HANG HING LOONG TRADING COMPANY LIMITED v. INCO LIMITED LIABILITY COMPANY

Filing 40

OPINION. Signed by Judge John Michael Vazquez on 10/18/17. (DD, )

Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

HANG HING LOONG TRADING COMPANY
LIMITED,
Civil Action No. 15-3614 (JMV)

Flainttff
v.

OPINION

INCO LIMITED LIABILITY COMPANY, a/k/a
INCO L.LC.,
Defendant.

John Michael Vazguez, U.S.D.J.

In this case, Plaintiff alleges that Defendant breached an agreement to repay millions of
dollars. This matter comes before the Court on Plaintiffs motion for summary judgment brought
pursuant to Federal Rule of Civil Procedure 56. D.E.

25.1

Defendant filed a brief in opposition to

Plaintiffs motion, D.E. 34, to which Plaintiff replied, D.E. 35.

The Court reviewed all

submissions, and considered the motions without oral argument pursuant to Fed. R. Civ. P. 78(b)
and L. Civ. R. 78.1(b). For the reasons that follow, Plaintiffs motion for summary judgment on
Count One is GRANTED. Plaintiffs motion for summary judgment on Count Two is DENIED.

‘In this Opinion, Plaintiffs brief in support of its motion (D.E. 29) will be referred to as “P1.
Br.” Defendant’s brief in opposition (D.E. 34) will be referred to as “Def. Opp. Br.” Plaintiffs
reply brief (D.E. 35) will be referred to as “P1. Reply.” Plaintiff separately docketed its motion
for summary judgment (D.E. 25), its statement of material facts (“P1. $OMF”) (D.E. 28), and its
brief in support of its motion (“P1. Br.”) (D.E. 29).

I.

FACTUAL BACKGROUND

Plaintiff and Defendant entered an installment contract signed by the parties obligating
Defendant to deliver 500 metric tons of copper cathodes for over $3.6 million. Defendant did not
deliver the product. The parties thereafler entered into a written agreement outlining how and
when Defendant would repay the money. This dispute concerns Defendant’s failure to abide by
the repayment agreement.
The Parties
Plaintiff Hang Hing Loong Trading Company (“Plaintiff’) is a corporation formed under
the laws of Hong Kong with its principal place of business in Yuen Long, Hong Kong. P1. $OMF
at

¶

1. Jianhui Li (“Li”) is Plaintiffs General Manager and owner. Id. at 2. Zhuosen Ye, also

known as Vincent Ye, (“Ye”) is Plaintiffs Director Manager. Id. at 3. Defendant Inco Limited
Liability Company (“Defendant”) is a New Jersey limited liability company with its principal place
of business in Rochelle Park, New Jersey. P1. SOMF at ¶ 4. Vincent Chou (“Chou”) is Defendant’s
sole member and executive officer. P1. SOMF at ¶ 5.
The August 2009 Installment Contract
The facts surrounding the original contract between Plaintiff and Defendant are not in
dispute. In August 2009, Plaintiff entered into an installment contract with Defendant to purchase
500 metric tons of LME registered grade “A” copper cathodes per month from Defendant (“August
2009 Installment Contract”).

P1. SOMF at

¶

13; Def. SOMF at

¶

7.

Defendant completed

deliveries to Plaintiff in September, October, and November 2009. P1. SOMF at ¶ 14. In December
2009, Plaintiff pre-paid Defendant $3,656,049.14 for the next scheduled delivery due that month.
P1. SOMF at

¶

15.

There is no dispute that Defendant never delivered the December 2009

shipment. Pt. SOMF at

¶

15. Defendant claims it was unable to deliver the December 2009

2

shipment “[d]ue to a positional hedging loss.” P1. SOMF at

¶

17. Chou, Defendant’s executive

officer, agreed to re-deliver the December 2009 shipment at a later date, using the original payment
as credit. P1. $OMF at

¶

19. However, by December 2010, Defendant had not delivered the

replacement shipment and Li, Plaintiffs General Manger and owner, requested that Defendant
return the prepayment. P1. $OMF at ¶J 20-21.
Winter 2011 Oral Agreement
It is at this point that the parties’ versions of the events begin to differ. On December 8,
2010, Li (representing Plaintiff) and Ye (representing Plaintiff) met with Chou (representing
Defendant). P1. SOMF at

¶ 22;

Def. SOMf at

¶

12. Defendant states that during this meeting,

Chou offered to turn over two of Defendant’s bank accounts to Plaintiff—an account at Standard
Bank (the “Standard Account”) and a Lind Waldock account (the “Waldock Account”)—but
Defendant alleges that Plaintiff declined to accept the accounts.2 Def. SOMF at

¶ 13.

Defendant

invested funds in the Standard Account and the Waldock Account pursuant to a “hedging” strategy
in futures markets. Def. SOMF at

¶J 5-6.

Defendant opened the Waldock Account in February

2010, Chou Decl. at ¶ 24, and the Standard Account in September 2010, Def. SOMF at ¶ 5; Chou.
Deci. at ¶ 14.
Plaintiff claims that at the meeting, Chou confirmed that Defendant had received
$3,656,049.14 from Plaintiff and offered to deliver 500 metric tons of LME registered grade A

copper cathodes to Plaintiff within 12 months or return the prepayment. P1. SOMF at ¶ 23. There
were emails with promissory note proposals sent back and forth between representatives for
Plaintiff and Defendant in December 2010 and January 2011.

2

P1. SOMF at

¶J

24-3 1.

Defendant claims that on December 8, 2010, the Standard Account had a balance of
$1,956,896.16 and the Waldock Account had a balance of $646,064.70. Def. SOMF at ¶ 14.
3

No

agreement was signed, but Defendant orally agreed to return $50,000 each month to Plaintiff
(“Winter 2011 Oral Agreement”). P1. SOMF at

¶

31. In February, March, and April 2011,

Defendant made payments for a total of$150,000. P1. SOMF at ¶ 32.
May 2011 Written Agreement
From May ito May 3, 2011, Li and Ye again met with Chou and asked for an accelerated
repayment plan. P1. SOMF at

¶ 33;

Def. SOMF at

¶

1$. On May 4, 2011, Li and Chou entered

into a written agreement (the “May 2011 Written Agreement”) to return the money due. P1. $OMF
at34.
The signed agreement is three pages long and, in relevant part, states:
After 3 days of discussion between INCO LLC and Hang Hing
Loong Trading Company Limited regarding [Inco’s inability to
deliver the December 2009 shipment] from May 1St to May 3rd,
2011, both parties have agreed that INCO LLC agrees to pay, the
principal sum of $3,656,049.14 (23,764,319.41 RMB) by the end
of 2012.
INCO LLC will be required to make payments monthly with a
minimum average of $50,000. INCO LLC will borrow funds to
make the required payments from its shareholders’ personal
income. These payments are due on or before the last day on [sic]
the month.
INCO LLC has made 3 payments of $50,000 in February, March
and April, total of $150,000 (975,000 RMB). This will be
considered payment against the principal amount above. The
current balance unpaid is $3,506,049.14 (22,789,319.41 RMB).
In addition INCO LLC will make additional payments based on the
following circumstances:
1. INCO LLC anticipates a projected net income directly
from the position hedged from $25B of $800,000 to
$1,000,000 for 2011. INCO LLC will pay 90% of this
amount at year end.
2. INCO LLC will attempt to sell company assets not
required for everyday operations including a 35%
interest in Yantai Tri-Circle Lock Industry Limited.
4

fNCO LLC estimates its interest to be worth $300,000
to $500,000.
3. 1NCO LLC will seek outside financing from financial
institutions, private parties and shareholders up to
$500,000 which will be used 100% in part of the
payment plan to Hang Hing Loong Trading Company
Limited.
INCO LLC anticipates total payments for 2011 between $1,700,000
and $2,000,000. The remaining balance would be paid in 2012.
D.E. 26, Ex. E.
Performance of May 2011 Written Agreement
Defendant did not make any of the future minimum monthly payments discussed in the
May 2011 Written Agreement. P1. SOMF at

¶ 48.

