Shapco Printing, Inc. v. MKM Importers, Inc.

Background

Shapco Printing sought to buy a commercial printing machine. It alleged that MKM Importers and Mark Marino, MKM’s president and chief executive officer, repeatedly represented that MKM could provide a fully installed and operable machine. Shapco also alleged that MKM and Jeff Grupp communicated about the equipment’s condition and installation and sent Shapco photographs and a video of equipment represented to be the machine available for purchase.

Shapco and MKM entered a written purchase agreement in August 2020, under which Shapco paid $2,100,000. The agreement required MKM to deliver the equipment by December 31, 2020, complete installation and print testing by January 31, 2021, replace all rollers and hoses, and pay all installation hours. The agreement provided that Connecticut law would apply.

According to Shapco, the equipment that arrived was dirty, damaged, rusted, affected by water damage and prior rodent infestation, and not properly packaged or shipped. Shapco further alleged that installation involved delays, missed deadlines, incomplete work, and substandard work. Although MKM eventually performed print testing, Shapco alleged that the equipment was still not fully operational or correctly installed.

Shapco’s amended complaint asserted breach of contract and fraud. MKM’s partial motion to dismiss challenged only the fraud claim. MKM had also moved against a rescission claim, but the amended complaint did not include that claim, and MKM acknowledged in its reply that this portion of the motion was moot.

Legal standard

The court applied Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not allege enough facts to state a legally plausible claim. At this stage, the court accepted plausible factual allegations as true and viewed them in the light most favorable to Shapco.

To state a fraudulent-inducement claim under Connecticut law, Shapco had to allege that MKM knowingly made a false statement of fact to induce Shapco to act, that Shapco acted on the statement, and that Shapco was injured as a result.

Reasons for denying dismissal

Puffery and alleged misrepresentations

MKM argued that Marino’s statements were merely “puffery”—subjective promotional statements that cannot be proved true or false. The court agreed that some statements, including claims that Shapco would not find a better press or price and that MKM would not cut corners, appeared to be puffery. But the court found that other statements were more specific and concrete, including assurances that MKM would install the equipment, replace all rollers and hoses, and address equipment problems. Some representations were also made in writing.

The court held that Shapco sufficiently alleged, for purposes of the motion, that Grupp was MKM’s agent in brokering the sale. Whether Grupp actually was MKM’s agent was a fact-intensive issue that could not be resolved at the motion-to-dismiss stage. The court also treated the photographs and video as alleged fraudulent statements for purposes of the motion because MKM provided no authority showing that they could not constitute such statements.

Contract disclaimers

MKM argued that the purchase agreement barred Shapco’s fraudulent-inducement claim because Shapco agreed that it had not relied on representations by MKM or its representatives. The court rejected that argument, explaining that under the Connecticut authority cited in the opinion, a disclaimer of reliance is not valid when the buyer alleges mistake, fraud, or unconscionability. Because Shapco alleged that MKM’s misrepresentations induced it to enter the contract, the warranty disclaimers and reliance language did not justify dismissal.

The court also rejected MKM’s argument that the agreement’s “as-is” clause eliminated liability. Shapco’s fraud claim was not limited to the equipment’s physical condition; it also alleged that MKM misrepresented its intention to install the machine and ensure that it was fully operational.

Damages

MKM separately sought dismissal of Shapco’s claim for damages based on lost customers and at least $50,000 in lost profits. MKM relied on a contractual provision excluding special, direct, indirect, incidental, and consequential damages.

The court noted that lost profits are generally consequential damages but may be direct damages in some circumstances. It cited machinery downtime as an example of a loss that may be more appropriately treated as direct damages when machinery is left idle. Shapco alleged equipment downtime, and MKM offered no authority rebutting Shapco’s argument. The court also stated that any ambiguity in the agreement would be construed in Shapco’s favor because MKM drafted it.

Disposition

The court denied MKM Importers, Inc.’s partial motion to dismiss. The ruling addressed whether Shapco had adequately pleaded its fraud claim and related damages at the pleading stage; it did not resolve the ultimate truth of the allegations or the parties’ underlying dispute.