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CRYSTALLINE H2O, INC. v. ORMINSKI

June 12, 2000

CRYSTALLINE H2O, INC., PLAINTIFF,
V.
EDWARD D. ORMINSKI AND WILLIAM A. KERR, JR., D/B/A ORTEC DEVELOPMENT GROUP, AND ORTEC DEVELOPMENT GROUP, INC., DEFENDANTS.



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

DECISION AND ORDER

The present dispute arises out of Plaintiff Crystalline H2O, Inc.'s ("Crystalline") discovery of an inexpensive and convenient product designed to sanitize swimming pools and its purported agreement with Defendants Edward Orminski, William Kerr, Jr., d/b/a Ortec Development Group and Ortec Development Group, Inc. (collectively "Defendants") to market and sell that product in the United States. In connection with that arrangement, Plaintiff, a start-up French Canadian corporation, apparently entered into a long-term marketing, sales and distribution agreement with Defendants, a New York sales and marketing professional corporation, which is the subject of the instant litigation.

I. Background

Plaintiff commenced the present action on August 19, 1999, seeking to void a 20-year marketing, sales and distribution agreement on the grounds that: (1) Daniele Henkel, Plaintiff's agent/consultant/business advisor/translator, had a conflict of interest at the time the contract was negotiated and executed (First Cause of Action), see Compl. at ¶¶ 32-35; (2) the contract is indefinite because it lacks essential elements with respect to the (i) financing of the marketing campaign and (ii) allocation of the cost of delivery and risk of loss once the product is shipped from Plaintiff's manufacturing site (Second Cause of Action), see id. at ¶¶ 36-40; and (3) the contract lacks mutuality of obligation because Defendants' obligation to purchase the Crystalline product is illusory (Third Cause of Action), see id. at ¶¶ 41-43. Plaintiff also alleges a claim of tradename infringement over Defendants' use of the name "Crystalline Pool Systems," and seeks to enjoin Defendants from using that name in connection with their business (Fourth Cause of Action), see id. at ¶¶ 44-56, and, if the Court does not void the contract, Plaintiff alleges a breach of contract claim based on Defendants' anticipatory repudiation of its obligation under the contract to purchase 300,000 units of Crystalline H2O (Fifth Cause of Action). See id. at ¶¶ 57-60. Presently before the Court is Plaintiff's motion for summary pursuant to FED. R. CIV. P. 56 with respect to the Second, Third, Fourth, and Fifth Causes of Action in the Complaint. See Notice of Motion at 1. Specifically, Plaintiff seeks a declaration that the October 30, 1997 agreement executed by the parties is void and unenforceable as a matter of law or, in the alternative, judgment in favor of Plaintiff on its breach of contract claim. Plaintiff also seeks injunctive relief enjoining Defendants from utilizing the "Crystalline Pool Systems" name in connection with its business.

In their Answer, Defendants raise numerous affirmative defenses and counterclaims to the Complaint. With respect to their affirmative defenses, Defendants allege that: (1) Henkel was not in a fiduciary relationship with Plaintiff and did not act in a "dual role" in her role in negotiating the October 1997 agreement (First Cause of Action), see Answer at ¶¶ 61-67; (2) the October 1997 agreement contained all of the essential terms and, thus, conveyed to Defendants the marketing, sales and distribution rights with respect Plaintiff's product (Second Cause of Action), see id. at ¶ 68; (3) if the October 1997 agreement is determined to be indefinite, parole evidence, e.g., trade usage and the parties prior business dealings, should be used to determine the meaning of the provisions of the agreement (Second Cause of Action),*fn1 see id. at ¶¶ 69-72; (4) the October 1997 agreement did not lack mutuality of obligation because it conveyed to Defendants the marketing, sales and distribution rights to Plaintiff's product in exchange for Defendants' "good faith" implementation of a marketing plan (Third Cause of Action), see id. at ¶¶ 73-74; (5) the parties agreed that Defendants' counsel would provide the necessary services "to protect the name of the product to be manufactured by Plaintiff and to be distributed by [D]efendant[s]" (Fourth Cause of Action), id. at ¶ 75; (6) Plaintiff failed to perform the conditions precedent to Defendants' performance under the agreement, i.e., "produce a product [that] was saleable in any location outside of Canada" (Fifth Cause of Action), id. at ¶¶ 80-81; (7) the time during which Defendants are required to perform under the agreement has not run in light of the approval requirements established by the U.S. Environmental Protection Agency ("EPA") (Fifth Cause of Action), see id. at ¶¶ 82-84; and (8) Defendants Orminski and Kerr never agreed to be personally liable for, or guarantee the performance of, Ortec's performance under the agreement. See id. at ¶¶ 85-89.

