KeyBank v. Beauty Quest Skincare, LLC

KEYBANK NATIONAL ASSOCIATION, Plaintiff, v. BEAUTY QUEST SKINCARE, LLC, and ABHA SHARMA WADHWA, Defendants.

No. 1:21-cv-778

United States District Court, W.D. New York

May 11, 2022

ORDER ON MOTION FOR SUMMARY JUDGMENT (DOC 14)

GEOFFREY W. CRAWFORD, JUDGE

KeyBank National Association (“KeyBank”) sues Beauty Quest Skincare, LLC (“Beauty Quest”) and Abha Sharma Wadhwa alleging two counts of breach of contract and one count of breach of guaranty arising out of Defendants' alleged “default due to a failure to make required payments per the terms and conditions of certain Promissory Notes and a Commercial Guaranty Agreement.” (Doc. 1 ¶ 1.) KeyBank moves for summary judgment against Beauty Quest and Ms. Wadhwa. (Doc 14.)

Factual Background^[1]

Plaintiff alleges that on or about November 23, 2015, Ms. Wadhwa, as a member of Beauty Quest, executed two Promissory Notes (“Notes”) and two Commercial Security Agreements on behalf of Beauty Quest, and executed a Commercial Guaranty Agreement (“Guaranty”). (Doc. 1 ¶¶ 7 11, 13, 17, 19; Doc. 14-2 ¶¶ 3-5.) The principal amount of the first Note, numbered 11001, was $200, 000.00. (Doc. 14-2 ¶ 3.) The principal amount of the second Note, numbered 21001, was $50, 000.00. (Doc. 14-2 ¶ 4.) The Guaranty lists Beauty Quest as the borrower, KeyBank as the lender, and Ms. Wadhwa as the Guarantor. (Doc. 14-5.)

Plaintiff alleges that or around November 23, 2016, Beauty Quest defaulted under the terms of the first Note. (Doc. 14-2 ¶ 6.) Plaintiff further alleges that on or around August 1, 2017, Beauty Quest defaulted under the terms of the second Note. (Id. ¶ 7.) Based on these agreements, Plaintiff alleges that Wadhwa personally guaranteed both loans, and has breached the Guaranty by failing to pay Beauty Quest's indebtedness upon Beauty Quest's default.

Defendant Wadhwa responds she did not personally guarantee two loans that Beauty Quest undertook in 2015. (Doc. 21-2 at 2.) She further argues that “Key Bank's contention that I personally owe it money for the two loans of the Salon lack merit.” (Id.) In the alternative, she argues that even if she is found personally liable for Beauty Quest's failure to pay the second Note, she did not guarantee the first Note in the amount of $200, 000. (Doc. 19-1 at 4.)

The court previously denied Ms. Wadhwa's motion to dismiss. (See Doc. 15.) In that order, the court found that the Complaint contained sufficient factual allegations to plausibly allege a breach of guaranty claim. Since the publication of that order, there have been no discovery or disclosures by either party.

I. Standard of Review

Summary judgment is appropriate “if the movant shows 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). At this stage, “the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). “[T]he court must draw all reasonable inferences in favor of the nonmoving party.” Reeves v. Sanderson Plumbing Prod., Inc., 530 U.S. 133, 150 (2000).

“[T]o show a genuine dispute, the nonmoving party must provide hard evidence, from which a reasonable inference in its favor may be drawn. Conclusory allegations, conjecture, and speculation ... are insufficient to create a genuinely disputed fact.” Hayes v. Dahlke, 976 F.3d 259, 267-68 (2d Cir. 2020) (cleaned up). Although the court “must disregard all evidence favorable to the moving party that the jury is not required to believe, ” the court credits “evidence supporting the moving party that is uncontradicted and unimpeached, at least to the extent that that evidence comes from disinterested witnesses.” Id.

Analysis

Plaintiff argues that the court should grant summary judgment in its favor without commencing discovery because there is “competent and incontrovertible documentary evidence supporting all of KeyBank's allegations.” (Doc 14-1 ¶ 11.) Plaintiff argues the documentary evidence filed as exhibits to the motion for summary judgment establish the following: (1) Two valid and enforceable loan agreements exist between KeyBank and Beauty Quest; (2) Ms. Wadhwa personally guaranteed both loan agreements; (3) Beauty Quest defaulted on its loan obligations; and (4) Ms. Wadhwa breached the guaranty by refusing to repay Beauty Quest's debts to KeyBank upon default. (Id. ¶ 4.) Taken together, Plaintiff avers that this “incontrovertible documentary evidence” leaves no genuine dispute of any material fact on all three of their claims. (Id. ¶ 11.)

