Elite International Enterprise, Inc. v. Patton Wallcoverings, Inc. et al

Filing 139

OPINION and ORDER granting in part pltf's Rule 59(e) Motion 133 ; denying deft's rule 59(e) Motion 136 and amending this court's prior opinion & order on recalculation of damages 129 Signed by District Judge Nancy G. Edmunds. (CBet)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

ELITE INTERNATIONAL ENTERPRISE,
INC.,
Plaintiff,

Case No. 12-14620
Honorable Nancy G. Edmunds

v.
PATTON WALLCOVERINGS, INC., and
NORWALL GROUP, INC.,
Defendants,
/

OPINION AND ORDER GRANTING IN PART PLAINTIFF'S RULE 59(e) MOTION
[133], DENYING DEFENDANT'S RULE 59(e) MOTION [136], AND AMENDING THIS
COURT'S PRIOR OPINION AND ORDER ON RECALCULATION OF DAMAGES
[129]
Plaintiff Elite International Enterprise, Inc., ("Elite" or "Plaintiff") obtained a grant of
summary judgment as to liability against Defendant Patton Wallcoverings, Inc. ("Patton" or
"Defendant"). The case went to a bench trial on damages where the Court awarded Elite
$222,465.01 in damages for lost profits. See Elite Int'l Enter., Inc. v. Patton Wallcoverings,
Inc., 2014 WL 4321776 (E.D. Mich. Sept. 2, 2014). Cross-appeals followed to the Court of
Appeals for the Sixth Circuit. The Sixth Circuit vacated the damages award and remanded
for "recalculation of damages using Elite's own sales data." Elite Int'l Enter., Inc. v. Norwall
Grp., Inc., 628 Fed. Appx. 370, 377 (6th Cir. 2015). Following remand, the Court held a
scheduling conference on this matter, the parties submitted briefs on damages and the
Court issued an opinion and order on recalculation of damages awarding total damages
to Plaintiff in the amount of $172,121.37. (Dkt. nos. 126, 127, 129.) The parties filed cross-

motions to amend the judgment under Fed. R. Civ. P. 59(e). The Court considered the
motions and amends its prior opinion and order and judgment as follows.
I.

Background
Plaintiff Elite is a Michigan-based company that specializes in selling wallpaper in the

Middle East. Mr. Rami Kseri is Plaintiff's owner, operator, and sole employee. Defendant
Patton Wallcoverings is an Ohio based manufacturer of wallpaper.1 The relevant
background is set forth in the Court's June 8, 2016 opinion and order on recalculation of
damages. (Dkt. 129.)
II.

ANALYSIS
The parties timely moved to alter or amend the findings of fact and judgment in the

Court's prior opinion and order (dkt. 129). See Fed. R. Civ. P. 59(e) ("A motion to alter or
amend a judgment must be filed no later than 28 days after the entry of the judgment.").
"Motions to alter or amend judgement may be granted if there is a clear error of law, newly
discovered evidence, an intervening change in controlling law, or to prevent manifest
injustice." GenCorp, Inc. v. American International Underwriters, 178 F.3d 804, 834 (6th
Cir. 1999) (internal citations omitted). The “purpose of Rule 59(e) is to allow the district
court to correct its own errors, sparing the parties and appellate courts the burden of
unnecessary appellate proceedings.” Howard v. United States, 533 F.3d 472, 475 (6th Cir.
2008) (quoting York v. Tate, 858 F.2d 322, 326 (6th Cir. 1988)). "A district court, generally
speaking, has considerable discretion in deciding whether to grant either type of motion,

1

Patton purchased co-defendant Norwall Group, a Canadian wallpaper company,
several years prior to the filing of this lawsuit, however, Patton continues to produce
wallpaper under the Norwall brand name. For purposes of this case, the Court uses the
term "Patton" or "Defendant" to refer to both Patton and Norwall Group.
2

