Shinano Kenshi Corporation v. Honeywell International Inc.

Background

A March 9, 2023, opinion granted Honeywell’s motion to dismiss the complaint. That opinion dismissed six causes of action: breach of contract, breach of a modified contract, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, and two fraud claims. The court allowed the plaintiffs to file an amended complaint solely to replead the breach-of-contract claim.

The plaintiffs filed an amended complaint on March 21, 2023. They also filed a letter motion seeking permission to file a proposed second amended complaint that would replead the dismissed implied-covenant and fraud claims. The court described this request as, practically speaking, an effort to obtain reconsideration of the March 9 opinion.

Request to File a Second Amended Complaint

The court explained that reconsideration requires an intervening change in controlling law, new evidence, or a need to correct clear error or prevent manifest injustice. The plaintiffs argued that the March 9 opinion had failed to interpret the parties’ agreement in their favor. The court rejected that argument, stating that the agreement was complete, clear, and unambiguous and that it had already considered and rejected the plaintiffs’ arguments about ambiguity.

As to the implied-covenant claim, the court found that the plaintiffs had not identified a basis for reconsideration. The earlier opinion dismissed that claim because the alleged duty conflicted with the agreement. The court relied on the agreement’s merger clause, which stated that representations outside the agreement would not be binding. It also explained that the plaintiffs’ theory concerning Honeywell’s alleged refusal to accept delivery was duplicative of the breach-of-contract theory, including because the proposed second amended complaint sought the same damages for both claims.

As to the two fraud claims, the court likewise found no basis for reconsideration. The earlier opinion had dismissed them because the alleged misrepresentations were not collateral or unrelated to the contract, as required under New York law. The plaintiffs argued that the alleged statements about a government contract should have been treated as purchase orders, but the court said they offered no basis to conclude that those statements were collateral or unrelated to the agreement. The court reached the same conclusion regarding alleged statements about accepting delivery.

The court therefore denied the plaintiffs’ request for leave to file a second amended complaint.

Request to Seal Information

The plaintiffs sought to file under seal certain information in the amended complaint, proposed second amended complaint, and motion for leave to amend. The plaintiffs stated that they did not seek confidential treatment, while Honeywell asserted that the information was commercially sensitive and confidential under the parties’ confidentiality agreement.

The court treated the complaints and the motion as judicial documents, meaning documents relevant to the court’s work and subject to a presumption of public access. It explained that sealing requires specific findings showing that closing the records is essential to protect a higher value and is narrowly tailored to that purpose. A contractual confidentiality designation, standing alone, does not overcome the presumption of public access. Because Honeywell offered only conclusory statements and no basis to conclude that disclosure would cause competitive harm, the court denied the motion to file the information under seal.

Further Proceedings and Disposition

The court directed that Honeywell’s planned motion to dismiss be filed by April 21, 2023; that the plaintiffs respond by May 5, 2023; and that Honeywell reply by May 12, 2023. The briefs were subject to page limits stated in the order. Discovery, which had been stayed under a February 22, 2023, order, remained stayed pending further order of the court. The clerk was directed to close the identified motions and unseal the documents at Docket No. 55.

Judge Lorna G. Schofield’s order thus denied leave to file the proposed second amended complaint and denied the request to seal information, while directing the parties to brief Honeywell’s contemplated motion to dismiss and continuing the discovery stay.