Opinion
04 Civ. 2540 (JSR).
February 8, 2005
MEMORANDUM ORDER
Defendants Target Corporation ("Target") and Associated Merchandising Corporation ("AMC") move for summary judgment. For the reasons that follow, the motion is granted in part and denied in part.
Plaintiffs are Nina Industries, Ltd. ("Nina"), a Pakistani textile company owned by the Sattar family, and Sunrise Textile, Inc. ("Sunrise"), a North Carolina corporation also owned by the Sattars. In 2002 and 2003, plaintiffs entered into five agreements with defendants whereby plaintiffs would manufacture, and defendants would purchase, certain linen products for the home. Each agreement covered a different product, and each provided a specific end date at which the shipping of the product covered by that particular agreement would stop.
According to plaintiffs, defendants breached these agreements in a variety of ways: e.g., failing to pay for some goods entirely; making belated payments for others; wrongfully refusing to accept certain merchandise they had ordered; improperly subtracting from the purchase price the costs of shipping the goods from Pakistan to the United States; and totally suspending payments in May 2003 at a time when defendants owed plaintiffs over five million dollars. Based on such allegations, plaintiffs claim defendants are liable to them for breach of contract.
Defendants' central argument on summary judgment is that the Amended Complaint identifies only purchase orders, rather than the actual contracts that are at issue in this litigation, and therefore fails to give adequate notice to defendants of what the terms were that defendants allegedly breached. Defendants explain that over the course of discovery they tried to get plaintiffs to explain which contracts were at issue in three different ways: through deposition testimony from one of plaintiffs' executives, answers to contention interrogatories (which they improperly propounded without leave of the Court), and a request for production of documents. According to defendants, none of these attempts was successful in getting plaintiffs to specify the contract terms and breaches.
Defendants' proper remedy in such a case, however, is not a motion for summary judgment, or even a motion to dismiss, but rather a motion for a more definite statement under Rule 12(e), Fed.R.Civ.P. See Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002); Pelman v. McDonald's Corp., 2005 U.S. App. LEXIS 1229, * 9 n. 5 (2d Cir. 2005). Accordingly, the Court, at oral argument on the instant motion on October 19, 2004, directed the plaintiffs to specify a complete set of the contract terms that they alleged were breached. After some whining, plaintiffs, in a Statement of Contracts and Breaches received by the Court on November 5, 2004, complied with this direction.
The Court notes, however, that plaintiffs far exceeded the bounds of what the Court directed them to do, in that the Statement of Contracts and Breaches includes argument about the merits of their case as well as responses to defendants' anticipated counterarguments.
Having reviewed plaintiffs' submissions, and after additional oral argument held on November 17, 2004, the Court concludes that plaintiffs have specified sufficient information to provide adequate notice to the defendants of the contractual breaches here at issue. The instant motion, which (though purporting to be a "summary judgment" motion) was chiefly premised on the absence of such notice, must therefore be denied, except in one respect. Specifically, defendants also move for summary judgment on plaintiffs' claim for $18 million in consequential damages chiefly arising from the losses of credit and customers that followed defendants' suspension of payments in May 2003.
New York law, which here governs, does not allow aggrieved sellers to recover such damages. See N.Y.U.C.C. § 2-703 (listing the six remedies for an aggrieved seller, and not including consequential damages). Because the $18 million in additional damages that plaintiffs claim beyond ordinary contractual damages are, according to plaintiffs' own expert report, "lost net profits," "lost sales revenue," and "lost . . . opportunity to use and invest the cash flow that would have been realized but for Target's claimed breach of contract," it is clear that plaintiffs' $18 million claim is for consequential damages and thus must be dismissed.See Expert Report of Mark S. Warshavsky, executed on September 8, 2004 ("Expert Report"), at 2-3.
Moreover, damages must have been in the contemplation of the parties and foreseeable, and plaintiffs have provided no evidence that this claim for damages meets these criteria. See, e.g., Schonfeld v. Hilliard, 218 F.3d 164, 172 (2d Cir. 2000). Plaintiffs assert that a senior Target executive acknowledged the direct effect on cash flow that a payment hold could have, saying, "Obviously [payment hold] has an impact on cash flow." See Deposition of Mark Murphy, October 12, 2004 ("Murphy Dep."), attached as Ex. S to Statement of Contracts and Breaches, at 60:29-61:6. However, this statement comes nowhere close to meeting plaintiffs' burden. A direct effect on cash flow is not the same thing as speculations about what investments plaintiffs might or might not have made if they had the cash flow they expected. Also, Murphy qualifies his own comment that payment holds have a direct effect on cash flow by adding, "Most vendor holds that I've been associated with are so short in nature that I don't see it having any significant impact to a vendor." See Murphy Dep. at 61:10-12.
Further still, it is clear from the parties' submissions on summary judgment that this claim is too speculative to stand. "[T]he recovery of lost profits as damages for breach is subject to the following requirements. First, it must be demonstrated with certainty that such damages are caused by the breach and, second, the alleged loss must be capable of proof with reasonable certainty. In other words, the damages may not be merely speculative, possible or imaginary, but must be reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes." Coastal Aviation, Inc. v. Commander Aircraft Co., 937 F.Supp. 1051 (S.D.N.Y. 1996). A claim for damages that, according to plaintiffs' expert, relies on speculation through 2008, especially when the contracts at issue here were not to run later than 2003 and the expert analyzing the claim self-admittedly did "not review the underlying data or assumptions that were used to prepare these projections," see Expert Report at 2-3, is far too speculative and remote to be directly traceable to any breach on the part of defendants.
Nothing in the "wrongdoer" rule to which plaintiffs refer, under which the wrongdoer bears the burden of the uncertainty of damages, changes this. See, e.g., Berley Industries, Inc. v. City of New York, 45 N.Y.2d 683, 687 (N.Y. 1978) (permitting plaintiff to recover when it is clear that some injury has occurred and the damage is unavoidably uncertain); cf. Sir Speedy, Inc. v. LP Graphics, Inc., 957 F.2d 1033, 1038 (2d Cir. 1992) (where a defendant's misconduct has prevented a more precise computation of damages, the jury may make its own reasonable estimate). These damages are speculative not because of any wrongdoing on the part of defendants; they are speculative because of the nature of the damages.
Accordingly, defendants' motion for summary judgment is granted as to plaintiffs' claim for consequential damages (identified by plaintiffs as "Damage to Plaintiffs' Business") but is otherwise denied. Counsel should jointly call Chambers by no later than February 22 to schedule a trial of the remaining claims.
SO ORDERED.