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stating that termination for convenience clause "clearly and unambiguously gave [defendant] the right to terminate the contract at any time without cause."
Summary of this case from Harris Corp. v. Giesting Associates, Inc.Opinion
98-CV-0331
December 22, 1998.
Edward J. Carroll, Esq., Office of Edward Carroll, Kingston, NY, for plaintiff
Paul A. Feigenbaum, Esq., Couch, White, Brenner, Howard Feigenbaum, LLP, Albany, NY, for defendant
MEMORANDUM-DECISION ORDER
Plaintiff TSI Energy, Inc. ("TSI") commenced this action against Stewart and Stevenson Operations, Inc. ("SSOI") in the New York State Supreme Court, County of Ulster, asserting claims for breach of contract, copyright infringement and defamation. SSOI removed the action to this Court pursuant to 28 U.S.C. § 1441 and 1446. In its Answer, SSOI counterclaims for, inter alia, overpayments made to TSI pursuant to the contract. This Court has subject matter jurisdiction pursuant to 28 U..C. § 1332 and ancillary jurisdiction over the compulsory counterclaim. See Harris v. Steinem, 571 F.2d 119, 121-22 (2d Cir. 1978).
SSOI now moves (a) for partial summary judgment, pursuant to Fed.R.Civ.P. 56, (i) dismissing TSI's claim for breach of contract and (ii) awarding SSOI judgment on its counterclaim; and (b) to strike TSI's demand for a jury trial as untimely.
For the reasons that follow, SSOI's motion is granted in part and denied in part.
I. BACKGROUND
TSI is a New York corporation, having its principal place of business in Kingston, New York. SSOI is a Delaware corporation, having its principal place of business in Houston, Texas. SSOI is engaged in the business of operating third party power plants throughout the world.
TSI failed to submit a statement in accordance with Local Rule 7.1(f), which requires "a separate, short and concise statement of the material facts as to which it is contended that there exists a genuine issue." Consequently, the following facts are deemed admitted and not in dispute. See N.D.N.Y. L.R. 7.1(f); see also Costello v. Norton, 1998 WL 743710, at *1, n. 2 (N.D.N.Y. Oct. 21, 1998).
On October 7, 1997, TSI executed a contract with SSOI to perform services in connection with the start-up of a power plant located in Manaus, Brazil. The contract was in the form of a standard SSOI purchase order. It provided that in exchange for TSI's services, SSOI would pay TSI $7,000 per month in advance, plus certain expenses. The length of the contract was "not to exceed 6 months." In addition, the reverse side of the purchase order set forth various terms and conditions. Section 14 of the terms and conditions provided, in pertinent part:
TERMINATION FOR PURCHASER'S CONVENIENCE: This Order may be terminated by [SSOI] in whole or in part at any time by a change order directing termination. . . . [SSOI] shall pay [TSI] a termination fee equal to actual costs incurred for work completed plus any additional expenses incurred by [TSI] as a direct result of termination, less any amounts previously paid with respect to the terminated Material. . . . [SSOI] shall in no event be required to pay cancellation charges in excess of the purchase price of any Terminated Material or any amount for prospective profits.
The contract's choice-of-law provision specified that the law of SSOI's principal place of business should govern, which is Texas.
In October 1997, TSI began performing services under the contract. In accordance with the contract, TSI submitted invoices for services in advance for the months of October and November 1997, which SSOI paid.
On November 21, 1997, SSOI terminated the contract. According to John Metcalf, the Manager of SSOI, that decision was caused by an incident in Brazil involving TSI's employee and co-owner, Jim Smith. The incident involved an automobile accident and ensuing argument, which resulted in the Brazilian police issuing a detaining warrant for Smith. Based upon the incident and the involvement of the police, SSOI decided that Smith should no longer perform services for SSOI.
TSI now brings, inter alia, a claim against SSOI for breach of contract. SSOI counterclaims for monies advanced to TSI for the post-termination period, monies paid to TSI for food and laundry, and to recoup a loan made to TSI. In sum, SSOI seeks $4,486.89
II. DISCUSSION
A. Standard For Summary Judgment
The standard for summary judgment is well-settled. A party seeking summary judgment must demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the initial burden of "informing the . . . court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)). The initial burden is to demonstrate "that there is an absence of evidence to support the nonmoving party's case." Id. at 325.
The nonmoving party may defeat the summary judgment motion by producing sufficient evidence to establish a genuine issue of material fact for trial. See id. at 322. The test for existence of a genuine dispute is whether a reasonable juror could find for the nonmoving party; that is, whether the nonmovant's case, if proved at trial, would be sufficient to survive a motion for judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-51 (1986).
