TransPacific Tire & Wheel Inc. v. Orteck International, Inc.. et al

Filing 70

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 3/30/10. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND TRANSPACIFIC TIRE & WHEEL, INC. v. ORTECK INTERNATIONAL, INC., : : : : : Civil Action No. DKC 2006-0187

MEMORANDUM OPINION Presently pending and ready for resolution in this

commercial contract case is the motion by Plaintiff TransPacific Tire & Wheel, Inc. for summary judgment on counts 1, 2, and 11 of its amended complaint. (Paper 62). The issues have been

briefed fully and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons,

Plaintiff's motion will be granted. I. Background The following facts are either undisputed or viewed in the light most favorable Inc. Inc. In to the non-moving 2002, party, Orteck

International, Tire & Wheel,

December

Plaintiff was

TransPacific as a

("TransPacific")

established

corporation under California law.

TransPacific was created to

purchase certain brands of tires from China and distribute them in North America. Defendant Orteck International, Inc.

("Orteck") is a tire distributor that is incorporated and has

its sole place of business in Maryland.1 matter jurisdiction because the

The court has subject are citizens of

parties

different states and the amount in controversy exceeds $75,000, exclusive of interest, legal fees, and costs. and 1334(b). Orteck was one of TransPacific's customers from about 28 U.S.C. §§ 1332

February 2003 to March 2005.

As a customer, Orteck bought tires

from TransPacific and sold them to a number of downstream tire distributors. (Orteck, Paper 58 ¶ 1; Orteck, Paper 112, Attach.

7, Chan Dep., at 77:17-18). In 2003, TransPacific and Orteck entered into an

arrangement under which Orteck was to send purchase orders to TransPacific for the particular quantity and type of tires it sought to purchase. TransPacific calls this agreement the

"Factory Direct Agreement."
1

(Orteck, Paper 112, Attach. 3, ¶

On October 21, 2005, Orteck and another company, Venetian Investments, LLC, filed a separate case against TransPacific in the United States District Court for the District of Maryland. That case is Orteck Int'l, Inc. et al. v. TransPacific Tire & Wheel, Inc., et al., No. 05-2882 (D.Md. filed Oct. 21, 2005) ("Orteck"). The cases have not been consolidated but have proceeded on parallel tracks for discovery and scheduling purposes. Here, TransPacific refers to the same "Defendants' Statement of Undisputed Material Facts" ("DSUMF") it filed in Orteck. (Orteck, Paper 112, Attach. 3). Likewise, Orteck refers to the same "Plaintiffs' Statement of Material Facts" ("PSMF") it filed in Orteck, although it also filed that document in this case. (Paper 67, Attach. 3). In DSUMF and PSMF, the term "Defendants" includes TransPacific and the term "Plaintiffs" includes Orteck. 2

114).

Under

the

Factory

Direct

Agreement,

TransPacific

was

supposed to deliver the tires Orteck ordered with an invoice that indicated the amount due to TransPacific for the tires. (Orteck, Paper 112, Attach. was 21, to DeIorio remit Decl., payment ¶ for 9). the

Subsequently,

Orteck

obligated

tires to TransPacific.

Orteck began to purchase tires from (Id. at 10).

TransPacific in 2003 on a purchase order basis.

TransPacific fulfilled the orders, arranged for delivery of the tires, and issued invoices to Orteck. (Id. at 11, 21; Orteck,

Paper 112, Attach. 7, Chan Dep., at 179:16-180:9; Attach. 14, DeIorio Dep., at 156:1-157:1). During 2003 and part of 2004, Orteck issued purchase orders for tires to TransPacific's customer service department in

California.

TransPacific calls this arrangement the "California (Paper 68, at 3). Under the California

Warehouse Agreement."

Warehouse Agreement, TransPacific was supposed to deliver the tires Orteck ordered from its California warehouse and send

Orteck an invoice indicating the amount due to TransPacific for the tires. (Id.). Throughout 2004, Orteck submitted purchase

orders to TransPacific for tires from TransPacific's California warehouse. TransPacific then delivered the tires from its

Carson, California warehouse to locations designated by Orteck

3

along with an invoice indicating the amount due. 3; Paper 112, Attach. 21, DeIorio Decl. ¶ 13).

(Paper 68, at

In early 2004, Sonny Veen ("Veen"), Orteck's executive vice president of purchasing, attended a meeting at TransPacific's headquarters in California. Dep., at 290:3-6). (Orteck, Paper 112, Attach. 5, Veen

TransPacific's representatives Brian Chan

("Chan") and Vic DeIorio ("DeIorio") were also present at the meeting. (Orteck, Paper 112, Attach. 7, Chan Dep., at 276:2-20; At the meeting, Veen,

Attach. 14, DeIorio Dep., at 153:11-21).

Chan, and DeIorio discussed a possible arrangement whereby each company Maryland Orteck would (the could pay half of the expenses for a warehouse in and

"Maryland both store

Warehouse") tires.

where was

TransPacific never a

There

written

agreement regarding the Maryland Warehouse. (Orteck, Paper 112, Attach. 5, Veen Dep., at 301:16-19, 337:13-20). TransPacific alleges that although the parties did not

reach an agreement on the Maryland Warehouse itself, they agreed that TransPacific could ship tires it owned to the warehouse and Orteck could sell TransPacific's tires on a consignment basis and thereafter pay TransPacific for the tires. (Orteck, Paper

112, Attach. 9, Chan Decl., ¶ 41; Attach. 14, DeIorio Dep., at 226:12-227:3; Attach 21, DeIorio Decl., ¶ 45). calls this agreement the "Consignment 4 TransPacific Bruce

Agreement."

