American Specialty Lab LLC v. GenTech Scientific Inc
Filing
31
DECISION AND ORDER -- IT HEREBY IS ORDERED that Defendant's Motion to Dismiss (Docket No. 27) is GRANTED. FURTHER, that the Clerk of Court is directed to CLOSE this case. SO ORDERED. Signed by William M. Skretny, United States District Judge on 9/8/2020. (JCM)-CLERK TO FOLLOW UP-
Case 1:17-cv-01187-WMS Document 31 Filed 09/08/20 Page 1 of 14
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
AMERICAN SPECIALTY LAB, LLC,
Plaintiff,
DECISION AND ORDER
v.
17-CV-1187S
GENTECH SCIENTIFIC, INC.,
Defendant.
I. INTRODUCTION
In this action, Plaintiff American Specialty Lab, LLC (“ASL”) asserts claims against
GenTech Scientific, Inc. (“GenTech”) for breach of contract and breach of the implied
covenant of good faith and fair dealing. Before this Court is GenTech’s motion to dismiss
ASL’s complaint, on statute of limitations grounds, pursuant to Rule 12 (b)(6) of the
Federal Rules of Civil Procedure. (Docket Nos. 4, 10.) For the following reasons,
GenTech’s motion is granted.
II. BACKGROUND
This Court assumes the truth of the following factual allegations contained in ASL’s
complaint. See Hosp. Bldg. Co. v. Trs. of Rex Hosp., 425 U.S. 738, 740, 96 S. Ct. 1848,
48 L. Ed. 2d 338 (1976); see also Hamilton Chapter of Alpha Delta Phi, Inc. v. Hamilton
Coll., 128 F.3d 59, 63 (2d Cir. 1997). This Court also considers the purchase order
between the parties, the terms and conditions incorporated into the purchase order, and
the work order completed upon delivery. 1
1
In determining whether dismissal is warranted, a court may consider: “(1) facts alleged in the complaint
and documents attached to it or incorporated in it by reference, (2) documents ‘integral’ to the complaint
and relied upon in it, even if not attached or incorporated by reference, (3) documents or information
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ASL “conducts a lab business” evaluating and analyzing “herbs as well as other
biological issues.” (Complaint, Docket No. 1, ¶ 5.) GenTech sells refurbished analytical
instruments. (See id., ¶¶ 6-7.)
On September 4, 2015, the parties entered into an agreement for the sale of three
pieces of equipment at a price of $75,000. (Purchase Order, Docket No. 27-6 at p. 1.)
This agreement was memorialized on a paper purchase order. 2 The purchase order was
filled out in pen, and ASL’s owner and manager, Azam Hakim, signed it and wrote in an
additional term. (Id.)
Printed next to the signature line on the purchase order is the following text, in a
font slightly smaller than the font used for other items:
This order for equipment, parts, or services is expressly
limited to acceptance of GenTech’s General Sales Terms
and Conditions. (available at
http://gentechscientific.com/content/tt-sales-terms-andconditions). Any different or additional terms are expressly
rejected by GenTech unless agreed to in writing.
(Docket No. 27-6 at p. 1.)
Item 34 of the Terms and Conditions is a “limitation on action,” stating that any
action must be brought within one year from the date of delivery of the equipment, or from
contained in defendant's motion papers if plaintiff has knowledge or possession of the material and relied
on it in framing the complaint, …, and [4] facts of which judicial notice may properly be taken under Rule
201 of the Federal Rules of Evidence.” Healthnow New York Inc. v. Catholic Health Sys., Inc., No. 14-CV986S, 2015 WL 5673123, at *2–3 (W.D.N.Y. Sept. 25, 2015) (Skretny, J.) (citing In re Merrill Lynch & Co.,
Inc., 273 F.Supp.2d 351, 356–357 (S.D.N.Y.2003) (footnotes omitted), aff'd 396 F.3d 161 (2d Cir.2005),
cert denied, 546 U.S. 935, 126 S. Ct. 421, 163 L. Ed. 2d 321 (2005)).
