terms of an otherwise incomplete written agreement, where the proposed additional term contradicts the terms of the written agreement. See U.S. West, 786 F. Supp. at 342. The written termination clause at issue here provides that either party may terminate the other upon twelve months written notice. It contains no limitations on the circumstances under which either party may elect to terminate the agreement. The alleged oral agreement would limit the circumstances under which Santa Carolina could terminate the parties' contract. Therefore, the alleged oral agreement contradicts the written termination clause.
If, on the other hand, we were to conclude that the 1991 written agreement is integrated, we could consider parol evidence only as an aid in interpreting an ambiguous provision in the written agreement. See Garza, 861 F.2d at 27. A contract provision is ambiguous "when it is capable of more than a single meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Garza, 861 F.2d at 27 (internal quotation omitted). It is clear from a reading of the written termination clause that it has only one reasonable meaning: that either party could terminate the 1991 agreement, subject only to the requirement that the terminating party provide twelve months written notice. The written termination provision is therefore unambiguous, and we may not consider parol evidence as an aid to its interpretation.
Because the termination clause contained in the 1991 written agreement permitted Santa Carolina to terminate Victori at will upon twelve months written notice, Santa Carolina did not breach the parties' contract by giving plaintiff written notice of termination by letter dated May 16, 1995. Therefore, Santa Carolina is entitled to summary judgment dismissing plaintiff's claim for breach of contract, and plaintiff's cross-motion for summary judgment on this claim is denied.
B. Breach of Implied Covenant of Good Faith
Under New York law, every contract contains an implied covenant of good faith and fair dealing. See Alco Standard Corp. v. Schmid Bros., Inc., 647 F. Supp. 4, 7 (S.D.N.Y. 1986). Plaintiff asserts that Santa Carolina breached this implied covenant by terminating the parties' contract. Santa Carolina seeks summary judgment dismissing this claim.
The New York courts apply this good faith requirement only to "'the exercise of obligations which parties owe to each other during the term of a contract.'" Id. (quoting Niagara Mohawk, 470 F. Supp. at 1316); see Lake Erie Distributors, Inc. v. Martlet Importing Co., 221 A.D.2d 954, 634 N.Y.S.2d 599, 602 (App. Div. 1995). Where a termination clause permits the parties to terminate an agreement at will on twelve months written notice, the courts do not "qualify an otherwise absolute power to terminate by requiring termination to be in good faith." Alco, 647 F. Supp. at 7 (internal quotation omitted). In short, a termination clause like the one at issue in this case "contains no implied requirement that it must be exercised in good faith." Id.
Accordingly, Santa Carolina is entitled to summary judgment dismissing this claim.
C. Promissory Estoppel
On September 28, 1994, Umbach presented two proposed promotion and distribution plans to Jaramillo and Billikopf. Plaintiff has alleged that during that meeting, Jaramillo promised that Santa Carolina would not terminate the parties' contract until after the completion of whichever promotional plan Santa Carolina selected. Santa Carolina subsequently chose Program B, which contained sales projections for 1995, 1996 and 1997. See Exhibit B, attached to Jaramillo Aff. Plaintiff alleges that in reliance on Jaramillo's promise, it incurred substantial expenses, above and beyond its obligations under the 1991 written agreement, that were necessary to achieve the long-term sales goals set by Program B. Plaintiff asserts that Jaramillo's alleged promise is enforceable under theory of promissory estoppel.
Santa Carolina seeks summary judgment dismissing this claim.
Under New York law, "a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee, and which does induce such action or forbearance, is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise." D & N Boening Inc. v. Kirsch Beverages, Inc, 99 A.D.2d 522, 471 N.Y.S.2d 299, 302 (App. Div.), aff'd, 63 N.Y.2d 449, 483 N.Y.S.2d 164, 472 N.E.2d 992 (N.Y. 1984). The New York courts have approached this doctrine with caution, however, and its application is limited to the class of cases in which it would be unconscionable not to enforce the alleged oral promise. See id.
This case does not fall within that limited class. Assuming for the sake of argument that Jaramillo made the alleged oral promise, plaintiff is hardly left high and dry if that promise is not enforced. Under the 1991 written agreement, plaintiff has the twelve-month period following notice of termination in which to find another supplier. Plaintiff bargained for this protection and, indeed, repeatedly asserted in February and March 1995 that the 1991 written agreement that contained this provision governed the parties' relationship. See Exhibits F, G, H, L, M, attached to Jaramillo Aff. (letters from Umbach to Santa Carolina personnel). Plaintiff's correspondence reveals that it was aware of the risk of making long-term commitments while it was operating under the 1991 agreement. See Exhibit F, attached to Jaramillo Aff. (letter from Umbach to Jaramillo proposing contract with five-year term and discussing need for Victori to make long-term commitments to shippers and retail outlets). Apparently, plaintiff chose to accept that risk, as it allegedly made expenditures that it was not obligated to make under the 1991 agreement in order to achieve long-term United States sales growth for itself and for Santa Carolina.