Li about the Standard Account. Def SOMF at

¶

However, in November 2011, Chou spoke to

19. Chou and Li agreed that Defendant would

give $1 million to Plaintiff. Def. $OMF at ¶ 20; Li Decl., Ex. E, Chou Dep. at p. 82. Thereafter,
Defendant paid Plaintiff $1 million in November 2011, as the first additional payment under the
May 2011 Written Agreement. P1. SOMF at

¶ 49,

but Plaintiff did not make the second or third

additional payment, Id. at ¶] 50-5 1.
Defendant claims that Li and Chou agreed in November 2011 “that the balance of
approximately $812,582.82 would remain [in] the Standard Bank account as ‘seed money’ for
[Defendant] to try and make back [Defendant’s] losses and make additional payments to Plaintiff.”
Def. SOMF at ¶ 20.
September 2012 Golf Outing
Defendant claims that in September 2012, Li and Chou played golf and had dinner together
in China. Def. SOMF at ¶ 22. Defendant alleges that Li and Chou discussed the Standard Account
and Chou told Li that the account had a balance of $1.4 million. Def. SOMF at ¶ 24. Defendant
contends that Li told Chou to buy, rather than to short, his copper position. Def. SOMF at ¶] 255

27. Defendant claims that Li declined Chou’s offer to turn over the Standard Account to Plaintiff
and Li stated that Chou should continue to invest the funds in a hedging account. Def. SOMF at

¶ 29-31.

Defendant alleges that Li and Chou agreed on a strategy that entailed waiting to see how

the current short position faired in the next few months, and if the position did not gain
significantly, Chou would make the switch to long positions, as Li requested. Def. SOMF at

¶J

3 1-32.
Defendant further states that because the short positions had not gained significantly during
the end of 2012, based on the parties’ discussions during the golf round and at dinner, Chou
changed the Standard Account positions from short to long. Def. SOMF at

¶ 34-3 5.

Defendant

claims that Chou was unable to make contact with Li, Def. SOMF at ¶J 3 6-37, but spoke to Ye in
the summer of 2013 when Ye inquired about the status of the hedging positions, Def. SOMF at ¶J
38-39. Defendant states that at that time, Chou advised Ye that the Standard Account had lost
some value. Def. SOMF at ¶ 3$.
August 2014 Meetings and Letter
Defendant claims that Chou and Ye met twice in August 2014, first in New Jersey and then
in New York. Def. SOMF at ¶ 40. Defendant claims that Ye told Chou that Plaintiff owed money
to a bank and asked Defendant to provide a letter to the bank stating that additional payments
would be made by Defendant to Plaintiff. Def. SOMF at

¶J 41.

Defendant claims that Chou, Ye,

and Li spoke on the phone to discuss the letter (the “August 2014 Letter”), Def. SOMF at

¶ 43,

and to discuss the “Fishkill demolition project,” which would possibly generate money that could
be paid to Plaintiff, Def. SOMF at

¶ 45.

Defendant claims that the August 2014 Letter “reflects

6

the parties’ intention that payments to Plaintiff were conditional on the success of the Fishkill
project.”3 Def. SOMF at ¶ 45.
Defendant also claims that during these August 2014 meetings, Chou offered the funds in
the Standard Account to Plaintiff, Def. SOMF at
Def. SOMF at

¶

¶ 50,

and after taking to Li, Ye did not accept,

51-52. Defendant claims that Chou was instructed to keep the money in the

Standard account in hopes that the account would increase in value. Def. SOMF at ¶ 53.
Defendant paid Plaintiff $200,000 in August 2014, P1. SOMF at

¶

46, which Defendant

claims is consistent with the terms of the August 2014 letter, Def. $OMF at

¶

47. However,

Defendant claims that the Fishkill project was halted and not resumed after September 2014. Def.
SOMF at48.

The letter, dated August 5, 2014, states:
To whom it may concern:
Re: Projected Payment Plan
Based on the request of Hang Hing Loong Trading Company Limited and
the amount owed by Inco LLC, hereby we plan to set up the payment
schedule upon the completion of Fishkill demo project sales as follows:
August 2014, INCO will remit $200,000 to Hang Hing Loong Trading
Company Limited account [sic]
September 2014, NCO will remit $200,000 to $250,000 to Hang Hing
Loong Trading Company Limited account [sic]
October 2014, INCO will remit $200,000 to $300,000 to Hang Hing
Loong Trading Company Limited account [sic]
Once the Fishkill demo project complete [sic], TNCO LLC will remit all
available profit to complete all remaining payment. [sic]
On behalf of INCO LLC
D.E. 26, Ex. E.
7

November 2014 Meeting
Defendant claims that Chou and Ye met in New Jersey in November 2014. Def. SOMF at

¶ 54.

Chou again offered the amounts in the Standard Account to Ye as a complete satisfaction of

the money owed to Plaintiff. Def. SOMF at ¶ 56. Ye rejected this offer afler speaking to Li. Def.
SOMF at ¶J 57-5 8.
Total Payments
In total, Defendant paid Plaintiff$1,350,000.00, which is comprised of $50,000 payments
in February 2011, March 2011, and April 2011, the $1 million payment in November 2012, and
the $200,000 payment in August 2014. P1. SOMF at ¶ 44. The remaining balance from the original
$3,656,049.14 is $2,306,049.14. P1. SOMF at45-47.
II. PROCEDURAL HISTORY

On May 29, 2015, Plaintiff filed its Complaint, asserting three counts. D.E. 1. Count One
alleges breach of contract because Defendant violated the terms of both the May 2011 Written
Agreement and the August 2014 letter. P1. Compl. at

¶J 36-41.

Count Two alleges Defendant

breached the implied covenant of good faith and fair dealing in its dealings with Plaintiff because
Defendant gave Plaintiff “specious ‘explanations’ for non-payment and, later, by engaging in
subterfuges and evasions to destroy and injure the right of Plaintiff to receive the benefits of the
contract.” P1. Compi. at ¶J 42-47. Count Three is a claim against Defendant for account stated in
regards to the alleged remaining balance owed back to Plaintiff.

‘

P1. Compi. at ¶N 48-49.

The numbering of Plaintiffs Counts in its Complaint is different than the numbering of
Plaintiffs Counts in its motion for summary judgment. In Plaintiffs motion for summary
judgment, Plaintiff states that Count One is for breach of contract and Count Two is for account
stated. As noted by Defendant, Def. Opp. Br. at 16 n.4, Plaintiffs motion for summary
judgment does not include any discussion of the Complaint’s Count Two claim for a breach of
the implied covenant of good faith and fair dealing.

