Opinion
Case No. CV 21-2661-DMG (AJRx)
2024-03-18
UNITED PRODUCTS AND TECHNOLOGY LIMITED, Plaintiff, v. ABOVE EDGE, LLC; Jay Fried; and Does 1-100, inclusive, Defendants.
Shahbod D. Kerendian, Kerendian and Associates, Inc., Los Angeles, CA, Edrin Shamtob, Shamtob Law Inc., Los Angeles, CA, for Plaintiff. Scott C. Levenson, Pro Hac Vice, Levenson Law, New York, NY, Shaun Khojayan, Shaun Khojayan and Associates PLC, Los Angeles, CA, for Defendants Above Edge, LLC, Jay Fried. Scott C. Levenson, Levenson Law, New York, NY, for Defendant Does.
Shahbod D. Kerendian, Kerendian and Associates, Inc., Los Angeles, CA, Edrin Shamtob, Shamtob Law Inc., Los Angeles, CA, for Plaintiff. Scott C. Levenson, Pro Hac Vice, Levenson Law, New York, NY, Shaun Khojayan, Shaun Khojayan and Associates PLC, Los Angeles, CA, for Defendants Above Edge, LLC, Jay Fried. Scott C. Levenson, Levenson Law, New York, NY, for Defendant Does.
ORDER RE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT [122]
DOLLY M. GEE, UNITED STATES DISTRICT JUDGE
This matter is before the Court on Plaintiff United Products and Technology Limited's ("United Products") motion for summary judgment in a case involving a dispute over the sale of personal protective equipment ("PPE") at the beginning of the COVID-19 pandemic. [Doc. # 122 ("MSJ").] The Motion is fully briefed. [Doc. ## 125 ("Opp."), 126 ("Reply").] The Court has also reviewed the parties' Joint Status Report re Stipulated Facts [Doc. # 121 ("JSR")] and evidence submitted in support of prior filings in this case. The Court held a hearing on March 15, 2024. Having duly considered the parties' written submissions and arguments, the Court renders the following ruling.
I.
FACTUAL BACKGROUND
A. Facts of Case
In March 2020, the COVID-19 pandemic erupted in the United States, and the demand for personal protective equipment ("PPE"), such as ear loop masks, skyrocketed. PSUF 3. In response to this demand, Defendant Jay Fried contacted Yasmine Hanane in March 2020 to determine if he and his company, Above Edge, LLC ("Above Edge"), could buy ear loop masks from United Products to resell to hospitals and the general public. PSUF 4. Hanane told Fried that United Products could manufacture and produce the masks in China and ship them to Defendants. PSUF 5. Fried responded that he was interested in purchasing eight million units of ear loops masks. Id.
The parties stipulated that Yasmine Hanane is an agent of United Products for the purpose of this case. See JSR at 2.
Based on that conversation, on or about April 13, 2020, Hanane prepared Purchase Order No. 1079 (the "Purchase Order"), which confirmed and memorialized the purchase and sale of eight million units of three-ply ear loop masks at a price per unit of $0.30, for a total of $2.4 million. PSUF 6. The sequence of events thereafter is heavily disputed, see infra Part IV. A.1, but the record reflects that Hanane sent an email that evening connecting Fried to Frank Qiu, the sole partner-owner of United Products. See Decl. of Yasmine Hanane ISO MSJ ("Hanane Decl."), Ex. C (Apr. 13, 2020 Email) at 17 [Doc. # 122-1].
All page citations herein refer to the page numbers inserted by the CM/ECF system.
Soon thereafter, Hanane created a group WeChat between herself, Qiu, and Fried to discuss the tendering of Defendants' initial payment due under the contract. See Hanane Decl., Ex. D (WeChat messages dated April 21-22, 2020) at 18-28 [Doc. # 122-1]. The WeChat messages appear to reference phone calls and do not represent the entirety of the communications between Hanane, Fried, and Qiu, but it appears that Fried was unable to transmit payment to Qiu as promised. See generally id.; see also PSUF 10.
