Filed: Jan. 06, 2011
Latest Update: Feb. 21, 2020
Summary: 09-3899, 09-3900 Diesel Props 09 09-3899, 09-3900 S.r.l. Diesel Props S.r.l. v. Greystone Business Credit II LLC v. Greystone Business 3900 09-3899, 09 Credit II LLC Diesel Props S.r.l. v. Greystone Business Credit II LLC 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 4 August Term, 2009 5 (Argued: April 14, 2010 Decided: January 6, 2011) 6 Docket Nos. 09-3899-cv, -3900-cv 7 8 DIESEL PROPS S.R.L., DIESEL KID S.R.L., 9 Plaintiffs-Counterclaim- 10 Defendants-Appellants, 11 - v. - 12 G
Summary: 09-3899, 09-3900 Diesel Props 09 09-3899, 09-3900 S.r.l. Diesel Props S.r.l. v. Greystone Business Credit II LLC v. Greystone Business 3900 09-3899, 09 Credit II LLC Diesel Props S.r.l. v. Greystone Business Credit II LLC 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 4 August Term, 2009 5 (Argued: April 14, 2010 Decided: January 6, 2011) 6 Docket Nos. 09-3899-cv, -3900-cv 7 8 DIESEL PROPS S.R.L., DIESEL KID S.R.L., 9 Plaintiffs-Counterclaim- 10 Defendants-Appellants, 11 - v. - 12 GR..
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09-3899, 09-3900
Diesel Props 09
09-3899, 09-3900
S.r.l.
Diesel Props S.r.l. v. Greystone Business Credit II LLC
v. Greystone Business 3900
09-3899, 09
Credit II LLC
Diesel Props S.r.l.
v. Greystone Business
Credit II LLC
1 UNITED STATES COURT OF APPEALS
2 FOR THE SECOND CIRCUIT
3
4 August Term, 2009
5 (Argued: April 14, 2010 Decided: January 6, 2011)
6 Docket Nos. 09-3899-cv, -3900-cv
7
8 DIESEL PROPS S.R.L., DIESEL KID S.R.L.,
9 Plaintiffs-Counterclaim-
10 Defendants-Appellants,
11 - v. -
12 GREYS TONE BUSINESS CREDIT II LLC, GLOBAL BRAND
13 MARKETING INC.,
14 Defendants-Counterclaimants-
15 Appellees.
16
17 Before: KEARSE, SACK, and LIVINGSTON, Circuit Judges.
18 Appeal from a judgment of the United States District Court
19 for the Southern District of New York, Harold Baer, Jr., Judge,
20 entered after a bench trial, dismissing plaintiffs· claims against
21 defendants and ordering plaintiff Diesel Props S.r.l. to pay
22 defendant Greystone Business Credit II LLC $677,381.93 on its
23 counterclaim for unjust enrichment. See 2009 WL 2514033.
24 Affirmed in part, reversed in part.
25 IRA S. SACKS, New York, New York (Jennifer
26 Daddio, Law Offices of Ira S. Sacks, New
27 York, New York, Mark S. Lafayette, Melanie
1 Sacks, Olshan Grundman Frome Rosenzweig &
2 Wolosky, New York, New York, on the brief),
3 for Plaintiffs-Counterclaim-Defendants-
4 Appellants.
5 OLIVER J. ARMAS, New York, New York (Chadbourne
6 & Parke, New York, New York, on the brief) ,
7 for Defendant-Counterclaimant-Appellee
8 Greystone Business Credit II LLC.
9 MICHAEL J. TIFFANY, New York, New York (Leader &
10 Berkon, New York, New York), submitted a
11 letter in support of affirmance on behalf
12 of Defendant-Counterclaimant-Appellee
13 Global Brand Marketing Inc.
14 KEARSE, Circuit Judge:
15 Plaintiffs Diesel Props S. r .1. (If Props If) and Diesel Kid
16 S.r.l. ("Kid") (collectively "Diesel") appeal from a judgment
17 entered in the United States District Court for the Southern
18 District of New York following a bench trial before Harold Baer,
19 Jr. , Judge, (a) dismissing their claims against defendants
20 Greystone Business Credit II LLC ("Greystone") and Global Brand
21 Marketing Inc. ("GBMI"), and (b) ordering Props to pay Greystone
22 $677,381.93 in damages, including interest I on its counterclaim
23 for unj ust enrichment. On appeal, Diesel contends principally
24 that the district court abused its discretion in rejecting, after
25 trial, Diesel's claims against Greystone for breach of contract,
26 unjust enrichment, and account stated, and in holding Props liable
27 to Greystone for unjust enrichment. For the reasons that follow,
28 we reverse the judgment against Props for unjust enrichment, and
29 we affirm the judgment in all other respects.
- 2 -
1 I. BACKGROUND
2 Most of the background facts of this controversy are
3 undisputed and were stipulated by the parties prior to trial.
4 A. The Relationships Among the Parties
5 Props and Kid are Italian companies, subsidiaries of
6 nonparty Diesel S.p.A. (IiSpA II ), which owns the trademarks on
7 Diesel-brand merchandise. Props and Kid are licensed by SpA to
8 produce adult shoes and children's shoes, respectively, bearing
9 Diesel trademarks. In 2005, Props and Kid entered into
10 distribution agreements with GBMI, a California corporation (the
11 IIDistribution Agreements ll ) , pursuant to which GBMI would purchase
12 Diesel-brand shoes designed and manufactured by Diesel and sell
13 them to retailers in the United States. In the summer of 2006,
14 GBMI was experiencing severe financial difficulties and owed SpA
15 and Kid more than $7 million in back royalties and advertising
16 commitments. By December 31, 2006, those amounts had increased to
17 more than $11.5 million.
