Opinion
X04HHDCV065009720S
08-03-2016
RBC Nice Bearings, Inc. et al. v. SKF USA, Inc.
UNPUBLISHED OPINION
MEMORANDUM OF DECISION ON MOTION RE SCOPE OF REMAND (#250)
David M. Sheridan, J.
This matter is back before this court on remand from the Connecticut Supreme Court " for further proceedings on the defendant's counterclaim." RBC Nice Bearings, Inc. v. SKF USA, Inc., 318 Conn. 737, 768, 123 A.3d 417 (2015). A dispute has arise between the parties as to the interpretation of the above direction. The defendant SKF USA, Inc. (" defendant") has filed a motion for order advocating that the scope of remand from the Supreme Court should encompass a retrial of six of the seven counterclaims. The plaintiff RBC Nice Bearings, Inc. (" plaintiff") counters that the only issue left for this court to decide is " the amount of damages to which the defendant is entitled based on the products listed in Schedule 1 of the 2000 agreement." RBC Nice Bearings, Inc. v. SKF USA, Inc., 146 Conn.App. 288, 316, 78 A.3d 195 (2013).
I. BACKGROUND
The procedural history and underlying facts of this case have been detailed in the decisions issued by the Supreme and Appellate Courts. As such, this court will refer to those decisions for the relevant procedural history and facts.
In RBC Nice Bearings, Inc. v. SKF USA, Inc., 318 Conn. 737, 123 A.3d 417, the Supreme Court set forth the following relevant procedural history and facts. " The defendant owned Nice Ball Bearings, Inc. (Nice), producer of the oldest line of ball bearings manufactured in the United States, until 1997, when it sold the product line and associated manufacturing assets to the plaintiffs. RBC Nice Bearings, Inc. v. SKF USA, Inc., supra, 146 Conn.App. at 291, 78 A.3d 195. 'The parties simultaneously executed a " Sales and Supply Agreement" (1997 agreement) through which the defendant became the plaintiffs' exclusive distributor for certain Nice products [to certain aftermarket customers]. The 1997 agreement provided for a term of eight years and required that the defendant expend, at a minimum, $9 million for the purchase of Nice products from the plaintiffs each year.' Id.
" Although the defendant failed to purchase the contractual minimum during the first three years of the 1997 agreement, the plaintiffs did not demand compliance with the minimum purchase requirement, nor did they take any steps to challenge the defendant's failure to comply with that requirement. Id. Rather, on July 31, 2000, the parties negotiated a new sales and supply agreement to reflect what they agreed were changed market realities (2000 agreement). Id. This 2000 agreement superseded the 1997 agreement. Id. It extended the term of the parties' exclusive supply relationship through the end of 2008, while lowering the minimum purchase requirement by providing that the defendant was required to buy not less than $6 million per year of Nice products. Id. The 2000 agreement also contained an adjustment clause that allowed for future increases in the minimum annual purchase requirement to reflect price increases in the marketplace. Id., at 291-92, 78 A.3d 195. The new agreement also allowed for downward adjustments in the minimum purchase requirement under certain exceptional circumstances outlined in the agreement. Id., at 292, 78 A.3d 195.
" Each contract year was designated to run from March 1 to the end of the following February. Id. The 2000 agreement provided that, if a deficit remained after the close of a given contract year, the defendant could designate a portion of its March sales during the following year toward making up the shortfall. Id. In any event, the defendant would be required to purchase enough Nice product to make up the shortfall by April 30 of the following year. Id. The 2000 agreement also provided, however, that, upon the expiration or termination of the agreement, the plaintiffs were obligated to repurchase from the defendant all salable Nice products in the defendant's inventory. Finally, the 2000 agreement retained the defendant's exclusive distributorship, under which it held exclusive rights to sell Nice products to certain industrial aftermarket customers. Id.
" During the first year of the 2000 agreement, the defendant purchased the required amount of bearings from the plaintiffs. Id. Although its purchases in the second contract year fell short of the $6 million minimum, this shortfall was contractually excused because the terrorist attacks of September 11, 2001, resulted in a significant falloff in demand for industrial bearings in the second half of the contract year.
