Diversified Colors Inc v. Cranston Print Works Company

Filing 44

ORDER granting 41 Motion for Summary Judgment; granting 38 Motion for Summary Judgment as set out. Signed by Honorable Henry M Herlong, Jr on 8/9/11.(sfla)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
SPARTANBURG DIVISION
Diversified Colors Inc.,

)
)
Plaintiff,
)
)
vs.
)
)
Cranston Print Works Company,
)
)
Defendant.
)
____________________________________)

C.A. No. 7:10-2156-HMH

OPINION & ORDER

This matter is before the court on the parties’ cross-motions for summary judgment.
After consideration, the court grants Cranston Print Works Company’s (“Cranston”) motion and
grants Diversified Colors Inc.’s (“Diversified”) motion.
I. FACTUAL AND PROCEDURAL BACKGROUND
In the complaint, Diversified alleges that it had an oral contract with Cranston, a printing
company, to provide rapidogen dyes to Cranston for use in its print business. Diversified alleges
that the “verbal agreement” required it to “keep on hand a sufficient amount of raw materials in
order to make on call rapidogen dyestuffs for the need of Cranston.” (Compl. ¶ 5.) Herbert
Moore, Jr. (“Moore”), the president of Diversified, states that Diversified has been supplying
rapidogen dyes to Cranston since late 2007. (Pl. Mem. Opp’n Summ. J. Ex. 4 (Moore Aff. at
1).) Moore states that
[f]or approximately 20 years he has been actively involved in supplying rapidogen
dyes to Cranston Print Works. This involvement was through Blackman Uhler
Chemical Company for 16 years, Greenville Colorants for one year and Diversified
[] for 3 years. This involvement consisted in determining with Cranston [] which
rapidogen products, their amounts, and their delivery to Cranston. Cranston Print
1

Works had used consignment inventory for many years to insure that adequate
inventory was on hand, due to the delicate nature of rapidogen dyes to cold
temperatures. Cranston [] determined and placed orders for consignment inventory
to be delivered to their locations.
In addition to the inventory that was held at Cranston [], I insured that
adequate stocks of finished rapidogen dyes were on hand for Cranston [] at our
manufacture locations. Additionally rapidogen material stocks had to be imported
on a regular basis to insure that rapidogen dye could be manufactured in a timely
manner.
(Id. Ex. 1 (Moore Aff. at 1-2).) Cranston would accept inventory on consignment to ensure that
adequate inventory was available for use. Thus, Diversified was paid for the rapidogen dye only
after it was sent to Cranston on consignment and actually used by Cranston. (Def. Mem. Supp.
Summ. J. 2.)
In late 2008, Diversified changed its raw materials supplier. Prior to late 2008,
Diversified obtained its raw materials for making rapidogen dyes from an Indian company,
Chem-Tex. (Def. Mem. Supp. Summ. J. Exs. (Moore Dep. Vol. II at 13).) However, ChemTex’s raw materials had quality issues. According to Moore, Chem-Tex’s “products contained
higher than acceptable salt content which required reworking by Diversified [] at its expense
without any damage or cost” to Cranston. (Pl. Mem. Opp’n Summ. J. Ex. 4 (Moore Aff. at 2).)
Thus, Diversified began purchasing raw materials from Eastar Chemical, a Chinese company, in
late 2008. However, Eastar would only provide the materials to Diversified in six-month
batches, known in the industry as “campaigning production.” (Id. Ex. 4 (Moore Aff. at 2).)
Previously, Diversified purchased raw materials based on quarterly estimates. (Def. Mem.
Supp. Summ. J. Exs. (Moore Dep. at 55).) According to Cranston, the decision to purchase raw
materials from Eastar was made “solely by Diversified and prior to placing the order with

