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Trebor Sportswear Co. v. Limited Stores Inc.

decided: January 12, 1989.

TREBOR SPORTSWEAR CO., INC. AND ROTANO SPORTSWEAR CO., INC., PLAINTIFFS-APPELLANTS,
v.
THE LIMITED STORES, INC., DEFENDANT-APPELLEE



Appeal from a judgment entered in the United States District Court for the Southern District of New York, Charles L. Brieant, Chief Judge, which granted appellee's motion for summary judgment and dismissed appellants' amended complaint, and which granted appellee's motion for summary judgment with respect to appellee's counterclaims.

Oakes, Kearse, and Pierce, Circuit Judges. Oakes, Circuit Judge (dissenting).

Author: Pierce

PIERCE, Circuit Judge:

Appellants Trebor Sportswear Co., Inc. ("Trebor") and Rotano Sportswear Co., Inc. ("Rotano") appeal from a judgment entered January 26, 1988 in the United States District Court for the Southern District of New York, Charles L. Brieant, Chief Judge, which granted the motion of appellee The Limited Stores, Inc. ("The Limited") for summary judgment and dismissed appellants' claims for damages for breach of contract, and which granted appellee's motion for summary judgment on its counterclaims for payment for goods delivered to appellants. The district court granted summary judgment and dismissed the amended complaint on the grounds, first, that the evidence of an agreement proffered by appellants Trebor and Rotano was insufficient to establish an enforceable contract under the statute of frauds, N.Y.U.C.C. ยง 2-201, and, second, that the evidence was inadmissible under Federal Rule of Evidence 408. For the reasons stated below, we affirm.

BACKGROUND

The Limited is a distributor and vendor of women's apparel, incorporated in Delaware. Apparel that firms such as The Limited seek to dispose of in the secondary market is referred to in the industry as "sell-off" merchandise. Trebor and Rotano bought and distributed sell-off merchandise. In late 1985 or early 1986 Trebor entered into the first of several agreements to purchase women's apparel from The Limited. Prior to the delivery of most, if not all, shipments, The Limited sent Trebor an invoice expressly stating that payment was "due upon receipt." Nevertheless, Trebor generally did not pay for the goods upon receipt of the invoice, nor, in fact, did Trebor usually pay for the goods upon delivery of the merchandise itself, which typically arrived thirty days after receipt of the invoice. In some instances, payment followed receipt of the invoice by more than sixty days.

Beginning in the spring of 1987, Rotano, a New York corporation affiliated with Trebor, agreed to purchase women's apparel from Limited Express, a division of The Limited. Appellants claim that Rotano, like Trebor, customarily paid its bills at some point after receipt of its merchandise.

Appellants allege that in February 1987 The Limited offered Trebor and Rotano, and that they accepted, a "right of first refusal" with respect to approximately $10,000,000 worth of women's apparel. It appears, however, that this alleged agreement was never reduced to a contemporaneous writing.

According to The Limited, by the end of June 1987, Trebor and Rotano were delinquent on their outstanding invoices. Trebor and Rotano claim that on July 7, 1987, The Limited nevertheless issued to Trebor four additional invoices totaling $4,303,638.75, and that two days later, on July 9, The Limited issued to Rotano seven additional invoices totaling $1,931,487. The merchandise had apparently not yet been delivered when on July 17, 1987, representatives of The Limited met with representatives of Trebor and Rotano and informed them that no further merchandise would be forthcoming from The Limited until payment was received for the merchandise already delivered, and that any further merchandise they purchased would have to be paid for upon receipt of the goods. Trebor and Rotano on the same day agreed to pay The Limited $2,002,923; approximately $1.3 million of that July 17 payment was for earlier amounts owed The Limited, and the remaining $700,000 was paid "on account," to be credited towards the merchandise from the July invoices (all of which apparently was delivered to Trebor and Rotano). Trebor subsequently paid a further $500,000 "on account" while this litigation was pending. Thus, of the merchandise delivered on the July invoices, which cost approximately $6.2 million, Trebor and Rotano owed approximately $5 million, plus interest, at the time of the district court's judgment.

The Limited's July 17 demand for payment had almost immediate repercussions. Four months earlier, Rotano had received goods worth $423,102.75 from Limited Express. Rotano had paid $171,321.50 of that amount by a check to Limited Express dated July 2, 1987, but in the wake of the July 17 meeting with The Limited, Rotano stopped payment on the check on or about July 23, 1987.

Approximately seven days later, William K. Gerber, the vice president and controller of The Limited, sent a cover letter and draft agreement (the "July 30 Documents") to Robert Falus, president of Trebor and Rotano. In relevant part the letter stated:

Enclosed is a draft agreement between our companies that can resolve the current issues and allow us to go forward with our business relationship.

We believe the proposal is fair, and your prompt attention is requested. Please approve the agreement and return one copy to me so that we may move forward.

Robert, we must resolve this issue without further delay. I must emphasize that failure to reach an agreement or at least bargin [sic] in good faith, will leave The Limited with no alternative other than immediate legal action.

The draft agreement read as follows:

AGREEMENT FOR MERCHANDISE SHIPMENT AND PAYMENT BETWEEN THE LIMITED STORES, INC. AND

TREBOR SPORTSWEAR CO., INC.

ROTANO SPORTSWEAR CO., INC.

* The parties agree that it is their mutual desire to continue the business relationship.

* TREBOR and ROTANO have purchased certain merchandise from The Limited Stores, Inc.

* TREBOR has received (subject to final quantity verification) merchandise valued at $4,303,638.75, against which $500,000 has been credited as partial payment. The balance currently outstanding is $3,803,638.75. (See attachment A).

* ROTANO has received (subject to final quantity verification) merchandise valued at $1,931,487.00, against which $200,000 has been credited as partial payment. The balance currently outstanding is $1,731,487.00. (See attachment B).

* The Limited Stores has remaining merchandise not yet shipped to TREBOR and ROTANO in the following ...


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