2
Although ASL did not attach the purchase order to its complaint, it relies on the existence of a contract
between the parties, and cites to elements of the purchase order. Because it is integral to the complaint,
Healthnow, 2015 WL 5673123, at *2-3, this Court will consider the purchase order in assessing GenTech’s
motion to dismiss.
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the date any alleged claim accrued, whichever is earlier. 3 (Docket No. 27-8, p. 3.)
The equipment was delivered and installed by November 12, 2015. (Work Order,
Docket No. 27-2 at p. 2.) The equipment never worked according to ASL’s specifications.
(Complaint, ¶ 15.) ASL and GenTech exchanged numerous emails, and GenTech sent
out technicians to attempt to fix the equipment. (Id., ¶¶ 20, 22.) ASL bought two new
computers to help the equipment function, but this did not improve the situation. (Id., ¶
20.) ASL lost money while its employees sat idle, waiting for the equipment to work. (Id.,
¶ 24.) ASL lost business and incurred expenses because of the equipment’s failure to
function. (Id., ¶¶ 28-30.)
GenTech offered ASL a partial refund of $32,150, but refused to refund the entire
$75,000 ASL had paid. (Id., ¶ 25.)
ASL brought an action against GenTech in the District of Nevada on May 1, 2017,
alleging breach of contract and breach of the implied covenant of good faith and fair
dealing. (Docket No. 1.) On June 23, 2017, GenTech filed two motions to dismiss: one
for untimeliness, pursuant to Rule 12 (b)(6), and one for improper venue, pursuant to Rule
12 (b)(3), or, in the alternative, to transfer venue based on the forum-selection clause in
the Terms and Conditions. (Docket Nos. 8, 10.) On November 16, 2017, the District of
Nevada held that the forum-selection clause was enforceable and directed its Clerk of
Court to transfer this action to the Western District of New York. (Docket No. 18.) The
District of Nevada declined to address the timeliness issue. (Id.)
On January 25, 2018, now in the Western District of New York, ASL requested a
3
This Court considers the Terms and Conditions to be incorporated by reference into the purchase order.
See infra, pp. 6-9.
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Clerk’s entry of default. (Docket No. 22.) This Court denied that motion as moot and
directed the parties to inform the Court how they intended to proceed. (Docket No. 24.)
In a text order dated May 16, 2018, this Court found that, pursuant to the terms and
conditions of the parties’ agreement, New York law governed the parties’ contract, denied
without prejudice GenTech’s motion to dismiss under Nevada law, and gave leave for
GenTech to move to dismiss under New York law, or otherwise respond to the complaint.
(Docket No. 26.) On June 15, 2018, GenTech filed the instant motion to dismiss (Docket
No. 27), which ASL opposes. (Docket No. 28.)
III. DISCUSSION
ASL seeks damages from GenTech stemming from the failure of its equipment to
function as promised, in breach of the contract between the parties and in breach of the
implied covenant of good faith and fair dealing.
GenTech moves to dismiss ASL’s claims as untimely, pursuant to Rule 12 (b)(6)
of the Federal Rules of Civil Procedure, because ASL brought its action after the running
of the one-year reduced statute of limitations specified in the terms and conditions of the
parties’ agreement.
A.
Rule 12 (b)(6)
Rule 12 (b)(6) allows dismissal of a complaint for “failure to state a claim upon
which relief can be granted.” Fed. R. Civ. P. 12 (b)(6). Federal pleading standards are
generally not stringent: Rule 8 requires only a short and plain statement of a claim. Fed.
R. Civ. P. 8(a)(2). But the plain statement must “possess enough heft to show that the
pleader is entitled to relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,127 S. Ct. 1955,
1966, 167 L. Ed. 2d 929 (2007).
