RBC Nice Bearings, Inc. v. SKF USA, Inc.
146 Conn. App. 288
Conn. App. Ct.2013Background
- In 1997 plaintiff sellers sold the "Nice" product line to plaintiffs and granted SKF USA (defendant) an exclusive distributorship under an eight‑year Sales and Supply Agreement with a $9 million annual minimum purchase; parties replaced that in 2000 with a new written agreement lowering the annual minimum to about $6 million and adding a written modification clause requiring signed writings to change terms.
- During several contract years SKF under‑purchased; plaintiffs repeatedly discussed shortfalls, issued shortfall invoices for at least the fifth year, negotiated purchase forecasts, and at times accepted lower purchase amounts without contemporaneous signed amendments.
- Plaintiffs terminated the 2000 agreement on June 21, 2006, citing unpaid shortfalls for the fifth and sixth contract years; plaintiffs sued for breach and anticipatory breach and asserted multiple ancillary claims; SKF counterclaimed for breach (including lost profits from plaintiffs’ direct sales to distributor customers in violation of exclusivity).
- The trial court found the parties had modified the 2000 agreement by course of performance and by assorted writings, and that plaintiffs had waived rights to enforce minimums (affecting years four–six and beyond); it ruled for defendant on plaintiffs’ claims but denied SKF damages for lost profits as too speculative.
- On appeal the Connecticut appellate court reversed the trial court: held a signed modification clause bars modification by course of performance, found no signed amendments existed, held plaintiffs had not waived enforcement for the sixth year, and concluded SKF proved lost‑profits damages for direct sales in breach of the exclusivity clause (subject to limitation to items listed on Schedule 1).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether course of performance can modify the written agreement despite a signed modification clause | Written modification clause and UCC §2‑209 bar oral/course modification; no signed writing exists | Course of performance (repeated acceptance of lower purchases) effectively modified the contract | Course of performance cannot modify a contract that expressly requires signed writings; trial court finding of modification was legally incorrect |
| Whether parties executed signed writings that modified the agreement | No signed writings demonstrating mutual assent to amend minimums | E‑mails and internal writings show written modifications for disputed years | E‑mails and documents did not constitute signed mutual modifications; trial court factual finding of signed modification was clearly erroneous |
| Whether plaintiffs waived right to enforce minimum purchases (particularly for sixth year) | Plaintiffs did not intentionally relinquish rights; they issued shortfall invoices and repeatedly sought compliance | Plaintiffs’ conduct negotiating and accepting lower purchases amounted to waiver | Finding of waiver for the sixth year was clearly erroneous; plaintiffs did not relinquish rights for year six |
| Whether defendant proved lost‑profits damages from plaintiffs’ direct sales in breach of exclusivity | Plaintiffs argued SKF’s lost‑profits claim was too speculative and causation was not shown | SKF presented sales records showing ~75 customers and plaintiff direct sales, supporting reasonable‑certainty damages | Reversed trial court: SKF proved sufficient evidence to estimate lost profits; remand to calculate damages limited to products covered by Schedule 1 of the agreement |
Key Cases Cited
- Putnam Park Associates v. Fahnestock & Co., 73 Conn. App. 1 (2002) (rules on contract interpretation and when clear contractual language presents a question of law)
- Torgerson v. Kenny, 97 Conn. App. 609 (2006) (course of performance and factual questions on contract modification)
- Wyszomierski v. Siracusa, 290 Conn. 225 (2009) (standard for reviewing trial court factual findings and legal conclusions)
- Ambrogio v. Beaver Road Associates, 267 Conn. 148 (2003) (lost profits and standards for consequential damages recovery)
- Multiplastics, Inc. v. Arch Industries, Inc., 166 Conn. 280 (1974) (waiver and intentional relinquishment of contract rights)
- Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775 (2d Cir. 2003) (conduct must show indisputable mutual departure from written agreement to establish waiver/modification)
- Message Center Management, Inc. v. Shell Oil Products Co., 85 Conn. App. 401 (2004) (testimony as to lost profits based on past and similar sales can be sufficiently reliable)