Corning Inc. v. Shenzhen Xinhao Photoelectric Tech. Co.

• Decision Date: 24 June 2021
• Docket Number: 18-CV-6739L
• Citation: 546 F.Supp.3d 204
• Parties: CORNING INCORPORATED, Plaintiff, v. SHENZHEN XINHAO PHOTOELECTRIC TECHNOLOGY CO., LTD., Defendant.
• Court: U.S. District Court — Western District of New York

546 F.Supp.3d 204

CORNING INCORPORATED, Plaintiff,

v.SHENZHEN XINHAO PHOTOELECTRIC TECHNOLOGY CO., LTD., Defendant.

18-CV-6739L

United States District Court, W.D. New York.

Signed June 24, 2021

Arthur W. Coviello, Pro Hac Vice, Wilmer Cutler Pickering Hale & Dorr LLP, Palo Alto, CA, Kevin S. Prussia, Pro Hac Vice, Michael J. Summersgill, Pro Hac Vice, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, William R. Leinen, Eric J. Ward, Ward Greenberg Heller & Reidy LLP, Rochester, NY, for Plaintiff.

Calvin E. Wingfield, Keith A. Zullow, Pro Hac Vice, Mark J. Abate, Goodwin Procter LLP, New York, NY, Erin Elizabeth Elmouji, William G. Bauer, Woods Oviatt Gilman LLP, Rochester, NY, for Defendant.

DECISION AND ORDER

DAVID G. LARIMER, United States District Judge

INTRODUCTION

Plaintiff Corning Incorporated ("Corning") brought this action in 2018 against defendant Shenzhen Xinhao Photoelectric Technology Co., Ltd. ("Xinhao"). Plaintiff has asserted two causes of action, both of which allege that Xinhao has breached the terms of a contract between Corning and Xinhao relating to Xinhao's "finishing" of cell phone cover glass manufactured by Corning. Jurisdiction is premised on diversity of citizenship under 28 U.S.C. § 1332.

On August 13, 2020, the Court issued a Decision and Order (Dkt. #28) denying Xinhao's motion (Dkt. #16) to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. 478 F.Supp.3d 456. Familiarity with that decision is assumed.

On August 27, 2020, Xinhao filed an answer to the complaint (Dkt. #29), asserting several affirmative defenses, as well as counterclaims for tortious interference with contractual relationships, tortious interference with prospective economic advantage, injurious falsehood, rescission, and breach of contract.

Corning filed a motion (Dkt. #32) on October 1, 2020, to dismiss all of Xinhao's counterclaims and to strike four of its affirmative defenses. The parties thereafter stipulated to extend Xinhao's time to file an amended answer, which Xinhao did on November 5, 2020.¹ The amended answer asserted four counterclaims: tortious interference with contractual relationships, tortious interference with prospective economic advantage, rescission/reformation, and breach of contract. Unlike the original answer, which alleged tortious interference with respect to "third-party cover glass manufacturers" generically, each of the two tortious-interference counterclaims in the amended answer alleged a particular contract and contractual relationship between Xinhao and another company. The third counterclaim was similar to the rescission counterclaim in the original answer, but included additional allegations and sought either rescission or reformation of the parties’ contract. The breach of contract counterclaim also added further factual allegations.

Pursuant to another stipulation of the parties, Xinhao filed a "revised corrected first amended answer" (Dkt. #45). That answer is substantially identical to the previously-filed amended answer, and contains the same counterclaims. It appears that they differ only insofar as the most recently filed answer, which was filed under seal, identifies by name the companies with which Xinhao has had contracts or sought to enter into contracts. In the previous complaint, those companies were identified by fictitious names.²

Corning has filed another motion (Dkt. #48) to dismiss three of Xinhao's counterclaims and to strike three of its affirmative defenses. Xinhao has responded to that motion (Dkt. #55).

On May 21, 2021, defense counsel advised the Court that it was withdrawing its third counterclaim for rescission/reformation, and its affirmative defense of mistake. (Dkt. #63.) What is now pending before the Court is Corning's motion to dismiss the counterclaims for tortious interference with contractual relations and prospective economic advantage, and to strike Xinhao's affirmative defenses of patent misuse and unconscionability.

DISCUSSION

I. Corning's Motion to Dismiss Xinhao's Counterclaims

A. General Principles

A motion to dismiss a counterclaim is evaluated under the same standard as a motion to dismiss a complaint. Feng Xue v. Koenig , No. 19 Civ. 7630, 2021 WL 1092503, at *5 (S.D.N.Y. Mar. 22, 2021) (citing Radiancy, Inc. v. Viatek Consumer Prod. Grp., Inc. , 138 F.Supp.3d 303, 313 (S.D.N.Y. 2014) ). Under that standard, to survive a motion to dismiss, the counterclaim must contain sufficient factual matter to state a claim for relief that is plausible on its face. Oneida Indian Nation v. Phillips , 981 F.3d 157, 165 (2d Cir. 2020).

