| Court: | US District Court, Southern District of NY |
| Facts: | Defendant (Memorex) had a contract with plaintiff (Copylease). Plaintiff would sell defendant's toner, and would be the exclusive vendor in some regions. Defendant unilaterally altered the business relationship breaching the contract. Plaintiff sued both for damages for losses, and for specific performance of the exclusivity agreement. |
| Posture: | This seems to be an intermediate ruling in a diversity jurisdiction case regarding breach of contract and the remedy of specific performance |
| Issue: | Is specific performance a remedy available to diversity jurisdiction plaintiffs when the substantive law governing the case eschews it? |
| Holding: | Maybe. Certainly there is a breach of contract here. Also, although it's not settled whether federal court can grant equitable relief in a diversity case in contravention of state substantive law, the state law should govern. In this case, however, there may be an exception that allows an injunction for specific performance, and more testimony (about the difficulty of covering) is needed to determine whether that would be appropriate. If specific performance is out of the question, there can still be recovery of damages. |
| Rule: | State law controls in concerns about injunctive relief, but state law may require refined interpretation or application to the facts of the case. As a rule, specific performance in long-term relationship situations is to be avoided. |
| Reasoning: | Scholars assert the primacy of state law as a consequence of the Erie doctrine. In this case, California law is not disposed to grant specific performance, except in the event that "the goods are unique or in other proper circumstances," so there is a possibility. Otherwise there can still be recovery of damanges. |
| Dicta: | |