MEMORANDUM OPINION
This mаtter comes before the Court upon cross-motions for summary judgment. (Doc. Nos. 88, 92.) Defendants’ cross-motion also seeks to redesignate affirmative defenses as counterclaims pursuant to Federal Rule of Civil Procedure 8(c)(2). Plaintiff also moves in limine to exclude certain defense expert witnesses pursuant to Federal Rule of Evidence 702. (Doc. No. 87.) This Court heard oral argument on these motions on September 16, 2010. For the following reasons, the Court will grant Plaintiffs motion in part without prejudice and deny Defendants’ motion. The Court will allow Defendants to redesignate their affirmative defenses, but the Court will limit these counterclaims to the 2006 deliveries. The Court will also deny Plaintiffs motion in limine without prejudice and permit Plaintiff to refile in light of this Court’s ruling with regard to the other motions.
I. BACKGROUND
This case involves a contract dispute between Plaintiff Rocheux International of New Jersey, Inc. (“Rocheux”), a distributor of raw plastic materials, and Defendants U.S. Merchants Financial Group, Inc., U.S. Merchants Inc. (d/b/a U.S. Merchants or The Merchant of Tennis, Inc.), and Diversified Repackaging Corporation, who are California-based providers of plastic product-packaging services. The dispute concerns large shipments of raw plastics delivered by Rocheux to Defendants between January and June 2006. For purposes of the parties’ cross-motions for summary judgment, the Court draws all reasonable inferences in the light most favorable to the respective non-moving
A. Undisputed Facts
The Court begins with the uncontested facts. The parties agree that Defendants ordered large quantities of raw PVC and APET plastic from Rocheux in 2005 and 2006, as demonstrated by purchase orders 21920, 22190, 22897, P13295, P13300, P13302, 20188, 20491, 20564, 20583, and 22488 (hereinafter “2005-2006 purchase orders”). (Pl.’s 56.1 Statement ¶ 1; Defs.’ 56.1 Resp. ¶ 1.) According to the parties’ descriptions, the plastic was ordered by the pound and delivered in rolled-up form as more than 7,000 rolls of plastic the size of garbage cans. (Flood Decl. ¶¶ 3, 9; see also Pl.’s Br. at 1; Defs.’ Resp. Br. at 6.) There is no dispute that Rocheux delivered to Defendants some of the plastic products related to the 2005-2006 purchase orders between January 2006 and June 2006 (hereinafter “2006 deliveries”), and that Rocheux sent Defendants invoices for these deliveries. (See PL’s 56.1 Statement ¶¶ 2, 6; Defs.’ 56.1 Resp. ¶¶ 2, 6.) It is undisputed that Defendants did not pay for most if nоt all of the 2006 deliveries and that Defendants no longer possess the goods from the 2006 deliveries. (PL’s 56.1 Statement ¶¶ 8, 12; Defs.’ 56.1 Resp. ¶¶ 8, 12.) According to Plaintiff, the outstanding balance for the 2006 deliveries is $2,116,571.76. (PL’s 56.1 Statement ¶9; Stephanoff Decl. ¶ 32 & Ex. A; Defs.’ 56.1 Resp. ¶ 9.)
In addition to the 2006 deliveries, it appears that Rocheux delivered some of the goods related to the 2005-2006 purchase orders to a local warehouse so that Defendants would be able to access the goods as needed on short notice. These deliveries to the warehouse (hereinafter “warehouse goods”) appear to have taken place between November 2005 and August 2006. (PL’s 56.1 Statement ¶¶262, 266, 270, 274, 277, 280, 283, 286, 289, 292, 295, 298, 301, 305, 308, 311, 314, 317, 320, 323, 326, 329, 332, 335, 338, 341, 344, 347, 350, 353; McRavin Decl. ¶¶ 275, 279, 283, 287, 290, 293, 296, 299, 302, 305, 308, 311, 314, 318, 321, 324, 327, 330, 333, 336, 339, 342, 345, 348, 351, 354, 357, 360, 363, 366; Defs.’ Resp. ¶¶ 262, 266, 270, 274, 277, 280, 283, 286, 289, 292, 295, 298, 301, 305, 308, 311, 314, 317, 320, 323, 326, 329, 332, 335, 338, 341, 344, 347, 350, 353.) According to Rocheux Vice President and Chief Operating Officer Robert Stephanoff, the original purchase price for the warehouse goods was $1,582,282.31. (Stephanoff Decl. ¶ 28; see also Defs.’ 56.1 Statement ¶ 3.) On September 24, 2006, Rocheux President Wendy Steed sent an email to Defendants’ President and CEO Jeffrie Green requesting the delinquent payments for the 2006 deliveries and the warehouse goods by September 29, 2009, and notifying Defendants that their failure to pay would result in Rocheux selling the warehouse goods and seeking any deficiency from Defendants pursuant to UCC § 2-706. (Steed Decl. ¶ 14 & Ex. F.) Rocheux incurred $18,562.36 in freight charges and $56,622.67 in additional warehouse charges in attempting to re-sell the warehouse goods, and Rocheux eventually sold the warehouse goods to third parties for $1,194,582.68, resulting in a deficiency of $387,699.70 compared to the original purchase price for the warehouse goods. (PL’s 56.1 Statement ¶¶ 18-19; Stephanoff Decl. ¶¶ 28-29; Defs.’ 56.1 Resp. ¶¶ 18-19.)
B. Disputed Facts
Although the parties do not contest the basic facts surrounding the 2006 deliveries and the warehouse goods, Defendants contest their liability for both, contending that the 2006 deliveries contained substantial amounts of unusable and/or nonconforming materials, and that Rocheux breached its contracts with Defendants when it re
For its part, Rocheux claims that it was not notified of problems with the 2006 deliveries until its president received an email from Defendants’ president on September 6, 2006. (Steed Decl. Ex. D (Sept. 6, 2006 email from Jeffrie Green to Wendy Steed) (indicating that “there have been some problems with the materials which Rocheux supplied,” and inquiring whether “[Rocheux’s] other customers encountered sealing problems”).) Prior to the September 6 email, Rocheux claims that Defendants had generally acknowledged that they owed payments for the 2006 deliver
After Ms. Steed received the September 6 email, she replied the following day with an email asking Mr. Green to “please provide [Rocheux] full details” regarding his assertion of defects with delivered goods. (Steed Decl. Ex. E (Sept. 7, 2006 email from Wendy Steed to Jeffrie Green).) Her response further asserted “We stand behind our product and will send a team to investigate any problems you may be having with our material. Any defective materials should be returned for a full credit.” (Id.) Ms. Steed asserts that Defendants never responded to her request for inspection or return of defective goods. (Steed Decl. ¶ 13.) Defendants concede that “the vast majority” of the 2006 deliveries had been discarded as scrap when they received Ms. Steed’s September 7, 2006 email requesting the return or inspection of defective goods. (Margaros Decl. ¶ 15.) More than a year later, the parties met at Defendants’ plant in California in November 2007 for an inspection of the defective goods Defendants still possessed. Defendants produced 33 rolls of plastic, “most of which, if not all, of which [we]re not part of the [2006 deliveries].” (Stephanoff Decl. ¶ 7; see also Margaros Decl. ¶ 15.)
The parties also dispute the applicability of additional terms for interest and attorneys’ fees that Rocheux asserts it included in both its order confirmations and invoices to Defendants.
(See
Pl.’s 56.1 Statement ¶ 257; Defs.’ 56.1 Resp. ¶ 257.) Rocheux’s Supervisor of Customer Service Donna McRavin attests that Rocheux, by virtue of its document-producing software, automatically included a “Terms and Conditions” page as page 2 of every order acknowledgment it sent to Defendants in response to Defendants’ purchase orders. (MсRavin Decl. ¶ 11.) Paragraph 7 of the Terms and Conditions page provides for a service charge of 1.5% per month on “all ... outstanding charges and invoices,” and states that the purchaser will be responsible for “all costs and expenses of collection, including reasonable attorneys’ fees of 25% of the outstanding balance, incurred by Rocheux in connection with [the parties’ sales contracts] or in any action or proceeding against Customer for breach of [the parties’ sales contracts].”
