741 F. Supp. 2d 651 (D. N.J. 2010)
Rocheux International of New Jersey, Inc., a distributor of raw plastic materials, entered into a business relationship around 2000 with U.S. Merchants Financial Group, Inc., U.S. Merchants Inc. doing business as U.S. Merchants or The Merchant of Tennis, Inc., and Diversified Repackaging Corporation, California-based providers of plastic product-packaging services.1
The defendants ordered large quantities of raw PVC and APET plastic from Rocheux pursuant to purchase orders numbered 21920, 22190, 22897, P13295, P13300, P13302, 20188, 20491, 20564, 20583, and 22488.2
Between January and June 2006 Rocheux delivered plastic products related to the 2005-2006 purchase orders to the defendants and sent corresponding invoices.3
The defendants did not pay for most if not all of these deliveries and no longer possess the goods from the 2006 deliveries.4
According to Plaintiff, the outstanding balance for the 2006 deliveries is $2,116,571.76.5
Rocheux also delivered goods to a local warehouse between November 2005 and August 2006 so that the defendants could access them as needed on short notice.6
On September 24, 2006 Rocheux president Wendy Steed sent an email to defendants' president Jeffrie Green requesting delinquent payments for both the 2006 deliveries and the warehouse goods by September 29, 2006 and notifying the defendants that failure to pay would result in Rocheux selling the warehouse goods and seeking any deficiency.
Rocheux later sold the warehouse goods to third parties for $1,194,582.68 after incurring $18,562.36 in freight charges and $56,622.67 in additional warehouse charges, resulting in a deficiency of $387,699.70 compared to the original purchase price of $1,582,282.31.7
The defendants contend that substantial portions of the plastic delivered between 2000 and 2006 were unusable due to latent defects such as discoloration, flow marks, waviness, pitting, and scratches that manifested only after the rolls were unwound and thermoformed.8
Thermoforming manager Nick Margaros notified Rocheux representatives Allison Tuan Lee and Michael Flood of these issues on multiple occasions, receiving repeated assurances that the defendants would receive credits.9
Rocheux maintains that it received no complaints about quality until an email from Jeffrie Green on September 6, 2006, and the defendants had generally acknowledged owing the invoice amounts at in-person meetings in April, May, and July 2006.1011
The defendants never responded to Rocheux's September 7, 2006 request for inspection or return of defective goods.12
Rocheux claims its order confirmations and invoices automatically included terms providing for a 1.5% per month service charge on outstanding balances and responsibility for reasonable attorneys' fees of 25% of the outstanding balance.13
The defendants deny receiving the Terms and Conditions pages with the order confirmations and state that they never agreed to such additional terms.14
On December 21, 2006 Rocheux filed a six-count complaint asserting breach of contract, book account, unjust enrichment, and conversion claims for the 2006 deliveries and warehouse goods.15
The defendants answered on February 28, 2007 asserting affirmative defenses including prior breach of contract, failure to supply conforming merchantable goods, and breach of express and implied warranties.16
The parties later filed cross-motions for summary judgment, a motion by defendants to redesignate affirmative defenses as counterclaims, and Rocheux's motion in limine to exclude defense experts, with oral argument held on September 16, 2010.17
Whether Defendants may redesignate affirmative defenses IV, VIII, and IX as counterclaims seeking offsets for nonconforming goods delivered between 2000 and 2005?18
Federal Rule of Civil Procedure 8(c)(2) requires a court to treat a misdesignated defense or counterclaim as correctly designated if justice requires.19 When the proposed redesignation would add entirely new claims outside the scope of the original pleadings it is treated instead as a motion to amend under Federal Rule of Civil Procedure 15(a)(2).20 This rule permits amendment with leave of court when justice so requires yet allows denial upon a showing of undue delay, prejudice to the opposing party, or futility.21
No. The Complaint alleged breach only for goods delivered between January and June 2006.22 The Answer asserted generic affirmative defenses limited to those same deliveries and the warehouse goods.23 Defendants did not seek redesignation until more than three years after filing their Answer and more than sixteen months after the close of discovery.24 At that point they sought nearly two million dollars in offsets the vast majority of which concerned pre-2006 deliveries.25
Rocheux had already prepared and filed its summary-judgment motion without fair notice of the expanded temporal scope and therefore suffered prejudice from the inability to conduct discovery on those earlier claims.26 The proposed counterclaims are also futile because they are time-barred under the four-year statute of limitations in N.J. Stat. Ann. § 12A:2-725.27
That statute begins to run upon tender of delivery and contains no discovery-rule exception for the warranties at issue.28
Defendants may not redesignate their affirmative defenses as counterclaims to seek offsets for nonconforming goods delivered between 2000 and 2005.29
