QVC, INC. v. MJC AMERICA, LTD.

Filing 50

MEMORANDUM AND OPINION. SIGNED BY HONORABLE THOMAS N. ONEILL, JR ON 7/18/11. 7/18/11 ENTERED AND COPIES E-MAILED.(fdc)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
QVC, INC.
v.
MJC AMERICA, LTD.
d/b/a SOLEUS INTERNATIONAL, INC.

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O’NEILL, J.

CIVIL ACTION
NO. 08-3830

July 18, 2011

MEMORANDUM
Now before me are the motions of plaintiff QVC for summary judgment on Count V of
its complaint against defendant MJC America, Ltd., d/b/a Soleus International, Inc and for
summary judgment on Counts VII, IX and XI. For the reasons that follow, I will grant in part
and deny in part QVC’s motions.
BACKGROUND
QVC retails a wide variety of products directly to consumers. Soleus markets and
distributes consumer products and has been a vendor to QVC since at least August 2003.
Between February 13, 2007 and January 8, 2008, QVC issued a number of Purchase Orders to
Soleus for heaters, fans, air purifiers, dehumidifiers and watercoolers, including units of a model
number HM5-15A heater.1 (QVC Exs. 1 to Exs. C) QVC sold some of the merchandise
supplied by Soleus to its customers in the ordinary course of business. Subsequently QVC’s
customers returned some of their purchases to QVC. (QVC Ex. C to Motion on Counts VII, IX

1

In April, 2008, QVC instituted a recall of the model number HM5-15A heater
citing customer reports that some of the heaters had smoked, sparked, overheated or caught fire.

and XI at ¶ 6.) Other merchandise remained unsold. (QVC Ex. C to Motion on Count V at ¶ 6.)
On February 12, February 27 and March 4, 2008, QVC returned to Soleus certain merchandise
which QVC’s customers had returned to QVC (“shipped customer return merchandise”). (QVC
Ex. C to Motion on Counts VII, IX and XI at ¶ 6.) QVC did not request a refund for this
merchandise prior to shipping it back to Soleus.
In an April 8, 2008 letter to Charley Loh, Soleus’ CEO, QVC sought to invoke its alleged
rights under the Purchase Orders with respect to the shipped customer return merchandise by
demanding immediate payment of an “outstanding debit amount . . . arising from prior
transactions between the parties” – including amounts allegedly due for the shipped customer
return merchandise. (QVC Exs. 3 to Exs. C at 4.) Also in the letter, QVC wrote that it had
received customer reports that certain HM5-15A heaters had smoked, sparked, overheated or
caught fire; that the HM5-15A heaters failed to comply with applicable safety standards; and that
as a result QVC had stopped all sales of the HM5-15A heaters and was commencing a recall of
the product under the procedures of the U.S. Consumer Product Safety Commission. (QVC Exs.
3 to Exs. C at 2, 4.) QVC requested that Soleus provide it with a return authorization number
and other information to facilitate the return of both additional customer return merchandise
which QVC had in its possession (“unshipped customer return merchandise”) and unsold HM515A heaters that it intended to ship back to Soleus. (Id. at 3.) QVC requested a refund for
unshipped customer return merchandise and for unsold heaters and “request[ed] payment of all
refund amounts prior to return shipment of any and all [of the unshipped customer return
merchandise and unsold heaters] to Soleus.” (Id. at 4.) Citing “reasonable grounds for insecurity
with respect to the ability or intention of Soleus to perform its obligations under the Purchase
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Orders regarding refund of any monies due upon return and delivery of any Merchandise to
Soleus,” QVC also demanded adequate assurances that Soleus could and would perform as
required by the Purchase Orders in the form of a payment of $508,199.02 in advance of QVC’s
return of the unshipped customer return merchandise and the unsold heaters. (Id. at 5.)
As requested, Soleus provided return merchandise authorizations to QVC for the
unshipped customer return merchandise and for the unsold heaters. (Soleus Ex. A at ¶ 9.) On
March 15, 2008, Loh wrote a letter to QVC confirming that Soleus would “indemnify QVC for
any claims associated with the products that Soleus International Inc. sold to QVC” and
informing QVC that QVC was named as an additional insured on Soleus’s $7 million product
liability insurance policy. (Soleus Ex. 2 to Ex. C at MJC00119.) However, Soleus did not
provide the requested refund to QVC for the shipped customer return merchandise, the unshipped
customer return merchandise or the unsold heaters. (QVC Ex. C to Motion on Count V at ¶ 10;
QVC Ex. C to Motion on Counts VII, IX and XI at ¶ 13.)
On April 18, 2008, counsel for Soleus wrote to counsel for QVC questioning the
reasonableness of QVC’s decision to recall the HM5-15A heaters and noting that “based on the
parties’ prior course of dealing, Soleus has always accepted return merchandise, provided
appropriate credit, and provided return merchandise authorizations.” (Soleus Ex. 2 to Ex. C at
MJC00117.) Soleus asserts that prior to April, 2008, when QVC had merchandise to return to
Soleus it would return merchandise to Soleus pursuant to a return merchandise authorization.
Soleus would then inspect and count returned merchandise and issue a credit memorandum to
QVC. QVC would issue a debit memorandum and Soleus would reconcile the two memoranda
and remit any credit balance due to QVC. (Soleus Ex. A at ¶ 2.) Soleus also asserts that QVC’s
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failure to return merchandise prevented Soleus from obtaining a refund for the merchandise from
its manufacturer, Ningbo Bole Electrical Appliance Co., Ltd.2 (Soleus Ex. A at ¶ 11.)
On August 8, 2008, QVC filed the instant action. In Count V of its complaint, QVC
asserts claims for breach of contract against Soleus for its alleged refusal to provide QVC with a
full refund for the amounts paid for the unsold heaters.3 In Counts VII, IX and XI of its
complaint, QVC asserts claims for breach of contract against Soleus for its alleged refusal to
provide QVC with a full refund for the amounts paid for the shipped and unshipped customer
return merchandise together with costs of unpacking, examining, repacking, storing, returning
and reshipping the merchandise.4
The Purchase Orders relevant to QVC’s claims – numbered 526487, 526488, 533029,
533103, 550957, 559089, 561074 and 567520 – contain uniform terms and conditions and
include provisions for QVC’s return of merchandise to Soleus in the event merchandise is
returned by its customers or is unsold.5 Section 7 of the Purchase Orders sets forth QVC’s rights

