CPG International LLC v. Shelter Products, Inc.
MEMORANDUM (Order to follow as separate docket entry) re 37 MOTION for Partial Summary Judgment filed by CPG International LLC Signed by Honorable James M. Munley on 2/3/17. (sm)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CPG INTERNATIONAL LLC,
SHELTER PRODUCTS, INC.
Before the court is Plaintiff CPG International LLC’s (hereinafter
“CPG”) motion for partial summary judgment on Defendant Shelter
Products, Inc.’s (hereinafter “Shelter”) breach of contract counterclaim.
(Doc. 37). For the reasons that follow, the court will deny CPG’s motion.
This case arises from a disputed oral contract between Shelter and
CPG.1 CPG manufacturers highly engineered building materials designed
to replace wood, metal, and other traditional materials in various building
applications. (Doc. 39, CPG’s Statement of Undisputed Material Facts
The commercial dealings underlying this action occurred between
Shelter and TimberTech, formerly an Ohio corporation. (Doc. 39, CPG’s
Statement of Undisputed Material Facts ¶ 2). TimberTech merged into
CPG on December 31, 2014. (Doc. 1-2, Certificate of Merger). As such,
CPG bring this action as TimberTech’s successor in interest.
(hereinafter “SOF”) ¶ 1).2 Shelter is a wholesale building supply distributor
servicing both retail building centers and the manufactured housing
industry in Minnesota, parts of North Dakota, South Dakota, Iowa, and
Wisconsin. (SOF ¶ 3). Prior to its merger into CPG, TimberTech and
Shelter engaged in business dealings over a prolonged period of time,
wherein Shelter purchased various TimberTech products to sell within its
sales territory. (SOF ¶ 4).
CPG, in anticipation of its merger with TimberTech, began narrowing
its field of distributors in 2013.3 (SOF ¶ 5). On September 10, 2013,
Shelter’s CEO Duane Lambrecht (hereinafter “Lambrecht”), called
TimberTech’s CEO Stuart Kemper (hereinafter “Kemper”).4 Lambrecht
and Kemper discussed Shelter’s status as a TimberTech distributor,
including various scenarios if CPG cancelled Shelter’s distribution. (SOF
We cite to CPG’s SOF (Doc. 39) for statements which Shelter
generally agrees with in its response (Doc. 53).
CPG based its decision on which distributors would survive and
which distributors would lose the TimberTech product line based on:
coverage area, sales expertise, number of people on the wholesaler’s
sales force, financial information, wholesaler’s physical size, and ability to
manage two product lines. (SOF ¶ 5).
Stuart Kemper is no longer an employee of TimberTech/CPG.
(SOF ¶ 8). According to CPG, Kemper “left the company at the end of
May 2014.” (Id.)
¶¶ 8-9, 19). The parties dispute whether, in the event CPG cancelled
Shelter’s TimberTech distributorship, CPG agreed to repurchase Shelter’s
TimberTech inventory or move the inventory to a surviving distributor–an
issue discussed in detail below.
On October 10, 2013, TimberTech cancelled Shelter’s TimberTech
distribution (SOF ¶ 11), and subsequently initiated the present action on
May 29, 2015 to collect an alleged unpaid balance of $96,360.95 from
Shelter (Doc. 1, Compl.). CPG’s four-count complaint avers the following
Pennsylvania state law claims: Count I, breach of contract; Count IIAccount Stated; Count III-Unjust Enrichment; and Count IV-Quantum
Meruit. (Id. ¶¶ 16-40).
On September 4, 2015, Shelter filed an amended answer and
counterclaim asserting a Pennsylvania state law breach of contract claim
against CPG. (Doc. 17, Am. Answer and Countercl. ¶¶ 1-11). After a
period of discovery, CPG filed a motion for partial summary judgment on
Shelter’s state law breach of contract claim. (Doc. 37, Mot. for Summ. J.).
The parties have briefed their respective positions, bringing the case to its
The court has jurisdiction pursuant to the diversity statute, 28 U.S.C.
§ 1332. CPG is a Delaware limited liability company with its principal
place of business in Pennsylvania. (Doc. 1, Compl. ¶ 2). Shelter is a
Minnesota Corporation with its principal place of business in Minnesota.