(E.g.,
McRavin Decl. Ex. F.) Ms. McRavin included order confirmations containing Terms and Conditions pages for the 2005-
In addition to the Terms and Conditions pages Rocheux contends it included with the order confirmations, Rocheux asserts that it sent Defendants invoices after each delivery that contained essentially the same additional terms. (Pl.’s 56.1 Statement ¶¶ 258, 260.) A footnote in the invoices provides that “[delinquent accounts are subject to a service charge of 1.5% per month” and notifies the purchaser that it will be responsible for costs and “reasonable attorney’s fees” if Rocheux has to institute legal proceedings to collect under the parties’ sales contracts. (E.g., McRavin Decl. Ex. K.) Ms. McRavin included the invoices for the 2005-2006 purchase orders. (See McRavin Decl. Exs. ATTTTTTTT.) Defendants deny that they ever received Terms and Conditions pages with the order confirmations that Rocheux sent. (Green Decl. ¶ 14; Oprisan Decl. ¶¶ 6-7.) According to Mr. Green, Defendants’ president and CEO, he arranged Defendants’ initial agreement to purchase plastics from Rocheux in a conversation or series of conversations with Rocheux salesman Mike Flood, ostensibly in or about 2000. (Green Decl. ¶¶ 10-11.) Mr. Green attests that his companies only purchase plastic materials “from suppliers [he] approve[s], on terms that [he] negotiate[s],” and that his companies “do not accept additional terms and conditions from [their] vendors.” (Id. ¶ 11.) Mr. Green further alleges that he discussed these limitations with Mr. Flood when they first met, and that Mr. Flood “agreed that if we did business, it would be on the terms that I outlined.” (Id.) Mr. Green denies being apprised of the additional terms for interest and attorneys’ fees now sought by Rocheux at any point in the parties’ business relationship, and Mr. Green further contends that, prior to the instant litigation, Rocheux never attempted to charge Defendants interest or attorneys’ fees on past-due invoices. (Id. ¶¶ 14-15.) Defendants do not deny receiving invoices containing terms for interest and attorneys’ fees, 1 but Defendants contest the legal significance of these invoices.
C. Procedural History
On December 21, 2006, Rocheux filed a six-count Complaint presenting claims for breach of contract (Counts I, V), claims on book accounts (Counts II, VI), unjust enrichment (Count III), and conversion of property (Count IV). Counts I-IV seek damages for the 2006 deliveries, and Counts V-VI seek damages for the warehouse goods. Defendants filed an Answer on February 28, 2007, that denied most of the allegations supporting Rocheux’s claims and asserted a number of affirmative defenses, including that Rocheux’s claims were barred by Rocheux’s prior breach of contract, failure to supply conforming goods of merchantable quality, and breach of express and implied warranties. (Answer, Affirmative Defenses IV, VIII, IX.) Rocheux now moves for summary judgment on its claims for the 2006 deliveries and warehouse goods, seeking $4,635,761.18 in damages, interest, attorneys’ fees, and costs.
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Defendants oppose
II. MOTION TO REDESIGNATE AFFIRMATIVE DEFENSES
The Court first considers Defendants’ request to redesignate certain affirmative defenses as counterclaims pursuant to Federal Rule of Civil Procedure 8(c)(2). This Rule provides in pertinent part: “If a party mistakenly designates a defense as a counterclaim, or a counterclaim as a defense, the court must, if justice requires, treat the pleading as though it were correctly designated, and may impose terms for doing so.” Fed.R.Civ.P. 8(c)(2). Defendants intend to rely on their affirmative defenses of breach of warranty and breach of contract to seek offsets from any amount due under its contracts with Rocheux on the basis of Rocheux’s failure to provide conforming goods between 2000 and 2006. According to Defendants, towards the beginning of the their business relationship, Roeheux expressly warranted that it would give Defendants the best prices on for all purchases and that it would always deliver “first quality virgin grade (non-recycled) material.” (Defs.’ Cross-Motion Br. at 4-5; Green Decl. ¶¶ 11-12.) Defendants allege that, in addition to shipping a substantial amount of unusable plastic, Roeheux also sold and delivered goods that did not conform to the “best-pricing” and “virgin-grade” warranties. Roeheux objects to Defendants’ proposed counterclaims on the grounds that Defendants’ requested modification would alter the “essential character” of the affirmative defenses by including “new counterelaim[s] that w[ere] not the subject of the complaint or the answer.” (PL’s Reply Br. at 26-27.) The question before the Court, then, is whether Defendants’ proposed modification redresses a simple mistaken designation, for which Rule 8(c)(2) provides the appropriate standard for relief, or whether Defendants’ modification presents a new claim, for which leave to amend is governed by Federal Rule of Civil Procedure 15(a)(2).
See Bozsi Ltd. P’ship v. Lynott,
Rocheux’s Complaint alleges that Defendants breached contractual obligations to pay for goods delivered between January and June 2006. (Compl. ¶ 21.) Indeed, the Complaint generally avers that the parties had a business relationship pri- or to this time. (Compl. ¶¶ 12 (alleging that Defеndants had purchased materials from Roeheux “[f]or the last several years,” and that Roeheux “sought information concerning Defendants’ creditworthy
The pleadings thus unequivocally demonstrate that the parties’ dispute concerned goods delivered between January and June 2006, as well as warehouse goods billed in September 2006. The plausibility standard imposed by Federal Rule of Civil Procedure 8(a),
see Ashcroft v. Iqbal,
— U.S. -,
Federal Rule of Civil Procedure 15(a)(2) provides that, under the present circumstances, “a party may amend [its] pleading only with the opposing party’s written consent or the court’s leave. The court should freely give leave when justice so requires.” This standard applies to affirmative and responsive pleadings alike.
Long v. Wilson,
If the underlying facts or circumstances relied upon by a [party] may be a proper subject of relief, he ought to be affordedan opportunity to test his claim on the merits. In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave sought should, as the rules require, be “freely given.”
Foman v. Davis,
With regard to delay, the undisputed record demonstrates that Defendants did not seek to add the proposed counterclaims until it opposed Rocheux’s motion for summary judgment on April 16, 2010, more than thrеe years after they filed their Answer on February 28, 2007, and more than 16 months after the close of discovery on November 28, 2008.
(See
Doc. No. 41 (July 29, 2008 Revised Scheduling Order).) Furthermore, based on Defendants’ representation that their answers to interrogatories notified Rocheux as early as August 2007 that they intended to seek offsets for nonconforming goods delivered before January 2006
{see
Defs.’ Cross-Motion Br. at 16-17), the Court may deduce that Defendants
knew
of their potential counterclaims in August 2007, more than 30 months prior to moving to include these counterclaims. Other than arguing their understanding that the parties’ installment contract opened the door for offsets in prior years, Defendants did not provide an explanation for their delay in seeking redesignation in either their motion briefs or during oral argument. As noted above, Defendants’ unpled understanding regarding the parties’ installment contract did not expand the scope of the pleadings, and the Court does not find that Defendants were justified in believing that it did. As the Court notes below, Defendants’ purported redesignation would drastically change the scope of the claims before the Court. Defendants’ delay in presenting these counterclaims has been substantial, and because Defendants have not provided a satisfactory explanation, the Court finds Defendants’ delay undue.
See, e.g., In re Madera,
Defendants respond that their answers to interrogatories in 2007 and 2008 timely notified Rocheux of their intent to seek offsets for nonconforming goods delivered before 2006.
