in the APA and in the Bring Down Certificate. Id.
~~
43,
50. It alleges that Xerox is entitled to indemnity from
Xchanging for losses it incurred as a result of Xchanging's
breach in the form of "the difference between the value of the
Tennessee Contract as warranted and represented, and the value
of the Tennessee Contract as delivered." Id.
~
55.
At the time this motion was served, discovery had been
ongoing for approximately two and a half years, which involved
considerable expense. Dkt. No. 59
~~
B.13-26.
In its Motion for Summary Judgment Xchanging makes two
arguments:
(1) Under New York's borrowing statute, Xerox's claim
is time barred by Texas's four year statute of limitation, and
(2) even if subject to New York's longer six year limitation
period, the claim is still time barred because it was filed
after the six year limitation period expired.
DISCUSSION
Jurisdiction
Jurisdiction exists pursuant to 28 U.S.C.
-4-
§
1332 because
the parties are diverse and the amount in controversy exceeds
$75,000 exclusive of interest and costs. Amend. Compl.
~
11.
Standard for Summary Judgment
"The court shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law." Fed. R. Civ.
P. 56(a). "An issue of fact is genuine if the evidence is such
that a reasonable jury could return a verdict for the nonmoving
party. A fact is material if it might affect the outcome of the
suit under the governing law." WWBITV, Inc. v. Vill. of Rouses
Point, 589 F.3d 46, 49
(2d Cir. 2009). "In looking at the
record, we construe the evidence in the light most favorable to
the nonmoving party and draw all inferences and resolve all
ambiguities in favor of the nonmoving party." Dalberth v. Xerox
Corp., 766 F.3d 172, 182 (2d Cir. 2014).
Choice of Law
"A federal court sitting in diversity jurisdiction will, of
course, apply the law of the forum state on outcome
determinative issues." Bank of N.Y. v. Amoco Oil Co., 35 F.3d
643,
650
(2d Cir. 1994), citing Erie R.R. Co. v. Tompkins, 304
U.S. 64, 80, 58 S. Ct. 817, 823 (1938); 28 U.S.C.
§
1652.
"Because this action was filed in a district court within the
State of New York, we will apply New York's substantive law."
Schiavone Constr. Co. v. City of New York,
-5-
99 F.3d 546, 548
(2d
•
/
Cir. 1996).
The APA provides that "This agreement shall be governed by,
and construed in accordance with, the laws of the State of New
York." Dkt. No. 56 Exh. A1 at 68. New York General Obligations
Law§ 5-1401(1) provides, in pertinent part:
The parties
to
any contract,
agreement or undertaking,
contingent or otherwise, in consideration of, or relating to any
obligation arising out of a transaction covering in the aggregate
not less than two hundred fifty thousand dollars . . . may agree
that the law of this state shall govern their rights and duties
in whole or in part, whether or not such contract, agreement or
undertaking bears a reasonable relation to this state.
See also Brown Bark III, L.P. v. AGBL Enters., LLC, 85 A.D.3d
699, 700,
924 N.Y.S.2d 571, 573 (2d Dep't 2011)
("Generally,
choice-of-law clauses are enforced so long as the chosen law
bears a reasonable relationship to the parties or the
transaction, and the chosen law does not violate public
policy.").
Even if Xchanging's first argument fails,
Summary Judgment
must still be granted if it prevails on its second argument. The
Court, therefore, addresses the second argument first.
New York General Obligations Law§ 17-103(1)
New York General Obligations Law § 17-103(1) provides:
A promise to waive, to extend, or not to plead the statute of
limitation applicable to an action arising out of a contract
express or implied in fact or in law, if made after the accrual
of the cause of action and made, either with or without
consideration, in a writing signed by the promisor or his agent
is effective, according to its terms, to prevent interposition
of the defense of the statute of limitation in an action or
proceeding commenced within the time that would be applicable
-6-
•
/
if the cause of action had arisen at the date of the promise,
or within such shorter time as may be provided in the promise.