(Id. ¶ 3). Additionally, the amount in controversy exceeds $75,000.
Because complete diversity of citizenship exists between the parties and
the amount in controversy exceeds $75,000, the court has jurisdiction over
the case. See 28 U.S.C. § 1332 (“[D]istrict courts shall have original
jurisdiction of all civil actions where the matter in controversy exceeds the
sum or value of $75,000, exclusive of interest and costs, and is between .
. . citizens of different States[.]”); 28 U.S.C. § 1441 (stating that a
defendant can generally remove a state court civil action to federal court if
the federal court would have had original jurisdiction to address the matter
pursuant to the diversity jurisdiction statute). As a federal court sitting in
diversity, the substantive law of Pennsylvania shall apply to the instant
case. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000) (citing
Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938)).
Granting summary judgment is proper if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter of law.
See Knabe v. Boury, 114 F.3d 407, 410 n.4 (3d Cir. 1997) (citing FED. R.
CIV. P. 56(c)). “[T]his standard provides that the mere existence of some
alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment; the requirement is that
there be no genuine issue of material fact.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).
In considering a motion for summary judgment, the court must
examine the facts in the light most favorable to the party opposing the
motion. Int’l Raw Materials, Ltd. v. Stauffer Chem. Co., 898 F.2d 946, 949
(3d Cir. 1990). The burden is on the moving party to demonstrate that the
evidence is such that a reasonable jury could not return a verdict for the
nonmoving party. Anderson, 477 U.S. at 248. A fact is material when it
might affect the outcome of the suit under the governing law. Id. Where
the nonmoving party will bear the burden of proof at trial, the party moving
for summary judgment may meet its burden by establishing that the
evidentiary materials of record, if reduced to admissible evidence, would
be insufficient to carry the non-movant’s burden of proof at trial. Celotex
v. Catrett, 477 U.S. 317, 322 (1986). Once the moving party satisfies its
burden, the burden shifts to the nonmoving party, who must go beyond its
pleadings, and designate specific facts by the use of affidavits,
depositions, admissions, or answers to interrogatories demonstrating that
there is a genuine issue for trial. Id. at 324.
CPG’s motion for partial summary judgment raises the following two
issues: 1) the Pennsylvania Uniform Commercial Code’s statute of frauds
precludes Shelter’s breach of contract claim; and 2) Shelter’s breach of
contract claim fails on the merits. The court will address these issues in
I. Statute of frauds
CPG first seeks summary judgment on Shelter’s breach of contract
claim, contending the undisputed record establishes that the oral contract
to repurchase Shelter’s TimberTech inventory is a sale of goods, and
therefore, violates the Pennsylvania Uniform Commercial Code’s
(hereinafter “U.C.C.”) statute of frauds because no writing memorializing
this agreement exists. Shelter argues that its oral contract with CPG was
not for the sale of goods. Rather, the oral contract required CPG to
provide specific services to assist Shelter in eliminating its TimberTech
inventory. Thus, according to Shelter, the statute of frauds fails to
preclude its oral contract claim.
The Pennsylvania U.C.C.’s statute of frauds provides that a contract
for the sale of goods of $500 or more is not enforceable unless it is in
writing. Brisbin v. Superior Valve Co., 398 F.3d 279, 297 (3d Cir. 2005)
(citing 13 PA. CONS. STAT. ANN. § 2201(a) (“[A] contract for the sale of
goods for the price of $500 or more is not enforceable . . . unless there is
some writing sufficient to indicate that a contract for sale has been made
between the parties and signed by the party against whom enforcement is
sought . . . .”)). Where, as here, the alleged contract for a sale of goods
occurs between merchants, the statute of frauds’ writing requirement is
satisfied “if within a reasonable time a writing in confirmation of the
contract and sufficient against the sender is received and the party
receiving it has reason to know its contents, it satisfies the requirements of
[section 2201(a)] against such party unless written notice of objection to
its contents is given within ten days after it is received.” 13 PA. CONS.
STAT. ANN. § 2201(b).