2

I note that Soleus has not cited any language in the Purchase Orders that would
condition Soleus’s obligation to provide a refund to QVC on its ability to obtain a refund from
Ningbo Bole.
3

QVC’s complaint refers to the unsold heaters as SRV24882 Merchandise.
(Compl. ¶¶ 44, 78.)
4

QVC refers to the merchandise in Count VII of its complaint as Customer Return
V24882 Merchandise. (Compl. ¶¶ 45, 81, 83.) The Customer Return V24882 Merchandise
encompasses both shipped and unshipped units. Count IX of QVC’s complaint pertains to
shipped customer return merchandise. QVC refers to the merchandise covered by Count IX as
the additional customer return merchandise. (Compl. ¶¶ 48, 89.) Count XI of QVC’s complaint
pertains to unshipped customer return merchandise which QVC refers to as the V25162
Customer Return Merchandise. (Compl. ¶¶ 50, 98.)
5

On June 3, 2011, QVC requested that the Clerk of Court replace the copies of the
terms and conditions originally attached as Exhibit 2 to Exhibit C to each of QVC’s motions for
-4-

with respect to returned merchandise as follows, in relevant part:
Merchandise furnished hereunder which is not in compliance with
the Laws this Order [sic], the Regulations or the Standards, which
is returned by any of Buyer’s customers for any reason, which fails
to meet Buyer’s quality control tests, which fails to meet Buyer’s
carrier’s quality, drop or other tests, or which is or may be used in
conjunction with merchandise furnished and rejected (or
acceptance thereof revoked under this Order or another order, may
be rejected (or acceptance thereof revoked) at Buyer’s option and
returned to Vendor. All expense of unpacking, examining,
repacking, storing, returning and reshipping any Merchandise
rejected (or acceptance of which has been revoked) as aforesaid
shall be at Vendor’s expense and risk. With respect to such
returned Merchandise or identical merchandise purchased under a
separate purchase order, Buyer shall, at its option, receive a credit
or refund equal to the average cost of amounts paid by Buyer for
each item of such Merchandise, or other identical merchandise,
including, without limitation, in-bound freight charges
(notwithstanding contrary Freight Terms, if any, set forth on the
face hereof). In the event that Buyer shall opt to receive a refund,
Vendor shall pay Buyer in immediately available funds within
fifteen (15) days of Buyer’s request. Buyer reserves the right to
require full refund prior to the return of Merchandise. In the event
that Buyer shall opt to receive a credit, Buyer may apply such
credit toward any amounts due or which may become due to
Vendor. . . . Authorization is expressly granted to Buyer to return
Merchandise without additional authorization, and Vendor hereby
agrees to accept such returns even without Buyer’s request for
return authorization labels. Merchandise returned or rejected by
Buyer is not to be replaced by Vendor without the prior written
approval of Vendor. Vendor acknowledges that Buyer does not