In ruling on a motion for summary judgment, a court is required to resolve all ambiguities and draw all reasonable inferences in favor of the nonmoving party. See Donahue v. Windsor Locks Bd. of Fire Comm'rs., 834 F.2d 54, 57 (2d Cir. 1987). The nonmoving party, however, "must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Indeed, the nonmoving party's opposition may not rest on mere allegations or denials of the moving party's pleading, but "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). "The non-movant cannot escape summary judgment merely by vaguely asserting the existence of some unspecified disputed material facts, or defeat the motion through mere speculation or conjecture." Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990) (citations and quotations omitted).
B. Is Summary Judgment Premature?
TSI contends that, under Fed.R.Civ.P. 56(f), SSOI's motion for summary judgment is premature because the parties have yet to conduct any discovery. It submits that Jim Smith and his wife, the owners and employees of TSI, "are presently located in Brazil and are unavailable to submit an affidavit" in opposition to SSOI's motion. Carroll Affidavit, at ¶ 6 (citing).
"Rule 56(f) states that when it appears that the party opposing a motion for summary judgment cannot 'present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit . . . discovery to be had.' Thus, a party seeking such discovery must file an affidavit explaining (1) what facts are sought and how they are to be obtained, (2) how those facts are reasonably expected to create a genuine issue of material fact, (3) what effort the affiant has made to obtain them, and (4) why the affiant was unsuccessful in those efforts." Hudson River Sloop Clearwater, Inc. v. Dept, of the Navy, 891 F.2d 414, 422 (2d Cir. 1989) ("Hudson") (citing Burlington Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919, 926 (2d Cir. 1985)).
In the present case, the affidavit of TSI's attorney falls well short of demonstrating any of the Hudson elements. Indeed, the attorney's affidavit does not even address them; it simply concludes that Rule 56(f) relief is proper due to the unavailability of the Smiths. Needless to say, such general statements do not satisfy TSI's burden on any of the specific requirements of Rule 56(f). See Hudson 891 F.2d at 422; see also Paddington Partners v. Bouchard, 34 F.3d 1132, 1138 (2d Cir. 1994) ("Rule 56(f) is not a shield against all summary judgment motions. Litigants seeking relief under the rule must show that the material sought is germane to the defense. . . .") (internal quotations omitted); United States v. Private Sanitation Ind. Ass'n of Nassau/Suffolk, Inc., 995 F.2d 375, 377 (2d Cir. 1993) (affirming Rule 56(f) denial when affidavit did not describe "in specific terms evidence that might be forthcoming and would demonstrate that a genuine issue actually existed"); Tucker Leasing Capital Corp. v. Marin Med. Management, Inc. 833 F. Supp. 948, 960-61 (E.D.N.Y. 1993) ("The Court may reject a request for further discovery pursuant to Rule 56(f) if the request is based on pure speculation as to what would be discovered.").
Furthermore, "Rule 56(f) is not appropriate where the discovery allegedly desired 'pertains to information already available to the non-moving party.'" Mason Tenders Dist. Council Pension Fund v. Messera, 958 F. Supp. 869, 894 (S.D.N.Y. 1997) (quotingFrankel v. ICD Holdings S.A., 930 F. Supp. 54, 66 (S.D.N.Y. 1996)). Here, TSI brings a claim for breach of contract. It should, therefore, be able to contest summary judgment by referencing the contract and relying on its own witnesses and documents.
Lastly, for the reasons explained below, TSI's claim for breach of contract present questions of law for the Court to decide from the contract language. Thus, discovery is not needed. See Four Star Capital Corp. v. Nynex Corp., 1997 WL 598411, *5 (S.D.N.Y. Sept. 25, 1997).
For these reasons, TSI's Rule 56(f) request is denied.
C. Choice of Law Analysis
The next issue raised by the parties is what law governs the contract claims.
In a diversity action, a federal court must apply the substantive law of the state in which it sits. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78-79 (1938). Because choice of law rules are substantive, we must apply the law that a New York State court would apply. Klaxon Co. v. Stentor Elec. Manuf. Co., 313 U.S. 487, 496 (1941). Here, SSOI argues that Texas law governs because of the choice-of-law provision in the contract to that effect. TSI, by contrast, asserts that New York law applies because New York is where the action was commenced, TSI resides, and the Smiths reside. It also asserts that "the disclaimer regarding Texas law . . . violates [the] Uniform Commercial Code, Sections 1-201(10) and 2-316 in that it is not conspicuous" because it is written on the reverse side of the contract in small type.
