Taub et al v. Marchesi Di Barolo S.P.A.
Filing
238
MEMORANDUM OF DECISION AND ORDER granting in part and denying in part 207 Motion for Judgment as a Matter of Law. The motion as to the plaintiff Palm Bay's cause of action for breach of the implied warranty of merchantability; and as to the t hird counterclaim based on the Dispute Resolution Provision in the Importation Agreement are both denied. The motion as to the sixth counterclaim against David Taub and Marc Taub for breach of their fiduciary duty in instructing Palm Bay to take the set-off is granted. The sixth counterclaim is dismissed as a matter of law. The Clerk of the Court is directed to enter judgment in accordance with this decision and to close the case. Ordered by Senior Judge Arthur D. Spatt on 7/11/2011. c/m - judgment clerk notified (Mahon, Cinthia) Modified docket text on 7/11/2011 (Mahon, Cinthia).
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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PALM BAY INTERNATIONAL, INC.,
Plaintiff,
MEMORANDUM OF
DECISION AND ORDER
CV 09-599 (ADS)(AKT)
- against MARCHESI DI BAROLO S.P.A.,
Defendant.
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DAVID S. TAUB and MARC TAUB,
Plaintiffs,
- against MARCHESI DI BAROLO S.P.A.,
Defendant.
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A P P E A R A N C E S:
ETTELMAN & HOCHHEISER, P.C.
Attorneys for Plaintiffs
100 Quentin Roosevelt Boulevard, Suite 401
Garden City, NY 11530
BY: Gary Ettelman, Esq. Of Counsel
DUANE MORRIS LLP
Attorneys for Defendant
1540 Broadway
New York, NY 10036
BY: Rachel G. Pontikes, Esq.
Larry Selander, Esq.
John Dellaportas, Esq., and
Javier Chavez, Jr., Esq., Of Counsel
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SPATT, District Judge.
The plaintiffs Palm Bay International, Inc., (“Palm Bay”) and David S. Taub and Marc
Taub (the “Taubs”) (collectively the “plaintiffs”) move for a post-judgment ruling granting to
them a judgment as a matter of law pursuant to Federal Rule of Civil Procedure (“Fed.R.Civ.P.”)
50(b) or, in the alternative, a new trial pursuant to Fed.R.Civ.P. 59. For the reasons set forth
below, the plaintiffs’ motions are denied in part and granted in part.
I. THE BACKGROUND
The facts in this case were initially stated in the Court’s prior Memorandum and Decision
and Order dated May 17, 2010. At the four week trial the facts were further set forth in greater
detail. In this opinion the Court will review only the essential facts which, together with the
applicable law, form the basis for this decision.
On January 1, 1994, defendant Marchesi Di Barolo S.P.A. (“Marchesi”) and the Taubs
entered into an “Agency Agreement,” by the terms of which Marchesi appointed David Taub and
Martin Taub as its exclusive sales agents in the United States. Martin Taub’s interest in the
agreement was later assigned to his grandson, the defendant Marc Taub. The Taubs are the
owners of Palm Bay, a New York company that specializes in importing wine and spirits.
On February 7, 1994, Palm Bay entered into a written agreement with Marchesi for the
exclusive right to import Marchesi’s wine in the United States (“the Importation Agreement”).
Among the terms of the agreement was the provision that payment for the wines must be made
by Palm Bay 100 days from the date on the bill of lading.
In 2006 and 2007, Palm Bay engaged in discussions with its customer, the Olive Garden
Restaurant chain with regard to the sale of a wine known as Moscato d’Asti wine (“Moscato”) to
be offered by Olive Garden in its 700 restaurants in the United States. On August 21, 2007,
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Palm Bay gave Marchesi a written order for the Moscato wine. The wine was to be made
available to all the Olive Garden restaurants on or about January 4, 2008. In October and
November 2007, Marchesi began to deliver the first two installments of approximately 3,500
cases each of Moscato wine. The installments were in two lots, named Lot 291 and Lot 310.
In January 2008, Palm Bay began to receive reports from Olive Garden restaurants that
the Moscato wine was defective. The evidence revealed that some of the bottles resembled
either a cloudy appearance with sediment or a clear appearance with a noxious smell and taste.
Palm Bay immediately notified Marchesi. On February 5 and 6, 2008, Marchesi directed that the
Moscato Lot 291 be recalled from the market. Palm Bay incurred significant expenses in
recovering the defective wine; in air-freighting replacement wine; and in a substantial payment
to Olive Garden. Nevertheless, on February 21, 2008, Olive Garden cancelled the Moscato
program, and would not accept any new wine product from Marchesi. This cancellation caused
additional money damages to Palm Bay. In fact, Palm Bay paid Olive Garden the sum of $1.1
million in alleged damages.
Prior to and following the termination of the Olive Garden program, Palm Bay and
Marchesi representatives met and exchanged communications to try to resolve various issues,
without success. By this time, Palm Bay had paid Marchesi for all the Moscato. However, in a
letter dated January 15, 2008, Palm Bay notified Marchesi that it was setting off the purchase
price of the Moscato against other outstanding payments due to Marchesi under the terms of
their Importation Agreement. Thereafter, on January 28, 2009, as a result of the “set-off”,
Marchesi sent a letter to Palm Bay and the Taubs terminating both the Importation Agreement
and the Agency Agreement.
A major issue in this case was the alleged attempt by Marchesi to “cure” the problem
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caused by the defective Moscato wine. The cure by a seller of a defective delivery is governed
by the New York Uniform Commercial Code § 2-508, which reads as follows:
§ 2-508. Cure by Seller of Improper Tender or Delivery; Re-placement
(1) Where any tender or delivery by the seller is rejected because nonconforming and the time for performance has not yet expired, the seller may
seasonably notify the buyer of his intention to cure and may then within the
contract time make a conforming delivery.
(2) Where the buyer rejects a non-conforming tender which the seller had
reasonable grounds to believe would be acceptable with or without money
allowance the seller may if he seasonably notifies the buyer have a further
reasonable time to substitute a conforming tender.
A. The Trial History
A jury was selected on July 12, 2010 and the trial commenced on July 13, 2010 and
concluded on August 3, 2010. The case went to the jury with regard to the following cause of
action and six counterclaims.
The plaintiff Palm Bay’s cause of action – Breach of the Implied Warranty of
Merchantability.
The defendant’s First Counterclaim – Based on as to the payment set-off by Palm Bay.
The defendant’s Second Counterclaim – Based on the failure of Palm Bay to pay for
conforming Marchesi wine within 100 days from the date on the bill of lading.
The defendant’s Third Counterclaim – Based on the claim by Marchesi that Palm Bay
breached the Dispute Resolution provision of the Importation Agreement.
The defendant’s Fourth Counterclaim – Based on the claim by Marchesi against Palm
Bay on an Agency Agreement term involving replacing defective wine on a “dollar for dollar”
basis. However, as to this provision, the jury would first have to determine that Marches proved
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that the Agency Agreement and the Importation Agreement were part of a single transaction and
were to be construed as a single contract. The jury found that Marchesi failed to prove that the
two agreements were part of a single transaction.
The defendant’s Fifth Counterclaim – Based on the claim by Marchesi against David
Taub and Marc Taub for breaching their fiduciary duty as agents by not considering any wine
importer other than Palm Bay.
The defendant’s Sixth Counterclaim – Based on the claim by Marchesi against David
Taub and Marc Taub for breach of their fiduciary duty by instructing Palm Bay to take a set-off
of the price of the wine.