summary judgment (the Affidavit of Alan Kujawa) with copies of a set of terms and conditions
containing different language. QVC provided no explanation for the substitution and did not
request to amend its briefs in light of the revised language in the Purchase Orders. Neither the
original nor the substituted exhibits were dated and neither the original nor the substituted terms
and conditions include references to Purchase Order numbers. However, the substituted terms
and conditions appear to mirror the terms and conditions attached to each of the Purchase Orders
included as Exhibit 1 to Exhibit C to each of QVC’s motions for summary judgment (the
Affidavits of Alan Kujawa). Absent an objection from Soleus with respect to QVC’s requests for
substitution, I look to the language included in the substituted terms and conditions in making my
decision.
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inspect each item at receipt of Merchandise and that defects,
imperfections or nonconformity with any representations,
warranties or covenants set forth herein may not be discovered by
Buyer until Merchandise shall have been purchased by its
customers and returned to Buyer. Buyer’s inspection, discovery of
a breach of warranty, failure to make an inspection or failure to
discover a breach of warranty shall not constitute a waiver of any
of Buyer’s rights or remedies whatsoever.
(QVC Substituted Exs. 2 to Exs. C at ¶ 7 (emphasis added).)
Section 8 of the Purchase Orders obligates Soleus to accept a return of up to a specified
percentage of the aggregate number of units acquired by QVC but not sold in the ordinary course
of business. (QVC Substituted Exs. 2 to Exs. C at ¶ 8.) It provides, in relevant part:
If a percentage greater than zero is indicated in the “Sale or
Return” designation on the face hereof, then this is a “sale or
return” transaction as defined in the Uniform Commercial Code as
enacted in Pennsylvania, 13 Pa. C.S. Division 2. In addition to its
right to return Merchandise as provided elsewhere in this Order,
Buyer may return to Vendor, for credit or cash, at Buyer’s option,
all or any portion of the following: (a) with respect to “sale or
return” transactions only, any Merchandise which is not sold by
Buyer up to the percentage indicated in the “Sale or Return”
designation on the face hereof (based on the aggregate amount of
this Order) within sixty (60) days after remittance of the
Subsequent Payment (as also defined in Section 12 herein) or, if no
Subsequent Payment, within one hundred and eighty (180) days
after remittance of Buyer’s Initial payment to Vendor (as defined in
Section 12 herein); and (b) with respect to all transactions, any
Merchandise which has been sold to and then returned by
customers at any time. The expenses incident to the return of
Merchandise to Vendor under the foregoing clause (b) shall be paid
or reimbursed by Vendor in accordance with Section 7 of this
Order. Buyer is not obligated to pay for any Merchandise returned
to Vendor and is therefore entitled to an immediate and full refund
of any and all monies previously paid to Vendor on account of
such returned Merchandise. If Vendor fails or refuses to make
arrangements for the return of Merchandise satisfactory to Buyer
within five (5) days of receipt of Buyer’s request for return
authorization, if any, Buyer may make such arrangements on
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Vendor’s behalf and at Vendor’s risk and expense. . . . The rights
of Buyer set forth in this Section are in addition to, and not in lieu
of, any and all other rights and remedies available to Buyer
pursuant to this Order, applicable law or in equity.
(Id. (emphasis added).) Relevant to QVC’s claims under Section 8, Purchase Order 550957,
which sets forth an order of 5,952 units of a black model number HM5-15A heater and 21,048
units of a charcoal model number HM5-15A heater, states that it provides for “50% Sale or
Return.” (QVC Ex. 1 to Ex. C to Motion on Counts VII, IX and XI.)
Section 15 of the terms and conditions provides that each Purchase Order “shall be
governed by the laws of the Commonwealth of Pennsylvania applicable to contracts to be
performed wholly therein, regardless of the place of acceptance.” (QVC Substituted Exs. 2 to
Exs. C at ¶ 15.) The terms and conditions also contain a no waiver provision, stating that
[n]o waiver by Buyer of any term, provision or condition hereof
shall be deemed to constitute a waiver of any other term, provision
or condition of this Order, or a waiver of the same or of any other
term, provision or condition with regard to subsequent transactions
or subsequent parts of the same transaction, including without
limitation, subsequent shipments under this Order.
(Id. at ¶ 16.) The Purchase Orders also include an integration clause: “[t]his Order and any other
written warranties and specifications, the Regulations and Standards, and the terms, conditions
and agreements herein and therein, constitute the full understanding of the parties hereto and a
complete and exclusive statement of the terms of the parties’ agreement concerning the
Merchandise furnished hereunder.” (Id. at ¶ 19.) The terms and conditions further provide that
acceptance of each Purchase Order is effectuated by shipment of conforming merchandise:
THIS PURCHASE ORDER (‘ORDER’) IS EXPRESSLY
CONDITIONED ON ACCEPTANCE OF THE TERMS AND
CONDITIONS HEREOF. Oral or written notice of acceptance by
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Vendor and/or shipment of all or any part of the merchandise
specified in this Order (‘Merchandise’) shall constitute acceptance
by vendor of the terms and conditions contained herein.
(Id. at Preamble.) Soleus delivered to QVC some or all of the merchandise ordered in each of the
Purchase Orders. (QVC Ex. C to Motion on Count V at ¶ 5; QVC Ex. C to Motion on Counts
VII, IX and XI at ¶ 5.)
STANDARD OF REVIEW
The party moving for summary judgment has the burden of demonstrating 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. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). If the
movant sustains its burden, the nonmovant must set forth facts demonstrating the existence of a
genuine dispute. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A dispute as to
a material fact is genuine if “the evidence is such that a reasonable jury could return a verdict for
the nonmoving party.” Id. A fact is “material” if it might affect the outcome of the case under
governing law. Id. The “existence of disputed issues of material fact should be ascertained by
resolving all inferences, doubts and issues of credibility against” the movant. Ely v. Hall’s Motor
Transit Co., 590 F.2d 62, 66 (3d Cir. 1978) (citations and quotation marks omitted).
To establish “that a fact cannot be or is genuinely disputed,” a party must:
(A) cit[e] to particular parts of materials in the record, including
depositions, documents, electronically stored information,
affidavits or declarations, stipulations (including those made for
purposes of the motion only), admissions, interrogatory answers, or
other materials; or
(B) show[ ] that the materials cited do not establish the absence or
presence of a genuine dispute, or that an adverse party cannot
produce admissible evidence to support the fact.
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Fed. R. Civ. P. 56(c)(1). The adverse party must raise “more than a mere scintilla of evidence in
its favor” in order to overcome a summary judgment motion and cannot survive by relying on
unsupported assertions, conclusory allegations, or mere suspicions. Williams v. Borough of
W. Chester, 891 F.2d 458, 460 (3d Cir. 1989). Summary judgment will be granted “against a
party who fails to make a showing sufficient to establish the existence of an element essential to
that party’s case, and on which that party will bear the burden of proof at trial.” Celotex, 477
U.S. at 322.
DISCUSSION
To withstand QVC’s motions for summary judgment on its claims for breach of contract
Soleus must demonstrate the existence of a genuine issue of material fact as to one or more of the
following: (1) the existence of a contract, including its essential terms; (2) a breach of a duty
imposed by the contract; and (3) resultant damages. Harry Miller Corp. v. Mancuso Chems. Ltd.,
469 F. Supp. 2d 303, 322 (E.D. Pa. 2007), citing Williams v. Nationwide Mut. Ins. Co., 750 A.2d
881, 884 (Pa. Super. Ct. 2000). In its response to QVC’s motions Soleus contends that genuine
issues of material fact remain regarding the terms of the parties’ agreement because based on the
parties’ course of conduct QVC was required to return merchandise to Soleus as a condition
precedent for any refund. (Soleus Opp. Mem. at 4.) Soleus also argues that genuine issues of
material fact remain with respect to QVC’s damages because it has made shifting representations
regarding the number of units of merchandise it seeks to return. (Id. at 5.)
I.