In other words, in contract actions, § 17-103(1) "authorizes an
agreement 'to waive, to extend, or not to plead the statute of
limitation' upon the conditions that the agreement is in writing
and signed by the promisor or his agent." Lifset v. W. Pile Co.,
85 A.D.2d 855, 856, 446 N.Y.S.2d 487, 489 (3d Dep't 1981).
However,
for an agreement that extends the statute of
limitation to be valid, § 17-103(1) "requires that the agreement
be made after the accrual of the cause of action." Id. New York
General Obligations Law§ 17-103(3) is clear that
A promise to waive, to extend, or not to plead the statute of
limitation has no effect to extend the time limited by statute
for commencement of an action or proceeding for any greater time
or in any other manner than that provided in this section, or
unless made as provided in this section.
In other words,
for an agreement that extends the statute of
limitation to be valid it must conform to the requirements of §
17-103(1). "Thus extension agreements made prior to the accrual
of the cause of action continue to have 'no effect'". John J.
Kassner & Co. v. City of New York,
46 N.Y.2d 544, 551-52, 389
N.E.2d 99, 103, 415 N.Y.S.2d 785, 790 (1979), citing Gen. Oblig.
Law§ 17-103(3). Therefore, "If the agreement to 'waive' or
extend the Statute of Limitations is made at the inception of
liability it is unenforceable because a party cannot 'in
advance, make a valid promise that a statute founded in public
policy shall be inoperative.'" Id. at 551, 389 N.E.2d at 103,
-7-
415 N.Y.S.2d at 789, quoting Shapley v. Abbott, 42 N.Y. 443, 452
( 1870) .
The claim for indemnification is based on the alleged
breach by Xchanging of representations and warranties contained
in the APA and in the Bring Down Certificate. The statute of
limitation in New York for "an action upon a contractual
obligation or liability" is six years. N.Y. C.P.L.R. § 213(2)
The statute of limitation period is generally "computed from the
time the cause of action accrued." N.Y. C.P.L.R. § 203(a); Hahn
Auto. Warehouse,
Inc. v Am. Zurich Ins. Co., 18 N.Y.3d 765, 770,
967 N.E.2d 1187, 1190, 944 N.Y.S.2d 742, 745 (2012). Contract
actions generally accrue at the time of the breach. Id.; ABB
Indus. Sys. v. Prime Tech., Inc., 120 F.3d 351, 360
1997)
(2d Cir.
("in New York it is well settled that the statute of
limitation for breach of contract begins to run from the day the
contract was breached, not from the day the breach was
discovered, or should have been discovered").
Where, as here, the cause of action is based on a breach of
representations and warranties, "the contract was breached, if
at all, on the day it was executed .
. " Id. "A
representation of present fact is either true or false--and the
contract therefore performed or breached--if the underlying fact
was true or false at the time the representation was made."
Deutsche Bank Nat'l Trust Co. v. Quicken Loans Inc., 810 F.3d
-8-
861, 866,
(2d Cir. 2015).
The APA, along with the attached Disclosure Schedule, was
executed on January 22, 2007. Any misrepresentation occurred
then. The six year limitation period for that breach expired on
January 22, 2013. The amendment to the APA, along with the
Closing Month Financial Baseline, as well as the Bring Down
Certificate which certified that the representations and
warranties in the Disclosure Schedule were "true and accurate,"
were executed on April 25, 2007, so if they were inaccurate the
breach occurred on that day. The six year limitation period for
that breach of the amendment or the Bring Down Certificate
expired on April 25, 2013.
The parties' agreement that the representations and
warranties would be actionable until the thirtieth day after the
running of the applicable statute of limitation was originally
made on January 22, 2007, and again on April 25, 2007 through
the Bring Down Certificate. Because each agreement to extend the
limitation period was made when the causes of action accrued,
not after they accrued (as§ 17-103(1) requires), under the New
York statute the thirty-day extension provision is
unenforceable. And because Xerox did not commence this action
till May 22, 2013, it must be dismissed as time barred.
Xerox's arguments in response are unavailing.
-9-
..
~
1.
Xerox argues that an agreement to extend the limitation
period was made after a cause of action accrued because a cause
of action accrued on January 22, 2007 when Xchanging made the
representations and warranties in the Disclosure Schedule, and
an agreement to extend the limitation period which started then
was made on April 25, 2007 when the amendment was executed.
