Decision and Order and Supplemental Report and Recommendation

HUGH B. SCOTT, Magistrate Judge.

I. INTRODUCTION

Plaintiffs Monarch Nut Company, LLC and Munger Farms ("Monarch" collectively), and their owner, Kable Munger, sued defendants Goodnature Products, Inc., Goodnature National, Inc., and Goodnature Inex, LLC ("Goodnature" collectively); and Goodnature's CEO, Dale Wettlaufer ("Wettlaufer"), alleging various claims of contractual breach and fraud in connection with the purchase of infusion and drying equipment that would prepare sweetened dried blueberries.1 On September 19, `, the Court issued a Report and Recommendation that addressed a number of dispositive motions from the parties. (Dkt. No. 120.) At the end, the Court recommended that the following claims or counterclaims proceed to trial:

(Id. at 56.)

During objections, defendants asked District Judge William Skretny for clarification on a gap that they perceived in this Court's analysis. Specifically, the first recommendation above, in defendants' view, did not state explicitly that incidental, consequential, and lost profit damages were prohibited by the way in which the Court interpreted the Licensing Agreement in question. Defendants inferred that "[b]ased on this plain and unambiguous language, the Report and Recommendation includes granting Defendants' motion for summary judgment on Plaintiffs' claims for incidental, consequential and/or lost profits damages. For purposes of clarity, Defendants ask that the Court confirm Defendants' understanding of the plain language in the Report and Recommendation." (Dkt. No. 122 at 8.) Among other objections of their own, plaintiffs disagreed that any clarification would be necessary:

(Dkt. No. 124 at 8.) On January 18, 2019, Judge Skretny adopted the Report and Recommendation in its entirety and referred any need for clarification back to this Court. (Dkt. No. 131.)

On January 22, 2019, the Court issued an electronic text order in an attempt to resolve the matter quickly. (Dkt. No. 132.) The Court explained that it "intended Monarch to have an ordinary claim for fraudulent inducement under New York law, limited only by 1) whatever damages are typically available for such a claim under New York law; and 2) whatever proof (for Rule 50 purposes) emerges at trial by the time Monarch rests." (Id.) If that clarification proved insufficient then the Court invited the parties to submit brief letters that explained the matter further.

On January 24 and 28, 2019, the parties accepted the Court's invitation and submitted additional explanations. Defendants began by listing eight points that they asserted in their dispositive motions, the last three of which were at the center of their request for additional clarification:

6. Plaintiffs disclaimed incidental and consequential damages.

7. Plaintiffs are not entitled to recover lost profit damages.

8. Plaintiffs are not entitled to recover expectation damages on their fraud claim.

(Dkt. No. 133 at 1.) Defendants then asserted that the Court did not explicitly declare (or recommend to Judge Skretny) that their motion to bar plaintiffs from incidental, consequential, lost profit, and expectation damages was denied. (Id. at 2.) On this point, defendants read the Report and Recommendation this way:

(Id. at 2-3 (emphasis in original).) From there, defendants asserted that expectation damages for lost profits cannot be recovered on a fraud claim under New York law. Defendants concluded with two other requests for clarification:

(Id. at 3.) Looking ahead to an eventual trial, defendants were candid about why they wanted more explicit clarifications than the Court had given them up to this point:

(Id.) For their part, plaintiffs saw no need to clarify any aspect of their claim for fraudulent inducement:

(Dkt. No. 134 at 2.)

II. DISCUSSION

As a preliminary matter, the Court has decided that a narrowly focused writing will avoid the need for further proceedings or a an extensive supplemental recommendation. A narrowly focused writing can fit under Rule 60(a), which allows a court to correct "a mistake arising from oversight or omission whenever one is found in a judgment, order, or other part of the record. The court may do so on motion or on its own, with or without notice." Fed. R. Civ. P. 60(a). "Rule 60(a) allows a court to clarify a judgment in order to correct a failure to memorialize part of its decision, to reflect the necessary implications of the original order, to ensure that the court's purpose is fully implemented, or to permit enforcement. Rule 60(a) allows for clarification and explanation, consistent with the intent of the original judgment, even in the absence of ambiguity, if necessary for enforcement . . . this broad rule does not allow a court to make corrections that, under the guise of mere clarification, reflect a new and subsequent intent because it perceives its original judgment to be incorrect. Rather, the interpretation must reflect the contemporaneous intent of the district court as evidenced by the record." L.I. Head Start Child Dev. Servs., Inc. v. Econ. Opportunity Comm'n of Nassau Cty., Inc., 956 F.Supp.2d 402, 410 (E.D.N.Y. 2013) (ellipsis in original) (internal quotation marks and citations omitted).