B. The Verdict
As to the plaintiff’s cause of action, the jury found that there was a breach of the implied
warranty of merchantability by Marchesi, in that the Moscato wine was not reasonably fit for the
intended use. However, the jury also determined that Marchesi proved the “cure” defense,
namely that it notified Palm Bay of its intention to cure and, also, that “it could have provided a
conforming delivery of valid conforming Moscato d’Asti wine sufficient to comply with Olive
Garden requirements within the time specified in the arrangements between Palm Bay and
Marchesi.” (Verdict; question 2). Therefore, the plaintiff Palm Bay was not entitled to recover
damages in its sole cause of action.
As to the first counterclaim, the jury was advised that, “. . . the Court has already
determined that the plaintiff Palm Bay has breached the Importation Agreement by taking this
set-off and failing to pay for certain Marchesi products, so that your function is to fix the
damages caused by this set-off. The damages on the first counterclaim based on the set-off is for
you to determine. It consists of the wine that was delivered and not paid for.” The set-off was
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for non-Moscato wine that was delivered to Palm Bay and was due and owing. The jury found
that the total amount of monetary damages to be awarded to Marchesi on the first counterclaim
was the sum of $519,552.68. The Court notes that Marchesi contended that the proper set-off
damages was the sum of $597,335.48. However, the jury determined that the Palm Bay
proposed lesser figure of $519,552.68 was the proper measure of damages.
As to the second counterclaim, the Court similarly advised the jury that it had already
determined that “Palm Bay had no legitimate basis to withhold payment for the conforming
wine. Therefore, Palm Bay breached that paragraph in the Importation Agreement.” However,
the jury was further instructed that the damages are the same as in the first counterclaim. “Do
not compensate Marchesi twice for the same damages.” As to the second counterclaim there was
an additional contested request for the cost of relabeling the wine in the sum of $115,885.89.
The jury, as in the first counterclaim, determined that the lesser sum of $519,557.68 was due to
Marchesi and also declined to award it the additional sum requested for the cost of relabeling.
The third counterclaim was based on the defendant’s assertion that Palm Bay breached
the Dispute Resolution provision in the Importation Agreement. The jury found that Palm Bay
breached this provision and awarded the same amount of damages of $519,552.68. As to the
defendant’s fourth and fifth counterclaims, the jury found in favor of the plaintiff.
The sixth and final counterclaim was against David Taub and Marc Taub for breach of
their fiduciary duty in instructing Palm Bay to take the set-off of the price of the wine. Again,
the Court instructed the jury that “the damages are the same as the first counterclaim, namely the
unpaid wine deliveries.” The jury found in favor of Marchesi in the sixth counterclaim,
awarding the same amount of damages, namely the sum of $519,552.68.
II. THIS MOTION AND THE CONTENTIONS OF THE PARTIES
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A. The Plaintiff’s Contentions
The plaintiff Palm Bay brings this post verdict motion for judgment as a matter of law
pursuant to Fed.R.Civ.P. 50(b) or, in the alternative, for a new trial pursuant to Fed.R.Civ.P. 59.
These are the plaintiff’s contentions:
1. As to the plaintiff’s cause of action for breach of the implied warranty of
merchantability, the plaintiff contends that the defendant failed to prove the defense of “cure.”
The plaintiff contends that “As a matter of law, such ‘cure’ was deficient because it did not put
Palm Bay in the position it would have been in but for the breach.” (Pltf’s Motion at p. 1). In
this regard, the plaintiff contends that there was no “cure” as a matter of law because: (1) Palm
Bay never received a tender of the purchase price; (2) Palm Bay incurred significant incidental
costs in removing the defective product from the market place but never received a tender of
those damages; (3) Palm Bay suffered lost profits as a result of the Olive Garden cancellation,
but never received a tender of those damages; and (4) Palm Bay never received a replacement
product.
It this regard the plaintiff also states that the jury verdict is “contrary to established law
and the expressed purpose of the U.C.C. which is to put the non-breaching party in its intended
position.” (Pltf’s Motion at p. 2). Stated otherwise, “Marchesi failed to cure because it did not
put and hold conforming goods at Palm Bay’s disposition and give Palm Bay notification
necessary to enable it to take delivery.” Also, Palm Bay asserts that Marchesi “did not make a
conforming tender within the time provided by the contract as required by U.C.C. § 2-508.
2. As to the third counterclaim and the jury finding that Palm Bay breached the “Dispute
Resolution Provision” of the Importation Agreement, the plaintiff contends this provision “was a
non-exclusive remedy and was a mere agreement to agree and thus not binding on the parties.”
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3. With regard to the sixth counterclaim, the Taubs contend that “the set-off taken by
Palm Bay was outside the scope of the Taubs and Marchesi’s fiduciary relationship and that the
parties were acting at arm’s length.” (Pltf’s Motion at p. 2). Stated otherwise, the plaintiff’s
contend that “the Taubs were not acting as Marchesi’s agents at the time of the set-off.” (Pltf’s
Motion at p. 23). Because “. . . the Taubs at best had only a limited fiduciary duty, namely the
appointment of importers, distributors and wholesalers, and they were not acting within the
scope of these relations when they instructed Palm Bay to take the set-off.” (Pltf’s Motion at p.
23). Accordingly, the plaintiff’s contend that this Court must hold, as a matter of law, that the
Taubs were not acting as fiduciaries when they instructed Palm Bay to take the set-off.
B. The Response by the Defendant Marchesi
The defendant presents a multifaceted response to the plaintiff’s contentions. Initially,
the defendant contends that this motion is essentially an attack on the jury’s fact finding, which,
according to Marchesi “are amply supported by this record.”
In addition, the defendant contends that these contentions by Palm Bay have been
waived.
As to the plaintiff’s assertion that the proof did not set forth a valid “cure” defense, in
addition to contesting the merits of this assertion, the defendant contends that this argument was
not raised by the plaintiff Palm Bay at the proper time during the trial and therefore it is waived.
In this regard, the defendant contends that the plaintiff’s Rule 50(a) motion did not raise the
claim that Marchesi’s cure was legally ineffective because it did not make the plaintiff’s
“whole”. The only contention raised by the plaintiff in the Rule 50(a) motion was that the cure
was futile in that Olive Garden terminated the program. The defendant contends that the issue
raised in this motion, namely, the supposed legal ineffectiveness of the cure is distinct from the
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question of whether the cure was futile. Therefore the defendant contends that the plaintiffs are
precluded from asserting the ineffectiveness of the cure defense in this Rule 50(b) motion.
Further, even assuming that the plaintiff’s prior Rule 50(a) motion could be construed to
contend that Marchesi’s cure was legally ineffective because it did not cover all the damages
allegedly sustained by Palm Bay, the defendant contends that it is untimely under Fed.R.Civ.P.
51(6)(2)(A). The defendant further contends that in the pre-charge conference the Court related
to counsel its proposed charge. According to Marchesi no argument was made by the plaintiff
that it could not legally offer a “cure” without first providing for the damages suffered by Palm
Bay by reason of the breach of warranty, which is their present argument.
In addition, Marchesi supplements its waiver argument by the fact that at the time the
Court addressed the content of the verdict sheet with counsel, “Plaintiffs again sat silent.” (Dft’s
Response at p. 6). So that the plaintiff did not object to the form of the Verdict Sheet as to the
cure defense. Again, at this time, no mention was made of the plaintiff’s damages; instead the
jury was to determine if Marchesi “could have provided a conforming delivery of valid
conforming Moscato d’Asti wine sufficient to comply with Olive Garden requirements within
the time specified in the arrangements between Palm Bay and Marchesi.” (Verdict Sheet at
question 2). Therefore, the defendant contends that this “cure” contention by the plaintiff is
barred by the provisions of Fed.R.Civ.P. 51(c).
