ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT
THIS CAUSE came before the Court upon Plaintiffs Motion for Partial Summary Judgment (dkt # 60).
UPON CONSIDERATION of the Motion, Defendants’ Response, Plaintiffs’ Reply, the pertinent portions of the record, and being otherwise fully advised in the premises, the Court enters the following Order.
I. BACKGROUND
This diversity case arises out of a contract dispute between Plaintiff Textron Financial Corp. (“Textron”), and Defendants Lentine Marine Inc. (“LMI”), Louis F. Lentine, and Julie A. Lentine (collectively, “the Lentines”). Textron is a Delaware commercial finance company. LMI is a Florida corporation in the business of selling boats, boat equipment, and related marine materials and services. Individual Defendants Louis Lentine and Julie Len-tine are Florida citizens and the proprietors of LMI.
The Parties’ business relationship began in September 2001, when Textron and LMI entered into a Credit and Security Agreement.
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(Facts, dkt #49, ¶ g n. 1). At that time, Louis Lentine also entered into a Personal Guaranty Agreement with Textron. (Facts, dkt # 49, ¶ i). On November 7, 2006, Textron and LMI entered into a new Credit and Security Agreement (“the Security Agreement”), which superseded the 2001 agreement. (Facts, dkt # 49, ¶ g n. 1). Under the Security Agreement, Textron agreed to finance LMI’s acquisition of new inventory, with Textron taking a security interest in the inventory. (Facts, dkt #49, ¶¶ h, 1). Textron perfected its security interest by filing the requisite UCC Financing Statement in 2001, and also filed a UCC Financing Continuation and a UCC Financing Amend
In November 2006 Julie Lentine also entered into a personal guaranty agreement with Textron (together with Louis Lentine’s agreement, “the Guaranty Agreements”). (Facts, dkt # 49 ¶ j). Under the terms of the Guaranty Agreements, the Lentines each agreed to act as guarantors for LMI, and to be personally liable in the event that LMI defaulted on any of its obligations to Textron. (Louis Lentine Guaranty Agreement, dkt # 49-4 ¶ 1; Julie Lentine Guaranty Agreement, dkt # 49-5 ¶ 1).
On July 8, 2008, Textron filed a Verified Complaint (dkt # 1), alleging that LMI had defaulted under the terms of the Security Agreement, and that LMI had breached the agreement by continuing to sell items of inventory without making payments to Textron. Compl. ¶ 35. Textron accelerated the payment of all debt due under the Security Agreement, and alleged that the total amount due, including interest and costs, exceeded $6.5 million. Compl. ¶¶ 17, 18. Textron’s Complaint sought (1) a preliminary injunction prohibiting LMI from selling inventory without remitting payment to Textron, (2) money damages for the sums owing under the Security Agreement, (3) repayment from the Lentines in their individual capacities as guarantors pursuant to the Guaranty Agreements, and (4) replevin of the LMI inventory in which Textron had perfected a security interest. On October 27, 2008, Defendants filed an Answer (dkt #48) broadly denying Plaintiffs allegations.
Following further negotiations by the parties, on September 25, 2008, this Court, upon the consent of Plaintiff and Defendants, issued Writs of Replevin (dkt #’s 42, 43), pursuant to which LMI returned its inventory to Textron. On the same date, and also with the consent of the Parties, this Court entered a Temporary Restraining Order (dkt #39) prohibiting LMI from selling or otherwise disposing of any of its inventory, and directing LMI to deliver to Textron any proceeds from past or future inventory sales. These consent orders effectively mooted Textron’s preliminary injunction and replevin claims. Textron has since repossessed LMI’s inventory, and has been able to recoup at least some of LMI’s debt by reselling certain items of inventory back to their original manufacturers, and by selling others items through local marine dealers Treasure Coast Boat Center and Legendary Marine, Inc.
Plaintiff filed the instant Motion for Partial Summary Judgment (dkt # 60) on March 3, 2009, seeking the following from Defendants; (1) $843,266.81 for items of inventory sold without remitting payment to Plaintiff; (2) $25,489.50 for costs incurred to repossess LMI’s inventory; (3) $916,201.44 for the deficiency between the full cost of the repossessed items and what Plaintiff was able to recover for them at resale; (4) $126,993.28 in unpaid interest, and (5) attorneys’ fees and costs.
II. STANDARD OF REVIEW
The applicable standard for reviewing a summary judgment motion is unambiguously stated in Rule 56(c) of the Federal Rules of Civil Procedure:
The judgment sought should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits 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.
Summary judgment may be entered only where there is no genuine issue of material fact.
Twiss v. Kury,
In applying this standard, the district court must view the evidence and all factual inferences therefrom in the light most favorable to the party opposing the motion.
Id.
