## Facts

- In 2017, Matec S.r.l. and its U.S. affiliate sold Gramercy Holdings I, LLC, doing business as Noranda Alumina (Noranda), two industrial water-filtration “filter press” machines for use in Noranda’s alumina business.
- Noranda later complained that the 2017 machines did not perform as agreed.
- In July 2019, the parties entered into two related agreements:
  - a “punch list” agreement under which Matec would perform specified repair/maintenance items on the 2017 machines, and
  - a separate manufacture/purchase agreement under which Noranda purchased three additional filter press machines from Matec.
- The manufacture/purchase agreement expressly made Noranda’s payment obligation for the new machines conditional on Matec’s completion of the punch-list work.
- The punch-list agreement included (1) a general term giving Noranda the right to inspect and approve Matec’s work and (2) a procedure addressing delays; the delay provision did not use express conditional language.
- Matec did not complete the punch-list items, and it also did not follow the punch-list agreement’s delay procedure as written.
- Noranda did not pay for the three new machines, relying on the condition that payment was not due until completion of the punch list.
- Matec alleged it attempted to complete the punch-list work but that Noranda frustrated performance by, among other things, restricting access to the equipment and plant, refusing delivery of replacement parts without justification, repeatedly changing completion standards, and improperly maintaining the machines.
- Matec sued Noranda for (1) breach of contract (nonpayment under the purchase agreement), (2) breach of the implied covenant of good faith and fair dealing (frustrating punch-list performance), (3) tortious interference with prospective business relations, and (4) misappropriation of trade secrets (including allegations tied to Noranda’s hiring of an employee from Matec’s supplier).
- Noranda moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6).

## Issues

1. Whether Matec plausibly stated a breach-of-contract claim for nonpayment for the new machines despite an express condition precedent (completion of the punch list), where Matec alleged Noranda wrongfully hindered completion of that condition.
2. Whether Matec plausibly stated a claim for breach of the implied covenant of good faith and fair dealing based on allegations that Noranda used its contractual inspection/approval rights and other conduct to obstruct Matec’s ability to perform the punch-list agreement.
3. Whether Matec plausibly stated a claim for tortious interference with prospective business relations by pleading a specific business relationship, Noranda’s knowledge, and interference by wrongful means.
4. Whether Matec plausibly stated a trade secret misappropriation claim by identifying the alleged trade secrets with adequate specificity and pleading nonconclusory facts showing improper acquisition, use, or disclosure.

## Decision

- The court granted the motion to dismiss in part and denied it in part.
- The motion to dismiss was denied as to Matec’s breach-of-contract claim: taking the allegations as true, Matec plausibly alleged that Noranda could not avoid payment by invoking a condition precedent that Noranda itself allegedly prevented or hindered.
- The motion to dismiss was denied as to the implied-covenant claim: Matec plausibly alleged that Noranda’s conduct frustrated Matec’s ability to obtain the contract’s benefits by obstructing punch-list performance.
- The tortious interference claim was dismissed for failure to plead the required elements with sufficient factual detail, including a concrete prospective business relationship and wrongful means.
- The trade secret misappropriation claim was dismissed because Matec did not plead the alleged trade secrets and the alleged misappropriation with enough specificity to state a plausible claim.

## Legal Principles

- On a Rule 12(b)(6) motion, the court accepts well-pleaded factual allegations as true, draws reasonable inferences in the plaintiff’s favor, and may consider contracts attached to or incorporated by reference in the complaint.
- Under New York law, when a contract makes a duty conditional on a condition precedent, the duty generally does not arise unless the condition occurs.
- New York’s prevention doctrine bars a party from relying on the nonoccurrence of a condition precedent where that party wrongfully frustrated or prevented the condition from occurring.
- New York law implies in every contract a covenant of good faith and fair dealing; neither party may act in a way that destroys or injures the other party’s right to receive the contract’s benefits, including by abusing contractual discretion (such as an inspection/approval right).
- Tortious interference with prospective business relations requires factual allegations identifying a specific prospective relationship, the defendant’s knowledge of it, intentional interference, and wrongful means or conduct aimed at the plaintiff.
- Trade secret misappropriation requires a protectable trade secret pleaded with enough detail to give notice of what information is claimed to be secret, plus nonconclusory facts showing improper acquisition, use, or disclosure.

## Conclusion

The court held that Matec plausibly alleged that Noranda obstructed completion of the punch-list work and therefore could not rely on that unmet condition to withhold payment for the new machines, allowing Matec’s breach-of-contract and implied-covenant claims to proceed, while dismissing the tortious interference and trade secret misappropriation claims for insufficient factual pleading.


Matec SLR v. Gramercy Holdings I, LLC, 2021 WL 1226956 (2021)