18 Greystone is a Delaware company that makes loans to
19 financially distressed companies and takes security interests in
20 their assets. In December 2006, Greystone, GBMI, and Diesel
21 entered into agreements pursuant to which Greystone would make
22 funds available to GBMI and would make payments from those funds
23 directly to Diesel. On December 2, SpA and Kid sent a letter to
24 GBMI, with a copy to Greystone, stating that Props and Kid were
- 3 -
1 each willing to sign a three-way agreement with Greystone and GBMI
2 with respect to such financing. On December 4, Greystone and GBMI
3 executed a loan and security agreement ("LSA"), pursuant to which
4 Greystone established a $25 million revolving credit account for
5 GBMI (the "revolver") in exchange for a security interest in
6 substantially all of GBMI I S present and after-acquired assets,
7 including "all of [GBMI' s1 books and records relating to
8 [GBMI 's] business." On the same day, two letter agreements,
9 identical in substance, were executed- one by GBMI, Greystone, and
10 Props, the other by GBMI, Greystone, and Kid (the "tripartite
11 agreements" or "TPAs")--with reference to the LSA and the
12 Distribution Agreements. The TPAs contained payment provisions
13 requiring, inter alia, that GBMI not place an order under the
14 Distribution Agreements unless it had received a bona fide
15 purchase order for Diesel products from a retailer (a "Customer
16 Purchase Order") and that GBMI provide copies of such customer
17 orders to Diesel and Greystone i that Diesel, before delivering
18 such products to GBMI, send Greystone copies of Diesel invoices
19 for those products ("Diesel Invoices") i and that GBMI supply
20 Diesel and Greystone with copies of invoices that GBMI sent to its
21 customers ("Customer Invoices"). In those circumstances, GBMI's
22 delivery of such Customer Invoices to Greystone would constitute
23 an irrevocable request that Greystone automatically pay Diesel,
24 from GBMI I s revolving credit account, the amounts shown on the
25 corresponding Diesel Invoices. With respect to GBMI debts on
26 orders not placed according to the terms of the TPAs--including
- 4 -
1 debts to its suppliers other than Diesel--Greystone was not
2 authorized to make payments from GBMI's credit account except as
3 expressly instructed by GBMI. Diesel was aware that the credit
4 account could be used to pay other GBMI creditors. The TPAs
5 provided that Diesel had the right, at any time before shipping
6 shoes to GBMI, to request and receive information from Greystone
7 as to, inter alia, whether GBMI was in noncompliance or default
8 with respect to any requirements imposed by the LSA (the "notice
9 provisions") .
10 Despite the December 2006 arrangements, GBMI's financial
11 difficulties continued. At various times- -beginning in December
12 2006 and January 2007--GBMI was in default of revenue covenants
13 and other terms of the LSA. In addition, during the next eight
14 months, Diesel shipped to GBMI several lots of shoes for which
15 Diesel was never paid. On September 4, 2007, Diesel notified
16 Greystone that Greystone was in default of the TPAs for, inter
17 alia, failing to make payments, and notified GBMI that GBMI was in
18 default of the Distribution Agreements; Diesel informed each that
19 unless its defaults were cured within 30 days, Diesel would
20 consider its agreements terminated (the nconditional termination
21 letters"). On October 17, 2007, after neither Greystone nor GBMI
22 had cured its defaults, Diesel notified them that their respective
23 contracts were terminated as of October 4. Diesel shortly
24 thereafter commenced the present action.
25 At the time of termination, GBMI had received orders from
26 retailers for 520,202 pairs of Diesel shoes for the 2008 spring-
- 5 -
1 summer season ("SS08 11 ) and had incurred significant expenses
2 associated with collecting those orders. After terminating the
3 Distribution Agreements with GBMI, Diesel designated Diesel USA
4 (IID-USAII), a wholly owned subsidiary of SpA, as its United States
5 distributor. D- USA had operated Diesel-brand retail stores but
6 had no experience in selling shoes to retailers, and had little
7 information about other retailers' orders for the SS08 season. In
8 November, D- USA hired a former GBMI employee, who gave D- USA a
9 complete list of GBMI' s open orders (the "Order Book"). Props
10 personnel referred to the Order Book as the GBMI employee's
11 "dowry" and wrote n [i] t looks like Christmas came early this
12 year." D-USA had net sales for the SS08 season of more than $14
13 million, selling 369,266 pairs of Diesel-brand shoes to retailers
14 who included those identified from the GBMI Order Book.
15 B. The District Court's Rulings After Trial
16 In the present action, Diesel asserted numerous ims,
17 several of which were dismissed prior to trial. To the extent
18 pertinent to this appeal, Diesel's third amended complaint leged
19 principally that Greystone had failed to give Diesel notice of
20 many defaults by GBMI under the LSA and had thereby breached the
21 TPA notice provisions; that the failures of GBMI and Greystone to
22 pay Diesel shoes shipped to GBMI breached the Distribution
23 Agreements and the TPA payment provisions i and that Diesel was
24 enti tIed to recover from each defendant for breach of contract,
25 unjust enrichment, or account stated. Diesel sought approximately
- 6 -
1 $20 million in damages, plus interest. Greystone, in connection
2 with Props's acquisition of the GBMI Order Book, in which
3 Greystone claimed a security interest, asserted a counterclaim
4 seeking more than $30 million for unjust enrichment.
5 The district court held a three-day bench trial on the
6 above claims. In a posttrial Opinion and Order reported at 2009
7 WL 2514033, No. 07 Civ. 9580 (S.D.N.Y. Aug. 18, 2009) ("Diesel"),
8 annotated with citations to pertinent documents and to testimony
9 and other sworn statements by officials of Greystone, GBMI, SpA,
10 Kid, and Props, the district court ruled against Diesel on all of
11 its claims and ruled in favor of Greystone on its unjust
12 enrichment counterclaim against Props. The court dismissed
13 Diesel's claims against GBMI on the ground that GBMI's obligations
14 to make payments to Diesel arose only under the Distribution
15 Agreements, and those agreements contained forum-selection clauses
16 requiring all claims thereunder to be litigated in Milan, Italy.
