GLASSER, Senior District Judge.
Plaintiff Dell's Maraschino Cherries Co. Inc. ("Dell's"), a Brooklyn-based producer of maraschino cherries — sweetened brine cherries often found in certain cocktails and on top of ice cream sundaes — on June 23, 2011 filed a second amended complaint against Shoreline Fruit Growers, Inc. ("Shoreline"), a corporation with its principal place of business in Traverse City Michigan, the self-proclaimed "Cherry Capital of the World." Also named as defendants are several other Michigan-based defendants in the cherry business: Cherry Ke, Cherries-R-Us, and Great Lakes Packing Co. ("Great Lakes") (together, "defendants"). Dell's asserts claims for a violation of the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499a et seq., and state law claims for breach of contract and breach of the implied covenant of good faith and fair dealing against Shoreline, as well as state law claims for tortious interference and civil conspiracy against Cherries-R-Us, Cherry Ke, and Great Lakes. On July 22, 2011, defendants filed an answer to the second amended complaint and Shoreline asserted several affirmative defenses, along with counterclaims for breach of contract and violations of PACA.
All of the parties' claims arise out of an alleged contract between Dell's and Shoreline in which Dell's agreed to purchase 100 truckloads of Michigan brine cherries from Shoreline at a price of $.49 per pound. Presently before the Court are cross-motions for summary judgment on Dell's claims, Shoreline's counterclaims, and its affirmative defense of commercial impracticability. For the reasons set forth below, the parties' motions are GRANTED in part and DENIED in part.
Unless otherwise noted, the following facts are undisputed. Dell's sells finished maraschino cherries to retail and wholesale customers. Plaintiff's Statement of Undisputed Material Facts Pursuant to Local Civil Rule 56.1 dated Mar. 30, 2012 ¶ 1 ("Pl.'s 56.1") (Dkt. No. 75). Shoreline is an agricultural cooperative that at the time of the parties' dispute was a wholesale seller of brine cherries. Pl.'s 56.1 ¶ 4;
On July 13, 2009, Arthur Mondella, Dell's President, entered into a written contract with Veliquette, the contract's drafter, to purchase 100 truckloads of "Michigan Brine Cherries (regulars)" at a price of 49 cents per pound, FOB Kewadin, Michigan from Shoreline (the "contract"). Pl.'s 56.1 ¶¶ 2, 8; Second Amended Complaint dated June 23, 2011 ("Am. Compl.") Ex. A (Dkt. No. 39).
Terms: 30 days with credit limit of $130,000
Am. Compl. Ex. A. Although Dell's had purchased cherries from Shoreline in the past, the parties had never before entered into a written contract for 100 loads of cherries. Second Declaration of Arthur Mondella dated Apr. 26, 2012 ("Mondella Decl. II") ¶ 14 (Dkt. No. 86). The contract did not require Dell's to purchase cherries exclusively from Shoreline. Am. Compl. Ex. A.
Dell's picked up the first shipment of cherries on October 12, 2009. Pl.'s 56.1 ¶ 11. And, in the months that followed, Dell's requested and Shoreline provided cherries in varying amounts under the contract. Mondella Decl. II ¶¶ 16, 20. The parties used both Dell's and Shoreline's bins to ship the cherries. Pl.'s 56.1 ¶ 41; Tata Decl. Ex. A (Reidy Dep.), at 52. Although Shoreline initially attempted to charge Dell's a "bin rental fee" for use of its bins, Dell's refused to pay the fee, and Shoreline never again invoiced Dell's for it. Id. Ex. A (Reidy Dep.), at 97.
During the contract's term, Dell's bought cherries from sources other than Shoreline, sometimes at a price equal to or lower than the contract price of $.49 per pound. See, e.g., Mondella Decl. II ¶ 29 ("In January 2010, Dell's started purchasing cherries from [Traverse Bay Cherry Cooperative]."); Defs.' 56.1 Ex. V (Dell's
On April 1 2010, Mondella and Veliquette had a telephone conversation regarding the remainder of loads of cherries due under the contract; Mondella and Veliquette remember the conversation differently. Mondella Decl. II ¶ 30; Veliquette Aff. ¶¶ 33-34. According to Veliquette, Mondella told him Dell's would only take delivery of an additional 35 loads under the contract — an amount that fell short of the 100 truckloads the two had agreed upon. Veliquette Aff. ¶ 34; Tata Decl. Ex. N (Veliquette Dep.), at 83. Mondella testified that in response to Veliquette's inquiry to him whether he was going to be able to take the remainder of the loads under the contract, he said that he would. Tata Decl. Ex L (Mondella Dep.), at 213, 217. After this conversation, Shoreline began selling its inventory to customers besides Dell's. Veliquette Aff. ¶ 36.