Campbell

("Campbell"),

who

also

attended

the

meeting

in

California, testified that it was agreed that Orteck could sell tires that TransPacific stored in the warehouse and Orteck would have to pay for them once they were sold. Attach. 17, Campbell Dep., at 178:15-22). Orteck consultant and later a (Orteck, Paper 112, Campbell was a former employee.2

TransPacific

Additionally, Campbell and Veen both testified that there was no agreement that TransPacific would be limited as to what tires it could store in the warehouse. (Id. at 177:3-178:14; Orteck,

Paper 112, Attach. 5, Veen Dep., at 302:11-13). Veen testified that the terms concerning the Consignment Agreement "were never finalized. Orteck would order the tires. tires as per the order. business." 302:6). On February 13, 2004, Veen wrote to Chan to propose using a warehouse located at 12201 Old Columbia Pike, Silver Spring, Maryland 20904. Veen and Chan exchanged emails over the All was [sic] finalized was [TransPacific] would ship the

We would sell the tires and grow the

(Orteck, Paper 112, Attach. 5, Veen Dep., at 301:20-

following days regarding the warehouse rent and other costs. Chan wrote to Veen regarding potential risks to TransPacific,

Orteck deposed Campbell on September 22, 2008. Paper 112, Attach. 17, Campbell Dep.). 5

2

(Orteck,

and Veen replied in an email on February 17th, which stated, in relevant part: Every business venture has risks. Orteck has to invest 150,000 in warehouse racking and equipment, have overall payroll of $250,00 [sic] per year. Just in the first year we have to spend $500,000. Orteck will make profit to cover the expenses, but the long term benefit goes to [TransPacific] as Primewell is your brand. If you were making Orteck brand then the deal would be different. [TransPacific] has NO RISK. Even if the tires are not sold they are still your asset and fully insured, what is your risk?? (Orteck, Paper 112, Attach. 26, at 1-2). Orteck negotiated and (Orteck, Paper

signed the lease for the Maryland Warehouse.

112, Attach. 27, Maryland Warehouse Lease; Attach 5, Veen Dep., at 321:2-21). After the meeting in California, TransPacific began to ship tires to the Maryland Warehouse. 21, Ex. CC). (Orteck, Paper 112, Attach.

Orteck asserts that TransPacific sent "surplus and (Orteck, Paper 112,

unwanted" tires to the Maryland Warehouse. Attach. 5, Veen Dep., at 327:16-328:2).

Orteck admitted through

Veen's testimony, however, that these tires were "surplus and unwanted" only because Veen had not ordered them. (Id. at

329:5-330:3). a finalized

Veen also admitted that the parties did not have agreement, written or 6 otherwise, that prohibited

TransPacific from shipping tires to the warehouse if Orteck had not ordered them. audited (Id. the at 331:9-332:13). Warehouse to TransPacific determine the

periodically

Maryland

amount of consignment sales that had taken place.

(Orteck,

Paper 112, Attach. 17, Campbell Dep., at 180:21-181:4, 20-24). In October and November of 2004, Orteck sold the "surplus and unwanted" tires at "fire sale" prices. (Orteck, Paper 112,

Attach. 5, Veen Dep., at 356:14-358:6, 538:14-20; Attach. 14, DeIorio Dep., at 214:5-215:13). Veen stated that "fire sale" meant a "deep discount". Dep., at 582:9). (Orteck, Paper 112, Attach. 5, Veen

Veen testified that he could not remember how

much Orteck realized from the sales of TransPacific's tires at the "fire sale" prices. (Id. at 538:21-539:2). Veen also

testified that Orteck had not come to an internal estimate of the value of the tires. after (Id. Veen's at 598:7-601:12). was taken, Veen's states

declaration,

filed

deposition

that the total amount that Orteck realized from the fire sale of TransPacific tires was $547,089. Decl., ¶ 41). (Paper 67, Attach 15, Veen

TransPacific alleges that it was never paid for (Paper 68, at 17). lease in the

the tires that were sold in the "fire sale." Orteck terminated the Maryland

Warehouse

"third or fourth quarter of 2004." 5, Veen Dep., at 396:3-18). On 7

(Orteck, Paper 112, Attach. October 28, 2004, Orteck

invoiced TransPacific for twelve months of rent at the Maryland Warehouse. Invoice). (Id. at 391:13-399:1; Attach. 28, Warehouse Rent The monthly rent for the warehouse was $11,500.

Orteck billed TransPacific $7,500 per month for rent which in total was $90,000 for the year. Warehouse Rent Invoice). a In (Orteck, Paper 112, Attach. 28, reliance of on Orteck's invoice, amount 29).

TransPacific Orteck owed

issued

credit

$90,000 Paper

against 112,

the

TransPacific.

(Orteck,

Attach.

