Opinion
00-CV-6572 CJS(F).
September 15, 2004
Robert D. Hooks, Esq., Woods Oviatt GiIman, LLP, Rochester, New York, For Plaintiff and Counterdefendant Paul T. Freund Corp.
Paul D. Kelly, Esq., Davidson, Fink, Cook Kelly Galbraith, LLP, Rochester, New York, For Defendant and Crossclaimant Commonwealth Packing Company.
DECISION and ORDER
INTRODUCTION
This diversity breach of contract case is before the Court on three post-trial motions filed by defendant Commonwealth Packaging Company ("Commonwealth") following a jury trial at which plaintiff Paul T. Freund Corp. ("Freund") was awarded damages for Commonwealth's breach of contract. The pending motions are as follows:
# 112 filed by Commonwealth on March 26, 2004, seeing to stay enforcement of the judgment entered for Freund;
# 118 filed by Commonwealth on April 1, 2004, seeking judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(b), or alternatively, a new trial, an order pursuant to Federal Rule of Civil Procedure 59; and
# 131 filed by Commonwealth on May 3, 2004, seeking an order reducing copying costs Freund included in its bill of costs.
For the reasons stated below, the Court denies # 118 in its entirety, and grants ## 112 and 131.
BACKGROUND
A detailed factual background was presented in the Court's earlier decision and order on summary judgment. See Paul T. Freund v. Consolidated Packaging Company, 288 F. Supp. 2d 357 (W.D.N.Y. 2003). Thus, only a brief outline of the pertinent facts is presented here.
Freund is in the business of manufacturing paper boxes. Commonwealth is a distributor of paper and packaging goods. Victoria's Secret Stores ("VSS") sells lingerie and women's clothing through retail stores around the United States. VSS planned to offer for sale in its stores a garment-filled gift box during the holiday season. The box used several component parts, including a flocked paper, called Dainel, that was used to cover the box. VSS contracted with Commonwealth for the manufacture and fulfillment of the boxes and Commonwealth, in turn, contracted with Freund, specifying, however, that Freund use Dainel cut and stacked by Commonwealth's own subcontractor, Ecological Fibers ("Ecological"), a Massachusetts paper firm. At trial, Freund alleged different theories of recovery, one being that Ecological performed unsatisfactorily, causing Freund delays in its ability to build, fulfill and ship the boxes to VSS. Commonwealth eventually cancelled a portion of its order from Freund. Of the more than 200,000 boxes that Commonwealth ordered from Freund, Commonwealth cancelled the order with respect to 76,661 boxes. VSS was dismissed from the case during the summary judgment motion stage, and Freund's claims against Commonwealth went to trial.
VSS listed the holiday season as the "holiday 1999 season" and Freund contended the season was to extend through Valentine's Day 2000.
Fulfillment refers to placing the merchandise inside the boxes. Freund subcontracted with Key Industries of Wayne County, New York, to place the clothing items inside the boxes.
On March 18, 2004, the jury returned its verdict, finding that Commonwealth breached the contract and awarded damages to Freund in the amount of $233,775.00. Subsequently, the Court, pursuant to Freund's motion, amended the judgment to add prejudgment interest, and on June 3, 2004, the Clerk filed the amended judgment for Freund in the amount of $323,930.60 plus costs with post judgment interest to accrue.
Motion for Judgment as a Matter of Law
In support of its motion for a new trial, Commonwealth presents two arguments: (1) as a matter of law, under the New York Uniform Commercial Code ("UCC"), "where performance by an agreed upon supplier is a known possible contingency, the seller, ( i.e., Freund) not the buyer ( i.e., Commonwealth) bears the risk of non-performance by the supplier unless that risk is expressly shifted to the buyer in the contract documents"; and (2) the jury had insufficient evidence from which to find that the risk of Ecological's nonperformance was expressly shifted from Freund to Commonwealth. Thus, Commonwealth concludes, since Ecological "persistently shipped discrepant material . . .," Freund bore the risk of nonperformace by a known supplier. The Court rejected these arguments during trial, and rejects them again now.