Dell's claims that shortly thereafter, in or around May 2010, Shoreline started restricting Dell's purchase of cherries under the contract. Declaration of Arthur Mondella dated Mar. 30, 2012 ¶ 11 ("Mondella Decl.") (Dkt. No. 78). Though Shoreline objects to this characterization of its actions and when they occurred, Defs.' Counterstatement of Material Facts dated Apr. 27, 2012 ¶ 19 ("Defs.' 56.1 Opp'n") (Dkt. No. 90),
On June 8, 2010, Great Lakes, on behalf of Shoreline, informed Dell's that it could not meet Dell's request for four loads of 18/20 mm and 20/22 mm cherries. Id. Ex. E (Hicks Dep.), at 50-51. At some point later that month, Mondella called Veliquette, informing him that Dell's was insisting on delivery of all 100 loads under the contract. Tata Decl. Ex. C (Veliquette Dep.), at 88; id. Ex. D (Cullimore Dep.), at 55-56. On June 25, 2010, Great Lakes employee, Johanna Hicks ("Hicks"), sent an email to Dell's employee, Mikhail Burlack ("Burlack"), stating, among other things, that Shoreline would only make 10 loads available to Dell's during July and August. Id. Ex. E (Hicks Dep.) Ex. 9 ("Dean says he can make available to you for this July & August comparable [sic] to what you took last season ten (10) loads."). After learning of this, Mondella sent the following message to Hicks:
Id. Ex. E (Hicks Dep.) Ex. 10. On June 28, 2010, Shoreline reiterated that it would not accept any more than 10 purchase orders from Dell's and that it would not accept any more purchase orders until mid-August. Id. Ex. E (Hicks Dep.), at 62 & Ex. 11.
However, at the same time it was refusing to accept additional purchase orders from Dell's, Shoreline was selling cherries to others at a price significantly higher than the Dell's contract rate of $.49 per pound. Id. Ex. C (Veliquette Dep.), at 443 ("Q.... You were taking spot orders though the spring and summer of 2010 to sell cherries that originally had been to — earmarked for Arthur at $.49 a pound, and you sold those for 59[sic] or $.67 per pound, correct.... A. That's correct."); Tata Decl. II Ex. D (Cullimore Dep.), at 215 ("Q. And at this time, even though Dean was on notice that Dell's wanted its last 50 truckloads, Dean was releasing cherries to Covita, Kuminiano, Burnette and Cibona at higher prices than the $.49 a pound, wasn't he? A. Yes.").
On July 21, 2010, Veliquette sent a memorandum to Mondella, contending that Dell's "ha[d] not acted in accordance with the agreement" in various ways: (1) by failing to provide the bins to be used in shipping the cherries; (2) failing to take delivery of cherries in a timely manner;
By letter dated August 9, 2010 to Mondella, Veliquette again accused Dell's of breaching the contract and stated that Shoreline was prepared to sell Dell's eight loads of brine cherries at a price of $.49 per pound. Id. Ex. D. Shortly thereafter, Dell's issued purchase orders for all of the remaining loads due under the contract, some of which Shoreline provided. Id. ¶ 35. Veliquette by letter dated August 13, 2010 reiterated that "[w]e would sell you an additional 8 loads at last year's price" plus two additional loads but rejected Dell's purchase orders for additional loads beyond those ten. Id. Ex. G ("We are rejecting Purchase Orders 1479 through 1532 for the reasons set forth in my recent letter to you. Any additional sales beyond the 10 loads referenced above must be at 2010 prices."). When questioned about why he rejected these purchase orders, Veliquette testified:
Tata Decl. Ex. C (Veliquette Dep.), at 435. He further testified:
Id. Ex. C (Veliquette Dep.), at 443-44.
During the period of June 2010 through September 2010, Shoreline made available approximately 25 loads of cherries to Dell's at a price of $.49 per pound, and other than $3,367 in freight charges that the parties dispute, Dell's paid Shoreline for all cherries provided under the contract. Pl.'s 56.1 ¶¶ 27, 78; see also Tata Decl. Ex. C (Veliquette Dep.), at 488 ("Q.... Dell's has paid for all the fruit that you've supplied? A. Yes."). But even with these additional loads, the 100 load amount provided for in the contract was not fulfilled. See, e.g., Tata Decl. II Ex. A (Veliquette Dep.), at 91 ("Q. It's fair to say that [Shoreline] did not deliver a hundred containers to Dell's, correct? A. That's correct."); Tata Decl. Ex. D (Cullimore Dep.), at 77 ("Q. And so it's your understanding that 40 or 50 truckload[s] of cherries that were due to be delivered under the contract were not released for delivery; is that correct? ... The Witness: That's correct.").
On August 17, 2010, Dell's initiated this action, alleging claims against Shoreline for a violation of PACA, along with state law claims for breach of contract and breach of the covenant of good faith and fair dealing. After filing the lawsuit, and when it became clear that Shoreline and Dell's were not going to be able to come to a resolution as to the balance of cherries due under the contract, Dell's in September 2010 purchased cover cherries at a price of $1.02 per pound from a Bulgarian company called Kuminiano Fruit Ltd. ("Kuminiano"). Mondella Decl. II ¶¶ 42-44.