" For reasons that are disputed by the parties, the defendant was unable to satisfy its minimum purchase requirements during the third through sixth years of the 2000 agreement. The shortfalls amounted to $221, 584 in the year ending February 28, 2003; $1, 810, 638 in the year ending February 29, 2004; $2, 150, 515 in the year ending February 28, 2005; and approximately $2 million in the year ending February 28, 2006.
" In the third through fifth years of the 2000 agreement, the plaintiffs, as they had under the 1997 agreement, continued to perform under the contract despite the defendant's repeated failure to meet its contractual obligations. They indicated their acceptance of the defendant's deficient performance, and they forbore from demanding compliance with the minimum purchase requirement, invoicing the defendant for the shortfalls, or taking any legal action to enforce their contractual rights. Instead, each year, while continuing to remind the defendant of its contractual obligations, the plaintiffs negotiated with the defendant a purchase requirement that the defendant believed the market reasonably could bear. During this period, in the interest of maintaining a solid business relationship between the parties, the defendant also overlooked or tolerated various deviations by the plaintiffs from their contractual requirements. For example, the defendant allowed the plaintiffs to fill its orders at a fill rate lower than provided for in the 2000 agreement, and also to increase prices earlier than the agreement permitted.
" The plaintiffs adopted a different strategy, however, midway through the sixth contract year, which began on March 1, 2005. The plaintiffs had, for some time, been exploring the possibility of terminating the 2000 agreement with the defendant, cutting out the middleman, and taking over directto-market distribution of Nice bearings. The plaintiffs never revealed these plans to the defendant. Their internal target date for the transition was the end of 2005. Accordingly, in July 2005, Michael Hartnett, the plaintiffs' president and chief executive officer, instructed Bruce Whipple, his director of business development, as follows: 'I want to run Nice at a rate this year that does not create a major inventory hangover problem [and] I don't want to end the contract this year. Play nice! But let's reserve our claim.' (Emphasis in original.)
" Pursuant to this new strategy, on August 10, 2005, the plaintiffs presented the defendant with a $1.6 million shortfall invoice for the fifth contract year. Still, despite the defendant's failure to make up the shortfall, the plaintiffs continued to sell Nice bearings to the defendant under the contract through the end of the sixth contract year on February 28, 2006. When the defendant again failed to purchase the contractual minimum by the end of March 2006, the plaintiffs issued a shortfall invoice for the sixth contract year. RBC Nice Bearings, Inc. v. SKF USA, Inc., supra, 146 Conn.App. at 302, 78 A.3d 195. Finally, in June 2006, the plaintiffs unilaterally terminated the 2000 agreement.
" 'On June 22, 2006, the plaintiffs commenced this action against the defendant for [among other things] failure to meet its contractual obligations under the 2000 agreement in the fifth and sixth contract years and for the anticipatory breach of contract in years seven through nine . . . In [a] counterclaim, the defendant alleged breach of contract, tortious interference with contractual relations and prospective business relations, unjust enrichment, promissory estoppel, and violations of [the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq.].' Id., at 293, 78 A.3d 195.
" After a trial to the court [Miller, J.], the court issued a memorandum of decision in which it ruled in favor of the defendant on the plaintiffs' claims and in favor of the plaintiffs on the defendant's counterclaims. The court concluded that the evidence presented clearly demonstrated that the 2000 agreement had been modified by the conduct of the parties, who for most of the contract period did not follow the annual sales requirements set forth therein, and instead negotiated mutually acceptable, annual purchase volumes based on the realities of the market and on their business capacities . . . [In the alternative, the] court found that for the fourth and fifth contract years, the plaintiffs . . . waived their right to enforce the minimum purchase requirement in the 2000 agreement . . . (Internal quotation marks omitted) Id., at 293-94, 78 A.3d 195. These conclusions were based, in part, on the court's findings that: (1) the testimony of the defendant was more credible than that of the plaintiff's; and (2) there was 'close to overwhelming' evidence that the plaintiffs merely used the defendant's contractual shortfalls as a pretext to terminate the agreement once they were ready to assume direct distribution of the Nice product line.
