Opinion
CIVIL ACTION NO. 02-6649
February 25, 2004
MEMORANDUM
Presently before this Court is Defendant Micro Stamping Corporation's Motion for Summary Judgment. (Dkt. No. 31). For the reasons discussed below, Defendant's Motion is GRANTED IN PART AND DENIED IN PART.
I. Factual Background
Plaintiff Unique Technologies, Inc. ("Unique") is a contract medical-device manufacture specializing in surgical blades and cutting instruments. Defendant Micro Stamping Corporation ("Micro Stamping") designs and manufactures precision stamp-metal components for a range of industries. Bausch & Lomb, Inc. ("B L") manufactures, among other things, surgical equipment used during eye surgery known as an ACS microkeratome corneal resection instrument ("Hansatome"), which is used by ophthalmic surgeons to perform Laser In-Situ Keratomileusis ("LASIK") surgery to correct vision deficiencies. A vital component of this instrument is the ophthalmic surgical blades ("ALK Blade"), which is used to cut the cornea of a patient to allow a laser to correct the vision deficiencies in the eye tissue underlying the cornea.
A. The Purchase Orders
In 1998, B L, Micro Stamping and Unique held a series of discussions regarding the manufacture of ALK Blades to be sold to B L for use in its Hansatomes. Affidavit of James A. Transue ("Transue Aff") ¶ 7. The essential concept was that Micro Stamping would manufacture blade blanks, and Unique would then grind and sharpen the blade angles. Certification of C.C. Edwards ("Edwards Cert.") ¶¶ 3-4. James A. Transue ("Transue"), Micro Stamping's Director of Product Development, would establish the ALK Blades' specifications. Transue Aff. ¶ 11.
The initial contact took place in June 1998 between B L and Micro Stamping at the MDM Trade Show in New York City. Unique, who had had a business relationship with Micro Stamping since 1995, became involved with Micro Stamping and B L relative to the ALK Blade project in the fourth quarter of 1998. Transue Aff. ¶ 7.
As a result of these conversations, on September 18, 1998, Micro Stamping submitted a preliminary quotation to B L to produce a minimum of 400,000 ALK Blades at $8.73 per blade. Id. After additional conversations between Micro Stamping and B L, on November 24, 1998, Micro Stamping submitted to B L a final quotation 1,400,000 blades per year at $6.50 per blade. Id.; Affidavit of Ransom C. Palmer, III ("Palmer Aff") ¶ 13.
These discussions culminated in B L ordering from Micro Stamping on December 4, 1998, 400,000 blades at $6.50 per blade (the "December 4 Purchase Order"). Edwards cert. ¶ 5. The December 4 Purchase Order provided that B L had the right to reject any material not meeting its "acceptance criteria." Edwards Cert., Ex. A. In an attachment to the Purchase Order, B L acknowledged that the blades to be provided to B L would be dimensionally and visually different than the razor-stock blades then being manufactured by B L, and that these differences would be incorporated into B L's manufacturing specifications after clinical acceptance was demonstrated. Palmer Aff. ¶ 15.
In turn, on December 18, 1998, Micro Stamping issued purchase order number MD002779 (the "December 18 Purchase Order") to Unique for grinding and sharpening services on 400,000 blades at $3.00 per blade. Edwards Cert., Ex. C. Specifically, the purchase order contemplated Micro Stamping's supplying Unique with blade blanks, which Unique would sharpen and polish into ALK Blades, pursuant to B L's specifications, to be delivered to B L. See id. The contract also contemplated payment being contingent upon B L's approval of the material: "PAYMENT IS CONTINGENT UPON PARTS APPROVAL BY CUSTOMER." Id.
On February 7, 2000, Micro Stamping issued a revised purchase order to Unique, closing out the balance of the December 18 Purchase Order and instead using separate orders for smaller additional shipments. Edwards Cert., Ex. F.
Following the December 1998 purchase orders, Unique and Micro Stamping collaborated on the production of an initial lot of 3,000 ALK Blades for qualification by B L. Transue served as an onsite monitor, advisor and engineer at Unique for five weeks to observe first-hand the developments of the Unique manufacturing processes and the production of the qualification lot. Transue Aff. ¶ 16; Palmer Aff. ¶ 18. During this five week period, Transue directed Unique to produce ALK Blades with a cutting bevel angle of approximately 25 degrees. Affidavit of Luther A. Hoffman ("Hoffman Aff") ¶ 4.