In deciding a Rule 12(b)(6) motion to dismiss a counterclaim, the court must accept all well-pleaded factual allegations in the counterclaim as true. Lynch v. City of New York , 952 F.3d 67, 74-75 (2d Cir. 2020). The court must draw all reasonable inferences in favor of the non-moving party, In re Elevator Antitrust Litig. , 502 F.3d 47, 50 (2d Cir. 2007), but "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Only a pleading that "states a plausible claim for relief survives a motion to dismiss." Id. at 679, 129 S.Ct. 1937.

"In adjudicating a motion to dismiss, a court may consider only the complaint, any written instrument attached to the complaint as an exhibit, any statements or documents incorporated in it by reference, and any document upon which the complaint heavily relies." In re Thelen LLP , 736 F.3d 213, 219 (2d Cir. 2013). "Dismissal is appropriate when ‘it is clear from the face of the complaint, and matters of which the court may take judicial notice, that the ... claims are barred as a matter of law.’ "

Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings SE , 763 F.3d 198, 208-209 (2d Cir. 2014) (quoting Conopco, Inc. v. Roll Int'l , 231 F.3d 82, 86 (2d Cir. 2000) ).

B. Counterclaim for Tortious Interference with Contractual Relations

In its first counterclaim, Xinhao alleges that it has "contracted with third-party mobile device companies," one of which is named, "to provide finished cover glass made from unfinished glass sourced from Corning and third-party cover-glass manufacturers for use in their mobile devices." Xinhao alleges that it and that named company "executed an agreement related to providing finished glass that took effect on April 5, 2017." (Dkt. #45 ¶ 29.)³

Xinhao further alleges, on information and belief, that Corning has actual knowledge of that contract, and that Corning "has engaged in acts designed to induce a breach, disruption, or otherwise render impossible performance of Xinhao's contractual relationships ...." Id. ¶¶ 30-32. Specifically, Xinhao alleges that a Corning employee, Fu Juncai, told representatives of the named third-party company that Corning could not or would not sell Corning Gorilla Glass to Xinhao. Id.

Xinhao further states that "[a]s a result of Corning's actions, Xinhao's contracts with mobile device companies and/or third-party cover-glass manufacturers have been breached." The counterclaim alleges that the named company "has not sourced or purchased finished Corning Gorilla Glass from Xinhao" and that "Xinhao has been unable to supply [the company] with finished Corning Gorilla Glass." Id. ¶¶ 33, 34.

Although framed in terms of interference with "contractual relations," this counterclaim is essentially a claim for tortious interference with contract, i.e. , with actual as opposed to prospective contractual relations. Under New York law, such a claim requires: "(1) the existence of a valid contract between the plaintiff and a third party, (2) defendant's knowledge of that contract, (3) defendant's intentional procurement of the third-party's breach of the contract without justification, (4) actual breach of the contract, and (5) damages resulting therefrom." Rich v. Fox News Network, LLC , 939 F.3d 112, 126-27 (2d Cir. 2019) (quoting Lama Holding Co. v. Smith Barney Inc. , 88 N.Y.2d 413, 425, 646 N.Y.S.2d 76, 668 N.E.2d 1370 (1996) ).

To state a claim for tortious interference with contract, a "plaintiff must identify the specific third-party contract with which the defendant allegedly interfered." MMS Trading Co. Pty Ltd. v. Hutton Toys LLC , 20-CV-1360, 2021 WL 1193947, at *12 (E.D.N.Y. Mar. 29, 2021) (citing Valley Lane Indus. Co. v. Victoria's Secret Direct Brand Mgmt., LLC , 455 F.App'x 102, 104 (2d Cir. 2012) ). It is not enough to describe the contract in general terms, though; "[i]t is imperative that, in bringing a tortious interference claim, a plaintiff identify ‘the relevant terms of the contract[ ] that existed’ that were breached by defendant." Alvarado v. Mount Pleasant Cottage Sch. Dist. , 404 F.Supp.3d 763, 791 (S.D.N.Y. 2019) (citing Leadsinger, Inc. v. Cole , No. 05 Civ. 5606, 2006 WL 2320544, at *12 (S.D.N.Y. Aug. 10, 2006) ).

With respect to the defendant's knowledge and intent, the defendant need not have been "aware of all the details" of the contract, but it must have had "actual knowledge of the specific contract." Medtech Products Inc. v. Ranir, LLC , 596 F.Supp.2d 778, 796 (S.D.N.Y. 2008). A defendant's general awareness that the plaintiff did business with third parties is not enough. See A.V.E.L.A., Inc. v. Estate of Marilyn Monroe, LLC , No. 12 Civ. 4828, 2018 WL 1273343, at *11 (S.D.N.Y. Mar. 5, 2018) ("General allegations that a party ‘knew or should have known’ about the contract in question fall short" of the requirements of a tortious-interference claim).

For that matter, even the alleged tortfeasor's knowledge that some contract existed is insufficient. Although "a plaintiff is not required to prove that the defendant had perfect or precise knowledge of the terms and conditions of the contracts in issue," Guzik v. Albright , No. 16 Civ. 2257, 2018 WL 4386084, at *6 (S.D.N.Y. Sept. 14, 2018), "the plaintiff must plead specific allegations of the...