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When determining whether a complaint states a claim, the court must construe it
liberally, accept all factual allegations as true, and draw all reasonable inferences in the
plaintiff’s favor. Goldstein v. Pataki, 516 F.3d 50, 56 (2d Cir. 2008); ATSI Commc’ns, Inc.
v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007). Legal conclusions, however, are not
afforded the same presumption of truthfulness. See Ashcroft v. Iqbal, 556 U.S. 662, 678,
129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (“The tenet that a court must accept as
true all of the allegations contained in a complaint is inapplicable to legal conclusions.”)
“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.’” Iqbal, 556 U.S.
at 678 (quoting Twombly, 550 U.S. at 570). Labels, conclusions, or “a formulaic recitation
of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Facial
plausibility exists when the facts alleged allow for a reasonable inference that the
defendant is liable for the misconduct charged. Iqbal, 556 U.S. at 678. The plausibility
standard is not, however, a probability requirement: the pleading must show, not merely
allege, that the pleader is entitled to relief. Id.; Fed. R. Civ. P. 8(a)(2). Well-pleaded
allegations in the complaint must nudge the claim “across the line from conceivable to
plausible.” Twombly, 550 U.S. at 570.
A two-pronged approach is thus used to examine the sufficiency of a complaint,
which includes “any documents that are either incorporated into the complaint by
reference or attached to the complaint as exhibits.” Blue Tree Hotels Inv. (Can.), Ltd. v.
Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004). This
examination is context specific and requires that the court draw on its judicial experience
and common sense. Iqbal, 556 U.S. at 679. First, statements that are not entitled to the
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presumption of truth—such as conclusory allegations, labels, and legal conclusions—are
identified and stripped away.
See id. Second, well-pleaded, non-conclusory factual
allegations are presumed true and examined to determine whether they “plausibly give
rise to an entitlement to relief.” Id. “Where the well-pleaded facts do not permit the court
to infer more than the mere possibility of misconduct,” the complaint fails to state a claim.
Id.
“Although the statute of limitations is ordinarily an affirmative defense that must be
raised in the answer, a statute of limitations defense may be decided on a Rule 12(b)(6)
motion if the defense appears on the face of the complaint.” Deswal v. U.S. Nat. Ass'n,
603 F. App'x 22, 23–24 (2d Cir. 2015); Ellul v. Congregation of Christian Bros., 774 F.3d
791, 798 n. 12 (2d Cir. 2014) (citing Staehr v. Hartford Fin. Servs. Grp., Inc., 547 F.3d
406, 425 (2d Cir. 2008)); see also 5 Charles Alan Wright & Arthur R. Miller, Federal
Practice & Procedure § 1226 (3d ed. 2004) (“[T]he current trend in the cases is to allow
[the statute of limitations defense] to be raised by a motion to dismiss under Rule 12(b)(6)
when the defect appears on the face of the complaint.”).
B.
The shortened statute of limitations in the terms and conditions is valid and
enforceable
GenTech argues that dismissal is warranted because the purchase order
incorporates terms and conditions specifying a one-year statute of limitations, which ran
before ASL filed its complaint. (Docket No. 27-1 at p. 3). ASL argues that the shortened
statute of limitations is not valid because ASL lacked notice of the terms and conditions
and never explicitly agreed to a shortening of the statute of limitations.
As an initial matter, this Court notes that the terms and conditions of the agreement
have already been given effect twice in this case. First, the District of Nevada found them
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incorporated into the contract between the parties when it enforced the forum-selection
clause and transferred the case to this Court. (Docket No. 18.) Additionally, this Court
found them incorporated into the contract between the parties when it held that the choiceof-law provision in the terms and conditions was controlling. (Docket No. 26.)
1. The terms and conditions are incorporated by reference into the
contract between the parties
The face of the purchase order states that the agreement is “expressly limited to
acceptance of GenTech’s General Sales Terms and Conditions (available at
http://gentechscientific.com/content/8-sales-terms-and-conditions).” (Docket No 27-6 at
p. 1.) GenTech has attached the terms and conditions to its motion papers. (Docket No.