Nonetheless, the first batch of ear loop masks containing 1,270,000 units arrived at LAX on May 2, 2020. PSUF 12. United Products received $1,035,000 in exchange for these masks. See Hanane Decl. ¶ 15. A third party, Imperial Glove & Safety ("Imperial"), received the masks. PSUF 13. The parties dispute the nature of the business relationship with Imperial, see infra Part IV.A. At the time of delivery, there was no complaint from Defendants about the merchantability, quality, or fitness of the masks. PSUF 14. About a week later, Hanane emailed Defendants advising them that the remaining 6,730,000 units were scheduled to arrive at the Port of Long Beach on May 12, 2020. PSUF 15. She also informed Defendants they would need to pay whatever freight costs were associated with their transfer. Id.
After this second mask shipment arrived, the 6,730,000 units remained in storage in Los Angeles until July 2020, at which time they were shipped to Nevada. PSUF 16. Defendants never paid for this second shipment of masks. Id. Instead, they communicated to Hanane that a third-party buyer—a hospital in Oklahoma—had agreed to purchase 6,000,000 mask units. PSUF 18. Accordingly, Hanane worked with Imperial to transfer these units to this buyer. Id. In a July 23, 2020 email, Defendants indicated that the payment from the Oklahoma buyer would be used to pay Qiu. PSUF 19; Hanane Decl., Ex. G (July 23, 2020 Email) at 44. Those units were ultimately received by the Oklahoma buyer. PSUF 20. Fried also directed the release of 291,000 other units to other buyers around that time. PSUF 21. By then, there were 439,000 masks remaining in United Products' possession, but it had received no additional payment beyond the initial $1,035,000 deposit. PSUF 22.
The July 28, 2020 Email also indicates that the Oklahoma buyer paid .28 per mask with a 1% commission going to Imperial, but the details of that transaction should be reflected in Plaintiff's accounting of damages.
On July 29, 2020, Defendants communicated the first complaints about the quality and merchantability of the masks to Hanane. PSUF 23. Upon hearing this complaint, Hanane sent the masks for testing at SGS Testing. See PSUF 23-26.
To help mitigate Plaintiff's damages, Hanane requested that Fried ship a portion of his units to Hanane for sale on ecommerce platforms. PSUF 29. The details around this transaction are disputed, but approximately 1,200,000 mask units were returned to Hanane. PSUF 30. Ultimately, Hanane successfully sold 788,000 masks and was able to recoup roughly $32,000 from the sale of those masks. PSUF 21. United Products never received any additional payment for the sale of the masks and, consequently, claims $1,333,000 in damages. PSUF 33; MSJ at 18 (describing claimed damages). It is unclear, however, how United Products arrives at the $1,333,000 damages figure.
Confusingly, Defendants do not dispute this fact but then dispute PSUF 30 ("In November 2020, Defendant Fried shipped approximately 1,200,000 mask units to Hanane, which were stored in a warehouse in Gardena, California") on the basis that Fried never had possession of the masks. See PSUF 30; Fried Decl. ¶ 25.
B. Evidentiary Rulings
The summary of the facts is undisputed, unless otherwise stated. Stipulated facts are set forth in the parties' JSR and will be cited accordingly. Other facts are drawn from United Products' Statement of Undisputed Facts ("PSUF") and Defendants' responses, as set forth with United Products' Reply [Doc. # 126-2]. Many of the parties' purportedly disputed facts are not in fact controverted by the evidence, and the Court therefore cites to them as uncontroverted facts. The Court previously ruled on United Products' motions in limine. [Doc. # 119 ("MIL Ord.").] The Court will indicate where it has excluded evidence pursuant to that ruling throughout this Order.
The Court addresses an additional evidentiary objection raised in Defendants' Opposition. Defendants object to admission of the SGS Report, on the basis that Hanane does not have personal knowledge of the masks that were sent for testing and the report was not properly authenticated. [See Doc. # 125-5 at 7.] Indeed, Hanane's declaration does not explain the basis for her personal knowledge of the SGS Report's authenticity and she does not supplement her declaration in response to the objection. See Fed. R. Evid. 901(b)(1); see also Orr v. Bank of Am., NT & SA, 285 F.3d 764, 773-74 (9th Cir. 2002) (describing authentication requirement on summary judgment). The objection to the SGS Report is therefore SUSTAINED.
Lastly, the Court has reviewed United Products' evidentiary objections to the Declaration of Jay Fried, and the various evidentiary objections interspersed throughout Defendants' responses to Plaintiff's Statement of Undisputed Facts. [Doc. ## 125-5, 126-2.] To the extent the Court does not address any of them in this Order, it is because the Court did not rely on the objected-to evidence in reaching its ruling. Any objections to such evidence are OVERRULED as moot.