On April 30, 1999, Micro Stamping hand delivered to B L the 3,000 blade qualification lot and a Fact Book prepared by Transue. Transue Aff. ¶ 18. The Fact Book contained the necessary inspection data for the qualification lot plus flow charts and other information B L deemed critical. Id. The drawings in the Fact Book suggested that the blades had a cutting bevel angle of 14 degrees. According to Transue, this drawing was "inconsistent with the product that was submitted to, and approved by, B L, in May 1999, and the product that was subsequently manufactured using that process." Id. at ¶ 24.
As alluded to above, after examining the 3,000 blade qualification lot, B L indicated that they were acceptable and directed the parties to commence full-scale production. Specifically, Doug Stowe of B L notified Transue that the blades were comparable, if not superior, to the modified razor blades then marketed by B L, and Chuck Weida, B L's Director of Quality Assurance, authorized shipment of production lots.
B. B L Rejects the ALK Blades and Cancels the Project
Between June and August 1999, Micro Stamping received from Unique roughly 25,000 ALK blades. Transue Aff. ¶ 22. The blades had been fabricated in accordance with then available B L specifications. Id. B L's specifications provided for visual inspection at 8X magnification for "edge quality," which included straightness of the edge. Id.
Upon receipt of the 25,000 ALK Blades, Ransom C. Palmer ("Palmer"), Micro Stamping's Vice President of Operations, Medical Division, Debbie Urbanowicz ("Urbanowicz"), Micro Stamping's Quality Assurance Technician, and Transue, discussed an "edge condition" which appeared to fall outside of the visual specifications Micro Stamping provided to Unique. Specifically, the cutting edges of the blade were serrated rather than straight. Transue prepared magnified photographs of the serrations. After reviewing the photographs, Transue determined that the serrations did not appear to meet the specifications' intent, though fell within dimensional tolerances. Nevertheless, Palmer, Urbanowicz and Transue decided to reject the ALK Blades and notify Unique to stop production. Chuck Edwards, Micro Stamping's Executive Vice President, however, overrode that decision and 11,414 ALK Blades were shipped to B L. Id. at ¶ 23; Palmer Aff. ¶ 23.
On September 1, 1999, B L rejected the 11,414 ALK blades because of a "serrated edge condition." At a subsequent meeting among representatives from Micro Stamping, Unique and B L, it was determined that Micro Stamping concluded the "serrated edge condition" was within dimensional tolerances because Micro Stamping, in accordance with B L's specifications for visual inspection, viewed the edge at 8X magnification. The condition, however, could only be seen at 20X magnification or greater. Accordingly, B L agreed to issue revised specifications requiring visual inspection at 20X magnification. It was also agreed that Micro Stamping and Unique would increase their visual inspection to 25X magnification to ensure compliance with B L's revised specifications. Id. at ¶¶ 25-27; Palmer Aff. ¶¶ 25-27.
In mid-September 1999, Unique completed corrective actions associated with the "serrated edge condition" and Micro Stamping submitted a new sample lot of ALK Blades for inspection by B L. B L approved the new edge condition. Id. at ¶ 29; Palmer Aff. ¶ 29.
As of October 11, 1999, however, B L had not issued revised specifications as promised and it remained unclear whether B L was satisfied with Unique's blade edge quality. Accordingly, Micro Stamping notified Unique that "the 'blade edge quality' has not yet been defined in formal terms . . . [and, therefore] we are each running our processes at our own risk." Edwards cert. ¶ 14, Ex. E. Notwithstanding the risk, Micro Stamping an Unique continued manufacturing and delivering production lots of ALK Blades to B L.
In October 1999, Micro Stamping sent a lot of ALK Blades to B L. This lot was inspected and formally accepted by B L in early December 1999. Transue Aff. ¶ 30.
Between mid-December 1999 and the March 2000, Micro Stamping received from Unique and shipped to B L over 100,000 ALK Blades. Transue Aff. ¶ 32; Palmer Aff. ¶ 32. In mid-March 2000, B L notified Micro Stamping that those blades appeared different than the blades then being manufactured by B L. Id. at ¶ 35; Palmer Aff. ¶ 36. Transue explained that the ALK Blades, although different — the ALK Blades were electropolished, whereas B L's product was cut up razor blade stock — were superior. Id.; Palmer Aff. ¶ 36. In response, B L invited Micro Stamping to explain the advantages of the ALK Blade at its directors' meeting in late-March 2000. Id.