Cf. D & N Boening, 471 N.Y.S.2d at 302. Under these circumstances, we do not believe that plaintiff's alleged injury is so egregious that it would be unconscionable not to enforce Jaramillo's oral promise.
Therefore, Santa Carolina's motion for summary judgment dismissing plaintiff's claim for promissory estoppel is granted.
Finally, plaintiff has alleged that Santa Carolina committed common law fraud by falsely representing that it would not terminate the parties' contract prior to the conclusion of Program B and that it was not seeking a United States distributor to replace Victori. In order to prove common law fraud, plaintiff must demonstrate "(1) that there was a material, false representation, (2) made with knowledge of its falsity, and (3) an intent to defraud (4) that plaintiff reasonably relied on, (5) causing the plaintiff damage." Kregos v. Associated Press, 3 F.3d 656, 665 (2d Cir. 1993), cert. denied, 510 U.S. 1112, 127 L. Ed. 2d 376, 114 S. Ct. 1056 (1994). Plaintiff must establish that Santa Carolina made the misrepresentations at issue with the present intention of deceiving plaintiff; mere representations of future intention that were not knowingly false when made are not sufficient to support a claim for common law fraud. See Sanyo Electric, Inc. v. Pinros & Gar Corp., 174 A.D.2d 452, 571 N.Y.S.2d 237, 238 (App. Div. 1991). Santa Carolina seeks summary judgment dismissing this claim.
Santa Carolina argues that there is no evidence from which a reasonable jury could conclude that it made any misrepresentations with the present intention of deceiving plaintiff. We are not persuaded. First, plaintiff has demonstrated that a question of fact exists regarding whether Santa Carolina represented that it would not exercise its termination rights under the 1991 distribution agreement until after the completion of Program B. Plaintiff asserts that on September 28, 1994, during the meeting at which Umbach presented two promotional proposals to Jaramillo and Billikopf, Jaramillo represented that Santa Carolina would not terminate the parties' relationship until the completion of whichever program Santa Carolina selected. See Affidavit of John Umbach, dated Oct. 16, 1995, at P 26. Jaramillo has denied making this statement.
See Jaramillo Aff., at P 14. We must leave to the jury the question of which individual's testimony is more credible.
Second, plaintiff has demonstrated that a question of fact exists concerning whether Santa Carolina represented to plaintiff that it was not meeting with other distributors. Plaintiff has asserted that on several occasions between October 1994 and January 1995, Jaramillo and Billikopf gave him verbal assurances that Santa Carolina was not meeting with other United States distributors about any matters that related to Victori's exclusive distributorship. See Umbach Aff., at P 31. Furthermore, on February 7, 1995, Besanceney faxed a letter to Umbach in response to his inquiry concerning rumors that Santa Carolina was talking other distributors. In that letter, Besanceney stated that Jaramillo, who was out of the office at the time, had asked her to respond that "Santa Carolina will continue its long relationship with Joseph Victori Wines" and that Jaramillo had no information about meetings that Correa was attending in the United States. See Exhibit E, attached to Jaramillo Aff. Jaramillo has stated that he asked Besanceney to relay to Umbach only the true statement that Santa Carolina had made no decision to terminate its contract with Victori and that the parties' relationship was continuing. See Jaramillo Aff., at P 17.
Furthermore, plaintiff asserts that Santa Carolina made these representations with a present intention to deceive plaintiff because Santa Carolina planned, throughout this time period, to replace Victori with another United States distributor. Plaintiff points out that Jaramillo and other Santa Carolina employees began meeting with other United States distributors on September 29, 1994--only one day after Jaramillo allegedly represented to plaintiff that Santa Carolina would not terminate its relationship with plaintiff until Program B was completed. Plaintiff has also submitted correspondence that indicates that Correa and Jaramillo were planning to attend, together, meetings with other United States distributors on February 6 and 7, 1995. See Exhibit K, attached to Umbach Aff. Nevertheless, Besanceney's letter dated February 7, 1995, informed Umbach that Jaramillo had no information about the meetings that Correa was attending in the United States. Based on this evidence, a reasonable jury could conclude that Santa Carolina made material, false representations with a present intention to deceive plaintiff, or it could reach the opposite result. We cannot resolve these disputed questions of fact on summary judgment.
Santa Carolina next argues that plaintiff's common law fraud claim must be dismissed because plaintiff was contractually obligated, rather than fraudulently induced, to make any expenditures that it incurred in promoting Santa Carolina's wines. Under New York law, plaintiff "cannot be induced to tender a performance which is required as a part of a preexisting contractual obligation." Megaris Furs, Inc. v. Gimbel Bros., Inc., 172 A.D.2d 209, 568 N.Y.S.2d 581, 584 (App. Div. 1991). Plaintiff does not disagree with this statement of the law. It contends, however, that in reliance on Santa Carolina's representations, it expended approximately $ 350,000 more than it was obligated to spend under the 1991 distribution agreement in order to achieve the three-year sales goal set in Program B. Plaintiff asserts that beginning in mid-October 1994, it incurred these expenses by increasing advertising, promotional efforts and credits to purchasers of Santa Carolina wines, by selling Santa Carolina wines at no profit or at a loss in order to open up new markets, by hiring additional personnel and by foregoing other business opportunities.