Regarding the general interpretation of the statute of frauds, the
Third Circuit Court of Appeals has noted that “the statute of frauds has
been frequently criticized as a means for creating rather than preventing
fraud.” Advent Sys. Ltd. v. Unisys Corp., 925 F.2d 670, 677 (3d Cir. 1991)
(citing Harry Rubin & Sons, Inc. v. Consol. Pipe Co. of Am., 153 A.2d 472,
476 (Pa. 1959), overruled on other grounds by AM/PM Franchise Ass’n v.
Atl. Richfield Co., 584 A.2d 915, 926 (Pa. 1990)). The U.C.C.’s rules of
construction also state that the language “must be liberally construed and
applied to promote its underlying purposes and policies, which are: (1) to
simplify, clarify and modernize the law governing transactions; (2) to
permit the continued expansion of commercial practices through custom,
usage and agreement of the parties; and (3) to make uniform the law
among the various jurisdictions.” 13 PA. CONS. STAT. ANN. § 1103(a).
Finally, the U.C.C. seeks to promote flexibility in providing “machinery for
expansion of commercial practices.” 13 PA. CONS. STAT. ANN. § 1103
cmt. 1. With these legal precepts in mind, we look to the realities of the
arrangement between the parties.
As previously stated, CPG claims Pennsylvania’s U.C.C. statute of
frauds precludes enforcement of any alleged oral agreement to
repurchase Shelter’s TimberTech inventory. CPG argues plaintiff has
presented no evidence establishing the existence of any writing pertaining
to CPG repurchasing Shelter’s TimberTech inventory. Specifically,
Shelter’s CEO Duane Lambrecht (hereinafter “Lambrecht”), testified that
CPG never promised to repurchase Shelter’s TimberTech inventory.
(Doc. 40, Ex. O, Lambrecht Dep. at 40-41).5 Moreover, Lambrecht never
confirmed with CPG in writing that CPG would repurchase its TimberTech
inventory. (Id.) Rather, according to CPG, the first written reference to an
agreement to repurchase Shelter’s TimberTech inventory appears in
Shelter’s Counterclaim. (SOF”) ¶¶ 16-17). Thus, according to CPG, the
statute of frauds precludes any agreement to repurchase Shelter’s
TimberTech inventory because no writing exists.
As such, the burden shifts to Shelter, which must go beyond its
pleadings, and designate specific facts within affidavits, depositions,
admissions, or answers to interrogatories demonstrating that genuine
Page numbers in citations to depositions refer to the page number
on the deposition itself, not the court’s electronic filing page number.
issues of material fact exist regarding whether Pennsylvania’s statute of
frauds precludes its oral agreement with CPG. Celotex at 324.
Shelter argues Pennsylvania’s statute of frauds fails to apply
because its oral contract required CPG to provide services, not
necessarily repurchase its TimberTech inventory. Shelter claims CPG did
not merely agree to repurchase its TimberTech inventory. Rather, CPG
agreed to provide services to eliminate Shelter’s TimberTech inventory,
including assistance with moving the inventory to a surviving distributor.
Accordingly, the statute of frauds is inapplicable because the oral
agreement required CPG to provide services, not merely repurchase
shelter’s TimberTech inventory.
To support its argument that CPG agreed to provide services, not
merely repurchase its TimberTech stock, Shelter notes that CPG agreed
to transfer its TimberTech inventory to another distributor. (Doc. 53,
Shelter’s response to CPG’s SOF & Shelter’s Counter-Statement of
Undisputed Material Facts (hereinafter “Shelter SOF”) ¶¶ 10(o)-10(t),
18(a)-18(m), 20, 22). Specifically, on September 10, 2013, a month
before CPG cancelled Shelter’s distributorship, Lambrecht and
TimberTech’s CEO Stuart Kemper (hereinafter “Kemper”) spoke about the
distributorship. (Shelter SOF ¶ 10(k)). During this conversation, Kemper
and Lambrecht addressed the logistics of moving Shelter’s TimberTech
inventory if CPG decided to cancel its distributorship. (Id.) Kemper
explained that if Shelter did not continue on as a TimberTech distributor,
CPG, as they did for their closed distributors in the Northeast, CPG would
help move Shelter’s TimberTech inventory to another surviving
distributors. (Shelter SOF ¶¶ 10(o), 10(p)). In short, Kemper would
“make sure that when all this gets done that [Shelter] will be whole.”
(Shelter SOF ¶ 22).