C.C. Edwards ("Edwards"), Executive Vice President of Micro Stamping, Luther Hoffman ("Hoffman"), President of Unique, and Transue attended the B L Directors meeting. B L attendees ranged from engineers to executives. Id. at ¶ 36; Palmer Aff. ¶ 37. As planned, Micro Stamping presented the advantages of the ALK Blade, using photographs to show the superiority of the blades' cutting edge. Id.; Palmer Aff. ¶ 37. It was at this meeting that B L personnel first realized that the ALK Blades had a cutting bevel angle that did not conform with B L's specifications. As a result, B L requested information regarding the angle and wanted functionality testing done before it would issue revised specifications. Id.; Palmer Aff. ¶ 37.
In the spring of 2000, B L notified Micro Stamping that it had rejected all of the ALK Blades produced to date because they failed to pass clinical tests. Accordingly, B L notified Micro Stamping that it would no longer purchase any ALK Blades and, on April 9, 2000, B L cancelled the existing purchase order it had issued to Micro Stamping in December 1999. Edwards cert. ¶¶ 16-17, Ex. G.
On April 24, 2000, based on notification from B L rejecting all ALK Blades and cancelling all future orders for ALK Blades, Micro Stamping cancelled all purchase orders to Unique with respect to the sharpening and polishing of ALK Blades. Edwards cert. ¶ 18, Ex. H.
C. The Strategic Alliance Agreement
In August 1999, Micro Stamping and Unique signed a Strategic Alliance Agreement (the "Agreement"). Edwards Cert., Ex. D. The Agreement defined the ALK blades to be supplied to B L as the "Initial Product" governed by the Agreement. Id. at Recitals, ¶ 3. More significantly, the Agreement required (1) Unique to "[c]ooperat[e] in developing and producing" the ALK Blades and "heat treat, sharpen, and chemically hone such blade blanks using proprietary grinding an electro-polishing techniques in accordance with the [B L's] specifications" (2) Micro Stamping to "market the jointly developed [ALK Blades] to [B L]" and (3) the parties to "work together in good faith to jointly develop an [ALK Blade] that meets the [B L] product specifications." Id. at Recitals, ¶ 3; Article II, § 2.1.In the Agreement, Micro Stamping and Unique agreed not to sue each other for consequential damages for breach of the Agreement:
EXCEPT FOR A BREACH OF SECTION(S) 2.5 AND 8.2 OF THIS AGREEMENT, NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY WILL BE LIABLE TO THE OTHER WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT (UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY) FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES.Id. at Article IX, § 9.1 (emphasis in original).
Because Unique has not alleged that Micro Stamping failed to meet specifications, the exceptions to Section 9.1 are irrelevant here.
The parties further agreed that their exclusive contractual remedy for damages would be indemnification for breach of the Agreement's terms:
Except as otherwise provided in Section 2.5 and Article VI hereof, the provisions of Sections 9.2.1 and 9.2.2 shall constitute the sole and exclusive remedy of Unique and Micro Stamping, respectively, for damages arising out of, resulting from, or incurred in connection with any inaccuracy in any representation or warranty or breach of any covenant or act or omission made by Micro Stamping or Unique, respectively, in connection with this Agreement.Id. at Article IX, § 9.2.3.
Section 2.5 required each party to perform its work "in a good and workmanlike manner consistent with industry standards . . . in accordance with [B L's] specifications." Id. at Article II, § 2.5. Article VI deals with the term and termination of the Agreement. Id. at Article VI. Finally, Sections 9.21 and 9.2.2 required the parties to indemnify each other in the event of "(i) any inaccuracy in any representation or warranty made by [either party], (ii) the breach by [either party] of any covenant or agreement to be performed by it hereunder or (iii) any act or omission by [either party] which constitutes negligence or willful misconduct." Id. Article IV, §§ 9.2.1.9.2.2.