However, the nonmoving party “may not rely merely on allegations or denials in its own pleading; rather, its response must — by affidavits or as otherwise provided in this rule — set out specific facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56(e)(2). “The mere existence of a scintilla of evidence in support of the [nonmovant’s] position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmovant].”
Anderson v. Liberty Lobby, Inc.,
III. ANALYSIS
A. Applicability of Florida Law
On a motion for summary judgment, the materiality of facts is determined with reference to the applicable substantive law.
Allen,
While it would have been preferable for the parties to brief this issue, or better still, to have expressly stipulated to the substantive law, the Court holds that because neither party disputes whether Florida law controls, and because both Parties’ briefs rely exclusively upon Florida law, the choice of law issue has been waived. The Court will accordingly apply Florida law.
See Topp, Inc. v. Uniden Am. Corp.,
B. Plaintiff’s Substantive Claims
As discussed above, Plaintiffs Complaint originally included five claims. Counts I and V, seeking a preliminary injunction and replevin, respectively, have been resolved through consent orders. Count II was styled as a breach of contract claim seeking recovery from LMI under the Security Agreement; Count III sought recovery from Louis Lentine under his personal guaranty agreement; Count IV,
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Plaintiff seeks recovery for: (i) the amount allegedly owed by LMI for items of inventory sold without repaying Plaintiff; (ii) the amount of deficiency
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allegedly owed by LMI for items of repossessed inventory resold or to be resold; (iii) costs allegedly incurred by Plaintiff in the course of repossessing LMI’s inventory, (iv) the amount of unpaid interest that LMI allegedly owes, and (v) attorneys’ fees and costs. As discussed in further detail below, Defendants’ Response contests only the issue of whether LMI owes Plaintiff a deficiency, without rebutting the other claims. Therefore, with respect to the remaining issues, if Plaintiff has met its initial burden, summary judgment for Plaintiff on those issues is proper, because Defendants have failed to set out specific facts showing the existence of material facts for trial. Fed.R.Civ.P. 56(e);
Celotex Corp. v. Catrett,
1. Breach of Contract Claim for Items Sold Without Repayment
Defendants have stipulated that LMI is liable to Plaintiff for inventory that LMI sold without repaying Plaintiff as required under the Security Agreement, and have even stipulated to the amount of damages due on this claim. The Court finds that summary judgment in favor of Plaintiff is proper on this claim.
Under Florida law, the elements of a breach of contract claim are: “(1) the existence of a contract, (2) a breach of the contract, and (3) damages resulting from the breach.”
Rollins, Inc. v. Butland,
2. Repossession Costs
Summary judgment in favor of Plaintiff is also appropriate on its second claim, for repossession costs arising out of breach of the Security Agreement. As discussed above, the parties have stipulated to the existence and validity of the agreement and that LMI breached the agreement. It is likewise undisputed that Plaintiff incurred costs in the course of repossessing inventory from LMI, and that pursuant to the Security Agreement, LMI was obligated to pay the cost of “retaking, holding, preparing for sale, selling and the like” in
3.Interest
Summary judgment in favor of Plaintiff is appropriate on its claim for interest. Under the Security Agreement, LMI is obligated to pay interest and charges on inventory financed by Plaintiff. (Security Agreement, dkt # 49-3, ¶ 4(a)). Plaintiff has supplied an affidavit and expense report showing that Defendants are liable for, and have not repaid, $126,993.28 worth of interest. (Layton Affidavit, dkt # 62-2, ¶ 13; Plaintiffs Ex. 1). Defendants’s Response does not dispute that Defendants owe interest under the Security Agreement, and sets out no specific facts to rebut Plaintiffs calculation of the interest amount. There are no genuine issues of fact with respect to Plaintiffs interest claim, and summary judgment on that claim is accordingly granted in favor of Plaintiff in the amount of $126,993.28.
4.Attorneys’ Fees
Summary judgment in favor of Plaintiff is appropriate on the Defendants’ liability for attorneys’ fees; however, the Court will withhold ruling upon the proper amount of the attorneys’ fees sought until Plaintiffs counsel has completed its work in this matter. Under the Security Agreement, LMI is obligated to pay
[A]ll other costs and expenses incurred by the Secured Party in connection with this Agreement, including but not limited to attorneys’ fees and other legal expenses in connection with or arising out of any deficiency suit, collection actions or otherwise following an Event of Default.
(Security Agreement, dkt #49-3, ¶ 4(a)). Plaintiffs counsel has submitted affidavits reflecting attorneys’ fees, costs, and expenses incurred to date. (Affidavit of Costs, dkt # 62-5; Affidavit of Miscellaneous Litigation Expenses, dkt #62-6; Affidavit of Time Spent, dkt # 62-7). Defendants’ Response does not dispute that Defendants owe attorneys’ fees under the Security Agreement.
