GE Transportation Parts, LLC v. Central Railway Manufacturing, LLC

Background

GE Transportation Parts, LLC and Central Railway Manufacturing, LLC manufacture train components. In late 2015, they entered into a supply agreement under which GE would be the sole channel to end customers for certain components manufactured by Central, while GE agreed to source components from Central. The agreement also required the parties to use commercially reasonable efforts to bolster customer confidence in the products and addressed licensing and technical information.

GE sold its LocoVISION camera systems bundled with Central’s event recorders to a customer. The customer complained that the recorders were not properly recording video data. Central alleged that testing showed its recorders could record the required data and that the problems instead resulted from defects in the LocoVISION system and the customer’s train networks. Central proposed a network solution, but alleged that GE did not act on the proposal or provide the information needed to pursue other approaches.

After the customer terminated its contract with GE, GE negotiated with the customer without Central’s knowledge. Central alleged that GE falsely blamed Central’s event recorders and claimed that Central had refused to develop a solution. The customer returned the event recorders rather than integrating them into a replacement system. GE then sued Central for breach of the supply agreement and indemnification related to GE’s settlement with the customer. Central asserted counterclaims for product disparagement, violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), and breach of contract.

Legal standard

The court evaluated GE’s motion under Federal Rule of Civil Procedure 12(b), which permits dismissal when a pleading does not state a legally sufficient claim. At this stage, the court accepted Central’s factual allegations as true and drew reasonable inferences in Central’s favor. A statute-of-limitations defense could be considered on a motion to dismiss because the relevant dates appeared in the pleading.

Because the case involved diversity jurisdiction, the court applied New York’s choice-of-law rules. The parties agreed that Central’s product-disparagement claim accrued in Florida, so New York’s borrowing statute required the court to apply the shorter applicable limitations period.

Product-disparagement counterclaim

The court dismissed this counterclaim as untimely. New York law imposes a one-year limitations period on product-disparagement claims. Central did not dispute that GE made the allegedly false statements no later than February 2019 and that Central did not assert the counterclaim until June 2020.

The court noted that New York law did not clearly establish whether a product-disparagement claim accrues when the statement is made or when the plaintiff suffers special damages. The court stated that, if required to choose, it would follow the approach under which the claim accrues when the disparaging statement is made. But it did not need to resolve that issue because Central’s allegations showed that both the statements and Central’s losses occurred by February 2019. Central alleged that the customer agreed in the February 2019 settlement to return the event recorders, that Central lost the opportunity to salvage its business relationship, and that GE sought indemnification for the repurchase costs. The court therefore concluded that the claim was untimely under either possible accrual rule.

FDUTPA counterclaim

The court also dismissed Central’s FDUTPA counterclaim. FDUTPA permits recovery of actual damages, but Florida courts have held that actual damages do not include consequential damages such as lost profits. Central pleaded no damages other than lost profits and did not plausibly allege actual damages under the applicable standard. The court therefore concluded that Central failed to state a FDUTPA claim.

Breach-of-contract counterclaim

The court declined to dismiss Central’s breach-of-contract counterclaim. Central alleged that GE breached provisions of the supply agreement and related trademark-license provisions by misinforming customers about Central’s products, failing to support proposed solutions, and withholding technical information needed to address the customer’s problems.

The court held that Central plausibly alleged a violation of the provision requiring GE and Central to use commercially reasonable efforts to bolster customer confidence. The provision expressly stated that both parties would use those efforts, and the court rejected GE’s argument that the provision benefited only GE. The court also held that Central plausibly alleged breaches of provisions requiring GE to provide specifications and technical information. The agreement did not clearly make those obligations dependent on a separate future licensing agreement. Central’s allegations also supported its claim that GE violated the implied covenant of good faith and fair dealing by frustrating Central’s contractual expectations.

Amendment and disposition

Central had chosen to rely on its amended counterclaims rather than seek further leave to amend after GE’s motion. Central did not request additional amendment. The court therefore concluded that Central had waived any right to amend to correct defects identified by the motion and dismissed the product-disparagement and FDUTPA counterclaims with prejudice.

The court granted in part and denied in part GE’s motion to dismiss Central’s amended counterclaims. It dismissed the product-disparagement and FDUTPA counterclaims with prejudice, declined to dismiss the breach-of-contract counterclaim, and stated that the discovery schedule remained in effect. GE’s prior motion to dismiss was denied as moot.