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AM INTL., INC. v. GRAPHIC MGMT. ASSOCS.

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION


October 29, 1993

AM INTERNATIONAL, INC., Plaintiff,
v.
GRAPHIC MANAGEMENT ASSOCIATES, INC., Defendant.

ALESIA

The opinion of the court was delivered by: JAMES H. ALESIA

MEMORANDUM OPINION AND ORDER

Before the court is plaintiff's motion for leave to file an amended complaint. For the reasons set forth below, the court denies plaintiff's motion.

 On August 10, 1993, the court granted defendant's motion for judgment on the pleadings as to Count I of plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(c). In that count, plaintiff claimed that defendant owed it accrued royalties of $ 1 million under a license agreement between plaintiff and defendant.

 According to that license agreement, defendant was obligated to pay plaintiff a royalty on each product -- newspaper inserting machines with a Missed Insert System ("MIRS machines") -- that defendant shipped after December 27, 1988, and before July 23, 1991. These royalties accrued on the date of shipment of the MIRS machine by defendant. However, the license agreement also contained an exception to this provision: beginning January 1, 1991, and continuing until July 23, 1991, royalties accrued upon defendant's receiving a bona fide purchase order for a MIRS machine, provided that the machine was shipped by December 31, 1991.

 The MIRS machines at issue in plaintiff's complaint were ordered in January 1990 and shipped between September 26, 1991, and November 14, 1991. The court found the language of the license agreement unambiguous, and concluded that the January 1990 order of the MIRS machines was outside the scope of the license agreement. Accordingly, the court granted defendant's motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). On September 7, 1993, the court denied plaintiffs motion to reconsider and vacate that judgment. Plaintiff now asks for leave to amend its original complaint.

 The substance of plaintiff's proposed amended complaint is that the January 1990 order of the MIRS machines was modified and confirmed on April 12, 1991, and that this constituted a new bona fide order of the modified machines. Were this true, the new order would be within the exception's "window." That is, the order would fall between January 1, 1991, and July 23, 1991, and the machines would have been shipped prior to December 31, 1991, thus triggering the accrual of royalties on those machines.

 Plaintiff supports its new claim by pointing to a "Factory Order Addition/Deletion/Change Notice" ("factory order"), which plaintiff obtained from defendant during discovery. According to plaintiff, this factory order modified the original purchase agreement between defendant and the purchaser of the MIRS machines at issue. That purchase agreement was subject to the condition that defendant would test the machines to assure they would meet the purchaser's needs; if the testing was unsuccessful, then the purchaser would have no further obligations under the purchase agreement. Because the original order was subject to conditions and was modified and confirmed by the factory order, plaintiff argues that the factory order constituted a new bona fide order of the modified MIRS machines.

 Leave to amend a party's pleading "shall be freely given when justice so requires." FED. R. CIV. P. 15(a). But Rule 15(a) "does not require courts to indulge in futile gestures." Universal Mfg. Co. v. Douglas Press, Inc., 770 F. Supp. 434, 435 (N.D. Ill. 1991) (citing Glick v. Koenig, 766 F.2d 265, 268-69 (7th Cir. 1985)). Thus, the court may deny leave to amend "if the proposed amendment could not withstand a motion to dismiss." Id.

 A Rule 12(b)(6) motion to dismiss for failure to state a claim may be granted if it is beyond doubt that the plaintiff is unable to prove any set of facts that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957). The court must take all well-pleaded allegations as true, and must view them in the light most favorable to the plaintiff. Ellsworth v. City of Racine, 774 F.2d 182, 184 (7th Cir. 1985), cert. denied, 475 U.S. 1047, 106 S. Ct. 1265, 89 L. Ed. 2d 574 (1986). The court may not go beyond the face of the pleading, but the court may take into consideration any document incorporated by reference to the pleading. United States v. Wood, 925 F.2d 1580, 1581-82 (7th Cir. 1991) (citing Goldman v. Belden, 754 F.2d 1059, 1065-66 (2d Cir. 1985) (pleading is deemed to include any document attached as an exhibit)).

 Plaintiff's proposed amended complaint would not withstand a motion to dismiss. Looking to the factory order and the license agreement, both of which are incorporated by reference to the pleadings, the court finds that the factory order cannot be considered a new bona fide purchase order. The license agreement explicitly states that royalties accrue upon "the receipt by GMA of a bona fide purchase order for a product." See Plaintiff's Proposed Amended Complaint, at 3 & ex. A (emphasis added). Given this language in the license agreement, as well as the apparent nature of the factory order as an internal memorandum prepared by defendant for its own use, the court cannot conclude that the factory order constitutes a bona fide purchase order.

 As with plaintiff's original complaint, the claim made in Count I of plaintiffs proposed amended complaint is belied by the unambiguous words of the license agreement, as well as by the obvious nature of the factory order. Grubb & Ellis Co. v. Bradley Real Estate Trust, 909 F.2d 1050, 1055 (7th Cir. 1990). Accordingly, the court denies plaintiff's motion for leave to amend its complaint pursuant to Rule 15(a).

 Date: OCT 29 1993

 JAMES H. ALESIA

 United States District Judge

19931029

© 1992-2004 VersusLaw Inc.



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