But at best that would give Xerox an additional thirty days
from January 22, 2013 to commence an action. The action was
commenced on May 22, 2013, three months after the thirty days
expired.
2.
Next Xerox argues that as this is a claim for
indemnification, in addition to the causes of action that
accrued on January 22, 2007 and April 25, 2007, "a further claim
accrued when, in October 2007, the parties finally agreed on the
pricing of the contract." Opp.
(Dkt. No. 57) at 31. Under this
argument, Xerox's complaint would be timely because it was filed
in May, well before October 2013.
"[I]t is well settled that a cause of action based upon a
contract of indemnification does not arise until liability is
incurred by way of actual payment." Varo, Inc. v. Alvis PLC, 261
A.D.2d 262, 265, 691 N.Y.S.2d 51, 55 (1st Dep't 1999), quoting
Travelers Indem. Co. v LLJV Dev. Corp., 227 A.D.2d 151, 154, 643
-10-
•
N.Y.S.2d 520, 523 (1st Dep't 1996)
(brackets in Varo). This is
because the principle of indemnity is that "if another person
has been compelled .
to pay the damages which ought to have
been paid by the wrongdoer, they may be recovered from him."
Raquet v. Braun, 90 N.Y.2d 177, 183, 240, 681 N.E.2d 404, 407,
659 N.Y.S.2d 237
(1997), quoting Oceanic Steam Nav. Co. v
Compania Transatlantica Espanola, 134 N.Y. 461, 468, 31 N.E.
987, 989 (1892)
(ellipsis in Raquet). When the indemnitee makes
the payment to a third party for which the contract (or the
common law) gives him indemnity, a claim arises for him to be
repaid by the indemnitor.
Here, Xerox incurred no costs or obligations to a third
party. The money that Xerox paid as the contract price was not
money that it paid on Xchanging's behalf, and no new cause of
action against Xchanging accrued to Xerox when it paid that
money.
When a claim is for a straightforward breach of contract,
calling the claim indemnification "does not alter the
commencement date of the limitations period." Lehman Bros.
Holdings v. Evergreen Moneysource Mortg. Co., 793 F. Supp. 2d
1189, 1194 n.2
(W.O. Wash. 2011)
(applying New York law).
Xerox cites two cases to support its argument, but they
deal with indemnification claims where the covered loss was the
result of liability to a third party.
-11-
First, Xerox cites In re Lehman Brothers Holdings Inc., 530
B.R. 601 (Bankr. S.D.N.Y. 2015). In that case, the defendant
initiated loans which it then sold to Lehman Brothers pursuant
to an agreement that contained numerous representations and
warranties. Id. at 604. Lehman Brothers then sold the loans to a
third party,
Fannie Mae. Id. at 604-05. When Fannie Mae
discovered that the loan agreements included false statements it
reached a settlement agreement with Lehman Brothers to recover
its losses from the bad loans. Id. at 605. Lehman Brothers'
indemnification claim against the defendant sought recovery of
the money it paid to Fannie Mae, the third party. See id.
Similarly, in Lehman Brothers Holdings Inc. v. Universal
American Mortgage Co. the plaintiff sought indemnification for
liability it incurred to a third party. In that case, a loan
issuer sold loans it had issued to an entity named LLB, which in
turn sold the loans to Lehman Brothers, together with its rights
and remedies against the loan issuer. See Lehman Bros. Holdings
Inc. v. Universal Am. Mortg. Co., LLC, No. 13 Civ.
0090(PAB) (MJW), 2014 WL 3258409, at *1-2
(D. Colo. July 8,
2014). Lehman Brothers then sold the loans to a third party,
Freddie Mac. Id. at *2. Two years later, when Freddie Mac
discovered that the loan agreements were in breach of the
representations and warranties contained in the purchase
agreement, it obtained reimbursement from Lehman Brothers for
-12-
its losses from the bad loans. Id. at *3. Lehman Brothers then
sued the loan issuer for indemnification seeking recovery of the
liability it incurred to Freddie Mac. Id.