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(Defs.’ Cross-Motion Br. at 16-17.) Yet, the interrogatory answers upon which Defendants rely do not expressly indicate that Defendants would present counterclaims for delivery of nonconforming goods before 2006. The only answer that
could
be read to encompass such goods was Defendants’ amended answer to interrogatory number 5, which asserts that “defects occurred at various times throughout the business relationship”
(see
McAlindin Cert. Ex. C), but this response does not expressly notify Rocheux of Defendants’ intent to expand the temporal scope of the action. . However, even if Rocheux had some notice that Defendants would seek offsets on the basis of goods delivered between 2000 and 2005 prior to the close of discovery, it was still prejudiced by the fact that it did not have fair notice of the factual and legal bases of Defendants’ proposed counterclaims until it received Defendants’ cross-motion. By that point, Rocheux’s counsel had already expended significant resources in preparing Rocheux’s motion for summary judgment. Although Plaintiffs summary judgment brief demonstrates an attempt to forecast and counter Defendants’ propоsed
Although substantial delay and prejudice alone warrant denying Defendants’ motion to redesignate, the Court also notes that Defendants’ proposed counterclaims appear to be time-barred. New Jersey law provides a four-year limitations period for contract and warranty claims arising under New Jersey’s Uniform Commercial Code (UCC) provisions. N.J. Stat. Ann. § 12A:2-725;
see also Spring Motors Distrib., Inc. v. Ford Motor Co.,
The Court will permit Defendants to redesignate Affirmative Defenses IV, VIII, and IX as counterclaims to seek offsets related to the goods that are the subject of Rocheux’s Complaint and Defendants’ Answer: goods delivered between January 2006 and June 2006.
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However, to the extent that Defendants’ cross-motion attempts to expand these Affirmative Defenses into counterclaims seeking offsets for goods delivered before 2006, the Court will deny Defendants’ motion on the
III. SUMMARY JUDGMENT
A party seeking summary judgment must “show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c);
see also Celotex Corp. v. Catrett,
The substantive law identifies which facts are “material.”
Anderson, 477
U.S. at 247-48,
With the present case, both parties present multiple theories in favor of or against summary judgment with regard to two distinct sets of goods (2006 deliveries and warehouse goods) and the disputed interest and attorneys’ fees provisions Rocheux claims were part of their contracts with Defendants. Accordingly, the Court will assess the parties’ arguments as they relate to these disputed claims, shifting the summary judgment standard as necessary to account for the arguments raised on cross-motion. Rocheux contends, and Defendants do not dispute, that New Jersey law applies to this action. Accordingly, the Court will apply New Jersey law to the claims at issue in these motions.
See, e.g., Am. Cyanamid v. Fermenta Animal Health Co.,
A. 2006 Deliveries
Rocheux argues that Defendants are liable for the purchase price of the 2006 deliveries because (1) Defendants accepted the goods; (2) Defendants violated N.J. Stat. Ann. §§ 12A2-515 and 12A:2-603 because they resold the goods without notifying Rocheux and failed to credit Rocheux’s account; and (3) Defendants have stated an account in favor of Rocheux. Defendants respond (1) that Rocheux is es-topped from obtaining judgment for the 2006 deliveries; (2) that Defendants have presented evidence creating a genuine issue of fact regarding whether Defendants rejected or revoked acceptance of a portion of the 2006 deliveries; 7 (3) that Defendants have presented evidence that they exercised their right under N.J. Stat. Ann. § 12A2-717 to withhold offsets for nonconforming goods; (4) that §§ 12A:2-515 and 12A:2-603 do not apply to the facts of this case; and (5) that Rocheux’s account stated claim is procedurally improper and subject to genuine issues of fact. Of Defendants arguments, only the first appears to seek affirmative relief on an affirmative defense via cross-motion, and the remainder appear to oppose Rocheux’s arguments in favor of summary judgment. Accordingly, the Court will begin with Defendants’ estoppel affirmative defense, and shift the summary judgment burdens to treat Rocheux as the non-moving party, before considering Rocheux’s arguments.
1. Defendants’ Estoppel Affirmative Defense
Defendants argue that the undisputed record demonstrates that Rocheux’s representatives repeatedly made promises to give Defendants credits for nonconforming goods throughout the course of the parties’ relationship, promises upon which Defendants relied by continuing to purchase plastic from Rocheux, but that Rocheux never delivered on these promises. Accordingly, Defendants argue that Rocheux’s promises estop them from seeking the full contract price on the 2006 deliveries.
Before the Court assesses Defendants’ arguments, the Court notes that Defendants did not plead an estoppel counterclaim for promises of credits made on deliveries prior to 2006. Nor do Defendants seek to redesignate their estoppel affirmative defense as a counterclaim. Thus, the Court limits Defendants’ estoppel affirmative defense to promises of credits made on the 2006 deliveries in accordance with this Court’s ruling on Defendants’ cross-motion to redesignate affirmative defenses.
Defendants invoke the doctrines of both promissory estoppel and equitable estoppel. In New Jersey, promissory estoppel consists of: “(1) a clear and definite promise by the promisor; (2) the promise must be made with the expectation that the promisee will rely thereon; (3) the
The only evidence relied upon by Defendants to establish that Rocheux made promises of credits is the declaration of Mr. Margaros, their thermoforming manager. (Defs.’ Cross-Motion Br. at 36.) While Mr. Margaros’s Declaration generally asserts that Rocheux representatives “always and repeatedly assured that Defendants would receive credits to their account for any and all defective and/or nonconforming material” whenever he notified them of problems with the goods (Margaros Decl. ¶ 12), it does not provide any details regarding when these promises were made, to which deliveries they applied, or the extent of the promised credit for the alleged defects. The Court cannot determine from these vague statements that Rocheux made definite representations regarding the 2006 deliveries, as opposed to prior deliveries not the subject of this suit, or that Defendants’ reliance was reasonable and the detrimental impact substantial. As the moving party with respect to this affirmative defense, Defendants must satisfy the burden of production by “identify[ing] those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which [they] believe[] demonstrate the absence of a genuine issue of material fact.”
See Celotex,
2. Rocheux’s Contract and Account Stated Claims
As noted above, Rocheux has presented three primary arguments in favor of summаry judgment on the 2006 deliveries: (1) Defendants’ acceptance of the goods; (2) Defendants’ noncompliance with N.J. Stat. Ann. §§ 12A2-515 and 12A:2-603, which
With regard to Rocheux’s argument that Defendants accepted the 2006 deliveries, it is undisputed that Rocheux made deliveries related to the 2005-2006 purchase orders (purchase orders no. 21920, 22190, 22897, P13295, P13300, P13302, 20188, 20491, 20564, 20583, and 22488) between January and June 2006, and that Rocheux sent Defendants invoices for these deliveries. (Pl.’s 56.1 Statement ¶¶ 1, 2, 6; Defs.’ 56.1 Resp. ¶¶ 1, 2, 6.) It is undisputed that Defendants did not pay for the 2006 deliveries and that Defendants no longer possess the goods from the 2006 deliveries. (PL’s 56.1 Statement ¶¶ 8, 12; Defs.’ 56.1 Resp. ¶¶ 8, 12.) Although Defendants dispute their liability for the 2006 deliveries, they do not dispute Rocheux’s assertion that the outstanding balance for the 2006 deliveries is $2,116,571.76. (PL’s 56.1 Statement ¶ 9; Stephanoff Deel. ¶ 32 & Ex. A; Defs.’ 56.1 Resp. ¶ 9.)
Under the UCC, the buyer has the following options with regard to delivery of nonconforming goods: “(a) reject the whole; or (b) accept the whole; or (c) accept any commercial unit or units and reject the rest.” N.J. Stat. Ann. § 12A:2-601.
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“The buyer must pay at the contract rate for any goods accepted.” N.J. Stat. Ann. § 12A:2-607(1). Thus, the question before the Court is whether Defendants accepted the goods. Defendants contend that they have presented evidence that they rejected or revoked portions of the 2006 deliveries, which would make summary judgment improper.
10
However, De
The UCC defines “commercial unit” as: such a unit of goods as by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article (as a machine) or a set of articles (as a suit of furniture or an assortment of sizes) or a quantity (as a bale, gross, or carload) or any other unit treated in use or in the relevant market as a single whole.