. . . ." Leisure Caviar, LLC v. U.S. Fish and Wildlife Service, 616 F.3d 612, 615 (6th Cir.
2010).
The Court has considered the parties' arguments in full. Plaintiff brings to the Court's
attention that the 2012 net profit amount used as a basis for the Court's calculation in its
prior judgment was based on income Plaintiff received from selling both Patton products
and non-Patton products (including Blue Mountain products). In its Motion to Amend,
Plaintiff explains that its 2012 profit from Patton's "old products" would have been less than
$6,000 and the "remaining $44,000 shown on Elite's [2012] tax returns came from other
sources that have nothing to do with this case . . . ." (Pl.'s Mot. to Amend 7, Ex. C, dkt.
133,133-4.) The Court agrees that the judgment should be amended to reflect this, which
requires a new damages calculation.
As set forth in the prior opinion and order, Plaintiff is entitled to damages for more
than simply the loss of the withheld collections. Plaintiff is entitled to damages for both the
old or existing products when it became unable to practicably sell them due to Defendant's
breach, and the withheld collections. In 2011, Plaintiff earned net income of $71,814,
"during a robust period of sales of all Patton's products." (Pl.'s Mot. to Amend 6; Kseri
Testimony, Trial Tr. Vol. 1 at 227, Ex. 69); see also Elite Int'l Enter., Inc., 628 Fed. Appx.
at 376. The Court uses the 2011 net income as a starting point from which to calculate lost
profits. The Court also notes Mr. Kseri's testimony that Blue Mountain products generally
accounted for 10-15% of the its sales. (Trial Tr. Vol. 1 at 173-74, dkt. 69.) Therefore, the
Court reduces Plaintiff's 2011 net profit by the mean and median of that range, 12.5%, to
arrive at 2011 net profit of $62,837.25.

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Defendant makes two arguments. Defendant's first argument is that the Court erred
in relying solely on Elite's past sales history, where Elite has no sales history for those
collections that Patton withheld and the Court should have coupled Plaintiff's sales history
with that of Excel Dubai for those collections which were withheld from Plaintiff. To the
extent Defendant takes issue with the Court's statement that Plaintiff had the benefit of the
full line of products from March 2011 through August 2011, the Court's finding could indeed
have been more clearly stated. The Court agrees that the "withheld collections" as defined
by Defendant as Cheeky Monkey, Silk Impressions and Rose Garden, included collections
that were not yet released in 2011. Prior to Defendant's August 2011 breach, however,
Plaintiff was operating at full capacity so-to-speak: Plaintiff had books from which to sell
product, it had access to its existing product lines, and it was not yet in the position of trying
to sell to existing or new customers without the benefit of books, current product and
upcoming product. Evidence shows that this changed after the August 2011 breach, when
Plaintiff's access to books and the existing collections was reduced.2 The Court already
found that "the act of cutting off the new products predictably resulted in Elite's customers
losing interest and taking their business elsewhere, thereby destroying Elite's ability to sell
even the older products. Further compounding Elite's problems, PWI refused to provide it

2

For example, Mr. Kseri testified that in October 2011, he requested specific collection
books via email and he was notified that he could no longer have books for Simply Silk 2,
Classic Silk and Texture Style, three collections with which he had previously been working.
(Trial Tr. Vol. 1 at 132, dkt. 69); see also Elite Int'l Enter., Inc., 2014 WL 4321776, at *3. He
testified that, except for a reorder sale to his father, he was not able to sell these collections
after the October email. (Id. at 133; see also Trial Tr. Vol. III at 86-87, dkt. 71.)
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with sales books on all but two of the older lines." (Findings of Fact, Conclusions of Law,
and Award of Damages, dkt. 77 at 10.)3
Defendant argues that the Court should use sales numbers from Excel Dubai to
calculate Plaintiff's damages and has twice stated that Excel Dubai's sales of Cheeky
Monkey, Silk Impressions and Rose Garden (comprising Defendant's definition of the
Withheld Collections) accounted for 29% of Excel Dubai's total sales.4 (Def.'s Mot. to
Amend 11, dkt. 136; Def.'s Br. on Damages 8, dkt. 127.) After adding Excel Dubai's
numbers itself, the Court concludes that the total number of rolls of wallpaper sold by Excel
Dubai is 69,479 and the number of rolls sold by Excel Dubai for these three collections is
22,456. (Def.'s Br. on Damages Ex. C, dkt. 127-4.) Therefore, the three withheld collections
accounted for 32% of Excel Dubai's total sales in 2011 through the first quarter of 2014.
(dkt. 127-4.) The Court finds that Excel Dubai is sufficiently similar to Plaintiff to use these
numbers as guidance for what Elite would have sold on the three collections (Cheeky