II.
PROCEDURAL BACKGROUND
United Products filed suit on May 26, 2021, asserting claims for: (1) breach of contract; (2) quantum meruit; (3) common count: goods and services received; (4) promissory estoppel; and (5) declaratory relief. [Doc. # 1.] Defendants filed their Answer and asserted counterclaims for: (1) breach of contract; (2) unjust enrichment; (3) breach of the implied warranty of merchantability; (4) breach of the warranty of fitness for a particular purpose; and (5) declaratory relief. [Doc. # 23.] United Products filed a timely answer to Defendants' counterclaims. [Doc. # 28.]
Under California law, common count "is not a specific cause of action," but "a simplified form of pleading normally used to aver the existence of . . . [an] alleged duty to make restitution." See Berryman v. Merit Property Mgmt., Inc., 152 Cal. App. 4th 1544, 1559-60, 62 Cal.Rptr.3d 177 (2007) (citations omitted in original).
On October 3, 2023, at what was supposed to have been the final pretrial conference, the Court deemed the case not trial-ready, vacated the final pretrial conference, and ordered the parties to meet and confer and file a joint status report ("JSR") regarding any stipulated facts and identifying the subject matter of any potential motions for summary judgment/summary adjudication of issues. Id. The parties timely filed their JSR, and Plaintiff filed the instant MSJ on January 12, 2024.
III.
LEGAL STANDARD
Summary judgment should be granted "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); accord Wash. Mut. Inc. v. United States, 636 F.3d 1207, 1216 (9th Cir. 2011). Material facts are those that may affect the outcome of the case. Nat'l Ass'n of Optometrists & Opticians v. Harris, 682 F.3d 1144, 1147 (9th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Liberty Lobby, 477 U.S. at 248, 106 S.Ct. 2505.
The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its initial burden, Rule 56(c) requires the nonmoving party to "go beyond the pleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.' " Id. at 324, 106 S.Ct. 2548 (quoting Fed. R. Civ. P. 56(c), (e)); see also Norse v. City of Santa Cruz, 629 F.3d 966, 973 (9th Cir. 2010) (en banc) ("Rule 56 requires the parties to set out facts they will be able to prove at trial."). "In judging evidence at the summary judgment stage, the court does not make credibility determinations or weigh conflicting evidence." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). "Rather, it draws all inferences in the light most favorable to the nonmoving party." Id.
IV.
DISCUSSION
Much of the Court's analysis is shaped by its prior evidentiary rulings in this case, which in turn resulted from Defendants' counsel's utter failure to participate in discovery. See generally MIL Ord. While this result may cut against the recognized "strong preference for deciding cases on the merits whenever reasonably possible," defense counsel's conduct throughout this case has made it much more difficult to do so here. See Silvagni v. Wal-Mart Stores, Inc., 320 F.R.D. 237, 244 (D. Nev. 2017) (citing Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 1986)); see also [Doc. ## 49, 91.]
A. Breach of Contract
The well-established elements for breach of contract are "(1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff." Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811, 821, 124 Cal.Rptr.3d 256, 250 P.3d 1115 (2011).
The parties do not dispute that California law governs the claims in this case.
1. Existence of a Contract
The parties both claim to have relied on a slightly different version of the Purchase Order in agreeing to the deal, and thus dispute whether a contract was actually formed. United Products submits a copy of an invoice and email response from Fried that it argues is incontrovertible proof of a valid contract between the parties. See MSJ at 21-24; Decl. of Yasmine Hanane ISO MSJ, Exs. A (Hanane Purchase Order) at 12-13, B (Offer Acceptance) at 15 [Doc. # 122-1]. Fried, on the other hand, provides an alternate version of the Purchase Order ("Fried Purchase Order") in support of his Opposition. See [Doc. # 125-2.]
Both Purchase Orders reflect that the field labeled "Description" contained the following text: "3 Ply FDA Approved in Boxes." See Hanane Purchase Order at 15; Fried Purchase Order. In Fried's version, he argues that he had added his address for shipping and the following text under "Comments or Special Instructions": "FDA APPROVED, LEVEL 1 EAR LOOP CIVIL MASK, PACKAGED IN A BOX, PAYMENT TERMS 50% DEPOSIT, 50% AT BOL." See Fried Purchase Order. Notwithstanding any discrepancies between these two documents, United Products maintains that Fried "did not modify any of the substantive aspects of the agreement," nor object to any aspect of the Purchase Order, so a contract was formed. See MSJ at 23.