Citing to trial Exhibit 414, Commonwealth asserts that Freund knew before contracting with Commonwealth that Ecological would be cutting and slitting the Dainel fabric for the VSS boxes. At the start of the trial, Freund's position was that, any inability on its part to deliver boxes in accordance with Commonwealth's time demands, was excused either pursuant to the contract's "non-cancellation" clause, or pursuant to UCC § 2-615. At the close of Freund's proof, Commonwealth moved to dismiss pursuant to Federal Rule of Civil Procedure 50(a)(1) on grounds that, as a matter of law, Freund's performance was not excused and that Freund had failed to meet the delivery schedule. The Court denied the motion and permitted Freund to amend its complaint to conform to the evidence pursuant to Rule 15(b). In denying the motion, the Court concluded, that viewing the evidence in a light most favorable to Freund, a reasonable jury could find that either (1) Freund had not agreed to a delivery schedule, or (2) that even if Freund did agree to a delivery schedule, Commonwealth breached an implied promise made to Freund that its subcontractor, Ecological, would timely deliver the Dainel fabric to Freund, properly cut and slit to Freund's specifications. At the close of all proof, Commonwealth moved again pursuant to Rule 50(a)(1) and (2). The Court denied the motion.
During deliberations, the jury asked the Court the following question:
We are finding that Commonwealth broke the contract with Freund by the behavior of their subcontractor Ecological. Ecological persistently shipped discrepant material even after Ecological representatives visited their site. This possibility is not on the verdict sheet. How do we proceed?
Transcript of Mar. 18, 2004 at 2 (included with Kelly Aff. [# 120]). During its discussion with counsel, outside the presence of the jury, and prior to responding the jury's question, the Court observed:
No. What I said and what I rejected all along was the position of Freund, that as a matter of law, Commonwealth would automatically be responsible for anything one of its subs did. I rejected that. I said in order for Commonwealth to held responsible for the conduct of Ecological, the jury would have to find that Commonwealth promised Freund that either it or Ecological would deliver the Dainel properly cut and slit. That is the whole reason I charged on implied covenant and that's the whole reason I charged on delegation, so it's not in any way inconsistent with what the Court said. The Court is merely responding to a direct question from the jury. In retrospect, it would have been better to have the questions on the jury sheet, but the discussion led to one question, so that is not what I'm doing in responding to their question. If the jury finds that Commonwealth, in fact, promised Freund either expressly or impliedly, that it would deliver the Dainel properly cut and slit, then the jury — and they unanimously agree, then clearly the jury, in this Court's opinion, can find Freund liable or can find Commonwealth liable under that theory.
Transcript of Mar. 18, 2004 at 4-5. The Court, following its extensive discussion on the record with counsel, then responded to the jury's inquiry, charging the following:
Freund has maintained that Commonwealth breached the contract by unlawfully cancelling it on December 9th, 1999. In regard to that contention, they have advanced two theories why Commonwealth could not cancel the contract on December 9, 1999. One theory was, and you heard argument on both sides, that Freund never agreed to any delivery schedule. The second theory was that Freund has maintained that Commonwealth broke its promise to Freund that the Daniel material would be properly delivered to Freund, cut and slit to Freund's specifications. So, it's been — it's Freund's position that there are two theories by which they have proven that Commonwealth breached the contract when they cancelled it on December 9, 1999. If you find by a preponderance of the evidence that Freund has proved one of the theories or if you find that they've proved both of the theories, then you would check yes to question 1. On the other hand, if you find that they have not proven either theory by a preponderance of the evidence, then you would check no to question 1.
It's important for me to emphasize, however, that you must — to check yes to question 1, you must all unanimously agree that they proved at least one theory. In other words, you can't check yes if four jurors believe they proved one theory and four believe they proved the other. You must be unanimous in your determination to check yes to question 1.
* * *
Freund's position, and I stated it, I think is that Commonwealth breached the contract when they cancelled it Their position is they couldn't cancel the contract and they offered two theories to explain why they couldn't cancel the contract. They couldn't cancel the contract accordingly, and I want to emphasize that Commonwealth disputed this, but Freund has said in closing that Commonwealth could not lawfully cancel the contract on December 9th, they've advanced two theories. One theory being because Freund never agreed to any deliver schedule and two, that even if Freund did agree to a delivery schedule, that Commonwealth broke its promise that it would deliver the Dainel to Freund properly cut and slit to Freund's specifications and by failing to do so, Commonwealth could not lawfully cancel the contract. Now, those are two different theories.
