Opinion
5:01-CV-388 (HGM/GJD)
November 14, 2002
Deborah H. Karalunas, Esq., Richard L. Weber, Esq., Bond, Schoeneck King, PLLC, Syracuse, New York, for Plaintiff.
John L. Murad, Jr., Esq., John G. Powers, Esq., Hancock Estabrook, LLP, Syracuse, New York, David R. Marshall, Esq., Gregory E. Karpenko, Esq., Fredrikson Byron, P.A., Minneapolis, Minnesota, for Defendant.
MEMORANDUM-DECISION AND ORDER
Currently before the court is defendant's motion for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure and plaintiff's cross-motion for partial summary judgment and for leave to amend the Complaint pursuant to Rule 15 of the Federal Rules of Civil Procedure. For the reasons that follow below, defendant's and plaintiff's motions for partial summary judgment are DENIED and plaintiff's motion for leave to amend the Complaint is GRANTED.
BACKGROUND
In July of 2000, plaintiff Oneida Ltd. ("Oneida") entered into a written agreement with non-party CarLen Enterprises, Inc. ("CarLen") for the purchase of "closeout" goods from Oneida. CarLen was interested in selling the goods to its own customers, but it did not have the financial ability to pay Oneida in advance.
In October of 2000, CarLen provided defendant RedTagBiz, Inc. ("RedTag") with the opportunity to purchase the goods from Oneida and re-sell them to CarLen's customers because RedTag had the ability to make advance payments to Oneida. RedTag accepted the opportunity and agreed with CarLen that CarLen would obtain orders from its customers and provide the orders to RedTag, who would forward them to Oneida. Then, RedTag would make the advance payment to Oneida and RedTag and CarLen would split the profits from the sale equally.
On November 1, 2000, RedTag and Oneida entered into a two-page agreement with two attached exhibits ("Agreement"). After the Agreement was signed, RedTag made two payments of $250,000 each and Oneida shipped a portion of the goods that RedTag had ordered. The subsequent facts pertaining to the parties' actions pursuant to the Agreement are greatly disputed.
On January 24, 2001, Oneida filed the present action in New York State Supreme Court, Madison County, primarily alleging breach of contract. The action was removed to this court on March 16, 2001.
Currently before the court is RedTag's motion for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure and Oneida's cross-motion for partial summary judgment and for leave to amend the Complaint pursuant to Rule 15 of the Federal Rules of Civil Procedure. Both of the parties have entered opposition to each of the motions and oral argument was heard on September 13, 2002.
DISCUSSION I. Standard for Summary Judgment
The standard for summary judgment is well-settled. Rule 56 of the Federal Rules of Civil Procedure allows for summary judgment where the evidence demonstrates that "there is no genuine issue of any material fact and the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Summary judgment is properly regarded as an integral part of the Federal Rules as a whole, which are designed "to secure the just, speedy and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1991) (quoting Federal Rule of Civil Procedure 1). A motion for summary judgment may be granted when the moving party carries its burden of showing that no triable issues of fact exist. See Thompson v. Gjivoje, 896 F.2d 716, 720 (2d Cir. 1990). In light of this burden, any inferences to be drawn from the facts must be viewed in the light most favorable to the non-moving party. See id.; United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam). If the moving party meets its burden, the burden shifts to the non-moving party to come forward with "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). To defeat a motion for summary judgment, however, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). A dispute regarding a material fact is genuine "if evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. When reasonable minds could not differ as to the import of the evidence, then summary judgment is proper. See id. at 250-251, 106 S.Ct. at 2511.
II. Oneida's Motion for Partial Summary Judgment
Oneida moves for summary judgment on the issue of liability for breach of the Agreement. It argues that it is entitled to partial summary judgment because the terms of the contract between the parties are clear and unambiguous — there is neither a genuine, material issue of fact regarding the express terms of the Agreement between RedTag and Oneida, nor a material issue of fact regarding RedTag's alleged breach of its obligation to accept and pay for all "Products," as defined by the Agreement.
In opposition, RedTag argues that the Agreement gave it the option, but not the obligation, to purchase goods from Oneida. In support of its argument, RedTag claims that the text of the Agreement, the actions of the parties, and the applicable law demonstrate that the Agreement provided RedTag with the option to purchase goods.