The choice-of-law issue raised by the parties is a bit of a red herring. The substantive law relating to contract interpretation is essentially the same in both New York and Texas. Assuming that the choice-of-law is germane, New York gives full effect to a parties' choice-of-law provision, provided that "the fundamental policies of New York are not thereby violated." See Woodling v. Garrett Corp., 813 F.2d 543, 551 (2d Cir. 1987) (citing New York cases). Here, TSI does not assert that any fundamental policies of New York would be violated by applying Texas law. Therefore, the Court must honor the parties' contractual choice of Texas law with respect to matters of substance involving the contract claims. See id.;Marcor Management, Inc. v. IWT Corp., 1998 WL 809011, *2 (N.D.N.Y. Nov. 17, 1998).
TSI's reliance on Article II of the U.C.C. is clearly misplaced. Article II governs the sale of goods, not a service contract such as we have here. See Tex. Bus. Com. Code Ann. § 2-102 (West 1998); N.Y. U.C.C. Law § 2-102 (McKinney's 1993). Moreover, the section cited by TSI (2-316) addresses disclaimers of warranties, not other contractual provisions.
D. SSOI's Motion for Summary Judgment
Turning now to the merits, SSOI moves for partial summary judgment dismissing TSI's claim for breach of contract and awarding SSOI judgment on its counterclaim. SSOI supports its motion with, among other things, the affidavit of it attorney, Paul Feigenbaum; the affidavit of John Metcalf; and various exhibits, including a copy of the contract and various invoices and letters.
In opposition, TSI submits only a brief and an attorney's affidavit. TSI's brief asserts that the Metcalf affidavit is not based upon personal knowledge and that TSI's evidence is disputed by the Complaint. The Court disagrees with both assertions.
Notably, the affidavit of TSI's attorney, Edward Carroll, is replete with legal arguments in disregard of the Local Rules. Local Rule 7.1(c) provides that "[a]n affidavit shall not contain legal arguments, but shall contain factual and procedural background as appropriate." Further, Local Rule 7.1(b)(3) provides that papers not in compliance with Local Rule 7.1 shall not be considered. Consequently, the Court will not consider the panoply of legal arguments improperly tossed into the Carroll affidavit but not addressed in TSI's memorandum of law. See Vercillo v. Paul Revere Life Ins. Co., 1998 WL 315094, *2, n. 2. (N.D.N.Y. June 10, 1998).
First, Metcalf was the Regional Manager of Latin America for SSOI. His affidavit states that he is fully familiar with the events in question. Thus, his affidavit is based upon personal knowledge. Second, TSI's reliance on the Complaint to refute the Metcalf affidavit and the attached documentary evidence in support of SSOI's motion for summary judgment is plainly improper. It is axiomatic that when the moving party has supported the motion by affidavits and documentary evidence, the non-movant
may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in [Rule 56], must set forth specific facts showing that there is a genuine issue [of material fact] for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.
Fed.R.Civ.P. 56(e); see also Champion v. Artuz, 76 F.3d 483, 485 (2d Cir. 1996). Because TSI failed to respond with affidavits or otherwise as required by Rule 56(e), the remaining question is whether summary judgment is "appropriate"; that is, whether SSOI's supporting materials establish an absence of a genuine issue of material fact and that it is entitled to judgment as a matter of law. See Champion, 76 F.3d at 486; Charles A. Wright Arthur R. Miller, 10A Federal Practice and Procedure § 2738, at 520-28 (2d ed. 1983).
SSOI's argument in support of summary judgment is very straightforward. SSOI asserts that TSI cannot state a claim for breach of contract because the unambiguous language of the contract gave SSOI the right to terminate the contract without cause. With respect to its counterclaim, SSOI contends that it is entitled recover for overpayments made to TSI pursuant to the contract.
The determination of whether contract language is ambiguous is a question of law. Coker v. Coker, 650 S.W.2d 391, 393-94 (Tex. 1983). "A contract . . . is ambiguous when its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning." Id. at 393. If the contractual language is clear, summary judgment is appropriate. Exxon Corp. V. West Texas Gathering Co., 868 S.W.2d 299, 302 (Tex. 1993). Conversely, if the contract language is ambiguous, a question of fact arises and summary judgment is perforce inappropriate. Id.