After being granted leave to do so, Dell's on June 23, 2011 filed a second amended complaint, asserting claims for a violation of PACA and state law claims for breach of contract and breach of the implied covenant of good faith and fair dealing against Shoreline, as well as state law claims for tortious interference and civil conspiracy against Cherries-R-Us, Cherry Ke, and Great Lakes. Defendants on July 22, 2011 filed their answer, asserting several affirmative defenses, along with counterclaims for breach of contract and various violations of PACA. On March 30, 2012, the parties filed cross-motions for summary. Dell's seeks summary judgment on its breach of contract and PACA claims along with Shoreline's commercial impracticability defense and breach of contract
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "`An issue of fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. A fact is material if it might affect the outcome of the suit under the governing law.'" Fincher v. Depository Trust & Clearing Corp., 604 F.3d 712, 720 (2d Cir.2010) (quoting Roe v. City of Waterbury, 542 F.3d 31, 35 (2d Cir.2008)).
The moving party bears the burden of establishing the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). When the burden of proof at trial would fall on the nonmoving party, it ordinarily is sufficient for the movant to point to a lack of evidence to go to the trier of fact on an essential element of the nonmovant's claim. Id. at 322-23, 106 S.Ct. 2548. To defeat a motion for summary judgment, the non-moving party "`must do more than simply show that there is some metaphysical doubt as to the material facts,'" Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir.2011) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)), and cannot "`rely on conclusory allegations or unsubstantiated speculation.'" Id. (quoting Fed. Deposit Ins. Corp. v. Great Am. Ins. Co., 607 F.3d 288, 292 (2d Cir.2010)).
A court deciding a motion for summary judgment must "`construe the facts in the light most favorable to the non-moving party and must resolve all ambiguities and draw all reasonable inferences against the movant.'" Brod v. Omya, Inc., 653 F.3d 156, 164 (2d Cir.2011) (quoting Williams v. R.H. Donnelley Corp., 368 F.3d 123, 126 (2d Cir.2004)). "`Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.'" Kaytor v. Elec. Boat Corp., 609 F.3d 537, 545 (2d Cir.2010) (quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000)); see also Gottlieb v. Carnival Corp., No. 04 Civ. 4202(ILG)(VP), 2011 WL 7046904, at *1 (E.D.N.Y. Feb. 1, 2011).
Moreover, in cases such as this one involving the interpretation of contractual terms, summary judgment is appropriate only if the language of the contract is plain and unambiguous, considered in light of the context and structure of the agreement as a whole. See, e.g., ADP Dealer Servs., Inc. v. Planet Automall, Inc., No. 09 Civ. 0185(ILG)(RER), 2012 WL 95211, at *3 (E.D.N.Y. Jan. 12, 2012) (citing Miller Marine Servs., Inc. v. Travelers Prop. Cas. Ins. Co., No. 04 Civ. 5679(ILG), 2005 WL 2334385, at *5 n. 3 (E.D.N.Y. Sept. 23, 2005)).
"A court faced with cross-motions for summary judgment need not `grant judgment as a matter of law for one side or the other,' but `must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.'" Infanti v. Scharpf, No. 06 Civ. 6552(ILG), 2012 WL 511568, at *3
With all of these principles in mind, the Court first turns to Dell's motion for summary judgment.
New York has adopted the Uniform Commercial Code ("U.C.C."), Article 2 of which provides a comprehensive body of rules applicable to "transactions in goods ...." N.Y.U.C.C. § 2-102 (McKinney 2012). It is undisputed that the cherries at issue here are "goods" and thus that Article 2 of the U.C.C. applies.
Dell's argues summary judgment is warranted because Shoreline's failure to deliver the 100 truckloads of cherries promised constitutes a breach of the contract and Shoreline had no grounds on which to refuse to fulfill the balance of cherries due under the contract. Pl.'s Mem. at 5-16. Defendants respond that no valid contract between Shoreline and Dell's was ever formed, and that even if it was, it was Dell's that breached the contract, not Shoreline, thus justifying its refusal to make available the additional loads of cherries to Dell's. Defs.' Opp'n at 6-13.
As an initial matter, there is no question that a valid, enforceable contract between Dell's and Shoreline existed. For a contract to exist there must be "a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms." Express Indus. & Terminal Corp. v. N.Y. State Dep't. of Transp., 93 N.Y.2d 584, 589, 693 N.Y.S.2d 857, 715 N.E.2d 1050 (1999). "Generally, courts look to the basic elements of the offer and the acceptance to determine whether there is an objective meeting of the minds sufficient to give rise to a binding and enforceable contract." Id.; see also Leibowitz v. Cornell Univ., 584 F.3d 487, 507 (2d Cir. 2009) ("To form a valid contract under New York law, there must be an offer, acceptance, consideration, mutual assent and intent to be bound."). Further, with respect to contract formation under the U.C.C., Section 2-204 provides:
Defendants appear to contend that no contract was formed because there was no meeting of the minds as to whether Dell's had to provide Shoreline with shipping containers, the meaning of 10 loads per month average, and whether certain loads exported by Dell's were covered by the contract,
Indeed, the New York Court of Appeals has emphasized, "[p]ractical business people cannot be expected to govern their actions with reference to nice legal formalisms. Thus, when there is basic agreement, however manifested and whether or not the precise moment of agreement may be determined, failure to articulate that agreement in the precise language of a lawyer, with every difficulty and contingency considered and resolved, will not prevent formation of a contract." Kleinschmidt Div. of SCM Corp. v. Futuronics Corp., 41 N.Y.2d 972, 973, 395 N.Y.S.2d 151, 363 N.E.2d 701 (1977). Such basic agreement is manifest in the contract and the parties' subsequent performance under it, and an enforceable agreement between Dell's and Shoreline thus exists.