17 See Diesel, 2009 WL 2514033, at *6, *11.
18 As to Diesel's claim against Greystone for breach of the
19 payment provisions of the TPAs, the court concluded that Diesel
20 was not entitled to recover, principally because it had not shown
21 that a condition precedent to Greystone's obligation to make
22 payments had been performed. The court found that the TPAs and
23 the LSA, executed "on the same day, II "made express reference to
24 one another," and that "the terms of each w [ere] conditioned on
25 the performance and fulfillment of conditions of the other."
Id.
26 at *2.
- 7 -
1 [T] he LSA authorized Greystone to wire GBMI I S funds
2 directly to Diesel II pursuant to the terms of the
3 [TPAs] . II Likewise, Greystone I s payment
4 obligations under the TPA w[ere] expressly II [s]ubject
5 to the terms and conditions of the [LSA]."
6 Thus, the standing instructions from GBMI to
7 Greystone to advance revolver proceeds directly to
8 Diesel applied only if the TPA applied to the
9 particular orders for which payment was requested and
10 all conditions under the TPA were met. . . . That
11 is, if the terms of the TPA did not apply to a
12 particular order for which payment was requested
13 (i.e., the order was "outside" the structure set
14 forth in the TPA)! Greystone had no authority under
15 the LSA to wire GBMI's revolver proceeds directly to
16 Diesel; rather, GBMI, as the borrower under the LSA,
17 would be required to send Greystone a separate
18 instruction to disburse loan proceeds to Diesel as a
19 third-party. .
20 The TPA contained three primary independent
21 provisions. First, GBMI was required to obtain a
22 purchase order from a bona fide customer ("Customer
23 Purchase Order") before placing an order for shoes
24 with Diesel. . A copy of the Customer Purchase
25 Order was to be delivered to both Diesel and
26 Greystone. Second, the TPA provided that at
27 any time before shipping the shoes, Diesel had the
28 right to request written notice from Greystone as to
29 whether at the time of such request there were (a)
30 sufficient funds to permit payment in the amount
31 requested in the Diesel Invoice, (b) if not, GBMI
32 would be prevented from requesting a loan under the
33 LSA, or (c) if GBMI was not in compliance with any of
34 the covenants and/or warranties under the LSA, or is
35 in default under the LSA, irrespective of whether
36 that non-compliance or default has been waived by
37 Greystone [] (the "Notice Provision"). Third,
38 pursuant to the TPA, GBMI was required to deliver to
39 Diesel and Greystone a copy of any invoices to
40 customers ("Customer Invoice"), which were deemed an
41 irrevocable request for disbursement of a revolving
42 loan in the amount of the corresponding Diesel
43 Invoice [] (the "Payment Provision"). In
44 accordance with the terms and conditions of the LSA,
45 within two days of its receipt of a Customer Invoice,
46 Greystone was required to wire the proceeds of the
47 new loan in the amount of the corresponding Diesel
48 Invoice. . . . The only express conditions prior to
49 payment w [ere] a receipt of a Customer Invoice and
50 availability of funds under the LSA. . . .
- 8 -
1 Diesel, 2009 WL 2514033, at *2 (citations to the record omitted;
2 emphases added). The court noted that Diesel's
3 December 2 Letter expressly stated that "the [TPA]
4 should only be applied to orders placed by GBMI upon
5 receipt of a purchase order for product from a bona
6 fide customer of Diesel Products."
7 Although Greystone did not sign the December 2
8 Letter, it is undisputed that it would not have
9 closed on the LSA if Diesel had not signed the
10 December 2 Letter, and that Greystone agreed to the
11 terms of the December 2 Letter by accepting the TPA
12 and closing on the LSA. [Joint Pretrial Order] ~ 16.
13 Diesel,
2009 WL 2514033, at *3 (other citations to the record
14 omitted; emphasis ours) Although noting that rejection of a
15 contract claim on the basis of nonperformance of a condition
16 precedent "is generally disfavored," the district court found that
17 in this case the words and actions of the parties
18 demonstrate that all interested parties intended that
19 the December 2 Letter make the Customer Purchase
20 Order requirement a condition precedent to the
21 operation of the TPA.
22 Diesel,
2009 WL 2514033, at *13. It found that when Diesel
23 shipped shoes to GBMI that were not supported by Customer Purchase
24 Orders" the TPA simply did not apply to these shipments,"
id.
25 at *7:
26 The effective date of the TPA was December 4,
27 2006. At that time, there were 110,000 pairs
28 of shoes being held at SNATT, Diesel's consolidator
29 warehouse in Hong Kong, waiting to be shipped to the
30 United States. Although the procedure set
31 forth under TPA was supposed to cover all orders
32 after its execution, GBMI paid for these shoes by
33 letter of credit because it wanted fast delivery, and
34 the formali ties required to implement the TPA were
35 not yet in place on GBMI' s end. While Diesel
36 contends "all parties" understood the rest of the
37 shipments for the SS07 season would be paid for under
38 the TPA, that does not appear to be what happened.
39 Beginning in January 2007, Diesel began accepting
40 orders from GBMI that were not supported by Customer
- 9 -
1 Purchase Orders, understanding that the terms of the
2 TPA would not apply to those shipments. Diesel
3 opted to take the risk of accepting those orders
4 because it was anxious to have its shoes distributed
5 into the United States in time for the Fall/Winter
6 2007 (IIFW0711) season. . . . Diesel continued to ship
7 to GBMI without requiring Customer Purchase Orders
8 throughout the life of the TPA knowing full well
9 that, based on the structure of the TPA and as made
10 explicit in the December 2 Letter, those orders were
11 not covered by the TPA. . . .
