Italiano v. Aromi D'Italia, Inc.

GRUPPO ESSENZIERO ITALIANO, SPA.

v.AROMI D'ITALIA, INC.

Civil No. CCB-08-65

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

Date: July 27, 2011

MEMORANDUM

Gruppo Essenziero Italiano, S.p.A. ("GEI") has sued Aromi D'Italia, Inc. ("ADI") for trademark infringement, unfair competition, and breach of the parties' exclusive distributor agreement. ADI has counterclaimed, asserting breach of the same agreement and several tort claims and seeking an accounting. Now pending before the court is a motion for partial summary judgment filed by counter-defendant GEI as to Counts I, II, V, VI, and a portion of Count VII of the counterclaim. The issues in this case have been fully briefed and no oral argument is necessary. See Local Rule 105.6 (D. Md. 2011). For the following reasons, GEI's motion will be granted as to Counts II, V, and VI; and denied as to Counts I and VII.

BACKGROUND

The facts giving rise to this case center around an exclusive distributor agreement signed by the parties on April 22, 2000. The agreement made ADI the exclusive distributor of GEI's gelato mix and ingredient products in the United States for a period of 10 years. Under the agreement, ADI was required to pay half of a purchase invoice within 60 days of shipment and the balance of the invoice within 90 days of shipment. The agreement also allowed GEI toterminate the agreement for monetary default without giving ADI an opportunity to cure.

The parties began conducting business under the exclusive distributor agreement in 2000. From May 2003 through December 2003, however, ADI failed to pay numerous invoices for products it ordered and received from GEI. Whether because of ADI's nonpayment or for some other reason, in early 2004 the parties mutually agreed to change the terms of payment under the exclusive distributor agreement. Going forward, ADI still was required to pay half of the purchase price of an invoice within 60 days of shipment, but was required to pay the remaining balance before the goods cleared customs. (See B. Ghazarian Dep. 73:4-76:19, Mar. 25, 2009.) Although ADI paid in full all invoices issued under this arrangement, the unpaid invoices from 2003, which allegedly amounted to €906,050.73, remained outstanding. (See May 7, 2004 Fax, GEI Ex. 10.)

From 2004 through 2007, the parties attempted on a number of occasions to negotiate a repayment plan for ADI's outstanding balance. These attempts were often complicated by disputes over the amount due on the unpaid invoices, with ADI consistently claiming that GEI owed it credits against its outstanding balance accrued from other dealings between GEI and ADI. The first attempt by the parties to negotiate a repayment plan occurred in March 2004 at a trade show in New York City. Boris Ghazarian, president of ADI, met with GEI representatives, including Filippo Ferrero, operations manager for GEI, to discuss ADI's outstanding debt. At a dinner meeting, Mr. Ghazarian allegedly insisted that before ADI could pay the outstanding invoices from 2003, GEI needed to give ADI credit for various invoice errors made by GEI in the past. (P. Perry Dep. 77:17-78:13, Nov. 17, 2008.) On June 1, 2004, Cristiano Ferrero, owner of GEI, sent Mr. Ghazarian an email that proposed an arrangement for ADI to repay itsoutstanding debt to GEI. Mr. Ferrero suggested that ADI add 30% to each new invoice it paid, and the extra payment would be deducted from ADI's outstanding balance. (June 1, 2004 Email, GEI Ex. 11.) Because Mr. Ghazarian believed that such an arrangement would result in overpayment to GEI, the parties agreed to discuss an alternative repayment plan at a later date. (B. Ghazarian Dep. 50:13-52:7, Mar. 25, 2009.) The parties did not meet again until January 2005, at ADI's offices in Glen Burnie, Maryland. At that meeting, Filippo Ferrero met with Mr. Ghazarian and Patrick Perry, an employee of ADI, to discuss ADI's outstanding debt and a possible repayment plan. The parties again failed to reach an agreement on repayment, but continued to carry on their business under the exclusive distributor agreement.