Even assuming that these actions constitute uncured breaches of the contract by Dell's, Shoreline's right to be relieved from its obligations under the contract requires a demonstration of a substantial impairment to the contract as a whole. See, e.g., Emanuel Law Outlines, Inc. v. Multi-State Legal Studies, Inc., 899 F.Supp. 1081, 1087 (S.D.N.Y.1995) (granting plaintiff's motion for summary judgment on breach of contract claim where there was no evidence plaintiff's failure to have goods prepared by promised date substantially impaired the value of entire contract). The parties do not dispute that the contract is an installment contract requiring or authorizing the delivery of goods in separate lots to be separately accepted pursuant to N.Y.U.C.C. § 2-612(1); nor do they dispute that § 2-612(3) applies. Pl.'s Mem. at 14; Defs.' Opp'n at 11. That provision provides:
N.Y.U.C.C. § 2-612(3). This rule "is designed to further the continuance of the contract in the absence of an overt cancellation," id. § 2-612(3), off. cmt. 6, and "precludes a party from canceling [a] contract for trivial defects." Emanuel, 899 F.Supp. at 1088. Shoreline's right to cancel the entire agreement thus depends on whether Dell's alleged breaches substantially impaired the value of the whole contract. See id.; see also 15 Williston on Contracts § 45-26 (4th ed. 2000) ("[T]he seller must demonstrate that the buyer's breach, such as its failure to pay for one or more installments, substantially impaired the value of the whole contract in order for the seller to refuse to ship any remaining installments and otherwise be relieved of its obligations under the contract.").
Although Shoreline points to several instances in which it contends Dell's allegedly breached the contract, Defs.' Opp'n at 7, it only contends that two of these breaches substantially impaired the entire contract, Defs.' Opp'n at 11-12. Shoreline contends that Dell's "refusal to supply shipping containers ... constitutes a substantial impairment of the Contract." Defs.' Opp'n at 12. The Court finds this argument unpersuasive. Although the contract certainly obligated Dell's to provide some of the shipping bins for the cherries, it did not obligate it to provide all of the bins. Am. Compl. Ex. A ("[Dell's] assures [Shoreline] that the trucks will be fully loaded with bins or barrels in bins with no charge for empty bins. [Shoreline] to start using [Dell]'s containers when processing starts back up in August 2009." (emphasis added)). Even if it did, however, the record reveals that the parties did in fact use both Dell's and Shoreline's bins; Robert Reidy, Shoreline's treasurer and secretary, acknowledged as much. See Tata Decl. Ex. A (Reidy Dep.), at 52 ("Q. [D]uring the course of the contract, [Shoreline] used a combination of both Dell's and its own containers, correct?
Shoreline also contends Dell's substantially impaired the contract when, according to Veliquette, Mondella told him during a phone call on April 1, 2010 that Dell's would only take delivery of an additional 35 loads under the contract, not the balance of 66 loads required to reach the 100 loads agreed upon. Defs.' Opp'n at 11. Veliquette testified that during the roughly two and a half minute call, when he asked Mondella how many more loads of cherries he was going to take under the contract and suggested 35, Mondella told him that number was "about right." Tata Decl. Ex. N (Veliquette Dep.), at 83; see also Veliquette Aff. ¶ 36 ("[W]hen Mondella told me on April 1, 2010 that Dell's would only need thirty-five more loads, I began selling Shoreline's inventory to other customers."). The first memorialization of this conversation was in a letter dated August 9, 2010 from Veliquette to Mondella that provides in relevant part:
Veliquette Aff. Ex. FF (Aug. 9, 2010 Letter), at 1.
The substance of the April 1 conversation between Mondella and Veliquette is disputed. A reasonable jury could infer that Mondella told Veliquette that Dell's did not intend to take the full balance of loads due under the contract, thus substantially impairing the contract and relieving Shoreline from its obligations under it. In light of this factual dispute and because whether a breach of an installment contract "constitutes `substantial impairment' is a question of fact," Emanuel Outlines, 899 F.Supp. at 1087; see also Williston § 45:24 ("The question whether a nonconformity [or default] ... impairs the value of the whole contract is, accordingly, one of fact, which will turn upon the particular circumstances in each case and, therefore, will ordinarily preclude summary judgment."), Dell's motion for summary judgment on its breach of contract claim must be denied.
Dell's also seeks summary judgment on its PACA claim pursuant to 7 U.S.C. § 499b(2). "PACA was enacted in 1930 to regulate the interstate sale of perishable agricultural commodities (essentially, fruits and vegetables)." Taylor & Fulton Packing, 2011 WL 6329194, at *5. Section 499b(2) provides that it is unlawful "[f]or any dealer to ... fail to deliver in accordance with the terms of the contract without reasonable cause any perishable commodity bought or sold or contracted to be bought, sold, or consigned in interstate or foreign commerce by such dealer." 7 U.S.C. § 499b(2).
