Reilly Foam Corp. v. Rubbermaid Corp.

Page 643

206 F.Supp.2d 643

REILLY FOAM CORP., Plaintiff, v. RUBBERMAID CORP., Defendant.

No. CIV.A.01-CV-2596.

United States District Court, E.D. Pennsylvania.

May 28, 2002.

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John Speros Kokonos, John S. Kokonos & Associates, Media, PA, for plaintiff.

David R. Fine, Kirkpatrick and Lockhart, Jacqueline Jackson-De Garcia Kirkpatrick & Lockhart LLP, Harrisburg, PA, for defendant.

MEMORANDUM AND ORDER

SCHILLER, District Judge.

I. INTRODUCTION

A dispute between Plaintiff Reilly Foam Corporation ("Reilly Foam") and Defendant Rubbermaid Corporation ("Rubbermaid") over a contract for sponges results in the Court doing the mopping-up. Reilly Foam alleges that it contracted to supply Rubbermaid with its requirements for certain sponges for assembly into mops sold to Target stores. Reilly Foam alleges that rather than obtaining sponges solely from Reilly Foam, Rubbermaid continued to obtain sponges from another supplier and failed to make set minimum purchases. Rubbermaid denies that the contract created between the parties called for Reilly Foam to be its exclusive supplier.

Reilly Foam moved for partial summary judgment, contending the agreement and record demonstrate Rubbermaid's liability as a matter of law. Rubbermaid, in a cross-motion, argues that it had no obligation to directly purchase sponges, that Plaintiff's misrepresentation claims are barred by the economic loss and gist-of-the-action doctrines, and that its claims for promissory estoppel and restitution are pre-empted by the parties' contract. The water here is murkier than both parties believe. Plaintiff's Motion for Partial Summary Judgment is granted in part and Defendant's Motion for Summary Judgment is granted in part as explained below.

Rubbermaid has also moved for sanctions because Reilly Foam produced a supplemental expert report after this Court's scheduling deadline. As set forth below, that motion is also granted in part.

II. BACKGROUND

Reilly Foam manufactures custom-order sponges and other foam products. Defendant Rubbermaid manufactures home products, including mops nationwide. Before its agreement with Reilly Foam, Rubbermaid obtained sponges for its mop products from a company known as Tek Pak, a competitor of Reilly Foam.

In 1997, Rubbermaid launched its "Tidal Wave Project" to introduce new and improved sponge mops into the marketplace. The new sponge mops were named for a wave pattern which would be cut into the sponges. There were to be two basic designs for the Tidal Wave mops: a butterfly sponge and a roller sponge. The butterfly sponge mop included a mechanism which folded in half like the wings of a butterfly in order to wring out water. The roller sponge would be squeezed by a roller mechanism.

Target Stores agreed to stock cobalt blue and yellow laminate versions of the Tidal Wave sponge mop line at its stores nationwide. Rubbermaid initially sought to obtain sponges for the mops from Tek Pak. However, Tek Pak could not make timely deliveries of sponges to meet Target's needs.

Rubbermaid contacted Reilly Foam on March 4, 1999 to determine if it could fulfill Rubbermaid's need for sponges. Rubbermaid's immediate objective with Reilly Foam was to satisfy Target's current demand. Reilly Foam submitted a price quotation to Rubbermaid on March 8, 1999 for Pattern Butterfly sponges and Pattern Roller Mop sponges on an expedited basis. Reilly Foam then manufactured and delivered the sponges.

Between March 8 and March 30, the parties discussed a longer-term relationship in which Reilly Foam would supply sponges for Rubbermaid's Tidal Wave Project. But the parties now vigorously dispute what the terms of the relationship were. According to Joseph Reilly of Reilly Foam, his company was to be the exclusive supplier of Butterfly and Roller Mop sponges with a Tidal Wave design. Rubbermaid was to purchase a minimum of 300,000 Butterfly, 300,000 Roller Mop, and 300,000 yellow ester Tidal Wave sponges each year. Rubbermaid also submitted written estimates to Reilly Foam of its requirements for Butterfly and Roller Mop sponges. Reilly Foam needed to retool its equipment and to license technology from a corporation named Foamex to produce the sponges with a "tidal wave" effect carved into their bottoms. Reilly Foam expressed concern that its profits on the contract permit it to recoup its costs.

On March 26, 1999, Reilly Foam forwarded a letter to Tony Ferrante of Rubbermaid signed by Joseph Reilly. The letter read:

This letter details the proposal that we briefly spoke about last evening. This includes the two laminates that we are currently working on, the roller mop and the butterfly mop. There are other products that we are familiar with through Kendo/New Knight, which would be the brown large celled ester, the pattern yellow ester and the yellow ether and white scrubmate. All of these are priced on the ensuing quotation.