Orteck does not dispute that Orteck received a credit for an entire year's worth of rent even though it had sold all the tires in the Maryland Warehouse, had not paid TransPacific for the tires, and terminated the lease on the Maryland Warehouse short of a year in the third or fourth quarter of 2004.

(Orteck, Paper 112, Attach. 5, Veen Dep., at 348:9-19). On March 3, 2005, DeIorio met and another Veen TransPacific in Maryland. At

representative,

Ronny

Hoseada,

with

(Orteck, Paper 112, Attach. 5, Veen Dep., at 581:6-582:9). the meeting, the parties' representatives discussed

Orteck's

late payments and the need for Orteck to catch up on payments for its outstanding invoices. Veen admitted that Orteck owed

TransPacific money, but stated that the parties had not agreed on the amount of money owed. (Id. at 596:21-598:1).

8

On April 15, 2005, TransPacific sent a letter to Orteck that detailed TransPacific's outstanding account balance.

(Orteck, Paper 112, Attach. 29).

On May 10, 2005, Veen faxed to

TransPacific the first page of the April 15th letter, which was marked with Veen's notes. (Orteck, Paper 112, Attach. 5, Veen Veen requested additional asked about "container On May 23,

Dep., at 552:18-553:7; Attach. 40). information about one invoice and

numbers" for three consignment invoices.

(Id.).

2005, TransPacific sent a letter to Orteck, which provided the information Veen requested. (Orteck, Paper 112, Attach. 41).

In June 2005, the parties continued their communications regarding Orteck's outstanding invoices. TransPacific sent

Orteck a letter on June 20, 2005 concerning Orteck's overdue account balance. (Orteck, Paper 112, Attach. 42). TransPacific

rejected Veen's proposal of a payment plan and instead suggested that it would accept six monthly equal payments of $367,069.53 starting on July 1, 2005. (Id.). TransPacific informed Orteck

that Orteck could resume placing orders if Orteck made those payments. TransPacific alleges that Orteck never paid the

outstanding bills.

(Paper 68, Attach. 1, at 9).

TransPacific filed a complaint against Orteck in the United States District Court for the Central District of California on August 17, 2005 (Paper 1) and filed an amended complaint on 9

January 20, 2006.

(Paper 12).

In January 2006, this case was

transferred to the United States District Court for the District of Maryland. After a period of discovery, TransPacific filed a (Paper 62).

motion for summary judgment on June 19, 2009.3

TransPacific asks the court to enter judgment as a matter of law on counts 1, 2, and 11 of its amended complaint. II. Orteck's Closed-Door Statute Argument As a threshold matter, Orteck asks the court to dismiss TransPacific's suit because Md. Code Ann., Corps. & Assn's § 7301 (the "Closed-Door Statute") allegedly bars TransPacific from bringing this suit in Maryland. (Paper 67, at 6).

Orteck argues that the Closed-Door Statute bars unqualified foreign corporations from bringing suit in any Maryland court. (Paper 67, at 6). Orteck asserts that TransPacific is an

unqualified corporation because the charter authorizing it to do business in Maryland was forfeited on July 1, 2006. Attach. 3, ¶ of 190). its Orteck contends the that (Paper 67,

TransPacific's of the

forfeiture

charter

"triggers

application

Closed Door Statute and the dismissal of this case." at 7).

(Paper 67,

Later, TransPacific filed an amended memorandum in support to its motion for summary judgment, in which citations to DSUMF have been corrected. (Paper 68). 10

3

The "Closed-Door Statute" states: § 7-301. Noncomplying corporation, maintenance of suit. If a foreign corporation is doing or has done any intrastate, interstate, or foreign business in the State without complying with the requirements of Subtitle 2 of this title, neither that corporation nor any person claiming under it may maintain a suit in any court of this State unless it shows to the satisfaction of the court that: (1) The foreign corporation or the person claiming under it has paid the penalty specified in §7-302 of this subtitle; and (2) Either: (i) The foreign corporation or a foreign corporation successor to it has complied with the requirements of Subtitle 2 of this title; or (ii) The foreign corporation and any foreign corporation successor to it are no longer doing intrastate, interstate, or foreign business in this State. Md. Code Ann., Corps. & Assn's § 7-301. Orteck's request to dismiss TransPacific's suit under the statute after Orteck successfully moved to transfer the case to this court is disingenuous and Orteck's understanding of the Closed-Door Statute is misguided. First, judicial estoppel weighs against Orteck's argument. Judicial estoppel "prevents a party who successfully pursued a 11

position in a prior legal proceeding from asserting a contrary position in a later proceeding." 399, 424 (2002), cert. denied, Gordon v. Posner, 142 Md.App. 369 Md. 180 (2002)(quotation

marks omitted). California

TransPacific originally filed this action in a On Orteck's motion, which TransPacific

court.

opposed, the case was transferred to the District of Maryland. Because Orteck first argued that the case should be transferred to Maryland, it may not later argue that the Closed-Door Statute prevents the court from hearing TransPacific's suit, which was not originally brought in Maryland. Furthermore, the Closed-Door Statute would not apply to bar TransPacific's suit even if the case had originated in Maryland. "[U]nder §7-301, that an unregistered in either or unqualified or foreign foreign

corporation

engages

interstate

business activity in Maryland is barred from suing in the courts of this State only if the corporation also engages in localized business activity in Maryland such that it is `doing business' here." Yangming Marine Transport Corp. v. Revon Prods. U.S.A, "The party asserting that an corporation is `doing S.A.S.