8

On February 13, 2017, Plaintiff filed a motion for summary judgment. D.E. 25. On March
13, 2017, Defendant filed opposition, D.E. 34, to which Plaintiff replied. D.E. 35.
Ill. SUMMARY JUDGMENT STANDARD

A moving party is entitled to summary judgment where “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. 5 6(a). A fact in dispute is material when it “might affect the outcome of the suit
under the governing law” and is genuine “if the evidence is such that a reasonable jury could return
a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.s. 242, 248 (1986).
Disputes over irrelevant or unnecessary facts will not preclude granting a motion for summary
judgment. Id. “In considering a motion for summary judgment, a district court may not make
credibility determinations or engage in any weighing of the evidence; instead, the nonmoving
party’s evidence ‘is to be believed and all justifiable inferences are to be drawn in his favor.”
Marino v. Indits. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004) (quoting Anderson, 477 U.s. at

255)). In other words, a court’s role in deciding a motion for summary judgment is not to evaluate
the evidence and decide the truth of the matter but rather “to determine whether there is a genuine
issue for trial.” Anderson, 477 U.S. at 249.
A party moving for summary judgment has the initial burden of showing the basis for its
motion and must demonstrate that there is an absence of a genuine issue of material fact. Celotex
Corp.

V.

Catrett, 477 U.S. 317, 323 (1986). After the moving party adequately supports its motion,

the burden shifts to the nonmoving party to “go beyond the pleadings and by [his] own affidavits,

In this Opinion, the Court will use Plaintiffs numbering as reflected in Plaintiffs motion
for summary judgment. In this Opinion, Count One refers to Plaintiffs action for breach of
contract and Count Two refers to Plaintiffs action for account stated. The Court does not
address the Complaint’s claim for a breach of the implied covenant of good faith and fair dealing
in this Opinion.
9

or by the depositions, answers to interrogatories, and admissions on file, designate specific facts
showing that there is a genuine issue for trial.” Id. at 324 (internal quotation marks omitted). To
withstand a properly supported motion for summary judgment, the nonmoving party must identify
specific facts and affirmative evidence that contradict the moving party. Anderson, 477 U.S. at
250. “[I]f the non-movant’s evidence is merely ‘colorable’ or is ‘not significantly probative,’ the
court may grant summary judgment.” Messa v. Omaha Prop. & Cas. Ins. Co., 122 F. $upp. 2d

523, 528 (D.N.J. 2000) (quoting Anderson, 477 U.S. at 249-50)).

Ultimately, there is “no genuine issue as to any material fact” if a party “fails to make a
showing sufficient to establish the existence of an element essential to that party’s case.” Celotex
Corp., 477 U.S. at 322. “If reasonable minds could differ as to the import of the evidence,”
however, summary judgment is not appropriate. See Anderson, 477 U.S. at 250-51.
IV. ANALYSIS

The parties do not dispute that Plaintiff and Defendant agreed to the August 2009
Installment Contract, that Plaintiff prepaid Defendant $3,656,049.14 for the scheduled delivery of
500 metric tons of LME registered grade “A” copper cathodes in December 2009, and that
Defendant did not deliver the December 2009 shipment. Moreover, the parties do not dispute the
existence of the May 2011 Written Agreement and that Defendant did not make all payments to
Plaintiff as required in the agreement. The dispute in the current motion centers on whether the
May 2011 Written Agreement provides the operative binding terms upon which Defendant was to
repay Plaintiff. Plaintiff claims that the May 2011 Written Agreement provides the binding terms.
On the other hand, Defendant alleges that oral agreements made between the parties supersede the
May 2011 Written Agreement.

10

Plaintiff argues that it is entitled to summary judgment on a number of grounds. First,
Plaintiff argues that it is entitled to summary judgment on its breach of contract claim because
there is no genuine issue of material fact that Defendant was in breach of the May 2011 Written
Agreement. P1. Br. at 2-14. Second, Plaintiff argues it is entitled to summary judgment on its
claim for account stated because there is no genuine issue of material fact to the unpaid amount
still owed to Plaintiff by Defendant. P1. Br. at 14-15. Lastly, Plaintiff argues that it is entitled to
an award of prejudgment interest under New Jersey law. P1. Br. at 15-18.
Defendant, on the other hand, first contends that Plaintiffs claims are barred by the New
Jersey statute of limitations. Def.

Opp. Br.

at 4-8. Second, Defendant argues an oral agreement

that supersedes the May 2011 Written Agreement. Def. Opp. Br. at 9-12. Third, Defendant claims
that Plaintiff failed to mitigate its alleged damages. Def. Opp. Br. 13-15. Fourth, Defendant argues
that there is a genuine issue of material fact as to the amount that Defendant owes Plaintiff. Def.
Opp. Br. at 16-19.

Lastly, Defendant contends that even if Plaintiff is entitled to summary

judgment, Plaintiffs request for prejudgment interest should be denied.
As an initial matter, the parties appear to assume that New Jersey substantive law applies
to the alleged facts of this case. Seeing no clear reason to deviate from the parties’ assumptions,
the Court will apply New Jersey law. See Manley Toys, Ltd. v. Toys R Us, Inc., 2013 WL 244737,
at *2 (D.N.J. Jan. 22, 2013) (“Because the parties have argued the viability of the remaining claims
as though New Jersey substantive law applies, the Court will assume that to be the case.”) (citing
USA Mach. Corp. v. CSC, Ltd., 184 F.3d 257, 263 (3d Cir. 1999) (“[D]espite the interstate, and

indeed international, nature of the putative transactions at issue, the parties have not chosen to
address choice-of-law issues.

.

.

.

Because the parties appear to be in agreement on this issue, we

will assume, without deciding, that Pennsylvania law supplies the appropriate substantive rules.)).

11

A. Count One: Breach of Contract

Concerning the breach of contract claim, the Court will first address the statute of
limitations and Plaintiffs alleged failure to mitigate damages. The Court will then address the
May 2011 Written Agreement and whether it was superseded by an oral contract.
1. Statute of Limitations

Defendant argues that Plaintiffs claims should be barred by New Jersey’s four-year statute
of limitations on contracts for the sale of goods under N.J.S.A. 12A:2-725(1) and, therefore,
Plaintiffs motion for summary judgment should be denied.5 Def Opp. Br. at 4-8.

Defendant

contends that the relevant starting date for calculating the statute of limitations is December 31,
2009

—

the date on which Defendant failed to deliver the December 2009 shipment to Plaintiff

based on the August 2009 Installment Agreement. Id. at 4. Plaintiff, on the other hand, responds
that the relevant contract that Defendant breached is not the August 2009 Installment Agreement
for the sale of goods. Rather, Plaintiff argues the pertinent contract is the May 2011 Written
Agreement to repay Plaintiff

—

and therefore the alleged breach of that agreement is the relevant

date for calculating the statute of limitations. P1. Reply at 1-3. Plaintiff also contends that even if
the original shipment contract is the relevant contract for calculating the statute of limitations,
Defendant made partial payments before and afier the expiration of the statute of limitations,
thereby reviving the statute of limitations. P1. Reply at 1-3.
Generally the a breach of contract claim in New Jersey is subject to a six year statute of
limitations pursuant to N.J.$.A. 2A:l4—l. However, a contract for the ‘sale of goods’ is covered
byN.J.$.A. 12A:2-725’s four-year statute of limitations. Midland FundingLLCv. Thiel, 446 N.J.
Super. 537, 547 (App. Div. 2016).