Whether Rocheux is entitled to summary judgment on its contract and account stated claims for the 2006 deliveries?30
Under N.J. Stat. Ann. § 12A:2-607(1) a buyer must pay the contract rate for any goods accepted.31 Under N.J. Stat. Ann. § 12A:2-606(2) acceptance of part of a commercial unit constitutes acceptance of the entire unit.32 Summary judgment is proper when the movant shows there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law.33
Yes. Rocheux established through undisputed facts that it delivered the 2006 goods, invoiced them, and that Defendants neither paid nor retained most of the goods.34 Defendants conceded they accepted and used the great majority of the deliveries and disputed only a small percentage on the basis of loss estimates.35 Because those estimates improperly relied on loss percentages derived from prior years rather than actual 2006 records, the court could not determine the precise commercial units rejected.36
Yet the undisputed evidence showed acceptance of the remainder.37 The court therefore granted summary judgment without prejudice for the accepted portion while permitting Defendants fifteen days to submit exact loss calculations by value and pound for the disputed portion.38
Rocheux is entitled to summary judgment on its contract and account stated claims for the portion of the 2006 deliveries that Defendants accepted.39
Whether Rocheux is entitled to summary judgment on its claims for the warehouse goods?40
N.J. Stat. Ann. § 12A:2-609 permits a party with reasonable grounds for insecurity to demand in writing adequate assurance of due performance and to suspend performance until assurance is received.41 Failure to provide adequate assurance within a reasonable time not exceeding thirty days constitutes repudiation.42 The reasonableness of grounds for insecurity and the adequacy of assurance are ordinarily questions of fact determined by commercial standards.43
No. Rocheux sent written demands in August and September 2006 that clearly identified its insecurity arising from Defendants' failure to pay more than two million dollars on both the 2006 deliveries and the warehouse goods.44 Rocheux stated its intent to suspend further performance and to sell the warehouse goods if payment was not received.45 Defendants' October 4 response offered to purchase additional material only on new terms including extended payment periods and conditioned on first-quality virgin material, yet never provided the demanded letter of credit.46 A reasonable jury could find either that the October 4 letter constituted adequate assurance or that it amounted to a repudiation by insisting on new conditions.
Genuine issues of material fact therefore preclude summary judgment for either party.47
Rocheux is not entitled to summary judgment on its claims for the warehouse goods.48
Whether the additional terms for monthly interest and attorneys' fees contained in Rocheux's order acknowledgments and invoices became part of the parties' contracts under the UCC?49
N.J. Stat. Ann. § 12A:2-207 provides that additional terms in a written confirmation between merchants become part of the contract unless the offer expressly limits acceptance to its terms, the additional terms materially alter the contract, or notification of objection has been given.50 An additional term materially alters the contract when it results in surprise or hardship if incorporated without express awareness by the other party.51
No. Rocheux sent Order Acknowledgments containing the interest and attorneys' fees terms.52 Defendants presented evidence that they never received the Terms and Conditions pages.53 The subsequent invoices arrived after acceptance had already occurred, rendering them ineffective as written confirmations under § 2-207.54 Even assuming Defendants received the Terms and Conditions pages, the court could not determine as a matter of law that the terms did not materially alter the agreement.55
The record left open questions of course of dealing, industry custom, and the precise economic impact of the 18 percent annual interest and 25 percent attorneys' fees provisions under the unique facts of this protracted litigation.56
The additional terms for monthly interest and attorneys' fees did not become part of the parties' contracts as a matter of law.57
Whether Rocheux's motion in limine to exclude Defendants' expert witnesses should be granted?58
Federal Rule of Evidence 702 permits expert testimony only if it is based on sufficient facts or data, is the product of reliable principles and methods, and will help the trier of fact understand the evidence or determine a fact in issue.59 A district court must ensure that expert testimony is both relevant and reliable.60
No. The court's rulings limiting Defendants' counterclaims to the 2006 deliveries and granting partial summary judgment on the accepted portion of those deliveries rendered the proffered expert testimony of Arthur Buckle, Nick Margaros, and Barbara Luna potentially irrelevant or unreliable as to the remaining issues.61 Because the parties' briefing on the in limine motion did not anticipate these limitations, the court denied the motion without prejudice and permitted Rocheux to refile in light of the narrowed scope of the case.62
Rocheux's motion in limine to exclude Defendants' expert witnesses is denied without prejudice.63