Inc., 311 Md. 496, 505 (1988). unregistered or unqualified

foreign

business within the state' carries the burden of proof."

Personnel Consult., Inc. v. Pat-Pan, Inc., 286 Md. 335, 339 (1979). The Court of Appeals of Maryland has declined to grant 12

a motion to dismiss filed pursuant to the Closed-Door Statute when the plaintiff had ceased "doing business" in Maryland

before its qualification lapsed. Insley, 293 Md. 483, 494 (1982).

See J.I. Case Credit Corp. v. Orteck has not met its burden

to prove that TransPacific is or was doing business in Maryland as an unregistered or unqualified corporation. TransPacific

asserts that it has not done any business in Maryland since its charter was forfeited in 2006. Decl., ¶ 3). for business (Paper 69, at 6; Attach. 1, Lawu

TransPacific only seeks to recover in this suit that was transacted before it has forfeited not done its any

Maryland

charter.

Because

TransPacific

intrastate business in Maryland without complying with Section 2 as referenced in § 7-301, the Closed-Door Statute does not apply and TransPacific's suit will not be dismissed. III. Motion for Summary Judgment A. Standard of Review has moved for summary judgment pursuant to

TransPacific

Federal Rule of Civil Procedure 56.

It is well established that

a motion for summary judgment will be granted only if there exists no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See

Fed.R.Civ.P. 56(f); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). 13 In

other

words,

if

there

clearly

exists

factual

issues

"that

properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party," summary judgment is inappropriate. Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 250 (1986); JKC Holding Co. LLC v. Washington Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). When ruling on a motion for summary judgment, the court must construe the facts alleged in the light most favorable to the party opposing the motion. See Scott v. Harris, 127 S.Ct. A party who bears

1769, 1774 (2007); Emmett, 532 F.3d at 297.

the burden of proof on a particular claim must factually support each element of his or her claim. 323. Celotex Corp., 477 U.S. at

As summarized by the Fourth Circuit: The party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials of his pleading, but "must come forward with specific facts showing that there is a genuine issue for trial." Matsushita [Elec. Indus. Co. v. Zenith Radio Corp.], 475 U.S. [574 (1986)] at 587, 106 S.Ct. 1348 (internal quotation marks & emphasis omitted); see Rivanna Trawlers Unlimited v. Thompson Trawlers, Inc., 840 F.2d 236, 240 Cir. 1988). "Mere unsupported (4th speculation is not sufficient to defeat a summary judgment motion if the undisputed evidence indicates that the other party should win as a matter of law." Francis v. Booz, Allen & Hamilton, Inc., 452 F.3d 299, 308 (4th Cir.2006); see Ash v. UPS, 800 F.2d 409, 411-12 (4th Cir. 1986) (per curiam) ("[U]nsupported speculation ... is not 14

sufficient to defeat a summary judgment motion."). Nor can the nonmoving party "create a genuine issue of material fact through mere speculation or the building of one inference upon another." Beale v. Hardy, 769 F.2d 213, 214 (4th Cir.1985). "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586, 106 S.Ct. 1348 (footnote omitted). Emmett v. Johnson, 532 at 297. B. 1. Analysis Breach of Contract (Counts 1 and 2) argues that it should be granted summary

TransPacific

judgment on its two breach of contract claims, count 1 (Breach of Contract re: Factory Direct Agreement) and count 2 (Breach of Contract amended breached re: California Warehouse Agreement), alleges of its Orteck tires first has from

complaint. several

TransPacific for its

that of

contracts TransPacific

purchases that

TransPacific. between purchase contracts, the

contends Orteck which

contracts

existed written for by

parties for

because tires,

sent

TransPacific

orders and

constituted those

offers contracts

TransPacific

accepted

fulfilling Orteck's orders.

(Paper 68, Attach. 1, at 11-12).

TransPacific alleges that Orteck breached those contracts by not remitting payment to TransPacific for the tires. 15). 15 (Id. at 14-

TransPacific contends that the following amounts, reflected in invoices ordered by and delivered to Orteck, are due pursuant to the Factory Direct Agreement: · · · · · · · · · · · · Invoice Invoice Invoice Invoice Invoice Invoice Invoice Invoice Invoice Invoice Invoice Invoice No. No. No. No. No. No. No. No. No. No. No. No. 5199O 5190O 51910 5193O 5196O 5197O 5201O 5202O 5203O 5204O 5208O 5209O / / / / / / / / / / / / Order Order Order Order Order Order Order Order Order Order Order Order No. No. No. No. No. No. No. No. No. No. No. No. 5333 5283 5304 5307 5311 5312 6015 6016 6017 6019 6137 6139 $35,910.41 $37,206.97 $36,123.41 $27,108.04 $36,123.41 $37,882.17 $36,385.75 $36,385.75 $36,385.75 $38,414.73 $36,123.41 $35,949.41

(Paper 68, at 14)(citations omitted). seeks for these invoices is

The total TransPacific plus prejudgment

$429,999.21,

interest. Additionally, TransPacific argues that it is entitled to payment for an invoice in connection with the California

Warehouse Agreement.