* * *
[J]ust because this is so important to both sides and, again, I want to emphasize that the Defendant Commonwealth has vigorously disputed that. They've maintained, as you heard me say, that it was not they who breached the contract, but rather Freund who breached the contract by not meeting deliver dates that Freund agreed to.
Transcript of Mar. 18, 2004 at 6-7. The jury returned to deliberate, eventually awarding Freund damages.
STANDARDS OF LAW
The standard for granting a motion for judgment n.o.v. pursuant to Rule 50(b), is whether "the evidence, viewed in the light most favorable to the non-movants without considering credibility or weight, reasonably permits only a conclusion in the movants' favor." Jund v. Hempstead, 941 F.2d 1271, 1290 (2d Cir. 1991) (internal quotations and citations omitted). This standard is the same as for a directed verdict. See 9 C. Wright A. Miller, Federal Practice Procedure § 2537, at 599 (1971).
Non obstante verdicto, or notwithstanding the verdict.
A judgment n.o.v. is proper if
(1) there is such a complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer surmise and conjecture, or (2) there is such an overwhelming amount of evidence in favor of the movant that reasonable and fair minded men could not arrive at a verdict against him.Jund, 941 F.2d at 1290 (citations omitted).
With regard to a motion for a new trial, Rule 59(a) states that a court may order a new trial following a jury verdict "for any of the reasons for which new trials have heretofore been granted in actions at law in the court of the United States." FED. R. CIV. P. 59(a)(1).
While a new trial may be granted if there was substantial error in the admission or exclusion of evidence or the court committed error in its jury instructions ( see Montgomery Ward Co. v. Duncan, 311 U.S. 243, 251 (1940)), the court may not grant a new trial unless it is convinced that "the jury has reached a seriously erroneous result or that the verdict is a miscarriage of justice." Smith v. Lightning Bolt Productions, Inc., 861 F.2d 363, 370 (2d Cir. 1988). The burden on the plaintiff is therefore substantial. See Mallis v. Bankers Trust Co., 717 F.2d 683, 691 (2d Cir. 1983) (alternative motion for new trial brings into play other considerations, chief of which is court's duty to prevent miscarriage of justice).Falco v. Stew Leonard's, 187 F.R.D. 442, 445 (D. Conn., 1999).
ANALYSIS
Commonwealth's arguments in support of its motion for judgment n.o.v. are the same ones it made at trial. At trial, Commonwealth objected to any charge under U.C.C. § 2-615, but now invokes that statute in support of its argument for a judgment n.o.v. U.C.C. § 2-615 provides as follows:
§ 2-615. Excuse by Failure of Presupposed Conditions.
Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:
(a) Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.
(b) Where the causes mentioned in paragraph (a) affect only a part of the seller's capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.
(c) The seller must notify the buyer seasonably that there will be delay or non-delivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.
U.C.C. § 2-615. In fashioning its jury instruction, the Court relied on the New York Court of Appeals case of Rowe v. Great Atlantic Pacific Tea Company, Inc., 46 N.Y.2d 62 (1978), in charging that "`the undertaking of each promisor in a contract must include any promises which a reasonable person in the position of the promisee would be justified in understanding were included.'" Id. quoting 5 Williston, Contracts [rev ed, 1937], § 1293 at 3682. Commonwealth argues that since U.C.C. § 2-615 displaced the common law with respect to a seller's liability for its supplier, the Court erred in instructing the jury, pursuant to Rowe v. Great Atlantic Pacific Tea Company, Inc that it could find an implied provision in the contract making Commonwealth responsible for Ecological's failure. The Court was not persuaded by Commonwealth's argument at trial, nor is it persuaded by such argument now. It is well settled that under the U.C.C., principles of law and equity remain applicable to the sale of goods between merchants. T.W. Oil, Inc. v. Consolidated Edison Co. of New York, Inc., 57 N.Y.2d 574, 457 N.Y.S.2d 458, 443 N.E.2d 932); Clark Oil Trading Co. v. J. Aron and Co. 172 Misc.2d 552, (N.Y.Sup.,1997); U.C.C. § 1-103. As to the cases, Commonwealth cites in support of its argument to the contrary, the Court finds that they are distinguishable.
