Sports South, LLC v. Johnson, II et al

Filing 52

MEMORANDUM OPINION & ORDER: For reasons listed within, 1) Pla's 32 Motion for Summary Judgment is DENIED; 2) Dft's 43 CROSS MOTION for Summary Judgment is DENIED. Signed by Judge Joseph M. Hood on 05/01/2014. (KLB) cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
)
)
)
)
)
)
)
)
)
)
)

SPORTS SOUTH, LLC,
Plaintiff,
v.
EARLEY M. JOHNSON, II, et al.,
Defendants.

Civil Case No.
5:13-cv-266-JMH-REW
MEMORANDUM OPINION
AND ORDER

***
This
Summary

matter

Judgment

is

before

filed

by

the

Court

Plaintiff

upon
Sports

cross-motions
South,

LLC

for
and

Defendant Security Safe Outlet, Inc. [D.E. 32, 43]. This matter
being fully briefed, and the Court being otherwise sufficiently
advised, it is ripe for review.
I. Procedural Background
Security Safe Outlet, Inc. was a Kentucky corporation doing
business in Paris, Kentucky. [D.E. 1 at 2; D.E. 10 at 1-2].
Security Safe applied for credit with Plaintiff Sports South,
LLC [D.E. 32-10], and the application was approved. Sports South
avers that it supplied Security Safe with hundreds of pieces of
inventory between March 23, 2012 and December 14, 2012, and sent
multiple invoices for the purchase price of the inventory. [D.E.
1

at

2].

According

to

Sports

South,

an

amount

equal

to

$279,733.25 remains unpaid. [D.E. 1 at 3]. Security Safe admits

in its Answer that it ordered and received goods from Sports
South, but disputes the amount owed. [D.E. 12 at 2].
Sports

South

filed

a

complaint

against

Security

Safe,

Earley M. Johnson II, President of Security Safe, and Jennifer
D.

Arnett,

Vice-President

of

Security

Safe,

for

breach

of

contract. The Court previously granted Defendants Johnson and
Arnett’s

Motion

for

Judgment

on

the

Pleadings

and

dismissed

Sports South’s claims against Johnson and Arnett. [D.E. 40].
Sports South and Security Safe have now filed cross-motions for
summary

judgment

on

Sports

South’s

breach

of

contract

claim

against Security Safe.
II. Standard of Review
A motion for summary judgment may only be granted “if the
movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). “On summary judgment the inferences to be
drawn from the underlying facts . . . must be viewed in the
light most favorable to the party opposing the motion.” U.S. v.
Diebold, Inc., 369 U.S. 654, 655 (1962). “[T]he plain language
of Rule 56(c) mandates the entry of summary judgment, after
adequate time for discovery and upon motion, against a party who
fails to make a sufficient showing to establish the existence of
an element essential to that party’s case, and on which that

2

party will bear the burden of proof at trial.” Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986).
III. Analysis
There remain genuine issues of material fact as to the
total amount owed by Security Safe, thus the Court will deny the
cross-motions

for

summary

judgment.

Sports

South

claims

that

because Security Safe admits that it ordered goods, that it
received those goods, and that Sports South has established the
debt owed by Security Safe, the Court should enter judgment
against

Security

Safe,

with

pre-

and

post-judgment

interest.

Security Safe argues that Sports South’s claim is barred by the
statute of frauds, and, alternatively, that genuine issues of
material fact exist as to the terms of the credit agreement and
balance owed by Security Safe.
It

is

undisputed

that

Sports

South

and

Security

Safe

entered into an agreement for the sale of goods. See KRS 355.2105(1) (“‘Goods’ means all things . . . which are movable at the
time of identification to the contract of sale other than the
money in which the price is to be paid, investment securities .
. . and things in action.”); [D.E. 12 at 2] (admitting that
Security Safe placed orders and received merchandise). Defendant
argues that KRS 371.010(9), Kentucky’s statute of frauds for
credit agreements bars this action. Plaintiff responds that the
statute of frauds does not apply, and, if it does, the statute
3

of

frauds

within

Kentucky’s

Uniform

Commercial

Code

(UCC)

controls. The Court finds that the sale of goods is partially
within the statute of frauds, and that the UCC controls.
In determining that the UCC statute of frauds controls this
action,

the

Technologies,

Court
Inc.

finds
v.

the
BJS

reasoning
North

of

America

Automated
E,

Inc.