TransPacific states, "Orteck has not paid

TransPacific $45,130.50 reflected in Invoice No. 100656Z, which was issued after TransPacific filled Orteck's Order No. W8007." (Id. at 15)(citation omitted). TransPacific seeks $45,130.50

for this invoice, plus prejudgment interest. Orteck counters that summary judgment should not be granted on TransPacific's breach of contract claims because disputes of material fact exist as to whether TransPacific delivered the 16

tires as claimed.

Orteck contends that TransPacific needs to

present a "very specific paper trail" to show that TransPacific delivered the tires Orteck requested to Orteck's customers.

(Paper 67, at 8). valid contracts for

Orteck asserts that in order to establish the "Factory Direct Agreement" invoices,

TransPacific would have to produce the "documents of transfer (including a signed receipt)." "[a]ppropriate documentary (Id. at 9). [for Orteck asserts that container sales or

proof

shipments claimed under the `oral consignment agreement'] should consist of an Invoice, Packing List, Arrival Notice, Bills of Lading, (Id.). Orteck documentation 0051990 admitted off." and argues to that TransPacific liability Orteck to has provided two that claims proper and Proof of Delivery signed by Orteck's customer."

establish

for

only

invoices, "[t]hese for set that

0051930,

although are

asserts

liabilities (Id. at

subject In

Orteck's

10).

contrast,

Orteck

states

TransPacific has not presented sufficient documentation for the rest of the invoices. 052080, First, and Orteck states not that been invoices properly

0051900,

052040,

052090

have

documented by TransPacific. asserts properly that invoices

(Id. at 11-12). 051960, and

Second, Orteck 051970 were the not tires

051910,

documented.

Orteck 17

alleges

that

corresponding

to

those

invoices

were

sent

to

the

Maryland

Warehouse and that TransPacific attempts to count them twice for damages under its breach of contract and conversion claims.

Third, Orteck asserts that TransPacific has produced "no paper trail of the shipment from the port to Orteck's customer and have no signed proof of delivery by Orteck's customers and have no proof of delivery to the Maryland Warehouse" for invoices 052010, alleges 052020, that and 052030. has (Id. not at 14). Finally, any Orteck to

TransPacific

provided

documents

support that a shipment was made for invoice 100656Z. 15). motion Orteck should concludes be denied that TransPacific's of all the but summary

(Id. at judgment in

because of

alleged two of

defects the

TransPacific's

documentation

tire

shipments related to its breach of contract claims. Under Maryland Law, a contract for a sale of goods is

governed by the Uniform Commercial Code ("UCC"). Ann., Com. Law §§ 2-101 et seq. The UCC

See Md. Code that a

provides

"contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which

recognizes the existence of such a contract." 204(1). "Unless otherwise unambiguously

Id. at § 2by the

indicated

language or circumstances," "[a]n offer to make a contract shall

18

be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances." Id. at § 2-206(1)(a). Maryland Supreme Maryland courts to determine

The UCC does not define the term "offer." Corp. v. Blake Co., 279 Md. 531, 538-39 (1977). "look to the common law and the law

merchant"

whether an offer has been made. definite and certain." Id.

Id. at 539.

"An offer must be

"To be capable of being converted

into a contract of sale by an acceptance, it must be made under circumstances evidencing an express or implied intention that its acceptance shall constitute a binding contract." Id. "[I]n

its final determination, the question of whether an offer was made seems to be one dependent on the intention of the parties, and, being such, it depends on the facts and circumstances of the particular case." Id. at 540.

Courts have typically regarded a written purchase order as an offer to buy. See USEMCO, Inc. v. Marbro Co., 60 Md.App.

351, 362 (1984)(finding that a purchase order "constitute[d] an offer Corp., to buy"); F.3d Audio 254, Visual 259 (4th Assocs., Cir. Inc. v. Sharp in Elecs. a case

210

2000)(noting

interpreting Maryland contract law, "Typically, a seller's price quotation is an invitation for an offer, and the offer usually takes the form of a purchase order, providing product choice, quantity, price, and terms of delivery."). 19

When an offer is made by one party, a contract may only be formed if acceptance of the offer is expressed by another party. Blake, 279 Md. At 541 ("The mutual assent which is the essential feature knowing of and every contract is crystallized to a when there and is a

sufficient

acceptance

certain

definite

offer.").

The UCC provides that the seller can accept such an

offer in any of several ways, often determined by custom and practice. 208. See Md. Code Ann., Com. Law §§ 2-204(1), 2-206(1), 2-

Unless otherwise indicated by the offeror, "[a]n 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. . . ."

Id. at § 2-206(1)(b).