N.J. Stat. Ann. § 12A:2-105(6). The record in this case demonstrates that the plastic was priced and ordered by the pound.
(See, e.g.,
McRavin Decl. Ex. E (purchase order).) Although the Court has not located New Jersey case law using goods’ weight as the commercial unit, other courts have applied their state’s UCC provisions in such a manner.
See, e.g., Figueroa v. Kit-San Co.,
Defendants do not identify how much of the 2006 deliveries they were able to use, but assert that Dr. Luna’s expert report
11
explains how much of the 2006 deliveries they rejected because the product was unusable. (Defs.’ Cross-Motion Br. at 39, 43.) Assuming
arguendo
the validity of Dr. Luna’s calculations, and applying this Court’s ruling with regard to the scope of Defendants’ redesignated counterclaims, it would appear that Defendants report losses (i.e., unusable plastic)
12
in 2006 of $147,320.32 (Luna Report sched. 2 revised) and $6,398.03
(id.
sched. 6 revised). Thus, of the $2,116,571.76 that Rocheux seeks for the 2006 deliveries, based on Defendants’ numbers it appears that Defendants dispute only $153,718.35 worth of product (approximately 7%), and Defendants do not
However, there are two problems with relying on this deduction to determine the proportion of the 2006 deliveries that Defendants accepted. First, Defendants’ asserted offsets appear to be based on value and not the commercial unit (pounds of plastic). Second, Dr. Luna applied an estimated “loss percentage” of 8.99% to calculate offsets due to unusable material. Dr. Luna determined this estimated loss percentage by dividing Defendants’ total loss write-offs from 2000 through January 2006 by the total product delivered during the same period. (Id. at 7-8.) Although this approach appears reasonable at first blush, it obscures the fact that Defendants have not presented records for the total loss write-offs for February-June 2006. This omission is surprising, considering that this litigation concerns the delivery of goods from January-June 2006 that Defendants allege were nonconforming, and because Dr. Luna’s Report appears to contain Defendants’ detailed records regarding the exact losses from all deliveries from March 2001 through January 2006. (Id. sched. 7.2.) The Court specifically inquired about these missing records during oral argument, and defense counsel did not have an explanation for why Defendants relied on loss estimates for February-June 2006. (Oral Argument Tr. at 41^2.) It would not be appropriate to permit Dr. Luna to estimate the losses for February-June 2006 to fill in these gaps, because Defendants concede that Dr. Luna, as a damages expert, has no firsthand knowledge of the amount of nonconforming goods, and that she would not have been qualified to make such a determination. (Defs.’ Cross-Motion Br. at 114 (arguing that Dr. Luna “base[s] her conclusions as to the amount of damages on an assumption regarding the product’s characteristics supplied by those with firsthand knowledge”).)
Rocheux, as the party seeking summary judgment, has met the burden of production by presenting undisputed facts regarding its shipment of the 2006 deliveries, the balance owed for these goods, and Defendants’ failure to pay for or retain these goods. The burden therefore shifts to Defendants to present more than a “mere scintilla” of evidence to establish a genuine issue of fact.
See, e.g., Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware Co., Inc.,
Given the voluminous nature of the records that Dr. Luna relied upon to calculate Defendants asserted loss offsets, the Court will not undertake to calculate the exact loss offsets claimed by Defendants for 2006. Rather, the Court will grant Rocheux’s motion for summary judgment without prejudice and give Defendants 15 days from the receipt of the accompanying Order to submit supplemental documentation and revised calculations of their loss offsets setting forth their exact losses, by value and pound, for 2006. Defendants shall not base these losses upon an estimate determined from prior deliveries’ loss percentages. The Court will give Rocheux 10 days to respond to any supplemental materials submitted by Defendants on this issue. Upon review of the parties’ submissions, the Court may deny summary judgment in part for the portion (in commercial units) of the 2006 deliveries Defendants contend they rejected and/or revoked, but the Court will award summary judgment in favor of Rocheux for the commercial units that Defendants accepted. 14
In anticipation that Defendants will submit supplemental documentation and/or revised calculations of loss due to unusable materials so as to substantiate their defenses of rejection and/or revocation of a portion of the 2006 deliveries, the Court notes that this dispute extends no further than (1)
whether Defendants owe the contract price for these goods,
if the factfinder were to find that Defendants did not reject or revoke acceptance of these goods, or (2)
whether Defеndants owe a lesser amount reflecting the difference between the value of the scrap material and the costs they incurred by storing and reselling the scrap,
if the factfinder were to resolve that Defendants rejected or revoked acceptance of a portion of the 2006 deliveries. Defendants appear to argue that they have no liability for worthless rejected goods.
(See
Defs.’ Cross-Motion Br. at 71) (citing
Northrop Corp. v. Litronic Indus.,
B. Warehouse Goods Cross-Motions
Rocheux next argues that Defendants are liable for the deficiency between the original purchase price and the subsequent resale value of the warehouse goods, as well as the costs Rocheux incurred by storing and reselling the same. Defendants respond that Rocheux cannot recover these sums as a matter of law because Rocheux improperly repudiated its contracts with Defendants under N.J. Stat. Ann. § 12A:2-609 without demanding adequate assurance and despite receiving such assurance from Defendants. Defendants do not seek any offset or damages related to the warehouse goods; accordingly, the Court considers whether Rocheux demanded adequate assurance and whether Defendants provided such assurance.
Section 12A:2-609 provides in pertinent part:
A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.
N.J. Stat. Ann. § 12A:2-609(1). The “failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract.”
Id.
§ 12A:2-609(4). Subsection 2 of this provision further provides that “[b]etween merchants the reasonableness of grounds for inseeurity and the adequacy of any assurance offered shall be determined according to commercial standards.”
Id.
§ 12A:2-609(2).
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Accordingly, a number of courts have recognized that the reasonableness of a party’s insecurity, the propriety of a demand of assurances, and the adequacy of assurance tendered present questions of fact to be resolved by the jury.
See, e.g., Brisbin v. Superior Valve Co.,
With regard to Defendants’ first contention that Rocheux did not demand adequate assurances, Defendants appear to challenge not only the language used by Rocheux in its cоrrespondence, but also Rocheux’s grounds for insecurity. Defendants argue that Rocheux did not demand adequate assurance, as was required by § 12A:2-609 prior to repudiating the parties’ contracts, because Rócheme “conditioned its own future performance on De
Unless payment of [past-due invoices] is received by September 29th, 2006, Rocheux will have no alternative but to commence an action and seek all appropriate remedies to recover said amount together -with all applicable 1.5% interest per month late fees, attorney’s fees and other damages available to Rocheux under its terms of sale. This letter shall also constitute notice of Rocheux’s intent, in the event payment is not forthcoming, to sell or otherwise dispose of the material remaining in our warehouse pursuant to UCC § 2-706 and recover any deficiency from you.
(Steed Decl. Ex. F.) Defendants cite a number of cases for the proposition that a party’s breach of a collateral contract does not authorize the aggrieved party to refuse performance under a separate and distinct contract. However, comment 3 to § 12A:2-609 provides that, “[u]nder commercial standards and in accord with commercial practice, a ground for insecurity need not arise from or be directly related to the contract in question.... Thus a buyer who falls behind in ‘his account’ with the seller, even though the items involved have to do with separate and legally distinct contracts, impairs the seller’s expectation of due performance.” N.J. Stat. Ann. § 12A:2-609 cmt. 3;
see also Brisbin,
Turning to the actual language of Rocheux’s correspondence of August 2 and September 21, 2006, which must be read in the context of the parties’ prior dealings, the Court notes that Rocheux both (1) clearly conveyed its reasons for insecurity — Defendants’ failure to pay substantial sums related to invoices for the 2006 deliveries and the warehouse goods, and (2) clearly indicated that it intended to suspend its own performance. Specifically, the August 2 email recognized that Defendants had recently sent a check on an invoice, and presented the following proposal to resolve Defendants’ problem with past-due invoices:
Based on your consistent weekly payments and with a full understanding of your short term computer problems I will throw out a proposal for your consideration.
