Adam Technologies, Inc. v. Hewlett Packard Co. ( 2005 )

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
2-2-2005
Adam Tech Inc v. Hewlett Packard Co
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-1306
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2005
Recommended Citation
"Adam Tech Inc v. Hewlett Packard Co" (2005). 2005 Decisions. Paper 1518.
http://digitalcommons.law.villanova.edu/thirdcircuit_2005/1518
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2005 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
NOT PRECEDENTIAL
UNITED STATES COURT OF APPEAL
FOR THE THIRD CIRCUIT
No. 04-1306
ADAM TECHNOLOGIES, INC.
Appellant
v.
HEWLETT PACKARD COMPANY;
COMPAQ COMPUTER CORPORATION
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 03-cv-03463)
District Judge: Hon. Dennis M. Cavanaugh
Argued November 2, 2004
BEFORE: ALITO, FUENTES and COW EN, Circuit Judges
(Filed February 2, 2005)
Harold M. Hoffman, Esq. (Argued)
75 Grand Avenue
Englewood, NJ 07631
Counsel for Appellant
Christopher J. Dalton. (Argued)
Klett, Rooney, Lieber & Schorling
550 Broad Street
Suite 810
Newark, NJ 07102
Counsel for Appellees
OPINION
COWEN, Circuit Judge.
Adam Technologies, Inc. (“ATI”) 1 appeals the District Court’s order dismissing its
complaint against Hewlett-Packard Company (“Hewlett-Packard”) and Compaq
Computer Corporation (“Compaq Computer,” together with Hewlett-Packard,
“Compaq”) 2 on the basis that the claims were time barred. ATI contends that the
complaint was not barred by the statute of limitations because the agreement was
governed by a six-year, rather than a four-year, limitations period. Alternatively, ATI
asserts that its claims accrued within four years of filing the complaint. We have
jurisdiction pursuant to 28 U.S.C. §1291 and will reverse and remand for further
proceedings.
1
In June 1997, ATI was a wholly owned subsidiary of Methode Electronics, Inc.
(“Methode”). On April 30, 2003 Methode conveyed all outstanding shares of ATI stock
to Vincent DeVito, an individual who was formerly a majority shareholder of ATI. (App.
104.)
2
In or about May 2003, Compaq Computers merged with, and became a wholly-
owned subsidiary of, Hewlett-Packard.
2
Compaq manufactures computers, hardware, and peripheral devices. Instead of
manufacturing all of the component parts for its computers, Compaq hires “third-party
integrators” to assemble machines pursuant to Compaq’s specifications, using parts from
suppliers approved by Compaq. IEC Electronics (“IEC”), not a party in this action, was
one of Compaq’s third-party integrators.
ATI is in the business of manufacturing and selling devices known as
“connectors,” which connect computer hardware equipment. ATI entered into an
agreement with IEC (the “IEC Agreement”) whereby ATI would supply IEC with
225,000 connectors for use in Compaq computers. After ATI had supplied over 100,000
connectors pursuant to the IEC Agreement, Compaq and IEC discovered that the
specifications they had provided ATI for the connectors were flawed. In order to remedy
the situation, ATI agreed to issue IEC a credit for $200,000 and cancel the IEC
Agreement. In exchange, Compaq, who was not a party to the IEC Agreement, entered
into an agreement with ATI (the “Compaq Agreement”) on September 18, 1998.
The Compaq Agreement provides that Compaq’s third-party integrators (including,
but not limited to IEC) would purchase specified percentages of their future allocations of
two types of connectors from ATI, subject to certain conditions. As stated in the
agreement:
Compaq will issue 60% ongoing allocation of Compaq P/N 241379-001 and
50% ongoing allocation of Compaq P/N 122721-002.
This entire Agreement is contingent upon Compaq’s approval of the
3
attached Rev. A of [ATI] Drawing . . . (Compaq P/N 241379-001), and
Compaq’s acceptance of a control lot production run . . . . The 50%
allocation of 122721-002 is dependent upon Compaq’s acceptance of first
article samples provided by [ATI], for the life of the component on those
products currently approved for use of such component as long as [ATI]
meets the quality, reliability and capacity requirements of Compaq.
(Appellant’s App. at 74.)
In February 1999, Compaq advised ATI that it was being placed on “disqualified/
restricted status” because its manufacturing facility was deficient. (Id. at 78.) Compaq
explained that it was instructing its integrators not to purchase any connectors from ATI,
unless and until these deficiencies were remedied. Discussions concerning a subsequent
inspection of the ATI facility continued through October, 1999.
On January 20, 2000, Compaq sent ATI an e-mail explaining that it did not receive
any of the allocations for the first quarter of 2000. It further stated that “these products
will now be bid on yearly.” (Id. at 97.) At a meeting held that same day, Compaq
allegedly indicated it was unilaterally abandoning the qualification process, and was
thereby rescinding the Compaq Agreement.
On July 22, 2003, ATI filed a complaint, in the district court under diversity
jurisdiction, alleging two causes of action for breach of contract. Compaq filed a pre-
answer motion for dismissal pursuant to Fed. R. Civ. P. 12(b)(6), or in the alternative, for
summary judgement pursuant to Fed. R. Civ. P. 56 on the following grounds: (1) the
complaint was time-barred; (2) ATI failed to meet a condition precedent to the agreement;
and (3) ATI had taken inconsistent legal positions in serial litigation. The District Court
4
granted the motion on the grounds that the complaint was time-barred and did not reach
the alternative theories supporting dismissal.