There are no genuine issues of fact with respect to Defendants’ liability for attorneys’ fees, and summary judgment on that issue is granted in favor of Plaintiff. However, Plaintiffs Motion for Summary Judgment is denied without prejudice with respect to the amount of attorneys’ fees and costs for which Defendants are liable. Upon the conclusion of its work on behalf of Plaintiff in this action, Plaintiffs counsel may submit detailed affidavits documenting the total amount of time spent working for Plaintiff, and the total amount of attorneys’ fees, expenses, and costs incurred. At that time, the Court will entertain a motion seeking an award of attorneys’ fees and costs.
5.Deficiency
Summary judgment in favor of Plaintiff is proper on the issue of Defendants’ liability for a deficiency payment under the Security Agreement. However, summary judgment is not warranted as to the issues of damages. There is insufficient information in the record to determine whether Plaintiffs dispositions were commercially
It is undisputed that under Florida law and the terms of the Security Agreement, Defendants are liable to Plaintiff for any deficiency. § 679.608(d), Fla. Stat.; (Security Agreement, dkt # 49-3, ¶ 4(a), 11). It is also undisputed that LMI has defaulted on its obligations to Plaintiff under the Security Agreement, and the Parties agree on the standard for whether a secured party is entitled to a deficiency (which is discussed in detail below). However, Defendants, through their Response and the attached affidavit of Louis Lentine, seek to place in issue the commercial reasonableness of Plaintiffs dispositions,
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which would shift the burden to Plaintiff to prove that its sales were in fact commercially reasonable or that the fair market value of the resold inventory was less than LM’s debt.
Burley v. Gelco Corp.,
Under Article 9 of the Uniform Commercial Code, as codified in the Florida statute governing default on security obligations, a secured party may take possession of collateral after a default. § 679.609, Fla. Stat. The secured party then “may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or after following any commercially reasonable preparation or processing.” § 679.610(1), Fla. Stat. “Every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable.” § 679.610(2), Fla. Stat. The rules governing commercial reasonableness are in place “to protect the debtor, because they help prevent the creditor from acquiring the collateral at less than its true value or unfairly understating its value so as to obtain an excessive deficiency judgment.”
Burley,
A defaulting party is liable for any deficiency remaining after the secured party disposes of collateral. § 679.608(d), Fla. Stat. To obtain the deficiency, the secured party must show that the disposition was commercially reasonable or that the fair market value of the collateral was less than the debt that the collateral secures.
Burley,
A disposition of collateral is made in a commercially reasonable manner if the disposition is made:
(a) In the usual manner on any recognized market;
(b) At the price current in any recognized market at the time of the disposition; or
(c) Otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition.
Subsections (2)(a) and (2)(b) are irrelevant here, as the term “recognized market” applies “only to markets in which there are standardized price quotations for property that is essentially fungible, such as stock exchanges.”
Burley,
Plaintiff argues that it need not make a showing as to commercial reasonableness, because Louis Lentine’s affidavit is insufficient to place commercial reasonableness at issue. Louis Lentine’s affidavit asserts, on the basis of his extensive experience in the marine retail industry that the boats resold were “new ... and could have been sold for at least the cost of the boats.” (Louis Lentine Affidavit, dkt # 70-2, ¶¶ 6-8). Under § 679.626, Florida Statutes commercial reasonableness need merely be “placed in issue” for the burden to shift to Plaintiff. A debtor need not affirmatively establish commercial unreasonableness, and Plaintiff cites no authority suggesting that Florida Statutes § 679.626 has been or should be interpreted to impose such a requirement.
In support of its argument, Plaintiff cites § 679.627(1), Florida Statutes. However, that provision states only that
The fact that a greater amount could have been obtained by a disposition ... at a different time or in a different method ... is not of itself sufficient to preclude the secured party from establishing that the disposition ... was made in a commercially reasonable manner.
§ 679.627(1), Florida Statutes. In other words, that provision relates to the standard for determining whether a secured party has proven commercial reasonableness, not whether a debtor has put it in issue in the first place. The burden shifts to Plaintiff to prove the commercial reasonableness of its disposition, or that the fair market value of the boats was less than LMI’s debt.
Plaintiff has not met the burden of proving commercial reasonableness or fair market value. The Layton Affidavit states that twenty-eight inventory items were sold back to their manufacturers pursuant to contractual agreements, at a price supposedly higher than that currently available on the retail market. (Layton Affidavit, dkt #62-2, ¶¶ 20-22). Plaintiff, however, provides no facts about these contracts, or how such contracts are generally formulated in the marine retail business, that would permit the Court to find that their contents or formulation are in conformity with reasonable commercial practices among dealers in the industry. Plaintiff has not submitted examples of these contracts, and Plaintiffs exhibits do not explain, for instance, how the re-purchase prices in the contracts were determined. Nor has Plaintiff submitted factual evidence, aside from the opinion of Mr. Layton, supporting its claim that the prices obtained by reselling to manufacturers are higher than those that could be obtained by reselling them by other means.