D. The Debit Memoranda
In the spring and summer of 2000, Micro Stamping issued various debt memoranda to Unique for Unique-produced ALK Blades rejected by B L for which Micro Stamping had paid Unique. On July 18, 2000, Micro Stamping sent Unique a letter agreement formalizing Unique's acceptance of these debit memoranda. On July 24, 2000, Unique acknowledged three of these debit memoranda, numbered 7401, 7402 and 7430, as "an obligation of [Unique] that exist[s] without regard to the outcome of current B L business." These debit memoranda total $193,631.81. Edwards Cert. ¶¶ 20-22, Exs. J, K.
II. Procedural History
On July 10, 2002, Unique filed the instant Complaint against Micro Stamping in the Court of Common Pleas of Berks County, Pennsylvania. Micro Stamping removed the Complaint to this Court on August 7, 2002, and shortly thereafter, filed an Answer and Counterclaim. Micro Stamping now moves for summary judgment as to all of Unique's claims.III. Standard of Review
Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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): see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505 (1986). In reviewing the record, "a court must view the facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor."Armbruster v. Unisys Corp., 32 F.3d 768, 777 (3d Cir. 1994). The moving party bears the burden of showing that the record discloses no genuine issues as to any material fact and that he or she is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); see also Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608 (1970). Once the moving party has met its burden, the non-moving party must go beyond the pleadings to set forth specific facts showing that there is a genuine issue for trial. See Fed.R.Civ.P. 56(e); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86, 106 S.Ct. 1348 (1986). There is a genuine issue for trial "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 249. "Such affirmative evidence — regardless of whether it is direct or circumstantial — must amount to more than a scintilla, but may amount to less (in the evaluation of the court) than a preponderance." Williams v. Borough of W. Chester, 891 F.2d 458, 460-61 (3d Cir. 1989).IV. Analysis A. Count One
In Count One, Unique alleges that Micro Stamping owes "Fifty Thousand Six Hundred Forty-Six and 00/100 Dollars ($50,646.00) for ALK Blades processed by Plaintiff in accordance with the [December 18] Purchase Order [and] shipped to Defendant." Compl. ¶ 27. Micro Stamping argues that Count One fails because (1) the customer, B L, did not approve those blades and (2) the December 18 Purchase Order explicitly states that "PAYMENT IS CONTINGENT UPON PARTS APPROVAL BY CUSTOMER." Defendant's Brief in Support of Its Motion for Summary Judgment ("Def.'s Br.") 10-11. Unique responds that the contingency appears only in the December 18 Purchase Order, which governed the 3,000 blade qualification lot, but not subsequent production lots. Pl.'s Br. 17-18. Unique's argument is unavailing.
In its Complaint, Unique defined the December 18 Purchase Order as the "Micro-Stamping Purchase Order." See Compl. ¶ 18. For ease of reference, throughout this opinion the Court will refer to the "Micro-Stamping Purchase Order" as the December 18 Purchase Order.
The December 18 Purchase Order (Number MD002779, revised on January 6, 2000), which is the very purchase order attached to Unique's Complaint, contains the language "PAYMENT IS CONTINGENT UPON PARTS APPROVAL BY CUSTOMER" and covers the blanket quantity of 400,000 blades. Indeed, in paragraph 30 of its Complaint, Unique concedes that the December 18 Purchase Order covers the blanket quantity of 400,000 blades: "Defendant has made available to Plaintiff only a sufficient number of ALK Blanks to be manufactured and processed into one hundred forty thousand forty-five (140,045) ALK Blades and has failed and refused, and continues to fail and refuse, to make available to Plaintiff additional ALK Blanks as required by contract with Plaintiff in order to enable Plaintiff to make the remaining two hundred fifty-nine thousand nine hundred fifty-five (259,955) ALK Blades necessary to satisfy the requirements of the [December 18 Purchase Order]." Compl. ¶ 30. Accordingly, payment for the production lots was also subject to B L's approval of the ALK Blades. Because it is undisputed that B L rejected the blades at issue here, Micro Stamping is under no obligation to pay Unique under the terms of the December 18 Purchase Order. Count One is therefore dismissed.
B. Count Two
In Count Two, Unique alleges breach of contract and seeks lost profits of $2,519,910 "on account of the [1.4 million] ALK Blanks which Defendant has not made available to Plaintiff and $521,000 "on account of investments which Plaintiff made on account of the representations and promises by Defendant necessary to fulfill its commitments under the [December 18 Purchase Order]." Compl. ¶ 34. Micro Stamping argues that under the Agreement, Unique waived its right to seek consequential damages, which include lost profits. Def.'s Br. 11-14. Unique responds that Count Two alleges breach of the December 18 Purchase Order, not the Agreement, which Unique asserts is not a contract because it lacks price and volume terms. Thus, the Court must first determine whether the Agreement is a valid and enforceable contract.