Two weeks before CPG cancelled Shelter’s distributorship, CPG met
with Shelter at Shelter’s offices in New Ulm, Minnesota on September 26,
2013. (Shelter SOF ¶ 10(u)). During this meeting, the parties discussed
Shelter’s status as a remaining distributor. (Id.) CPG indicated that
Shelter would remain as a TimberTech distributor, which further induced
Shelter to keep buying and selling TimberTech. (Shelter SOF ¶ 10(v)).
The parties also discussed TimberTech product changes. (Shelter SOF
¶ 10(w)). CPG represented that TimberTech would remain a good stable
product and would not become stale or obsolete. (Id.) Based on CPG’s
representations on September 10, 2013, and September 26, 2013, Shelter
continued to purchase TimberTech inventory. (Shelter SOF ¶ 10(x)).
Specifically, Shelter ordered additional TimberTech inventory on
September 20, 2013, and October 4, 2013. (Shelter SOF ¶ 10(y)).
On October 10, 2013, however, CPG advised Shelter that it had
been dropped as a distributor. (Shelter SOF ¶ 18(b)). Shelter
immediately raised the issue of its TimberTech inventory, including the
inventory it purchased less than a week prior on October 4, 2013.
(Shelter SOF ¶ 18(c)). CPG advised Shelter that CPG would get their
people working on it. (Id.) CPG, however, did nothing to facilitate the
transfer of Shelter’s TimberTech inventory to a surviving distributor.
(Shelter SOF ¶¶ 18(d) - 18(m)). To date, Shelter still possesses
approximately $139,000 of TimberTech inventory. (Shelter SOF ¶ 29(m)).
Viewing Shelter’s credible evidence in the light most favorable to it, a
reasonable juror could conclude that CPG agreed to assist Shelter with
moving its TimberTech inventory to a surviving distributor. That is, the
agreement at issue is for services, not for the sale of goods. Thus,
Pennsylvania’s statute of frauds fails to preclude the parties’ oral
agreement, and the court will deny CPG’s motion for summary judgment
on this issue.
II. Shelter’s breach of contract claim
Having determined that Pennsylvania’s statute of frauds fails to
preclude Shelter’s asserted oral agreement with CPG, the court next
addresses whether a valid oral contract existed between the parties
pertaining to CPG assisting Shelter in the elimination of its TimberTech
inventory. Under Pennsylvania law, parties asserting claims for breach of
contract must allege the following three elements to adequately state a
claim: “(1) the existence of a contract, including its essential terms; (2) a
breach of duty imposed by the contract; and (3) resultant damages.”
Alpart v. Gen. Land Partners, Inc., 574 F. Supp. 2d 491, 502 (E.D. Pa.
2008) (citing CoreStates Bank, N.A. v. Cutillo, 723 A.2d 1053, 1058 (Pa.
Super. Ct. 1999)).
Regarding the first element, to prove the existence of an oral
contract, Shelter must establish that: “(1) both parties manifested an
intention to be bound by the terms of the agreement; (2) the terms of the
agreement were sufficiently definite to be specifically enforced; and (3)
there was mutuality of consideration. York Excavating Co., Inc. v.
Employers Ins. of Wausau, 834 F. Supp. 733, 740 (M.D. Pa. 1993)
(citation omitted) ;see also In re Estate of Hall, 731 A.2d 617, 621 (Pa.
Super. Ct. 1999) (same). Pennsylvania requires courts determining the
existence of an oral contract to assess the parties’ conduct in light of the
surrounding circumstances to determine the existence of an oral contract,
including its terms. Fenestra, Inc. v. John McShain, Inc., 248 A.2d 835,
836-37 (Pa. 1969) (emphasis added); Johnston the Florist, Inc. v. TEDCO
Const. Corp., 657 A.2d 511, 516 (Pa. Super. Ct. 1995) (citation omitted).
The party asserting the existence of an oral contract must establish its
terms are “clear and precise.” Edmondson v. Zetusky, 674 A.2d 760, 764
(Pa. Commw. Ct. 1996); Orchard v. Covelli, 590 F. Supp. 1548, 1556
(W.D. Pa. 1984).6
Moreover, when the existence of an oral contract is disputed, the
Pennsylvania Supreme Court has established a three-stage inquiry: “First,
what were the terms of the contract; second, what was the understanding
of the parties as expressed by those terms; third, what was the legal effect
CPG contends that “the existence of an oral contract must be
established by ‘clear and precise’ evidence.” (Doc. 44, Am. Br. in Supp.