We will ship you on a two to one payment ration; i.e. for every two truckload invoices you pay we will release onetruckload. In other words if you pay past due invoices of $100,000 we will release $50,000. This will move us in the right direction so we can be on track when your computer problems are finally resolved.
Please let me know if you have any interest in this option.
(Steed Decl. Ex. A.) As noted above, the September 21 letter indicated that Rocheux would dispose of the warehouse goods if Defendants did not pay on their past-due invoices. (Steed Decl. Ex. F.) Although neither message included the exact term “adequate assurance,” courts have generally еschewed applying formalistic requirements for the demand of adequate assurances, instead opting for a case-specific approach that considers a party’s demands in the context of its course of dealings with the adverse party.
See, e.g., AMF, Inc. v. McDonald’s Corp.,
Finally, with regard to assurances provided, Defendants argue that Mr. Green’s October 4 letter provided adequate assurance that Defendants would continue to perform under the contract. (See Steed Decl. Ex. G (Oct. 4, 2006 letter from Jeffrie Green to Wendy Steed).) This letter generally disputed Defendants’ liability for Rocheux’s invoices, asserting that “Rocheux alone is responsible for its failure to ship and bill product which we ordered,” but nevertheless indicated that Defendants “[we]re willing to purchase the undelivered PVC ... ordered under [purchase orders] 20491 and 21920.” (Id. at 1.) The letter also indicated a willingness to purchase “APET which Rocheux did not deliver ... at the price and terms set forth on our orders.... ” (Id. at 3.) Both of these proposals were conditioned on the assumption that Rocheux would provide “first quality virgin” and “RF sealable” material. (Id. at 2-3.) The letter appears to adopt quantities and prices from the parties’ 2005-2006 purchase orders. (See id. at 3-4.) Defendants further proposed in the letter that:
[t]he additional PVC and APET may be delivered to us FOB our Ontario facility as we request it. We hereby advise you that the first delivery may be made the week of October 23, 2006. We anticipate that the balance of the additional PVC and APET will be requested for delivery prior to April 30, 2007. Please confirm in writing by no later than Friday, October 5, 2006, that Rocheux will make these deliveries when and as requested. Upon receipt of your written confirmation, we will advise you in writing of each delivery which we request. We will also advise you whether the payment will be made on a C.O.D. basis by Company check or whether we will arrange for a letter of credit payable Net 120 days from our receipt of each delivery....
(Id. at 4.) Rocheux’s president responded by letter of October 6, 2006, which stated that Defendants’ “continuing failure to pay Rocheux’s outstanding invoices ... relieved [Rocheux] of any obligation to ship any material to [Defendants],” but proposed that withheld materials would be released to Defendants “only on the condition that, prior to shipment, [Defendants] open[] an irrevocable letter of credit in favor of Rocheux ... for an amount not less than the total amount of the open invoices.... ” (Steed Decl. Ex. H (Oct. 6, 2006 letter from Wendy Steed to Jeffrie Green).) The letter concluded “[t]he aforesaid letter of credit need be your only reply.” (Id.) The October 6, 2006 letter appears to have been the last correspondence between the parties on this matter.
Defendants argue that, by offering to pay on a C.O.D. basis or extend a letter of credit in the October 4 letter, they provided adequate assurance as a matter of law. While Defendants correctly note that courts have generally rеcognized that letters of credit provide adequate assurance of performance due,
see, e.g., Lustrelon, Inc. v. Prutscher,
What constitutes “adequate” assurance of due performance is subject to the same test of factual conditions. For example, where the buyer can make use of a defective delivery, a mere promise by a seller of good repute that he is giving the matter his attention and that the defect will not be repeated, is normally sufficient. Under the same circumstances, however, a similar statement by a known corner-cutter might well be considered insufficient without the posting of a guaranty or, if so demanded by the buyer, a speedy replacement of the delivery involved.
N.J. Stat. Ann. § 12A:2-609 cmt. 4. Given Defendants’ continued failure to pay outstanding invoices regarding the 2006 deliveries and warehouse goods, this Court cannot say as a matter of law that Rocheux’s demand for a letter of credit covering
Furthermore, it appears Defendants’ October 4 letter sought to change the terms of delivery of the warehouse goods.
16
The October 4 letter expressly contemplates extending the delivery рeriod for the retained goods through April 2007, and that Defendants would reserve 60-120 days to pay upon the deliveries if it provided a letter of credit. Alternatively, it requested that Rocheux propose a “discount for immediate C.O.D. payment rather than payment on extended terms.” (Steed Decl. Ex. G at 4.) Generally speaking, a buyer’s refusal to perform except upon conditions not required by the contract constitutes repudiation.
E.g., Aero Consulting Corp. v. Cessna Aircraft Co.,
However, nor can this Court determine as a matter of law that Defendants’ letter of October 4 constituted repudiation or provided inadequate assurance. These issues usually present questions of fact to be determined according to commercial standards.
See, e.g., Timmerman v. Grain Exchange, LLC,
C. Interest and Attorneys ’ Fees
Finally, with regard to interest and attorneys’ fees, Rocheux argues that it sent two written confirmations in response to each of Defendants’ purchase orders — the Terms and Conditions page and a subsequent invoice — both of which included terms for interest on overdue invoices at 1.5% per month and attorneys’ fees. Because the parties are merchants, Rocheux contends that these terms became part of the parties’ contract pursuant to N.J. Stat. Ann. § 12A:2-207.
UCC § 2-207 states:
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made eonditional on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
N.J. Stat. Ann. § 12A:2-207. Defendants respond that they never received the Terms and Conditions pages with Rocheux’s Order Acknowledgments, that they expressed objection to additional terms in advance of the purchase orders, that the subsequent invoices do not qualify as a “written confirmation” under UCC § 2-207, that the interest and attorneys’ fees terms sought by Rocheux materially altered the parties’ agreement, and that Rocheux waived these terms by failing to enforce them. Of these responses, Defendants only cross-move for summary judgment on the ground that the additional terms materially altered the parties’ agreement.
Defendants have presented evidence that they never received Terms and Conditions pages Rocheux claims it sent with the Order Acknowledgments. (See Green Deck ¶ 14; Oprisan Deck ¶¶ 6-7.) This evidence presents a genuine issue of material fact regarding whether the Order Acknowledgments contained the additional terms provided in the Terms and Conditions pages. Because Rocheux claims that the subsequent invoices also incorporated these terms, the Court begins with Defendants’ argument, raised in opposition to Rocheux’s motion for summary judgment, that § 2-207 does not apply to Rocheux’s subsequently sent invoices. For purposes of this issue, the Court draws all inferences in the light most favorable to Defendants as the non-moving party, and presumes that Defendants did not receive the Terms and Conditions pages.
1. Invoices as Written Confirmations Under UCC § 2-207
Defendants argue that Rocheux’s invoices are not “written confirmations” under the statute because Rocheux sent them after it accepted the Defendants’ purchase orders. Although Defеndants contest that they received the Terms and Conditions page (page 2) of Rocheux’s Order Acknowledgments, they do not dispute that they received the first page of the Order Acknowledgments. The Order Acknowledgments specify the customer purchase orders, expressly state “Rocheux Int’l acknowledges your order and here by [sic] confirms our acceptance as follows,” and identify the goods, quantities, and prices proposed in the purchase order.
(See, e.g.,
McRavin Deck Ex. F.) It is undisputed that Rocheux subsequently shipped goods related to the purchase orders to Defendants. Considering the express terms of the Order Acknowledgments and the parties’ course of dealing, this Court may conclude that the Order Acknowledgments constituted Rocheux’s acceptance of Defendants’ offers to purchase goods.