Dell's next seeks summary judgment with respect to Shoreline's counterclaims for breach of contract. Pl.'s Mem. at 18-19. Shoreline alleges a laundry list of breaches by Dell's including failing to supply shipping containers; taking unauthorized deductions for freight charges from remittance monies due Shoreline; and making short payments. Answer to Second Amended Complaint and Counterclaim dated July 22, 2011 ("Answer") ¶¶ 36-39 (Dkt. No. 54).
Dell's motion for summary judgment on Shoreline's bin rental fee breach of contract claim is granted. The contract contains no provision regarding bin rental fees, and Veliquette acknowledged as much during his deposition. See Tata Decl. Ex. C (Veliquette Dep.), at 58 ("Q.... It doesn't say you get a bin rental fee, does it? A. You're correct."); id. Ex. C (Veliquette Dep.), at 126 ("Q. But the contract you now admitted has no bin rental fee in it, does it? A. That's right." "So you were not entitled to a two and a half cent per pound bin rental fee, were you? A. There was a — based on the contract, no.").
As for Shoreline's short payment claim, there was no breach of the contract because the record establishes that Shoreline agreed to the price Dell's paid during the period at issue from March 2010 through July 2010. Pl.'s 56.1 ¶¶ 50-51. Indeed, in a July 26, 2010 memorandum to Mondella, Veliquette acknowledges that Shoreline "lowered the price temporarily to $.47/pound." Defs.' 56.1 Ex. R. Additionally,
However, summary judgment is denied as to Shoreline's breach of contract claim based on Dell's taking $3,367.00 in unauthorized freight deductions from Shoreline invoices. The contract provides that Shoreline agreed "to pay freight on bins and barrel return." Am Compl. Ex. A. However, because Shoreline refused to pay certain freight charges for the return of Dell's bins to Great Lakes, see, e.g., Tata Decl. Ex. C (Veliquette Dep.), at 463-64; Tata Decl. II Ex. U (Hicks Dep.), at 65-67 & Ex. 13, Dell's paid the freight charges on Shoreline's behalf, and deducted $7,700 from certain payments to Shoreline to cover the cost. Mondella Decl. ¶ 35. Shoreline "has acknowledged that it owed Dell's $4,333 of this $7,700, but there is still $3,367 in dispute." Pl.'s Mem. at 13; see also Tata Decl. Ex. A (Reidy Dep.), at 90 ("Q. And based on this calculation, Shoreline fruit determined that Dell's owed ... Shoreline Fruit $3,367.00, correct? A. That's correct."); Mondella Decl. ¶ 35 ("[T]here is still $3,367.00 in dispute."). In light of this factual dispute as to Shoreline's entitlement to these funds, Dell's motion for summary judgment as to this claim is denied.
In sum, summary judgment is denied as to the breach of contract counterclaim premised on Dell's allegedly unauthorized deductions for freight and granted as to the remainder of the breach of contract counterclaims.
Shoreline's PACA counterclaims are based on Dell's alleged failure to pay Shoreline PACA trust funds in violation of 7 U.S.C. § 499e, Answer ¶ 30, and its failure to issue purchase orders for the cherries Shoreline allegedly set aside for it in violation of 7 U.S.C. § 499b(2).
As an initial matter, summary judgment is denied as to Shoreline's unfair conduct counterclaim. Shoreline's theory appears to be that Dell's violated § 499b(2)
As for Shoreline's PACA trust counterclaim, Dell's argues summary judgment is warranted because it is undisputed Shoreline never invoked PACA's statutory trust provisions by invoicing Dell's for the trust funds it seeks. Pl.'s Mem. at 19. The Court agrees.
Under PACA's trust provisions, "produce sellers become the beneficiaries of a constructive, statutory trust that lasts until they get paid. This trust consists of all produce-related assets, including produce inventory, receipts, and accounts receivable." Taylor & Fulton, 2011 WL 6329194, at *5 (citations omitted). As a PACA trustee, "a produce buyer is charged with a duty `to ensure that it has sufficient assets to assure prompt payment for produce and that any beneficiary under the trust will receive full payment.'" Coosemans, 485 F.3d at 705 (quoting D.M. Rothman & Co. v. Korea Commer. Bank of N.Y., 411 F.3d 90, 94 (2d Cir.2005)). The buyer has a "fiduciary obligation under PACA to repay the full amount of the debt owed to the PACA beneficiary." C.H. Robinson Co. v. Alanco Corp., 239 F.3d 483, 488 (2d Cir.2001). Under the statute, the trust is formed at the moment the buyer receives the produce and remains in effect until the seller is paid in full. See 7 C.F.R. § 46.46(c)(1); In re Kornblum & Co., 81 F.3d 280, 286 (2d Cir. 1996). However, to establish the existence of a PACA trust, a number of prerequisites must be met:
Taylor & Fulton, 2011 WL 6329194, at *5 (citations omitted).