Soleus’s Liability for Customer Return Merchandise
Section 7 clearly provides that merchandise “which is returned by any of Buyer’s

customers for any reason . . . may be rejected (or acceptance thereof revoked) at Buyer’s option
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and returned to Vendor.” (QVC Substituted Exs. 2 to Exs. C at ¶ 7.) The plain language of
Section 7 also clearly provides QVC with an option to request a refund, rather than a credit, for
merchandise returned by its customers: “Buyer shall, at its option, receive a credit or
refund . . . .” (Id.) Cf. QVC, Inc. v. Starad Inc., No. 03-5295, 2005 WL 742500, at *12 n.69
(E.D. Pa. Mar. 31, 2005) (finding that “QVC’s right to return [merchandise] for credit (or cash, at
QVC’s option) was a right specifically spelled out by QVC’s Purchase Orders, which did not
impose any conditions on QVC’s choice of remedies”) (emphasis in original). Further, Soleus
has admitted that it is obligated to reimburse QVC for customer return merchandise:
Q.

Mr. Loh, we’ve talked about the customer returns. My
question to you is, with respect to units that are returned to
QVC and QVC then returns to Soleus, and assuming the
accounting is correct, would you agree that QVC is entitled
to a refund of the cost price of the returns? . . .
The cost price would be the price that QVC paid to Soleus
for each unit that is then returned by the customer. Would
you agree with me that in accordance with the purchase
order provisions, QVC is entitled to a refund of its cost
price paid to Soleus for the unit?

A.

Yes.