See
N.J. Stat. Ann. § 12A:2-206(2) (“Unless otherwise unambiguously indicated by the language or circumstances ... an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods.... ”). Yet, Rocheux did not send the respective invoices for the purchase orders until after it sent the Order Acknowledgments. Although the invoices were typically sent within a day of the shipment, they sometimes came a mat
It does not appear that New Jersey’s courts have considered whether a writing sent after the acceptance of goods can modify the parties’ agreement pursuant to N.J. Stat. Ann. § 12A:2-207. Accordingly, this Court must predict how the New Jersey Supreme Court would interpret this statutory provision.
Zamboni v. Stamler,
There is a considerable split of authority regarding whether a document sent after the delivery of goods qualifies as a “written confirmatiоn” capable of modifying the parties’ agreement under UCC § 2-207.
Compare Cosden Oil & Chem. Co. v. Karl O. Helm Aktiengesellschaft,
Here, there is no dispute that the Order Acknowledgments constituted written confirmations under § 2-207. Pursuant to the statute, each Order Acknowledgment thus “operate[d] as an acceptance.” N.J. Stat. Ann. § 12A:2-207. Generally speaking, “[o]nce a contract is formed, the parties may of course change their agreement by another agreement, by course of performance, or by conduct amounting to a waiver or estoppel. In order to determine the terms of such change, we look to UCC 2-208 and 2-209, not 2-207.”
CT Chems. (U.S.A.), Inc. v. Vinmar Impex, Inc.,
is intended to deal with two typical situations. The one is the written confirmation, where an agreement has been reached either orally or by informal correspondence between the parties and is followed by one or both of the parties sending formal memoranda embodying the terms so far as agreed upon and adding terms not discussed. The other situation is offer and acceptance, in which a wire or letter expressed and intended as an acceptance or the closing of an agreement adds further minor suggestions or proposals such as “ship by Tuesday,” “rush,” “ship draft against bill of lading inspection allowed,” or the like. A frequent example of the second situation is the exchange of printed purchase order and acceptance (sometimes called “acknowledgment”) forms.
N.J. Stat. Ann. § 12A:2-207 cmt. 1. Had Rocheux simply sent the ordered goods contemporaneously with the invoices without previously sending the Order Acknowledgment, this matter would appear to fall under the first scenario presented by the comment. Rocheux relies heavily upon this Court’s prior decision in
Phibro Animal Health U.S., Inc. v. Cornerstone AG Products,
Civ. No. 03-2664,
Rocheux also argues that the parties’ course of dealing, which spanned more than five years and always involved Order Acknowledgments and invoices bearing these additional terms, enables the invoice terms to become part of the parties’ bargain regardless of § 2-207. However, the Third Circuit rejected this contention in
Step-Saver Data Systems, Inc. v. Wyse Technology,
Because the invoices cannot supply the additional terms sought by Rocheux, the additional terms must derive from the Order Acknowledgment. As the Court noted above, there remains a genuine dispute of fact regarding whether or not Defendants received the Terms and Conditions pages containing the additional arguments. For this reason, the Court must deny Rocheux’s motion for summary judgment with regard to interest and attorneys’ fees. 18
2. Defendants’ Cross-Motion: Material Alteration
Having denied Rocheux’s motion, the Court considers Defendants’ cross-motion for summary judgment on the ground that the additional terms would materially alter the parties’ agreement. For purposes of adjudicating this issue, the Court must draw all inferences in the light most favorable to Rocheux as the non-moving party. The Court will therefore presume that Defendants did receive the Terms and Conditions pages with the Order Acknowledgments for purposes of this cross-motion.
Roсheux presently seeks to apply an 18% annual service charge and a flat attorneys’ fees rate calculated as 25% of Defendants’ outstanding balance, in accordance with the interest and attorneys’ fees terms stated on the Terms and Conditions pages of the Order Acknowledgments. Defendants argue that the interest and attorneys’ fees rates should not become a part of the contracts under N.J. Stat. Ann. § 12A:2-207, because they would materially alter the parties’ agreements and unduly burden Defendants. Based on Rocheux’s calculation of interest and the flat rate for attorneys’ fees, it appears that these terms would add approximately $2 million in interest and approximately $1 million in attorneys’ fees to Defendants’ liability if they apply to the parties’ agreements.
{See
Defs.’ Cross-Motion Br. at 28, 30.)
19
Defendants rely on New Jersey’s usury statute, N.J. Stat. Ann. § 31:1— 1 (proscribing certain interest rates exceeding 6% and 16%) and case law to
The Court notes that there is a considerable split of authority among jurisdictions regarding whether the material alteration determination presents a question of law or fact. In New Jersey, two federal district court decisions resolved the matter as presenting a question of fact for the jury,
ICI Australia Ltd. v. Elliott Overseas Co.,
In deciding whether the additional terms materially altered the parties’ agreement, this Court begins with the UCC comments on § 2-207.
See El Paso Pipe & Supply Co.,
a clause negating such standard warranties as that of merchantability or fitness for a particular purpose in circumstances in which either warranty normally attaches; a clause requiring a guaranty of 90% or 100% deliveries in a case such as a contract by cannery, where the usage of the trade allows greater quantity leeways; a clause reserving to the seller the power to cancel upon the buyer’s failure to meet any invoice when due; a clause requiring that complaints be made in a time materially shorter than customary or reasonable.
a clause setting forth and perhaps enlarging slightly upon the seller’s exemption due to supervening causes beyond his control, similar to those covered by the provision of this Article on merchant’s excuse by failure of presupposed conditions or a clause fixing in advance any reasonable formula of proration under such circumstances; a clause fixing a reasonable time for complaints within customary limits, or in the case of a purchase for sub-sale, providing for inspection by the sub-purchaser; a clause providing for interest on overdue invoices or fixing the seller’s standard credit terms where they are within the range of trade practice and do not limit any credit bargained for; a clause limiting the right of rejection for defects which fall within the customary trade tolerances for acceptance “with adjustment” or otherwise limiting remedy in a reasonable manner (see Sections 2-718 and 2-719).
N.J. Stat. Ann. § 12A:2-207 cmts. 4, 5. “[Wjhether an addition to a contract constitutes a material alteration ... depends on the unique facts of every case.”
El Paso Pipe & Supply Co.,
In determining whether the additional terms constituted an unreasonable surprise, this Court considers a number of factors, including: (1) the parties’ prior course of dealing; (2) industry custom; (3) how clearly the additional terms were marked in the confirmation; and (4) whether the additional terms appeared in the parties’ standard forms.
See El Paso Pipe,
a. Surprise
In this case, Rocheux has presented evidence that it sent Terms and Conditions pages with each Order Acknowledgment it sent related to the 2006 deliveries.