Mot for Summ J. at 8). CPG states the correct evidentiary burden if the
oral contract modifies or changes or cancels a prior written contract.
Pellegrene v. Luther, 169 A,2d 298, 300 (Pa. 1961) (citations omitted).
Pennsylvania law, however, provides a plaintiff asserting the existence of
a valid oral contract must, in the absence of any writing, establish the oral
contract’s terms are clear and precise by a preponderance of the
evidence. Edmondson, 674 A.2d at 764; Orchard, 590 F. Supp. at 1556.
of the agreement as thus determined and interpreted.” McCormack v.
Jermyn, 40 A.2d 477, 479 (Pa. 1945). Stage one and two are for the jury
as questions of fact. Id. Stage three is for the court as a matter of law.
This process ensures that “the meaning of words used in
conversation, and what the parties intended to express by them, is
exclusively for the jury to determine.” Id. (quoting Brubaker v. Okeson, 36
Pa. 519 (Pa. 1860); see also Prime Bldg. Corp. v. Itron, Inc., 22 F. Supp.
2d 440, 444 (E.D. Pa. 1998) (“[I]n the case of a disputed oral contract,
what was said and done by the parties, as well as what was intended by
what was said and done by the parties, are questions of fact to be
resolved by the trier of fact . . . .”) (quoting Johnston the Florist, Inc., 657
A.2d at 516).
In the instant matter, myriad issues of material fact preclude
summary judgment regarding whether CPG agreed to eliminate Shelter’s
TimberTech inventory. As previously explained, CPG claims it never
agreed to move Shelter’s TimberTech inventory to a surviving distributor.
Specifically, Shelter’s CEO testified that CPG never promised to
repurchase Shelter’s TimberTech inventory. (Doc. 40, Ex. O, Lambrecht
Dep. at 40-41). Shelter argues the exact opposite–that is, CPG agreed to
facilitate the transfer of Shelter’s TimberTech inventory to another
distributor. (Shelter’s SOF ¶¶ 10(o)-10(t), 18(a)-18(m), 20, 22).
As such, it is apparent that summary judgment is inappropriate
because the jury will be required to weigh the respective testimony and
assign credibility. Doe v. Luzerne Cty., 660 F.3d 169, 175 (3d Cir. 2011)
(noting that at summary judgment “[t]he court may not . . . weigh the
evidence or make credibility determinations because these tasks are left
for the fact finder.”); Boyle v. Cty. of Allegheny Pa., 139 F.3d 386, 393 (3d
Cir. 1998) (stating that trial courts “may not weigh the evidence or make
credibility determinations; these tasks are left to the fact-finder.”); see also
McCormack, 40 A.2d at 479 (noting that what were the terms of the
alleged oral contract and what was the understanding of the parties
expressed by these terms are questions of fact for the jury.).
Stated differently, Pennsylvania law requires the fact-finder to
ascertain the meaning and existence of an oral contract in light of the
surrounding circumstances. Fenestra, 248 A.2d at 836-37; Johnston the
Florist, 657 A.2d at 516 (citation omitted). Here, the jury must determine
these issues in light of CPG and Shelter’s seventeen-year business
relationship. To make credibility determinations and preemptively
adjudicate the existence of the alleged oral contract in the absence of the
parties extensive business relationship, as CPG would have the court do,
may reward profit and expedience over relationships and people.
Pennsylvania law precludes such analysis. Instead, the jury must
determine the terms of the oral agreement and the parties’ understanding
of those terms.
Viewing the evidence in Shelter’s favor, genuine issues of fact exist
regarding whether the parties entered into an oral contract pertaining to
CPG eliminating Shelter’s TimberTech inventory. Thus, the court will deny
CPG’s motion for partial summary judgement on Shelter’s breach of
Based upon the above reasoning, the court will deny CPG’s motion
for partial summary judgement. An appropriate order follows.
s/ James M. Munley
JUDGE JAMES M. MUNLEY
United States District Court
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