2

Eastar, Diversified did not have any communications with Cranston to confirm that Cranston
would use six months of material.” (Id. 3.)
In 2009, Cranston closed its Webster manufacturing plant for economic reasons.
Cranston notified Diversified that it would no longer need rapidogen dye two weeks prior to the
January 26, 2009 public notice that the plant was closing. (Id. Exs. (Moore Dep. at 52).)
However, Cranston continued to use and pay for rapidogen dye for an additional five months
“while its Webster manufacturing plant phased out.” (Id.) Diversified’s final request for
payment for rapidogen dye used by Cranston was emailed on June 1, 2009. (Id. Ex. 3
(June 1, 2009 Email).) In the instant suit, Diversified is seeking to recover $85,476.25, for raw
materials that it purchased between 2006 and 2008 from Chem-Tex and Eastar. None of the
materials that Diversified is seeking payment for were delivered to Cranston or converted “into a
finished product suitable for use by Cranston.” (Id.)
Cranston moved for summary judgment on June 30, 2011, alleging that it is entitled to
summary judgment on Diversified’s breach of contract claim because there was no oral contract,
and even if an oral contract existed, the oral agreement violates the statute of frauds. Diversified
responded to Cranston’s motion for summary judgment on July 15, 2011. On
July 19, 2011, Diversified moved for summary judgment on Cranston’s counterclaims for an
accounting and abuse of process. Diversified alleges that it has performed an accounting and
that the abuse of process claim is without merit. Cranston never responded to Diversified’s
motion for summary judgment and the deadlines have expired. Therefore, these matters are ripe
for consideration.

3

II. DISCUSSION OF THE LAW
A. Summary Judgment Standard
Summary judgment is appropriate only “if the movant shows that there is no genuine
dispute as to any material fact and that the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). In deciding whether a genuine issue of material fact exists, the evidence
of the non-moving party is to be believed and all justifiable inferences must be drawn in his
favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). However, “[o]nly
disputes over facts that might affect the outcome of the suit under the governing law will
properly preclude the entry of summary judgment. Factual disputes that are irrelevant or
unnecessary will not be counted.” Id. at 248.
A litigant “cannot create a genuine issue of material fact through mere speculation or the
building of one inference upon another.” Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985).
“Where the record taken as a whole could not lead a rational trier of fact to find for the
non-moving party, disposition by summary judgment is appropriate.” Monahan v. County of
Chesterfield, 95 F.3d 1263, 1265 (4th Cir. 1996). “[T]he mere existence of some alleged factual
dispute between parties will not defeat an otherwise properly supported motion for summary
judgment; the requirement is that there be no genuine issue of material fact.” Ballinger v. N.C.
Agric. Extension Serv., 815 F.2d 1001, 1005 (4th Cir. 1987).
B. Cranston’s Motion for Summary Judgment
Cranston moves for summary judgment on Diversified’s breach of contract claim,
arguing that (1) there is no oral contract between Cranston and Diversified; and (2) even if there

4

were an oral contract, this claim is barred by the statute of frauds. (Def. Mem. Supp. Summ. J.,
generally.)
To recover for a breach of contract, a plaintiff must prove the existence of a contract, the
breach of the contract, and damages caused by the breach. See Fuller v. E. Fire & Cas. Ins. Co.,
124 S.E.2d 602, 610 (S.C. 1962). The required elements of a contract are an offer, acceptance,
and valuable consideration. Sauner v. Pub. Serv. Auth. of S.C., 581 S.E.2d 161, 166 (S.C.
2003). “A contract is an obligation which arises from actual agreement of the parties manifested
by words, oral or written, or by conduct.” Roberts v. Gaskins, 486 S.E.2d 771, 773 (S.C. Ct.
App. 1997). Valuable consideration may consist of “some right, interest, profit or benefit
accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or
undertaken by the other.” Prestwick Golf Club, Inc. v. Prestwick Ltd. P’ship, 503 S.E.2d 184,
186 (S.C. Ct. App. 1998). In order to have a binding contract, it is necessary that the parties to a
contract have a meeting of the minds with regard “to all essential and material terms of the
agreement.” Player v. Chandler, 382 S.E.2d 891, 893 (S.C. 1989). Price, time, and place are
essential terms of a contract. Edens v. Laurel Hill, Inc., 247 S.E.2d 434, 436 (S.C. 1978).
Furthermore, the assent must be as to all of the terms of the contract. See Lee v. Travelers’ Ins.
Co. of Hartford, Conn., 175 S.E. 429, 433 (S.C. 1934).
The court finds that there are no genuine issues of material fact concerning whether an
oral contract requiring Diversified to “keep on hand a sufficient amount of raw materials in
order to make on call rapidogen dyestuffs for the need of Cranston” existed between the parties.
(Compl. ¶ 5.) In conclusory form, Diversified alleges that “[t]he contract was valid between the
two parties. Both parties agreed for valuable consideration that Diversified Colors Inc. would
5