Plaintiff also submits affidavits from representatives of Treasure Coast and Legendary Marine, testifying on the basis of their experience in the marine retail industry that they received fair market value for the items they resold. (Grane
Plaintiff claims that it has submitted sufficient evidence to prove that every aspect of the dispositions were commercially reasonable, but its own Statement of Material Facts raises questions as to whether that is the case. In disposing of secured collateral, “[t]he importance of correct notice cannot be overstated. Notice is an integral aspect of whether the disposition is ‘commercially reasonable’ under chapter 679.”
Burley,
Lastly, Plaintiff has not adequately supported its speculative claim that an average of 77% recovery is the best that can be achieved on the inventory that remains to be resold. Even if it were proper for the Court to make a determination about the deficiency remaining on these items before they have been sold, Plaintiff has supplied no factual evidence indicating why more than 77% recovery on the remaining items is unfeasible, other than that this is the average percentage recovery on resold items to date.
Plaintiff generally argues that Defendants’ Response rests largely on the opinion of Louis Lentine, and is therefore inadequate to defeat Plaintiffs Motion for summary judgment. However, it is Plaintiff as the moving party here who bears the burden in the first instance of proving the absence of material issues of fact before the burden of rebuttal shifts to Defendants,
Adickes,
Summary judgment in favor of Plaintiff is appropriate as to the joint and several liability of the Lentines. Under their respective Guaranty Agreements, the Len-tines are each individually liable for the obligations of LMI in the event of default. (Guaranty Agreements, dkt #’s 49-4, 49-5, ¶ 1). The Guaranty Agreements are unconditional and irrevocable, and waive any right to require Plaintiff to first exhaust its remedies against LMI. (Guaranty Agreements, dkt #’s 49-4, 49-5, ¶4(a)). Defendants have stipulated to the validity of the Guaranty Agreements as submitted to the Court, and Defendants’ Response does not dispute that Julie Lentine and Louis Lentine are each personally liable under their respective Guaranty Agreements, nor does it set out specific facts rebutting Plaintiff on this issue.
There are no genuine issues of fact with respect to the joint and several liability of Louis Lentine and Julie Lentine, and summary judgment on that issue is accordingly granted in favor of Plaintiff in the total amount awarded in this Order, plus the proper deficiency amount, if any, to be determined at trial, and the total amount of attorneys’ fees and costs ultimately awarded.
IV. CONCLUSION
For the foregoing reasons, it is
ORDERED AND ADJUDGED that Plaintiff Textron Financial Corporation’s Motion for Partial Summary Judgment (dkt # 60) is GRANTED IN PART AND DENIED IN PART. The Motion is GRANTED on the issues of (1) inventory sold without repayment, in the amount of $843,266.81, (2) repossession costs, in the amount of $25,489.50, (3) interest, in the amount of $126,993.28 and (4) the joint and several liability of Louis Lentine and Julie Lentine. It is further
ORDERED AND ADJUDGED that the Motion is GRANTED on the issue of Defendants’ liability for Plaintiffs attorneys’ fees, costs, and expenses, but DENIED WITHOUT PREJUDICE as to the total amount thereof to be awarded, pending a full accounting by Plaintiffs counsel at the conclusion of this matter. It is further
ORDERED AND ADJUDGED that the Motion is GRANTED on the issue of Defendants’ liability for a deficiency under the Security Agreement, but DENIED as to the commercial reasonableness of Plaintiffs dispositions, the fair market value of the resold inventory, and the correct amount of the deficiency. This matter will proceed to trial on those issues alone.
Notes
. To the extent possible, the factual background is taken from the Summary of Uncontested or Stipulated Facts (''Facts”) that the Parties submitted to the Court on November 13, 2008, as part of their Joint Scheduling Report (dkt # 49). The Parties have stipulated that true and correct copies of all the relevant agreements were attached to the Joint Scheduling Report. (Facts, dkt # 49, ¶ g, i, j)-
. Count IV is mislabeled in the Complaint as “Count VI.”
. That is, the difference between the amount that Plaintiff paid to finance LMTs acquisition of the inventory, and the amount that Plaintiff eventually recovered for the inventory upon resale.
. Defendants do not challenge the validity of the Security Agreement or the Guaranty Agreements on grounds of unconscionability, illegality, or any other basis.
. Defendants’ Response asserts that the boats resold were "new ... and could have been sold for at least the costs of the boats.” Louis Lentine, on the basis of more than forty years of experience in the marine retail industry, makes the same claim in his affidavit. (Louis Lentine Affidavit, dkt # 70-2, ¶¶ 6-8).