At issue here is the fifth prerequisite. Although among the threadbare allegations in Shoreline's counterclaim, is that it "preserved its interest in the PACA trust by sending invoices to Plaintiff containing the language required by 7 U.S.C. § 499e(c)(4),"
In sum, Dell's motion for summary judgment is granted as to Shoreline's PACA trust counterclaim and denied as to its PACA unfair conduct counterclaim.
Dell's next seeks summary judgment on Shoreline's defense that its performance under the contract was excused on impracticability grounds pursuant to N.Y.U.C.C. § 2-615. Pl.'s Mem. at 16-17. Shoreline contends it was excused from providing the balance of cherries due under the contract because it did not have the capacity to fulfill the orders and argues that "Dell's demands would have overwhelmed Shoreline's limited storage and processing capacity,...." Defs.' Opp'n at 14.
Section 2-615 provides in part:
Although Shoreline makes reference to Section 2-615's standard, it fails to articulate how it has satisfied each of its elements. And its assertion that it did not have the capacity to fulfill Dell's orders is plainly belied by the record; it is undisputed Shoreline had the cherries in inventory to provide Dell's with the balance of them due under the contract. Veliquette testified as follows:
Tata Decl. Ex. C (Veliquette Dep.), at 435; see also id. Ex. C (Veliquette Dep.), at 444 ("And if you wanted to ... you could have used the cherries that were overflowing at your warehouse and in your 32 brine pits to satisfy Arthur Mondella's contract at Dell's? ... A. We had the — we had the cherries."). Cullimore provided similar testimony. See Tata Decl. Ex. D (Cullimore Dep.), at 58-59 ("Q. [B]etween the cherries in the pit that you could process and the stored cherries that you had in the plant, do you believe you had enough cherries to fulfill the Dell's contract as of May or June 2010? ... A. Yes."). Indeed, during the period, Shoreline's sales of brine cherries to other customers — at a higher price than the contract price with Dell's — continued unabated. See, e.g., Tata Decl. Ex. A (Reidy Dep.), at 30-34. Accordingly, because Shoreline cannot establish that it can maintain its commercial impracticability defense, Dell's motion for summary judgment on it is granted.
In sum, Dell's motion for summary judgment is DENIED as to (1) its breach of contract claim; (2) its PACA claim; (3) Shoreline's unfair conduct PACA counterclaim; and (4) Shoreline's breach of contract claim premised on Dell's allegedly unauthorized deductions for freight. Dell's motion is GRANTED as to (1) the remainder of Shoreline's breach of contract counterclaims; (2) Shoreline's PACA trust counterclaims; and (3) and Shoreline's commercial impracticability defense.
The Court next turns to Shoreline's motion for summary judgment on Dell's claims and its own counterclaims. The Court addresses each claim and counterclaim below.
As discussed in Part II.B.1.-2. supra, there are disputed issues of material fact as to Dell's willingness to perform under the terms of the contract and thus whether Shoreline was entitled to cancel it. Shoreline's motion for summary judgment on Dell's breach of contract and PACA claims is thus denied.
Defendants next seek summary judgment with respect to Dell's claim for "cover," incidental, and consequential damages under the U.C.C., contending that even assuming Shoreline breached the contract, Dell's has failed to satisfy the prerequisites
Section 2-711 of the U.C.C. provides an aggrieved buyer with a number of options where, as here, "the seller fails to make delivery or repudiates." One of those options is allows the buyer to "`cover' and have damages under [Section 2-712] as to all the goods affected...." N.Y.U.C.C. § 2-711(1)(a). Section 2-712 defines "cover" as the "making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller." Id. § 2-712(1).
Section 2-712(2) explains that, after purchasing the substitute goods, the aggrieved buyer may obtain cover damages — the difference between the cost of the substitute goods and the subject contract price — along with any incidental and consequential damages "less expenses saved in consequence of the seller's breach." Id. § 2-712(2), 2-713(1). Incidental damages include, among other things, "any commercially reasonable charges, [or] expenses incident" to the breach, and "[c]onsequential damages resulting from the seller's breach include (a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise;...." Id. § 2-715(1)-(2). Consequential damages, the New York Court of Appeals has explained, "are restricted to those damages which were reasonably foreseen or contemplated by the parties during their negotiations or at the time the contract was executed." Kenford Co. v. County of Erie, 73 N.Y.2d 312, 321, 540 N.Y.S.2d 1, 5, 537 N.E.2d 176 (1989).