(QVC Ex. D to Motion on Counts VII, IX and XI at 124:16-125:8.) The admission of Soleus’s
corporate designee is binding on Soleus. Fed. R. Civ. P. 30(b)(6).
A.

Shipped Customer Return Merchandise

Given Soleus’s admission regarding its obligation to refund QVC for customer return
merchandise, Soleus has no defense for its failure to provide QVC with a refund for the shipped
customer return merchandise. Under the unambiguous language of the Purchase Orders, once
QVC informed Soleus that it intended to exercise its option to receive a refund under Section 7
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of the Purchase Orders, Soleus was obligated to “pay [QVC] in immediately available funds
within fifteen (15) days . . . .” (QVC Substituted Exs. 2 to Exs. C at ¶ 7.) Soleus’ obligation to
provide QVC with a refund is “presented in clear, mandatory terms.” Mextel, Inc. v.
Air-Shields, Inc., No. 01-7308, 2005 WL 226112, at *29 (E.D. Pa. Jan. 31, 2005), citing PBS
Coals, Inc. v. Barnham Coal Co., 558 A.2d 562, 564 (Pa. Super. Ct. 1989) (“In determining the
intent of parties to a written agreement, the court looks to what they have clearly expressed, for
the law does not assume that the language of the contract was chosen carelessly.”). There is no
question that in failing to provide QVC with its requested refund, Soleus has breached its
obligation under Section 7 of the Purchase Orders with respect to the shipped customer return
merchandise.
Further, Soleus has been in possession of the shipped customer return merchandise since
at least March 2008 and has had ample opportunity to inspect and count the customer return
merchandise so that it could determine the amount of the refund owed to QVC. Soleus has not
set forth any evidence to rebut the evidence contained in the affidavit of Alan T. Kujawa that
QVC returned to Soleus 6804 units of merchandise, including 4,284 units of the HM5-15A
heater, with a total extended cost price of $277,303.26 and that the return expenses for the
shipped customer return merchandise total $7,050.49. (QVC Ex. C to Motion on Count V at
¶¶ 17-18.) Accordingly, I will enter summary judgment in QVC’s favor with respect to its claim
for breach of contract for the shipped customer return merchandise and will award damages to
QVC in the amount of $284,353.75.
B.