sell goods to Cranston Print Works Company for a price, which was based upon Diversified
Colors’ cost plus an agreed upon markup as required to meet Cranston’s needs.” (Pl. Mem.
Opp’n Summ. J. 2.) However, Diversified has failed to present any evidence of offer or
acceptance of the alleged oral contract. The evidence presented is devoid of any inference of
discussion or negotiation of contract terms or a meeting of the minds on the essential terms of an
oral contract. Diversified, without consulting Cranston, decided to purchase a six-month supply
of raw materials from Eastar. (Id. Ex. 4 (Moore Aff. at 2).); (Def. Mem. Supp. Summ. J. Exs.
(Moore Dep. at 54).) Diversified decided to “campaign production” because of the “economy in
manufacture.” (Pl. Mem. Opp’n Summ. J. Ex. 4 (Moore Aff. at 2).)
Moore’s statements in his affidavit indicate that there was general discussion with
Cranston regarding its needs based on orders from prior years. In an email from Richard
Malachowski, technical manager at Cranston, to Andy Sylvia, president of Cranston, on
June 26, 2009, Malachowski states that
Cranston did supply Diversified with best projections regarding Rapidogen color
needs, including that it was expected that Cranston would use about the same
amount of Rapidogen color in Calendar year 2008. Monthly expectations of
Rapidogen color were also communicated based on current Plant backlogs.
Conversations with Diversified Color on planning color supply are typical and
happen with most Suppliers in order to assure consistent production and delivery
of product.
(Id. Ex. 1 (Malachowski Email 6/26/09).) However, there is no evidence that Cranston required
that Diversified have available a particular amount of raw materials to produce rapidogen dye or
that Cranston was required to purchase rapidogen dye in certain minimum quantities. (Def.
Mem. Supp. Summ. J. Exs. (Moore Dep. Vol. II at 32).) To the contrary, Cranston ordered
rapidogen on consignment to ensure that it would have enough rapidogen dye available at its
6

facility. Cranston would notify Diversified of how much rapidogen had been used at the end of
the month and Diversified would invoice Cranston for that amount. (Id. Exs. (Moore Dep. at
87).) Upon use, Cranston paid Diversified for the rapidogen dye. There is no evidence that
Cranston has failed to pay for any rapidogen dye that was used by Cranston. To the contrary,
Diversified seeks payment for raw materials that were not sent to Cranston on consignment. (Id.
Exs. (Moore Dep. Vol. II at 12).) Based on the foregoing, Diversified has failed to produce any
evidence of a meeting of the minds on any basic terms of the alleged oral contract with any
“reasonable certainty.” Trident Constr. Co. v. Austin Co., 272 F. Supp. 2d 566, 576 (D.S.C.
2003).
At best, Cranston and Diversified had a course of dealing. However, having found that
no contract exists, the parties’ course of dealing is irrelevant. Course of dealing only applies
when “a contract is silent as to a particular matter” or to the interpretation of an ambiguous
contract. Keith v. River Consulting, Inc., 618 S.E.2d 302, 305 (S.C. Ct. App. 2005) (“[I]t is
necessary for enforceability that the essentials of the contract be agreed upon but all need not be
expressed. They may be implied from custom and usual forms [trade usage] and former course
of dealing.” (Internal quotation marks omitted); Moss v. Porter Bros., Inc., 357 S.E.2d 25, 27
(S.C. Ct. App. 1987). Based on the foregoing, the court finds that no contract existed with
Cranston. Therefore, the breach of contract claim fails.
In addition, even if there were an oral contract, the breach of contract claim fails because
the claim does not satisfy the statute of frauds. S.C. Code Ann. § 36-2-201(1) provides that
[e]xcept as otherwise provided in this section a contract for the sale of goods for
the price of $500 or more is not enforceable by way of action or defense unless
there is some writing sufficient to indicate that a contract for sale has been made
7