12 Because the TPA simply did not apply to these
13 shipmentsI GreYstone lacked any authority to lend
14 funds to a third-party (such as Diesel) without the
15 direct authorization of GBMI as its borrower under
16 the LSA. . . . GBMI and Greystone' s actions under
17 the LSA were consistent with this understanding--on
18 18 occasions, GBMI requested that Greystone wire
19 revolver funds directly to Diesel in specified
20 amountsi Greystone honored each instruction.
21 Diesel/ 2009 WL 2514033/ at *6-*7 (footnote and citations to the
22 record omitted; emphases added) i see also
id. at *13.
23 As to Diesel's claim against Greystone for breach of the
24 TPA notice provisions/ the district court found that there were
25 indeed numerous occasions on which Greystone failed to give notice
26 of GBMI' s noncompl iance wi th the LSA. But it found that Diesel
27 had failed to carry its burden of showing that losses it suffered
28 from nonpayment for shoes it shipped to GBMI were caused by those
29 failures. GBMI's Greystone credit account was available for
30 payments not only to Diesel but to other GBMI creditors as well/
31 and the court found that Diesel/ with awareness of GBMI's
32 financial problems, shipped shoes to GBMI even when it had
33 received notice of GBMI defaults or of the current lack of funds
34 in the credit account sufficient to pay for shoes being shipped by
35 Diesel. See/~,
id. at *5-*7/ *12.
- 10 -
1 There is no dispute that Diesel was well aware of
2 GBMI's dire financial situation, and that it chose to
3 take the business risk associated with continuing to
4 ship shoes to GBMI, because it wanted to ensure a
5 market for its footwear in the United States. . . .
6 One example is the occasion on January 16, 2007, when
7 Diesel sent a Notice Letter requesting a response
8 under the Notice Provision of the TPA, but failed to
9 wait the requisite two business days for a response
10 from Greystone, and shipped over three-quarters of a
11 million dollars worth of shoes that same day. To
12 make the cheese more binding, the testimony revealed
13 that on the two occasions when Diesel was notified of
14 GBMI's defaults under the LSA, rather than
15 discontinue its relationship with GBMI, it continued
16 to ship goods. In February, over the four days
17 following the first default notice, Diesel shipped
18 $1.7 million worth of shoes. Thereafter, even though
19 it knew GBMI was in financial difficulty and in
20 default under the LSA, and that it had not been paid
21 for its shipments, in the three months following the
22 first notice of default, Diesel proceeded to ship
23 over $13 million dollars worth of shoes to GBMI.
24 After it received the second notice of GBMI's default
25 on July 18, 2007, undeterred by GBMI's financial
26 state, Diesel continued to ship shoes, shipping over
27 $1 million worth of shoes in the ensuing two weeks.
28 Diesel continued to ship shoes up until the day
29 before it sent its notices to Greystone and GBMI of
30 its intent to terminate the TPA and Distribution
31 Agreements, almost two months after it received the
32 second notice of default.
33 Id. at *12. The court noted testimony by Diesel witnesses who
34 testified that "had they received notice of any of the additional
35 instances of covenant breaches or lack of availability (in
36 addition to the two notices of default actually received), they
37 would not have continued to ship shoes to GBMI."
Id. i see also
38
id. at *5. But the court found that "this testimony [wa]s belied
39 by the events as they actually unfolded, II at *5, and that
40 Diesel's "own actions and business decisions to continue to ship
41 shoes irrespective of GBMI's financial condition" constituted "an
42 intervening cause of [Diesel']s losses, II
id. at *12.
- 11 -
1 Addressing Diesel's alternative claims against Greystone,
2 the district court dismissed the claim for account stated, finding
3 that the e-mails on which Diesel relied for that claim were
4 statements of accounts owed not by Greystone, but by GBMI.
5
id. at *15. As to the claim for unj ust enrichment, which was
6 premised on Greystone's receipt from GBMI of proceeds of sales of
7 shoes for which payment was not made to Diesel, the court found
8 that Greystone had not been enriched unjustly:
9 The evidence in this case reveals the only benefit
10 Greystone retained was to the extent it was, or could
11 have been, repaid for loan funds disbursed to GBMI
12 under the L8A. However, GBMI was obligated to repay
13 Greystone for those loans. Equity and good
14 conscience do not require a party to give up what it
15 rightfully obtained, or is entitled to, under a
16 contract. ([B]argained-for benefits cannot be
17 deemed to unjustly enrich a contracting party.)
18 Diesel,
2009 WL 2514033, at *14 (internal quotation marks
19 omitted) .
20 The district court found merit, however, in Greystone's
21 counterclaim for unjust enrichment against Props for lithe value
22 that Props unjustly obtained by purloining Greystone's
23 collateral," i.e., GBMI's 8808 Order Book.
Id. at *16. The court
24 rejected Props's contention that the Distribution Agreements
25 entitled Props to the Order Book at the end of the 8808 sales
26 campaign. Having found that the 8808 sales campaign "had ended as
27 of the termination of the Distribution Agreement [s] ,"
id. at * 9,
28 the court found that
29 the facts show that Props purposely timed its notice
30 of default so that the end of the 30-day cure period
31 would coincide with the end of the sales
32 campaign. . . . The Distribution Agreement nowhere
- 12 -
1 states that Props is entitled to the Order Book if
2 the Agreement is terminated; Props timed its notice
3 of default and termination to correspond exactly with
4 the end of the sales period. The Court is not
5 persuaded by Props's arguments that GBMI was required
6 to provide it with the Order Book,
7 id. at *16. The court ordered Props to pay Greystone unj ust
8 enrichment damages in the amount of $572,616.75 plus $104,765.18
9 in interest, for a total of $677,381.93.