In Count Two, Unique also seeks damages ($50,646) arising out of Micro Stamping's alleged failure to pay for ALK Blades processed by Unique pursuant to the December 18 Purchase Order. This claim mirrors Count One and, therefore, must be dismissed.
Micro Stamping argues that the U.C.C. governs the Agreement, but the Code appears inapplicable, in that the Agreement is more appropriately characterized as a joint venture, rather than a contract for sale of goods. Def.'s Br. 11-14.
"In order to form a valid contract, there must be an offer, acceptance and consideration or mutual meeting of the minds." Yarnall v. Almy, 703 A.2d 535, 538-39 (Pa.Super. 1997) (citing Jenkins v. County of Schuylkill, 441 Pa. Super. 642, 648, 658 A.2d 380, 383, allocatur denied, 542 Pa. 647, 666 A.2d 1056 (1995)): see also Odatalla v. Odatalla, 355 N.J. Super. 305, 312, 810 A.2d 93, 98 (2002) (quotingJohnson and Johnsons v. Charmley Drug Co., 11 N.J. 526, 539, 95 A.2d 391 (1953), the court stated that "a contract is a voluntary obligation proceeding from a common intention arising from an offer and acceptance"). Looking at the objective intent of the parties, as expressed in the Agreement, the Court concludes that there was a meeting of the minds between Micro Stamping and Unique to enter into a binding contract. The Agreement is signed by representatives from both parties. It includes definite terms with respect to, inter alia, specifications for the ALK Blade, right of first quote, exclusivity, competition, term and termination, ownership of intellectual property and liability. Finally, the parties' agreeing not to compete with each other for a period of two years provides ample consideration for the Agreement. Accordingly, the Court concludes that the Agreement is a valid contract.
None of the cases cited by Unique suggest otherwise. The Agreement stands in stark contrast to the alleged oral agreements in USA Mach. Corp. v. CSC, Ltd., 184 F.3d 257, 265-66, (3d Cir. 1999) and Hoffman LaRoche, Inc. v. Weissbard, 19 N.J. Super. 210, 224, 88 A.2d 238, 88 A.2d 238, 245 (Ch.Div. 1952), and the handwritten notation in Garnet Mine, LLC v. Brandolini, 158 F. Supp.2d 580 (E.D. Pa. 2001).
This conclusion is bolstered by the fact that the Court cannot imagine any rational business reason for Unique to have paid corporate counsel to negotiate and draft an agreement that is a nullity.
The Court now turns to the question of whether the parties intended the Agreement to bar Unique's claim for lost profits arising out of Micro Stamping's alleged breach of the December 18 Purchase Order. The resolution of this issue depends on whether or not the words of the Agreement are ambiguous and susceptible to more than one interpretation on its face. The question of whether a contract provision is ambiguous is a question of law. See Nester v. O'Donnell, 301 N.J. Super. 198, 210, 693 A.2d 1214, 1220 (App.Div. 1997) ("Whether a [contract provision or] term is clear or ambiguous is a question of law."); Greater Nanticoke Area School Dist. v. Greater Nanticoke Area Educ. Ass'n. 760 A.2d 1214, 1217 ( Pa. Commw. 2000) ("Where a contract case is tried to a judge and jury, the trial judge determines as a threshold issue whether the contract language is ambiguous."). Where a contract is susceptible to two interpretations, the moving party is not entitled to summary judgment because interpretation of an ambiguous contract is a question of fact. See Schor v. FMS Fin. Corp., 357 N.J. Super. 185, 193, 814 A.2d 1108, 1113 (App.Div. 2002) ("The construction of a written contract is usually a legal question for the court, but where there is uncertainty, ambiguity or the need for parol evidence in aid of interpretation, then the doubtful provision should be left to the jury."); Greater Nanticoke, 760 A.2d at 1217 ("If the court finds the language to be clear and unambiguous, it does not submit the issue to the jury, but itself decides the question of the parties' intent based exclusively upon the terms of the agreement."). If, however, the contract is unambiguous, a court may interpret the contract as a matter of law and the moving party may be entitled to summary judgment. Id.; Greater Nanticoke, 760 A.2d at 1218 ("[I]f the court finds the language to be ambiguous, the jury may hear and consider extrinsic evidence to determine the parties' intent.").
