Pars Ice Cream Company, Inc. et al v. Conopco, Inc.
Filing
163
ORDER GRANTING SHELLEY TRAYWICKS MOTION FOR PARTIAL SUMMARY JUDGMENT (Doc. 149). Signed by District Judge Avern Cohn. (SCha)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
PARS ICE CREAM COMPANY, INC., and
PARS ICE CREAM CALIFORNIA, INC.,
Plaintiffs,
v.
Case No. 12-15598
HON. AVERN COHN
CONOPCO, INC., d/b/a UNILEVER,
Defendant / Counter-Plaintiff,
v.
DAVOUD SADEGHI, SHELLEY TRAYWICK,
PARS ICE CREAM COMPANY, INC., and
PARS ICE CREAM CALIFORNIA, INC.,
Counter-Defendants.
______________________________________/
ORDER GRANTING SHELLEY TRAYWICK’S
MOTION FOR PARTIAL SUMMARY JUDGMENT (Doc. 149)
I. INTRODUCTION
This is a long-running contentious commercial dispute concerning agreements to
distribute ice cream. Pars Ice Cream Company, Inc. (“Pars Michigan”) and Pars Ice
Cream California, Inc. (“Pars California”) (collectively, “Pars”) are ice cream distributors.
Conopco, Inc., d/b/a Unilever (“Unilever”) manufactures ice cream and other frozen
dessert products. Davoud Sadeghi (“Sadeghi”) is the President of Pars Michigan and
Pars California; Shelley Traywick (“Traywick”) is Sadeghi’s wife and an officer of Pars.
In the initial action, Pars Michigan and Pars California brought suit against
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Unilever for breach of contract. Unilever subsequently brought counterclaims against
Pars as well as third-party claims against Sadeghi and Traywick as guarantors of Pars
Michigan’s account with Unilever.
Now before the Court is Traywick’s Motion for Partial Summary Judgment on
Counterclaim Counts IV and V. (Doc. 149). For the reasons that follow, Traywick’s
Motion is GRANTED.
II. BACKGROUND1
A. Traywick’s Personal Guaranty
Pars Michigan has conducted business with Unilever for over 20 years. For a
portion of this time, Pars Michigan bought ice cream from a number of vendors.
However, beginning in 2004, Pars Michigan entered into a number of contractual
arrangements, which made Pars Michigan the exclusive distributor of Unilever products
in Michigan.
On or about March 3, 2004, as part of the business arrangement between Pars
Michigan and Unilvever, Sadeghi and Traywick personally guaranteed Pars Michigan’s
obligations to Unilever. The Unlimited Personal Guaranty stated in relevant part:
[T]o induce [Unilever] . . . to extend credit to [Pars Michigan] . . . , the
undersigned guarantees payment of and promise to pay or cause to be
paid to [Unilever] all loans, drafts, overdrafts, checks, notes, and all other
debts, obligations, and liabilities of every kind and description . . . , arising
out of credit previously granted, credit contemporaneously granted or
credit granted in the future by [Unilever] to [Pars Michigan] . . . when due
or to the extent not prohibited by law, at the time [Pars Michigan] becomes
the subject of bankruptcy or other insolvency proceeding, or is unable to
pay its debts when they become due.
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The facts described below are taken from Unilever’s Response to Traywick’s
Statement of Material Facts, which consolidates Traywick’s statement of material facts
with Unilever’s responses.
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B. The 2004 Freezer Program Agreement
On April 20, 2004, Pars Michigan and Unilever entered into a Distributor Freezer
Program Agreement (the “Freezer Program Agreement”). This was the first written
agreement between Pars Michigan and Unilever. Prior to its signing, it appears that the
business arrangement between Pars Michigan and Unilever was on open account.
The Freezer Program Agreement provided terms and conditions for Unilever to
provide Pars Michigan display and storage freezers, pushcarts, and other freezer
equipment “to be placed in [Pars Michigan’s] retail accounts for merchandising and
displaying ice cream and other frozen dessert products.”
Among the terms and
conditions of the Freezer Program Agreement was the requirement that Pars Michigan
not participate in a freezer equipment program with any third party, and that it
maintained adequate inventory and stock / distribute products deemed necessary by
Unilever. The Freezer Program Agreement was signed by Sadeghi as President of
Pars Michigan.