Unshipped Customer Return Merchandise

In defense of its failure to provide QVC with a refund for the unshipped customer return
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merchandise, Soleus asserts that it was not obligated to provide QVC with a refund prior to
QVC’s return of the merchandise to Soleus. Soleus contends that: (1) I must look to the prior
course of dealing between Soleus and QVC in determining the terms of the agreement between
them; and (2) their prior course of dealing establishes that QVC was obligated to return
merchandise to Soleus prior to Soleus’s issuance of any refund for returned merchandise. I
disagree with both contentions.
First, Section 7 of the Purchase Orders unambiguously provides that “Buyer reserves the
right to require full refund prior to the return of Merchandise.” (QVC Substituted Exs. 2 to Exs.
C at ¶ 7 (emphasis added).) “Because the language of the Agreement is clear and unambiguous,
the Court need not resort to extrinsic evidence to interpret” Section 7. Mextel, 2005 WL 226112,
at *29, citing Sabad v. Fessenden, 825 A.2d 682, 688 (Pa. Super. Ct. 2003).
Further, “[p]arol evidence cannot be used to contradict the provisions of [a written,
integrated] contract.” AstenJohnson, Inc. v. Columbia Cas. Co., 562 F.3d 213, 220 (3d Cir.
2009); see also Matlock Rental Co., Inc. v. Lift-All, No. 97-2786, 1998 WL 631974, at *3 (E.D.
Pa. Aug. 27, 1998), citing Sundlun v. Shoemaker, 617 A.2d 1330 (Pa. Super. Ct. 1992)
(“Pennsylvania law . . . permits evidence extrinsic to the written contract which arguably
complements, rather than contradicts, terms used in the contract.”). In accordance with Section
19, the parties intended the Purchase Orders to be the complete and exclusive statement of the
terms of their agreement. (QVC Substituted Exs. 2 to Exs. C at ¶ 19.) “Where a writing was
intended as “a complete and exclusive statement of the terms of the agreement,” it “may be
explained or supplemented . . . by course of performance, course of dealing, or usage of trade
. . . .” 13 Pa. Cons. Stat. Ann. § 2202. However, “[c]ourse of dealing . . . should not be
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permitted to be used as a ‘bootstrap’ to avoid the stricter provisions of the parol evidence rule for
complete and exclusive writings.” Precision Printing Co., Inc. v. Unisource Worldwide, Inc.,
993 F. Supp 338, 355 n.15 (W.D. Pa. 1998). Soleus’s contention that it was not obligated to
prepay QVC’s refund for the unshipped customer return merchandise clearly contradicts the
unambiguous language in Section 7 of the Purchase Orders reserving QVC’s right to require a
full refund prior to the return of the unshipped customer return merchandise.
Second, Soleus has not presented any evidence that QVC had previously elected to
exercise its option under the Purchase Orders to obtain a refund instead of a credit. Accordingly,
the parties’ prior conduct cannot be used to explain how Soleus should have performed when
QVC first elected to exercise its option for a refund under Section 7. Further, the no waiver
provision set forth in Section 16 of the Purchase Orders clearly establishes that QVC did not
waive its option to request a refund for returned merchandise in lieu of a credit simply by
choosing to opt for a credit and not a refund in its previous return transactions. (QVC
Substituted Exs. 2 to Exs. C at ¶ 16.) In failing to provide QVC with its requested refund for the
unshipped customer return merchandise, Soleus has breached its obligation under Section 7 of
the Purchase Orders. Accordingly, I will grant summary judgment in QVC’s favor on the
question of liability for the unshipped customer return merchandise.
However, I find that a question of material fact remains as to the number of units of
unshipped customer return merchandise. As Soleus argues, QVC has made inconsistent
representations concerning the number of unshipped customer return units. In QVC’s April 8
letter to Soleus, it represented that it was rejecting acceptance of “no less than 1453 units of the
[HM5-15A heater] that had been sold by QVC to its retail customers and subsequently returned
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to QVC by such customers.” (QVC Exs. 3 to Exs. C at 4.) The letter did not reference other
unshipped customer return merchandise. Id. In its complaint, QVC stated that it had in its
possession “no less than 1,155 units of the [HM5-15A heater] that had been sold by Plaintiff to
its retail customers and subsequently returned to Plaintiff by such customers ” and also that it had
“in its possession a further quantity of [a SoleusAir Micathermic Ultra Thin Portable Heater] sold
by Plaintiff but thereafter returned to Plaintiff by its retail customers consisting of no less than
755 units . . . .” (Compl. at ¶¶ 29, 50.) In a September 4, 2009 letter, counsel for QVC noted
that “[o]f the 10,717 heaters in Frozen Warehouse Status, approximately 7,991 were never sold
to or returned by customers,” suggesting that 2,726 units still in QVC’s possession had been sold
to customers and returned to QVC. (Soleus Ex. D. at 2.) Finally, the affidavit of Alan T. Kujawa
identifies a total of 2,983 units of unshipped customer return merchandise. Given the
inconsistencies in these numbers, I find that QVC’s damages with respect to the unshipped
customer return merchandise are an issue of fact for the jury.6
III.

Soleus’s Liability for Unsold Heaters
Soleus has admitted that QVC was entitled to return the unsold heaters, but objects to

QVC’s demand that it refund the purchase price of the unsold heaters prior to QVC’s return of
the heaters to Soleus:
Q.

So in the case of QVC’s request that Soleus pay the refund

6

Genuine issues with respect to the amount of damages may be reserved for trial
after a summary judgment on liability. See Fed. R. Civ. P. 56(g) (“If the court does not grant all
the relief requested by the motion, it may enter an order stating any material fact – including an
item of damages or other relief – that is not genuinely in dispute and treating the fact as
established in the case.”); see also NCN Lending, LLC v. Cook, No. H-10-483, 2010 WL
5146600, at *5 (S.D. Tex., Dec. 13, 2010) (granting plaintiff’s motion for summary judgment as
to liability but denying the motion as to damages).
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amount before shipping the goods back to Soleus, do you
dispute QVC’s right to return the goods or just the demand
for the refund up front?
A.

We never refuse to accept a return, but we cannot honor
their demand for prepayment for goods we have not even
seen . . . .

(QVC Ex. D to Motion on Count V at 126:8-126:14.) Both Sections 7 and 8 of the Purchase
Orders provide possible grounds for Soleus to refund QVC for certain unsold heaters.
A.