27-8.) ASL does not dispute that the document GenTech has attached is the document
referred to in the purchase order.
Under New York law, “a paper referred to in a written instrument and sufficiently
described may be made a part of the instrument as if incorporated into the body of it.”
PaineWebber Inc. v. Bybyk, 81 F.3d 1193, 1201 (2d Cir. 1996) (citing Jones v. Cunard
S.S. Co., 238 A.D. 172, 173, 263 N.Y.S. 769, 771 (2d Dep't 1933)). New York “requires
that the paper to be incorporated into a written instrument by reference must be so
referred to and described in the instrument that the paper may be identified beyond all
reasonable doubt.” Wendrovsky v. Chase Paymentech, No. 12 CIV. 0704 (AJN), 2012
WL 13042574, at *3 (S.D.N.Y. Oct. 15, 2012) (citing New Moon Shipping Co. Ltd. v. MAN
B & W Diesel AG, 121 F.3d 24, 31 (2d Cir. 1997). Reference to a website containing terms
and conditions can provide proper identification. Wendrovsky, 2012 WL 13042574, at *3
(where a fax cover page contained an internet link and indicated that Plaintiff could visit
that website “[t]o access our Terms and Conditions,” terms and conditions were held to
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be incorporated). See also One Beacon Ins. Co. v. Crowley Marine Serv. Inc., 648 F.3d
258, 267 (5th Cir. 2011) (where a contract stated that it was to be construed
“in
accordance with the purchase order terms and conditions” to be found on a specified
website, those terms and conditions were validly incorporated); Ward v. TheLadders.com,
Inc., 3 F. Supp. 3d 151, 163 (S.D.N.Y. 2014) (where an additional Terms section merely
stated that the website may contain other terms and conditions, terms were held not to
be incorporated by reference).
Under New York law, “[a] party is under an obligation to read a document before
he or she signs it, and a party cannot generally avoid the effect of a [document] on the
ground that he or she did not read it or know its contents.” Marciano v. DCH Auto Grp.,
14 F. Supp. 3d 322, 330 (S.D.N.Y. 2014) (citing Brandywine Pavers, LLC v. Bombard,
108 A.D.3d 1209, 970 N.Y.S.2d 653, 655 (2013)); Superior Officers Council Health &
Welfare Fund v. Empire HealthChoice Assurance, Inc., 85 A.D.3d 680, 927 N.Y.S.2d 324,
326 (2011) (“[P]arties are presumed to know the contents of the agreements they have
signed.”).
“The law simply does not protect someone who willingly signs an agreement which
references and incorporates other controlling documents which he or she has not seen.”
Butvin v. DoubleClick, Inc., No. 99 Civ. 4027, 2001 U.S. Dist. LEXIS 2318, at *16
(S.D.N.Y. Mar. 7, 2001). “[W]hen a party to a written contract accepts it he is bound by
the stipulations and conditions expressed in it whether he reads them or not. … He who
signs or accepts a written contract, in the absence of fraud or other wrongful act on the
part of another contracting party, is conclusively presumed to know its contents and to
assent to them.” Level Exp. Corp. v. Wolz, Aiken & Co., 305 N.Y. 82, 87, 111 N.E.2d 218,
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221 (1953).
Here, the purchase order contains a reference to a specific website where the
terms and conditions can be found. This makes the terms and conditions “identifiable
beyond all reasonable doubt,” and validly incorporates them by reference. In signing the
purchase order, therefore, ASL was bound by the terms and conditions incorporated into
it.
2. The contract between the parties is not a “browsewrap” agreement
The parties do not dispute that the purchase order controls the agreement between
them. Neither do the parties dispute that the terms and conditions submitted by GenTech
with its motion to dismiss are those described on the purchase order.