10 This appeal followed.
11 II. DISCUSSION
12 On appeal, Diesel contends that the judgment dismissing
13 its claims against Greystone and holding it liable to Greystone
14 for unjust enrichment should be reversed--and that judgment should
15 be entered in its favor for some $17.3 to $19.3 million- -on the
16 grounds that the district court "abuse [d] its discretion" in,
17 inter alia, finding that there was an unperformed condition
18 precedent to Greystone's obligation to make payments, finding that
19 Greystone' s failures to give Diesel notice of many of GBMI IS
20 defaults were not the proximate cause of Diesel's losses, finding
21 that Props benefited from D-USA's use of GBMI' s Order Book, and
22 failing to find that Props was contractually entitled to the Order
23 Book. (~, Diesel brief on appeal at 2-3.) Applying the normal
24 standard of review, we conclude that the judgment should be
25 affirmed insofar as it dismissed the claims of Diesel but reversed
26 insofar as it held Props liable to Greystone for unjust
27 enrichment.
- 13 -
1 A. Standard of Review
2 On an appeal from a judgment entered after a bench trial,
3 we review the district court's conclusions of law de novo. See,
4 ~,Giordano v. Thomson, 564 F.3d 163, 168 (2d Cir. 2009) i Henry
5 v. Champlain Enterprises, Inc.,
445 F.3d 610, 617-18, 623 (2d Cir.
6 2006) i FDIC v. Providence College,
115 F.3d 136, 140 (2d Cir.
7 1997) . Under New York law, which the TPAs provided would be
8 applicable, the initial matter of whether a written contract is
9 ambiguous is a question of law. See, ,Law Debenture Trust
10 Co. of New York v. Maverick Tube Corp.,
595 F.3d 458, 465 (2d Cir.
11 2010) i JA Apparel Corp. v. Abboud,
568 F.3d 390, 396 (2d Cir.
12 2009) i International Multifoods Corp. v. Commercial Union
13 Insurance Co.,
309 F.3d 76, 83 (2d Cir. 2002). The meaning of an
14 unambiguous contract is likewise a matter of law. See,~,
15 Revson v. Cinque & Cinque. P.C.,
221 F.3d 59, 66 (2d Cir. 2000);
16 K. Bell & Associates, Inc. v. Lloyd's Underwriters,
97 F.3d 632,
17 637 (2d Cir. 1996) i Seiden Associates, Inc. v. ANC Holdings, Inc.,
18
959 F.2d 425, 429 (2d Cir. 1992).
19 When the district court as factfinder is confronted with a
20 contract provision that is not unambiguous, it may properly
21 consider evidence extrinsic to the contract, including testimony
22 offered by the parties. ~,
id. i Amusement Business
23 Underwriters v. American International Group, Inc.,
66 N.Y.2d 878,
24 880-81,
498 N.Y.S.2d 760, 763 (1985) i 67 Wall Street Co. v.
25 Franklin National Bank,
37 N.Y.2d 245, 248,
371 N.Y.S.2d 915, 918
- 14 -
1 (1975) (evidence of "surrounding facts and circumstances" to show
2 the parties' intent). The meaning of an ambiguous provision, in
3 light of such evidence, is a question of fact for the factfinder.
4 See,~, Revson v. Cinque & Cinque, P.C., 221 F.3d at 66; In
5 Time Products, Ltd. v. Toy Biz, Inc.,
38 F.3d 660, 665 (2d Cir.
6 1994); Cons arc Corp. v. Marine Midland Bank, N.A.,
996 F.2d 568,
7 573 (2d Cir. 1993).
8 After a bench trial, the court's "[f] indings of fact,
9 whether based on oral or other evidence, must not be set aside
10 unless [they are] clearly erroneous." Fed. R. Civ. P. 52 (a) (6);
11 see,~, Anderson v. Bessemer City,
470 U.S. 564, 573-74 (1985);
12 Banker v. Nighswander, Martin & Mitchell,
37 F.3d 866, 870 (2d
13 Cir. 1994) The" clearly erroneous" standard applies whether the
14 findings are based on witness testimony, or on documentary
15 evidence, or on inferences from other facts. See,~, Anderson,
16 470 U.S. at 574; Petereit v. S.B. Thomas, Inc.,
63 F.3d 1169, 1176
17 (2d Cir. 1995).
18 In deciding whether factual findings are clearly
19 erroneous, we are required to "give due regard to the trial
20 court's opportunity to judge the witnesses' credibility." Fed. R.
21 Civ. P. 52 (a) (6). It is within the province of the district court
22 as the trier of fact to decide whose testimony should be credited.
23 See,~,
Anderson, 470 U.S. at 574. The court is also entitled,
24 just as a jury would be, see, ~, Robinson v. Cattaraugus
25 County,
147 F.3d 153, 160 (2d Cir. 1998); Fiacco v. City of
26 Rensselaer,
783 F.2d 319, 325 (2d Cir. 1986), cert. denied, 480
- 15 -
1 U.S. 922 (1987), to believe some parts and disbelieve other parts
2 of the testimony of any given witness. We are not allowed to
3 second-guess the court1s credibility assessments.
4
Anderson, 470 U.S. at 573-74.
