Shaoxing Daqin Import & Export Co. v. Notations, Inc., 19-cv-2732 (JSR)

SHAOXING DAQIN IMPORT & EXPORT CO., LTD., Plaintiff, v. NOTATIONS, INC., SCOTT ERMAN, and LYNN BRANDS, LLC, Defendants.

19-cv-2732 (JSR)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

December 3, 2019

MEMORANDUM AND ORDER

JED S. RAKOFF, U.S.D.J.

This case concerns claims arising from unpaid fabric orders plaintiff Shaoxing Daqin Import & Export ("Shaoxing") fulfilled in the course of its dealings with defendants Notations, Inc. ("Notations") and Scott Erman. Plaintiff alleges numerous contract, quasi-contract, and tort claims against Notations and Erman, as well as successor liability claims against defendant Lynn Brands, LLC ("Lynn Brands"), which purchased Notations's assets in early 2019.

Now before the Court are the defendants' motions for summary judgment against plaintiff. For the reasons below, the Court grants the motions in part and denies them in part. Further, the Court grants Notations and Erman's motion for summary judgment against Lynn Brands's cross-claim for indemnification.

I. Summary Judgment Standard

"Summary judgment is proper when, after drawing all reasonable inferences in favor of a non-movant, no reasonable trier of fact could find in favor of that party." Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993); see also Fed. R. Civ. P. 56(a) ("The court shall grant summary judgment 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."). "A fact is 'material' for these purposes if it 'might affect the outcome of the suit under the governing law.'" Holtz v. Rockefeller & Co., Inc., 258 F.3d 62, 69 (2d Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). "An issue of fact is 'genuine' if 'the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Id. "Genuine issues of fact are not created by conclusory allegations." Heublein, 996 F.2d at 1461.

"Rule 56(c) mandates the entry of summary judgment . . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). To avoid summary judgment, "[t]here must be more than a 'scintilla of evidence' in the non-movant's favor; there must be evidence upon which a fact-finder could reasonably find for the non-movant. Heublein, 996 F.2d at 1461 (quoting Anderson, 477 U.S. at 252).

II. Notations and Scott Erman's Motion for Summary Judgment Against Plaintiff

a. Facts Specific to Notations and Scott Erman's Summary Judgment Motion

Until March 4, 2019, Notations was a manufacturer of women's apparel. Defendants Notations, Inc. and Scott Erman's Statement of Material Facts ("Notations SMF") ¶ 1, ECF No. 41. Scott Erman was President of Notations from about 2014 or 2015 until 2019. Id. ¶ 79. Notation's production model started with its designing garments and determining what fabrics to use. Plaintiff, Shaoxing Daqin Import & Export Co., Ltd., was one of Notations's fabric suppliers. When ordered, fabric was shipped by plaintiff to garment factories that assembled the completed garments, after which the garments were shipped to Notations. Id. ¶ 2. There is no dispute that neither Notations nor Scott Erman has any ownership interest in the garment factories, which included Easytex, PT Doosan, Now Vina Corp., Kody, and Hwain. Id. ¶¶ 3-4.

Parties are in substantial disagreement about how exactly fabric orders were placed. They agree, however, that somewhere in the order process either Notations or the garment factories would issue purchase orders ("Fabric POs" or "POs") describingfabric orders from plaintiff. Notations SMF ¶ 7-8; Response to Defendants Notations and Scott Erman's Rule 56.1 Statement ("Pl. Notations SMF") ¶ 2. These POs each listed a "Bill To" and "Ship To" party. Plaintiff generally sent invoices to the company designated as the "Bill To" party on a PO. Notations SMF ¶ 8; Pl. Notations SMF ¶ 2. Throughout this process of issuing POs and invoices, plaintiff and Notations were in communication about the details of orders.

At issue in this litigation are amounts owed on a number of fabric orders documented in such POs that ultimately were delivered to Notations but were never paid for in full by either Notations or the garment factories. The orders are documented in a "Proof of Claim" document generated by plaintiff. Shen Decl. Exh. 6, ECF No. 40. Plaintiff seeks a total of $700,000 in compensatory damages listed in the Proof of Claim. Pl. Notations SMF ¶¶ 10-11. Notations does not dispute that it owes $127,000 for orders where Notations was listed as the "Bill To" party, but claims it is not responsible for the remainder of the orders where garment factories were listed as the "Bill To" parties. Notations SMF ¶ 13. Plaintiff asserts a number of theories by which defendants could be held liable for the rest of the $700,000 listed in the Proof of Claim.

b. Breach of Contract

Plaintiff first alleges a breach of contract claim. Under New York law, the elements of a breach of contract claim are "(1) the existence of a contract, (2) performance by the party seeking recovery, (3) non-performance by the other party, and (4) damages attributable to the breach." RCN Telecom Servs., Inc. v. 202 Centre Street Realty LLC, 156 Fed. Appx. 349, 350-51 (2d Cir. 2005) (summary order). Because the sale of goods is involved, Article 2 of New York's Uniform Commercial Code ("UCC") controls. See Integrated Circuits Unlimited v. E.F. Johnson Co., 875 F.2d 1040, 1041 (2d Cir. 1989).

