The opinion of the court was delivered by: Walls, District Judge.
This matter comes before the Court on the motion of plaintiff
AT & T Credit Corp. ("AT & T Credit") for summary judgment on
its claims against defendants Zurich Data Corp. and Zurich
Depository Corp. (collectively "Zurich") and dismissal of
defendants' counterclaim and the cross-motion of the Zurich
defendants for summary judgment to dismiss the complaint.
Pursuant to Fed.R.Civ.P. 78, the Court decides these motions
without oral argument. Plaintiff AT & T Credit's motion for
summary judgment on its claims is granted; AT & T Credit's
motion for summary judgment dismissal of the defendants'
counterclaim is denied; the Zurich defendants' motion to dismiss
the complaint is denied.
This action arises out of a lease agreement between plaintiff
AT & T Credit and the Zurich defendants wherein plaintiff was to
finance defendants' purchase of computer hardware and software
from the AT & T Corporation ("AT & T Corp."). Under the Master
Equipment Lease Agreement ("the Lease Agreement"), Zurich Data
agreed to assign its rights in equipment purchased from AT & T
Corp. to AT & T Credit and AT & T Credit agreed to lease back
certain computer hardware and software to Zurich Data for
thirty-six months beginning July, 1995. Pursuant to an amendment
to the Lease Agreement, Zurich Depository agreed to be a
co-lessee with Zurich Data, jointly and severally responsible
for the payment obligations of the Lease Agreement. On July 5,
1995, when Zurich executed the Lease Agreement by a Commencement
Certificate, it acknowledged delivery, acceptance, and proper
working condition of the leased equipment. (Lipkin Aff. Ex. V.)
That equipment was the subject of a September 21, 1994
purchase and licensing agreement ("Licence Agreement") between
Zurich and AT & T Corp. Under that Agreement, AT & T Corp.
agreed to sell to Zurich computer hardware, software, licenses,
development rights, and technical support known as a "CommVault"
system. The CommVault system would enable Zurich, a data storage
business, to receive data for storage from its clients
electronically. AT & T Corp. delivered the system to Zurich in
November, 1994 and March, 1995. Because AT & T Corp. did not
receive payment from Zurich, by letter dated June 30, 1995 it
terminated their License Agreement. Although this termination
letter was dated before Zurich Data executed its Lease Agreement
with AT & T Credit, the termination was not effective until 90
days from the letter's date. Zurich Data contends that although
it possessed the equipment, it was not licensed to use it at the
beginning of the Lease Agreement because the License Agreement
had already been terminated. Zurich argues that the lease was
not initiated because AT & T Credit never delivered the licenses
to use the equipment.
According to AT & T Credit, in August, 1995 Zurich made a
payment under the Lease Agreement and did not make any
subsequent ones. (Compl. ¶ 9.) On April 17, 1996, AT & T Credit
sued Zurich for breach of the Lease Agreement. By letter to AT &
T Credit dated July 16, 1996, Zurich revoked its acceptance of
the leased equipment. (Lipkin Aff., Ex. W.) On August 30, 1996,
Zurich filed an answer, counterclaim, and a third-party
complaint against AT & T Corp., Lucent Technologies, Inc., and
CommVault Systems.*fn1 In its counterclaim, Zurich asserts
that the equipment never performed to standards set by the
License Agreement and that AT & T Corp. and AT & T Credit acted
together to breach the License Agreement. Zurich contends that
the Lease Agreement was related to the License Agreement with AT
& T Corp. Zurich's third-party complaint asserts claims for
breach of contract, breach of warranties in the License
Agreement, tortious interference with contract, and tortious
interference with prospective business advantage.
Earlier, plaintiff moved for summary judgment. This Court held
by Letter Order that material issues of fact existed as to
whether the Lease Agreement was ever effected — whether plaintiff
actually delivered the goods to be leased — and, if so, whether
the leased goods were timely rejected by defendant Zurich Data.
The Court determined that the lease entered into by AT & T
Credit and Zurich was a finance lease defined by the New Jersey
Uniform Commercial Code, N.J.S.A. 12A:2A-101 et seq.
Notwithstanding defendants' objections, the Court found that the
actual status of the Lease Agreement was not affected by the
relationship of AT & T Credit to AT & T Corp. as its corporate
subsidiary. The Court wrote that in order to effect a finance
lease, a lessor must first acquire the goods to be leased, and
it was unclear whether AT & T Credit ever acquired the
equipment. AT & T Credit maintained that it had acquired the
equipment when Zurich Data assigned its rights under the License
Agreement to it. However, because the License Agreement was
canceled apparently before Zurich executed the Lease Agreement,
the Court concluded that it was uncertain what goods, if any, AT
& T Credit was entitled to lease defendants after June 30, 1995.
AT & T Credit maintains that after further discovery, these
material issues of fact have been resolved. In particular, it
contends that the June 30, 1995 letter of termination did not
take effect until 90 days later. (Lipkin Aff., Ex. R.) Because
of this, the License Agreement was still in effect on July 5,
1995 when the Lease Agreement was executed. And the licenses
were "delivered" with the software and hardware. AT & T Credit
argues that James Holleran, president/CEO of Zurich, admitted in
his deposition that after the June 30, 1995 letter both Zurich
and AT & T Corp. continued to operate as if the License
Agreement had not been terminated. (Pl.'s Br. in Supp. of Its
Mot. for Summ. J. at 15; Lipkin Aff. Ex. G at 100:5-101:6.) As
to the second issue of material fact, AT & T Credit claims that
the Court need not decide whether Zurich's delay in revoking its
acceptance of the leased goods was reasonable, because Zurich,
as a matter of law, cannot revoke its acceptance. (Pl.'s Br. in
Supp. of Its Mot. for Summ. J. at 18.)
A. Summary Judgment Standard
Summary judgment is appropriate where the moving party
establishes that "there is no genuine issue of fact and that
[it] is entitled to a judgment as a matter of law." Fed.R.Civ.P.
56(c). A factual dispute between the parties will not defeat a
motion for summary judgment unless it is both genuine and
material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
24748, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual dispute
is genuine if a reasonable jury could return a verdict for the
nonmovant and it is material if, under the substantive law, it
would affect the outcome of the suit. See Anderson, 477 U.S.
at 248. The moving party must show that if the evidentiary
material of record were reduced to admissible evidence in court,
it would be insufficient to permit the nonmoving party to carry
its burden of proof. See Celotex v. Catrett, 477 U.S. 317,
318, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
Once the moving party has carried its burden under Rule 56,
"its opponent must do more than simply show that there is some
metaphysical doubt as to the material facts in question."
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The opposing party
must set forth specific facts showing a genuine issue for trial
and may not rest upon the mere allegations or denials of its
pleadings. See Sound Ship Building Co. v. Bethlehem Steel Co.,
533 F.2d 96, 99 (3d Cir. 1976), cert. denied, 429 U.S. 860, 97
S.Ct. 161, 50 L.Ed.2d 137 (1976). At the summary judgment stage
the court's function is not to weigh the evidence and determine
the truth of the matter, but rather to determine whether there
is a genuine issue for trial. See ...