5 Further, II [w] here there are two permissible views of the
6 evidence, the factfinder's choice between them cannot be clearly
7 erroneous. II rd. at 574; see United States v. Yellow Cab Co., 338
8 U.S. 338, 342 (1949). The fact that there may have been evidence
9 to support an inference contrary to that drawn by the trial court
10 does not mean that the findings made are clearly erroneous. See,
11 ~,Palazzo v. Corio,
232 F.3d 38, 44 (2d Cir. 2000) i Healey v.
12 Chelsea Resources, Ltd.,
947 F.2d 611, 618-19 (2d Cir. 1991).
13 [W] hen the district court is sitting as trier of
14 fact, it has no obligation to draw a given inference
15 merely because it is supportable; nor has it any
16 obligation, in its capacity as trier of fact, to view
17 the evidence in the light most favorable to [a
18 particular party]. The obligations of the court as
19 the trier of fact are to determine which of the
20 witnesses it finds credible, which of the permissible
21 competing inferences it will draw, and whether the
22 party having the burden of proof has persuaded it as
23 factfinder that the requisite facts are proven.
24 Cifra v. General Electric Co.,
252 F.3d 205, 215 (2d Cir. 2001).
25 Given the standards governing our review of the district
26 court1s rulings after the bench trial, we have little difficulty
27 in concluding that the rej ection of Diesel r s claims should be
28 affirmed. We reach the opposi te conclusion wi th respect to the
29 ruling that Greystone was entitled to unj ust enrichment damages
30 from Props.
- 16 -
1 B. The Dismissal of Diesel's Contract Claims against Greystone
2 In order to recover from a defendant for breach of
3 contract, a plaintiff must prove, by a preponderance of the
4 evidence, ( 1) the existence of a contract between itself and that
5 defendant i (2) performance of the plaintiff's obligations under
6 the contract i (3) breach of the contract by that defendant; and
7 (4) damages to the plaintiff caused by that defendant's breach.
8 See,~, Eternity Global Master Fund Ltd. v. Morgan Guaranty
9 Trust Co. of New York, 375 F.3d 168, 177 (2d Cir. 2004) i Harsco
10 Corp. v. Segui,
91 F.3d 337, 348 (2d Cir. 1996). "Causation is an
11 essential element of damages in a breach of contract action; and,
12 as in tort, a plaintiff must prove that a defendant's breach
13 directly and proximately caused his or her damages." National
14 Market Share v. Sterling National Bank,
392 F.3d 520, 525 (2d Cir.
15 2004) (emphasis in original); see, ~, Wakeman v. Wheeler &
16 Wilson Manufacturing Co.,
101 N.Y. 205, 209,
4 N.E. 264, 266
17 (1886) . Recovery is not allowed if the claimed losses are "the
18 result of other intervening causes." Id.; see, ~, National
19 Market Share v. Sterling National
Bank, 392 F.3d at 526; Kenford
20 Co. v. County of Erie,
67 N.Y.2d 257, 261,
502 N.Y.S.2d 131, 132
21 (1986) .
22 The dist ct court concluded that Diesel's claim against
23 Greystone for breach of the TPA notice provisions should be
24 dismissed for lack of sufficient proof that the failures to give
25 Diesel notice of many of GBMI's defaults caused Diesel's losses.
26 Although Diesel argues that this was error because its witnesses
- 17 -
1 testified that Diesel would have ceased shipping shoes to GBMI if
2 Greystone had notified Diesel of each of GBMI I S defaults, the
3 court's refusal to credit that testimony was entirely permissible.
4 The court found, inter alia, that in January 2007, Diesel faxed a
5 request to Greystone for GBMI default information within two
6 business days but did not bother to await a response, instead
7 shipping more than three-quarters of a million dollars worth of
8 shoes to GBMI on the day of the inquiry; that in February 2007, in
9 the four days following its receipt of a notice from Greystone
10 that GBMI was in default, Diesel shipped to GBMI $1.7 million
11 worth of shoes; that in the three months following that first
12 notice of default, Diesel sent GBMI more than $13 million dollars
13 worth of shoes i that in July 2007, in the two weeks after it
14 received notice of another GBMI default, Diesel shipped GBMI more
15 than $1 million worth of shoes; and that Diesel was still shipping
16 shoes to GBMI on September 3, 2007, one day before sending GBMI
17 the conditional notice of termination. These findings are
18 supported by documentary evidence, and the court as factfinder was
19 entitled to find that the testimony of Diesel I s witnesses--that
20 Diesel would have stopped shipping had it received any additional
21 notices of default--was not credible, as that testimony I! [wa] s
22 belied by the events as they actually unfolded, I! Diesel, 2009 WL
23 2514033, at *5. The court correctly applied the legal principles
24 as to causation, and its findings of fact are not clearly
25 erroneous. There is thus no basis for overturning its ruling that
- 18 -
1 Diesel failed to prove the causation element of its claim against
2 Greystone for breach of the TPA notice provisions.
3 The district court concluded that Diesel failed to
4 establish its claim that Greystone breached the TPA payment
5 provisions because, inter alia, Greystone had not received the
6 relevant copies of Customer Purchase Orders, receipt of which the
7 court found was a condition precedent to Greystone's duty to pay.
8 A contract imposes a condition precedent when it provides that "an
9 act or event, other than a lapse of time," unless excused, "must
10 occur before a duty to perform a promise in the agreement arises."
11 Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685,
12 690,
636 N.Y.S.2d 734, 737 (1995) (internal quotation marks
13 omitted) "'Since an express condition [precedent] . depends
14 for its validity on the manifested intention of the parties, it
15 has the same sanctity as the promise itself.'"
Id. at 690-91
16 (quoting 5 Williston, Contracts § 669, at 154 (3d ed. 1961)) In
17 this case, the December 2 Letter provided that the TPA would "only
18 be applied to orders placed by GBMI upon receipt of a purchase
19 order for product from a bona fide customer of Diesel Products."