(E.g.,
McRavin Decl. Ex. F.) Rocheux has also presented evidence that it sent Defendants hundreds of invoices and credit memos bearing the same additional terms for interest and attorneys’ fees as the 2006 invoices
20
between 2000 and 2006 with regard to prior purchase orders. (McAlindin Decl. Ex. E pts. 1-16.) These forms bear Defendants’ bates stamp, and many of them have been stamped “Ok to pay.” Each of these forms — both those related to the 2006 deliveries and those related to prior purchases — appear to be Rocheux’s standard printed sales forms. Furthermore, the terms for interest and attorneys’
Defendants argue that they have presented evidence that they previously objected to additional terms and that Rocheux waived these terms by not charging interest or attorneys’ fees prior to the 2006 deliveries. Neither argument has evidentiary support. Mr. Green’s Declaration, which Defendants rely upon to demonstrate previous objection to additional terms, states that he met with Rocheux salesman Michael Flood at the beginning of the parties’ relationship, ostensibly in or about 2000. The Declaration further states that Mr. Green advised Mr. Flood that “[Defendants] do not accept additional terms and conditions from our vendors .... [Mr. Flood] agreed that if we did business, it would be on the terms I outlined and he agreed to them on behalf of Rocheux.” (Green Decl. ¶ 11.) However, these statements refer to the parties’ negotiation expectations, and do not indicate that the parties formed a contract for the sale of goods that was limited by Mr. Green’s terms. Furthermore, Defendants do not suggest that Rocheux previously proposed terms for interest and attorneys’ fees, and that Defendants rejected these terms. Rather, the undisputed records indicates that Defendants began making orders, and Rocheux began sending confirmatiоns and invoices containing additional terms that Defendants never noticed or rejected. Under such circumstances where the non-assenting party does not respond to the additional terms, comment 6 to § 2-207 instructs that “it is both fair and commercially sound to assume that [the additional terms’] inclusion has been assented to.” N.J. Stat. Ann. § 12A:2-207 cmt. 6;
see also Vulcan Auto. Equip., Ltd. v. Global Marine Engine & Parts, Inc.,
With regard to Defendants’ waiver argument, the Declarations of Mr. Green and Defendants’ accounting representative Catalin Oprisan generally aver that Rocheux never charged interest or attorneys’ fees for prior past-due invoices. (Green Decl. ¶ 15; Oprisan Decl. ¶ 7.) Other than the 2006 deliveries, Defendants do not specify another time when they fell behind on paying their invoices or how those defaults were remedied. Rocheux disputes that Defendants ever fell behind on accounts so as to trigger these default terms. (Rocheux’s Reply Br. at 22; Stephanoff Decl. ¶ 19.) However, even if Rocheux declined to enforce such terms on prior occasions, the Terms and Conditions page contained a savings clause specifying that “Rocheux’s failure to insist on performance of any of the terms and conditions ... shall not
Having carefully considered the parties’ evidence under the factors outlined above, this Court concludes that Defendants should have known of the additional terms appearing on the hundreds of sales forms, and that Defendants have not met the burden of proving unreasonable surprise.
b. Hardship
Having determined that the additional terms did not constitute unfair surprise, the Court notes that a number of courts have suggested that hardship does not provide independent grounds for a finding of material alteration.
See, e.g., Union Carbide Corp. v. Oscar Mayer Foods Corp.,
As noted above, Defendants argue that Rocheux’s calculations of interest and attorneys’ fees (approximately $3 million combined) would cause Defendants significant hardship, considering that Rocheux seeks only $2.5 million in damages. However, the Court notes that the current interest and attorneys’ fees calculations necessarily reflect the protracted nature of the parties’ attempts to resolve the instant dispute. Had the parties resolved the matter within one year as opposed to four, the interest and attorneys’ fees would have been roughly 1/3 of the current estimates.
21
The Court bears these circumstances in mind in assessing Defendants’ hardship argument.
See Bayway Refining,
Defendants cite New Jersey’s usury statute and cases to challenge the inclusion of these terms under UCC § 2-207.
See, e.g., Springfield School Dist. R-12 v. Transamerica Ins. Co.,
The Court is not persuaded that New Jersey’s usury statute, which Defendants concede does not apply to the instant dispute,
see
N.J. Stat. Ann. § 31:1-6 (“No corporation ... shall plead or set up the defense of usury to any action brought against it to recover damages or enforce a remedy on any obligation executed by said corporation.”), demands a contrary finding. The 18% rate ■ allegedly proposed by Rocheux does not substantially exceed the 16% rate imposed by the usury statute for written contracts that specify rates of interest.
See
N.J. Stat. Ann. § 31:1-1. Defendants have not presented evidence that Rocheux’s interest rate exceeds the trade practice, and Rocheux’s proposed interest rate is within the range permitted by the majority of courts listed above. The fact that Defendants’ delays have led to substantial amounts of accrued interest does not by itself warrant a finding of hardship.
See Advance Concrete Forms,
The attorneys’ fees term presents a slightly more difficult issue. Defendants correctly note that courts in Pennsylvania and Utah have squarely rejected additional terms for attorneys’ fees under § 2-207.
Herzog,
The Court notes that in many of the cases allowing the incorporation of attorneys’ fees under § 2-207, it appears that the parties did not object to the additional term, and most of the cases on both sides of the issue contain scant discussion of the material impact of the attorneys’ fees terms. Based on this Court’s review of these decisions, it appears that Herzog is the only one to discuss material alteration at length. In considering an identical 25% attorneys’ fees provision, the Herzog court reasoned:
in common experience an attorney’s fee provision is considerably less common than an interest rate provision; thus, it would not be as readily expected or anticipated. Secondly, when found, such clauses are usually less than 25% of the balance, often 10 or 15%, thus bringing the reasonableness of this particular clause into question. Thirdly, a lump sum addition of 25% changes the obligor’s financial obligation under the contract to, what must be considered, a material degree. Fourthly, we choose to follow the precedent of Johnson Tire Service, Inc. v. Thorn, Inc.,613 P.2d 521 , 529 [524] (Utah, 1980)....
A reasonable term for attorneys’ fees, which presumes the need to take legal action to recover sums owed under contract, more closely resembles a term for interest on past-due invoices than any of the examples of material alteration provided by comment 4 to § 2-207. Under the unique facts of this case, the Court cannot say as a matter of law that the attorneys’ fees provision allegedly added by Rocheux’s Order Acknowledgments constituted an unreasonable hardship.
Because Defendants have failed to demonstrate unreasonable surprise or hardship, the Court concludes that the interest and attorneys’ fees provisions did not materially alter the parties’ agreements, and the Court will deny Defendants’ cross-motion in this regard.
IV. ROCHEUX’S CHALLENGE TO DEFENDANTS’ EXPERT WITNESSES
This Court’s rulings with respect to Defendants’ cross-motion to redesignate and Rocheux’s motion for summary judgment on the 2006 deliveries necessarily affect the relevance of the testimony of Defendants’ proposed expert witnesses. An expert witness who did not examine the 2006 deliveries is not qualified to testify as to the factual issue regarding the portion of the 2006 deliveries that were unusable (losses) or otherwise nonconforming. Because the parties’ briefing on the expert witness issue did not anticipate the limitations now imposed by this Court with regard to the scope of the remaining claims, the Court will deny Rocheux’s motion in limine without prejudice and permit Rocheux to renew their motion in light of this Court’s rulings on the cross-motions.
y. CONCLUSION
For the aforementioned reasons, the Court will grant Rocheux’s motion for summary judgment (Doc. No. 88) in part without prejudice and deny Defendants’ cross-motion for summary judgment (Doc. No. 92). Defendants will have 15 days from receipt of the accompanying Order to submit supplemental documentation and revised calculations of their loss offsets setting forth their exact losses, by value and pound, for 2006. Rocheux will have 10 days to respond to Defendants’ submissions on this issue. The Court will allow Defendants to redesignate their affirmative defenses, but the Court will limit these counterclaims to the 2006 deliveries. The Court will also deny Rocheux’s motion in limine (Doc. No. 87) without prejudice and permit Rocheux to renew this motion in light of this Court’s rulings on the cross-motions. An appropriate form of order accompanies this Memorandum Opinion.
Notes
. Indeed, the invoices attached to Ms. McRavin’s Declaration bear Defendants' bates stamp. (E.g., McRavin Decl. Ex. K.)
. Rocheux’s damages calculation consists of $2,116,571.76 in damages for the 2006 deliveries, $387,699.70 for the deficiency related to the resale of the warehouse goods, and $18,562.36 and $56,622.67 in freight and storage charges related to the resale of the warehouse goods. (Pl.'s Br. at 5-6.) According to the Declaration of Mr. Stephanoff and its accompanying Exhibit A, Rocheux seeks $2,056,304.68 in interest on the 2006 deliveries and warehouse goods as of May 31, 2010.
. The Complaint also contains a claim for breach of contract related to the warehouse goods. (Compl. Count V.) It appears that the alleged breach underpinning this Count took place in or about September 2006. (Compl. ¶ 40.)
. Defendants’ theory appears to be that, because the UCC permits installment contract buyers to recoup damages for nonconformities, see UCC § 2-717, then they could withhold sums for nonconformities that occurred during prior years' deliveries. While that may be true, Defendants did not plead a recoupment defense, and, as the Court explains infra note 10, Defendants have not presented evidence that they actually did withhold specific sums as recoupment for nonconformities occurring with specific deliveries.