In both Lehman cases the courts held that the
indemnification claims accrued when the plaintiffs made the
payments to the third parties. In re Lehman Bros. Holdings Inc.,
530 B.R. at 613 ("the six-year statute of limitations on LBHI's
claim for contractual indemnification did not begin to run until
January 22, 2014, the date of the Fannie Mae settlement");
Universal Am. Mortg. Co., 2014 WL 3258409, at *10 ("plaintiff's
indemnification claim is not time-barred because it did not
accrue until August 7, 2008 when plaintiff made Freddie Mac
whole for loan 5128").
Xerox also cites Chrysler First Financial Services Corp. of
America v. Chicago Title Insurance Co., 156 Misc. 2d 814, 595
N.Y.S.2d 302
(Sup. Ct. Nassau Cty. 1993), which holds that "a
plaintiff suing on a mortgage title insurance policy, similar to
a plaintiff in an action on any other indemnity contract
is not entitled to indemnification prior to establishing
damages." Id. at 820, 595 N.Y.S.2d at 306. In that case, the
plaintiff purchased three title insurance policies in connection
with second mortgages he took on three properties. Id. at 81617, 595 N.Y.S.2d at 304. The title insurance policies were all
subject to first mortgages, but in amounts that turned out to be
-13-
below the actual outstanding amount of those mortgages. Id. When
both the first and second mortgage on the three properties
defaulted, the properties were foreclosed on and sold at
auction. Id. Because the actual outstanding amount of the first
mortgages consumed more than the title insurance company had
said, the plaintiff was left with less money than he expected,
and he sued the title insurance company for the difference. Id.
The court held that under New York insurance law, "title
insurance is a contract of indemnity against actual monetary
loss or damage," and applied the familiar rule that a claim for
such indemnification does not accrue until actual payment
establishes damages.
Id. at 820, 595 N.Y.S.2d at 306.
Here, however, Xerox did not face liability to a third
party as a result of Xchanging's breach of representations and
warranties. Rather,
damages
it seeks to recover ordinary contract
(i.e., the difference between the contract value as
promised and the contract value as delivered).
Where parties agree to "indemnify" each other for losses
incurred by a breach of contract, where those loses do not
relate to liability to a third party, the characterization of
"indemnification" is no more than an epithet for recovery for
breach of contract.
In Germantown Central School District v. Clark, Clark,
Millis & Gilson, AIA, 294 A.D.2d 93, 743 N.Y.S.2d 599 (3d Dep't
-14-
2002), aff'd, 100 N.Y.2d 202, 791 N.E.2d 398, 761 N.Y.S.2d 141
(2003), the plaintiff contracted with the defendants to remove
asbestos in a building it owned, following which the defendants
certified that the asbestos had been removed. Id. at 94, 743
N.Y.S.2d at 601. Thirteen years later, the plaintiff discovered
asbestos in the building and sued the defendants for damage to
its property due to the asbestos and for the cost to remove the
asbestos. Id. The court held that the claims were time barred
under the statute of limitation, id. at 98-99, 743 N.Y.S.2d at
604-05, and that a claim for indemnification and restitution
would be meritless because the plaintiff did not actually pay
damages to any of the third parties, and therefore, "defendants'
alleged breach of duty to these third parties does not, as it
must, form the basis for plaintiff's indemnification and
restitution claims." Id. at 99, 743 N.Y.S.2d at 605 (emphasis in
original). The court stated that:
the actual premise of these claims is that defendants breached
their contractual duty to plaintiff in negligently performing
their
professional
services--the
very
duties
underlying
plaintiff's time-barred tort claims--which patently cannot
support plaintiff's proposed equitable causes of action.
Permitting plaintiffs to add these tort claims by recasting them
in indemnification and restitution language would improperly
circumvent the statute of limitations' bar on these claims.
Id.
(emphasis in original).
The fact that the amended complaint, and the APA, label the
claim as one for "indemnification" does not alter the fact that
it is one for breach of representations and warranties, which
-15-
accrues at the time the representations and warranties are made.
3.
Xerox's third argument is that the Court should "find that
by reason of conduct of the party to be charged it is
inequitable to permit him to interpose the defense of the
statute of limitations.u N.Y. Gen. Oblig. Law§ 17-103(4) (b).