Defendant did not cross-move for summary judgment based on the statute of limitations.
12

N.J.S.A. 12A:2-725 provides, in part:
(1) An action for breach of any contract for sale must be commenced
within four years after the cause of action has accrued. By the
original agreement the parties may reduce the period of limitation to
not less than one year but may not extend it.
(2) A cause of action accrues when the breach occurs, regardless of
the aggrieved party’s lack of knowledge of the breach. A breach of
warranty occurs when tender of delivery is made, except that where
a warranty explicitly extends to future performance of the goods and
discovery of the breach must await the time of such performance the
cause of action accrues when the breach is or should have been
discovered.
Therefore, any actions based on a breach of a contract for sale of goods must be brought within
four years of the breach.
The May 2011 Written Agreement is a valid contract. In fact, Defendant does not argue to
the contrary.6 In addition, because the contract concerns repayment of a debt (as opposed to the
underlying installment contract, which dealt with the sale of goods), it is subject to a six-year
statute of limitations, and Plaintiff filed within that time. Clearly, by May 2011, Plaintiff wanted
its money back not delivery of the goods under the original installment contract. Moreover, even
—

if the four-year statute of limitations applied, the matter was still filed within the required time
period. Giving Defendant the benefit of all favorable inferences, the May 2011 Written Agreement
was not first breached until May 31, 20l1, when Defendant failed to make the required $50,000
payment. Plaintiff filed its Complaint on May 29, 2015

—

which is within the four-year period.

6

While Defendant never argues against the validity of the May 2011 Written Agreement,
Defendant does allege that it was superseded by a verbal agreement. This argument is addressed
below.

It is not clear that this would be the correct date because Plaintiff did make a November 2011
partial payment of $1,000,000. See Burlington Cty. Country Club v. Mid/antic Nat. Bank S., 223
N.J. Super. 227, 235 (Ch. Div. 1987) (“Payment of or an account of a debt or obligation may also
13

Defendant nevertheless claims that the August 2009 Installment Agreement controls for
statute of limitations purposes because the May 2011 Agreement was based on, and derivative of,
the 2009 contract. Def. Opp. Br. at 4. While this argument is at best questionable, the May 2011
Agreement would nevertheless renew the statute of limitations period.

If a new agreement

qualifies under N.J.S.A. 2A: 14-24, the original statute of limitations for the underlying breach will
no longer apply. N.J.S.A. 2A:14-24 provides, in part:
In actions at law grounded on any simple contract, no
acknowledgment or promise by words only shall be deemed
sufficient evidence of a new or continuing contract, so as to take any
case out of the operation of this chapter, or to deprive any person of
the benefit thereof, unless such acknowledgment or promise shall be
made or continited by or in some writing to be signed by the party
chargeable thereby.
(Emphasis added).8 N.J.S.A. 2A:14-24 “prescribes the standards by which acknowledgement of a
pre-existing debt or promise can serve to set aside the statute of limitations bar.” Ong v. Ong,
2011 WE 2377900, at *3 (N.J. Super. Ct. App. Div. May 19, 2011).
The May 2011 Written Agreement is unquestionably an acknowledgement, in writing, by
Plaintiff that he owed the debt. As a result, N.J. S .A. 2A: 14-24 applies, and the statute of limitations

toll or revive the statute of limitations, thereby extending it for the statutory period from the time
of such payment.”).
8

As indicated in note 7, under New Jersey law, “[p]ayrnent of or an account of a debt or
obligation may also toll or revive the statute of limitations, thereby extending it for the statutory
period from the time of such payment.” Bttrlington Cty. Countiy Clttb v. Midlantic Nat. Bank S.,
223 N.J. Super. 227, 235 (Ch. Div. 1987). “When a partial payment is made after the statutory
period has run, the party seeking to revive the statute must show (1) that the payment was partial,
and (2) an act or declaration which establishes the debtor’s recognition of, and intention to pay,
the entire claim.” Bttrtington Ctv. Country Clttb, 223 N.J. Super. at 235. The New Jersey courts
have made clear that there must be an intention to pay the entire debt, and that “mere payment is
not enough.” Burlington dy. Coitntiy Club, 223 N.J. Super. at 236 (citing Romaine v. Corlies,
47 N.J.L. 108, 109 (Sup. Ct. 1885)). In Romaine, the court held that “[i]t must appear that the
payment is made only as part of a larger debt, for in the absence of such evidence it will be
deemed an admission of no more indebtedness than it pays.” Id. at 109.
14

also began anew on the date that the agreement was signed. F AC at

¶ 77.

Defendant cites one

case, Citstom Commc’nsEng’g, Inc. v. E.F. Johnson Co., 269 N.J. Super 531 (App. Div. 1993), in

support of its contention that the underlying August 2009 Installment Agreement is the relevant
contract for calculating the statute of limitations. However, that case is inapposite. In Custom
Communications, the court found that a number of claims were time barred by the four-year statute
of limitations. Id. at 541. But, in Custom Communications, there was no subsequent agreement;
instead the breach was based on the original contract.
Therefore, there is no genuine issue of material fact that would preclude summary
judgment on statute of limitations grounds.
2. Failure to Mitigate Damages

Defendant also claims that even if Defendant is found to be in breach of the May 2011
Written Agreement, Plaintiffs motion for summary judgment should be denied because Plaintiff
failed to mitigate its damages. Def.

Opp. Br. at 13-15.

Defendant argues that Chou made several

attempts to turn over hedging accounts to Plaintiff and that Plaintiff rejected these offers, instead
instructing Chou how to invest the money in the Standard Account.9 Defendant argues that this

Specifically, Defendant claims that Chou offered four times to let Plaintiff take over the
Standard Account (and in one case the Waldock Account) or to turn over the proceeds from the
Standard Account without requesting a release of Defendant’s obligation to Plaintiff. Defendant
alleges that the amount in the account(s) at the time of the offers were: (1) $1,956,894.16
(Standard Account) and $646,064.70 (Lind Waldock Account) in December 2010; (2) between
$719,200.21 and $1,409,380.82 (Standard Account) in May of 2011; (3) $1,400,000 (Standard
Account) in September 2012; (4) more than $900,000 (Standard Account) in August 2014. Def.
Opp. Br. at 14; D.E. 34, Chou Decl. at ¶ 27, 28, 37, 55.
Defendant also alleges that Chou offered to liquidate the Standard Account a fiflh time
and give the approximately $700,000 proceeds to Plaintiff in November 2014. However, this
offer was conditioned on Plaintiff relieving Defendant of the remaining amount owed. D.E. 34,
Chou Decl. at ¶ 64-66 (“I told [Ye] that if they wanted to liquidate the Standard Account, Inco’s
sole asset, they would have to agree not to ask me or Inco for any more money.”).
15

constitutes a failure to mitigate damages. Def.

Opp.

