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CLIFFSTAR CORP. v. RIVERBEND PRODUCTS

November 15, 1990

CLIFFSTAR CORPORATION, PLAINTIFF,
v.
RIVERBEND PRODUCTS, INC., DEFENDANT.



The opinion of the court was delivered by: Curtin, District Judge.

BACKGROUND

There are two disputes at issue in this case. Plaintiff Cliffstar Corporation ("Cliffstar") has moved for summary judgment on its claimed loss from partial delivery of an order of 3.2 million pounds of tomato paste. Defendant Riverbend Products, Inc. ("Riverbend") has cross-moved for summary judgment for payment on its delivery to Cliffstar of ten boxcars of lemon concentrate and also for payment on the tomato paste it actually delivered to Cliffstar.

FACTS

I.  TOMATO PASTE CONTRACT

Riverbend processes and sells tomato paste and frozen citrus products. It has processing plants in Visalia, California and Yuma, Arizona. Item 28, at 1.

On July 14, 1988, Cliffstar ordered 3.2 million pounds of tomato paste from Riverbend. Item 1, Ex. A (Purchase Order No. 100011). In the same order, Cliffstar attempted to purchase an option on an additional 500,000 pounds of paste. Delivery of the paste was to be spread over the following year, until June 30, 1989. Riverbend accepted the order in writing on July 25, 1988. Item 1, Ex. B. Dale Seal, Riverbend's Director of Sales, rejected Cliffstar's requested option, however, writing: "at this time I am unable to give any options for any additional quantities due to the uncertainty of the incoming tonnage. I will keep you advised as the season progresses." Id.

Between October and December 1987, Riverbend had forecast sales for the 1988 tomato crop of approximately 53 million pounds of tomato paste. Item 32, at 4. In January and February of 1988, Riverbend's field department contracted with growers in Arizona and California to supply 170,000 tons of raw tomatoes. Id. at 5. The field department also projected purchasing additional tons of raw tomatoes on the spot market. Id. at 5-6. By combining firm contracts with spot buys, Riverbend planned to acquire sufficient numbers of raw tomatoes to support its sales forecast. Thereafter, Riverbend received oral and written orders for approximately 78 million pounds of tomato paste. Id. at 6. It remains disputed, however, whether Riverbend accepted these orders, and thus entered into contracts to supply this amount. Compare id. at 6 (citing Seal EBT at 24-26, Seal affidavit ¶ 10) with Item 28, at 2 (citing Seal EBT). See also Item 38, at 5-10 (arguing at length that Seal EBT and affidavit are not in contradiction).

About the time the Cliffstar-Riverbend contract was formed, and into the early fall, a shortage developed in the tomato crop in Arizona and California. Weather conditions in Arizona caused the crop, normally harvested over an eight to nine week stretch in June and July, to "bunch" (i.e., ripen at the same time), and thus last only five to six weeks from June 1 until mid-July. Item 32, at 7. The California crop experienced similar bunching, causing an accelerated harvest concluding in late September. Id. When the harvest is accelerated in this fashion, processors cannot process all of the crop as it becomes ready and growers are forced to plow under some of the crop, thus creating a shortage.

The combined 1988 Arizona and California tomato harvest was about 8.45%, less than early season estimates. However, Riverbend's contract growers delivered only 95-100,000 tons of the 170,000 tons of tomatoes Riverbend had contracted for, or about 56-58%. Item 32, at 6. Shortages developed in other parts of the country as well. See Item 34, Ex. RB-28. Riverbend became aware of the Arizona shortage by August 1, 1988, and of the California shortage in September, 1988, when its processing plants had completed canning the shortened supply.

Based on the shortages it was experiencing, Riverbend failed to deliver the 3.2 million pounds of paste. Instead, Riverbend chose to allocate its available supply among its customers. Riverbend first notified Cliffstar by letter of September 27, 1988, that all contracts would have to be reevaluated. Item 34, Ex. RB-5.*fn1 Riverbend notified Cliffstar by letter of November 21, 1988, that Cliffstar would be allocated one million pounds of paste. Item 34, Ex. RB-7. Riverbend did not allocate to each of its customers an equal percentage of their orders.

Between November 21, 1988, and January 23, 1989, Riverbend and Cliffstar engaged in oral and written settlement-modification negotiations. The parties dispute whether Cliffstar agreed to an allocation, or otherwise modified the initial contract with Riverbend. In any event, Riverbend delivered substantially less than one million pounds of paste to Cliffstar. Cliffstar demanded its full contract amount and this lawsuit ensued.

II. LEMON CONCENTRATE CONTRACT

There are no disputed facts here. In July, 1988, Cliffstar ordered 127,817.89 pounds of lemon concentrate from Riverbend. The concentrate was delivered on December 29, 1988, and January 4, 1989. The total price of the concentrate was $249,244.88.

Cliffstar essentially admits these facts. See Item 7. It merely asserts in defense that it is entitled to offset the cost of these shipments against its claim for non-delivery of the tomato paste either under N.Y.U.C.C. Law § 2-717 (McKinney 1964) or under state law.

DISCUSSION

I.  PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT ON THE TOMATO PASTE
    CONTRACT

Plaintiff Cliffstar has moved for summary judgment. In order to prevail on its motion, Cliffstar must show "that there is no genuine issue as to any material fact and that [it] is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A material fact is one "that might affect the outcome of the suit under the governing law. . . ." Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The court "must resolve all ambiguities and draw all reasonable inferences in favor of the party defending against the motion." Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir. 1985), cert. denied, 484 U.S. 918, 108 S.Ct. 269, 98 L.Ed.2d 226 (1987). "Uncertainty as to the true state of any material fact defeats the motion." United States v. One Tintoretto Painting, 691 F.2d 603, 606 (2d Cir. 1982) (citation omitted).

A. N.Y.U.C.C. § 2-615

Plaintiff bases its cause of action on the fact that (1) it ordered 3.2 million pounds of tomato paste on July 14, 1988 for delivery over the next year, (2) this order was accepted by defendant on July 25, 1988, and (3) the tomato paste was not forthcoming. Riverbend defends under N.Y.U.C.C. Law § 2-615 (McKinney 1964), which provides:

    Except so far as a seller may have assumed a
  greater obligation and subject to the preceding
  section on substituted performance:
  (a) Delay in delivery or non-delivery in whole or
    in part by a seller who complies with paragraphs
    (b) and (c) is not a breach of his duty under a
    contract for sale if performance as agreed has
    been made impracticable by the occurrence of a
    contingency the non-occurrence of which was a
    basic assumption on which the contract was made..
  (b) Where the causes mentioned in paragraph (a)
    affect only a part of the seller's capacity to
    perform, he must allocate production and
    deliveries among his customers but may at his
    option include regular customers not then under
    contract as well as his own requirements for
    further ...

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