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Esquire Radio & Electronics Inc. v. Ward

decided: November 5, 1986.

ESQUIRE RADIO & ELECTRONICS, INC., PLAINTIFF-APPELLEE,
v.
MONTGOMERY WARD & CO., INC., DEFENDANT-APPELLANT



Appeal from a judgment of the United States District Court for the Eastern District of New York, Jack B. Weinstein, Chief Judge, following a jury trial in which plaintiff was awarded damages in a contract action, plus pre-judgment interest as of the date of repudiation.

Newman, Cardamone, and Pierce, Circuit Judges.

Author: Pierce

PIERCE, Circuit Judge:

In this diversity action, Montgomery Ward & Co., Inc. ("Ward") appeals from a judgment entered after a seven-day jury trial in the United States District Court for the Eastern District of New York, Jack B. Weinstein, Chief Judge, awarding plaintiff-appellee Esquire Radio & Electronics, Inc. ("Esquire") $4,230,507.70 plus interest as of January 3, 1984, the date of anticipatory repudiation of Ward's obligation to purchase certain electronic products and spare parts from Esquire.

The judgment, originally entered on January 23, 1986, and amended on February 20, 1986, was based on a jury award of $2,414,976.86 for finished products, $1,235,840.95 for spare parts inventory, $269,689.89 for accounts receivable, and $283,000.00 for a program called "Tangent."

Ward argues that: (1) as to the spare parts and accounts receivable claims, plaintiff failed to establish an implied or oral contract, and the claimed oral agreement is barred by the Statute of Frauds; (2) as to the accounts receivable claim, the district court should not have permitted Esquire to amend its complaint to include this claim, and it was error for the district judge to amend the judgment for $269,689.89 to one for $296,686.89 by post-judgment order; also that (3) it was error for the district judge to compute interest on the judgment award as of January 3, 1984, the date on which Ward terminated its business relationship with Esquire.

Esquire responds that the spare parts and accounts receivable claims were properly submitted to the jury on either an implied or oral contract theory or a promissory estoppel theory; that the Statute of Frauds does not bar recovery; that the evidence regarding accounts receivable was sufficient; that the district court did not abuse its discretion in correcting a clerical error in the accounts receivable award; and that the date of repudiation was the appropriate date for accrual of pre-judgment interest.

We hold that the spare parts and accounts receivable claims were properly submitted to the jury on a promissory estoppel theory; that the evidence regarding accounts receivable was sufficient; that the amendment of the $269,689.89 award to $296,686.89 was within the district court's discretion; and that the appropriate date for accrual of pre-judgment interest under N.Y. Civ. Prac. Law ยง 5001 (McKinney 1963) is not the date of anticipatory repudiation but an intermediate date during the period in which the repudiated payments were due.

Judgment affirmed in part. Award of interest vacated and remanded.

BACKGROUND

Esquire is a Delaware corporation located in Brooklyn, New York that develops private brand consumer electronics products for sale by others. Ward is a national retail corporation with its principal place of business in Illinois and sells consumer electronics products. Both parties agree that their contractual relations at issue herein are governed by New York law.

Esquire and Ward were involved in a long-standing business relationship from 1958 until 1984. Initially, Esquire manufactured radios for sale by Ward under Ward trademarks. At that time, Esquire also manufactured radios for other major corporations, such as Sony and Panasonic. In the early 1960s, Ward's consumer electronics business expanded rapidly. During this time, consumer electronic products were increasingly manufactured in the Far East. Accordingly, Esquire's function on behalf of Ward shifted from primary manufacturing to providing "expertise to interface with foreign suppliers" and other technical, engineering, design and importing assistance. Products as to which Esquire had input in designing and developing were identified with model numbers preceded by the prefix "GEN." A tripartite product buy-back arrangement was instituted among Ward, Esquire and foreign manufacturers. The arrangement required Esquire to import and store finished consumer electronic products and spare parts for Ward's ultimate repurchase. Although certain import orders, purchase contracts, fee schedules and other incidents of the buy-back arrangement were reduced to writings in the normal course of business and introduced at trial, the terms of the actual buy-back arrangement itself were never reduced to a written document.

Testimony and documentary evidence adduced at trial showed, and the parties do not dispute herein, that under the buy-back arrangement, Ward, as retailer, would issue an import order to a foreign manufacturer and pay the F.O.B. costs thereof. The manufacturer would ship the ordered goods to Esquire, as per Ward's instructions on the import order. Esquire, nominally a middle-man vendor, would accept delivery of the goods and pay Ward the so-called "landed cost" of the shipment, which was the F.O.B. costs plus other importing-related expenses, including a 5% handling fee to a Ward trading company. If the goods shipped were finished products, then the initial import order would have been issued along with a contemporaneous purchase contract under which Ward committed to purchase the goods from Esquire. If the goods shipped were spare parts, then no such contemporaneous purchase contract would have been executed, although Ward and Esquire would enter into such a contract when Ward's retailing needs for such parts arose. In all other respects, the arrangement was the same for finished products as for spare parts. Upon delivery by Esquire to Ward of the finished products or spare parts, Ward would pay Esquire a set purchase price consisting of repayment of Esquire's "landed cost" on the goods plus a commission. The commission to Esquire from Ward varied from time to time. The last rate, set in 1978, was 4 7/8% on video goods and 11% on audio goods.

Esquire's long-term success in this arrangement depended upon the success of the "GEN" electronic models that it helped to design and import. During their business relationship over a period of at least twenty years, Ward paid Esquire the agreed commission on every GEN product imported. Esquire would not import products on its sole initiative; rather, it accepted delivery of GEN products only pursuant to Ward's import orders. Further, because of Esquire's role in Ward's strategic planning and product development, John Fisher, Ward's National Merchandise Manager, asked Esquire early in the 1960s to cease doing work for Ward competitors. Esquire ...


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