As for the substance of defendants' request, one omission from the Report and Recommendation should be addressed briefly. Specifically, when the Court assessed the impact of disclaimer language on several of plaintiffs' claims, it inadvertently omitted the impact on the fifth claim of the amended complaint because defendants were not attacking the substantive core of that claim. Although the parties have referred to plaintiffs' fifth claim in the amended complaint colloquially as "breach of contract," plaintiffs officially described it as a breach of express written warranties against all defendants. (Dkt. No. 59 at 19.) The fifth claim has been dismissed as against former defendant CPM Wolverine Proctor because of an express disclaimer of warranties in the contract known as EL10515 Revision 6 or "Revision 6." (Dkt. No. 120 at 11-12, 43.) Plaintiffs' contract with the remaining defendants, known as "Quotation 1940," contained nearly identical language. (Id. at 7.) The Court decided explicitly in the Report and Recommendation that the disclaimer language of Quotation 1940 led to the demise of the sixth claim for breach of implied warranties because that claim in its entirety went beyond the remedies available. (Id. at 53.) The Court's contemporaneous intent was that the disclaimer language of Quotation 1940 similarly would truncate the fifth claim against the remaining defendants to the extent that plaintiff sought any damages beyond "(I) the repair or replacement of the equipment on which the liability is based; or (II) at Seller's option, the refund to Buyer of the amount paid by Buyer to Seller for said equipment." (Id. at 7; Dkt. No. 94-3 at 83.) That contemporaneous intent is entirely consistent with and a necessary implication of all of the contractual analysis in the Report and Recommendation, which the Court incorporates here by reference for the sake of brevity. The above clarification is the extent of the clarification that the Court will provide for plaintiffs' fifth claim, one of two that they have left in this case. Plaintiffs have the right under 28 U.S.C. § 636 and Rule 72 if they believe that this part of the Court's writing is dispositive in nature and requires review from Judge Skretny.

With respect to plaintiffs' second claim for fraudulent inducement, the Court is still not entirely certain what needs to be clarified. The Court has already said that plaintiffs, for their claim of fraudulent inducement, will be allowed to pursue "whatever damages are typically available for such a claim under New York law." To the extent that defendants are asking what that means, they have partly answered their own question by asserting that "[t]here is simply no dispute that lost profit damages cannot be recovered on the second cause of action." (Dkt. No. 133 at 3.) If that be true then the Court's commitment to following New York law has left nothing unaddressed. Unless the parties want to consent to try the case before this Court, the Court is reluctant to add commentary to a now-adopted Report and Recommendation that it had not contemplated earlier. The Court additionally is reluctant to address defendants' apparent real concern—potential prejudice from expert testimony about large sums of damages—in any way that would encroach on Judge Skretny's right to manage motions in limine and trial evidentiary questions as he sees fit.

The most that the Court is willing to do with respect to the second claim is to review in more detail the principles of New York law that it reviewed when preparing the Report and Recommendation. As now confirmed by Judge Skretny, plaintiffs have a claim in this case for fraudulent inducement to enter the Licensing Agreement in question. "Any contract induced by fraud as to a matter material to the party defrauded is voidable." Adams v. Gillig, 92 N.E. 670, 671 (N.Y. 1910). "This form of fraud is usually based on facts occurring prior or subsequent to the execution of a contract which tend to demonstrate that an agreement, valid on its face and properly executed, is to be limited or avoided. When an opponent of a contract alleges fraud in the inducement, whether as an affirmative defense or by way of a counterclaim seeking rescission, he must sustain the burden of persuasion. That burden of proving fraud in the inducement, or a cause of action seeking rescission on that ground, requires that the proof be by most satisfactory evidence, which we interpret to be clear and convincing evidence rather than only a fair preponderance of the credible evidence. We have also accepted the principle that innocent misrepresentations are sufficient to make a contract voidable." Mix v. Neff, 473 N.Y.S.2d 31, 33-34 (N.Y. App. Div. 1984) (internal quotation marks and citations omitted).

"A person who has parted with consideration upon a contract induced by fraud has three remedies open to him. He may rescind the contract absolutely and sue in an action at law to recover the consideration parted with upon the fraudulent contract. . . . He may bring an action in equity to rescind the contract and in that action have full relief. . . . Lastly, he may retain what he has received and bring an action at law to recover the damages sustained." Sager v. Friedman, 1 N.E.2d 971, 973 (N.Y. 1936) (ellipses in original) (internal quotation marks and citations omitted). Out of countless examples, one example of indemnity for fraudulent inducement is "the costs to locate the goods, the costs to repurchase the goods, storage fees and disposal costs, and under the first counterclaim for the balance remaining due on the purchase price for the goods sold and delivered." Deerfield Commc'ns Corp. v. Chesebrough-Ponds, Inc., 502 N.E.2d 1003, 1004-05 (N.Y. 1986). New York's Pattern Jury Instructions elaborate further on the monetary damages available when plaintiffs can prove a claim for fraudulent inducement:

N.Y. Pattern Jury Instructions—Civil § 3:20 (citations omitted).

The Court trusts that the principles quoted above will guide the parties through whatever motions in limine might be necessary as they prepare for trial before Judge Skretny.

III. CONCLUSION

The Court clarifies its prior recommendation and text order as explained above.

SO ORDERED.