DP Technology Corp. v. Sherwood Tool, Inc., Civ. No. H-90-355(AHN).

• Decision Date: 29 November 1990
• Docket Number: Civ. No. H-90-355(AHN).
• Citation: 751 F. Supp. 1038
• Parties: D.P. TECHNOLOGY CORP. v. SHERWOOD TOOL, INC.
• Court: U.S. District Court — District of Connecticut

751 F. Supp. 1038

D.P. TECHNOLOGY CORP. v. SHERWOOD TOOL, INC.

Civ. No. H-90-355(AHN).

United States District Court, D. Connecticut.

November 29, 1990.

H. Kenneyd Hudner, Everett E. Newton, Murtha, Cullina, Richter and Pinney, Hartford, Conn., for plaintiff.

Darcy McGraw, Carolyn W. Kone, Brenner, Saltzman, Wallman and Goldman, New Haven, Conn., for defendant.

RULING ON DEFENDANT'S MOTION TO DISMISS

NEVAS, District Judge.

In this action based on diversity jurisdiction, the plaintiff seller, D.P. Technology ("DPT"), a California corporation, sues the defendant buyer, Sherwood Tool, Inc. ("Sherwood") a Connecticut corporation, alleging a breach of contract for the purchase and sale of a computer system. Now pending is the defendant's motion to dismiss, pursuant to Rule 12(b)(6), Fed.R. Civ.P., for failure to state a claim upon which relief can be granted. For the reasons that follow, the defendant's motion to dismiss is denied.

I.

A.

The facts of this case can be easily summarized. On January 24, 1989, the defendant entered into a written contract to purchase a computer system, including hardware, software, installation and training, from the plaintiff. The complaint alleges that the computer system was "specifically" designed for the defendant and is not readily marketable.¹ The contract², executed on January 24, 1989, incorporates the delivery term set forth in the seller's Amended Letter of January 17, 1989 stating that the computer system would be delivered within ten to twelve weeks. The delivery period specified in the contract ended on April 18, 1989. The software was delivered on April 12, 1989 and the hardware was delivered on May 4, 1989. On May 9, 1989, the defendant returned the merchandise to the plaintiff, and has since refused payment for both the software and the hardware. Thus, the plaintiff alleges that the defendant breached the contract by refusing to accept delivery of the goods covered by the contract while the defendant argues that it was rather the plaintiff who breached the contract by failing to make a timely delivery.

B.

In considering a motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim upon which relief can be granted, a court is under a duty to determine whether the plaintiff has a valid claim under any possible theory. A motion to dismiss should not be granted "unless it appears beyond a doubt" that the plaintiff cannot support a claim that would entitle it to relief, Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 101, 2 L.Ed.2d 80 (1957). The pleader, however, must set forth sufficient information to outline the elements of the claim or to permit inferences to be drawn that these elements exist. In determining whether to grant a Rule 12(b)(6) motion, the court primarily considers the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint, also may be taken into account. 5A C. Wright and A. Miller, Federal Practice and Procedure: Civil § 1364, 475-80 (1990). Dismissal is justified only when the allegations of the complaint itself clearly demonstrate that the plaintiff does not have a claim. For purposes of a motion to dismiss, the court must take the allegations of the complaint as true, United States v. Mississippi, 380 U.S. 128, 143, 85 S.Ct. 808, 816, 13 L.Ed.2d 717 (1965), and construe all reasonable inferences to be drawn from those facts in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974).

C.

A federal court sitting in diversity must be mindful that it follow the law determined by the highest court of the state whose law is applicable to resolution of the dispute. Plummer v. Lederle Laboratories, 819 F.2d 349, 355 (2d Cir.), cert. denied, 484 U.S. 898, 108 S.Ct. 232, 98 L.Ed.2d 191 (1987). When that state court has not directly ruled on the issue under consideration, the federal court "`must make an estimate of what the state's highest court would rule to be its law.'" Carpentino v. Transp. Ins. Co., 609 F.Supp. 556, 560 (D.Conn.1985) (Zampano, J.) (quoting Cunninghame v. Equitable Life Assurance Soc'y of United States, 652 F.2d 306, 308 (2d Cir.1981)). See also Plummer, 819 F.2d at 355. In calculating this estimate, the federal court may consider all data the high court would use in reaching its decision. Doyle v. St. Paul Fire & Marine Ins. Co., 583 F.Supp. 554, 555 (D.Conn.1984) (Dorsey, J.). Thus, the federal court may discern the forum state's law by examining relevant decisions from the forum state's inferior courts, decisions from sister states, federal decisions, and the general weight and trend of authority.³

II.