20 And in the TPAs, GBMI agreed that it would not order shoes from
21 Diesel before receiving such a Customer Purchase Order and agreed
22 to provide copies of such purchase orders to both Diesel and
23 Greystonei Diesel "agree[d] to provide [Greystone] with a copy of
24 any invoice for its products delivered to [GBMI] (a 'Diesel
25 Invoice')" and "agree[d] that each Diesel Invoice shall be
26 delivered prior to the delivery of the products ordered by the
- 19 -
1 applicable Diesel Customer to [GBMI]" (emphasis in original). The
2 TPAs provided that Greystone would be obligated to make payment to
3 Diesel after GBMI furnished Greystone with a copy of a GBMI
4 invoice to a Diesel customer "in the amount of the corresponding
5 Diesel Invoice. 1I
6 The district court / having determined that the contract
7 documents were somewhat ambiguous as to whether the Customer
8 Purchase Order requirement was a condition precedent to
9 Greystone's duty to pay Diesel/ admitted extrinsic evidence as to
10 the parties' intent. The court found that the parties intended
11 the Customer Purchase Order requirement to be a condition
12 precedent/ based on/ inter alia/ a March 2007 e-mail sent by
13 Diesel to GBMI stating that "under the current agreements," any
14 "GBM! orders to Diesel submitted prior to confinnation of GBM!
15 customers orders are not sub; ect to the tripartite and
16 should be assisted by a letter of credit" (first emphasis in
17 originali second emphasis added)/ and evidence that in fact when
18 Diesel was paid for shoes it shipped pursuant to a GBMI order that
19 was not preceded by a Customer Purchase Order, Diesel was paid
20 through a different mechanism, not through the TPAs.
21 We see no error in the district court's determination that
22 the contract documents were ambiguous in this regardi and/ in
23 light of the evidence, we see no clear error in its finding that
24 the parties intended that satisfaction of the Customer Purchase
25 Order requirement be a condition precedent to Greystone's duty to
26 make payments from GBMI's credit account to Diesel. As there is
- 20 -
1 no dispute that that condition was not fulfilled, Diesel's claim
2 against Greystone for failure to make payments to Diesel with
3 respect to those shipments was properly dismissed.
4 C. The Dismissal of Diesel's Other Claims
5 Diesel's challenges to the district court's posttrial
6 dismissal of its other claims do not require extended discussion.
7 In light of the agreements among the parties, the district court
8 properly dismissed Diesel's claims that it was entitled to recover
9 from Greystone for unjust enrichment as a result of GBMI's
10 receiving Diesel shoes for which Diesel was not paid. "The theory
11 of unjust enrichment lies as a quasi-contract claim. It is an
12 obligation the law creates in the absence of any agreement. II
13 Goldman v. Metropolitan Life Insurance Co., 5 N.Y.3d 561, 572, 807
14 N.Y.S.2d 583, 587 (2005) i see, ~, In re First Central Financial
15 Corp.,
377 F.3d 209, 213 (2d Cir. 2004) i Clark-Fitzpatrick, Inc.
16 v. Long Island R.R. Co.,
70 N.Y.2d 382, 388,
521 N.Y.S.2d 653, 656
17 (1987) (liThe existence of a valid and enforceable written contract
18 governing a particular subject matter ordinarily precludes
19 recovery in quasi contract for events arising out of the same
20 subject matter.").
21 The court also properly dismissed Diesel's claims against
22 Greystone for account stated. The viability of such a claim
23 depends on lithe existence of some indebtedness between the
24 parties, or an express agreement to treat the statement as an
25 account stated. It cannot be used to create liability where none
- 21
1 otherwise exists. II M. Paladino, Inc. v. J. Lucchese & Son
2 Contracting Corp., 247 A.D.2d SIS, 516, 669 N.Y.S.2d 318, 319 (2d
3 Dep't 1998). The district court found that the e-mails on which
4 Diesel relied for this claim were statements of amounts owed to
5 Diesel by GBMI, not by Greystone, a finding that is not clearly
6 erroneous. Further , given that Diesel has failed to establ ish
7 Greystone' s liability under the TPAs for the unpaid amounts, an
8 account-stated claim against Greystone is untenable.
9 Finally, we note Diesel's contention that if the dismissal
10 of its claims against Greystone is upheld on the basis that GBMI
11 failed to perform a condition precedent to Greystone I s duty to
12 pay, GBMI should be held liable for breach of the TPAs. Diesel's
13 one-paragraph presentation of this argument contains neither a
14 citation to the record nor a citation of law and provides us with
15 no basis for reversal. In any event, the district court found
16 that although GBMI' s delivery of Customer Purchase Orders to
17 Diesel and Greystone was a condition precedent to Greystone' s
18 obligation to pay, GBMI's failure to provide such purchase orders
19 did not constitute a material breach. See Diesel,
2009 WL
20 2514033, at *14 n.13. The finding of lack of materiality insofar
21 as Diesel is concerned is supported by the very fact that,
22 despite GBMI's failure to supply those documents, Diesel persisted
23 in making many millions of dollars worth of shipments to GBMI.
22 -
1 D. The Award of Unjust Enrichment Damages to Greystone
2 In order to succeed on a claim for unjust enrichment
3 under New York law, a plaintiff must prove that "(1) defendant
4 was enriched, (2) at plaintiff's expense, and (3) equity and good
5 conscience militate against permitting defendant to retain what
6 plaintiff is seeking to recover. II Briarpatch Ltd. v. Phoenix
7 Pictures, Inc., 373 F.3d 296, 306 (2d Cir. 2004), cert. denied,
8 544 U.8. 949 (2005) i see, ~, Nordwind v. Rowland,
584 F.3d 420,
9 434 (2d Cir. 2009) i Kaye v. Grossman,
202 F.3d 611, 616 (2d Cir.
10 2000). In the present case, the district court ruled that Props
11 was unjustly enriched by its receipt of the GBMI Order Book for
12 8808 upon the termination of the agreements with Greystone and
13 GBMI, reasoning that Greystone had taken a security interest in
14 all of GBMI's assets, including the Order Book, and stating that
15 the Distribution Agreement did not give Props the right to receive
16 the GBMI Order Book upon the Distribution Agreement's termination,
17 see Diesel,
2009 WL 2514033, at *16. We disagree because Diesel
18 had a contractual right to receive the 8808 Order Book at the
19 relevant time, and that right was superior to Greystone's security
20 interest.