" The trial 'court found these conclusions dispositive of all of the plaintiffs' claims against the defendant.' RBC Nice Bearings, Inc. v. SKF USA, Inc., supra, 146 Conn.App. at 294, 78 A.3d 195. As to the defendant's counterclaim that the plaintiffs had violated the exclusive sales clause of the 2000 agreement, although the court found that the plaintiffs had breached the agreement, it denied the defendant any relief on the grounds that: (1) the defendant had failed to prove its counterclaim damages with sufficient certainty; and (2) 'the amount in dispute did not become a significant issue between the defendant and the [plaintiffs] until litigation was being contemplated.' (Internal quotation marks omitted.) Id., at 312, 78 A.3d 195.
" On appeal, the Appellate Court reversed the judgment of the trial court as to both the plaintiffs' breach of contract claims and the defendant's counterclaim. Id., at 316, 78 A.3d 195. With respect to the plaintiffs' claims, the Appellate Court concluded that, as a matter of law, any modification of the agreement by the parties' course of performance was barred by a provision of the 2000 agreement requiring that any modification of its terms be in writing. Id., at 296, 300-01, 78 A.3d 195. The Appellate Court further concluded that 'there were no signed writings from which the [trial] court could properly conclude that the plaintiffs had agreed to modify the terms of the 2000 agreement.' Id., at 302, 78 A.3d 195. In addition, the Appellate Court concluded that the trial court's finding that the plaintiffs waived the minimum purchase requirement in the sixth contract year was clearly erroneous. Id., at 311, 78 A.3d 195. Accordingly, it remanded the case for a new trial. Id., at 316, 78 A.3d 195. With respect to the defendant's counterclaim, the court concluded that the defendant's damages could be calculated without speculation, and that the defendant's motive for pursuing the claim was irrelevant. Id., at 314-15, 78 A.3d 195. Accordingly, the Appellate Court remanded the case with direction to render judgment in favor of the defendant on its counterclaim and for further proceedings to determine the amount of damages to which the defendant was entitled. Id., at 316, 78 A.3d 195." (Footnotes omitted; internal quotation marks omitted.) RBC Nice Bearings, Inc. v. SKF USA, Inc., supra, 318 Conn. at 741-47, 123 A.3d 417.
Based on the above, the Supreme Court stated that the " sole issue we consider in this certified appeal is whether the Appellate Court properly concluded that the trial court's finding of a continuing waiver of the minimum purchase requirement as to the sixth contract year and the executory portions of the agreement was clearly erroneous." Id., at 747. The Supreme Court proceeded to provide an overview on the relevant legal principle, waiver in the context of contract law and the Uniform Commercial Code (UCC). It defined waiver as " the excuse of the nonoccurrence of or a delay in the occurrence of a condition of a duty." Id., at 748. Applying that principle to the facts of this case, the Supreme Court found that " the plaintiffs had waived the minimum annual purchase requirement for three consecutive years prior to the sixth contract year." Id., at 754. It further held that the " parties' undisputed course of performance and course of dealing . . . adequately support the trial court's finding of continuing waiver." Id., at 757, and ultimately concluded that " the trial court's finding that the plaintiffs' previous waiver of the minimum purchase requirement extended into the sixth year and the executory portion of the 2000 agreement was not clearly erroneous." Id., at 768. Based on the above, the Supreme Court reversed and remanded the Appellate Court " with direction to render judgment affirming the judgment of the trial court in favor of the defendant on the plaintiffs' breach of contract claims and to remand the case to the trial court for further proceedings on the defendant's counterclaim." Id.
II. DISCUSSION
The applicable legal standard for a trial court to follow when determining the scope of a remand has been defined as follows. " Determining the scope of a remand is a matter of law because it requires the trial court to undertake a legal interpretation of the higher court's mandate in light of that court's analysis . . . Because a mandate defines the trial court's authority to proceed with the case on remand, determining the scope of a remand is akin to determining subject matter jurisdiction . . . In carrying out a mandate of [an appellate court], the trial court is limited to the specific direction of the mandate as interpreted in light of the opinion . . . This is the guiding principle that the trial court must observe . . . It is the duty of the trial court on remand to comply strictly with the mandate of the appellate court according to its true intent and meaning . . . The trial court should examine the mandate and the opinion of the reviewing court and proceed in conformity with the views expressed therein . . . Compliance [with a mandate] means that the direction is not deviated from. The trial court cannot adjudicate rights and duties not within the scope of the remand . . . No judgment other than that directed or permitted by the reviewing court may be rendered . . . The trial court should examine the mandate and the opinion of the reviewing court and proceed in conformity with the views expressed therein." (Citations omitted; internal quotation marks omitted.) Hurley v. Heart Physicians, P.C., 298 Conn. 371, 383-84, 3 A.3d 892 (2010).