3

Even the Sixth Circuit agreed, noting its concern that Defendant's then-proposed
damages methodology "fixes Elite's 2011 net-profit figure as the baseline for determining
damages, ignoring the possibility that Elite would have earned more than $71,814 in net
profit in 2011 had the breach not occurred mid-year." Elite Int'l Enter., Inc., 628 Fed. Appx.
at 376. Yet Plaintiff's argument that it lost $165,000 at the end of 2011 due to the breach
is not supported by the record other than Mr. Kseri's testimony, and he testified that he did
not have written documents to evidence the orders that are the basis of this alleged sixfigure loss. (Trial Tr. Vol. III at 89, 93-95, dkt. 71.)
4

The Sixth Circuit criticized the dissent's suggestion that the Court compare Elite to
competitor sub-distributors like Excel Dubai, because the dissent failed to identify any subdistributor sales data evidence in the record. See Elite Intern. Enter., Inc., 628 Fed. Appx.
at 376. Yet in its prior brief on damages (dkt. 127), Defendant pointed to Plaintiff's provision
of sales data for Excel Dubai and Excel India and therefore provides a basis to rely on
Excel Dubai's sales to assign a value to the loss of the three collections which were
withheld. (Def.'s Br. on Damages 6 and Ex. C, dkt. 127, 127-4; Tr. Ex. 72; Trial Tr. Vol. I
at 146, dkt. 69.) Not only did Mr. Kseri provide the list of the Excel Dubai sales numbers,
he was questioned on the same at the trial. (Trial Tr. Vol. I at 146, dkt. 69.)
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Monkey, Silk Impressions and Rose Garden) that were not made available to Plaintiff. The
Court will use 32% to calculate lost sales.
The three withheld collections (Silk Impressions, Rose Garden and Cheeky Monkey)
will be treated as adding an additional 32% to the 2011 Patton net profit for years 2012
through February 2014. Damages for 2012 are $76,945.17 ($82,945.17 minus the
estimated $6000 in sales profit that Plaintiff was able to eke out of its remaining
Patton/Norwall product); damages for 2013 are $82,945.17; and damages for the first two
months of 2014 are $13,824.20. Total damages are $173,714.54. This order amends the
Court's June 8, 2016 Opinion and Order on Calculation of Damages (dkt. 129).
Defendant also argues that the Court did not take into account that Elite lost its largest
profit-producing customer prior to Defendant's breach "through absolutely no fault of
Patton." (Def.'s Mot. to Amend 4.) Defendant shows no reason to revisit the Court's use of
Plaintiff's net income for the years at issue as a basis from which to calculate damages. As
in the June 8, 2016 opinion and order, the Court proceeds according to the "mandate and
law of the case as established by the appellate court." See Petition of U.S. Steel Corp., 479
F.2d 489, 493 (6th Cir. 1973). The Court finds that using the 2011 net income as a basis
from which to start provides a reasonable degree of certainty in calculating Plaintiff's
damages. See generally Demirjian v. Kurtis, 91 N.W.2d 841, 843 (Mich. 1958). This method
does not leave Plaintiff in a better position than it would have been without the breach, nor
does it result in manifest injustice.
IT IS ORDERED THAT:
The Court GRANTS IN PART Plaintiff's motion to amend (dkt. 133, 138), DENIES
Defendant's motion to amend (dkt. 136, 137), and amends its prior award to Plaintiff Elite
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International Enterprise, Inc., to $173,714.54 in damages for its lost profits as a result of
Defendant Patton Wallcoverings Inc.'s breach of contract. An amended judgment in the
aforementioned amount shall be entered forthwith.
SO ORDERED.

s/Nancy G. Edmunds
Nancy G. Edmunds
United States District Judge
Dated: October 31, 2016
I hereby certify that a copy of the foregoing document was served upon counsel of record
on October 31, 2016, by electronic and/or ordinary mail.
s/Carol J. Bethel
Case Manager

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