Xerox Corporation v. RP Digital Services, Inc. et al

Filing 21

ORDER granting plaintiff's motion for summary judgment 11 . Xerox is awarded damages on Count 1 (breach of the Purchase Agreement) in the amount of $3,237.80 (the principal amount of the unpaid invoices), plus interest at the rate of 1.5& #037; per month from August 1, 2014 (a "reasonable intermediate date" with respect to the accrual of the claims), to the date of entry of this Order. The Court likewise grants summary judgment to plaintiff on Count 2, in an amount to be de termined. The Court will grant defendants' request for discovery on the issue of damages solely with respect to Count 2 (the Finance Lease), including but not limited to determination of the fair market value of the returned X770 printer at the time Ultragraphics requested that Xerox reclaim it. Such discovery is to be completed within 4 months of the entry of this Order. Within 30 days thereafter, plaintiff is directed to file affidavits, exhibits, and such other proof in admissible for m as is appropriate to explain and support its damages calculations for Count 2, and its request for an award of costs and attorney fees. Defendants are directed to file their response, if any, within 20 days of the filing of plaintiff's submissions. Signed by Hon. David G. Larimer on 2/8/17. (EMA)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
_______________________________________________

XEROX CORPORATION,

Plaintiff,
DECISION AND ORDER
16-CV-6063L
v.
RP DIGITAL SERVICES, INC.,
ULTRAGRAPHICS, INC.,
a/k/a John T. Crossley, Inc.,

Defendants.
________________________________________________
INTRODUCTION
Plaintiff Xerox Corporation (“Xerox”) commenced this action for breach of contract
against defendant RP Digital Services, Inc. (“RP”) and Ultragraphics, Inc., a/k/a John T.
Crossley Inc. (“Ultragraphics”) (collectively “defendants”). Xerox seeks a money judgment
against the defendants for failure to pay monies due pursuant to a Purchase Agreement and
equipment Finance Lease (Dkt. #1). Defendants assert counterclaims against Xerox for breach
of contract and lost profits. (Dkt. #8). Familiarity with the underlying facts is presumed.
Xerox now moves for summary judgment on both of the counts contained in the
Complaint (Dkt. #1) – breach of a Purchase Agreement by the defendants, and breach of the
Finance Lease by Ultragraphics – pursuant to Fed. R. Civ. P. 56. (Dkt. #11). For the reasons set
forth below, that motion is granted.

FACTUAL BACKGROUND
I.

The Purchase Agreement

On September 28, 2010, RP executed a Purchase Agreement for a D242 Printer with
Xerox. Pursuant to the Purchase Agreement, RP agreed to make monthly payments to Xerox
based on the number of prints produced by the printer. The Purchase agreement provides that, in
the event of default by RP, Xerox may cease providing maintenance services on the printer and
may require immediate payment as liquidated damages for all amounts due, plus interest, and
any costs and attorneys’ fees incurred by Xerox in attempting to enforce the Purchase
Agreement.
II.

The Finance Lease

On January 18, 2012, Ultragraphics executed a finance lease agreement (“Finance
Lease”) with Xerox. Pursuant to the Finance Lease, Ultragraphics leased a X770 printer and
agreed to make specified monthly minimum payments, in addition to monthly payments during
the term for print charges, calculated with reference to the number of prints produced by the
printer, both for a term of 60 months. The Finance Lease provided that if Xerox was unable to
maintain the printer in accordance with the agreement, Ultragraphics’ exclusive remedy would
be for Xerox to provide it with an identical, or comparable, printer. The Finance Lease also
stated that upon default by Ultragraphics, Xerox could, inter alia, remove the leased equipment,
cease providing maintenance services, and require immediate payment as liquidated damages of
all amounts then due, plus interest, and demand any remaining payments due for the remainder
of the Finance Lease term.

