Navigant Consulting, Inc. v. Modernica, Inc.
K16C-07-003 WLW
| Del. Super. Ct. | Oct 26, 2017Background
- Navigant contracted to provide consulting services to Modernica under three agreements governed by California law and billed $248,990.31 for services through May 27, 2015.
- Modernica paid $59,666.34 between January and September 2015, leaving $189,323.37; on October 19, 2015 Modernica tendered $100,000 via three checks each stamped or accompanied by the phrase "final accord and satisfaction."
- Navigant deposited the checks, did not return the funds, and later sued (filed July 7, 2016) seeking the remaining balance ($89,323.37).
- Modernica asserts an affirmative defense of accord and satisfaction based on a bona fide dispute and the conspicuous "final accord and satisfaction" language. Modernica claims it had repeatedly communicated disputes about the invoices prior to tendering the checks.
- Navigant contends it was not on notice of a bona fide dispute (citing an e-mail the day before the payments asking Modernica to state whether it intended to pay) and alternatively invokes the statutory designated-recipient exception in California Commercial Code § 3311(c)(1).
- The court denied Modernica’s summary judgment motion because a genuine factual dispute exists whether Modernica had communicated a bona fide dispute before tendering the checks.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Modernica's tender of checks labeled "final accord and satisfaction" discharged the debt under California accord-and-satisfaction doctrine | Navigant: It did not discharge the debt because Navigant was not on notice of a dispute; it deposited checks only after seeking clarification and expected further payments | Modernica: It tendered the checks in good faith while a bona fide dispute over the unliquidated amount existed; the conspicuous language discharged the claim | Denied MSJ — factual dispute exists whether a bona fide dispute was communicated before tendering the checks, so summary judgment is inappropriate |
| Whether the designated-recipient exception (§3311(c)(1)) prevents discharge because communications were not sent to Navigant's specified employee | Navigant: It sent a conspicuous prior notice designating a recipient; checks were deposited at a lockbox instead of being received by that designee | Modernica: Contends its tender satisfied the claim; does not concede the designated-recipient predicate | Not decided on summary judgment; court focused on existence of pre-tender dispute and left factual issues for discovery |
| Whether Modernica met its burden on summary judgment as the party asserting accord and satisfaction | Navigant: Modernica's initial affidavit lacked personal-knowledge basis; evidence was insufficient | Modernica: Supplemented with a personal-knowledge affidavit; no prejudice shown from supplementation | Court treated affidavit issue as moot given supplementation but still found a material factual dispute on the key element (existence of dispute) |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden shifting principles)
- Ebersole v. Lowengrub, 180 A.2d 467 (Del. 1962) (summary judgment standard; view facts favoring non-moving party)
- Bii Fin. Co. v. U-States Forwarding Servs. Corp., 95 Cal. App. 4th 111 (Cal. Ct. App. 2002) (question of whether accord and satisfaction occurred is one of fact)
- Rabinowitz v. Kandel, 1 Cal. App. 3d 961 (Cal. Ct. App. 1969) (accord and satisfaction burden on party asserting the defense)
- Aguilar v. Atlantic Richfield Co., 24 P.3d 493 (Cal. 2001) (evidentiary standard for summary judgment in California)
- Lucky United Properties Inv., Inc. v. Lee, 185 Cal. App. 4th 125 (Cal. Ct. App. 2010) (dispute must exist before tender to support accord and satisfaction)
- Maloney-Refaie v. Bridge at School, Inc., 958 A.2d 871 (Del. Ch. 2008) (choice-of-law and forum law governing procedural matters)