Cutting
to

be

persuasive.
As other courts confronting the issue of dual statutes
have held, the UCC’s statute of frauds controls where
it applies. The Court finds that, as a specific
section addressing the requirement of a writing, and
the enforceability of that writing, section 2-201 acts
to preempt [KRS] 371.010. The latter is ‘displaced by
the particular provisions of the Uniform Commercial
Code,’ KRS 355.1-103(2), and thus does not apply to
transactions in goods. Section 2-201 provides the
decisional basis.
Automated Cutting Techs., Inc. v. BJS N. Am. E, Inc., No. 5:10cv-208-REW, 2012 WL 2872823, at *4 (E.D. Ky. July 12, 2012).
Thus, KRS 355.2-201 applies to this action, not KRS 371.010(9).
Multiple contracts were created between Sports South and
Security Safe and not all of those contracts are subject to the
statute of frauds. Sports South argues that the amount owed on
the contract has been established by the multiple invoices sent
to Security Safe. In their briefing, the parties did not discuss
whether this was a breach of a single contract for the sale of
goods or multiple contracts for the sale of goods. The only
evidence of a contract are the invoices provided by Sports South

4

and the internal balance sheet provided by Security Safe. The
parties claim that the goods were ordered via purchase order.
Thus, the Court finds that each purchase order constituted an
offer to purchase and the shipping of the goods constituted an
acceptance

of

the

offer.

See

McJunkin

Corp.

v.

Mechanicals,

Inc., 888 F.2d 481, 487 (6th Cir. 1989) (“[B]y shipping the stub
ends,

Alaskan

accepted

McJunkin’s

offer

(made

in

McJunkin’s

purchase order) . . . .”). Therefore, multiple contracts for the
sale of goods were created.
The UCC requires all contracts for the sale of goods for
$500 or more to be in writing and “indicate that a contract for
sale has been made between the parties and signed by the party
against whom enforcement is sought or by his authorized agent or
broker.” KRS 355.2-201(1). To be valid, the contract must state
the quantity term. Id. The Court has reviewed the invoices and
not every contract is subject to the statute of frauds because
some of the orders were for less than $500. Thus, the Court must
determine

if

a

contract

has

been

proved

for

those

orders

governed by the statute of frauds and for those contracts not
governed by the statute of frauds.
The Court turns first to those contracts governed by the
statute of frauds.

Security Safe is barred from asserting the

statute of frauds as a defense to the contracts for $500 or more

5

because it has admitted that it placed orders with Sports South
and received the goods ordered. See [D.E. 12 at 2].
If the making of a contract is admitted in court, . .
. no additional writing is necessary for protection
against fraud. . . . [I]t is no longer possible to
admit the contract in court and still treat the
Statute as a defense. . . . The admission so made by a
party is itself evidential against him of the truth of
the facts so admitted and of nothing more. . . .
KRS 355.2-201 cmt. 7. Security Safe has admitted that it placed
purchase orders with Sports South, that it received those goods
from

Sports

South,

and

that

it

received

invoices

for

those

goods. [D.E. 12 at 2]. Thus, Security Safe has admitted that a
contract was made. However, the amount of goods received, the
amount of goods ordered, and the total amount billed have not
been

admitted

by

Security

Safe.

Thus,

the

Court

finds

that

Security Safe has admitted there was a binding contract, but the
terms of the contract and the outstanding balance have not been
admitted.
As to those invoices not governed by the statute of frauds,
there likewise remain genuine issues of material fact as to the
terms of the agreement and the outstanding balance. Security
Safe admitted that it ordered goods from Sports South and that
it received those goods. [D.E. 12 at 2]. Thus, both parties
agree that a contract was made, but disagree as to the terms and
the outstanding balance on the contracts.