Soleus’ Liability for Unsold Heaters Under Section 7

In addition to providing QVC with a mechanism for obtaining a refund for merchandise
returned by its customers, Section 7 also provides that merchandise “which is not in compliance
with the Laws this Order [sic], the Regulations or the Standards, . . . which fails to meet Buyer’s
quality control tests, [or] which fails to meet Buyer’s carrier’s quality, drop or other tests . . . may
be rejected (or acceptance thereof revoked) at Buyer’s option and returned to Vendor.” (QVC
Substituted Exs. 2 to Exs. C at ¶ 7.) In its complaint, QVC has alleged that the V24882
Merchandise, which includes the unsold heaters, “fails to satisfy the implied warranties under
Pennsylvania law, the express warranties, representations and covenants set forth in Section 3 of
the Purchase Orders and or Plaintiff’s Standards (as referenced and incorporated in the Purchase
Orders). (Compl. ¶ 27). If true, QVC would have been entitled to return the unsold heaters to
Soleus pursuant to Section 7 of the Purchase Orders and would have had a right to “require full
refund prior to the return of” the unsold heaters under the plain language of the Purchase Orders.
(QVC Substituted Exs. 2 to Exs. C at ¶ 7.) However, the parties dispute whether the unsold
heaters would meet the relevant requirements of Section 7, including whether the unsold heaters
were not in compliance with relevant laws, warranties, representations or applicable standards
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provided by QVC to Soleus.7 Accordingly, I find that there is a material question of fact as to
whether the unsold heaters could be returned to Soleus under Section 7 of the Purchase Orders.
If a jury finds that the unsold heaters could have been returned to Soleus under Section 7, then
Soleus breached its obligations to QVC under Section 7 with respect to the unsold heaters in
failing to prepay QVC’s requested refund for the unsold heaters.
B.

Soleus’ Liability for Unsold Heaters Under Section 8

Section 8 of the Purchase Orders provides a second mechanism for the return of the
unsold heaters, allowing for the return of “any Merchandise which is not sold by buyer up to the
percentage indicated in the ‘Sale or Return’ designation on the face hereof . . . .” (QVC
Substituted Exs. 2 to Exs. C at ¶ 8.). Unlike Section 7 of the Purchase Orders, Section 8 does not
include a provision explicitly reserving QVC’s right to require a full refund prior to the return of
merchandise. Instead, Section 8 of the Purchase Orders provides that “Buyer is not obligated to
pay for any Merchandise returned to Vendor and is therefore entitled to an immediate and full
refund of any and all monies previously paid to Vendor on account of such returned
Merchandise.” (QVC Substituted Exs. 2 to Exs. C at ¶ 8 (emphasis added).) Section 8 further
provides that if Soleus “fails or refuses to accept any returned Merchandise and/or fails to remit
such refund to Buyer in a timely manner and in accordance with the terms of this Order, Buyer
may . . . take such other action as it may deem necessary or desirable to recover the monies owed

7

QVC has not moved for summary judgment with respect to Count I of its
complaint in which it seeks entry of a declaratory judgment that, inter alia, “the subject V24882
Merchandise fails to satisfy the implied warranties under Pennsylvania law, the express
warranties, representations and covenants set forth in Section 3 of both PO 550957 and PO
567520, and Plaintiff’s standards (as referenced and incorporated in both PO 550957 and PO
567520)[.]” (Compl. at 16.)
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by Vendor.” Id. I find that under the plain language of Section 8, Soleus was not required to
provide a refund to QVC until it returned the unsold heaters to Soleus. Because QVC did not
return the unsold heaters to Soleus, QVC did not trigger Soleus’s obligation to provide it with a
refund under Section 8.
C.

Soleus’s Obligation to Provide Adequate Assurances

Because I find that Section 8 of Purchase Orders did not give QVC the right to demand
payment prior to relinquishing custody of the unsold heaters to Soleus, I will consider QVC’s
argument that QVC was permitted to demand pre-payment from Soleus as a form of adequate
assurances of Soleus’s performance in accordance with Section 4 of the relevant Purchase Orders
and in accordance with 13 Pa. Cons. Stat. Ann. § 2609(a). Under Section 4 of the Purchase
Orders, when QVC provides Soleus with notice of a claim, Soleus is obligated to “provide
prompt assurance, to [QVC’s] reasonable satisfaction, of [Soleus’s] ability to[ ] indemnify
[QVC] . . . .” (QVC Exs. 2 to Exs. C at ¶ 4 (brackets in original).) Section 2609(a) provides that
“[w]hen reasonable grounds for insecurity arise with respect to the performance of either party
the other may in writing demand adequate assurance of due performance and until he receives
such assurance may if commercially reasonable suspend any performance for which he has not
already received the agreed return.” 13 Pa. Cons. Stat. Ann. § 2609(a).
Soleus attempted to confirm its willingness and ability to satisfy its indemnification
obligations in its March 15, 2008 letter to QVC. (Soleus Ex. 2 to Ex. C at MJC001119.)
Whether Soleus’s letter constituted sufficient assurances of its ability to indemnify QVC under
Section 4 of the Purchase Orders and/or sufficient assurances of its ability to provide the
requested under Section 2609(a) are issues of material fact that should be left to the jury.
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Likewise, I find that whether QVC had “reasonable grounds for insecurity” under Section
2609(a) with respect to Soleus’s willingness and ability to pay for the unsold heaters is a question
of fact for the jury. See Nowicki v. United Timber Co., No. 99-257, 2000 WL 1239966, at *4
(E.D. Pa. Aug. 31, 2000) (“Whether the plaintiffs did provide adequate assurances so as to avoid
repudiating the contract is a question of disputed material fact that is better left for the jury to
decide.”); Lance Int’l Ltd. v. Menominee Paper Co., No 98-2229, 1999 WL 482317, at *6 (E.D.
Pa. July 9, 1999) (“[A] question of fact is presented as to whether the request for adequate
assurances was proper and reasonable under the circumstances.”); Personnel Data Sys. v. Grand
Casinos, No. 97-4896, 1998 WL 437268, at *6 (E.D. Pa. July 30, 1998) (“demand for adequate
assurances under the UCC presents an issue of fact that cannot be decided on summary
judgment”); see also Brisbin v. Superior Valve Co., 398 F.3d 279, 285-86 (3d Cir. 2009) (finding
that a trial court’s conclusions on adequate assurance under Section 2609(a) “are generally
questions of fact” but noting that a conclusion on adequate assurance as a matter of law might be
allowed in instances of clearly egregious or innocuous conduct). Accordingly, I will deny QVC’s
motion for summary judgment with respect to the unsold heaters.
IV.