Santa Carolina contends that the 1991 agreement obligated plaintiff to use its best efforts to promote Santa Carolina wines and that any expenditures that it made were therefore required under the 1991 agreement. Contrary to Santa Carolina's assertion, however, the 1991 agreement does not obligate plaintiff to use its best efforts to promote Santa Carolina wines. Instead, it states that Victori will promote Santa Carolina's products in accordance with its then-current practice and will pay half of the agreed-upon advertising and promotional budget. See Exhibit A, attached to Jaramillo Aff. Victori's half of the 1995 advertising and promotion budget was only $ 32,000. See Exhibit C, attached to Jaramillo Aff. We have no information at this time about the parties' 1994 advertising and promotion budget or about the level of spending associated with Victori's usual practice in promoting Santa Carolina's wines. Therefore, we cannot determine whether Victori's obligations under the 1991 agreement required it to spend any or all of the approximately $ 350,000 that plaintiff contends it spent promoting Santa Carolina wines after Santa Carolina selected Program B on October 13, 1994.
Santa Carolina also contends that after April 10, 1995, plaintiff could not, as a matter of law, have reasonably relied on the alleged representations that Santa Carolina was not meeting with other United States distributors and that it would not terminate Victori until after the completion of Program B. We agree. On that date, Jaramillo, Correa and Umbach met in New York, and Jaramillo and Correa informed Umbach that Santa Carolina was considering engaging another United States distributor and that it would not agree to sign a new contract. See Jaramillo Aff., at PP 27-28. Although Umbach asserts that Jaramillo and Correa downplayed the likelihood of Santa Carolina deciding to change distributors, he does not dispute that he was told of that possibility. See Umbach Aff., at PP 43-44. Any reliance that he placed on the alleged misrepresentations after he received that information was clearly unreasonable as a matter of law.
Therefore, Santa Carolina's motion for summary judgment dismissing plaintiff's common law fraud claim is granted with respect to alleged reliance after April 10, 1995, but is otherwise denied.
Santa Carolina has also made a motion under Rule 9(b) seeking dismissal of plaintiff's common law fraud claim for failure to plead fraud with particularity. Under Rule 9(b), plaintiff must "state precisely what material misstatements were made, the time and place of each misstatement, the speaker, the content, the manner in which the statement was misleading, and what the defendants 'obtained' as a result of the fraud." Morin v. Trupin, 823 F. Supp. 201, 205 (S.D.N.Y. 1993). The complaint in this case satisfies several of these requirements, as it sets forth the content of the alleged misstatements, states the time and place of some of them, describes how they were misleading and explains what Santa Carolina allegedly obtained as a result of the misstatements. The complaint does not, however, contain allegations specifically setting forth all of the misstatements to which plaintiff refers in its motion papers. Compare Complaint, at P 28(b) with Umbach Aff., at P 31. It also fails to identify the speaker of any of the misstatements.
Nonetheless, Santa Carolina has already filed a responsive pleading and, as is evident from the discussion above, document discovery and the testimony in Umbach's affidavit have already fleshed out plaintiff's allegations. Dismissing plaintiff's fraud claim or requiring plaintiff to file an amended complaint at this point in order to correct relatively minor deficiencies in the pleading would merely be an inefficient, overly technical exercise. Therefore, Santa Carolina's motion under Rule 9(b) is denied.
II. Santa Carolina's Counterclaim
Finally, Santa Carolina seeks summary judgment on its counterclaim for a declaratory judgment that the 1991 agreement terminated on May 16, 1996. The parties do not dispute that Santa Carolina gave plaintiff written notice of termination by letter dated May 16, 1995 and sent the following day. See Exhibit P, attached to Jaramillo Aff; Jaramillo Aff., at P 31. Umbach has acknowledged that plaintiff received that letter on or about May 17, 1995. See Umbach Aff., at P 37. The termination clause in the 1991 written agreement, which we have concluded may not be varied or contradicted by the introduction of parol evidence, provides that the agreement is terminable on twelve months written notice. Therefore, the 1991 agreement between Santa Carolina and Victori terminated on May 17, 1996, and Santa Carolina is entitled to the entry of a declaratory judgment to that effect.
For the foregoing reasons, we grant Santa Carolina's motion for summary judgment dismissing plaintiff's claims for breach of contract, breach of the implied covenant of good faith and promissory estoppel. We deny plaintiff's cross-motion for summary judgment on its breach of contract claim. Santa Carolina's motion for summary judgment dismissing plaintiff's claim for common law fraud is granted with respect to alleged reliance after April 10, 1995, but is otherwise denied. We deny Santa Carolina's motion under Rule 9(b) to dismiss plaintiff's common law fraud claim for failure to plead fraud with particularity. Finally, we grant Santa Carolina's motion for summary judgment on its first counterclaim and enter a declaratory judgment that the 1991 agreement terminated on May 17, 1996.
Date: July 24, 1996
White Plains, New York
William C. Conner
Senior United States District Judge