We review de novo the District Court’s order granting defendant’s motion to
dismiss, see Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 653 (3d Cir. 2003), or
motion for summary judgment, see Morton Int’l, Inc. v. A.E. Staley Mfg. Co., 343 F.3d
669, 679 (3d Cir. 2003). Dismissal on a pre-answer motion is only appropriate if it
appears beyond doubt that plaintiff can prove no set of facts in support of its claim which
would entitle it to relief. Worldcom, Inc., 343 F.3d at 653. Here, the District Court
considered the motion under the standards set forth in both Rule 12b(6) and Rule 56
because the parties relied on evidence outside of the pleadings.
On this appeal, we limit our analysis to the accrual of the cause of action and make
no findings as to the nature of the contractual relationship or the ultimate merits of the
complaint. If ATI’s claims accrued after July 22, 1999, then the complaint would be
timely regardless of whether a four or a six year limitations period were applicable.
As the legislature has not defined when a cause of action shall be deemed to have
accrued, the matter has been left to “judicial interpretation and administration”. Rosenau
v. City of New Brunswick, 238 A.2d 169, 172 (N.J. 1968). Under New Jersey law, a
cause of action accrues so that the applicable statute of limitations commences to run,
“when the potential plaintiff knows of his or her injuries and of facts sufficient to
attribute those injuries to the fault of another.” Windsor Card Shops, Inc. v. Hallmark
5
Cards, Inc., 957 F. Supp. 562, 566 (D.N.J. 1997) (quoting Viviano v. CBS, Inc., 503 A.2d
296, 300 (N.J. 1986)). In other words, a claim accrues, for statute of limitations
purposes, when the plaintiff has an enforceable right to institute and maintain an action.
See Metromedia Co. v. Hartz Mountain Assocs., 655 A.2d 1379, 1381 (N.J. 1995).
Here, Compaq contends and the District Court found that ATI’s claims accrued in
February 1999, when Compaq first notified ATI that it would be placed on
“disqualified/restricted status.” The District Court concluded, “there is no question but
that the Plaintiff was on notice as of February 1999 of the alleged breach.” (Appellant’s
App. at 117.) We disagree.
The February 1999 notification was merely meant to suspend, rather than
eliminate, Compaq’s obligations pending future compliance with Compaq’s “minimum
quality, process control, and material management requirements for support.” (Id. at 79.)
Compaq contemplated that ATI may obtain approved status as reflected in the message:
“I know that Adam Tech will want to do every thing possible to rectify this situation as
quickly as possible.” (Id. at 78.) One month later, Compaq continued to maintain that
until the “qualification of the facility has been completed and . . . has been approved we
cannot qualify any components built in those facilities.” (Id. at 84.) Such notifications
are not sufficient to trigger the running of the statute of limitations.
In addition, the relationship between Compaq and ATI was subject to certain
qualification requirements. The Compaq Agreement conditions a significant part of
6
Compaq’s obligations on ATI meeting “the quality, reliability and capacity requirements
of Compaq.” (Id. at 74.) Three months after executing the Compaq Agreement, Compaq
sent a letter to ATI explaining that:
[a]s a consequence of [a] reorganization, and due to the timing of the recent
negotiations, Compaq has made the decision to review the results and
awards given for the ‘99 business, and are requesting that a review of the
negotiations and subsequent awards be held . . . . We intend to make this
review process as painless as possible for all parties involved.
(Id. at 76.)
Failure to pass Compaq’s review was the stated reason for the disqualification:
“We regret having to take this course of action, but cannot continue to receive product, or
approve new designs, from a facility that (of its’ own accord, as well as from the report)
cannot meet our minimum quality, process control, and material management
requirements for support.” (Id. at 79.) As it was Compaq’s position that the review
process was permissible, it cannot now take the position that it breached the contract by
placing ATI on restricted status as a result of its failure to meet Compaq’s minimum
standards.
Finally, the tone of the February e-mail suggests, and ATI expected, the parties
would work together to restore ATI to approved status. As stated in the message
attaching the survey report:
Please let me know as soon as [ATI] is able to come up with a plan of
action for recovery. I will do whatever I can on this end to help with that
effort. I am sure that a personal visit from yourself and or Vince is one of
the options that will be considered, and I am ready to put that together as
7
soon as you think it is appropriate.
(Id. at 78.)
Significantly, Compaq purported to work in tandem with ATI for several months
thereafter to complete the facility site visit and qualification process. In a letter dated
March 1999, a Senior M anager of Compaq wrote to ATI: “I am glad to hear things are
progressing on the qualification process . . . Compaq would be glad to meet and discuss
the requirements necessary in order to fulfill the expectations of the 5-Step development
process for new parts.” (Id. at 84.) Even as late as October 22, 1999, Compaq and ATI
were still contemplating a site visit and completion of the qualification process. (Id. at
96.)
We refrain from deciding whether any subsequent action taken by Compaq
constitutes a breach. Any such assertion should be considered by the District Court in the
first instance. For purposes of this appeal, we merely conclude that ATI did not have an
actionable claim against Compaq before July 22, 1999. Accordingly, even assuming
arguendo applicability of a four-year limitations period, the complaint filed on July 22,
2003, would be timely.
For the foregoing reasons, the judgment of the District Court entered on January
23, 2004, will be reversed and the matter will be remanded for further proceedings.
8