Br. at 13-15. Plaintiff counters that the

doctrine of the duty to mitigate is inapplicable to this case because there was no new additional
damage when Plaintiff declined to take over the hedging accounts and because Plaintiff had no
duty to take less than the total amount owed by Defendant. Pt. Reply at 7-9.
Under New Jersey law, “[lit is well settled that injured parties have a duty to take
reasonable steps to mitigate damages.” McDonald v. Mianecki, 79 N.J. 275, 299 (N.J. 1979).
“Damages will not be recovered to the extent that the injured party could have avoided his losses
through reasonable efforts ‘without undue risk, burden or humiliation.” Ingraham v. Trowbridge
Builders, 297 N.J. Super. 72, 82—83 (App. Div. 1997) (quoting Restatement (Second) of Contracts,
Section 350(1)-(2) (1981)). The duty to mitigate “is based on the premise that a plaintiff may not
recover damages for injuries which he may have avoided.”10 Russo farms, Inc. v. Vineland 3d.
of Educ., 144 N.J. 84, 10$ (N.J. 1996) (internal quotations omitted).
Here, Defendant argues that Plaintiff failed to mitigate its damages because Plaintiff did
not accept the Standard Account when the account had a large sum of money in it. However, this
contention misstates the scope of a party’s duty to mitigate damages. While “[lit is well settled
that a party claiming damages for a breach of contract has a duty to mitigate his loss,” Sommer i
Kridel, 74 N.J. 446, 454 (N.J. 1977), the non-breaching party is still “entitled to the amount of

damages.

.

.

which.

.

.

will put that party in the same position it would have been in if the breaching

party had performed the contract in accordance with its terms,” Magnet Resources, Inc. v. Summit
MRL Inc., 318 N.J. Super. 275, 292—93 (App. Div. 199$). Here, Plaintiff did not increase the

10

“The doctrine is particularly applicable to an employment contract wherein the discharge of a
full-time employee frees him to earn moneys for his personal services.” Sandler v. Lawn-A-Mat
Chem. & Equip. Corp., 141 N.J. Super. 437, 455 (App. Div. 1976), holding modfled by Ellmex
Const. Co. v. Republic Ins. Co., 202 N.J. Super. 195 (App. Div. 1985).
16

damages it was owed; rather, Plaintiff chose to not accept accounts with less than the total amount
allegedly owed by Defendant. A non-breaching party must not act unreasonably in rejecting
adequate substitutes, but it is “not required to compromise its debt to mitigate its damages.” Valley
Nat’lBankv. fister, 2017 WL476149, at *3 (App. Div. Feb. 6,2017) (finding that a bank was not
obligated to agree to proposed sales of a property to resolve the deficiency in a foreclosure
proceeding when the bank would be compromising the amount of its deficiency claim). Here,
Plaintiff was under no obligation to accept accounts with less than the total alleged amount owed
by Defendant.

While it is true (and unfortunate for both parties) that Defendant’s accounts

subsequently lost value, this cannot be legally attributed to any of Plaintiffs acts. Defendant
essentially argues that because Plaintiff gave Defendant unwise instructions on how to invest
Defendant’s remaining assets, Plaintiff failed to mitigate its damages. Of course, there was nothing
preventing Defendant from liquidating its account (regardless of Defendant’s advice)11 and making
a partial payment to Defendant. But in such a scenario, Defendant would have still owed the
remaining amount to Plaintiff absent an agreement to the contrary.
Applying the duty to mitigate to the facts of this case would fundamentally misapply the
doctrine. Therefore, the Court denies Defendant’s request to deny summary judgment based on
Plaintiffs failure to mitigate.
3. The May 2011 Written Agreement

Plaintiff argues that summary judgment is appropriate on its claim for breach of contract
in regard to the May 2011 Written Agreement because there is no genuine issue of material fact

Defendant appears to be making some form of estoppel argument concerning its detrimental
reliance on Plaintiffs instructions to continue hedging the money. But Defendant did not raise
estoppel by way of either counterclaim or affirmative defense.
17

that the valid and binding contract was signed by both Plaintiff and Defendant and that Defendant
breached the contract. P1. Br. at 2-14.
To establish a breach of contract under New Jersey law, a plaintiff must demonstrate that
there is (1) a valid contract; (2) plaintiff perfonried under the contract; (3) defendant’s breach of
the contract; and (4) resulting damages. Lacroce v. li Fortttna Roofing, Inc., 2017 WL 43176$,
at *5 (D.N.J. Jan. 31, 2017); Murphy v. Implicito, 392 N.J. Super. 245, 265 (App. Div. 2007) (To
establish a breach of contract under New Jersey law, “a plaintiff has the burden to show that the
parties entered into a valid contract, that the defendant failed to perform his obligations under the
contract and that the plaintiff sustained damages as a result.”). Defendant does not challenge the
existence of the May 2011 Written Agreement between the parties,’2 nor does Defendant dispute
that it did not follow the repayment plan described by the May 2011 Written Agreement.’3 Rather,
Defendant bases its opposition to summary judgment on the existence of superseding oral
agreements between the parties. Because there is no dispute that the parties entered into the May

12

Defendant notes that the May 2011 Written Agreement “reflects a memorialization of
[Defendant’s] projected repayment or refund of Plaintiffs December 2009 Payment for the
goods it did not receive from [Defendant]. Under the [May 2011 Written Agreement],
[Defendant] had agreed to return Plaintiffs full payment under certain conditions. No additional
consideration from either party was recited in the [May 2011 Written Agreement]. Thereafier,
the projected repayment terms under the [May 2011 Written Agreement] were superseded by the
oral agreement of the parties.” Def. Opp. Br. at 9.
‘While Defendant briefly states that there was no additional consideration in the May
2011 Written Agreement, Defendant focuses its arguments on the validity of alleged superseding
oral agreements; beyond its brief mention of lack of consideration, Defendant does not attempt to
argue that the May 2011 Written Agreement was invalid at the time it was signed. Moreover,
Defendant does not explain why the 2011 Written Agreement lacks consideration. One obvious
form of consideration is that Defendant was not forced to pay all the money back at once.
Another is that Plaintiff did not sue Defendant for the outstanding amount. Yet another is that
Plaintiff did not seek interest on the amount owed.
Defendant states that “[t]here is no dispute that [Defendant] immediately did not make the
monthly payments under the [May 2011 Written Agreement].” Def Opp. Br. at 9.
13

1$

2011 Written Agreement and that Defendant failed to perform under the contract, the Court now
moves to examining whether the parties entered into a subsequent and superseding oral agreement
that modified Defendant’s duties.
4. Oral Agreements

Defendant claims that the May 2011 Written Agreement was superseded by subsequent
oral agreement of the parties. Def.

Opp.

Br. at 9-12. Specifically, Defendant points to events

during two time periods to support its claims: November 2011 and September 2012. Defendant
first alleges that in November 2011, Li and Chou agreed that the parties would leave money in the
Standard Account as “seed money” so Chou could attempt to make up for the parties’ losses. Def

Opp. Br. at 9; D.E. 34, Chou Deci. at ¶ 32-3 5.