Further, as to the cure defense, Marchesi points to the jury finding in the third
counterclaim. In that determination, the jury found that Palm Bay “refused to reach a mutually
satisfactory solution concerning the defective Moscato d’Asti” by not accepting Lot 310
expedited by air-freight to the United States as a replacement for the defective wine in Lot 291,
together with the majority of non-defective bottles in Lot 291, estimated to be in excess of
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30,000 bottles, and the proposed Sella & Mosca Moscato wine, all of which could have filled
any Olive Garden order.
An important issue addressed by Marchesi is its response to the plaintiff’s contention that
any wine would be futile because Olive Garden had already cancelled the Moscato program at
the time the cure was rendered. Not so, says Marchesi; the relevant efforts to cure took place
prior to the termination of the Olive Garden – Moscato program which took place on February
21, 2008. In this regard, Marchesi contends that there were three separate theories of cure:
(1) Lot 310 constituted a replacement for Lot 291; (2) a new third party supplier Sella & Mosca,
could have provided new replacement wine from its existing inventory; and (3) Petteruti of Palm
Bay was told by Ernesto Abbona that Marchesi’s employees would personally come to Palm
Bay’s warehouse in the United States and remove the defective bottles, estimated to be 6,000 in
number, from Lot 291 thereby permitting the remaining good 34,000 bottles in Lot 291 to be
resold. In sum, the defendant contends that, as to the cure defense, there were proper factual
issues for the jury concerning whether Marchesi could offer a proper cure under the provisions
of § 2-508.
As to the third counterclaim, the defendants contends that the jury was presented with
factual questions as to whether Palm Bay complied with the Dispute Resolution Provision in the
Importation Agreement. In response to the argument by Palm Bay that the Dispute Resolution
Provision was not an exclusive remedy, Marchesi asserts that “it is at the very least a condition
precedent to Palm Bay asserting other remedies.” In addition, Marchesi disputes the contention
by Palm Bay that the provision was too indefinite to be enforceable. Marchesi contends that “the
requirement that the parties negotiate to settle disputes is enforceable.” Further, Marchesi
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contends that although the parties did negotiate for a period of time, Palm Bay did not negotiate
in good faith, as is required in all such agreements.
As to the sixth counterclaim based on breach of their fiduciary duty by the Taubs in
instructing Palm Bay to take the set-off of the price of the good wine, the defendant contends
that this was a question of fact for the jury and there is no basis to disturb their verdict. The
defendant asserts that the Taubs, as agents, owed to Marchesi good faith, loyalty and honesty.
As such, when the Taubs instructed Palm Bay to take the set-off, the jury could and did find that
there was a breach of fiduciary duty.
Finally, the defendant contends that the plaintiff’s Rule 59 motion for a new trial should
also be denied in that the plaintiffs failed to demonstrate that the verdict was against the weight
of the evidence. Marchesi asserts that the trial was about credibility and the jury chose to
believe Marchesi’s witnesses.
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III. DISCUSSION
A. The Standards
1. As to Rule 50(b)
In substance, Fed.R.Civ.P. 50(b) provides that if a jury returns a verdict for which there is
not a legally sufficient evidentiary basis, the District Court may either order a new trial or direct
the entry of judgment as a matter of law. “The same standard that applies to a pre-trial motion
for summary judgment pursuant to Fed.R.Civ.P. 56 also applies to motions for judgment as a
matter of law during or after trial pursuant to Rule 50.” Piesco v. Koch, 12 F.3d 332, 341 (2d
Cir. 1993); see also the Advisory Committee Note to 1991 Amendment of Fed.R.Civ.P. 50. This
Rule is well and clearly explained in the seminal case of This Is Me, Inc. v. Elizabeth Taylor,
157 F.3d 139 (2d Cir. 1998). In Taylor, the Court commented that the then recent adoption of
the term “judgment as a matter of law” to replace both the term “directed verdict” and the term
“judgment N.O.V.” was intended to call attention to the close relationship between Rule 50 and
56. 157 F3d at 142. The Court then went on to explain the basis for granting a post-verdict Rule
50 motion, as follows:
A district court may not grant a motion for a judgment as a matter of law unless
“the evidence is such that, without weighing the credibility of the witnesses or
otherwise considering the weight of the evidence, there can be but one conclusion
as to the verdict that reasonable [persons] could have reached.” Cruz v. Local
Union No. 3, Int’l Bhd. of Elec. Workers, 34 F.3d 1148, 1154-55 (2d Cir. 1994)
(quoting Simblest v. Maynard, 427 F.2d 1, 4 (2d Cir. 1970)) (internal quotation
marks omitted). Weakness of the evidence does not justify judgment as a matter
of law; as in the case of a grant of summary judgment, the evidence must be such
that “a reasonable juror would have been compelled to accept the view of the
moving party.” Piesco, 12 F.3d at 343.
Id.
The same explanation of a Rule 50 motion, was more recently stated in Fairbrother v. Morrison,
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412 F.3d 39, 48 (2d Cir. 2005), in the following terms:
This circuit has stated that judgment was a matter of law “may only be granted if
there exists such a complete absence of evidence supporting the verdict that the
jury’s findings could only have been the result of sheer surmise and conjecture, or
the evidence in favor of the movant is so overwhelming ‘that reasonable and fair
minded [persons] could not arrive at a verdict against [it].’” Luciano v. Olsten
Corp., 110 F.3d 210, 214 (2d Cir. 1997) (quoting Cruz v. Local Union No. 3, 34
F.3d 1148, 1154 (2d Cir. 1994)) (alterations in original). The motion should be
granted “only if [the court] can conclude that, with credibility assessments made
against the moving party, a reasonable juror would have been compelled to accept
the view of the moving party.” Piesco v. Koch, 12 F.3d 332, 343 (2d Cir. 1993).
The court cannot assess the weight of conflicting evidence, pass on the credibility
of witnesses, or substitute its judgment for that of the jury.” Tolbert v. Queens
College, 242 F.3d 58, 70 (2d Cir. 2001) (quoting Smith v. Lightning Bolt
Productions, Inc., 861 F.2d 363, 367 (2d Cir. 1988)).
See also Fabri v. United Technologies International Inc., 387 F.3d 109, 119 (2d Cir. 2004)
(same); Sanders v. New York City Human Resources Administration, 361 F.3d 749, 755 (2d Cir.
2004). A Rule 50(b) motion should be granted only when there is “such a complete absence of
evidence supporting the verdict that the jury’s findings could only have been the result of sheer
surmise and conjecture,” or where there is “such an overwhelming amount of evidence” in favor
of the moving party that fair minded jurors could not reasonably arrive at a verdict against the
movant; Gronowksi v. Spencer, 424 F.3d 285, 292 (2d Cir. 2006) (Internal quotation marks
omitted).
In reviewing the record to determine whether a motion for JMOL should be granted, ‘the
court must draw all reasonable inferences in favor of the nonmoving party, and it may not make
credibility determinations or weight the evidence ‘Credibility determinations, the weighing of
the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those
of a judge.’” Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 150, 120 S.Ct. 2097,
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147 L.Ed.2d 105 (2000) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct.
2505, 9 L.Ed.2d 202 (1986)). A judgment as a mater of law is thus “proper only if ‘the evidence
is such that, without weighing the credibility of the witnesses or otherwise considering the
weight of the evidence, there can be but one conclusion as to the verdict that reasonable men
could have reached.’” Fiacco v. City of Rensselaer, 783 F.2d 319, 329 (2d Cir. 1986) (quoting
Simblest v. Maynard, 427 F.2d 1, 4 (2d Cir. 1970)), cert. denied, 480 U.S. 922 (1987). Also, in
making this determination, the court “must disregard all evidence favorable to the moving party
that the jury is not required to believe.” Reeves, 530 U.S. at 151 120 S.Ct. 2017; Meloff v. New
York Life Insurance Company, 240 F.3d 138, 145 (2d Cir. 2001).