Once a contract has been formed, "[t]he obligation of the seller is to transfer and deliver and that of the buyer is to accept and pay in accordance with the contract." Com. Law § 2-301. Md. Code Ann.,

A buyer's failure to pay for goods is a

material breach of contract that entitles the seller to damages. Id. at §§ 2-607, 2-709. UCC Section 2-709(1)(a) provides that

"[w]hen the buyer fails to pay the price as it becomes due the seller may recover . . . the price . . . [o]f goods accepted." Id. Thus, a seller is entitled to recover damages for the

20

purchase price of goods when a buyer breaches a contract for the sale of goods by failing to pay the purchase price. In addition to damages, a seller may also recover

prejudgment interest when a buyer breaches a contract for a sale of goods by failing to pay the invoice price for goods ordered and delivered. "Pre-judgment interest is allowable as a matter

of right when `the obligation to pay and the amount due had become certain, definite, and liquidated by a specific date

prior to judgment so that the effect of the debtor's withholding payment was to deprive the creditor of the use of a fixed amount as of a known date.'" Buxton v. Buxton, 363 Md. 634, 656

(2001)(quoting First Virginia Bank v. Settles, 322 Md. 555, 564 (1991)). The statutory rate for prejudgment interest is six Md. Const. art. III, § 57. entered into several contracts with

percent per annum. Here, Orteck

TransPacific. order for

For each contract, Orteck sent a written purchase to TransPacific. Orteck's purchase order

tires

constituted an offer to enter into a contract. TransPacific accepted Orteck's offer for each

In response, contract by

shipping the tires described in Orteck's purchase order and by issuing an invoice to Orteck. TransPacific arranged for the

delivery of tires pursuant to Orteck's instructions for each of the orders. To support its breach 21 of contract claims,

TransPacific

has

provided

as

evidence

documents

created

by

Orteck indicating that Orteck placed the orders, TransPacific invoices, shipped and bills either of the lading showing in that or the tires were

from

factory While

China

TransPacific's the type of

California

warehouse.

Orteck

disputes

documents TransPacific needs to produce to meet its burden for summary judgment, Orteck does not dispute that the tires for each invoice were delivered. Orteck has not produced any

evidence to refute the inference that the tires underlying any of the invoices at issue were delivered. has not presented any evidence to show Furthermore, Orteck that Orteck paid

TransPacific the amounts specified in the invoices.4 Accordingly, Orteck has not raised a genuine issue of

material fact and will be liable to TransPacific for the invoice price of the tires in following invoices, plus prejudgment

interest:

Orteck contends that invoices 51910, 51960, and 51970 were "double counted by TransPacific as proof of damages for conversion." (Paper 67, at 12). The container numbers holding these shipments (UCMU8952949, ECMU9022245, and ECMU9265353), however, do not appear on TransPacific's list of consignment containers that were shipped to Maryland, which is the list used as the basis for TransPacific's conversion claim. (Compare Orteck, Paper 112, Attach. 21, DeIorio Decl., Ex. F, at TP001973 with Orteck, Paper 112, Attach. 21, DeIorio Decl., Ex. O, at ORTECK 001279; Ex. R, at ORTECK 001283; Ex. T, at ORTECK 001288). Thus, Orteck's assertion of double counting is without evidentiary support. 22

4

· · · · · · · · · · · ·

Invoice Invoice Invoice Invoice Invoice Invoice Invoice Invoice Invoice Invoice Invoice Invoice and

No. No. No. No. No. No. No. No. No. No. No. No.

5199O 5190O 51910 5193O 5196O 5197O 5201O 5202O 5203O 5204O 5208O 5209O

/ / / / / / / / / / / /

Order Order Order Order Order Order Order Order Order Order Order Order

No. No. No. No. No. No. No. No. No. No. No. No.

5333 5283 5304 5307 5311 5312 6015 6016 6017 6019 6137 6139

-

$35,910.41 $37,206.97 $36,123.41 $27,108.04 $36,123.41 $37,882.17 $36,385.75 $36,385.75 $36,385.75 $38,414.73 $36,123.41 $35,949.41

·

Invoice No. $45,130.50

100656Z will of

/ be

Order

No.

W8007 in

of plus

Accordingly, TransPacific in

judgment the amount

entered in

favor

$475,129.71

damages

prejudgment interest of 6% accruing between 30 days after the invoice date and the date of final judgment. 2. Conversion (Count 11) argues that it should be granted summary

TransPacific

judgment on its conversion claim, count 11 of its first amended complaint. TransPacific alleges that Orteck sold all of the

tires owned by TransPacific that were stored at the Maryland Warehouse, but did not pay TransPacific for those tires. 68, Attach. 1, at 17). TransPacific argues that (Paper is

Orteck

liable for conversion as a matter of law because: 1) Orteck was a consignee who failed to return or pay for consigned goods; and 23

2)

even

if

the

parties'

alleged

Consignment unlawful

Agreement control

was over

invalid,

Orteck

intentionally

exerted

TransPacific's property in denial of TransPacific's right to the property. (Id. at 16-18). As proof of the quantity of the

tires that were in the warehouse, TransPacific offers invoices generated after physical audits of the warehouse (Orteck, Paper 112, Attach 22, Ex. to D, the at TP002007), a list on of all the

containers

shipped

Maryland

Warehouse

consignment

(Id., Ex. F, at TP001973), and the bills of lading showing all of the containers that were shipped from China. (Id., Ex. CC).