Shoreline contends Dell's is not entitled to cover damages and thus that summary judgment is warranted because Dell's cover purchases of cherries from Kuminiano at price of $1.02 per pound were neither made in good faith, nor reasonable, nor made without unreasonable delay. Defs.' Mem. at 14. But determinations as to the reasonableness of the parties' actions or their good faith are generally questions of fact for the jury, not the Court, and thus cannot be decided on summary judgment. Cf. Capital, S.A. v. Lexington Capital Funding III, Ltd., No. 10 Civ. 25(PGG), 2011 WL 3251554, at *11 (S.D.N.Y. July 28, 2011) (collecting cases and noting that "[w]hether a party to a contract acted in good faith, however, generally presents a question of fact for a jury"); Feinberg v. Katz, No. 01 Civ. 2739(CSH), 2007 WL 4562930, at *11 (S.D.N.Y. Dec. 21, 2007) ("Whether a party acted with objective reasonableness is a quintessential common law jury question." (citation and quotation marks omitted)). In any event, fact questions abound. First, there is competing testimony with respect to bad faith. Shoreline contends Mondella on April 1, 2010 told Veliquette that Dell's would only be taking delivery of 35 more loads but subsequently sent Shoreline purchase orders for the remaining balance of cherries due under the contract; actions, Shoreline maintains, suggest "any purchase of cherries from a source other than Shoreline for the purported purpose of cover was done in bad faith." Defs.' Mem. at 15. Mondella testified that he said no such thing and that when Veliquette asked him whether he would take the remainder of the loads under the contract, he said that he would. Tata Decl. Ex L (Mondella Dep.), at 213, 217. There are also factual disputes about the reasonableness of the price Dell's paid for the Kuminiano cherries. Compare Defs.' Mem. at 15 ("In light of the prevailing market for comparable cherries, it was unreasonable for Dell's to pay $1.02 per pound and expect Shoreline to cover the
Shoreline also contends summary judgment is warranted on Dell's claim for incidental and consequential damages pursuant to N.Y.U.C.C. § 2-715. It argues Dell's claim for incidental damages is not warranted for the same reasons it argues that the cover was untimely, made in bad faith, and unreasonable. Defs.' Mem. at 16 ("For the reasons set forth above, Dell's cover was not commercially reasonable, and therefore incidental damages must be disallowed."). In light of the fact questions discussed above with respect to the reasonableness of Dell's cover purchases, the Court rejects this contention, and Shoreline's motion for summary judgment as to Dell's claim for incidental damages is denied.
However, the Court grants defendants' motion for summary judgment as to Dell's claim for consequential damages. Dell's seeks consequential damages in its second amended complaint, Am. Compl. ¶¶ 40-41, but the specific nature of the consequential damages it seeks is unclear. Dell's has not identified any damages it considers to be consequential and thus cannot make the required showing that the damages "were fairly within the contemplation of the parties to the contract at the time it was made." Kenford, 73 N.Y.2d at 321, 540 N.Y.S.2d 1, 537 N.E.2d 176 (consequential damages unavailable where there was no provision in contract providing for them and no evidence in record that they were within contemplation of parties prior to or at time of contracting).
In sum, defendants' motion for summary judgment is denied as to Dell's claim for cover and incidental damages and granted as to Dell's claim for consequential damages.
Summary judgment is also granted as to Dell's claim for breach of the covenant of good faith and fair dealing. Dell's has not opposed Shoreline's motion as to this claim, and the Court therefore deems the claim abandoned. See, e.g.,
Defendants next move for summary judgment on Dell's claims for conspiracy and tortious interference with contract against Great Lakes, Cherries-R-Us, and Cherry Ke. Defs.' Mem. at 19, 22.
"New York does not recognize an independent tort of conspiracy." Kirch v. Liberty Media Corp., 449 F.3d 388, 402 (2d Cir.2006) (citing Alexander & Alexander of N.Y., Inc. v. Fritzen, 68 N.Y.2d 968, 969, 510 N.Y.S.2d 546, 547, 503 N.E.2d 102 (1986)). Instead, a civil conspiracy claim must be premised on an independent underlying tort — any "unlawful" act, or a "lawful" act done "in an unlawful manner," Arlinghaus v. Ritenour, 622 F.2d 629, 639 (2d Cir.1980) (citation omitted) — here, Dell's claim against Great Lakes, Cherry Ke, and Cherries-R-Us for tortious interference with contractual relations. Accordingly, to establish a civil conspiracy claim, a plaintiff must demonstrate the underlying tort plus three elements: (1) a corrupt agreement; (2) an overt act in furtherance of that agreement; and (3) membership in the conspiracy by each defendant. Cofacredit v. Windsor Plumbing Supply Co., 187 F.3d 229, 240 (2d Cir. 1999). "As is true in criminal conspiracies, agreements in civil conspiracies will not easily be shown by direct evidence, but may be inferred from circumstantial evidence." Cofacredit S.A. v. Windsor Plumbing Supply Co., 187 F.3d 229, 240 (2d Cir.1999).
A claim of tortious interference with contract "requires the existence of a valid contract between the plaintiff and a third party, defendant's knowledge of that contract, defendant's intentional procurement of the third-party's breach of the contract without justification, actual breach of the contract, and damages resulting therefrom." Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 424, 646 N.Y.S.2d 76, 668 N.E.2d 1370 (1996). "[T]o be actionable, the interference must be intentional and not incidental to some other lawful purpose." Health-Chem Corp. v. Baker, 915 F.2d 805, 809 (2d Cir.1990) (citing Alvord & Swift v. Stewart M. Muller Constr. Co., 46 N.Y.2d 276, 281, 413 N.Y.S.2d 309, 385 N.E.2d 1238, 1241 (1978)). Actions taken to protect an economic interest cannot give rise to a tortious interference with contract claim. Foster v. Churchill, 87 N.Y.2d 744, 750-51, 642 N.Y.S.2d 583, 665 N.E.2d 153 (1996). However, a plaintiff can overcome the "economic justification" affirmative defense by establishing that the defendant was "motivated by malice or employed illegal means to safeguard its interest." Id. at 750, 642 N.Y.S.2d 583, 665 N.E.2d 153.