C. The 2005 Preferred Distributor Agreement
On October 1, 2005, Pars and Unilever entered into a “Preferred Distributor
Agreement” whereby Pars became the preferred distributor of certain Unilever ice
cream products in 16 counties in Michigan (the “Michigan Distribution Agreement”). The
Michigan Distribution Agreement was amended on November 27, 2006, to give Pars
Michigan exclusive rights to distribute Unilever products throughout the same market.
Among the terms and conditions, Pars Michigan was required to use its “best efforts to
promote, distribute and sell the products and to exploit the market potential for the
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products in the territory” but was prohibited from selling Unilever’s products outside of
the defined territory. The Michigan Distribution Agreement applied to all products sold
under the 2004 Freezer Program.
The Michigan Distribution Agreement and its
amendment were signed by Sadeghi as President of Pars Michigan.
D. The 2007 Preferred Distributor Agreement
On April 27, 2007, Unilever and Pars Michigan entered into a “Mobile Vending
Distributor Agreement” pertaining to territories within California and Arizona (the
“California Distribution Agreement”).
This gave Pars Michigan exclusive distributor
rights to Unilever’s products in the southern part of California.
The California
Distribution Agreement contained the same terms and conditions as the Michigan
Distribution Agreement. The California Distribution Agreement was signed by Sadeghi
as President of Pars Michigan.
E. Pars California Is Created
Pars California was incorporated on January 16, 2008. At the time the California
Distribution Agreement was signed by Pars Michigan, Pars California did not exist.
Commencing in January 2008, Pars California began distributing products pursuant to
the California Distribution Agreement.
F. The 2009 Supplemental Agreement
By 2009, Pars Michigan and Pars California fell substantially behind on paying its
product and freezer rent bills.
To settle the parties’ existing financial disputes, the parties entered into a
Supplemental Agreement on February 27, 2009. This agreement added Pars California
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as a contracting party with Pars Michigan, and was signed by Sadeghi as President of
Pars Michigan and President of Pars California. The Supplemental Agreement provided
that, “[f]or the purposes of resolving the existing financial disputes between the parties, .
. . Pars Michigan and Pars California agree to each be jointly and severally liable to
Unilever for any financial obligation owed to Unilever pursuant to [the Michigan and
California Distribution Agreements].”
Also in the February 27, 2009 agreement, Sadeghi “reaffirm[ed] the obligations
set forth in the personal guaranty provided to Unilever in 2004” and additionally
“agree[d] that the personal guaranty applies to both [the Michigan and California
Distribution Agreements].”
G. The Instant Action
On December 20, 2012, Pars filed the instant action alleging, inter alia, breach of
contract under the Michigan and California Distribution Agreements for improper
imposition of freezer rental fees, refusal to recognize promised rebates and other
deductions, and failure to supply goods. Unilever filed the Counterclaim, which included
Counts IV and V, on May 5, 2014.
III. STANDARD OF REVIEW
The summary judgment standard of review under Fed. R. Civ. P. 56 is well
known and not repeated here. Ultimately a district court must determine whether the
record as a whole presents a genuine issue of material fact drawing “all justifiable
inferences in the light most favorable to the non-moving party.” Hager v. Pike Cnty. Bd.
of Ed., 286 F.3d 366, 370 (6th Cir. 2002).
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IV. DISCUSSION
Traywick seeks summary judgment with respect to Counterclaim Counts IV
(Breach of Written Agreement/Liability on the Personal Guaranty) and V (Liability for
Attorneys’ Fees and Costs-David Sadeghi and Shelley Traywick).
A.
In Count IV, Unilever asserts that Sadeghi and Traywick are personally
responsible for payment of all outstanding obligations owed by Pars Michigan and Pars
California, including those incurred pursuant to the Freezer Program Agreement, the
Michigan and California Distribution Agreements, and the Supplemental Agreement.
Unilever says that both Sadeghi and Traywick, as guarantors of Pars Michigan, are
obligated under their personal guaranty to pay Unilever the outstanding amount due.
In Count V, Unilever says that, under the 2004 personal guaranty, it is entitled to
fees and costs associated with bringing this action.
B.
In her motion for partial summary judgment, Traywick says that her liability under
the 2004 personal guaranty to Pars Michigan was extinguished by the 2009
Supplemental Agreement, which made Pars Michigan and Pars California jointly and
severally liable for the financial obligations under the Michigan and California
Distribution Agreements, and which “reaffirmed” Sadeghi’s personal guaranty—but not
Traywick’s personal guaranty—as to the debts of Pars Michigan and Pars California.
C.