Such motions “should be granted cautiously and sparingly.” 9A Charles A. Wright &
Arthur R. Miller, Federal Practice and Procedure § 2524, at 252 (1995); Japan Airlines Company
Ltd. v. Port Authority of New York & New Jersey, 178 F.3d 103, 112 (2d Cir. 1999). In ruling
on a motion for judgment as a matter of law, the court may not itself weigh credibility or
otherwise consider the weight of evidence; rather, it must defer to the credibility assessments
that may have been made by the jury and the reasonable factual inferences that may have been
drawn by the jury. (See Williams v. County of Westchester, 171 F.3d 98, 101 (2d Cir. 1999)).
2. As to Rule 59
Here, the plaintiffs move for judgment as a matter of law, pursuant to Rule 50(b), “or in
the alternative for a new trial, pursuant to Fed.R.Civ.P. 59.” In the plaintiffs’ motion papers little
is said about Rule 59. In fact, a review of the Rule itself reveals little explanation with regard to
the legal basis for the Rule, which reads in relevant part:
Rule 59. New Trial; Altering or Amending a Judgment
(a) In General.
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(1) Grounds for New Trial. The court may, on motion, grant a
new trial on all or some of the issues – and to any party – as
follows:
(A) after a jury trial, for any reason for which a
new trial has heretofore been granted in an action at
law in federal court.
Generally, the grant of a new trial under Rule 59 is warranted only if the district judge is
“convinced that the jury has reached a seriously erroneous result or that the verdict is a
miscarriage of justice.” Sorlucco v. New York City Police Dept., 971 F.2d 864, 875 (2d Cir.
1992) (quoting Smith v. Lightning Bolt Productions, Inc., 861 F.2d 363, 370 (2d Cir. 1988)). In
evaluating a Rule 59 motion, the trial judge’s duty is essentially to see that there is no
miscarriage of justice. Bevevino v. Saydjari, 574 F.2d 676, 684 (2d Cir. 1978). However, in
general, as stated above, a motion for a new trial should not be granted unless the Court is
“convinced that the jury has reached a seriously erroneous result or that the verdict is a
miscarriage of justice.” Sorlucco, 971 F.2d at 864; see also Nimely v. City of New York, 414
F.3d 381, 390 (2d Cir. 2005); Smith v. Nurse Carpenter, 316 F.3d 178 (2d Cir. 2003); Hugo Boss
Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 623 (2d Cir. 2001).
In comparison to a Rule 50 motion, the Second Circuit has held that the standard for a
Rule 59 motion in some respects is less onerous for the moving party in two ways: first,
“[u]nlike judgment as a matter of law, a new trial may be granted even if there is substantial
evidence supporting the jury’s verdict.” DLC Management Corp. v. Town of Hyde Park , 163
F.3d 124, 134 (2d Cir. 1998). Second, in deciding a Rule 59 motion “a trial judge is free to
weigh the evidence himself, and need not view it in the light most favorable to the verdict
winner.” Id.
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B. As to the “Cure” Defense
1. The Defendant Says “Waiver”
In its verdict, the jury found that the defendant Marchesi breached the Implied Warranty
of Merchantability in that the Moscato d’Asti wine was not reasonably fit for the intended use.
However, in a separate question, the jury also determined that the defendant Marchesi proved:
(a) that it notified Palm Bay of its intention to cure and (b) that it could have provided a
conforming delivery of valid conforming Moscato d’Asti wine sufficient to comply with Olive
Garden requirements within the time specified in the arrangements between Palm Bay and
Marchesi.
In essence, Palm Bay now contends that Marchesi could not legally “cure” its breach of
implied warranty of merchantability because it “could not remedy all the damages suffered by
Palm Bay as a result of the sale of defective wine” to Olive Garden its important customer
(plaintiff’s motion at 16). In particular, Marchesi did not remedy the “lost profit damages”
incurred when Olive Garden cancelled its Moscato program. In other words, the plaintiff
contends that it was not made whole and therefore the attempts to cure by Marchesi were legally
insufficient. The defendant responds that this requirement was not raised in the plaintiff’s Rule
50(a) motion, and it is waived.
In Lambert v. Genesee Hospital, 10 F.3d 46, 54 (2d Cir. 1993), at the time of the change
in nomenclature of post trial motions, the Court stated the rule that a motion for judgment as a
matter of law must specify the grounds upon which the motion relies, and a party cannot assert
new grounds for relief after the verdict is rendered. In Lambert the Court stated that “at times
courts have been lax in enforcing this specificity requirement . . . although more recently courts
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have more rigorously exacted compliance with the specificity requirement . . . ” Id. at 54 (citing
Smith v. Lightning Bolt Prods, Inc., 861 F.2d 363, 367 (2d Cir. 1988); McCarty v. Pheasant Run
Inc., 826 F.2d 1554, 1555-56 (7th Cir. 1987)). The rule was well-stated in Lambert, as follows:
Motivating the Advisory Committee’s concern for specificity was the
desire to put a party on notice of potential deficiencies in its proof before the case
is submitted to the jury. As Professor Moore explains, “[a] careful reading of the
Advisory Committee Note indicates that the Committee was particularly
interested in protecting the nonmovant’s right to be informed, prior to submission
of the case to the jury, of the alleged deficiencies in the case.” 5A Moore &
Lucas, Moore’s Federal Practice ¶ 50.08, at 50-95 (2d ed. 1993).
Because the defendants failed even to raise the issue of the promotion of
Dupre to manager at the directed verdict stage, let alone the grounds upon which
they deserved judgment as a matter of law, they are not permitted to raise the
issue in a subsequent j.n.o.v. motion. Defense counsel’s prefatory remark at the
directed verdict stage that “as a matter of law the plaintiff’s have failed to prove
any of the claims they are entitled to prove in this phase of the trial” is insufficient
to satisfy the specificity requirement of Fed.R.Civ.P. 50(a). If such a broad,
general statement that “a party has failed to prove any and all of its claims” were
held to satisfy Fed.R.Civ.P. 50(a), the specificity requirement of that rule would
be rendered a nullity.
Id.
Also in Cruz v. Local Union No. 3 of International Brotherhood of Electrical Workers, 34
F.3d 1148, 1154 (2d Cir. 1994), a case in which this Court has some familiarity, the “waiver”
rule was discussed:
In Samuels, this Court ruled that judgment as a matter of law is limited to those
issues “specifically raised in [a] prior motion for a directed verdict.” 992 F.2d at
14. In its motion to dismiss or for a directed verdict made at the close of the
plaintiff’s case, Local Union No. 3 challenged only the adequacy of the
grievances and the issue of exhaustion of remedies by the prevailing employees –
it did not challenge the issue of damages. “The rule is well established that a
motion for directed verdict at the close of all the evidence is a prerequisite for
[judgment as a matter of law].” Hilord Chemical Corp. v. Ricoh Electronics, Inc.,
875 F.2d 32, 37 (2d Cir. 1989). Moreover, this procedural requirement may not
be waived as a mere technicality. See Redd v. City of Phenix City, Ala., 934 F.2d
1211, 1214 (11th Cir. 1991).
17
Id. at 1154.
Further as stated in Tolbert v. Queens College, 242 F.3d 58, 77 (2d Cir. 2001), “A motion
that identifies one element of a claim is insufficient to permit the district court to grant J.M.O.L.
for lack of proof of some other, unspecified element . . ..” See also Kirsch v. Fleet Street, Ltd.,
148 F.3d 149, 164 (2d Cir. 1998) (“It is well established that a party is not entitled to challenge
on appeal the sufficiency of the evidence to support the jury’s verdict on a given issue unless it
has timely moved in the district court for judgment as a matter of law on that issue.”).
In the Reply Memorandum the plaintiffs respond to this “waiver” issue, as follows:
1. Once Olive Garden terminated the program on February 21, 2008 it was impossible to
cure, so that any cure after that date was futile.