6

Sports South argues that under the Restatement (Second) of
Contracts the invoices became the terms of the contracts because
Security Safe did not object to the invoices. [D.E. 51 at 1-2].
Sports South relies on the “Account Stated” provision of the
Restatement
account

(Second)

stated

is

a

of

Contracts,

which

manifestation

of

provides

assent

by

that

“[a]n

debtor

and

creditor to a stated sum as an accurate computation of an amount
due the creditor. A party’s retention without objection for an
unreasonably long time of a statement of account . . . is a
manifestation of assent.” Restatement (Second) of Contracts §
282 (1981). Thus, according to Sports South, Security Safe has
assented

to

the

outstanding

argument

is

flawed

because

balance
the

of

$279,733.25.

invoices

do

not

This

state

an

outstanding balance. Each invoice only states the amount due for
that particular sale. Sports South has not provided evidence
that

Security

Safe

was

provided

notice

of

the

outstanding

balance and failed to object, which is what is contemplated by
the provision upon which Sports South relies. The individual
invoice has no bearing on the total account because it does not
reflect prior orders, payments, returns, or an unpaid balance.
In short, Sports South provided a statement of an individual
order, not a statement of the account. Thus, the Court finds §
282 of the Restatement (Second) of Contracts inapplicable to the
facts

at

hand.

Therefore,

based
7

only

on

Security

Safe’s

admissions before this Court, genuine issues of material fact
remain as to the terms of the contracts governed by the statute
of frauds and those not governed by the statute of frauds.
The evidence presented on the terms of the contracts and
the outstanding balance does not resolve the genuine issues of
material fact. The only evidence presented on the issue of the
amount outstanding on Security Safe’s account are invoices and a
customer

account

statement

filed

by

Sports

South,

and

an

affidavit and internal balance sheet filed by Security Safe.
“When the company established its account and the balance due,
the

burden

then

shifted

to

defendants

to

establish

payment,

satisfaction, or that the account was incorrect. . . .” H.C.
Whitmer

Co.

v.

Richardson,

111

S.W.2d

577,

579

(Ky.

1937).

Sports South has met its burden by providing invoices and a
customer account statement as to the amount owed by Security
Safe.

However,

Security

Safe

has

also

provided

evidence

asserting that the account is incorrect.
A

review

of

the

customer

account

statement

provided

by

Sports South shows that, from March 23, 2012 to the end of 2012,
Sports South billed Security Safe for $304,242.15. The customer
account

statement

also

reflects

credits

of

$24,508.90.

While

also denoted as “payment” on the customer account statement,
each credit is notated with “CR” and, in its briefs before this
Court, Sports South maintains that these amounts are “credits
8

awarded to Security Safe.” [D.E. 51 at 3]. Thus, based on the
evidence presented by Sports South, Sports South has no record
of Security Safe making any payments after March 23, 2012.
Alternatively, based upon the records provided by Security
Safe for the same time period, Sports South billed Security Safe
for $418,081.42, and awarded a credit of $56,560.28. Security
Safe’s evidence shows payments in the amount of $273,998.67.
Additionally, Security Safe’s records show that $9,000 was paid
in 2013. Security Safe further maintains that it sent $60,000
worth of goods back to Sports South and has not been informed
how, or if, those goods were credited back to Security Safe’s
account. [D.E. 43-3 at 3]. Thus, the only evidence presented to
the Court is contradictory in every aspect except that these two
parties entered into a contract. Therefore, the terms of the
contracts and the outstanding balance owed by Security Safe are
genuine

issues

trial. This

of

material

fact

that

will require evidence of

must

be

determined

the amount billed,

at
the

amount of payments made, the amount of goods returned, and the
amount of credits that were, and should have been, awarded.
Sports South argues that the Court should not rely on the
evidence provided by Security Safe because it is not trustworthy
and does not fall under the business records exception to the
hearsay rule. While the Court agrees with Sports South that the
totals appear to be incorrect, the evidence provided clearly
9

denotes

payments,

accompanied

by

an

bills,
affidavit

and

credits.

signed

by

the

The

records

Vice-President

are
of

Security Safe swearing that she was in charge of maintaining the
books and records and that the records are made at or near the
time of the transaction, and that the provided copies are true
and accurate. [D.E. 43-3 at 2-3]. Additionally, Security Safe
also questions the trustworthiness of Sports South’s records by
noting that the supporting affidavit for the customer account
statement is inconsistent with the customer account statement.
[D.E. 42 at 5]. In light of this, the Court will not exclude the
business records on a motion for summary judgment based upon an
error in addition and subtraction.
IV. Conclusion
Accordingly, for the foregoing reasons, IT IS ORDERED:
(1)

that Plaintiff’s Motion for Summary Judgment [D.E. 32]

be, and the same hereby is, DENIED;
(2)

that Defendant’s Motion for Summary Judgment [D.E. 43]

be, and the same hereby is, DENIED.
This the 1st day of May, 2014.

10