between the parties and signed by the party against whom enforcement is sought or
by his authorized agent or broker. A writing is not insufficient because it omits or
incorrectly states a term agreed upon but the contract is not enforceable under this
paragraph beyond the quantity of goods shown in such writing.
Further, § 36-2-201(3) provides that a contract that is not in writing,
but which is valid in other respects is enforceable
(a) if the goods are to be specially manufactured for the buyer and are not suitable
for sale to others in the ordinary course of the seller’s business and the seller,
before notice of repudiation is received and under circumstances which reasonably
indicate that the goods are for the buyer, has made either a substantial beginning
of their manufacture or commitments for their procurement; or
(b) if the party against whom enforcement is sought admits in his pleading,
testimony or otherwise in court that a contract for sale was made, but the contract
is not enforceable under this provision beyond the quantity of goods admitted; or
(c) with respect to goods for which payment has been made and accepted or which
have been received and accepted.
“Moreover, a contract required to be in writing by the South Carolina Statute of Frauds cannot
be orally modified.” Player, 382 S.E.2d at 894 (internal citations omitted). Diversified does not
dispute that the alleged oral contract was for the sale of goods in an amount exceeding $500.00.
Moore states in his affidavit that although Cranston was responsible for “over 95% of the
rapidogen dye” utilized in the United States, that there are two other users in the United States,
Santee Prints and Carlisle Finishing. (Pl. Mem. Opp’n Summ. J. Ex. 4 (Moore Aff. at 1).)
Further, Diversified seeks payment for raw material that has not been converted into rapidogen
dye. Thus, the raw materials at issue have not been specially manufactured for Cranston and
although Moore states that “there is no other market in the world at this time,” based on his own
affidavit there are two other potential buyers who use rapidogen dye in the United States. (Id.
Ex. 4 (Moore Aff. at 4).) In addition, Cranston has not admitted to the existence of a contract.
Finally, the raw materials have not been received or accepted by Cranston as Diversified

8

concedes that it is seeking recovery for raw materials in its possession. Based on the foregoing,
there is no applicable statute of frauds exception. Thus, even if the parties had entered an oral
contract, it is unenforceable for failure to satisfy the statute of frauds. For all of the reasons
stated above, the court grants Cranston’s motion for summary judgment.
C. Diversified’s Motion for Summary Judgment
Diversified moves for summary judgment on Cranston’s counterclaims for an accounting
and abuse of process.
1. Accounting
Diversified alleges that it has performed a complete accounting. (Pl. Mem. Supp.
Summ. J. 1.) Further, Cranston has not submitted any evidence to counter Diversified’s
assertion. Therefore, Diversified is entitled to summary judgment on this claim.
2. Abuse of Process
In addition, Diversified moves for summary judgment on Cranston’s abuse of process
claim. “[A]n abuse of process is the employment of legal process for some purpose other than
that which it was intended by the law to effect—the improper use of a regularly issued process.”
Huggins v. Winn-Dixie Greenville, Inc., 153 S.E.2d 693, 695 (S.C. 1967). “The essential
elements of abuse of process . . . [are]: first, an ulterior purpose, and second, a wilful act in the
use of the process not proper in the regular conduct of the proceeding.” Id. at 694 (internal
quotation omitted). “Some definite act or threat not authorized by the process, or aimed at an
objective not legitimate in the use of the process, is required; and there is no liability where the
defendant has done nothing more than carry out the process to its authorized conclusion, even
though with bad intentions.” Id. (internal quotation omitted).
9

After review, there is no evidence to support a claim for abuse of process. Further,
Cranston has offered no evidence to counter Diversified’s motion. Therefore, Diversified is
entitled to summary judgment on this claim.
Therefore, it is
ORDERED that Cranston’s motion for summary judgment on Diversified’s claim,
docket number 38, is granted. It is further
ORDERED that Diversified’s motion for summary judgment, docket number 41, is
granted as to Cranston’s counterclaims.
IT IS SO ORDERED.
s/Henry M. Herlong, Jr.
Senior United States District Judge

August 9, 2011
Greenville, South Carolina

10