2. The plaintiffs did raise the issue of damages in the pre-charge conference, as follows:
The instruction that we’re talking about here is with respect to
cure. They’re saying they had the right to cure. That’s about
damages. And what damages are, are what damages reasonably
flowed as a result of the breach. And the question there is the
damages that reasonably flow from that breach the cancellation of
that program and once that program is cancelled, therefore, and the
damages are incurred, how can there be a cure? (Tr. At 2282).
The Court finds that the one viable issue in the plaintiff’s present motion for a judgment
as a matter of law with regard to the breach of warranty issue is that the Court did not advise the
jury that, in order to be a valid cure, Marchesi had to tender a remedy for Palm Bay’s damages.
The Court finds that, even if this statement as to damages is the law regarding a cure – and the
subject will be covered later in the opinion – that the plaintiff Palm Bay waived this claim. A
review of the record reveals that Palm Bay did not advance this contention at the time of posttrial motions and the pre-charge and pre-verdict conferences prior to the Court’s charge. No
18
request was ever made that the Court charge the jury that – in order to be an effective cure there
must have been a tender by Marchesi of the plaintiff’s damages, including the $1.1 million paid
to Olive Garden. The plaintiffs never expressly advanced the theory that the alleged cure must
place Palm Bay in the same position it would have been if there had been no breach of warranty.
These contentions were raised for the first time in this post-verdict motion. This “damages”
contention is different and distinct from the question of whether the cure was futile after
February 21, 2008, when Olive Garden terminated the Moscato Program.
Apparently, the only reference to damages in relation to the cure defense was made by
plaintiff’s counsel when he discussed “damages that reasonably flow from that breach.” (Tr. At
2282). The Court finds that this statement standing along is insufficient to constitute a request to
charge the jury that the jury must find that all the damages have been remedied and the defendant
must have placed the plaintiff in the same position as if no breach had occurred (see the
plaintiffs’ recitation as to its version of the correct charge as set forth in pages i and ii in its
motion for judgment as a matter of law).
As stated above, “more recently courts have more rigorously exacted compliance with the
specifity requirement.” Lambert v. Genesee Hospital, 10 F.3d at 54. See also Smith v.
Lightening Bolt Production, Inc., 861 F.2d 363, 367 (2d Cir. 1988) (“In all, we see no indication
that the defendants’ motions were sufficiently specific to alert Smith to these present
contentions . . .”); McCarthy v. Pleasant Run Inc., 826 F.2d 1554, 1555-56 (7th Cir. 1987)
(“Thus, neither motion for directed verdict presented the question whether the issue of the
defendant’s negligence should be withdrawn from the jury and resolved in the plaintiff’s favor.
She could not present that issue for the first time in her motion for judgment n.o.v.”).
19
To the contrary, not only did the plaintiffs not request a charge and/or a question in the
Verdict Sheet that their damages were a requisite part of the cure, but their counsel said the
Court had “done a good job” on the cure question in the Verdict Sheet. The discussion with
counsel concerning the “cure” question in the verdict sheet was, in part, as follows:
THE COURT: Here is what I think that I’m going to change it to. Question 2:
Did the defendant Marchesi prove that, A, it notified Palm Bay of its intention to
cure, and B, that it could have provided a conforming delivery of valid
conforming Moscato D’Asti wine sufficient to comply with Olive Garden
requirements within the time – I’m taking original out – within the time specified
in the – instead of agreement, I’m putting arrangements between Palm Bay and
Marchesi. I’m going to repeat it.
That it could have provided a conforming delivery of valid conforming Moscato
D’Asti wine sufficient to comply with Olive Garden requirements within the time
specified in the arrangements between Palm Bay and Marchesi. That’s what I’m
going to put. But I’m leaving Olive Garden in. There’s no question, everybody
knew it was for Olive Garden.
MS. PONTIKES: Your Honor, I renew my objection.
THE COURT: You have an exception. And so do you if you want one.
MR. ETTELMAN: Your Honor, I think you’ve done a good job. The only thing is if
we’re going to use arrangement, I think the reference there should be to arrangement between
Palm Bay and Olive Garden.
THE COURT: No. Palm Bay and Marchesi. Any other exceptions to the verdict sheet?
Ms. Pontikes?
MS. PONTIKES: I don’t think so, your Honor.
THE COURT: Mr. Ettelman.
MR. ETTELMAN: No your Honor.
(Tr. at 2381, 2382).
In this regard, the Court notes that an objection to a Verdict Sheet should be made prior
to the jury retiring. As stated by then Circuit Judge Sonia Sotomayor in Javis v. Ford Motor Co.,
283 F.3d 33 (2d Cir. 2002):
20
We have previously emphasized that “[f]ailure to object to a jury instruction or
the form of an interrogatory prior to the jury retiring results in a waiver of that
objection . . .. Surely litigants do not get another opportunity to assign as error an
allegedly incorrect charge simply because the jury’s verdict comports with the
trial court’s instructions.” Lavoie, 975 F.2d at 55; see also Barrett, 194 F.3d at
349 (applying Rule 51 to an objection to an instruction provided on the jury
form); cf. Play Time, Inc. v. LDDS Metromedia Communications, Inc., 123 F.3d
23, 29 n. 6 (1st Cir. 1997) (“The Rule 51 standard applies to the jury charge and
any special verdict form.”).
Id. at 57.
See also Fogarty v. Near North Insurance Brokerage, Inc., 162 F.3d 74, 81 (2d Cir. 1998)
(“We conclude that Near North waived its challenge to the Instruction, and we affirm the
judgment of district court”); Chooseco, LLC v. Lean Forward Media, LLC, 364 Fed. Appx. 670,
672 (2d Cir. 2010) (“The parties were given an opportunity to object to the jury instructions and
verdict form, see Fed.R.Civ.P. 51(b)(2), but LFM did not raise any objection until after the jury’s
deliberations. The ‘failure to object to a jury instructions or the form of an interrogatory prior to
the jury returning results in a waiver of that objection.” ) quoting Jarvis v. Ford Motion Co., 283
F.3d 33, 57 (2d Cir. 2002)); Countryman v. Farber, 340 Fed. Appx. 703, 704 (2d Cir. 2009)
(“Federal Rule of Civil Procedure 51 requires that an objection to a question on a verdict sheet or
to jury instructions be made ‘on the record’ stating distinctly the matter objected to and the
grounds for the objection, before the case is submitted to the jury . . .”).
Here, the issue of the “legally effective” cure with regard to a tender of Palm Bay’s
damages was not sufficiently raised in the Rule 50(b) motion or in the pre-charge conference or
in the verdict sheet discussion. The Court finds that the failure to raise the issue or object to the
charge or the verdict sheet resulted in a waiver of this objection and is not a basis for Rule 50(b)
relief.
21
2. The Cure Defense – On the Merits
The Court has reviewed the cases cited by the plaintiff Palm Bay for the proposition that
the cure in this case required Marchesi to tender the damages that Palm Bay suffered, including
the $1.1 million paid to Olive Garden. Even in the absence of a waiver by Palm Bay – which the
Court has already found – there was no reversible error in the Court’s charge or the verdict sheet.
A review of the cases advanced by Palm Bay in the order raised reveals the following:
Afolabi v. Jones, No. 06-CV-27561 2008 WL *4890166 (E.D.N.Y. Nov. 12, 2008) concerned
straight away damages in a default judgment case and had nothing to do with the § 2-508 cure;
Sinco Inc. v. Metro North Commuter Railroad Company, No 99-CV-10631 2001 WL *1609388
(S.D.N.Y. Dec. 17, 2001) also concerned an inquest as to contract damages and did not involve
a cure situation; nor did Canvisa Corp. v. A & Lobasco, 986 F. Supp. 723, 732 (E.D. N.Y. 1997);
or G.A. Thompson & Co. v. Wendell J. Miller Mortgage Company, Inc., 457 F. Supp. 996, 999
(S.D. N.Y. 1978).