Second, Defendant claims that in September 2012,

Li and Chou again discussed the strategy of the Standard Account and that Li (and “Mrs. Li”)
“insisted that the parties maintain their joint strategy to use the account to attempt to earn back all
of their losses,” Def. Opp. Br. at 9-10, instead of cashing out the account and give the funds to
Plaintiff,14 Def. Opp. Br. at 11. Defendant contends that these two events are evidence of an oral
agreement (to jointly invest the Standard Account) that supersedes the May 2011 Written
Agreement. Def. Opp. Br. at 11. Plaintiff, on the other hand, argues that the parties did not come
to a legally binding oral agreement to modify the terms of the May 2011 Written Agreement. P1.
Reply at 3-4.
Defendant is correct that the parole evidence rule would not bar evidence of any
superseding oral agreement made sztbseqttent to the May 2011 Written Agreement, however, to
defeat summary judgment Defendant must provide some evidence that there was such an oral

As mentioned in note 11 supra, Defendant appears to be raising some form of estoppel
argument, but Defendant did not raise estoppel in its Answer and did not actually argue it in its
opposition to the current motion.
19

agreement between the parties. Here. Defendant has failed to provide sufficient evidence to show
a genuine issue of material fact regarding the existence of a valid oral contract between Plaintiff
and Defendant that supersedes the May 2011 Written Agreement.
“A contract arises from offer and acceptance, and must be sufficiently definite ‘that the
performance to be rendered by each party can be ascertained with reasonable certainty.” Weichert
Co. Realtors v. Ryan, 128 N.J. 427, 435 (N.J. 1992) (quoting Friedman v. Tappan Dev. Corp., 22

N.J. 523, 531 (N.J. 1956)) (other citations omitted). “Thus, if parties agree on essential terms and
manifest an intention to be bound by those terms, they have created an enforceable contract.”
Weichert Co. Realtors, 128 N.J. at 435. “An essential characteristic of an enforceable contract is

that its obligations be specifically described in order to enable a court or a trier of fact to ascertain
what it was the [prornisor] undertook to do.” Malaker Corp. Stockholders Protective Comm. v.

first Jersey Nat’l Bank, 163 N.J. Super. 463, 474 (App. Div. 1978) (citations omitted), certtf
denied, 79 N.J. 488 (N.J. 1979).
Defendant essentially argues that, without specifically mentioning the term, a novation
occurred. “[A] novation substitutes a new contract and extinguishes the old one.” Wells Reit II80 Park Plaza, LLC v. Dir., Div. of Taxation, 414 N.J. Super. 453, 466 (App. Div. 2010). Under

New Jersey law, “[t]he elements of a novation are: (1) a previously valid contract; (2) an agreement
to make a new contract; (3) a valid new contract; and (4) an intent to extinguish the old contract.”
Id. Regarding the fourth element, “[i]n order to effect a novation there must be a clear and definite

intention on the part of all concerned that such is the purpose of the agreement, for it is a well
settled principle that novation is never to be presumed.” Id. at 467 (quoting Sixteenth Ward Bldg.
& Loan Ass’n v. Reliable Loan Mortgage & Sec. Co., 125 N.J. Eq. 340, 342—43 (E & A. 1939).
While New Jersey courts have cautioned that the existence of a novation is generally a question of

20

fact to be presented to the jury,” Wells Reit 11-80 Park Plaza, LLC, 414 N.J. Super. at 467, “when
the evidence is ‘one-sided’ regarding whether the parties entered into a novation, summary
judgment is appropriate, Id. (citing Tttng v. Briant Park Homes, Inc., 287 N.J. Super. 232, 239
(App. Div. 1996)).
Here, Defendant claims that Chou’s deposition testimony and statements in Chou’s
Declaration describing discussions between Li and Chou in November 2011 and September 2012
show that Defendant’s repayment “was no longer governed by the [May 2011 Written Agreement],
but was either governed by, or entirely contingent upon, the parties’ joint investment in the
[Standard Account].” Def.
i.

Opp. Br. at 9,

11.

November 2011 Discussions

Defendant first claims that discussions between the parties in November 2011 show that
they made an oral agreement that supersedes the May 2011 Written Agreement. Def. Opp. Br. at
9. In Chou’s Declaration submitted to this Court, he claims that an oral agreement was made in
November 2011 after the May 2011 Written Agreement. D.E. 34, Chou DecI. at

¶]

32-35.

However, looking to Chou’s deposition testimony, Chou states that a concrete oral agreement was
made before the May 2011 Written Agreement.’5 To be clear, any discussions or agreements
before the May 2011 Written Agreement are barred by the parol evidence rule. “The parol
evidence rule excludes evidence of antecedent negotiations or agreements to alter a subsequent
writing, on the theory that such antecedent matters were integrated in the written agreement.

.

.

However, the rule does not exclude evidence of alterations or agreements made subsequent to the
writing.” Gen. Am. Life Ins. Co. v. Int’l Ins. Co., 2000 WL 35547519, at *4 (D.N.J. Jan. 3,2000).

Chou stated in his deposition testimony that “before we even entered the [May 2011 Written
Agreement], even before that date, we had verbally bonded together to make the money back
from Standard Bank.” Li Deci., Ex. E, Chou Deposition at p. 117 (emphases added) (D.E. 27).
‘

21

According to Chou’s own deposition, the parties came to an agreement before the May 2011
Written Agreement

—

any such agreement is barred by the parol evidence rule.

Defendant now essentially claims that Chou told Li about the Standard Account before the
parties signed the May 2011 Written Agreement, and that after the parties signed the May 2011
Written Agreement, there were continuing discussions about the Standard Account. Plaintiff
claims that the subsequent oral agreement supersedes the May 2011 Written Agreement. Def.

Opp. Br. at 12.

In support of this argument, Chou states in his Declaration that in November 2011,

Chou had a phone call with Mr. Li and Mrs. Li in which Chou told Mr. Li “that the [Standard
Account] was performing very well and that we should both be able to withdraw funds to make up
for our losses. I told him I could give him $1 million now, and leave a substantial balance, or
‘seed’ money, in the account to try to make back the losses for both parties as quickly as possible.
Mr. Li agreed.

...

[Mr. Li] told me that my strategy, which at the time was ‘shorting’ the price of

copper, was good, and he specifically told me to ‘keep doing that.”6 D.E. 34, Chou Deci. at ¶j
34. However, even accepting everything Defendant states as true, Defendant fails to provide
evidence that the parties intended the November 2011 discussions to extinguish the May 2011

Plaintiff claims that Chou’s declaration should be barred by the “sham affidavit” doctrine. A
sham affidavit is a contradictory affidavit that indicates only that the affiant cannot maintain a
consistent story or is willing to offer a statement solely for the purpose of defeating summary
judgment. A sham affidavit cannot raise a genuine issue of fact because it is merely a variance
from earlier deposition testimony, and therefore no reasonable jury could rely on it to find for the
nonmovant. Jiminez v. A11Am. Rathskeller, Inc., 503 F.3d 247, 253 (3d Cir. 2007).
16

Plaintiff claims that at Chou’s deposition, he only testified to a verbal agreement before
May 2011 Written Agreement, while his declaration now discusses an agreement after.
However, during his deposition, Chou testified that the parties had November 2011 discussions
about the hedging business, Li Decl., Ex. E, Chou Dep. p. 94, as well as discussions about the
Standard Account on the golf course in September 2012, Id. at p. 111-122. The Court finds that
the differences in Chou’s deposition testimony and Chou’s affidavit are not enough to warrant
application of the sham affidavit doctrine.
22

Written Agreement. Defendant fails to provide enough evidence to show a genuine issue of
material fact whether these discussions show that there was an oral agreement made in November
2011 that supersedes the May 2011 Written Agreement.
ii. September 2012 Discussions
Second, Defendant points to discussions between the parties’ individual representatives in
September 2012 in China as evidence that the parties formed an oral agreement that supersedes
the May 2011 Written Agreement. Def.