Both parties offer specific language of the Agreement in support of its position. Oneida points out that the Agreement states, in pertinent part, that:
1. Products. The Products shall be all quantities in Oneida's warehouses of the merchandise contained in Schedule A attached, which consists of closeout merchandise, that is, excess, obsolete, and returned goods. Actual quantities may vary from those shown on the schedule.
. . . .
4. Term. This agreement shall be effective upon execution and shall continue in force through January 19, 2001, and Redtag must accept all Products by this date.
. . . .
6. Payment. Payment shall be in advance as arranged from time between Redtag and Oneida. In general, Redtag shall prepay for all shipments before they are transported from Oneida's warehouse. In any event, final payment for all Products is due before January 19, 2001.
Amended Complaint, Exhibit A. (emphasis added). Therefore, Oneida claims, the terms of the Agreement are definite and unambiguous: RedTag was to accept and make payment for "all Products" — expressly defined by the Agreement as "all quantities in Oneida's warehouses of the merchandise contained in Schedule A" — by January 19, 2001. Since it is uncontested that RedTag did not accept or make payment for "all Products" contained in Schedule A by January 19, 2001, Oneida concludes that RedTag failed to fulfill its obligations under the terms of the Agreement as is therefore in breach.
RedTag reaches a different conclusion from the terms of the Agreement, namely that it gave them the option to purchase goods from Oneida during a specified period of time. In support of its conclusion, RedTag points out that the Agreement states, in pertinent part, that:
This letter is our agreement covering purchases and sales by Redtagoutlet.com (Redtag) of Oneida products, which shall be upon the following terms and conditions.
. . . .
4. Term. This agreement shall be effective upon execution and shall continue in force through January 19, 2001, and Redtag must accept all Products by this date.
5. Product Prices. The prices shall be twenty-seven and ninety-five hundredths percent (27.95%) of the prices listed for the Products on Schedule A.
Id. (emphasis added). RedTag claims that this language clearly and unambiguously supports its argument that the Agreement was an option contract. Specifically, RedTag argues that the phrase "purchases and sales" reflects that the parties intended that RedTag would make multiple purchases from Oneida and the phrase "shall be" indicates that the transactions would take place in the future.
Also, RedTag argues that paragraph 4 is consistent with the terms of an option contract, providing RedTag with the option to purchase goods until the expiration of the Agreement on January 19, 2001. Finally, RedTag argues that Agreement does not set forth a total price for the goods that Oneida claims were sold, but instead contains a price term that would be consistent with future multiple purchases by RedTag. Based upon the aforementioned arguments based on the language of the Agreement, RedTag claims that the specific language supports its conclusion that the Agreement was an option contract.
Oneida and RedTag each make additional extrinsic evidence arguments in support of their positions. However, it is not necessary to examine them at this time. There is clearly a genuine issue of material fact pertaining to the question of whether the Agreement was an option contract or not. Therefore, Oneida's motion for partial summary judgment on the issue of liability under the Agreement must be denied.
III. Oneida's Motion for Leave to Amend the Complaint
Oneida moves to amend its Complaint because it has attempted to resell the goods identified to the Agreement during the months subsequent to the filing of the Complaint and discovery has revealed additional information that was not available at the time of filing. Rule 15 of the Federal Rules of Civil Procedure provides that leave to amend a party's pleading "shall be freely given when justice so requires." The Rule reflects two of the most important underlying principles of the Federal Rules: (1) pleadings serve the limited role of providing the opposing party with notice of the claim or defense to be litigated; and (2) "mere technicalities" should not prevent cases from being decided on the merits. See Monahan v. New York City Dep't of Corrs., 214 F.3d 275, 283 (2d Cir. 2000) (citing Conley v. Gibson, 355 U.S. 41, 47-48, 78 S.Ct. 99, L.Ed.2d 80 (1957); Forman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962)). Therefore, absent evidence by the non-movant of prejudice or bad faith, the Rule's mandate must be obeyed. See Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993).
Mere delay, absent a showing of prejudice or bad faith, does not provide a basis for a court to deny the general right to amend. See id. (quoting State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981)). However, "the longer the period of an unexplained delay, the less will be required of the nonmoving party in terms of a showing of prejudice." Id. (quoting Evans v. Syracuse City Sch. Dist., 704 F.2d 44, 47 (2d Cir. 1983)).