The parties agree that the case is controlled under New York law. Traywick cites
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United Natural Foods, Inc. v. Burgess, 488 F. Supp. 2d 384 (S.D.N.Y. 2007), for the
proposition that “[a]n obligation is altered when the debtor is discharged from the
original contract and a new contract is substituted in its place. . . . In such a case, the
principal is no longer bound to perform the obligation guaranteed, so the guarantor
likewise cannot be held responsible for the failure of the principal to perform.” Id. at 391
(citations and internal quotations omitted). Traywick further says that “an alteration of
the contract to which the guaranty applies will serve to discharge the guarantor’s
obligation unless the guarantor has consented to the alteration.”
Arlona Ltd.
Partnership v. 8th of Jan. Corp., 50 A.D.3d 933, 934 (N.Y. App. 2008).
Traywick says that Unilever is attempting to extend her personal guaranty as to
Pars Michigan to the debts owed by Pars California.
Traywick says that the 2009
Supplemental Agreement—in which Sadeghi reaffirmed his personal guaranty as to
Pars Michigan and Pars California, and in which Pars Michigan and Pars California
agreed to be jointly and severally liable to Unilever for debts under the Michigan and
California Distribution Agreements—served to discharge her from liability under the
2004 personal guaranty.
Unilever responds that under the 2004 personal guaranty, Traywick is obligated
to pay the current and debts of Pars Michigan, regardless of where or when those debts
arise. Unilever also notes that the 2007 California Distribution Agreement was signed
by Pars Michigan—rather than by Pars California, which was not yet in existence.
Unilever says that Pars Michigan’s decision to expand operations into California did not
change Traywick’s liability under the personal guaranty, which expressly provided for
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future extensions of credit from Unilever to Pars Michigan.
D.
Based on the extensive history of the relationship between Unilever, Pars
Michigan, and finally Pars California, Traywick’s has sufficiently demonstrated a
material alteration to the underlying basis of her 2004 personal guaranty.
On March 3, 2004, when Traywick signed the personal guaranty to induce
Unilever to extend credit to Pars Michigan, Pars Michigan was selling Unilevermanufactured products on open account.
Beginning with the 2004 Freezer Program Agreement, however, the relationship
between Pars Michigan and Unilever underwent significant change.
The Freezer
Program Agreement, as described above, provided for the lease of Unilever-owned
freezers to Pars Michigan.
More than a year later, the 2005 Michigan Distribution
Agreement and its amendment made Pars Michigan the preferred distributor, and then
the exclusive distributor, in Michigan. Later, the 2007 California Distribution Agreement
similarly made Pars Michigan the exclusive distributor within certain regions in
California. Although the personal guaranty stated that Traywick would be liable for
“credit granted in the future by [Unilever] to [Pars Michigan],” she signed it while Pars
Michigan and Unilever were operating in an open account arrangement. The Freezer
Program Agreement and the Michigan and California Distribution Agreements
significantly altered the nature of the business relationship between Pars Michigan and
Unilever, adding additional rights and, more importantly, obligations to Pars Michigan
that were not included at the time Traywick signed the personal guaranty.
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Further, the 2009 Supplemental Agreement added Pars California as a
contracting party, making Pars Michigan and Pars California jointly liable on all the
financial obligations arising out of the exclusive distribution of products in certain
territories in Michigan, and later, in California. Again, these additional responsibilities
were not present at the time of signing the 2004 personal guaranty, evidenced by the
fact that Sadeghi—without Traywick—reaffirmed his personal guaranty as to the
obligations of Pars Michigan and Pars California.
At no point did Traywick reaffirm her personal guaranty as to Pars Michigan
and/or Pars California. Nor is there any indication that Traywick was given any notice or
asked for her consent to the expanding business relationship between Pars Michigan
and Unilever, and later with Pars California. Without Traywick’s acknowledgment, these
changes constitute a significant alteration of the underlying agreement to which the
personal guaranty applied and serve to discharge Traywick’s obligations under the
personal guaranty.
Count IV of the Counterclaim therefore DISMISSED with respect to Traywick.
Similarly, Count V, seeking fees and costs associated with bringing this action, is
DISMISSED with respect to Traywick.
V. CONCLUSION
For the above reasons, Traywick’s Motion for Partial Summary Judgment has
been granted.
SO ORDERED.
s/Avern Cohn
UNITED STATES DISTRICT JUDGE
Dated: August 10, 2015
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I hereby certify that a copy of the foregoing document was mailed to the attorneys of
record on this date, August 10, 2015, by electronic and/or ordinary mail.
s/Marie Verlinde for s/Sakne Chami
Case Manager, (313) 234-5160
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