Trial courts have been cautioned, however, to " rejected efforts to construe [appellate] remand orders so narrowly as to prohibit a trial court from considering matters relevant to the issues upon which further proceedings are ordered that may not have been envisioned at the time of the remand . . . So long as these matters are not extraneous to the issues and purposes of the remand, they may be brought into the remand hearing." (Citation omitted; internal quotation marks omitted.) Id., at 384-85.
The issue in dispute here is the scope of the latter part of the Supreme Court's remand order, 'further proceedings on the defendant's counterclaim.' As stated above, the two sides advocate very different interpretations of this direction. The defendant argues that the scope of remand from the Supreme Court should encompass a retrial of six of the seven counterclaims. The plaintiff counters that the only issue left for this court to decide is the amount of damages the defendant is entitled to based on the products listed in Schedule 1 of the 2000 agreement due to the plaintiffs' violation of the exclusivity provision of the contract.
To decide this issue, this court looks to the Appellate Court decision rather than the Supreme Court decision because the Supreme Court specifically stated that the issue of damages on the defendant's counterclaim is not an issue before it. In defining the issues that were pending before it, the Supreme Court stated in footnote two of its decision that " [t]he Appellate Court also held that the trial court improperly determined that the defendant was not entitled to damages on its counterclaim . . . That issue is not before us in this certified appeal." RBC Nice Bearings, Inc. v. SKF USA, Inc., supra, 318 Conn. 741 n.2, 768, 123 A.3d 417. As such, it is the Appellate Court's ruling on the defendant's counterclaim that governs the remand pending before this court.
In summarizing the defendant's cross appeal, the Appellate Court explained that the defendant was claiming " lost profits of $77, 915 on direct sales of Nice products made by the plaintiffs in violation of the exclusivity clause in the 2000 agreement." RBC Nice Bearings, Inc. v. SKF USA, Inc., supra, 146 Conn.App. 311. More specifically, it held that " [t]his claim stems not from the [trial] court's erroneous conclusion that the plaintiffs breached the 2000 agreement by early termination, but rather from evidence of the plaintiffs' actions during the life of the contract in making certain direct sales of Nice products to customers in violation of the defendant's exclusive right to sell." Id. The court held that " [o]ur case law unequivocally supports awarding lost profits as an element of compensatory damages for general breach of contract claims . . . Traditionally, consequential damages include any loss that may fairly and reasonably be considered [as] arising naturally, i.e., according to the usual course of things, from such breach of contract itself . . . Although there is no unyielding formula by which damages are calculated, it is our rule that [u]nless they are too speculative and remote, prospective profits are allowable as an element of damage whenever their loss arises directly from and as a natural consequence of the breach." (Citations omitted; internal quotation marks omitted.) Id., at 312-13.
Based on the evidence submitted, the Appellate Court found that " there was evidence that provided the court a sufficient basis to estimate the amount of damages with reasonable certainty. Although the defendant may not be able to prove absolutely that every aftermarket customer who purchased product from the plaintiffs would have purchased the same product from the defendant, in order to assess damages, the defendant could satisfy its burden of proving damages by demonstrating that these lost profits were a 'natural consequence of [the plaintiffs'] breach' of the exclusivity clause. " Under these circumstances, it would be neither speculative nor too remote for the court to conclude that the defendant, the exclusive distributor of certain Nice product, would have been in the position to sell the product to the customers who purchased directly from the plaintiffs. The defendant presented evidence of approximately seventy-five different companies that purchased Nice product directly from the plaintiffs during the years 2000 to 2006. That list included companies that were already the defendant's customers and others that, although not the defendant's customers in the years in question, could have readily become customers in the defendant's normal course of business conduct had the plaintiffs not sold directly to them. Finally, the defendant also presented documentation of all the sales of Nice product made by the plaintiffs, during the life of the parties' agreement, to those seventy-five companies. On the basis of this evidence, we cannot agree that the defendant's claim is 'based on so many variables and contingencies' that the court could not assess damages." (Citations omitted.) Id., at 314-15.