In Moulden & Sons, Inc. v. Osaka Landscaping Nursery, Inc., 584 P.2d 968 (Wash. App.
Ct. 1978), the incidental damages complained of necessarily arose with the discovery of the nonconforming goods. In this case, there were no such incidental damages and, with reasonable
certainty, the jury could have found that there would be no such incidental damages, and any
subsequent lost profit or printing costs could have been avoided. Here, the Court charged the
jury that “In order to show that it effectuated a proper cure, Marchesi must demonstrate that . . .
(2) it could have provided a conforming delivery within the original time specified in the
appropriate documents.” In Nationwide Mutual Insurance Co. v. United Computer Capital
Corp., No. 16340, 1994 WL 78640 at 43 (Ohio Ct. App. March 16, 1994), the Court held that the
22
“cure must correspond to the default and remedy it.” In this case, a reasonable jury apparently
held that the default could have been remedied by the many efforts of Marchesi to replace the
defective wine.
In both Travelers Indemnity Co. v. Mako Machine Tool Corp., 952 F.2d 26, 29 (2d Cir.
1951) and Clark Oil Trading Company v. Cimerada Hess Trading Company, No. 90-CV-1856
1993 WL 300039 (S.D.N.Y. Aug. 4, 1993), it was held that a proposed cure “is not deficient if it
does not mention costs associated with a proposed cure because, as a matter of law, the seller is
presumed to bear those expenses.” 1993 WL 300039, at *5 Here, apparently, the issue of costs
did not arise because Palm Bay rejected Marchesi’s efforts to cure. Instead, the record reveals
that Palm Bay relied not on its damages, but on its assertion of futility in that the cure was too
late because Olive Garden terminated the Moscato program. However, Olive Garden did not
terminate the program until February 21, 2008. The proof is clear that Marchesi attempted to
cure prior to that date. By its verdict, the jury found that Marchesi did make valid proper cure
efforts prior to February 21, 2008 and so the issue of corrective damages may have not been
considered, or if considered was rejected.
Finally, as to the issue of futility, the plaintiffs continue to assert that any cure would
have been futile because Olive Garden had already cancelled the Moscato program by the time
the efforts to cure were tendered. The record reveals, and the jury so found, that all the relevant
efforts to cure on the part of Marchesi took place prior to the date Olive Garden cancelled the
Moscato program on February 21, 2008. In its charge, the Court expressly brought this factor
into the jury’s consideration, as follows:
In order to show that it effectuated a proper cure, Marchesi must
demonstrate that: (1) it notified Palm Bay of its intention to cure; and (2) it could
have provided a conforming delivery within the original time specified in the
23
appropriate documents.
Here, Palm Bay contends that the intended purpose of the shipment of
Moscato d’Asti was for the Olive Garden, which cancelled its order with Palm
Bay on February 21, 2008, and that Marchesi did not effectively communicate its
intention to cure the defective shipment of Moscato d’Asti. Marchesi counters
that Palm Bay knew that it fully intended to send saleable Moscato d’Asti wine
that would meet Palm Bay’s needs. In particular, Marchesi contends that its
intention to cure was manifested when they agreed to license their trademark and
labels to Sella & Mosca so that it could produce additional Moscato d’Asti to
compensate for the defective shipment.
*
*
*
*
*
If the plaintiff does prove this violation, then the second question you
must answer as to this cause of action, is, did the defendant Marchesi prove that:
(1) it notified Palm Bay of its intention to cure and (2) it could have provided a
conforming delivery of Moscato d’Asti wine within the specified time.
(Charge at pp. 47, 48, 49 and 50).
Thus, the jury was advised of this futility contention and, apparently, determined that the
offers and efforts to cure were made prior to the February 21, 2008 cancellation of the Moscato
wine order by Olive Garden, and within the specified time of delivery. Not only did Marchesi
supply an entire valid Lot 310 consisting of 2846 cases of Moscato, as a replacement for Lot
291, it contacted a new third party major supplier, Sella & Mosca to immediately manufacture
additional replacement wine. Also, the record reveals that Marchesi offered to send its
employees to Palm Bay’s warehouse in the United States, to remove the defective bottles from
Lot 291, believed to be approximately 6,000 in number and thereby permit the remaining 34,000
bottles to be used by Palm Bay. The Court charged the jury – without objection – that,
“Marchesi claims that if given the opportunity, it could have tendered the full amount providing
nondefective bottles of Moscato d’Asti from Lot 291 or arranging for additional supply from
Terrenostre or Sella & Mosca.” The jury verdict indicates that it made that finding.
24
In sum, as to the cure defense, even in the absence of the “waiver” issue, there were
factual issues as to whether Marchesi could effectuate a proper cure under the provisions of § 2508. The jury resolved these factual issues in favor of the defendant Marchesi. The Court finds
no valid legal or factual reason to disturb that verdict. Accordingly, the motion of the plaintiff
Palm Bay for a judgment as a matter of law pursuant to Fed.R.Civ.P. 50(b) with regard to the
jury verdict in the breach of implied warranty of merchantability cause of action, is denied.
Also, with regard to the plaintiff’s motion for a new trial pursuant to Fed.R.Civ.P. 59, the
Court has weighed the evidence favorable to Marchesi, and finds that the jury has not reached a
seriously erroneous result or that the verdict with regard to the breach of warranty of
merchantability, is a miscarriage of justice. Accordingly, the plaintiff’s Rule 59 motion with
regard to this cause of action is denied.
D. As to the “Dispute Resolution Provision” - The Third Counterclaim
The jury determined that Palm Bay breached section seven of the Importation Agreement
by failing to come to a “mutually satisfactory resolution” when it took the set-off . The damages
awarded was the same amount as the set-off. The relevant section of the Importation Agreement
provides as follows:
A solution fully satisfactory to each party will be sought for each complaint with
verification of the condition of the disputed merchandise at the importers
warehouse in the presence of the Cantine’s technicians. The findings of that
verification will serve as the basis for a mutually satisfactory resolution of the
complaint.
Palm Bay asks for judgment as a matter of law in its favor as to this counterclaim based
on three contentions. First, the “mutually satisfactory resolution” was not an exclusive remedy
so that Palm Bay cannot be deemed to have committed a breach by taking the set-off without
25
resort to this provision. Second, the provision is an unenforceable agreement to agree which is
too indefinite to bind Palm Bay and cannot constitute a breach of the Importation Agreement.
Third, Palm Bay did negotiate with Marchesi in good faith over eleven months attempting to
reach a “mutually satisfactory resolution,” and if any party failed to act in good faith it was
Marchesi.
In response to these contentions, Marchesi states that, at the very least, the provision was
a condition precedent to Palm Bay asserting other remedies, and would be meaningless if it can
be circumvented. Therefore, according to the defendant, under the terms of the provision Palm
Bay was obligated to at least attempt to reach a solution. In addition, the defendant denies that
the provision is too indefinite to be enforceable. Marchesi contends that the material terms of
the provision were fully set forth and the requirement that the parties negotiate in the Palm Bay
warehouse in the presence of the technicians is enforceable. In addition, Marchesi raises the
issue of lack of good faith in attempting to negotiate under the terms of this provision.
The Court’s charge in this regard was short and to the point.
Paragraph seven of the Importation Agreement provides, in pertinent part,
that in the event there are complaints concerning the wine:
“[A] solution fully satisfactory to each party will be sought for
each complaint with verification of the condition of the disputed
merchandise at the importer’s warehouse in the presence of
[Marchesi’s] technicians. The findings of that verification will
serve as the basis for a mutually satisfactory resolution of the
complaint.”