In this case, section 14 of the contract clearly and unambiguously gave SSOI the right to terminate the contract at any time without cause. "The courts of [Texas] have consistently given effect to provisions which give a right or option to either party to terminate a contract." See Crystal City v. Lo-Vaco Gathering Co., 535 S.W.2d 722, 724 (Tex.Civ.App. 1976). Thus, TSI's claim for breach of contract arising from the contract's termination must be dismissed.
With respect to SSOI's counterclaim, Section 14 also specified the parties rights and obligations upon termination. Although that section does not explicitly address whether SSOI is entitled to recover advance payments for services in the event of termination, it does specify that upon termination TSI shall cease all work and that SSOI will pay to TSI "a termination fee equal to actual costs incurred for work completed plus any additional expenses incurred by TSI as a direct result of termination." Here, SSOI paid TSI in advance for its services through the month of November 1997. Thus, SSOI is entitled to recoup $2100 from TSI for overpayments made pursuant to the contract.
TSI does not contest whether the contract was terminated by a change order.
Additionally, SSOI is entitled to recoup $500 from TSI, which represents a loan from SSOI to TSI. However, the $1,886.89 sought by SSOI for expenses allegedly paid to TSI's employees for food and laundry during the duration of the contract is not recoverable on summary judgment because the contract is ambiguous with respect to whether such are "normal living expenses" that SSOI must pay. SSOI also submitted no documentary or other evidence indicating payment for the food and laundry expenses of any TSI employees; it only submitted a copy of the invoice seeking repayment.
The loan is evidenced by a letter from TSI to SSOI. Indeed, TSI wrote a check to SSOI for that sum, which TSI stopped payment on.
In sum, the Court finds that the undisputed facts entitle SSOI to summary judgment dismissing TSI's claim for breach of contract and awarding judgment on its counterclaim for $2,600.
E. Motion to Strike Demand for a Jury Trial
Lastly, SSOI moves to strike TSI's demand for a jury trial as untimely pursuant to Fed.R.Civ.P. 38(b). TSI responds that its demand satisfies that Rule. Although the Court agrees with TSI's conclusion that it is entitled to a jury trial, it is not for the reasons TSI propounds.
"The Federal Rules of Civil Procedure proceed on the basic premise that a jury trial is waived unless a timely demand is filed. Rule 38, applicable generally to cases in the federal courts, requires the written demand to be served upon the adverse party no later than ten days after service of the last pleading directed to the issue." Cascone v. Ortho Pharmaceutical Corp., 702 F.2d 389, 391 (2d Cir. 1975). Rule 39(b) permits a court to exercise its discretion and grant a jury trial despite an untimely demand. Fed.R.Civ.P. 39(b).
Both parties overlook, however, that Rule 81(c) governs jury demands in removed cases, not Rule 38. Fed.R.Civ.P. 81(c) ; Higgins v. Boeing Co., 526 F.2d 1004, 1006 (2d Cir. 1975); Cascone, 702 F.2d at 391. Rule 81(c) contemplates three scenarios: (1) when all necessary pleadings have been served prior to removal; (2) when a party has, before removal, requested a jury in accordance with state law; and (3) when state law does not require the party to demand a jury trial. Fed.R.Civ.P. 81(c).
Rule 81(c) provides:
These rules apply to civil actions removed to the United States district courts from the state courts and govern procedure after removal. . . . If at the time of removal all necessary pleadings have been served, a party entitled to trial by jury under Rule 38 shall be accorded it, if his demand therefor is served within 10 days after the petition for removal is filed if he is the petitioner, or if he is not the petitioner within 10 days after service on him of the notice of filing the petition. A party who, prior to removal, has made an express demand for trial by jury in accordance with state law, need not make a demand after removal. If state law applicable in the court from which the case is removed does not require the parties to make express demands in order to claim trial by jury, they need not make demands after removal unless the court directs that they do so within a specified time if they desire to claim trial by jury. The court may make this direction on its own motion and shall do so as a matter of course at the request of any party. The failure of a party to make demand as directed constitutes a waiver by him of trial by jury.
Here, like the Cascone and Higgins cases, none of the Rule 81(c) situations directly apply — (1) all necessary pleadings had not been served prior to removal; (2) TSI did not request, before removal, a jury trial in accordance with New York State law; (3) and New York State does not automatically grant jury trials. See Higgins, 526 F.2d at 1006; Cascone, 702 F.2d at 391-92. As noted in Higgins, "the framers of Rule 81(c), taking into account the clear cut situations where state law either requires a demand or not, did not expressly consider the gray area here present." 526 F.2d 1007. "The New York statute requires that the request for a jury in the state courts be made by filing it with a 'note of issue.' No time for the notice is specified."Cascone, 702 F.2d at 391 (quotations and citations omitted). Further, even jury demands that are received after the filing of a note of issue may be granted in New York, so long as there is no undue prejudice to the rights of another party. See N.Y. C.P.L.R. 4102(e) (McKinney's 1992). Thus, "[t]his latitude granted to [New York] litigants approaches, but does not precisely match, the third situation contemplated by Rule 81(c). . . ." Thompson v. Beth Israel Med. Ctr., 1998 WL 689937, *2 (S.D.N.Y. Oct. 2, 1998).