The contract at issue in this case, for the sale of PPE, is governed by the California Uniform Commercial Code ("UCC"). See Cal. Com. Code § 2102. Under the UCC, a contract for the sale of goods "may be made in any manner sufficient to show agreement . . . ." Id. § 2204(a). Furthermore, the UCC provides that a contract for sale of goods "does not fail for indefiniteness" if the parties' clear intent is to form a contract and "there is a reasonably certain basis for giving an appropriate remedy." Id. § 2204(3).
The UCC provision most pertinent here is Section 2207, which provides that when parties have exchanged conflicting forms, "[a] definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms." Cal. Com. Code § 2207 (emphasis added). In other words, Fried's email response and course of conduct signaled his acceptance, regardless of whether he added additional language to the Purchase Order. See Steiner v. Mobil Oil Corp., 20 Cal. 3d 90, 99, 141 Cal.Rptr. 157, 569 P.2d 751 (1977) (highlighting the UCC's recognition that the terms of offer and acceptance "will seldom be identical" in many commercial cases for the sale of goods and that Section 2207 was written to reflect that reality).
Fried did not condition his acceptance on those additional terms, and thus a contract was formed even if the parties' mutual understanding of the terms of the Purchase Order differed slightly. Cf. Trans-Tec Asia v. M/V HARMONY CONTAINER, 435 F. Supp. 2d 1015, 1024 (C.D. Cal. 2005) ("Under the UCC, an additional term is a material alteration if it would result in surprise or hardship" if it were incorporated "without express awareness by the other party.") (internal quotation marks and citations omitted). Neither of the contested changes in the Purchase Order would have caused "surprise or hardship" to either party, and Defendants do not argue otherwise.
2. Performance, Breach, and Damages
United Products argues that it substantially performed all its obligations under the Purchase Order. See MSJ at 23-24. It delivered 1,270,000 units to Defendants' buyer on or about May 12, 2020, released an additional six million masks to Defendants' buyer in Oklahoma, and only kept possession of the remaining 439,000 due to Defendants' refusal to tender payment. Id. Defendants' response is that there was no performance on the original contract because the parties "scrapped the Purchase Order" after Defendants could not transmit payment, and entered into two separate agreements with Imperial. See Opp. at 8-9. It is undisputed that United Products performed its obligation to deliver 8,000,000 masks, and that it only received payment of $1,055,000 on a $2,400,000 Purchase Order. See JSR at 2-3; Purchase Order.
Defendants claim to have made a separate contract with Imperial that effectively rescinded the original contract with United Products, but provide no evidence supporting that contention beyond a vague, "self-serving" declaration by Fried. See Nigro v. Sears, Roebuck & Co., 784 F.3d 495, 497 (9th Cir. 2015) (the Ninth Circuit has observed that "declarations are often self-serving, and this is properly so because the party submitting it would use the declaration to support his or her position."). Although a declaration can be self-serving, Fried's declaration has a more significant problem. Fried states that he "came to agreeable terms" with Imperial to purchase the eight million masks, but does not provide any details about those terms nor does he explain why that contract would have amounted to a rescission of his original contract without United Products' consent. See Decl. of Jay Fried ISO Opp. ¶ 19 [Doc. # 125-1 ("Fried Decl.")]; see also Seoul Semiconductor Co. v. Finelite, Inc., 694 F. Supp. 3d 1199, 1212-13 (N.D. Cal. Sept. 26, 2023) (a party claiming novation must prove by clear and convincing evidence that: (a) there was a previous valid contract; (b) the parties agreed to a new contract; (c) the old contract was terminated; and (d) the new contract is valid) (citations omitted).