Liability for Prejudgment Interest
Under Pennsylvania law, a plaintiff is entitled to interest on money owed under contract

as a matter of legal right beginning when an obligation to pay arises. See Fernandez v. Levin,
548 A.2d 1191, 1193 (Pa. 1988) (holding the prevailing party’s “right to interest begins at the
time payment is withheld after it has been the duty of the debtor to make such payment.”); see
also Restatement of Contracts § 337(a). “The basic premise underlying the award of
prejudgment interest to a party centers on the fact that the breaching party has deprived the
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injured party of using interest accrued on money which was rightfully due and owing to the
injured party.” Widmer Eng’g, Inc. v. Dufalla, 837 A.2d 459, 469 (Pa. Super. Ct. 2003).
Because I find that Soleus breached its contract with respect to the shipped and unshipped
customer merchandise, I also find it liable for prejudgment interest with respect to the amounts
due and owing for QVC’s return of the shipped and unshipped customer return merchandise.
QVC’s right to interest for its damages for the shipped and unshipped customer
merchandise arose when it demanded a refund on April 8, 2008. Accordingly, I find that Soleus
is liable for $55,667.34 in prejudgment interest for the shipped customer return merchandise.8 I
withhold judgment as to the amount of prejudgment interest owed with respect to the unshipped
customer return merchandise because QVC’s damages with respect to such merchandise have yet
to be fixed. “There is no requirement that damages must be liquidated in order to receive
prejudgment interest, and there is also no exception to a party’s right to prejudgment interest
simply because the amount of damages must be determined at trial.” Eastern Elec. Corp. of N.J.
v. Shoemaker Const. Co., 657 F. Supp. 2d 545, 561 (E.D. Pa. 2009), citing Spang & Co. v. USX
Corp., 599 A.2d 978, 984 (Pa. Super. Ct. 1991).
8

From April 8, 2008 (the date of QVC’s demand for a refund) through July 12,
2011 (the date of the Court’s judgment), 1191 days elapsed. Because it does not appear that the
parties have by contract determined otherwise prejudgment interest is calculated at the statutory
rate of 6 percent per annum. 41 P.S. § 202 and 42 Pa. Cons. Stat. Ann.§ 8101. Accordingly,
QVC is entitled to 1190 days worth of interest at 6 percent and the prejudgment interest award of
55,620.60 is derived as follows:
6% per year x $284,353.75 = $17,061.23 per year
$17,061.23 per year / 365 days = $46.74 per day
$46.74 per day x 1191 days = $55,667.34
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V.

Liability for Attorneys’ Fees
Section 4 of the Purchase Orders provides, in relevant part, that:
Vendor hereby agrees to protect, defend, hold harmless and
indemnify Buyer . . . from and against any and all claims, actions,
suits, costs, liabilities, damages and expenses (including, but not
limited to, all direct, special incidental, exemplary and
consequential damages and losses of any kind [including without
limitation, present and prospective lost profits and lost business]
and reasonable attorneys’ fees based upon or resulting from . . . (d)
breach by Vendor of any representations, warranties or covenants .
. . .”

(QVC Exs. 2 to Exs. C at ¶ 4 (brackets in original).) Because I find that Soleus has breached its
obligations under Section 7 of the Purchase Orders with respect to the shipped and unshipped
customer return merchandise, I find that Soleus is liable for QVC’s reasonable attorney’s fees
resulting from such breach. Accordingly, I will direct QVC to submit an application of
reasonable attorneys’ fees incurred in prosecuting its claims with respect to the shipped and
unshipped customer return merchandise.
An appropriate Order follows.

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