Defendant Marchesi alleges that although its technicians verified that the
Moscato d’Asti from Lot 310 was saleable, Palm Bay did not accept that
verification and refused to reach a mutually satisfactory solution concerning the
defective Moscato d’Asti. On the other hand, the plaintiff Palm Bay contends that
it did not breach paragraph seven because it accepted and paid for Lot 310 and, it
spent months negotiating with Marchesi regarding the appropriate measure of
26
damages for the defective Moscato d’Asti and that it took the set-off only after it
was clear that no agreement could be reached.
It is for you to decide whether Palm Bay breached paragraph seven of the
Importation Agreement by failing to come to a “mutually satisfactory resolution”
regarding the defective Moscato d’Asti.
As to damages on this third counterclaim, again it is the wine that was
delivered and unpaid; the same damages as the first and second counterclaim.
As stated above, the plaintiff contends that the jury verdict based upon the provision at
issue in the third counterclaim “must be disregarded and judgment entered as a matter of law in
favor of Palm Bay . . . for three separate reasons.” (Pltf’s motion at 21). The first reason is that
the provision is not an exclusive remedy. The Court has reviewed the cases advanced by the
plaintiff in support of this contention and is not impressed. This dispute resolution provision
does not have to be an “exclusive remedy” in order to be viable. It is an agreement by both
parties that, in the event of a problem or a complaint with regard to the manufacture and sale of
the wine, “a solution fully satisfactory to each party will be sought for each complaint”.
(emphasis supplied). Further, the provision goes on to state that there should be “verification of
the condition of the disputed merchandise at the importer’s warehouse in the presence of the
Cantine’s technicians.” The evidence at the trial revealed that Marchesi offered to go to the
Palm Bay warehouse to sort out the valid wine bottles. This offer was never accepted by Palm
Bay.
Palm Bay’s second contention is that the provision was an “unenforceable agreement to
agree.” In Aventis Environmental Science USA LP v. Scott Company, 383 F. Supp 2d 488, 511
(S.D.N.Y. 2005), the provision at issue obligated the parties “to engage in negotiations” and “to
use best efforts . . . to have met and begun good faith negotiations intended to reach agreement
27
on those matters set out as Exhibit 20(ii) . . .”, the Court in Aventis held that this was “a mere
agreement to agree and is an unenforceable”. Id. The Court reasoned as follows:
Thus, similar to the situation in Arcadian Phosphates, Inc. v.
Arcadian Corp., 884 F.2d 69, 72 (2d Cir. 1989), this is not a
situation in which the parties must merely work out a few details
or formalize an agreement on essential terms after manifesting an
intent to be bound. Similar to Arcadian Phosphates, a reasonable
juror could not interpret Scotts’ statement in the letter of intent as
anything more than a statement that Scotts was contemplating the
possibility of discussing entering into binding supply agreements
at some undefined future date. Id. This is an example of a mere
agreement to agree and is unenforceable. Compare Itek Corp. v.
Chicago Aerial Indus., Inc., 248 A.2d 625, (Del. 968) (holding that
where the parties met and orally agreed to the essential terms, a
trier of fact could reach the conclusion that defendant had failed to
exercise reasonable effort to agree on final terms of the contract).
Id. In contrast to the facts in Aventis, here the parties agreed to a method to resolve the issue of
the disputed merchandise and, therefore, it is no “mere agreement to agree”. In sum, the parties
to this Importation Agreement agreed that, in the event of a complaint about the wine, they will
seek a solution by verifying the condition of the disputed merchandise at the Palm Bay
warehouse in the presence of technicians. The proof revealed that Marchesi offered to come to
the United States and review the disputed merchandise at the Palm Bay warehouse. This offer
was apparently not accepted by Palm Bay in violation of the relevant dispute resolution
provision, or so a jury could find.
Marchesi responds to the plaintiff’s contention that there was an agreement to agree by
asserting that “it is at the very least a condition precedent to Palm Bay asserting other remedies.”
(Def. Response at 22). The Court agrees. In Manley vs. AmBase Corp., 337 F.3d 237, 250 (2d
Cir. 2003), it was stated that New York law clearly “disfavors interpretations that render contract
provisions meaningless or superfluous.” Here, there is a definite commitment on the part of both
28
parties to verify the condition of the disputed merchandise at the Palm Bay warehouse in the
presence of technicians. Marchesi offered to comply but Palm Bay apparently declined. See
also, Jim Ball Chrysler, LLC v. Marong Chrysler-Plymouth, Inc., 17 A.D. 3d 1113, 1113-14, 794
NYS 2d 545, 546 (4th Dept. 2005); 22 NY Jur. Contracts § 333 (“Before liability can arise on a
promise qualified by conditions expressed or implied in fact, those conditions must be
fulfilled.”)
Further, when the implementation of certain contract terms are left to be resolved in the
future, it does not necessarily prevent the enforcement of the agreement. In Tractebel Energy
Marketing Inc. v. AEP Power Marketing, Inc., 487 F.3d 89, (2d Cir. 2007) the rule was wellstated:
[A] mere agreement to agree, in which a material term is left for
future negotiations, is unenforceable.” Joseph Martin, Jr.,
Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105, 109, 436
N.Y.S.2d 247, 417 N.E.2d 541 (1981) (citation omitted).
However, “not all terms of a contract need be fixed with absolute
certainty.” Express Indus., 93 N.Y. 2d at 589, 693 N.Y.S.2d 857,
715 N.E.2d 1050. “[A] contract is not necessarily lacking in all
effect merely because it expresses the idea that something is left to
future agreement.” May Metro Corp. v. May Oil Burner Corp.,
290 N.Y. 260, 264, 49 N.E.2d 13 (1943). “[A]t some point
virtually every agreement can be said to have a degree of
indefiniteness,” but “parties . . . should be held to their promises.”
Cobble Hill Nursing Home v. Henry & Warren Corp., 74 N.Y.2d
475, 483, 548 N.Y.S.2d 920, 548 N.E.2d 203 (1989).
*******
The fact that the contract anticipates that the parties will have to
negotiate these details in the future does not render the contract
unenforceable. See May Metro. Corp., 290 N.Y. at 264, 49 N.E.2d
13. Where, as here, the parties have agreed on all material terms
of the contract and clearly manifested their intent to b bound by
those terms, but have left the practical implementation of certain
terms to be resolved in good faith negotiations at a future date, the
contract will be enforced.
29
Id. at 95, 97, 98.
Here, the parties have agreed on the material terms of the dispute resolution provision,
namely, verification of the merchandise at the Palm Bay warehouse in the presence of
technicians. Further, the parties agreed that the finding of that verification will serve as the basis
for a resolution of the complaint. The fact that the parties will have to resolve the complaint
based on the warehouse verification does not render this contract provision unenforceable.
Accordingly, as to the third counterclaim based on the dispute resolution provision, the
plaintiff’s motions for judgment as a matter of law pursuant to Fed.R.Civ.P. 50(b) or for a new
trial pursuant to Fed.R.Civ.P. 59, is denied.
E. As to the Breach of Fiduciary Duty by the Taubs - The Sixth Counterclaim
In the Court’s decision on the parties cross-motions for summary judgment, the Court
ruled that the issue of the sixth counterclaim and the effect of the Taub’s obligation under the
Agency Agreement with regard to the set-off was for the jury in the following language:
With respect to Count IV, the Taubs argue that they were not
acting as agents for Marchesi but in their capacity as the owners of
Palm Bay when they instructed it to take a set-off. However, as
Marchesi points out, this is the problem. The Agency Agreement
was still in effect when the Taubs instructed Palm Bay to take the
set-off. By instructing their company to take an action that would
harm their principal, the Taubs may have breached their duty of
loyalty. A jury will have to decide this question.