Defendants also raise numerous counterclaims to Plaintiff's claims and more specifically, the October 1997 agreement that is the basis of both the Complaint and Plaintiff's instant motion for summary judgment. Defendants' counterclaims include: (1) breach of contract, see id. at ¶¶ 90-95 (delivery of Crystalline product by Plaintiff and implementation of a marketing plan) and ¶¶ 113-23 (payment for marketing services performed by Defendants); (2) breach of contract implied in fact, see id. at ¶¶ 96-101 (delivery of Crystalline product by Plaintiff) and ¶¶ 131-35 (payment for marketing services performed by Defendants); (3) promissory estoppel, see id. at ¶¶ 102-06; (4) quantum meruit, see id. at ¶¶ 107-12 (payment for marketing services performed by Defendants in preparation of distributing Plaintiff's product); ¶¶ 124-30 (payment for other marketing consultation services performed by Defendants); and ¶¶ 149-53 (payment for services performed by Defendants in connection with registering Plaintiff's product with the EPA); (5) breach of implied contract for tradename protection, see id. at ¶¶ 136-42; and (6) breach of contract implied in fact for EPA registration services performed by Defendants, see id. at ¶¶ 143-48. In total, Defendants raise nine affirmative defenses and ten counterclaims in response to Plaintiff's five causes of action.

The Court assumes familiarity with the procedural and factual background set forth in its prior bench decision in this matter. See Crystalline H2O, Inc. v. Orminski, 99-CV-1311 bench decision dated December 13, 1999 ("Bench Decision") (attached to Notice of Motion at Ex. B). In that decision, the Court denied Defendants' motion to dismiss the Complaint pursuant to FED. R. CIV. P. 12(b)(6) and (7). See id. at 3-12.

II. Discussion

As a threshold matter, the parties dispute whether Defendants should be entitled to discovery before Plaintiff moves for summary judgment. Specifically, Defendants argue that Plaintiff's motion for summary judgment is premature in light of the fact that discovery has not yet commenced and the only submissions before the Court are the pleadings and the parties' affidavits. See Defs. Mem. of Law at 6-7; Affidavit of Matthew Mazur, Esq. ("Mazur Aff.") at ¶¶ 3-5. In his moving papers, Plaintiff generally argues that the absence of discovery is not a bar to entry of summary judgment in favor of Plaintiff because there are no disputed factual issues underlying Plaintiff's claims and Defendants' request for additional discovery is too speculative and irrelevant to the issues before the Court. See Pl. Mem. of Law at 6-8. Notably, Plaintiff does not dispute that discovery has not commenced and, moreover, does not address this issue in his reply papers. Accordingly, before considering the merits of the instant motion, the Court will first consider whether a grant of summary judgment is premature at this stage.

FED. R. CIV. P. 56(f), which addresses cases where a litigant opposing summary judgment requests additional discovery, provides:

Should it appear from the affidavits of a party opposing the motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment or may order a continuance to permit affidavits to be obtained or depositions to be taken or discovery to be had or may make such other order as is just.

FED. R. CIV. P. 56(f) (West 2000).

In connection with a motion made pursuant to Rule 56(f), the party opposing a motion for summary judgment generally must file an affidavit explaining: "1) the nature of the uncompleted discovery, i.e., what facts are sought and how they are to be obtained and 2) how those facts are reasonably expected to create a genuine issue of material fact; and 3) what efforts the affiant has made to obtain those facts; and 4) why those efforts were unsuccessful." Burlington Coat Factory Warehouse Corp. v. Esprit De Corp., 769 F.2d 919, 926 (2d Cir. 1985) ("Burlington"); see also Paddington Partners v. Bouchard, 34 F.3d 1132, 1138 (2d Cir. 1994); Hudson River Sloop Clearwater, Inc. v. Department of Navy, 891 F.2d 414, 422 (2d Cir. 1989). "[A] denial of access to relevant information weighs in favor of the party opposing a motion for summary judgment." Burlington, 769 F.2d at 925; see also McVan v. Bolco Athletic Co., 600 F. Supp. 375, 378 (E.D.Pa. 1984) ("Under many circumstances, parties seeking relief under Rule 56(f) should be granted that relief almost as a matter of course.") (quotation omitted).

There is a critical distinction, however, between cases where a litigant opposing a motion for summary judgment requests a stay of that motion to conduct additional discovery and cases where that same litigant opposes a motion for summary judgment on the ground that it is entitled to an opportunity to commence discovery with respect to Plaintiff's claims and its counterclaims. In the present case, the Court is faced with the latter scenario. This distinction was noted by the ...


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