Even viewing the evidence in the light most favorable to Defendants, this vague statement alone does not give rise to a genuine dispute of material fact as to contract termination, cancellation, rescission, release, or any other method by which Defendants' contractual obligations might have been discharged. See Pac. Gulf Shipping Co. v. Vigorous Shipping & Trading S.A., 992 F.3d 893, 897-98 (9th Cir. 2021) (" 'The nonmovant's burden of production at this point is not a light one'—it 'must show more than the mere existence of a scintilla of evidence' or 'some metaphysical doubt' as to the material facts at issue." (quoting In re Oracle Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010) (internal quotation omitted))); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
Fried also claims that he never transmitted any money to United Products, and that he only transacted with Imperial, see Opp. at 8-9, but that statement is contradicted by other record evidence. The WeChat messages strongly suggest that he sent $25,000 to Qiu, who confirmed receipt. See WeChat Messages at 25. The record also contains an email indicating that Defendants would use the payment from the Oklahoma buyer to pay Qiu. See PSUF 19; July 23, 2020 Email at 44. Hanane's explanation is that she "enlisted the assistance of Imperial, a domestic company, to "receive a portion of the mask deliveries, obtain payment from Defendants, and distribute the masks to Defendants" when Defendants were unable to pay the $1,035,000 initial deposit due to issues with international wire transfer. See Hanane Decl. ¶ 14; see also Reply at 11-12.
Whatever the details of Imperial's involvement may be, any outstanding disputes with that entity fall outside the scope of this litigation. The salient fact here is that Defendants have not met their burden of production to provide an affirmative showing of "specific facts showing that there is a genuine issue for trial." See Celotex, 477 U.S. at 322, 106 S.Ct. 2548. Summary judgment is GRANTED to Plaintiff on its breach of contract claim.
B. Merchantability/Fraud
Defendants' Opposition raises an argument that amounts to a fraudulent inducement defense—that the Purchase Order is void because of alleged misrepresentations made by Plaintiff about the merchantability and quality of the masks. See Opp. at 9-11; see also Ans. at 10 (pleading affirmative defense of fraud) [Doc. # 23].
Throughout United Products' briefing, it sometimes overstates the Court's ruling on its MILs and claims that the Court "barred" Defendants from any contentions that the masks were not merchantable. [See Doc. # 126-2 at 5.] Instead, the Court expressly declined to order issue sanctions on the issue of merchantability because it had already excluded much of the documentary evidence and witnesses Defendants intended to use to prove that claim. See generally MIL Ord.
Since Defendants would have the burden of proof at trial on this argument whether it arises as an affirmative defense or on their counterclaims, the Court first addresses whether they have met their burden of production. See Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). The only evidence submitted in support of this defense is Fried's hearsay statement that he refused further shipments of masks after receiving customer complaints. See Fried Decl. ¶¶ 26-28. Yet, he failed to produce any non-hearsay evidence of these complaints in discovery in response to Plaintiff's requests for production. See Hanane Decl. ¶ 28, Ex. I (email dated Aug. 1, 2020 discussing the purported merchantability issues) at 49-50; see also MIL Ord. at 2-3.
The Court SUSTAINS United Products' objections to paragraph 27 of Fried's declaration on the basis that it lacks foundation and personal knowledge, and to paragraph 26 on the basis of hearsay. See Fed. R. Evid. 602, 801-03.
Furthermore, Fried did not raise any merchantability issues with the masks until long after he accepted the shipment, nor is there any evidence that he asked for verification of their FDA-approved status. See Cal. Com. Code § 2606 (acceptance of goods occurs when the buyer fails to make an effective rejection after a reasonable opportunity to inspect them); Magic Link Garment Ltd. v. ThirdLove, Inc., 445 F. Supp. 3d 346, 360 (N.D. Cal. 2020) (granting summary judgment where defendant "accepted [goods] within the meaning of [Section] 2606" and "failed to expressly identify any evidence showing that any non-conformity . . . substantially impaired [the] value" of the goods).
For the same reasons as discussed previously, see supra Part IV.A.2, Defendants do not sustain their burden on this issue. Summary judgment is GRANTED to United Products and against Defendants on their counterclaims for restitution/unjust enrichment and breach of the implied warranties of fitness and/or merchantability.
C. Remaining Claims
As pleaded, United Products' remaining claims for quantum meruit, common count, promissory estoppel, and declaratory relief are duplicative of or obviated by its breach of contract claim. See Compl. ¶¶ 39-76. Any arguments in opposition to these claims by Defendants are based on their argument of merchantability/fraud, which fail for the same reasons discussed above, see supra Part IV.B. See Opp. at 12-14.
V.
CONCLUSION
In light of the foregoing, the Court GRANTS United Products' MSJ as to liability on the breach of contract claim. Within one week of this Order, United Products shall file a declaration setting forth a full accounting of its damages, supported by citations to record evidence, and a proposed judgment. Defendants may file a response within one week thereafter.