Under these circumstances, the Second Circuit has concluded that Rule 81(c) "compels the exercise of sound district court discretion," the degree of which is framed in part by the discretionary New York practice. Higgins, 526 F.2d at 1007; see also Cascone, 702 F.2d at 392 ("[D]esignated times set out in the federal rules and the New York practice is intended to serve as background against which we evaluate the limits of discretion" under Rule 39(b)); Thompson, 1998 WL 689937, at *2 ("Whether New York law is read into Rule 81(c), as suggested by Higgins, or incorporated into Rule 39(b), as suggested by Cascone, it is proper to approach [a] demand for a jury trial with liberality and due regard for the practice of New York State, from which this case was removed."). As guidance in that regard, Higgins enumerated three factors that should govern the consideration of late jury demands in removed cases: (1) whether the matter is traditionally tried by a jury; (2) whether the parties had proceeded for some time on the assumption that the matter would not be a bench trial; and (3) whether defendant would be prejudiced by granting a late demand. 526 F.2d 1007;Cascone, 702 F.2d at 292-93.
TSI's demand for a jury trial and its opposition to TSI's motion to strike that demand may be treated as a motion for a jury trial at the Court's discretion under Rule 39(b). See Federal Deposit Ins. Corp. v. Palermo, 815 F.2d 1329, 1333 (10th Cir. 1987) ("Although Rule 39 provides for the court's discretion to be invoked by motion, some similar manifestations of the desire of a party to have a jury trial will suffice.") (quoting 9C Charles A. Wright and Arthur R. Miller, Federal Practice Procedure § 2334, at 112 (1971) (citing Swofford v. B W, Inc., 336 F.2d 406, 408-09 (5th Cir. 1964) (untimely demand for jury trial under Rule 38(b) has the effect of a motion for jury trial under Rule 39(b)), cert. denied, 379 U.S. 962 (1965));see also Figueroa v. Pratt Hotel Corp., 158 F.R.D. 306, 307 (S.D.N.Y. 1995) (treating untimely letter request for jury trial as motion under Rule 39(b)).
In the present case, TSI's Reply pleading demanded a jury trial on all issues approximately one month after SSOI removed the case from New York State court. Applying the Higgins factors, the Court finds that all three weigh in favor of a jury trial. First, TSI's claims for defamation and copyright infringement have traditionally been tried before a jury. Feltner v. Columbia Pictures Television, ___ U.S. ___, 118 S.Ct. 1279, 1281 (1998) (copyright infringement). Second, as evidenced by its Reply, TSI has proceeded with the assumption that this matter would be a jury trial. Third, SSOI has not shown any prejudice it would suffer would the case go to a jury. See Reliance Elec. Co. v. Exxon Capital Corp., 932 F. Supp. 101, 103 (S.D.N.Y. 1996) ("Any prejudice alleged must arise from the untimeliness of the jury demand and not simply from the possibility of a jury trial."). In that regard, SSOI misses the mark by only arguing untimeliness under Fed.R.Civ.P. 38(b). Further, prejudice is highly unlikely as discovery has not yet commenced. See generally CPH Int'l Inc. v. Phoenix Assurance Co. of New York, 1993 WL 485356, at *2 (S.D.N.Y. Nov. 24, 1993) (stating that prejudice may result when parties' longstanding reliance on bench trial caused it to prepare for case very differently); see also Van Zandt v. Uniroyal, Inc., Peerless Tire Div., 529 F. Supp. 482, 484 (W.D.N.Y. 1982) (finding no prejudice when demand for jury made during early stages of discovery).
Accordingly, in its discretion, the Court finds that TSI is entitled to a jury trial. Therefore, SSOI's motion to strike the demand is denied.
III. CONCLUSION
For the reasons stated above, the Court: (1) GRANTS SSOI's motion for partial summary judgment dismissing TSI's claim for breach of contract; (2) GRANTS SSOI'S motion for summary judgment on SSOI's counterclaim to the extent of $2,600; and (3) DENIES SSOI's motion to strike TSI's demand for a jury trial.