ASL argues, rather, that the terms and conditions were somehow hidden from its
view. It refers to the web address where the terms and conditions were located as a
“hyperlink” that was too small, or located too far from where ASL accepted the contract,
to be seen. ASL argues, thus, that it lacked notice of the terms and conditions.
ASL develops its notice argument by likening the purchase order to a
“browsewrap” agreement and urges this Court to adopt a “browsewrap” analysis of this
case. This Court declines to do so, because the “browsewrap” argument does not apply
to the contract at issue here.
“Browsewrap” is a term referring to contracts formed on websites. “[B]rowsewrap”
agreements involve terms and conditions accessible through a hyperlink, 4 commonly at
4
A hyperlink is “a piece of text in a hypertext document which, when selected or clicked onscreen, causes
another related object (esp. a file or program) to be displayed or activated.” Oxford English Dictionary,
https://www.oed.com/view/Entry/248741?rskey=0GJMlV&result=1&isAdvanced=false#eid,
accessed
8/27/2020.
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the bottom of the screen, and do not request an express manifestation of assent. Nicosia
v. Amazon.com, Inc., 834 F.3d 220, 233 (2d Cir. 2016).
An offeree in an online contract will not be bound by terms and conditions of an
internet contract, unless he has either actual notice of certain contract terms, or “if he is
on inquiry notice of them and “assents to them through conduct that a reasonable person
would understand to constitute assent.” Starke v. SquareTrade, Inc., 913 F.3d 279, 289
(2d Cir. 2019).
Courts “look to the design and content of the relevant interface to determine if the
contract terms were presented to the offeree in a way that would put her on inquiry notice
of such terms.” Id., 289–90 (citing Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1177
(9th Cir. 2014) (“Where the link to a website’s terms of use is buried at the bottom of the
page or tucked away in obscure corners of the website where users are unlikely to see it,
courts have refused to enforce the [ ] agreement.”). A website user can be deemed to be
on inquiry notice of contract terms if the “design and content” of the webpage renders the
existence of those terms “reasonably conspicuous.” Nicosia v. Amazon.com, Inc., 834
F.3d 220, 233–34 (2d Cir. 2016).
ASL appears to argue that the web address printed on the purchase order, which
it mistakenly refers to as a “hyperlink,” was not reasonably conspicuous and that it
therefore lacked notice of the additional terms and conditions contained there. (Docket
No. 28.) It argues that the “hyperlink” leading to the terms and conditions was “hidden in
the Customer Purchase Order,” that the reference to the website containing the terms
and conditions was “located in a very inconspicuous place with a smaller font which is not
even readily readable,” that the terms were “placed far below, separate and apart, from
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the main handwritten Order inconspicuously,” and that “these almost invisible hyperlinked
website material clauses required Plaintiff to go to the website.” (Docket No. 28 at pp. 9,
4, 5.)
ASL’s argument fails. The purchase order is not a website, but a paper form that
ASL’s owner signed in ink. The terms and conditions were not accessible by a “hyperlink,”
because there are no hyperlinks on paper contracts. Rather, the purchase order
conspicuously directed ASL to access the applicable terms and conditions at the website
listed. This is a valid form of incorporation by reference and binding on ASL. The reference
to the terms and conditions, and the web address where they could be found, were
located directly next to the signature line on the purchase order. Consequently, as a
matter of law, ASL is deemed to have read those terms and conditions and assented to
them when it executed the purchase order.
3. The one-year statute of limitations is enforceable
Under New York law, “an agreement which modifies the Statute of Limitations by
specifying a shorter, but reasonable, period within which to commence an action is
enforceable.” Exec. Plaza, LLC v. Peerless Ins. Co., 22 N.Y.3d 511, 518 (2014) (internal
quotation marks and citation omitted). The New York Court of Appeals has “enforced
contractual limitation periods of one year.” Id. See also N.Y. U.C.C. § 2–725(1) (“By ...
agreement the parties may reduce the period of limitation [for a breach of contract action]
to not less than one year.”).