. Defendants also argue that Rocheux had an opportunity to depose Dr. Luna regarding her calculation of offsets for nonconforming goods delivered between 2000 and 2005. (Defs.’ Cross-Motion at 18.) The Court notes, however, that this deposition did not take place until October 2009, well after the close of discovery in November 2008, and the deposition transcript suggests that Dr. Luna’s testimony on these damages came as a surprise to Plaintiff’s counsel. (See McAlindin Certif. Ex. D (Luna Deposition) at 87-88.) Because Dr. Luna is not a fact witness, but a damages expert who relies upon the factual allegations of Defendants' fact witnesses, this argument does not address Rocheux's claim that it was deprived of an opportunity to conduct discovery on Defendants' proposed counterclaims.
. The warehouse goods are not included in this group, because it is undisputed that these goods were never delivered to Defendants, and Defendants have raised a distinct defense to liability for these goods.
. The Court notes that Defendants have also presented a counterclaim for breach of warranties seeking offsets on the basis that portions of the 2006 deliveries did not conform to Rocheux’s alleged “best-pricing” and "virgin-grade” warranties. However, these purported offsets for breach of warranty do not preelude consideration of Plaintiff's claim for the contract price of the goods.
See, e.g., Phibro Animal Health U.S., Inc. v. Cornerstone AG Prods.,
. Even if Defendants had satisfied the burden of production, it does not appear that their estoppel affirmative defense would preclude the entry of judgment on the portion of goods that Defendants concede they accepted.
See infra
Part III.A.2. Because Defendants seek to estop Rocheux from collecting the full contract price on the 2006 deliveries, their estoppel affirmative defense resembles Defendants’ other counterclaims seeking offsets. However, as this Court has previously noted,
see supra
note 7, the availability of offsets does not preclude summary judgment on an otherwise undisputed contract claim.
See, e.g., Phibro,
. The Court notes that, in addition to the buyer's options provided by § 2-601, § 2-612 provides an additional option for buyers who have purchased via an installment contract: "[t]he buyer may reject any installment which is non-conforming if the nоn-conformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents.... ” N.J. Stat. Ann. § 12A:2-612(2). Although Defendants argue that the parties' transactions constituted a series of installment contracts (Defs.’ Br. at 65-67), Defendants do not argue that they rejected an installment for nonconformities that substantially impaired the value of the installment.
. Alternatively, Defendants contend that summary judgment cannot be granted because they have presented evidence that they exercised their right under N.J. Stat. Ann. § 12A:2-717 to recoup damages caused by the nonconformities. However, Defendants did not plead a defense on the basis of recoupment, and even if they did, Defendants’ only purported evidence regarding recoupment — the declaration of their accounting representative Catalin Oprisan (see Defs.' Cross-Motion Br. at 68) — does not indicate that Defendants actually did withhold payment for nonconforming goods, let alone when Defendants withheld payment, how much Defendants withheld, for which deliveries payments were withheld, and when Defendants notified Rocheux of its election to recoup payment for nonconforming goods. (See Oprisan Decl. ¶ 4 (explaining that, "on a number of occasions between 2000 and the end of 2006,” Rocheux promised credits for nonconforming goods, to which Mr. Oprisan responded "the amounts of the credits needed to be worked out,” also telling Rocheux’s representatives "that some amount would be held back until the credits were resolved and that payments which were made would be made on account and subject to further adjustment for the credits”).) Defense counsel did not fill in these evidentiary gaps during oral argument, but instead relied on conclusory assertions of their statutory right to recoupment. (Oral Argument Tr. at 38-39.) Furthermore, Defendants do not suggest that, due to other nonconformities, they intentionally withheld any sums related to the portion of the 2006 deliveries that they used, sold, and, thereby, accepted.
In the absence of colorable evidence on this issue, Defendants have not established a genuine issue of fact regarding recoupment that would preclude summary judgment on the
. It appears that Dr. Luna's calculation of "loss” offsets аre based upon Defendants' business records regarding the amount of material that was unusable. (See Luna Report sched. 7.2 n. 1 (indicating that U.S. Merchants provided the write-off schedule).)
. For purposes of determining the amount of goods Defendants accepted, the Court adopts Defendants’ distinction between nonconforming goods that they used and sold and the nonconforming goods that they could not use, which Dr. Luna refers to as "losses.” Accordingly, when the Court refers to Defendants' losses in this section, the Court means the portion of the 2006 deliveries that Defendants used and sold, regardless of nonconformities.
. Although Mr. Margaros's statements regarding rejection and or revocation of the nonconforming goods are only slightly more specific than his statements regarding promises of credits (compare Margaros Decl. ¶ 11 with id. ¶ 12), which the Court found insufficient to present a question of fact regarding estoppel, see supra Part III.A.l, the Court finds that the detailed records of loss, when combined with Mr. Margaros’s statements regarding notifying Rocheux that Defendants were rejecting and/or revoking the goods “on each such occasion” (Margaros Decl. ¶ 11), satisfies the "mere scintilla” standard, such that a reasonable jury could conclude that Defendants rejected or revoked a portion of the 2006 deliveries.
. The Court notes that Rocheux's secondary arguments, based on its claim for an account stated and UCC §§ 2-515 and 2-603, do not completely resolve the dispute such that the Court may grant final summary judgment in Plaintiff's favor for all the 2006 deliveries. Defendants have presented evidence creating issues of fact regarding whether they agreed to a specific amount owed for the 2006 deliveries (Green Decl. ¶¶ 24-26), or whether they received instructions from Rocheux within a reasonable time from notification of the defects (Margaros ¶ 11).
. The parties do not dispute that they qualify as merchants under the UCC.
. The Court notes that Rocheux also contends that Defendants sought to buy the warehouse goods for less than the original contract price. (Steed Decl. ¶ 15.) However, based on this Court’s review of the original purchase orders and the October 4 letter, the Court has not been able to discern the price disparity claimed by Rocheux.
. The present situation differs from the "battle of the forms” that occurs when the buyer and seller exchange forms presenting different terms.
See Northrop Corp.,
. Because the Court denies Rocheux’s motion on the basis of Defendants’ argument that § 2-207 does not apply to the subsequent invoices, the Court need not consider Defendants' other responsive arguments sounding in prior objection to the terms and waiver.
. The parties do not consider how the interest and attorneys’ fees would be affected by a finding that Defendants rejected and/or revoked a portion of the 2006 deliveries. However, because the Court is denying Rocheux's motion for summary judgment as it regards interest and attorneys’ fees, the Court need not resolve the exact interest and attorneys’ fees calculations at this time.
. As noted above, the invoices refer to "reasonable attorneys’ fees,” while the Terms and Conditions pages have a term for attorneys' fees in the amount of 25% of the outstanding balance.
. Eighteen percent interest on $2.5 million is $450,000, and 25% fees of the combined principle and interest is $737,500. Under this hypothetical, the combined interest and fees would be $1,187,500.
. Defendants' accounting representative Catalin Oprisan states that, to his knowledge, none of Defendants’ other suppliers required interest and attorneys’ fees terms, adding that, based on his experience, "such an agreement would be unusual and not standard in our business.” (Oprisan Decl. ¶ 8.) However, Defendants also state that they never knew of the interest and attorneys’ fees provisions appearing on Rocheux's Order Acknowledgments, invoices, and credit memos from the past six years. Even construing industry custom in Defendants’ favor, the Court cannot say that this factor alone demonstrates unreasonable hardship, for the same reasons that this Court found that the attorneys’ fees term did not constitute unreasonable surprise.
. Based on Rocheux’s proposed terms, the 18% interest rate surpasses the 25% attorneys’ fees provision in terms of additional costs to the defaulting party for any dispute that lasts longer than a year and a half. The longer the dispute goes, the more the charged interest exceeds attorneys' fees.