Commonwealth argues that The Zamoiski Co. v. Tenavision, Inc., No. 84 Civ. 3231 (BN), 1986 U.S. Dist. LEXIS 20645, 1986 WL 10274 (S.D.N.Y. Sep. 9, 1986), is on point and involves "facts very similar to the instant matter." Def. Mem. at 5. In Zamoiski, the seller was a franchise distributor of Zenith television sets and promised its buyer it would supply 720 of them by specific dates. The seller confirmed the availability of the television sets with Zenith, but then Zenith could not deliver as promised. Ruling against the seller and in favor of the buyer, the district court held in relevant part:
In short, while clearly Zenith was not blameless for plaintiff's breach of contract, nonetheless plaintiff was obligated to make a reasonable effort to obtain either the old or new model Zenith TV sets from an alternative source of supply to meet the specified delivery dates. "Within the bargain made by the parties, specifying no specific source of supply and providing no contractual excuse if [Zenith] failed to [timely] manufacture the [TV sets], plaintiff's obligation to deliver was absolute". See Barbarossa Sons, Inc. v. Iten Chevrolet, Inc. 265 N.W .2d 655, 659 (Minn. 1978). Moreover, the failure of a seller's source of supply is generally treated as a foreseeable contingency, the risk of which is allocated to the seller absent a specific provision to the contrary in the contract. Id. Hence, plaintiff has not shown that its agreed performance should be excused as "commercially impractical" for purposes of UCC 2-615.Zamoiski Co., 1986 U.S. Dist. LEXIS 20645, *15.
The contract in Zamoiski put the responsibility for supply of suitable television sets on the plaintiff. In contrast, the contract here, in a provision specifically bargained for by Commonwealth, required Freund to use Commonwealth's subcontractor, Ecological, as the sole supplier of the cut and slit Dainel, for which Commonwealth paid Ecological directly. Additionally, Freund conditioned its timely performance on the results of a 9,000 — box trial run, which led to the discovery that Ecological was unable to provide Dainel that was cut, slit and stacked to Freund's specifications. Finally, unlike the buyer in Zamoiski, Commonwealth's witness, Mindy Waters, testified that Ecological was expected to report to Commonwealth if any problems developed, and that its subsequent failure to so report led her to write the strongly worded letter that became Defendant's Exhibit 447 at trial. Trial Transcript (Mar. 17, 2004) at 38-40 (cross examination of Mindy Waters) (attached to Hooks Aff. as Ex. A); Defense Exhibit 447 (attached to Hooks Aff. as Ex. C). Thus, the Court finds that Zamoiski is clearly distinguishable from the case at bar.
Next, Commonwealth cites the case of Barbarossa Sons, Inc. v. Iten Chevrolet, Inc., 265 N.W.2d 655 (Minn. 1978), asserting that the court there analyzed the "identical issue." Def. Mem. at 7. Barbarossa involved a General Motors ("GM") dealer who promised to supply a GM truck to a buyer. As with Zamoiski, it was the seller, and not the buyer, who arranged for the supply of the truck. Barbarossa, like Zamliski, is not analogous to the situation at bar. It is undisputed Freund never promised to supply the pre-cut materials. Rather, that promise was made by the defendant. Furthermore, Mindy Waters' testimony definitively established that Ecological would pre-cut the materials to Freund's "exact" specifications. Trial Transcript at 26 — 27. Finally, unlike the seller in Barbarossa, evidence was presented at trial that Freund conditioned the timeliness of its performance on the satisfactory results of a 9,000 box trial run.
Commonwealth also cites Center Garment Co., Inc. v. United Refrigerator Co., 369 Mass 633 (1976). However, Commonwealth's reliance that case is also misplaced, since, like Zamioski and Barbarossa, it was the seller who was responsible for finding a suitable vendor. By contrast, here Freund was required by Commonwealth to use its vendor, Ecological, to cut, slit and stack the Dainel. Commonwealth not only negotiated a price with Ecological, but did not involve Freund in any of the negotiations between it and Ecological. Trial Transcript (Mar. 18, 2004) at 16-17.