Opp.

Br. at 9-10. Defendant argues that during these

September 2012 discussions the parties “again discussed the performance of the [Standard
Account], which both parties were relying on to make up their losses at that point.

.

.

.

Over the

course of the golf outing and dinner afierwards, Mr. Chou offered to turn over the balance in the
[Standard Account] to Plaintiff.

.

.,

but Mr. Li and Mrs. Li (at the dinner) insisted that the parties

maintain their joint strategy to use the account to attempt to earn back all of their losses,” and that
Li asked Chou to change the Standard Account to a long position strategy.17 Def. Opp. Br. at 910. Again, accepting everything that Defendant states as true regarding these September 2012
discussions, Defendant fails to provide enough evidence to show a genuine issue of material fact
whether these discussions show that there was an oral agreement made that supersedes the May
2011 Written Agreement.

Chou’s Declaration claims that during dinner, the parties discussed the Standard Account and
that Chou “offered to turn over the [Standard Account] funds so [Li] could invest those funds
himself.” Chou’s Declaration then states that “Mrs. Li said that she thought the account was
doing well and I should just continue to invest the funds in the hedging account. I told them that
I would see how the short position performed in the next few months, and if it did not gain
significantly, I would make the switch, as [Li] requested, to long positions. Mr. and Mrs. Li both
agreed to that strategy.” D.E. 34, Chou Decl. at ¶ 41-42. The record is devoid of any
information as to how, if at all, Mrs. Li is connected with Plaintiff or how she could make
decisions that bind Plaintiff.
17

23

In short, Defendant’s own infoniiation fails to show any evidence that, to the extent
understandings were reached based on verbal discussion, Plaintiff agreed to extinguish the May
2011 Written Agreement. At best, the evidence shows that Plaintiff and Defendant agreed that
Defendant should not liquidate the Standard Account but instead keep trading in it. Therefore, the
Court grants Plaintiffs motion for summary judgment on its claim for breach of May 2011 Written
Agreement.
B. Count Two: Account Stated

Plaintiff also claims that summary judgment is appropriate on its cause of action for
account stated. Plaintiff argues that the May 2011 Written Agreement, the August 2014 Letter,
and the proposed November 2014 Accord and Satisfaction all clearly state the total unpaid amount
owed by Defendant to Plaintiff. P1. Br. at 15. Defendant counters that summary judgment is
inappropriate on Count Two because there is a material disputed issue of fact as to the definite
amount owed by Defendant to Plaintiff. Def.

Opp. Br. at 16.

Defendant repeats its claim that there

was an oral agreement that superseded the May 2011 Written Agreement and that Plaintiffs
account stated action is based on the same circumstances as its breach of contract claim. Def. Opp.
Br. at 16-19.
Here, this Court has already determined that there is no genuine issue of material fact that
the May 2011 Written Agreement is the operative agreement between the parties and that Plaintiff
is entitled to summary judgment on its breach of contract claim. Because the Court has already
granted Plaintiffs motion for summary judgment for breach of contract, the Court need not reach
Plaintiffs claim for account stated because Plaintiff may only recover once. See Carter Ledyard
& Mi/burn LLF v. Carrascosa, 2010 WL 3703699, at *4 (D.N.J. Sept. 10, 2010) (“In light of this
Court’s ruling [in favor of plaintiff on plaintiffs] breach of contract claim, the Court need not

24

decide [plaintiffs] account stated and quantum mentit claims, which seek the same damages.”);
see Manley Toys, Ltd. v. Toys R Us, Inc., 2013 WL 244737, at *5 (D.NJ. Jan. 22, 2013) (advising

that if “[plaintiff eventually] prove[s] successful on its breach of contract claim, however, it will
only be able to recover once”).
C. Prejudgment Interest

Lastly, Plaintiff argues that prejudgment interest at a 2.2 5% rate is just and equitable. P1.
Br. at 15-18. Defendant counters that prejudgment interest at a 2.25% rate is inappropriate because
Defendant did not have exclusive control over the money in the Standard Account. Def.

Opp. Br.

at 20-21. Defendant argues that if prejudgment interest is awarded, it should be awarded at a
0.25% rate, not a 2.25% rate, because Plaintiff has not shown that there are unusual circumstances
warranting an additional two percent rate of interest. Def. Opp. Br. at 21.
“As a federal court sitting in diversity, this Court must apply the prejudgment interest rules
of the state whose law governs the action.” Buck Consultants, Inc. v. Glenpointe Assocs., 2010
WL 2104982, at *2 (D.N.J. May 25, 2010) (citing McA dam v. Dean Witter Reynolds, Inc., $96
f.2d 750, 773 (3d Cir.1990) (“New Jersey law controls the question of whether pre-judgment
interest is available.”)). Under New Jersey law, “[a]lthough prejudgment interest in a tort action
is expressly governed by R. 4:42—11(b), ‘the award of prejudgment interest on contract

[] claims

is based on equitable principles.” Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372, 390 (N.J.
2009) (quoting County of Essex v. First Union Nat’l Bank, 186 N.J. 46, 61(2006)). “Thus the
award of prejudgnent interest in a contract case is within the sound discretion of the trial court.
Similarly, the rate at which prejudgment interest is calculated is within the discretion of the

25

court.”18 Litton Inthts., Inc., 200 N.J. at 390. When considering whether to award prejudgment
interest, a court must primarily consider that
the defendant has had the use, and the plaintiff has not, of the
amount in question; and the interest factor simply covers the value
of the sum awarded for the prejudgment period during which the
defendant had the benefit of monies to which the plaintiff is found
to have been earlier entitled.
Id. at 390 (quoting Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 506 (1974)).

Here, the Court determines that Plaintiff is entitled to prejudgment interest. Plaintiff pre
paid Defendant $3,656,049.14 for a delivery of 500 metric tons of LME registered grade “A”
copper cathodes to be delivered in December 2009. Defendant never delivered the copper cathodes
and has not paid Plaintiff back the entire amount. Defendant argues that Plaintiff has failed to
show that Defendant had exclusive control over the money given to it by Plaintiff—and therefore
prejudgment interest is inappropriate. Def. Opp. Br. at 20-21. However, even if Plaintiff was
advising Defendant on how to invest the money in the Standard Account, Defendant retained
exclusive legal control over the account—evidenced by the fact that Chou made the changes to the
account’s holdings, even during the time that Defendant alleges Plaintiff had “control” over the
account. Therefore, Plaintiff is entitled to prejudgment interest.
1. Interest Rate

Generally, absent unusual circumstances, the prejudgnent interest rate applied to contract
claims is determined by the annual rate of return of the State of New Jersey Cash Management
Fund, and shall not fall below 0.25%. N.J. Ct. R. 4:42-1 1(a)(ii); DialAmerica Mktg., Inc.

