## Facts

- Harland and Artistic entered a 1996 set of agreements, including a Master Agreement, a Fulfillment Agreement, and an equipment-purchase agreement.
- Under the Fulfillment Agreement, Artistic agreed to purchase its requirements of checks exclusively from Harland for its direct-to-consumer business, and Harland agreed to supply those requirements.
- The Master Agreement included a covenant not to compete that restricted Harland in the direct-mail market and limited certain supply relationships involving Artistic and banks.
- Harland’s equipment investment was tied to anticipated purchase volume from Artistic.
- MDC later acquired Artistic.
- Harland alleged that after the acquisition, MDC caused or encouraged conduct that reduced Artistic’s purchases from Harland and shifted marketing and preference toward check products supplied by MDC affiliates.
- Harland alleged it failed to recover its equipment investment due to the reduced volume.
- MDC and Artistic sought declaratory and injunctive relief to prevent enforcement of the noncompete against MDC.
- Harland asserted counterclaims: (1) breach of contract against Artistic based on implied best-efforts and good-faith obligations in an exclusive-dealing/requirements arrangement; and (2) tortious interference with contract against MDC.
- MDC and Artistic moved to dismiss the counterclaims under Rule 12(b)(6).

## Issues

1. Whether Harland plausibly stated a breach-of-contract claim against Artistic based on an implied best-efforts obligation arising from an exclusive-dealing/requirements arrangement.
2. Whether Harland plausibly stated a breach-of-contract claim against Artistic for violation of the implied covenant of good faith and fair dealing in a requirements contract.
3. Whether Harland plausibly stated a tortious-interference-with-contract claim against MDC based on intentional procurement of Artistic’s breach.
4. Whether dismissal was warranted at the pleading stage under Rule 12(b)(6).

## Decision

- The court denied the motion to dismiss.
- The court held Harland’s counterclaim plausibly alleged breach by Artistic under implied best-efforts and good-faith theories in an exclusive-dealing/requirements setting.
- The court held Harland plausibly alleged tortious interference by MDC, including knowledge of the agreements, intentional procurement of breach, and resulting damages.
- The counterclaims proceeded for further litigation.

## Legal Principles

- In exclusive-dealing and requirements arrangements, courts may imply a “best efforts” obligation to prevent the contract from becoming illusory and to reflect the parties’ commercial expectations.
- Under New York law, every contract includes an implied covenant of good faith and fair dealing, which bars conduct that deprives the counterparty of the benefits of the bargain.
- A buyer in a requirements contract must act in good faith in determining and satisfying its requirements and may not manipulate requirements to defeat the seller’s expected return.
- Under New York law, tortious interference with contract requires: (1) a valid contract, (2) defendant’s knowledge, (3) intentional procurement of breach, and (4) damages; plausibility is assessed on the pleadings with reasonable inferences drawn for the claimant.
- On a Rule 12(b)(6) motion, the court accepts well-pleaded factual allegations as true and does not resolve factual disputes or merits defenses requiring development of the record.

## Conclusion

The court refused to dismiss Harland’s counterclaims, concluding that allegations of post-acquisition diversion of purchasing and marketing away from an exclusive supplier plausibly supported breach based on implied best-efforts and good-faith duties in a requirements relationship, and that MDC’s alleged direction of that conduct plausibly supported tortious interference with contract.


MDC Corp., Inc. v. John H. Harland Co., 228 F. Supp. 2d 387 (S.D.N.Y. 2002)