In order to determine what constitutes prejudice, a court must consider whether the proposed amendments would: (1) require the non-movant to expend significant additional resources to conduct discovery and prepare for trial; (2) significantly delay the resolution of the dispute; or (3) prevent the non-movant from bringing a timely action in another jurisdiction. See Monahan, 214 F.3d at 284 (quoting Block, 988 F.2d at 350).
RedTag opposes Oneida's motion to amend on two primary grounds. First, RedTag argues that Oneida has not offered a legitimate explanation for its delay. Oneida commenced this case in February of 2001, the deadline for amendments pursuant to the Uniform Pretrial Scheduling Order was October 15, 2001, and dispositive motions have already been filed. Thus, RedTag argues, Oneida's motion to amend is untimely.
The court has already stated that mere delay does not provide a basis for denying a motion to amend, it merely reduces the non-movant's burden to show prejudice. Therefore, the court will move on to RedTag's second primary ground of opposition — if Oneida is allowed to amend its Complaint, RedTag will be forced to re-open discovery to explore the new allegations and to experience the resulting prejudice. Besides its conclusory statement, RedTag has failed to allege any specific examples of prejudice.
In response to RedTag's opposition, Oneida points out that RedTag has already had exhaustive discovery on Oneida's mitigation efforts, including depositions of several Oneida employees and non-party witnesses who purchased goods during the mitigation. Additionally, Oneida states that it has produced invoices from mitigation sales and continues to do so. After reviewing each of the party's arguments, the court concludes that there is no reasonable basis to deviate from the traditional rule that leave to amend should be freely given. RedTag has failed to demonstrate how it will be specifically prejudiced by amendment of the Complaint, despite the delay in doing so. It has generally alleged that it will be required to expend additional resources to re-open discovery, but it has not alleged how amendment would significantly delay resolution of the dispute or prevent another action from being brought in another jurisdiction. Because RedTag has failed to make a sufficient showing of prejudice or bad faith, the court must grant Oneida's motion to amend the Complaint.
IV. RedTag's Motion for Partial Summary Judgment
RedTag moves for partial summary judgment on various grounds. First, RedTag argues that Oneida cannot establish the elements of an "action for price" under N.Y.U.C.C. § 2-709 ("§ 2-709"). Secondly, RedTag argues that Oneida has filed suit for goods that were not the subject of the Agreement. Finally, RedTag argues that Oneida repudiated the Agreement by refusing to provide adequate assurances that it would perform its obligations under the contract.
A. Failure to Establish the Elements of an "Action for Price" Under § 2-709
RedTag claims that Oneida's failure to establish the elements of an "action for price" under § 2-709 warrants dismissal of the claim. Under § 2-709, if a buyer fails to pay the price for goods as it becomes due and a seller is unable to re-sell them at a reasonable price after a reasonable effort, then a seller may recover the price of accepted goods identified to the contract, plus incidental damages.
RedTag argues that it did not accept the goods by the means set forth in the Agreement, so the "accepted goods" element of § 2-709(a) cannot be satisfied. Oneida takes a contrary position and argues that, although RedTag failed to pay for the goods under the Agreement, it took action that may be deemed "acceptance" under the N.Y.U.C.C. Under N.Y.U.C.C. § 2-606, acceptance of goods occurs when the buyer: (1) signifies to the seller, after a reasonable opportunity to inspect the goods, that the goods are conforming or that he will take or retain them in spite of their non-conformity; (2) fails to make an effective rejection after a reasonable opportunity to inspect the goods; or (3) does any act inconsistent with the seller's ownership.
After reviewing the parties' arguments, the court concludes that there is a genuine issue of material fact as to whether acceptance of the goods occurred, intimately related to the issue of liability raised by Oneida's motion for partial summary judgment. Until the question of what type of contract the parties entered into is resolved, there is a remaining question of specifically what goods were the subject of the Agreement. Therefore, RedTag's motion for summary judgment based on Oneida's alleged failure to establish the elements of an "action for price" under § 2-709(a) must be denied.
