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MAN ROLAND INC. v. QUANTUM COLOR CORP.

June 18, 1999

MAN ROLAND INC., PLAINTIFF,
v.
QUANTUM COLOR CORP., DEFENDANT.



The opinion of the court was delivered by: Alesia, District Judge.

MEMORANDUM OPINION AND ORDER

Before the court is plaintiff MAN Roland Incorporated's motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), defendant Quantum Color Corporation's amended counterclaims. For the following reasons, the court grants in part and denies in part plaintiff MAN Roland Incorporated's motion to dismiss Quantum Color Corporation's amended counterclaims.

I. BACKGROUND

Plaintiff MAN Roland Incorporated ("MAN Roland") brings this diversity action against the defendant Quantum Color Corporation ("Quantum"). MAN Roland is a business incorporated under the laws of Delaware with its principal place of business in Illinois. Quantum is a business incorporated under the laws of New York with its principal place of business in New York. The amount in controversy exceeds $75,000. Thus, this court has original subject matter jurisdiction pursuant to 28 U.S.C. § 1332.

This action allegedly arises out of a June 27, 1997 used machinery contract between the two parties.*fn1 In this contract, MAN Roland agreed to sell a 1987 used press to Quantum for $405,000. According to MAN Roland, Quantum agreed to pay $5,000 upon execution of the contract, $265,000 upon delivery of the press, and the balance of $135,000 upon commercial operation of the press. MAN Roland alleges that it never received the balance even though Quantum allegedly put the press into operation long ago. Any additional facts, the court will discuss in further detail under the relevant counterclaim.

II. DISCUSSION

A. Standard for deciding a Rule 12(b)(6) motion to dismiss

In addressing MAN Roland's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court assumes that the well-pleaded allegations of Quantum's amended counterclaims are true and considers them in the light most favorable to Quantum. See Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). If, when viewed in the light most favorable to Quantum, the counterclaim fails to state a claim upon which relief can be granted, the court must dismiss it. See FED.R.CIV.P. 12(b)(6); Gomez, 811 F.2d at 1039. However, the court may dismiss the counterclaim only if it appears beyond a doubt that Quantum can prove no set of facts in support of its claim that would entitle it to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

Even under the liberal notice pleading standard of the Federal Rules of Civil Procedure, however, the counterclaim must include either direct or inferential allegations respecting all material elements of the claim asserted. Perkins v. Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). Bare legal conclusions attached to narrated facts will not suffice. Strauss v. City of Chicago, 760 F.2d 765, 768 (7th Cir. 1985).

B. First and second amended counterclaims — Breach of
  contract

Quantum styles both its first and second amended counterclaims as allegations of a breach of contract. Although, in reality, Quantum is asking this court to rescind the contract because MAN Roland failed to deliver the "standard equipment" and failed to install the equipment. Thus, the court will treat the first and second amended counterclaims as allegations to state a claim for recission of the contract.

Quantum has the right to rescind a contract of sale, if it offered to return the article. See American Sanitary Rag Co. v. United States Hoffman Machinery Corp., 320 Ill. App. 556, 51 N.E.2d 809, 811 (1943). Quantum did offer to return the press to MAN Roland, (D.Countercl. ¶ 162), but MAN Roland would not accept the return. (D.Countercl. ¶ 162). Thus, Quantum has fulfilled one of the requirements for a claim of recission.

Furthermore, a party may seek recission of a contract only when there has been a material breach by another party. See Arrow Master, Inc. v. Unique Forming Ltd., 12 F.3d 709, 714 (7th Cir. 1993); Unique Watch Crystal Co. v. Kotler, 344 Ill. App. 54, 99 N.E.2d 728, 733 (1951). A material breach occurs when a party to the contract "fails to perform an element of the agreement without which the contract would not have been made." Stowe v. Balsier, No. 88 C 4929, 1989 WL 32932, at *3 (N.D.Ill. Apr.4, 1989) (citing Trapkus v. Edstrom's, 140 Ill. App.3d 720, 95 Ill.Dec. 119, 489 N.E.2d 340, 344-45 (1986)).

MAN Roland also alleges that Quantum's second amended counterclaim fails to state a claim because the term "install" does not require MAN Roland to install the press so that it would (1) "produce commercially acceptable two color process work in a commercially acceptable manner," (D.Countercl. ¶ 129), and (2) "operate in accordance with its design specifications . . . and accepted mean time between service call specifications" (D.Countercl. ¶¶ 131, 132). Thus, MAN Roland alleges it did not breach the contract.

Despite that the contract does not specifically state that MAN Roland had any obligation to install the press so that it would function as Quantum claims,*fn2 both parties interpretation of the term "install" is reasonable. Thus, the court finds this term, "install," to be ambiguous, see ECHO, Inc. v. Whitson Co., 52 F.3d 702, 705 (7th Cir. 1995) (quoting Metalex Corp. v. Uniden Corp. of Am., 863 F.2d 1331, 1333 (7th Cir. 1988) (stating that ambiguity exists if the language of the contract is "`reasonably and fairly susceptible to more than one meaning.'")); and therefore, at this stage of the litigation, the court can not rule as a matter of law ...


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