MDC Corp. v. John H. Harland Co.

John H. Harland Co. (Harland) (defendant) and Artistic Greetings, Inc. (Artistic) (plaintiff), two companies in the check business, entered into a series of agreements. Under the fulfillment agreement, Artistic agreed to purchase checks exclusively from Harland for its needs. The master agreement contained a noncompete clause barring Harland from competing with Artistic in the direct market. The noncompete agreement also restricted Artistic from entering supply relationships with banks. MDC Corporation Inc. (plaintiff) acquired Artistic after the agreements were in effect. After the acquisition, MDC made numerous decisions that hindered the relationship. Artistic’s purchases of checks from Harland fell, and Artistic’s advertising reflected a preference for check products from MDC affiliates. As a result, Harland had not recouped the cost of equipment purchased from Artistic. Harland sent a letter to MDC explaining its position that any attempt on behalf of MDC affiliates to supply checks to banking institutions would constitute a violation of the agreements. Artistic and MDC sought a declaration that the noncompete agreement was only enforceable against Artistic and an injunction barring any attempt to enforce the noncompete agreement against MDC. Harland counterclaimed, alleging breach of contract under two theories: (1) the theory of breach of the implied obligation to use best efforts in an exclusive-dealing contract; and (2) breach of the implied covenant of good faith in a requirements contract. MDC and Artistic filed a motion to dismiss these counterclaims for failure to state a claim.