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Xerox commenced the instant action on February 3, 2016, claiming that defendants had
breached the Purchase Agreement and Lease Agreement by failing to make the agreed-upon
payments. Defendants answered the complaint, denying the bulk of Xerox’s allegations and
asserting counterclaims for breach of the Lease Agreement based on Xerox’s alleged failure to
provide equipment without defects and in good working order, and the lost profits that ensued.
Xerox now moves for summary judgment on both of its causes of action, and seeks
damages in the amount of $3,237.80 plus costs and attorneys’ fees on Count 1 (breach of the
Purchase Agreement) and $83,618.76, plus costs and attorneys’ fees, on Count 2 (breach of the
Finance Lease). For the reasons that follow, Xerox’s motion (Dkt. #11) is granted, and Xerox is
awarded damages on Count 1 in the amount of $3,361.44, and on Count 2 in an amount to be
determined.
DISCUSSION
I.

Standard on a Motion for Summary Judgment

Rule 56(c) provides that a moving party is entitled to summary judgment “if the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 249 (1986). The Court’s role in determining a motion for summary judgment is not “to
weigh the evidence and determine the truth of the matter but to determine whether there is a
genuine issue for trial.” Id. When considering a motion for summary judgment, the Court must
draw inferences from underlying facts “in the light most favorable to the party opposing the
motion.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 88 (1986)

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II.

Count 1: Breach of the Purchase Agreement

It is undisputed that Xerox submitted monthly invoices to defendants for payments due
under the Purchase Agreement for three years, which were paid without incident. However,
beginning in June 2014 and continuing through October 2014, defendants ceased making
payments on outstanding invoices. Pointing to the Purchase Agreement’s provision that in the
event of default by RP, “all amounts then due” are owed, Xerox requests judgment in the amount
of $3,237.80, the total amount due on the outstanding invoices, plus unspecified costs and
attorneys’ fees.
RP offers no arguments or evidence to refute Xerox’s claims related to the Purchase
Agreement and the Model D242 printer to which it pertained, and does not raise any questions of
fact with respect to its default on payments under the Purchase Agreement. I therefore find that
Xerox is entitled to summary judgment on its claim that RP breached the terms of the Purchase
Agreement.
III.

Count 2: Breach of the Finance Lease

It is undisputed that the Finance Lease identifies itself as a “finance lease” pursuant to
Article 2A of the Uniform Commercial Code, under which Ultragraphics waived all “rights and
remedies as a lessee under Article 2A.” (Dkt. #11-2, Exh. C). It is further undisputed that in or
about June 2014, after repeatedly informing Xerox of ongoing technical difficulties and
performance deficiencies associated with the X770 printer, Ultragraphics ceased making
payments pursuant to the Finance Lease and requested that Xerox take back the printer, which
Xerox eventually did.

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Relying on the Finance Lease’s provision that Ultragraphics’ obligation to make all
payments is “not subject to delay, reduction, set-off, defense, counterclaim or recoupment for
any reason whatsoever, irrespective of Xerox’s performance of its obligations hereunder,” Xerox
demands full payment of the outstanding balance of $83,618.76, plus costs and attorneys’ fees.
Xerox contends that this amount incorporates all applicable reductions under the Finance Lease,
including, for example, a credit for the fair market value of the returned equipment.
Defendants’ affidavits in opposition generally establish that the Model D770 printer to
which the Finance Lease pertained was plagued with ongoing performance issues, which
defendants contend caused damages in the form of lost profits. Defendants also assert that prior
to their execution of the Finance Lease, Xerox made multiple false and fraudulent statements
about the performance capabilities of the D770 printer, but for which defendants would not have
entered into the Finance Lease.
Defendants’ assertions that Xerox breached the Finance Lease by providing defective
equipment, despite extra-contractual assurances that the printer it was providing was fit for a
particular purpose, are expressly waived by the clear terms of the Finance Lease, which provides
that the “obligation to make all payments, and to pay any other amounts due or to become due, is
absolute and unconditional, and not subject to delay, reduction, set-off, defense, counterclaim or
recoupment for any reason whatsoever, irrespective of Xerox’s performance of its obligations
hereunder . . . Xerox disclaims the implied warrant[y of] fitness for a particular purpose . . .”
(Dkt. #11-2 at 24).