“[U]nder New York law ‘[f]ailure to comply with a contractual limitations period will
subject the action to dismissal, absent proof that the limitations provision was obtained
through fraud, duress, or other wrongdoing.’” CingleVue Int'l Pty, Ltd. v. eXo Platform NA,
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LLC, No. 1:13-CV-818 GLS/RFT, 2014 WL 3400856, at *3 (N.D.N.Y. July 10, 2014); see
also Infectious Disease Solutions, P.C. v. Synamed, LLC, No. 07–CV–5423, 2012 WL
1106847, at *9 (E.D.N.Y. Mar. 30, 2012); Kozemko v. Griffith Oil Co., Inc., 256 A.D.2d
1199, 1200 (4th Dep't 1998) (upholding a shorter limitations period provided by parties'
contract because plaintiffs “failed to demonstrate any fraud, duress or misrepresentation
regarding the agreement to shorten the period of limitations”).
Here, the one-year statute of limitations provided in the Terms and Conditions is
reasonable under New York law. And ASL does not allege fraud, duress, or
misrepresentation, as would be needed to defeat the shortened statute of limitations. The
statute of limitations is therefore enforceable.
4. This Court will not consider material submitted in support of the
parties’ papers
GenTech attaches the declaration of Clair Bragg, president of GenTech, to its
motion to dismiss. (Docket No. 27-5.) In his declaration, Bragg asserts that the purchase
order, work orders, and terms and conditions attached are true and correct copies, except
that paragraph 7 of the terms and conditions was amended in December 2016. ASL
argues that this declaration shows that the entire agreement between the parties is
illusory, because one party was able to amend its terms. (Docket No. 28 at pp. 6, 19.)
ASL attaches an affidavit from its president, Azam Hakim, to its response to
GenTech’s motion to dismiss. (Docket No. 28-1.) In his affidavit, Hakim alleges that he
failed to see the mention of the terms and conditions due to his limited knowledge of
English, his poor eyesight, and his minimal computer literacy. (Id. at p. 1-2.) GenTech
responds by arguing that failure to understand English or have a contract explained does
not excuse a party who has entered into it.
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This Court will not consider either of these documents, or the arguments related to
them. When a party submits additional evidence to the Court in connection with a motion
to dismiss, the Court must either convert the motion to dismiss into a motion for summary
judgment or exclude the extraneous documents from consideration. See Fed. R. Civ. P.
12 (b); Fonte v. Board of Managers of Cont'l Towers Condo., 848 F.2d 24, 25 (2d Cir.
1988). In assessing GenTech’s motion to dismiss, this Court declines to convert it into a
motion for summary judgment, and declines to consider any extraneous documents
submitted by the parties.
C.
Dismissal is proper because ASL did not timely file its action
Because ASL signed the purchase order, it was bound to the terms and conditions
incorporated by reference. The one-year statute of limitations specified in the terms and
conditions is enforceable under New York law. ASL received the equipment from
GenTech on November 12, 2015, and quickly learned that it did not work according to its
specifications. (Docket No. 27-7 at p. 2, Complaint, ¶ 15.) ASL filed its action on May 21,
2017, more than one year after the delivery of the equipment and the accrual of its claims.
ASL’s complaint is thus untimely and must be dismissed.
IV. CONCLUSION
For the reasons stated above, GenTech’s motion to dismiss is granted, because
ASL did not bring its action within the one-year statute of limitations provided in the
contract between the parties.
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V. ORDERS
IT HEREBY IS ORDERED, that Defendant’s Motion to Dismiss (Docket No. 27) is
GRANTED.
FURTHER, that the Clerk of Court is directed to CLOSE this case.
SO ORDERED.
Dated:
September 8, 2020
Buffalo, New York
s/William M. Skretny
WILLIAM M. SKRETNY
United States District Judge
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