TransPacific seeks to be awarded the fair market value of the tires shipped by TransPacific to the Maryland Warehouse for six invoices: · · · · · · Invoice Invoice Invoice Invoice Invoice Invoice No. No. No. No. No. No. 300002O - $1,388.91 300003O - $70,929.97 300004O - $120,272.11 300005O - $548,198.61 300011O - $547,634.81 INVDC00000707 - $538,776.33

(Paper 68, at 20). TransPacific notes: Measured by invoice prices, the total fair market value of the converted tires is actually $1,827,150.74. In closing out its relationship with Orteck, however, TransPacific applied several credits, including the generous credit for the warehouse rent . . . . Accounting for these credits results in a reduction of the amount 24

of damages that TransPacific conversion to $1,725,231 . . . . (Paper 68, at 20, n.1)(citation omitted).

seeks

for

Thus, TransPacific seeks summary judgment on its conversion claim and an award of $1,725,231 in damages, plus prejudgment interest. TransPacific's amended complaint also seeks punitive

damages on TransPacific's conversion claim. Orteck responds that TransPacific is not entitled to

summary judgment on its conversion claim because Orteck properly rejected the tires and disposed of them in a "commercial, Citing

reasonable manner" under the UCC.

(Paper 67, at 16).

Md. Code Ann., Com. Law § 2-601, the "Perfect Tender" rule, Orteck contends of that it or rightfully surplus" rejected tires to TransPacific's the Maryland

shipments Warehouse.

"unwanted

(Id. at 19).

Section 2-601(a) states, ". . . if the

goods or the tender of delivery fail in any respect to conform to the contract, the buyer may (a) Reject the whole . . . ." Id. Orteck asserts that it rightfully rejected TransPacific's of "unwanted or surplus" tires to the Maryland

shipments

Warehouse because the tires failed to conform to the contract between about the the parties rejection and of because the Orteck a notified reasonable 67, TransPacific time at after 18-19).

tires

TransPacific

delivered

them.

(Paper

Additionally, Orteck contends that its sale of the tires does 25

not amount to conversion because Orteck held the tires for a time sufficient for TransPacific abandoned them. to remove (Id. at them, 20-21, and 23).

TransPacific

instead

Finally, Orteck disputes TransPacific's calculation of damages and asserts that the amount Orteck realized from selling the tires is the "fair market value of the tires." Orteck concludes that in addition to denying (Id. at 26-29). TransPacific's

motion for summary judgment on its conversion claim, the court should award Orteck "its rightful relief" of a ten percent

commission on the tires it sold from the Maryland Warehouse in addition to expenses and other costs. "Conversion is an intentional (Id. at 23). tort, consisting of two

elements, a physical act combined with a certain state of mind." Darcars Motors of Silver Springs, Inc. v Borzym, 379 Md. 249, 261 (2004). "The physical act can be summarized as "`any

distinct act of ownership or dominion exerted by one person over the personal property of another in denial of his right or

inconsistent with it.'" Id. (quoting Allied Investment Corp. v. Jasen, 354 Md. 547, 560 (1999). of exerting unlawful control, . . . there is an intent element to the tort of conversion, and a wide range of different states of mind qualify. At a minimum, a defendant liable of conversion must have "an intent to exercise a dominion or control over the goods which is in fact inconsistent 26 In addition to the physical act

with the plaintiff's rights." Keys v. Chrysler Credit Corp., 303 Md. 397, 414, 494 A.2d 200, 208 (1985). The defendant may have the requisite intent even though he or she acted in good faith and lacked any consciousness of wrongdoing, as long as there was an intent to exert control over the property. Darcars, 379 Md. at 262. A defendant's level of intent may also

rise to the level of "actual malice," or consciousness of the wrongdoing, in which case the defendant's conduct may justify a jury's imposition of punitive damages. Id. at 263-64. "For

Conversion may occur in a variety of circumstances.

example, `[a] purchaser of stolen goods or an auctioneer who sells them in the utmost good faith becomes a converter, since the auctioneer's acts are an interference with the control of the property.'" Id. 262-63. Additionally, a consignee who

fails to return or pay for consigned goods may be held liable for conversion. See, e.g. Bacon & Assocs, Inc. v. Rolly Tasker

Sails (Thailand) Co., 154 Md.App. 617, 632 (2004). Here, Orteck is liable for the tort of conversion.

TransPacific made several shipments of tires to the Maryland Warehouse.5 (Orteck, Paper 112, Attach 22, Ex. D, at TP002007; Orteck admitted through Veen's

Ex. F, at TP001973; Ex. CC).

Orteck's assertion that TransPacific has not included the proper documentation to establish that the tires were delivered is incorrect. To the contrary, Orteck has not presented any evidence to refute the evidence that the tires were delivered. 27

5

testimony that, in October and November of 2004, Orteck sold the tires stored by TransPacific at the Maryland Warehouse in a "fire sale." (Orteck, Paper 112, Attach. 5, Veen Dep., at

356:14-358:6, 538:14-20).

Orteck admitted that it had sold or

otherwise disposed of tires TransPacific stored in the Maryland Warehouse by March 3, 2005. 21). Orteck's to suggestion the (Orteck, Paper 112, Attach 44, ¶ that TransPacific is without gave Orteck

permission support.

hold

"fire

sale"

evidentiary

Orteck did not pay TransPacific for the tires it sold (Orteck, Paper 112, Attach. 5, Veen Dep.,

in the "fire sale." at 357:7-358:6). subsequent

Orteck's sale of TransPacific's tires, without for those tires, is a distinct act of

payment

ownership or dominion exerted over TransPacific's property in denial of TransPacific's right to the tires. While it is an

issue for the jury whether Orteck acted with "actual malice" when it held the "fire sale" and later did not pay for the tires, Orteck at least acted with good faith intent to exert control over TransPacific's property. Thus, Orteck has

committed the tort of conversion. Orteck's arguments regarding the "Perfect Tender" rule are unpersuasive. To repeat, the rule states, ". . . if the goods

or the tender of delivery fail in any respect to conform to the contract, the buyer may (a) Reject the whole. . . ." 28 Md. Code

Ann., Com. Law § 2-601(a).

