Diesel Props S.R.L. v. Greystone Business Credit II LLC
2011 U.S. App. LEXIS 318
2d Cir.2011Background
- Props and Kid are Italian Diesel subsidiaries licensed to produce Diesel-branded shoes for the U.S. market under GBMI distribution agreements.
- Greystone provided a $25 million revolving credit facility to GBMI under an LSA, with a security interest in GBMI's assets and a TPAs framework relating to payments.
- TPAs required Customer Purchase Orders, notice of GBMI defaults, and copies of Customer Invoices and Diesel Invoices to trigger disbursements, with Greystone obligated to pay Diesel after GBMI invoices were provided.
- Diesel shipped numerous orders to GBMI during GBMI's financial distress, and GBMI defaulted on covenants, leading to termination of the Distribution Agreements in October 2007.
- Diesel sued Greystone and GBMI; the district court dismissed most claims, ordered Props to pay Greystone unjust enrichment, and Diesel appeals seeking broader recovery.
- The Second Circuit reversed the unjust enrichment award against Props but affirmed the other dismissals and addressed causation and contract-formation issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Diesel proved causation for damages from GBMI defaults | Diesel argues Grestone's notice failures caused its losses | Greystone contends losses were caused by GBMI's defaults and Diesel's shipping despite notices | Yes, Diesel failed to prove causation; district court's causation ruling affirmed |
| Whether the TPA payment obligation was triggered without a valid Customer Purchase Order | Diesel contends TPAs applied to orders irrespective of PO | Greystone and GBMI argued PO condition precedent barred payments absent PO | Yes, PO condition precedent not fulfilled; Greystone not obligated to pay for those shipments |
| Whether Props unjustly enriched by receiving GBMI’s SS08 Order Book | Diesel asserts Props obtained collateral to which Greystone had security, harming Diesel | Props had a contractual right to the Order Book at the end of SS08; Greystone knew of the Distribution Agreement | Props did not unjustly enrich Greystone; Props priority to Order Book based on contract; reverse district court on this point |
Key Cases Cited
- Eternity Global Master Fund Ltd. v. Morgan Guaranty Trust Co. of New York, 375 F.3d 168 (2d Cir. 2004) (causation and damages under contract/finance context; standards applied)
- Nordwind v. Rowland, 584 F.3d 420 (2d Cir. 2009) (equitable claims and standards in complex contracts)
- Kaye v. Grossman, 202 F.3d 611 (2d Cir. 2000) (prudential limits on quasi-contract claims)
- Septembertide Publishing, B.V. v. Stein & Day, Inc., 884 F.2d 675 (2d Cir. 1989) (first-in-time priority and adverse claims in secured transactions)
- Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685 (N.Y. 1995) (definition and effect of a contract-based condition precedent)
- Revson v. Cinque & Cinque, P.C., 221 F.3d 59 (2d Cir. 2000) (interpretation of ambiguous contracts and extrinsic evidence)