On May 6, 2006, Mr. Ghazarian sent a letter to Filippo Ferrero proposing a repayment plan under which ADI would pay $3,000 per month to GEI from July 2005 through March 2006; $7,000 per month beginning March 2006; and a lump sum of $100,000 after the settlement of an unrelated litigation matter with a third party. GEI rejected this proposal as unreasonable because of the large amount of debt owed by ADI. (See F. Ferrero Dep. 265:17-266:12, Feb. 20, 2009.) Following Mr. Ghazarian's proposal, GEI informed ADI that it would begin assessing interest on ADI's outstanding balance. In an email to GEI dated May 14, 2005, Mr. Ghazarian objected to this assessment of interest on ADI's debt to GEI, but affirmed that ADI had no doubt it would repay its obligations to GEI. (May 14, 2005 Email, GEI Ex. 15.) Mr. Ghazarian also sent a follow-up email to GEI five days later, stating again that it had "no intention to deny or not fulfill [its] obligation towards [its] debt" to GEI. (May 19, 2005 Email, GEI Ex. 16.)

In January 2007, the parties met at GEI's manufacturing facility in Italy. At that meeting, Mr. Ghazarian offered to pay GEI $300,000 to satisfy the entire debt owed by ADI to GEI. (B.Ghazarian Dep. 286:6-287:21, Mar. 25, 2009; F. Ferrero Dep. 82:18-84:7, Feb. 20, 2009.) GEI refused the offer. After that meeting, the relationship between the parties quickly deteriorated. In May 2007, Filippo Ferrero met with Mr. Ghazarian in Chicago for a food trade show and later the same month met in ADI's offices in Baltimore to discuss ADI's debt. During the course of those meetings, Mr. Ghazarian offered to pay GEI $300,000 over the next three years to satisfy its debt. Mr. Ferrero again rejected the offer, but offered to let ADI pay €600,000 to satisfy its debt, which GEI argued was well above that amount. (B. Ghazarian Dep. 288:12-289-21, Mar. 25, 2009.) Mr. Ghazarian rejected this offer. Mr. Ghazarian also suggested that because the parties could not appear to agree on a repayment plan or how much ADI continued to owe GEI, the parties should consult a third party to handle the dispute. (F. Ferrero Dep. 141:21-142:6, Apr. 29, 2008; B. Ghazarian Dep. 289:3-10, Mar. 25, 2009.)

On June 7, 2007, GEI, through its attorney, sent ADI a letter reminding ADI of its outstanding debt of approximately €800,000, demanding adequate assurances that ADI would pay the debt, and demanding full payment for goods before shipment. After a period of failed negotiations, on June 20, 2007, GEI sent another letter to ADI demanding payment in the amount of €1,001,472.76, which included €811,349 in outstanding principal and €190,123.76 in accrued interest, or a proposal for a reasonable repayment plan. The letter also requested a detailed accounting of any claimed credits within 10 days or a request for an extension of time. The next day ADI, through its attorney, responded to GEI's demand. ADI emphasized that it disputed the amount owed to GEI, but failed to propose a reasonable repayment plan or to provide an accounting of any claimed credits to GEI. On July 2, 2007, GEI sent a formal cancellation of the exclusive distributor agreement to ADI.

STANDARD OF REVIEW

Rule 56(a) of the Federal Rules of Civil Procedure provides that "a court shall grant summary judgment 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). The Supreme Court has clarified that this does not mean that any factual dispute will defeat the motion. "By its very terms, this 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).

"A party opposing a properly supported motion for summary judgment 'may not rest upon the mere allegations or denials of [his] pleadings,' but rather must 'set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003) (alteration in original) (quoting Fed. R. Civ. P. 56(e)). The court must "view the evidence in the light most favorable to . . . the nonmovant, and draw all reasonable inferences in her favor without weighing the evidence or assessing the witnesses' credibility," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir. 2002), but the court also must abide by the "affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial." Bouchat, 346 F.3d at 526 (internal quotation marks omitted) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993), and citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)).

ANALYSIS

A. Applicable Law

The United Nations Convention on the Contract for the International Sale of Goods ("CISG"), 15 U.S.C.App., 52 Fed. Reg. 6262 (March 2, 1987), governs the sale of goods between parties whose places of business are in nations that are signatories to the CISG. CISG, art. 1(1). Because the CISG does not apply to tort claims, see Dingxi Longhai Dairy, Ltd. v. Becwood Tech. Grp., L.L.C., 718 F. Supp. 2d 1019, 1024 (D. Minn. 2010), the parties agree that Maryland law applies to ADI's counterclaims sounding in tort. The parties, however, dispute whether Maryland law or the CISG governs ADI's breach of contract claim, which asserts that GEI wrongfully terminated the parties' exclusive distributor agreement (Count I).¹

Article 1 of the CISG states that the "Convention applies to contracts of sale of goods between parties whose places of business are in different States." CISG, art. 1 (emphasis added). Although distribution agreements are considered contracts...