An issue arose " between the parties as to the definition of 'Nice products' as contained in the exclusivity clause of the 2000 agreement. The plaintiffs contend that 'Nice products' referred only to the specific bearings listed on Schedule 1 of the 2000 agreement, whereas the defendant contends that the exclusivity clause extended to all Nicebranded bearings, regardless of their inclusion on Schedule 1. This determination is relevant to the amount of lost profits the defendant may recover based on whether it can only recover lost profits for direct sales made by the plaintiffs of Nice products listed on Schedule 1 or of any direct sales made by the plaintiffs of Nice products, regardless of their inclusion on Schedule 1." Id., at 315-16.
The Appellate Court agreed with the plaintiffs and held " that the defendant cannot recover lost profits on items for which it was not contractually the exclusive distributor and that the language of the 2000 agreement specifically defines 'Nice Products' as including: 'A listing of all of such Nice Products . . . is set forth on Schedule 1. Nice Products do not include any other products made by or for [the plaintiffs], its parent or affiliates unless the Parties, by mutual agreement, add such products to Schedule 1.' On remand, therefore, the court must determine the amount of damages to which the defendant is entitled based on the products listed in Schedule 1 of the 2000 agreement." Id., at 316.
Based on all of the above, this court is hard pressed to interpret the remand from the Appellate Court to include six out of seven of the counterclaims as the defendant advocates. No where in the court record does it indicate that the trial court (Miller, J.) declined to decide, or reserved for decision at a later time, any of the defendant's counterclaims. Thus, all of the counterclaims were presented to and decided by the original trial court. Both sides then took appeals of various portions of the trial court decision. Any claim or ruling left undisturbed by the Supreme/Appellate Courts is thus still in effect in this case and constitutes a final judgment on that issue. See Tomasso Bros. v. October Twenty-Four, Inc., 230 Conn. 641, 644 n.3, 646 A.2d 133 (1994).
The defendant's reliance on State v. Brundage, 320 Conn. 740, 135 A.3d 697 (2016) and Rizzo Pool Co. v. Del Grosso, 240 Conn. 58, 689 A.2d 1097 (1997) does not help it overcome the limitations set by the Appellate Court on its remand. In State v. Brundage, the defendant was convicted of sexual assault in the first degree and risk of injury to a child. The Appellate Court determined that certain charges were time barred and reversed and remanded the case for new trial. On remand, the state filed a substitute information charging the defendant with kidnapping in the first degree. The trial court dismissed the substitute information and the state appealed that dismissal. The Appellate Court reversed the trial court's dismissal and the defendant appealed. See State v. Brundage, supra, 320 Conn. 742-44.
The Supreme Court ultimately held that the Appellate Court's initial remand order did not preclude the state from filing a substitute information bringing new charges against the defendant on remand. It reasoned that nothing in the Appellate Court's decision considered whether the state should be allowed to fire a substitute information or was prohibited from doing so, but held only that the state could not proceed on any charges against the defendant that were time barred. See State v. Brundage, supra, 320 Conn. 751.
Brundage is legally and factually distinguishable from the present case. In Brundage, the central issue was whether the state could, on remand, bring a new and different charge against the defendant. The Supreme Court determined that this question was not before the Appellate Court during the initial appeal and thus the initial remand would not have barred the state from filing subsequent charges against the defendant. Here, there is no factual basis for the defendant to claim that any of its counterclaims were not before the court during the initial trial such that, on remand, it is entitled to a trial on its counterclaims because they had not previously be adjudicated.
The defendant's reliance on Rizzo Pool Co. v. Del Grosso, 240 Conn. 58, 689 A.2d 1097 (1997) is also not particularly helpful to their position. In Rizzo Pool Co., the defendants prevailed in their appeal from the judgment of the trial court in favor of the plaintiff and the case was remanded with direction to render judgment in favor of the defendants. See Rizzo Pool Co. v. Del Grosso, 232 Conn. 666, 657 A.2d 1087 (1995). On remand, the defendants sought attorneys fees pursuant to General Statutes § 42-150bb, which the trial court awarded. Rizzo Pool Co. v. Del Grosso, supra, 240 Conn. at 61-62. The plaintiff appealed, claiming that the remand order prohibited the trial court from awarding attorneys fees to the defendants. Id., at 65.