It is undisputed that the December 18 Purchase Order satisfies the essentials of a valid contract under both New Jersey and Pennsylvania law.
The Agreement provides that it will be governed by New Jersey law. Edwards Cert., Ex. D at Article X, § 10.3. Unique, however, argues that Pennsylvania, not New Jersey law applies here. Pl's Br. 20. Because the Court's resolution is reached by applying principles of contract construction common to both states, it is unnecessary to engage in a choice of law analysis.
In interpreting a contract, the court is not confined to the four corners of the document. See id. at 191, 814 A.2d at 1112; Pacitti v. Macy's, 193 F.3d 766, 774 (3d Cir. 1999) (applying Pennsylvania law, the court noted that a court is not limited to the four corners of the written document when interpreting a contract). Rather, the court should examine the document as a whole. See id.; Pacitti, 193 F.3d at 774 (citing Hullet v. Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 111 (3d Cir. 1994)). As part of this interpretive process, "the court may consider, among other things, 'the words of the contract, the alternative meaning suggested by counsel, and the nature of the objective evidence to be offered in support of that meaning.'" Mellon Bank. N.A. v. Aetna Bus. Credit. Inc., 619 F.2d 1001, 1011 (3d Cir. 1980); see also Great Atlantic & Pacific Tea Co. v. Checcio, 335 N.J. Super. 495, 501, 762 A.2d 1057, 1061 (App.Div. 2000) (holding the plaintiff should have been allowed to present "evidence of the facts and circumstances surrounding the execution" of a contract). Finally, the court should not interpret the contract as to render any of its terms meaningless. See Borough of Princeton v. Bd. of Chosen Freeholders of County of Mercer., 333 N.J. Super. 310, 325, 755 A.2d 637, 645 (App.Div. 2000); Girard Trust Bank v. Life Ins. Co. of No. Am., 243 Pa. Super. 152, 364 A.2d 495, 498 (Pa.Super. 1976).
Looking at the Agreement, the Court concludes that there is a genuine issue of material fact as to whether the parties intended the provisions of the Agreement limiting consequential damages to apply to a breach of the December 18 Purchase Order. The Agreement is open to at least two interpretations. On the one hand, the provisions of the Agreement limiting consequential damages could reasonably be interpreted as applying to disputes, like this one, involving the marketing, development and manufacture of ALK Blades. See Edwards Cert., Ex. D, Article IX, § 9.1 ("NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY WILL BE LIABLE TO THE OTHER WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT . . . FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES.") (emphasis added). On the other hand, those provisions could reasonably be interpreted as applying only to a breach of the Agreement, and not other contracts between the parties, such as the December 18 Purchase Order. See id., at Article II, § 2.1 ("The parties may enter into one or more separate agreements with respect to the [ALK Blades] (which may set forth, among other things, their respective rights and responsibilities in relation thereto."). Accordingly, Micro Stamping's Motion is denied, to the extent that it asserts the Agreement bars Unique's claims for lost profits.
Alternatively, Micro Stamping argues that Count Two fails because payment under the December 18 Purchase Order was subject to B L's approval of the ALK Blades. The contingency, however, limits Unique's right to payment for sharpening services, but not its right to seek lost profits.
Alternatively, Micro Stamping argues that the doctrine of frustration of purpose absolves it of liability. The doctrine of frustration of purpose provides:
Where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.Restatement (Second) of Contracts, § 265 (1981) (emphasis added). To invoke this doctrine, "[t]he object must be so completely the basis of the contract that both parties understand, without it the transaction would make little sense." Id., comment a.