In the charge, the Court briefly set forth the instructions as to the sixth counterclaim
based on breach of fiduciary duty as follows:
The sixth and final counterclaim by the defendant Marchesi, is
against the Taubs for breach of their fiduciary duty under the
Agency Agreement when they instructed Palm Bay to take a setoff of the price of the imported wine.
30
In this regard, the Taubs contend that they were not acting as
agents for Marchesi but in their capacity as the owners of Palm
Bay when they instructed it to take a set-off. However, the
defendant Marchesi contends that the Agency Agreement was in
full force and effect when the Taubs instructed Palm Bay to take
the set-off. Marchesi further contends that, when the Taubs
instructed their company, Palm Bay to take the set-off, that was an
action that would harm their principal, Marches (sic), and
therefore, the Taubs breached their duty of loyalty in that regard.
You will have to determine this question.
In essence, the plaintiff asserts that the act of deciding to set-off the purchase price of the
good wine by the Taubs was not “within the scope of the (agency) relation.” (Pltf’s motion at
23). Palm Bay emphasizes that “the Taubs at best only had a limited fiduciary duty, namely the
appointment of importers, distributors and wholesalers, and they were not acting within the
scope of these relations when they instructed Palm Bay to take the set-off.” Id. Further, Palm
Bay contends that it and Marchesi had been negotiating with regard to the issue of the defective
Moscato at arms length. In their role as agents the Taubs were not involved. Therefore, the
Taubs conclude that they were not acting as fiduciaries and could not have breached any
fiduciary duty when they instructed Palm Bay to take the set-off.
Not so, says Marchesi. It is basic agency law that agents owe their principal a fiduciary
duty of loyalty and good faith in all of their efforts to represent Marchesi. Stated otherwise, the
defendant asserts that, “Far from being limited to selecting their own company as Marchesi’s
importer, the Taubs owed Marchesi a duty of loyalty and good faith in all of their efforts to
represent Marchesi and its brand in the United States. (Dft’s Response at 24).
Initially, the Court notes that in its answer to a prior question in the Verdict Sheet, as to
the fourth counterclaim, the jury found that the Agency Agreement and the Importation
Agreement were not part of a single transaction and should not be construed as a single contract
31
(Jury Verdict Sheet at question 8). That determination by the jury does not resolve the question
as to the alleged breach of fiduciary duty with regard to the sixth counterclaim. However, it is a
factual determination that has some bearing on the determination of the issues in this motion.
When Palm Bay acting by the Taubs, its owners, took the improper set-off, the Agency
Agreement was in full force and effect. However, the scope of the Agency Agreement was
clearly set forth in the first paragraph:
Agency: The Manufacturer hereby appoints the Agents as its
exclusive sales agents and representatives in the United States of
America and all its territories and possessions, to sell the
Manufacturer’s products with brand name MARCHESI Di Barolo
and/or others to be agreed, select and appoint primary importers,
distributors and wholesalers, and otherwise to act as the
representative of the Manufacturer in the Unites States of America,
Canada, Mexico and other areas to be decided, and the agents with
all authority to select and appoint primary importers, distributors
and wholesalers and act as sales agents and otherwise represent the
interests of the Manufacturer in accordance with the terms of the
Agreement.
It is well-established that agents owe their principals a duty to exercise the utmost good
faith and loyalty. Sokoloff v. Harriman Estates Dev. Corp., 96 N.Y.2d 409, 416, 729 N.Y.S.2d
425, 430 754 N.E.2d 184 (2001). However, an agent owes a fiduciary duty “only with respect to
matters within the scope of his agency.” Mickle v. Christies, Inc., 207 F. Supp 2d 237, 245
(S.D.N.Y. 2002); see also Steinbeck v. McIntosh & Otis, Inc., No. 04-CV-5497 2009 WL
128189 at *8 (S.D.N.Y. Mar. 31, 2009) (“M&O’s fiduciary duty owed to plaintiff was
circumscribed by the terms of the agreement.”); Restatement (Third) of Agency § 8.01:
(“Fiduciary obligation, although a general concept, is not monolithic in its operation. In
particular, an agent’s fiduciary duties to the principal vary depending on the parties’ agreement
and the scope of the parties’ relationship [and] examining whether particular interactions are as
32
principal and agent . . .”); Meisel v. Grunberg, 651 F.Supp. 2d 98, 116 (S.D.N.Y. 2009)
(“Similarly, under the facts alleged no fiduciary relationship exists with Michael with respect to
paragraph 67(h) since the conduct alleged falls outside of Michael’s role as Fanny’s agent;
plaintiff and Michael are more properly characterized as ‘two parties acting and contracting at
arm’s length’ in connection with the Buy-Out . . .”).
Notwithstanding the well-established rule that an agent must exercise the utmost good
faith and undivided loyalty to their principal throughout the relationship, Western Elec. Co. v.
Brenner, 41 NY2d 291, 295, 392 N.Y.S.2d 409, 360 N.E.2d 1091 (1977), where parties have
entered into an agency agreement, the Courts look to the agreement to discern the rights and
obligations of the agent. See EBCI, Inc. v. Goldman Sachs & Co., 5 N.Y.3d 11, 799 N.Y.S.2d
170, 832 N.E.2d 26 (2005). Here, the obligations of the Taubs as agents of Marchesi was to
select and appoint importers, distributors and wholesalers. The jury determined that the two
agreements were separate transactions with different purposes. The Taubs were under no
fiduciary duty when, acting as officers of Palm Bay, they instructed Palm Bay to take the set-off.
As stated in Northeast General Corp v. Wellington Advertising, Inc., 82 N.Y2d 158, 172-73, 604
N.Y.S.2d , 1, 9, 624 N.E.2d 129, 137-38 (1993), the fiduciary relationship is with regard to
matters “within the scope of the relation”. Also, as stated in Northeast General Corp.,
“(u)ltimately, the dispositive issue of fiduciary-like duty or no such duty is determined not by the
nomenclature ‘finder’, or ‘broker’ or even ‘agent’, but instead by the services agreed to under the
contract between the parties.” Id., 82 N.Y.2d at 163, 604 N.Y.S.2d at 4. The Agency Agreement
says nothing about the Taubs acting as agents with respect to payments between the importer and
Marchesi. As stated in Meisel v. Greenberg, supra at 116, the set-off is outside the scope of the
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role of the Taubs as agent for Marchesi. As to the set-off the Taubs were acting independently,
and not within the terms of the Agency Agreement.
Therefore, the Court finds as a matter of law, that, with regard to the set-off, the Taubs
were not acting as fiduciaries when they instructed Palm Bay to take the set-off. Accordingly,
there is only one conclusion as to the sixth counterclaim; namely, judgment as a matter of law in
favor of the plaintiffs dismissing the counterclaim. It is now so ordered.
IV. CONCLUSION
The motion by the plaintiffs Palm Bay International and David and Marc Taub for
judgment as a matter of law, pursuant to Fed. R. Civ. 50(b), or for a new trial pursuant to Fed. R.
Civ. 59 (1) as to the plaintiff Palm Bay cause of action for breach of the implied warranty of
merchantability; and (2) as to the third counterclaim based on the Dispute Resolution Provision
in the Importation Agreement, are both denied.
The motion by the plaintiffs for judgment as a matter of law pursuant to Fed. R. Civ.
50(b) as to the sixth counterclaim against David Taub and Marc Taub for breach of their
fiduciary duty in instructing Palm Bay to take the set-off, is granted. The sixth counterclaim is
dismissed as a matter of law.
The Clerk of the Court is directed to enter judgment in accordance with this decision and
to close this case.
SO ORDERED.
Dated: Central Islip, New York
July 11, 2011
/s/ Arthur D. Spatt
ARTHUR D. SPATT
United States District Judge
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