"Our courts have long had the power, both at law and equity, to
bar the assertion of the affirmative defense of the Statute of
Limitations where it is the defendant's affirmative wrongdoing
. which produced the long delay between the accrual of the
cause of action and the institution of the legal proceeding.u
Gen. Stencils,
Inc. v. Chiappa, 18 N.Y.2d 125, 128, 219 N.E.2d
169, 171, 272 N.Y.S.2d 337, 340 (1966). Equitable estoppel is
the "principle that a wrongdoer should not be able to take
refuge behind the shield of his own wrong,u and is applied when
plaintiff's delay in bringing suit is "because of defendant's
affirmative wrongdoing and concealment.u Id. at 127, 219 N.E.2d
at 170, 272 N.Y.S.2d at 339.
That said, it is "fundamental to the application of
equitable estoppel for plaintiffs to establish that subsequent
and specific actions by defendants somehow kept them from timely
bringing suit.u Zumpano v. Quinn,
926,
6 N.Y.3d 666,
674, 849 N.E.2d
929, 816 N.Y.S.2d 703, 706 (2006). Xerox claims that
Xchanging's conduct makes it inequitable to allow Xchanging to
-16-
invoke the defense of statute of limitation. Opp. at 32-33.
Xerox first points to the fact that,
id. at 32:
beginning in January of 2007,
Xchanging represented and
warranted that the APA--including the 30-day statute of
limitations extension that it now attacks as illegal and invalid-"shall constitute, legal, valid and binding obligations .
enforceable against" Xchanging. APA § 3.0. Xchanging repeated
those promises on April 25, 2007 in the APA Amendment, and again
in the Bring Down Certificate. These representations and
warranties were deemed so important that they would never expire.
APA § 1. 01.
As a result of this conduct by Xchanging, Xerox claims
that, id. at 32-33:
Xerox has continuously relied on these representations and
warranties--and had no reason to believe that Xchanging would
dishonor them--when it commenced this action and diligently
prosecuted the case for three years. Had Xerox known that
Xchanging
was
going
to
affirmatively
disclaim
its
own
representations and warranties about the enforceability of the
APA and belatedly assert that the 30-day statute of limitations
extension was invalid, Xerox would not have needlessly incurred
litigation costs associated with prosecuting this action.
The other conduct of Xchanging that Xerox points to is, id.
at 33:
it [Xchanging) already moved to dismiss on statute of limitations
grounds three years ago--and it chose to do so only as to Xerox's
claim for breach of contract, not its claim for indemnity, and
only on the basis of the New York statute of limitations. (See
Xchanging USA Notice of Motion to Dismiss Count II [ECF No. 8];
Xchanging USA Memorandum of Law in Support of Motion to Dismiss
Count
II
[ECF No.
9)).
In response,
Xerox voluntarily
discontinued its breach of contract claim with the filing of its
Amended
Complaint.
Absolutely
nothing
was
mentioned
in
Xchanging's motion about the General Obligations Law.
However, these actions by Xchanging do not constitute
conduct that would bar it from raising the statute of limitation
as a defense.
-17-
"The elements of estoppel are with respect to the party estopped:
(1)
conduct which amounts to a
false representation or
concealment of material facts; (2) intention that such conduct
will be acted upon by the other party; and (3) knowledge of the
real facts. The party asserting estoppel must show with respect
to himself: (1) lack of knowledge of the true facts; (2) reliance
upon the conduct of the party estopped; and (3) a prejudicial
change in his position . . . . " Airco Alloys Div., Airco Inc. v.
Niagara Mohawk Power Corp., 76 A.D.2d 68, 81-82, 430 N.Y.S.2d
179[, 187] ([4th Dep't] 1980).
Smith v. Smith, 830 F.2d 11, 12 (2d Cir. 1987).
The alleged conduct fails to satisfy the first and third
elements with respect to Xchanging because Xerox does not allege
that Xchanging, any more than Xerox, knew at the time it
executed the APA that the thirty days extension provision was
invalid under New York law and falsely misrepresented that it
was valid.