Apart from the contention that no valid contract between Dell's and Shoreline existed — a contention the Court has
Further, summary judgment on Dell's conspiracy claim is required, defendants maintain, because Dell's has provided no evidence of a corrupt agreement among defendants or any overt act taken by defendants in furtherance of such an agreement. Defs.' Mem. at 22-23. Dell's responds, among other things, that there is ample evidence in the record to create an issue of fact as to whether Great Lakes, Cherries-R-Us, and Cherry Ke, acting through Veliquette, agreed to and did intentionally procure Shoreline's breach of the contract. Pl.'s Opp'n at 23-28. In light of the interwoven nature of the relationship among Great Lakes, Cherries-R-Us, Cherry Ke, Shoreline, and Veliquette — who was intimately involved in the operations of all of the entities — the Court agrees that a reasonable juror could draw such an inference.
For example, the record establishes that Veliquette, Shoreline's president and the contract's drafter, is also the President of Cherries-R-Us and the Vice President and Chairman of the Board of Cherry Ke — a company wholly owned by Cherries-R-Us that also shares office space with it — and the contract was typed up by Cherry Ke's office manager and faxed from Cherry Ke's offices to Dell's. Tata Decl. Ex. C (Veliquette Dep.), at 39; Tata Decl. II Ex. B (Veliquette Dep.), at 32-33; Veliquette Aff. ¶ 10. Veliquette testified that he made calls regarding the contract, sent faxes regarding the contract, and received emails regarding the contract from Cherry Ke. Tata Decl. II Ex. A (Veliquette Dep.), at 83-84, 87, 92. Further, he acknowledged during his deposition that he sent the July 21, 2010 memorandum to Dell's regarding the Shoreline and Dell's contract dispute from Cherry Ke's offices. Id. Ex. A (Veliquette Dep.), at 86-87.
The record also establishes that Veliquette is a board member of Great Lakes, and that its president is his brother Jon Veliquette. Tata Decl. II Ex. D (Cullimore Dep.), at 19. It likewise establishes that in his role as a board member at Great Lakes, Veliquette often would make decisions regarding the release of cherries to particular customers. Id. Ex. D, at 21. Indeed, Trudy Cullimore, Veliquette's sister and Great Lakes' 30(b)(6) witness, testified that she took "orders" from Veliquette as to whom to deliver cherries to. Id. Ex. D, at 59 ("Q. Now, you say you just took orders from Dean with respect to who to deliver cherries to and who not to deliver cherries to; is that correct? A. Correct."). She also testified that even after Dell's insisted that Shoreline fulfill the contract, Veliquette told her to deliver cherries that that would have satisfied Dell's contract to others. Id. Ex. D, at 59-60 ("Q. And during the summer of 2010, after Dean and you knew that Dell's was insisting that the contract be fulfilled, were there times when Dean told you to deliver cherries that would satisfy the Dell's contract to other companies besides Dell's? A. Yes."). All of this evidence is sufficient to create a fact question for the jury as to whether Great Lakes, Cherries-R-Us, and Cherry Ke through Veliquette agreed to and did cause Shoreline to breach the contract. As Dell's aptly notes: "[t]here is no dispute that Dean Veliquette was making all of the decisions regarding [Shoreline's] Contract with Dell's. The issue for the jury is what `hat' Dean Veliquette was wearing when he directed the breach of the Contract." Pl.'s Opp'n at 25.
See Defs.' Mem. at 20.
For all of the foregoing reasons, Dell's motion for summary judgment is DENIED as to (1) its breach of contract claim; (2) its PACA claim; (3) Shoreline's
Defendants' motion for summary judgment is DENIED as to (1) Shoreline's counterclaims; (2) Dell's breach of contract, PACA, conspiracy, and tortious interference with contractual relations claims; and (3) Dell's claims for cover and incidental damages under the N.Y.U.C.C. Defendants' motion is GRANTED as to (1) Dell's claim for breach of the covenant of good faith and fair dealing; and (2) Dell's claim for consequential damages under the N.Y.U.C.C.
Since neither party has provided any legal basis for the award of attorney's fees and costs, each will bear its own. Finally, the Court declines to enter an order pursuant to Fed.R.Civ.P. 56(g) treating certain facts as established. See Fed.R.Civ.P. 56(g) advisory committee's note (g) ("Even if the court believes that a fact is not genuinely in dispute it may refrain from ordering that the fact be established. The court may conclude that it is better to leave open for trial facts and issues that may be better illuminated by the trial of related facts that must be tried in any event.").
Ignoring the wise observation of Francis Bacon that "an overspeaking judge is no well-tuned cymbal," I feel constrained to make plain that my determination of the respective parties' motions for summary judgment are in obedience to the law's requirement that I construe the facts in the light most favorable to the non-moving party being ever conscious in doing so, that I make no credibility judgment which, if made, would perhaps dictate a different result.
SO ORDERED.