Because the contract between the parties was a contract for the sale of goods,⁴ the law governing this transaction is to be found in Article 2 of the Uniform Commercial Code ("UCC"); Conn.Gen.Stat. §§ 42a-2-101 et seq. In its motion to dismiss, the defendant argues that the plaintiff fails to state a claim upon which relief can be granted because the plaintiff breached the contract which provided for a delivery period of ten to twelve weeks from the date of the order, January 24, 1989. Since the delivery period ended on April 18, 1989, the May 4 hardware delivery was 16 days late. The defendant contends that because the plaintiff delivered the hardware after the contractual deadline, the late delivery entitled the defendant to reject delivery, since a seller is required to tender goods in conformance with the terms set forth in a contract. U.C.C. § 2-301; Conn.Gen.Stat. § 42a-2-301.

In its memorandum in opposition, the plaintiff contends that the defendant waived the original delivery schedule. The plaintiff points to its allegation in the complaint that it designed and developed the computer system pursuant to the contract, Complaint ¶ 3-6. and argues that, in designing and developing a "specifically designed" computer system, consultations with the defendant took place which resulted in adjustment of the delivery schedule, and that the defendant waived the 10-12 week delivery requirement. In Bradford Novelty Co. v. Technomatic, 142 Conn. 166, 170, 112 A.2d 214, 216 (1955) (pre-Code), where the buyer acquiesced to a delay in delivery, the court found that the buyer "by its conduct, waived its right to strict compliance with the provisions of the contract as to time of performance." In the instant case, however, the plaintiff failed to allege its waiver claim in the complaint. Consequently, the defendant's motion to dismiss cannot be denied on a claim of waiver.

The plaintiff also states that even if the computers were delivered late, the buyer could not reject the goods pursuant to Conn.Gen.Stat. § 42a-2-602 because the parties had an installment contract. The plaintiff contends that the contract was an installment one, which authorizes the delivery of goods in separate lots to be separately accepted, as illustrated by the separate deliveries of software and hardware. A buyer may reject an installment only if the non-conformity substantially impairs the value of the goods. Conn.Gen.Stat. § 42a-2-612(2)-(3). The defendant has not asserted that the late delivery substantially reduced the computer system's value. Since the allegations in the complaint must be construed in favor of the nonmoving party in a motion to dismiss, if an installment contract was alleged, then UCC Section 2-601 would be superseded by UCC Section 2-612. However, the complaint lacks any reference to an installment contract. Therefore, the defendant's motion to dismiss cannot be denied on the grounds that there was an installment contract.

In addition, the plaintiff argues that the defendant relies on the perfect tender rule, allowing buyers to reject for any non-conformity with the contract. Plaintiff points out that the defendant has not cited one case in which a buyer rejected goods solely because of a late delivery, and that the doctrine of "perfect tender" has been roundly criticized. While it is true that the perfect tender rule has been criticized by scholars principally because it allowed a dishonest buyer to avoid an unfavorable contract on the basis of an insubstantial defect in the seller's tender, Ramirez v. Autosport, 88 N.J. 277, 283-85, 440 A.2d 1345, 1348-49 (1982); Moulton Cavity & Mold, Inc. v. Lyn-Flex Indus., Inc., 396 A.2d 1024, 1027 (Me.1979); E. Peters, Commercial Transactions 33-37 (1971) (even before enactment of the UCC, the perfect tender rule was in decline), the basic tender provision of the Uniform Commercial Code continued the perfect tender policy developed by the common law and embodied in the Uniform Sales Act. Section 2-601 states that with certain exceptions⁵, the buyer has the right to reject "if the goods or the tender of delivery fail in any respect to conform to the contract." (emphasis supplied). Conn.Gen.Stat. § 42a-2-601. The courts that have considered the issue have agreed that the perfect tender rule has survived the enactment of the Code. See, e.g., Intermeat, Inc. v. American Poultry, Inc., 575 F.2d 1017, 1024 (2d Cir. 1978) ("There is no doubt that the perfect tender rule applies to measure the buyer's right of initial rejection of goods under UCC section 2-601."); Capitol Dodge Sales, Inc. v. Northern Concrete Pipe, Inc., 131 Mich.App. 149, 158, 346 N.W.2d 535, 539 (1983) (adoption of 2-601 creates a perfect tender rule replacing pre-Code cases defining performance of a sales contract in terms of substantial compliance); Texas Imports v. Allday, 649 S.W.2d 730, 737 (Tex.App.1983) (doctrine of substantial performance is not applicable under 2-601); Ramirez, 440 A.2d at 1349 (before acceptance, the buyer may reject goods for any nonconformity); Sudol v. Rudy Papa Motors, 175 N.J.Super. 238, 240-241, 417 A.2d 1133, 1134 (1980) (section 2-601 contains perfect tender rule); see also Bowen v. Young, 507 S.W.2d 600, 602 (Tex.Civ.App. 197...