18 The date when prejudgment interest begins to run in a contract case is also within the sound
discretion of the court, based on equitable principles. County of Essex v. First Union, 186 N.J.
46, 61-62 (N.J. 2006); see Pressler & Verniero, Current N.J court Rules, comment 3.1 on R.
4:42-11, at 1996 (2018).
26

V.

KeySpan Energy Corp., 374 N.J. Super. 502, 511, (App. Div. 2005); WR. HuffAsset Mgmt. Co.
v. William Soroka 1989 Tr., 2009 WI 2436692, at *7 (D.N.J. Atig. 6, 2009) (“The New Jersey
Appellate Division has found that in contract cases, New Jersey Court Rule 4:42—11 (a)(ii)—
requiring application of the New Jersey Cash Management Fund Rate for pre- and postjudgment
interest in tort actions—provides an appropriate ‘starting point,’ absent unusual circumstances.”);
Pressler & Vemiero, CterrentN.i Cottrt Rules, comment 3.1 on R. 4:42-11, at 1989, 1996 (201$).
Under R. 4:42-11(a)(iii), 2% interest maybe added to “judgments exceeding the monetary limit
of the Special Civil Part.” N.J. Court R. 4:42-I l(a)(iii). New Jersey courts have advised that in
contract cases “subsection (a)(ii) provides an appropriate starting point in determining the rate of
prejudgment interest” and that (a)(iii)’s 2% increase is discretionary in “unusual circumstances”
based on equitable principles. DiatAmerica Mktg., Inc. v. KevSpan Energy Corp., 374 N.J. Super.
502, 511, (App. Div. 2005) (“We thus find, in the absence of the ‘unusual circumstances’ to which
we specifically adverted in Benevenga, that subsection (a)(ii) provides an appropriate starting point
in determining the rate of prejudgment interest, but we do not in any sense foreclose the use of
subsection (a)(iii) in connection with a rule-based calculation of prejudgnient interest, should the
equities demand it.”).
Plaintiff relies on WR. Huff Asset Mgmt. Co. v. William Soroka 1989 Tr., 2009 WI
2436692, at *7 (D.N.J. Aug. 6, 2009) to argue that the Court should exercise its equitable discretion
to award Plaintiff the additional 2% interest rate increase authorized by R. 4:42-11(a)(iii) because
this case involves a large sum of money, because there were two years of litigation based on what
Plaintiff calls Defendant’s baseless and unreasonable defenses, and because Plaintiffs
responsibility to pay financing costs and charges. P1. Br. at 16-17. However, in WR. Hi4fAsset
Mgmt. Co., the Court did not deviate from the starting point provided in subsection (a)(ii). WI?.

27

HuffAssetligrnt. Co., 2009 WL 2436692, at *7 (D.N.J. Aug. 6, 2009) (“The Court has considered
all of the circumstances bearing upon a fair rate, including (but not limited to): the amount of
judgment at issue; the length of this litigation; the reasonable rates of return that defendants might
have earned; the rate of return the reserve funds actually earned; and the financial tumult that the
nation has recently endured. On balance, the Court finds that New Jersey Court Rule 4:42—
11(a)(ii) provides an appropriate compromise between what defendants might possibly have
earned and a ‘rock-bottom level’ that would not provide fair compensation

.

.

.

while

simultaneously preventing undue punishment against [the other party].”).
The Court similarly finds that R. 4:42-1 1(a)(ii) provides the appropriate rate for calculating
prejudgment interest in this case. Therefore, the prejudgment interest rate will be calculated by
application of the historical New Jersey Cash Management Fund yearly rates, not to be less than
0.25%. 19
2. Type of Interest

R. 4:42-11(a) provides that “[e]xcept as otherwise ordered by the court or provided by law,
judgments, awards and orders for the payment of money, taxed costs and counsel fees shall bear
simple interest.” N.J. Ct. Rule 4:42—11(a).

“Because compound interest unduly hastens the

accumulation of debt, courts regard it as unfairly harsh and oppressive. Accordingly, compound
interest is disfavored at common law.” Henderson v. Camden Cty. Mttn. Util. Auth., 176 N.J. 554,
559 (N.J. 2003) (internal quotations and citations omitted); Johnson v. Johnson, 390 N.J. Super.
269, 274 (N.J. 2007) (“N.J. Ct. Rule 4:42—11(a) prescribes that any order to pay money bears
simple interest.

.

.

.

[C]ompound interest is clearly the exception rather than the rule.”). The Court

Information regarding the New Jersey Cash Management Fund rate is found at
http ://www.nj .gov/treasury/doinvest/cash3 shtml (last visited Oct. 10, 2017 3:52 P.M.).
19

.

28

finds, in accordance with New Jersey courts’ presumption, that prejudgment interest shall be
calculated using a simple interest rate method.
3. Relevant Dates for Interest Calculation
Rule 4:42—11(b) states that a court may suspend prejudgment interest in a tort actions for
a period of time in “exceptional cases.” N.J. Ct. R. 4:42-11(b). This principle also applies to
prejudgment interest in contract cases. See North Bergen Rex Transport, Inc. v. Trailer Leasing
C’o., A Division ofKeller Sys., Inc., 15$ N.J. 561, 575 (N.J. 1999). “[P]rejudgment interest can be
withheld only where it is demonstrated that the policy, spirit and intent of the rule are patently
inapposite to the circumstances at hand.” Ruffv. Weintratth, 105 N.J. 233, 245 (N.J. 1987) (internal
quotation and citation omitted).

“The exceptional cases doctrine is used to avoid punitive

prejudgment interest awards.” WR. HtffAsset Mgmt. Co. v. William Soroka 1989 Tr., 2009 WL
243 6692, at *9 (D.N.J. Aug. 6, 2009).
Here, however, the Court finds no reason to suspend the imposition of prejudgment
interest. Plaintiff requests that prejudgment interest begin to apply on November 8, 2011, P1. Br.
at 17, the day afler Defendant made his last payment according to the May 2011 Written
Agreement. P1. SOMF at

¶ 44,

49. The Court finds this to be an appropriate starting point, as

Defendant had already breached the agreement when it did not deliver any of the monthly
payments provided for in the May 2011 Written Agreement. Therefore, Plaintiff is entitled to
prejudgment interest beginning on November 8, 2011.
4. Applicable Amount of the Judgment
Plaintiff argues that there “is no dispute that the unpaid balance was $2,506,049.14 from
November 8, 2011 until August 18, 2014 and $2,306,049.14 from August 1, 2014 until today. P1.
Br. at 17; P1. SOMF at

¶

44, 47. The Court finds that there is no evidence to dispute these

29

calculations.

Therefore, prejudgment interest shall be determined using these amounts, in

accordance with the New Jersey Cash Management Fund rate, discussed supra.
V.

CONCLUSION
For the reasons set forth above and for good cause shown, Plaintiffs motion for summary

judgment on Count One for breach of contract (D.E. 25) is GRANTED. Plaintiff is also entitled
to prejudgment interest consistent with this Opinion. The Court need not reach Plaintiffs motion
for summary judgment on Count Two for account stated. An appropriate Order accompanies this
Opinion.

Date: October 18, 2017

\

\

,-“

John Michael VazqeS(J.

30