United States District Court, D. Arizona
A. Teilborg, Senior United States District Judge.
before the Court is Plaintiff/Counter-Defendant’s
Motion for Judgment on the Pleadings (Doc. 69) pursuant to
Federal Rule of Civil Procedure (“Rule”) 12(c).
The Court now rules on the motion.
November 30, 2018, Plaintiff/Counter-Defendant IceMOS
Technology Corporation (hereinafter
“Counter-Defendant”) filed the pending Motion for
Judgment on the Pleadings (Doc. 69).
Defendant/Counter-Claimant Omron Corporation (hereinafter
“Counter-Claimant”) filed a timely Response (Doc.
93) on January 2, 2019, and Counter-Defendant subsequently
filed a Reply (Doc. 96) on January 9, 2019.
following facts are either undisputed or construed in the
light most favorable to the non-moving party. See Wyler
Summit P’ship v. Turner Broad. Sys., Inc., 135
F.3d 658, 661 (9th Cir. 1998). Counter-Defendant sets out to
sell super junction metal oxide semiconductor field-effect
transistors (“Super Junction MOSFETs”) to
third-parties. (Doc. 60 at 6–7). On October 12, 2006,
Counter-Defendant’s representative approached
Counter-Claimant and suggested that the parties enter into a
business relationship. (Id. at 11).
Counter-Claimant’s representatives entered into
“preliminary discussions” with Counter-Defendant
in April 2007. (Id. at 12).
negotiations, Counter-Defendant represented to
Counter-Claimant that monthly demand for Super Junction
MOSFETs would “remain at a forecasted volume of up to
3,500 wafers per month by the year 2014.” (Doc. 28 at
49). Additionally, Counter-Defendant indicated that it would
order “more than 240,000 wafers for Super Junction
MOSFETs” between 2011 and 2017. (Id.)
Counter-Defendant and Counter-Claimant eventually entered
into an agreement (“Supply Agreement”) on
February 28, 2011 for Counter-Claimant to fabricate and
supply semiconductor wafers for Counter-Defendant’s
Super Junction MOSFETs. (Doc. 60 at 15).
Supply Agreement obligated Counter-Defendant to provide a
“monthly rolling forecast of its estimated demand for
wafers over the next twelve months” in order to allow
Counter-Claimant to plan for the manufacture of wafers
reasonably in line with the estimated demands” of
Counter-Defendant. (Doc. 59-1 at 6). Additionally, the Supply
Agreement required Counter-Defendant to provide updated
forecasts to Counter-Claimant “no later than fourteen
days before the end of each calendar month.”
(Id.). After Counter-Claimant fabricated and
supplied the semiconductor wafers, the Supply Agreement
required Counter-Defendant to pay Counter-Claimant at net
sixty (60) days EOM. (Id.). Between December 2013
and December 2014, Counter-Defendant made thirteen late
payments. (Doc. 28 at 43–44). Additionally,
Counter-Defendant ordered only 5,202 semiconductor wafers
between 2011 and 2017, approximately two percent of its
forecasted need represented during negotiations.
(Id. at 49).
Supply Agreement would have had a term of ten years from the
effective date, but Counter-Claimant exercised its
termination options under the Supply Agreement. (Doc. 60 at
20). Following Counter-Claimant’s termination of the
Supply Agreement, Counter-Defendant initiated the current
litigation, alleging, among other claims, breach of contract
and fraud. (Doc. 14 at 18–23). In response,
Counter-Claimant brought counterclaims against
Counter-Defendant, asserting the following causes of action:
(i) breach of the implied covenant of good faith and fair
dealing, (ii) breach of contract for failure to timely make
payments, (iii) breach of contract for failure to pay
invoices, and (iv) fraud in the inducement. (Doc. 28 at
41–50; see also Doc. 60 at 63).
November 30, 2018, Counter-Defendant moved for Judgment on
the Pleadings on the following three claims: (i) breach of
implied covenant of good faith & fair dealing, (ii)
breach of contract for failure to timely make payments, and
(iii) fraud in the inducement. (Doc. 69).
judgment on the pleadings is properly granted when, taking
all the allegations in the pleadings as true, the moving
party is entitled to judgment as a matter of law.”
Nelson v. City of Irvine, 143 F.3d 1196, 1200 (9th
Cir. 1998) (citation omitted). In other words, dismissal
pursuant to Rule 12(c) is appropriate if the facts as pleaded
would not entitle the plaintiff to a remedy. See Merchs.