TransPacific does not argue that it

delivered the tires at issue for its conversion claim pursuant to a contract. While Orteck contends that TransPacific should

have sent "an appropriate mix of Steer Tires to service GCR, not the unmarketable and space consuming allotment of drive tires dumped upon Orteck by TransPacific," Orteck has not presented any evidence of an agreement between the parties that required TransPacific only to ship an "appropriate mix." 18; Paper 68, at 16-17). Orteck admitted (Paper 67, at through Veen's

testimony that the parties did not have a finalized agreement, written or otherwise, that prohibited TransPacific from shipping tires to the warehouse even if Orteck had not ordered them. (Orteck, Paper a 112, Attach. 5, Veen Dep., at 331:9-332:13). the buyer

Additionally,

rejection

"is

ineffective

unless

seasonably notifies the seller." 602(1). rejected Maryland Although the Orteck

Md. Code Ann., Com. Law § 2that "Orteck rightfully to the

contends tires it

non-conforming because

that

were

shipped

warehouse

promptly

notified

TransPacific

that they were not conforming . . . .," it has not presented evidence of its rejection of any shipment. 15, Veen Decl., ¶ 93). (Paper 67, Attach

Therefore, the "Perfect Tender" rule

does not apply in this case to shield Orteck from liability for conversion. 29

"The measure of damages in an action for conversion of personal property is the fair market value of the property at the time of conversion, with legal interest thereon to the date of the verdict." 415 (1985). TransPacific claims that the following invoices, reflecting wholesale prices, establish the fair market value of the tires shipped by TransPacific to the Maryland Warehouse before Orteck converted and sold the tires: · · · · · · (Paper 68, Invoice Invoice Invoice Invoice Invoice Invoice at No. No. No. No. No. No. 3000020 - $1,388.91 3000030 - $70,929.97 3000040 - $120,272.11 3000050 - $548,198.61 3000110 - $547,634.81 INVDC00000707 - $538,776.33 omitted). invoices is The total amount plus Keys v. Chrysler Credit Corp., 303 Md. 397,

20)(citations for these

TransPacific

seeks

$1,725,231

prejudgment interest. Orteck asserts that there is a genuine issue of material fact as to the fair market value for the tires because its calculation of the value of the tires sold at the "fire sale" is $547,089. (Paper 67, Attach 15, Veen Decl., ¶ 41). The

evidence Orteck has presented as to the value of the tires, however, is inconsistent and therefore does not raise a genuine issue of fact regarding the value of the tires. 30 Orteck did not

attempt to value the tires sold at the "fire sale" until Veen's declaration TransPacific's was submitted for with Orteck's judgment. opposition In fact, to Veen

motion

summary

testified on an earlier date that Orteck "could not arrive at an amount" for the tires without TransPacific's input, but that the amount was "much less than" TransPacific claimed. (Orteck, Veen stated When "fire

Paper 112, Attach. 5, Veen Dep., at 597:8-601:12). that "fire sale" meant a "deep discount". asked specifically show much Orteck

(Id. at 582:9). from the

realized

sale," Veen testified, "I don't recall." Veen's declaration, which values the

(Id. at 538:21-539:2). tires at $547,089,

contradicts his own prior testimony.

"If a party who has been

examined at length on deposition could raise an issue of fact simply by submitting an affidavit contradicting his own prior testimony, this would greatly diminish the utility of summary judgment as a procedure for screening out sham issues of fact." Barwick v. Celotex Corporation, 736 F.2d 946, 960 (4th Cir.

1984)(quoting Perma Research & Dev. Co. v. Singer Co., 410 F.2d 572, 578 (2d Cir. 1969)). Accordingly, "[a] genuine issue of

material fact is not created where the only issue of fact is to determine which of the two conflicting versions of the . . . testimony is correct." Id. Therefore, Orteck's valuation of

the tires, as stated in Veen's declaration, is not sufficient to 31

raise a genuine factual dispute as to the fair market valuation of the converted tires. Accordingly, TransPacific in judgment the amount will of be entered in in favor of plus

$1,725,231

damages

prejudgment interest of 6% accruing between March 3, 2005 and the date of final judgment.6 IV. Conclusion For the foregoing reasons, Plaintiff's motion for summary judgment will be granted as to counts Plaintiff 1, 2, will and be 11 of

Plaintiff's

amended

complaint.

awarded

damages in the amount of $475,129.71 plus prejudgment interest for its breach of contract claims and $1,725,231 plus

prejudgment interest for its conversion claim. will follow.

A separate Order

/s/ DEBORAH K. CHASANOW United States District Judge

TransPacific also seeks punitive damages on its conversion claim, but correctly notes that "entitlement to punitive damages and the amount of punitive damages is an issue to be determined by a jury." (Paper 68, at 19, n.9). 32

6