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GORODENSKY v. MITSUBISHI PULP SALES
March 31, 2000
HYMAN GORODENSKY, H & H WAREHOUSING CO., AND THE ESTATE OF HAROLD MURAWNIK, PLAINTIFFS,
MITSUBISHI PULP SALES (MC) INC., DEFENDANT.
The opinion of the court was delivered by: Miriam Goldman Cedarbaum, United States District Judge.
This is a breach of contract suit arising out of an alleged
failure to satisfy the obligations of a letter of intent.
Plaintiffs Hyman Gorodensky, H&H Warehousing Co. ("H&H"), and the
estate of Harold Murawnik attempted, unsuccessfully, to establish
a venture to build a manufacturing plant, operate the plant, and
sell its output. Plaintiffs claim that defendant Mitsubishi Pulp
Sales (MC) Inc. ("MPS") entered into a binding contract with them
by signing a letter of intent to purchase all of the output of
the proposed plant. The complaint alleges that MPS breached this
contract by repudiation shortly after it was signed, and that the
breach caused the venture to fail. Plaintiffs seek putative lost
profits and other consequential damages, as well as damages for
wasted time and effort invested in the project.
MPS moves for summary judgment on three grounds: first, that
the letter of intent was not a binding contract; second, that
even if a contract existed, it does not provide for lost profits
as a remedy; and third, that even if MPS breached a binding
contract, the breach did not cause plaintiffs' injuries.
Plaintiffs also move for summary judgment on three grounds:
first, that the letter of intent was a binding contract; second,
that MPS breached the contract; and third, that there is no
dispute as to the extent of plaintiffs' damages. At oral
argument of these motions, I denied plaintiffs' motion as to the
issues of breach and damages. I reserved decision on the issue
of the existence of a contract and as to the entirety of MPS'
motion. Because I find that there was no binding agreement
between plaintiffs and MPS, MPS' motion is granted and the
balance of plaintiffs' motion is denied.*fn1
Hyman Gorodensky is a citizen and resident of Montreal, Canada.
Prior to the transactions at issue in this case, Gorodensky's
business consisted mainly of the purchase and sale of recycled
materials, primarily textiles. Gorodensky was a partner, along
with Harold Murawnik, of H&H, a family partnership. MPS is a New
York corporation that is currently based in Chicago, Illinois.
MPS sells pulp manufactured by others to paper mills.
In early 1992, plaintiffs began to investigate the technical
and environmental feasibility of setting up a venture to
manufacture and sell deinked pulp. Plaintiffs owned two
commercial rental buildings in an industrial section of Montreal,
Canada. They proposed to convert these buildings into a facility
to manufacture deinked pulp. This interest stemmed from the fact
that, in 1991 and 1992, demand for pulp made from recycled
materials was growing because regulations in the United States
and Canada were increasingly requiring the use of recycled
materials in the manufacture of paper.
After making a preliminary determination that the project was
feasible, plaintiffs began to decline to renew tenants' leases in
the two Montreal buildings, or to renew leases only for limited
time periods. They also did not seek new tenants for those
buildings. Their purpose was to make the buildings available for
conversion to a pulp mill in the near future. In mid-1992,
plaintiffs retained Dick Engineering to prepare a feasibility
study of the proposed mill. The study, completed by September
1992, contains preliminary engineering design specifications,
proposed technology to be used, specifications of the pulp to be
produced, and estimated costs of the proposed facility.
After completion of the feasibility study, plaintiffs started
to contact potential sources of raw materials and various Quebec
governmental agencies. In March and April 1993, they obtained
written expressions of interest in supplying waste paper from
Perry S. Koplik & Sons, Inc. and D. Benedetto, Inc. Although
plaintiffs' business plan described these letters as "letters of
intent," Gorodensky testified that this was an error and that he
never considered these letters as binding. Plaintiffs never
entered into a contract with a supplier of waste paper.
Plaintiffs also received a letter in March 1993 from the
Societe de Development Industriel Du Quebec ("SDI"), the economic
development agency of the government of Quebec. The letter
suggested that SDI might guarantee 50% of the possible loss a
lender could incur in the project, dependent upon further review
of plaintiffs' business plan and discussions with other
government officials. Plaintiffs never forwarded a copy of their
business plan to SDI or formally applied for a loan guarantee.
After completion of the feasibility study, plaintiffs met with
Ted Homa, a marketing manager of Mitsubishi Canada Ltd. ("MCL")
to discuss whether MCL would be interested in participating in
the deinked pulp mill project. By March 15, 1993, MCL informed
plaintiffs that it was interested in being a "turnkey contractor"
for the project, meaning that it would build the pulp mill to
agreed-upon specifications for a fixed price. However, MCL stated
that it was not interested in operating or otherwise having a
continuing investment or involvement in the pulp mill project.
MCL's interest in the project was contingent on the securing of
suitable financing by plaintiffs. In response to a request by
plaintiffs, MCL provided a letter in July 1993 stating that MCL
was interested in being the turnkey contractor for the project if
plaintiff were able to secure term or project financing.
In early 1993, MCL contacted MPS to determine whether MPS would
be interested in selling the output of the proposed pulp plant.
MPS was enthusiastic about the project because MPS did not handle
deinked pulp and wished to add a recycled product to its product
The Letter of Intent states that MPS "inten[ds] to enter into a
contract" for the "exclusive right and obligation" to purchase
and sell the entire output of plaintiffs' plant for five years,
"conditional on the output of the facility" meeting certain
specifications outlined in the letter. The letter states that
pulp would be "competitively priced, on a calendar monthly and
quarterly basis, at levels mutually agreed upon." The letter
does not state whether MPS would receive a commission for its
sales or how the price paid by MPS for the plant's pulp would be
determined. The letter concludes by stating that MPS is "looking
forward to entering into detailed ...
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