Moreover, "The uncommon remedy of equitable estoppel 'is
triggered by some conduct on the part of the defendant after the
initial wrongdoing .
'"Ross v. Louise Wise Servs., Inc., 8
N.Y.3d 478, 491, 868 N.E.2d 189, 198, 836 N.Y.S. 2d 509, 518
(2007), quoting Zoe G. v. Frederick F.G., 208 A.D.2d 675, 67576, 617 N.Y.S.2d 370, 371 (2d Dep't 1994). Here, Xchanging's
representation in the APA, that Xerox would be able to commence
an action against it for thirty days after the statute of
limitation period expires, was concurrent with, and not after,
the accrual of the cause of action.
If Xerox's argument were accepted, the exception would
swallow the rule. Under§ 17-103(3), an agreement to extend the
-18-
statute of limitation made when or before the claim accrues is
invalid. If the invalid agreement itself justifies estopping
invocation of§ 17-103(3), the statute would seldom apply.
The other conduct that Xerox cites is Xchanging's omission
to raise the statute of limitation as a defense to Xerox's
indemnification claim at the outset of this action. It argues
that Xchanging should be estopped to raise the statute of
limitation at this juncture, given all the time and.money
expended by the parties during the past three years. If Xerox is
correct, however, Xchanging would be not only equitably estopped
from raising the statute of limitation as a defense, it would be
barred as waived under Federal Rule of Civil Procedure 8{c) (1).
Kropelnicki v. Siegel, 290 F.3d 118, 130 n.7
(2d Cir. 2002)
("The statute of limitations is an affirmative defense that is
waived if not raised.").
The short answer is that the statute of limitation defense
was pleaded in both defendants' answers. Their fifth affirmative
defenses state "Plaintiff's claim is barred in whole or in part
by the applicable statute of limitations." Xchanging USA's
Amend. Answer to Amend. Compl.
(Dkt. No. 35) at 16; Xchanging
Ltd.'s Answer to Amend. Compl.
(Dkt. No. 31) at 16. While Xerox
claims that "Absolutely nothing was mentioned in Xchanging's
motion [to dismiss] about the General Obligations Law," Opp. at
33, "the statute of limitations defense need not be raised in a
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pre-answer motion. Rather, under Fed. R. Civ. P. 8(c), the
statute of limitations constitutes an affirmative defense, to be
asserted in a responsive pleading." Furthermore, "the defense
need not be articulated with any rigorous degree of specificity:
'The defense is sufficiently raised for purposes of Rule 8 by
its bare assertion. Identification of the particular statute
relied upon, though helpful, is not required in the pleading.'"
Kulzer v. Pittsburgh-Corning Corp., 942 F.2d 122, 125 (2d Cir.
1991), quoting Santos v. Dist. Council of N.Y.C.,
967
(2d Cir. 1980)
619 F.2d 963,
(emphasis in Kulzer).
4.
Xerox's final argument is that "it would be inequitable for
this Court to grant the remedy sought by Xchanging now, nine
years later," because the APA requires the parties, if any
provision of it is determined to be invalid, to "negotiate in
good faith to modify this Agreement as to effect the original
intent of the parties as closely as possible in an acceptable
manner in order that the Transaction is consummated as
originally contemplated to the greatest extent possible." Opp.
at 34; Dkt. No. 56 Exh. Al at 67.
All that the APA requires is for the parties to negotiate
in good faith in the event that it is determined that a
provision in the APA is invalid. Now that it has been held
invalid (seep. 9 above), the parties are encouraged to
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negotiate to salvage their original contemplation to the
greatest extent possible.
CONCLUSION
Because "there is no genuine dispute as to any material
fact" and Xchanging "is entitled to judgment as a matter of
law," Fed. R. Civ. P. 56(a), defendants' motion for summary
judgment dismissing plaintiff's amended complaint (Dkt. No. 53)
is granted. The clerk will enter judgment accordingly, with each
party to bear its own costs and disbursements.
So ordered.
Dated:
New York, New York
October 19, 2016
t..~~L. L.STANTON
. st;,J,._.
LOUIS
U.S.D.J.
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