Home Delivery Serv., Inc., v. Hall & Co., 50 F.3d
1486, 1488 (9th Cir. 1995). “Federal courts generally
hesitate to grant judgment on the pleadings, because
‘hasty or imprudent use of this summary procedure by
the courts violates the policy in favor of ensuring to each
litigant a full and fair hearing on the merits of his claim
or defense.’” Carrasco v. Fiore Enters.,
985 F. Supp. 931, 934 (D. Ariz. 1997) (quoting 5A Charles A.
Wright & Arthur R. Miller, Federal Practice and
Procedure, Civil 2d § 1368 (1990)). A motion for
judgment on the pleadings under Rule 12(c) is
“functionally identical” to a Rule 12(b)(6)
motion to dismiss. Cafasso v. Gen. Dynamics C4 Sys.,
Inc., 637 F.3d 1047, 1054 n.4 (9th Cir. 2011).
Therefore, “the same standard of review applies to
motions made under either rule.” Id. (internal
quotations and citation omitted).
survive a Rule 12(b)(6) motion for failure to state a claim,
a complaint must meet the pleading requirements of Rule 8.
Rule 8 requires that the pleading contain a “short and
plain statement of the claim showing that the pleader is
entitled to relief.” Fed. R. Civ. P. 8(a)(2). To meet
this standard, a complaint must contain sufficient factual
matter, which, if accepted as true, states a claim that is
“plausible on its face.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To have
facial plausibility, a complaint must include factual content
that allows the Court to “draw the reasonable
inference” that the defendant is liable for the alleged
misconduct. Iqbal, 556 U.S. at 678. “Legal
conclusions couched as factual allegations are not entitled
to the assumption of truth and therefore are insufficient to
defeat a motion to dismiss for failure to state a
claim.” Arvizu v. Medtronic, Inc., 41 F. Supp.
3d 783, 786 (D. Ariz. 2014) (citations omitted). The analysis
is “context-specific” and is driven by
“judicial experience and common sense.”
Iqbal, 556 U.S. at 679. In deciding a motion to
dismiss, the Court must construe the facts alleged in the
complaint in the light most favorable to the non-moving
party. See Cafasso, 637 F.3d at 1053; Wyler
Summit P’ship, 135 F.3d at 661.
moving for judgment on the pleadings, Counter-Defendant
argues that: (1) the counterclaim for breach of the implied
covenant of good faith and fair dealing fails to allege a
breach; (2) the counterclaim for breach of contract for
failure to timely make payments fails because
Counter-Claimant waived timely payment; and (3) the
counterclaim for fraud in the inducement both fails for lack
of particularity and fails to allege an actionable fraudulent
representation. (Doc. 69).
Implied Covenant of Good Faith and Fair Dealing
Article IX of the Supply Agreement, New York law governs the
Supply Agreement. (Doc. 59-1 at 9).
New York law, “all contracts imply a covenant of good
faith and fair dealing.” 511 W. 232nd Owners Corp.
v. Jennifer Realty Co., 773 N.E.2d 496, 500 (N.Y. 2002);
see also Dalton v. Educ. Testing Serv., 663 N.E.2d
289, 291 (N.Y. 1995). The implied obligation of each promisor
to exercise good faith encompasses “any promises which
a reasonable person in the position of the promisee would be
justified in understanding were included.”
Dalton, 663 N.E.2d at 291 (citation omitted). This
covenant includes an implicit promise that “neither
party to a contract shall do anything which has the effect of
destroying or injuring the right of the other party to
receive the fruits of the contract.” M/A-COM Sec.
Corp. v. Galesi, 904 F.2d 134, 136 (2d Cir. 2006).
“Whether particular conduct violates or is consistent
with the duty of good faith and fair dealing necessarily
depends upon the facts of the particular case, and is
ordinarily a question of fact to be determined by the jury or
other finder of fact.” Int’l Tech. Mktg.,
Inc. v. Verint Sys., Ltd., 157 F. Supp. 3d 352, 368
(S.D.N.Y. 2016) (quoting Tractebel Energy Mktg., Inc. v.
AEP Power Mktg., Inc., 487 F.3d 89, 98 (2d Cir. 2007)).
of this covenant may give rise to a claim of relief.”
ARI & Co. v. Regent Int’l Corp., 273
F.Supp.2d 518, 522 (S.D.N.Y. 2003). However, the covenant
only applies “where an implied promise is so interwoven
into the contract as to be necessary for effectuation of the
purposes of the contract.” Thyroff v. Nationwide
Mut. Ins. Co., 460 F.3d 400, 407 (2d Cir. 2006)
(internal quotations and citations omitted). “It is the
‘intent and reasonable expectations’ of parties
entering into a given contract that fix the boundaries of the
covenant of good faith and fair dealing, provided that those
expectations are consistent with the express terms of the
contract.” ARI & Co., 273 F.Supp.2d at 522
(quoting Cross & Cross Props., Ltd. v. Everett Allied
Co., 886 F.2d 497, 502 (2d Cir. 1989)). This necessarily
means that any breach of the implied covenant of good faith
and fair dealing must be grounded in the terms of the
underlying contract and does not create new contractual
rights between the parties. See Geler v. Nat’l
Westminster Bank USA, 770 F. Supp. 210, 215 (S.D.N.Y.
1991). Moreover, “[t]he ...