Although Micro Stamping is correct that the continued purchase of Unique's sharpening services for ALK Blanks would make little sense, given the fact that B L has cancelled the ALK Blade project and Micro Stamping cannot find an alternative market or customer for the blades because they were produced using B L's confidential and proprietary designs, there is a genuine issue of material fact as to whether Micro Stamping was at fault for B L's cancellation of the project. B L cancelled the project after the ALK Blades failed clinical tests. B L attributed the failure to either the cutting bevel angle or sharpness or a combination of those factors. Transue Aff. ¶ 37. Specifications for the ALK Blades and, more specifically, their cutting bevel angle, "were established by [Micro Stamping] through [Transue]." Id. at ¶ 11. Even though there is evidence to suggest that B L's reason for cancelling the project was pretextual — subsequent tests indicated that the "serrated edge condition" was an aesthetic problem of no clinical significance and cutting bevel angles between 14 and 38 degrees did not impact cutting performance — based on the record before this Court, a reasonable jury could conclude that Micro Stamping was at fault for the loss of the B L relationship. See id. at ¶ 37
The December 4 Purchase Order provided that the design for the ALK Blades remained the confidential property of B L, and that Micro Stamping was prohibited from selling them elsewhere. See Edwards Cert., Ex. A. In addition, Micro Stamping and B L entered into a Confidentiality and Exclusivity Agreement, which stated that Micro Stamping could not "manufacture, distribute or sell [ALK] blades for any other company for five years. . . ." Id., Ex. B.
Finally, Micro Stamping argues that Unique's lost profit claim for $2,519,910 based on an alleged oral contract between Unique and Micro Stamping for 1.4 million ALK Blades fails under the Uniform Commercial Code's statute of frauds. The Court agrees. The U.C.C. provides that when a transaction for the sale of goods is over $500, there must be some writing, signed by the party against whom enforcement is sought, sufficient to indicate that a contract for sale has been made. N.J.S.A. § 12A:2-201(1); 13 Pa. Cons. Stat. Ann. § 2201(a); see also E. Dental Corp. v. Isaac Masel Co., 502 F. Supp. 1354, 1363 (E.D. Pa. 1980) ("The statute of frauds' requirement of a writing is applicable to all contracts for the sale of goods for $500 or more, including requirements contracts.") (citations omitted). Unique concedes there is nothing in writing between the parties that speaks of a volume of 1.4 million ALK Blades per year; the largest purchase order was for 400,000 ALK Blades. Accordingly, Unique's lost profit claim for $2,519,910 is dismissed.
The parties agree that the U.C.C., as adopted by both New Jersey and Pennsylvania, governs the Court's analysis with respect to this issue.
It is undisputed that the alleged oral agreement between Unique and Micro Stamping was for the sale of goods over $500.
Contrary to Unique's assertion, Micro Stamping's quotation to B L of 1.4 million blades per year, which is not a contract itself, does not transform the alleged oral agreement between Unique and Micro Stamping into an enforceable contract under the U.C.C.
C. Count Three
In Count Three, Unique seeks to revoke its acceptance of three debit memoranda, numbered 7401, 7402 and 7430, contending that it conditioned acceptance on the parties' continuing to manufacture ALK Blades for B L. In a letter dated July 24, 2000, however, Unique acknowledged that these debit memoranda are "an obligation of [Unique] that exist[s] without regard to the outcome of current B L business." In light of this letter, Unique's subsequent conclusory allegation that Unique conditioned acceptance of the three debit memoranda on a further business relationship with B L is not sufficient to create a triable issue of fact. See Compl. ¶ 41. Accordingly, Count Three is dismissed.
Micro Stamping's counsel, Gavin J. Rooney, represented during oral argument that Unique has satisfied the debit memoranda at issue here.
D. Conclusion
In sum, all that remains of Unique's Complaint is that portion of Count Two seeking lost profits of $521,000 arising out of Micro Stamping's alleged breach of the December 18 Purchase Order. Micro Stamping's motion is therefore granted in part and denied in part. An appropriate order will be entered.
ORDER
AND NOW, this day of February, 2004, upon consideration of Defendant Micro Stamping Corporation's Motion for Summary Judgment (Dkt. No. 31), and Plaintiff Unique Technologies, Inc.'s response thereto, consistent with the accompanying memorandum, it is hereby ORDERED that said Motion is GRANTED IN PART AND DENIED IN PART. More specifically:
1. Count One, in which Plaintiff alleges that Defendant owes $50,646.00 for ALK Blades processed by Plaintiff pursuant to the December 18 Purchase Order, is DISMISSED
2. With the exception of Plaintiff's claim for lost profits of $521,000 based on Defendant's alleged breach of the December 18 Purchase Order, Count Two is DISMISSED.
3. Count Three, in which Plaintiff seeks to revoke its acceptance of three debit memoranda, is DISMISSED.