Our proposal is that Rubbermaid Cleaning Products commit to two million pieces of product under the sub-heading Other Affected Products. There would be a surcharge of $.015 per part in an effort to amortize the cost of tooling for the wave pattern. The two million products would need to be taken over a two year period. We would also require a commitment for all of the butterfly and roller mop laminates that include the Rubbermaid Cleaning Products design.

I have also spoken to Foamex and they have agreed to run their "sample" tool for the short term until the production tool is complete, which would be approximately eight weeks. Please keep in mind that this is a proprietary pattern and we would need your design should this project move forward.

Finally, we appreciate the opportunity and understand the price sensitive nature of your products. Reilly Foam Corporation has made various concession to keep this program moving forward.

Tony, after reviewing the quotation and the conditions of this letter, please respond through a letter stating Rubbermaid Cleaning Products intentions.

I look forward to your response.

/s/ Joseph G. Reilly

Joseph G. Reilly

(March 26, 1999 Letter, Def.App. at 2a). Accompanying the letter was a list of products, prices, and quantities on Reilly Foam letterhead:

RUBBERMAID CLEANING PRODUCTS PROJECT
                                                                     Quotation
                                                                 3/25/99
PRODUCT SIZE PRICE1
Butterfly Sponge                    1-1/4" × 2-7/8" × 9"       $.675 each
Roller Mop                          2-3/8" × 3-3/4" × 8-5/8"   $.625 each
OTHER AFFECTED PRODUCTS
Brown Sponge                        2-3/8" × 3-3/4" × 8-1/2"
     Annual Quantity          340,000 Pcs.                     $.290 each
Yellow Ester with Wave Pattern      2-1/2" × 3-3/4" × 8-1/2"
      Annual Quantity         350,000 Pcs.                     $.320 each
Yellow Ether to White Scrubmate     2-3/8" × 3-3/4" × 8-5/8"
      Annual Quantity         300,000 Pcs.                     $.290 each

(Def.App. at 3a).

Tony Ferrante responded by letter on March 30, 1999. The letter, addressed to "Joe" Reilly, read in relevant part:

This letter is to serve as Rubbermaid's commitment and authorization to procure tooling so that Reilly Foam will be in a position to make sponge products with Rubbermaid's patent pending Tidal Wave^TM design. I understand that $.015 will be added to the cost of the sponge purchase price until we have made purchases of 2 million sponges, thereby covering the tooling cost of $30,000.

Referencing the attached quotation, our commitment is as follows:

1. Any sponge mop product produced by New Knight, Inc., on behalf of Rubbermaid Home Products, will source the sponge component from Reilly Foam. This includes the current product offering, as referenced in your quotation, as well as any future new products that New Knight will produce for us.

2. Should any cost savings arise from productivity improvements, Rubbermaid is entitled to share in those benefits.

* * *

Best Regards /s/ Tony Ferrante Tony Ferrante Product Manager Rubbermaid Home Products

(Def.App. at 4a). New Knight, an independent corporation, assembled mops on behalf of Rubbermaid. Attached to his letter was Reilly Foam's price list, marked "Approved" and signed by Mr. Ferrante. Shortly thereafter, Rubbermaid supplied Reilly Foam with a forecast of how many sponges of each variety it would need.

Following the exchange of letters, Rubbermaid instructed New Knight to purchase sponges solely from Reilly Foam. New Knight complied and used Reilly Foam as its exclusive source of sponges until New Knight entered bankruptcy in August 2001. Rubbermaid itself made purchases of sponges listed under the "other affected products" category. At the same time, Rubbermaid continued to purchase sponges from Tek Pak for use in the Tidal Wave line of mops. Moreover, Rubbermaid did not purchase two million sponges within the two-year window which Reilly Foam sought.²

Reilly Foam contends that Rubbermaid has breached the contract by failing to use Reilly Foam as Rubbermaid's exclusive supplier for the Tidal Wave Project (including roller mop and butterfly mop sponges) and making purchases from Plaintiff's competitors, by failing to purchase the minimum annual quantities of sponges in the "other affected products category" set forth in the price list which Joseph Reilly sent on March 26, 1999, and by failing to purchase two million "other affected sponges" within two years with a $0.015 surcharge.

III. DISCUSSION OF CROSS-MOTIONS FOR SUMMARY JUDGMENT

A. Standard of Review

The parties have now filed cross-motions for summary judgment. The standard for summary judgment does not change when parties file cross-motions. See Southeastern Pa. Transp. Auth. v. Pa. Pub. Util. Comm'n, 826 F.Supp. 1506, 1512 (E.D.Pa.1993)(Pollak, J.). Summary judgment must be granted if the record, when viewed in a light most favorable to the...