RedTag also claims that Oneida's failure to allege and meet its burden under § 2-709(b) to prove that the goods identified to the Agreement cannot be re-sold warrants dismissal of the claim. Specifically, RedTag argues the validity of its claim for three reasons. First, RedTag argues that Oneida has failed to allege in its Complaint that the goods could not readily be re-sold. While this was originally the case, the court has subsequently granted Oneida's motion for leave to amend the Complaint and include specific allegations pertaining to the re-sale of goods. Therefore, RedTag's argument is without merit.
Secondly, RedTag argues that Oneida has failed to produce evidence of its inability to re-sell the goods at a reasonable price. This argument is also without merit. Oneida has alleged and offered evidence to support its claim that it was unable to sell all of the goods identified to the agreement.
Finally, RedTag argues that Oneida has failed to produce evidence that there is no market for the goods and, therefore, that it need not attempt to re-sell them. At this time, there is sufficient evidence to support a finding that Oneida did, in fact, undertake at least some reasonable efforts to re-sell the goods identified to the Agreement. Therefore, RedTag's argument that Oneida's failure to produce evidence that there is no market for the goods is irrelevant and without merit.
Because RedTag has failed to prove its claim that Oneida's failure to allege and meet its burden under § 2-709(b) to prove that the goods identified to the Agreement cannot be re-sold, its motion for summary judgment based on Oneida's alleged failure to establish the elements of an "action for price" under § 2-709(b) must be denied.
B. Suit for Goods Not Identified to the Agreement
RedTag claims that Oneida sued it for goods that were not the subject of the Agreement, so it is entitled to summary judgment, regardless of whether the Agreement is an option or a present sale. The underlying issue is which list of obsolete/excess merchandise was Exhibit A to the Agreement — the October 9, 2000 list or the October 26, 2000 list. RedTag argues that Exhibit A was the October 9 list and offers an email from Oneida to CarLen and deposition testimony from Gregg Denny, Chief Financial Officer of Oneida, and two CarLen employees to support its argument. In opposition, Oneida argues that Exhibit A was the October 26 list and offers declarations from Mr. Denny and Shaun MacKenzie, Manager of Discount Marketing of Oneida, in support.
Although RedTag suggests that there is no genuine issue of material fact related to its claim, this court cannot agree. There is clearly an issue as to which list was Exhibit A to the Agreement. Therefore, RedTag's motion for summary judgment based on Oneida's alleged suit for goods that were not the subject of the Agreement must be denied.
C. Failure to Provide Adequate Assurances
RedTag argues that Oneida repudiated the Agreement by refusing to provide adequate assurance that it would perform its contractual obligations, so it is entitled to summary judgment. N.Y.U.C.C. § 2-609 ("§ 2-609") states "[w]hen reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return."
The question of whether a buyer has reasonable grounds for insecurity under § 2-609 is generally a question of fact. See BAII Banking Corp. v. UPG, Inc., 985 F.2d 685, 702 (2d Cir. 1993). However, there are certain circumstances where this issue may be resolved as a matter of law. See id. The present case is one of those situations.
RedTag claims that it submitted a written demand for adequate assurance of performance to Oneida in the form of January 25, 2001 letter. However, the Agreement states that it "shall be effective upon execution and shall continue in force until January 19, 2001." Regardless of whether the Agreement was an option or present contract, RedTag's claimed demand for adequate assurance was dated a full six days after the termination of the Agreement and one day after the present action was commenced. Therefore, RedTag's claimed written demand for adequate assurance of performance was untimely and its motion for summary judgment based on Oneida's refusal to provide such assurances must be denied.
V. Trial Date
The court, not having previously set a trial date for this action, directs the parties to appear for a non-jury trial on Monday, December 16, 2002, at 10:00 a.m. in Syracuse, New York.
CONCLUSION
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED, that defendant's and plaintiff's motions for partial summary judgment are DENIED, and it is further
ORDERED, that plaintiff's motion for leave to amend the Complaint is hereby GRANTED, and it is further
ORDERED, that the parties appear for a non-jury trial on Monday, December 16, 2002, at 10:00 a.m. in Syracuse, New York. It is further
ORDERED, that the Clerk of the Court serve a copy of this Memorandum — Decision and Order upon the parties by regular mail.
IT IS SO ORDERED.