21 In general, when the question is the IIpriority between a
22 secured creditor and [a person] whose interests in the collateral
23 preceded it, a first in time, first in right rule applies. II
24 8eptembertide Publishing, B.V. v. Stein & Day, Inc.,
884 F.2d 675,
25 682 (2d Cir. 1989) (IISeptembertide ll ) i Fallon v. Wall 8treet
26 Clearing Co.,
182 A.D.2d 245, 249,
586 N.Y.S.2d 953, 956 (1st
- 23 -
1 Dep't 1992) ("Fallon"). "It has always been the law in New York
2 that an assignee stands in the shoes of its assignor and takes
3 subject to those liabilities of its assignor that were in
4 existence prior to the assignment"; and, thus, "in taking a
5 security interest in its assignor's property, [the assignee]
6 cannot claim rights in the property that were not the assignor's
7 to give." Septembertide, 884 F.2d at 682.
8 A later-in-time assignee can have priority over a claimant
9 whose right was created earlier only if the later assignee was a
10 "bona fide purchaser."
Fallon, 182 A.D.2d at 249,
586 N.Y.S.2d
11 at 956. But "that status cannot be attained where the transferee
12 takes with knowledge of an adverse claim" i and "[a] n 'adverse
13 claim' is not limited strictly to an adverse ownership interest,
14 but rather could include, in this context, any transfer with
15 knowledge of violation of an agreement."
Id. Thus, when a
16 creditor takes a security interest in collateral to which knows
17 a third party has even an unperfected contract right, it takes
18 that securi ty interest "subj ect to [those] pre existing
19 liabilities," and the "acquired interest [ils secured only to the
20 extent that [the assignor] had an unencumbered, transferable
21 interest." . i see, ~,
Septembertide, 884 F.2d at 677, 681-82
22 (creditor who acquired a security interest in "all ll of the
23 debtor's "contract rights and accounts" was not entitled to
24 proceeds that an earlier contract had assigned to a third party) .
25 In the present case, the pertinent Distribution Agreement
26 was entered into in 2005. Defining Props as the "Company" and
- 24 -
1 GBMI as the "Distributor," that agreement provided that "within 15
2 (fifteen) days from the end of each Sales campaign the Distributor
3 shall communicate to the Company the list of the Sales Outlets and
4 the relevant orders collected," i.e., the GBMI Order Book for that
5 sell ing season. The district court found that the SSO 8 "sales
6 campaign had ended as of the termination of the Distribution
7 Agreement[s].11 Diesel, 2009 WL 2514033, at *9. Greystone
8 acquired its security interest in GBMI I S assets when it entered
9 into the LSA in 2006, and it is undisputed that Greystone had
10 knowledge of the Distribution Agreements at that time. The LSA
11 made express reference to the TPA among Greystone, GBMI, and
12 Props; and the TPA made express reference to the 2005 Distribution
13 Agreement. As the preexisting Props Distribution Agreement
14 entitled Props to receive GBMI's records of customers and orders
15 for Props products at the end of each sales campaign, Greystone's
16 later-acquired security interest in GBMI's assets was subordinate
17 to Diesel's right to receive the Order Book at the close of each
18 such campaign.
19 The district court instead described Props as having
20 "purloin [ed] II Greystone's collateral, at *16, noting the
21 apparent glee reflected by Props e-mails referring to Props's
22 receipt of the Order Book as II f Christmas'" coming '" early, '" and
23 noting testimonial and documentary evidence that Props made
24 efforts to conceal its possession of the Order Book.
Id. at *10.
25 The court suggested that Props had no right to the SS08 Order Book
26 because it had timed its termination of the Distribution Agreement
- 25 -
1 to coincide with the end of the sales campaign, see id. at *16.
2 But the district court did not find--nor does Greystone contend,
3 and nothing in the record suggests--that Props did not have the
4 right to terminate the Distribution Agreement when it did. And as
5 the provision in that agreement giving Props the right to receive
6 GBMI's customer and order records at the end of each sales
7 campaign was unambiguous, extrinsic evidence, such as Props's
8 reaction to receiving the Order Book following the Distribution
9 Agreement's termination, was inadmissible to vary the plain
10 meaning of the contract provision.
11 In sum, because (a) the Distribution Agreement gave Props
12 the right, at the end of the 8808 sales campaign, to receive
13 GBMI I s list of sales outlets and orders for Props shoes, (b)
14 termination of the Distribution Agreement coincided with the end
15 of that sales campaign, (c) Diesel's contract right existed prior
16 to the creation of Greystone's security interest in GBMI assets,
17 and (d) Greystone was aware of the existence of the Distribution
18 Agreement when it entered into the L8A, Props did not receive the
19 Order Book at Greystone's expense, and equity and good conscience
20 did not militate against allowing Props to enjoy the benefit of
21 its bargained-for contract right. The district court should have
22 dismissed Greystone's counterclaim.
- 26 -
1 CONCLUSION
2 We have considered all of the parties' contentions on this
3 appeal and, for the reasons stated above, have found merit only in
4 Greystone's arguments supporting the dismissal of Diesel's claims
5 and in Props's challenge to the award of unjust enrichment damages
6 to Greystone. We reverse so much of the judgment of the district
7 court as awarded damages to Greystone. In all other respects, the
8 judgment is affirmed.
9 Each side shall bear its own costs of this appeal.
- 27 -