Plaintiff has failed to establish the first element of its breach of contract claim, viz., that a contract exists that might entitle it to payment from Notations and Scott Erman. While Notations and Erman argue that plaintiff has admitted that a series of "PO" or purchase orders and invoices constitute the contracts at issue in this suit, this is not the case. To the contrary, plaintiff argues that the POs and invoices were merely confirmation notices that did not represent all of the terms of agreements between plaintiff and defendants. Pl. Mem. of Law in Opp. to Defs. Notations & Scott Erman's Mot. for Summary Judgment ("Pl. Opp. Notations & Erman") 13-14, ECF No. 48. However, while plaintiff clearly disputes that the POs and invoices are controlling contracts, it offers no alternative contract theory precluding summary judgment.

"To establish the existence of an enforceable agreement, a plaintiff must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound (22 N.Y. Jur. 2d, Contracts § 9). That meeting of the minds must include agreement on all essential terms (id. § 31)." Resetarits Const. Corp. v. Olmsted, 118 A.D.3d 1454, 1455, 988 N.Y.S.2d 797, 798 (2014). The burden of proving the existence of the contract falls on the party seeking to enforce it, in this case plaintiff.

Plaintiff has failed to make a showing sufficient to establish such a contract here. Plaintiff instead offers a litany of communications between it and defendants that it claims require defendants to pay for fabrics plaintiff delivered to a third party. While such communications, coupled with plaintiff's production of the fabrics, might in theory constitute an offer and acceptance, plaintiff does not articulate such a theory, much less provide support for it. By failing to demonstrate how defendants might be bound by their communications with plaintiff, plaintiff has failed to allege facts demonstrating the existence of a contract that defendants could have breached. The Court thus grants Notations and Erman's summary judgment motion against plaintiff on its breach of contract claim.

c. Quasi-Contract Claims

Plaintiff asserts several quasi-contract claims against defendants Notations and Scott Erman. These include claims for quantum meruit, unjust enrichment, promissory estoppel, and equitable estoppel. Notations and Erman first argue that these claims are preempted by plaintiff's breach of contract claim. In order to be preempted, however, a contractual relationship must govern the parties' relationship. See Janousky v. North Fork Bancorporation, Inc., No. 08 Civ. 1858 (PAC), 2011 WL 1118602, at *1 (S.D.N.Y. 2011); Park Irmat Drug Corp. v. Optumrx, Inc., 152 F.Supp.3d 127, 138 (S.D.N.Y. 2016). Indeed, "where there is a bona fide dispute as to the existence of a contract or where the contract does not cover the dispute in issue, plaintiff may proceed upon a theory of quantum meruit and will not be required to elect his or her remedies." Am. Tel. & Util. Consultants, Inc. v. Beth Israel Med. Ctr., 763 N.Y.S.2d 466, 466 (N.Y. App. Div. 2003).

As the movant, defendants must show that there is no genuine dispute that a contract covers the issues in this case. Defendants have not met this burden here. Although they argue that the POs and invoices are controlling contracts in this case, defendants have failed to establish as much. Rather than offering legal or factual support for this proposition, defendants simply assert that plaintiff has conceded that the POs and invoices are controlling contracts. As previouslydiscussed, plaintiffs do not concede as much. Thus, defendants have failed to meet their burden of demonstrating that there is no genuine dispute that a contract covers the issues in this case, and plaintiff's quasi-contract claims are not preempted, as a general matter. The Court therefore turns to each of the specific claims.

i. Promissory Estoppel

To make out a claim for promissory estoppel, a plaintiff must prove (1) a clear and unambiguous promise, (2) reasonable and foreseeable reliance by the promisee, and (3) unconscionable injury to the relying party as a result of the reliance. Readco, Inc. v. Marine Midland Bank, 81 F.3d 295, 301 (2d Cir. 1996). Here, plaintiff claims that it relied to its detriment on...