In addition, Commonwealth relies on Robberson Steel, Inc. v. J.D. Abrams, Inc., 582 S.W .2d 558 (Tex.Civ.App. 8th Dist. 1979). There, the seller was a steel fabricator that arranged with its own steel provider to supply a buyer with steel., as with Commonwealth's other cases cited in support of its proposition, Robberson is distinguishable on its facts.
Commonwealth cites, as well, Deardorff-Jackson Co. v. National Produce Distributors, Inc., 4 UCC Rep. Serv. 1164 (1967), where the seller had promised to deliver 50 carloads of potatoes, but knew that its own grower had planted only enough potatoes to harvest 27 carloads. As a result, the Court did not excuse seller's failure under U.C.C. § 2-615. Commonwealth's reliance on Heat Exchangers Inc. v. Map Construction Corp., 34 Md. App. 679, 368 A.2d 1088 (1977) is similarly misplaced. There, a heating company agreed to supply 398 custom-designed air-conditioning units by a specific date, but inexplicably delayed for approximately two months ordering certain component pieces.
Commonwealth has cited numerous additional cases in its memorandum, but none persuade the Court that Freund bore the risk that Ecological would not timely supply the Dainel. Here, Commonwealth specified that Ecological would be the supplier, then contracted directly with Ecological, and finally it was Commonwealth that gave instructions to Ecological to perform in accordance with Freund's exact specifications.
Motion for a New Trial
As an alternative to its motion for a judgment n.o.v., Commonwealth moves for a new trial pursuant to Federal Rule of Civil Procedure 59. In its application, plaintiff alleges the following grounds in support:
a. the jury verdict was against the weight of the evidence;
b. the damages awarded by the jury were excessive;
c. the Court erroneously charged the jury after the close of proof and before jury deliberations began, and again during the course of jury deliberations, in response to a jury question, before the verdict was rendered;
d. the defendant was unfairly surprised by Court rulings during trial and in particular, after the close of plaintiff's proof; and
e. the defendant was deprived of its right to a fair trial.
Upon due consideration, the Court determines that there was no substantial error in the admission or exclusion of evidence, and that the Court did not err in its jury instructions. Likewise, the Court is not convinced that "the jury has reached a seriously erroneous result or that the verdict is a miscarriage of justice." Smith v. Lightning Bolt Productions, Inc., 861 F.2d 363, 370 (2d Cir. 1988). Consequently, Commonwealth has failed to meet its substantial burden to show that it is entitled to a new trial.
Motion to Stay Enforcement of the Judgment
In addition to its motions for a new trial and for a judgment n.o.v., Commonwealth has applied to the Court for a stay on enforcement of the judgment pursuant to Federal Rule of Civil Procedure 62(b) and (d) "pending disposition of Defendant's motion for a new trial pursuant to [FED. R. CIV. P.] 59, when Defendant takes an appeal in this action." Def. Notice of Motion (# 112) at 1. Though the Notice is unclear as to whether defendant seeks a stay pending only the disposition of the motion for a new trial or judgment n.o.v., or also seeks a stay pending appeal, Commonwealth's memorandum of law makes it clear that it is seeking both.
As to a stay pending disposition of the two applications before the Court, the motion is moot, since the Court, at a hearing on April 1, 2004, the day the motion was filed, granted Commonwealth's motion to stay pending resolution of defendant's motions for new trial and motion for amended verdict, acknowledged that the parties would discuss settlement, and ordered, that if no settlement was reached by April 15, 2004, Commonwealth would file a supersedeas bond in the amount of the amended judgment. On April 23, 2004, Commonwealth posted a bond in the amount of $323,939.60. Thus, pursuant to Rule 62(d), the Court finds the bond as posted sufficient, and grants the application for a stay.
Motion to Reduce Copying Costs
Commonwealth seeks an order reducing Freund's $.20 per page claim to $.10 per page. On May 4, 2004, Freund informed the Court by letter that it would consent to the reduction. Thus, Commonwealth's motion is granted, and Freund has already filed a revised bill of costs for a total of for $8,616.25, rather than the originally claimed $9,827.27.
CONCLUSION
For the reasons stated above, the Court denies Commonwealth's motion (# 118) for judgment n.o.v., or, in the alternative, for a new trial, and grants its applications (## 112 131) for a reduction in copy costs on the bill of costs, and for a stay, having posted a satisfactory bond.
IT IS SO ORDERED.