In response, Defendants argue that summary judgment is premature because no discovery has occurred, and because there are open questions of fact which preclude summary judgment. (Doc. 19 ¶¶ 8-11.) Defendants seek discovery to establish that Ms. Wadhwa did not personally guarantee either of the loans, or in the alternative, that Ms. Wadhwa's guarantee covered only the $50, 000 loan, not the second loan in the amount of $200, 000 which she alleges was secured by the assets of the Beauty Quest salon. (Doc. 21 at 2.) Both Defendants assert the defense of modification and supplementation of guaranty through the parties' course of performance or by subsequent agreement or course of conduct. (Doc. 9 ¶¶ 5-7; Doc. 17 ¶¶ 5-7.)

Defendants further argue that KeyBank's motion for summary judgment prior to Ms. Wadhwa's opportunity to serve an Answer was a “pre-joinder motion for summary judgment” procedurally barred by N.Y. C.P.L.R. § 3212(a). (Doc. 19-1 at 3.)

The court begins by noting deficiencies in Plaintiffs motion for summary judgment under the Western District of New York local rules, and then addresses the governing law in New York State regarding contract enforcement and defenses.

I. Western District of New York Local Rule 56

W.D.N.Y. Local Rule 56 requires that any party moving for summary judgment must attach “a separate, short, and concise statement, in numbered paragraphs, of the material facts as to which the moving party contends there is no genuine issue to be tried. Each such statement must be followed by a citation to admissible evidence as required by Fed.R.Civ.P. 56(c)(1)(A).” W.D.N.Y. L. R. 56(a)(1). Failure to include a statement of facts “may constitute grounds for denial of the motion.” Id. The nonmoving party, in their papers opposing the motion for summary judgment, must also include a response to each numbered paragraph of the moving party's statement of facts. W.D.N.Y. L. R. 56(a)(2). It is within the district court's discretion to excuse non-compliance with local rules. Wight v. Bank America Corp., 219 F.3d 79, 85 (2d Cir. 2000).

Plaintiffs motion for summary judgment did not annex a statement of facts, and so the motion does not comply with the local rules. Instead, Plaintiff relies upon attorney affidavits and attached exhibits as factual support. Although “it is well established that an attorney's affidavit can be used, in connection with a summary judgment motion, to place documents produced in discovery before the Court, ” Pace v. Air & Liquid Sys. Corp., 171 F.Supp.3d 254, 272 (S.D.N.Y. 2016), “[a]n attorney's affidavit or declaration not based on personal knowledge carries no weight.” Fed. Trade Comm 'n v. Vantage Point Servs., LLC, 266 F.Supp.3d 648, 654 (W.D.N.Y. 2017).

Nevertheless, Plaintiffs have provided authenticated copies of the relevant promissory note documentation and the declaration of KeyBank Loan Workout Relationship Manager Charles Benjamin to verify the underlying debt and the nature of the transaction. The court will exercise its discretion to excuse both parties non-compliance with Local Rule 56(a).

II. N.Y. C.P.L.R. § 3212(a)

Defendants argue that KeyBank's decision to move for summary judgment prior to Ms. Wadhwa's service of an Answer renders their motion premature because issue had not been joined at the time of the motion. (Doc. 19-1 at 3 (citing N.Y. C.P.L.R. § 3212(a)).) New York state law permits a party to move for summary judgment only “after issue has been joined, ” provided that the motion is not filed earlier than 30 days, or later than 120 days, after the filing of the note of issue. N.Y. C.P.L.R. § 3212(a). Recognizing that no court in the Second Circuit has imposed a similar timing bar for a motion under Rule 56, Defendants nevertheless ask the court to apply New York State's rule limiting when a party may move for summary judgment. Plaintiff responds that even if the court applied New York state law, the issue is now moot because Ms. Wadhwa has since filed an answer and therefore issue is joined and ripe for adjudication. (Doc. 20 at 2.)

A federal court sitting in diversity applies state substantive law and federal procedural law. Hanna v. Plumer, 380 U.S. 460, 465 (1965). The Second Circuit recognizes that the summary judgment standard is procedural, and so the federal procedural rule-i.e., Rule 56- applies in federal court. Allianz Ins. Co. v. Lerner, 416 F.3d 109, 118 (2d Cir. 2005) (“New York state procedural rules do not apply here to a federal court sitting in diversity”); All Am. Tel. Co., Inc. v. AT & T Corp., 328 F.Supp.3d 342, 354 (S.D.N.Y. 2018) (“C.P.L.R. § 3212 and the New York case authority interpreting and applying that standard do not apply.”). The court will not deny Plaintiffs motion because its filing did not comply with New York procedural law.

III. Breach of Contract Claims Against Beauty Quest (Counts I, II)

Plaintiff brings two breach of contract claims against Beauty Quest. Plaintiff alleges that KeyBank entered into two valid and enforceable contracts with Beauty Quest. (Doc. 1 ¶¶ 26-35.) Plaintiff further alleges that KeyBank performed all...