A contractual duty to make payments regardless of the other party’s

performance, commonly known as a “hell or high water” clause, is typically enforceable. See
Xerox Corp. v. Graphic Management Servs., Inc., 959 F. Supp. 2d 311, 318 (W.D.N.Y. 2013)

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(granting summary judgment to Xerox in an action alleging breach of a finance lease virtually
identical to the one presented here, and holding that defendants’ claims of fraudulent inducement
and negligent misrepresentation are insufficient to overcome the clear language of the “hell or
high water” clause).
Furthermore, although defendants argue that the instant motion is premature (and
speculate that the Finance Lease is unenforceable) 1 because no discovery has taken place, where,
as here, the parties’ claims are governed by a clear and unambiguous contract with a merger
clause specifying that it “constitutes the entire agreement as to its subject matter, supersedes all
prior oral and written agreements” (Dkt. #11-2 at 25), and the breach of which is not in dispute,
“the Court need only look to the plain language of the lease[] to decide” whether summary
judgment is appropriate. Id., 959 F. Supp. 2d at 319 (“[w]hile a fraudulent inducement claim
would not be foreclosed by a boilerplate merger clause” by itself, the combination of “language
[that] is sufficiently specific as to [defendant’s] waiver of defenses and counter claims and the
prohibition of relying on prior statements” precludes a defendant from claiming fraudulent
inducement or negligent misrepresentation). I therefore find that Xerox is entitled to summary
judgment on its claim that Ultragraphics breached the Finance Lease.
IV.

Damages

Xerox seeks summary judgment on the issue of damages relating to defendants’ defaults
under the Purchase Agreement and Finance Lease. Defendants argue that Xerox has failed to

1 To the extent defendants argue that the Finance Lease’s limitation of liability terms are unconscionable because
the Finance Lease “fails of its essential purpose” by leaving plaintiff “with no remedy at all” in the event of Xerox’s
default (Xerox Corp., 959 F. Supp. 2d at 320), it is undisputed that the Finance Lease’s unambiguous terms did
supply plaintiff with a remedy: if plaintiff was “not totally satisfied,” Xerox promised to, at plaintiff’s request and
without charge, provide plaintiff with replacement equipment, in the form of the same model printer, or one with
“comparable features and capabilities.” (Dkt. #11-2 at 23). It does not appear that the defendants attempted to
invoke this remedy.

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properly mitigate its damages. However, where, as here, a contract contains a valid liquidated
damages provision, “mitigation of damages is not relevant.” Xerox, 959 F. Supp. 2d at 321.
The Court does, however, concur with defendants’ contention that Xerox’s damages
calculations with respect to Count 2 require further specification and support.

Xerox has

submitted copies of the invoices at issue, but has not provided a full explanation of its damages
calculations, including but not limited to its determination of the fair market value of the returned
X770 printer at the time Ultragraphics requested that Xerox reclaim it. Accordingly, additional
discovery and supplemental submissions will be required in order for the Court to properly
assess damages on Count 2.
CONCLUSION
Plaintiff’s motion for summary judgment (Dkt. #11) is granted.

Xerox is awarded

damages on Count 1 (breach of the Purchase Agreement) in the amount of $3,237.80 (the
principal amount of the unpaid invoices), plus interest at the rate of 1.5% per month from August
1, 2014 (a “reasonable intermediate date” with respect to the accrual of the claims), to the date of
entry of this Order. See e.g., Marfia v. T.C. Ziraat Bankasi, 147 F.3d 83, 91 (2d Cir. 1998)
(where contractual damages arose on many occasions over time, Court may opt to fix a
“reasonable intermediate date” from which to calculate prejudgment interest). Such interest adds
up to $123.64, for a total compensatory damages figure of $3,361.44 on Count 1.
The Court likewise grants summary judgment to plaintiff on Count 2, in an amount to be
determined. The Court will grant defendants’ request for discovery on the issue of damages
solely with respect to Count 2 (the Finance Lease), including but not limited to determination of
the fair market value of the returned X770 printer at the time Ultragraphics requested that Xerox

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reclaim it. Such discovery is to be completed within four (4) months of the entry of this Order.
Within thirty (30) days thereafter, plaintiff is directed to file affidavits, exhibits, and such other
proof in admissible form as is appropriate to explain and support its damages calculations for
Count 2, and its request for an award of costs and attorney fees. Defendants are directed to file
their response, if any, within twenty (20) days of the filing of plaintiff’s submissions.
IT IS SO ORDERED.

_______________________________________
DAVID G. LARIMER
United States District Judge
Dated: Rochester, New York
February 8,2017.

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