Like Brundage, the central issue in Rizzo Pool Co . was whether a particular issue-attorneys fees--had been presented to and/or decided by an appellate court. The Supreme Court found that it had not, reasoning that " [t]he relevant circumstances in this case necessarily include the fact that the attorneys fees statute, § 42-150bb, became applicable to the defendants only after the trial court had rendered judgment in their favor, post-appeal. Consequently, the trial court was required to look carefully at the words of the appellate mandate in conjunction with the language of the statute in question. Under § 42-150bb, the court has no latitude to deny such an award to a consumer who successfully defends an action brought against him by a commercial party. Therefore, despite the absence of a specific mandate in the remand order, attorneys fees were available to the defendants by operation of law." (Emphasis added; footnote omitted.) Rizzo Pool Co. v. Del Grosso, supra, 240 Conn. at 66.
Though it is true that, typically, " [t]he rule is that a determination once made will be treated as correct throughout all subsequent stages of the proceeding except when the question comes before a higher court . . ." (Citation omitted; internal quotation marks omitted.) American Diamond Exchange, Inc. v. Alpert, 302 Conn. 494, 509, 28 A.3d 976 (2011). This rule, however, " applies only when the issue that a party seeks to raise in a subsequent appeal was one that the party actually litigated prior to the initial appeal such that the issue could have been raised in the initial appeal." Id., at 508. In Rizzo Pool Co., the issue of attorneys fees did not become relevant to the proceedings until after the parties had exhausted their appellate rights.
Rizzo Pool Co., like Brundage, is distinguishable from the present case. In the present matter, the defendant is not advocating that it is entitled to some form of post-appeal relief such as attorneys fees. Rather, the defendant takes the position that the remand order entitles it to a retrial of six of its counterclaims. This interpretation of the remand from the Appellate Court clearly exceeds the scope of the remand order. " [I]t is a well-recognized principle of law that the opinion of an appellate court, so far as it is applicable, establishes the law of the case upon a retrial, and is equally obligatory upon the parties to the action and upon the trial court." (Citation omitted; internal quotation marks omitted.) Detar v. Coast Venture XXVX, Inc., 91 Conn.App. 263, 266, 880 A.2d 180 (2005). Thus, this court must " examine the mandate and the opinion of the reviewing court and proceed in conformity with the views expressed therein . . . The trial court cannot adjudicate rights and duties not within the scope of the remand . . . No judgment other than that directed or permitted by the reviewing court may be rendered." Hurley v. Heart Physicians, P.C., supra, 298 Conn. 383-84, 3 A.3d 892.
In summarizing the defendant's cross appeal, the Appellate Court limited its discussion to the defendant's claim for damages in the form of lost profits of $77, 915.00 on direct sales made by the plaintiffs in violation of the exclusivity clause of the 2000 agreement. This figure, $77, 915.00 was put forth by the defendant itself as damages it was entitled to under Counterclaims One, Two, and/or Three. The defendant argued that it was entitled to $77, 915.00 in lost profits due to plaintiffs' violation of the exclusivity clause of the agreement, which constituted a breach of contract (Counterclaim one), tortious interference with contractual relations (Counterclaim Two), and tortious interference with prospective business relations (Counterclaim Three). See SKF USA Inc.'s Post-Trial Brief at p. 106-07; 114-18 (docket entry #209). None of the other counterclaims sought damages in the form of lost profits.
The Appellate Court's directive on remand was very clear. It reversed the judgment in favor of the plaintiffs on the defendant's counterclaim for lost profits and remanded the matter to this court " with direction to render judgment in favor of the defendant on that counterclaim and for further proceedings to determine an award of damages." RBC Nice Bearings, Inc. v. SKF USA, Inc., supra, 146 Conn.App. 316. Specifically, the Appellate Court remanded the matter to this court for a determination as to lost profit damages to which the defendant is entitled based on the products listed in Schedule 1 of the 2000 agreement. Given this directive from the Appellate Court, this count finds that the only issue pending before it is a determination as to lost profits related to Counterclaims One, Two and Three limited to the products listed in Schedule 1 of the 2000 agreement.
III. CONCLUSION
For all of the above stated reasons, this count finds that the only issue pending before it is a determination as to lost profits damages related to Counterclaims One, Two and Three limited to the products listed in Schedule 1 of the 2000 agreement.