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UTICA ALLOYS, INC. v. ALCOA INC.

April 1, 2004.

UTICA ALLOYS, INC. Plaintiff, -vs- ALCOA INC., Defendant


The opinion of the court was delivered by: DAVID HURD, District Judge

MEMORANDUM-DECISION and ORDER

I. BACKGROUND

  The facts of this case were adequately set forth in Utica Alloys, Inc. v. Alcoa Inc., ___ F. Supp.2d ___, available at 2004 WL 226157 (N.D.N.Y. Jan. 28, 2004), and will not be repeated here. Page 2

  In the Memorandum-Decision and Order, summary judgment was granted in favor of defendant Alcoa Inc. ("Alcoa") on its breach of contract counterclaim, and against plaintiff Utica Alloys' ("Utica Alloys"), the quantum meruit and unjust enrichment claims of which were dismissed. (Docket No. 32.) In the decision, it was held that Alcoa's measure of damages would be the difference, calculated for each of February, March, and April of 2002, between the per pound purchase agreement price of the scrap shipped by Alcoa and received by Utica Alloys, and the fair market value of unprocessed scrap. The parties were directed to submit materials relevant to the following three inquiries: (1) the amount, in pounds, of scrap shipped by Alcoa and received by Utica Alloys in each of the three months; (2) the per pound purchase agreement price for the scrap shipped and received in each of the three months; and (3) the fair market value of unprocessed scrap during each of the three months. On February 24, 2004, Alcoa submitted its verified application for damages, along with exhibits. (Docket No. 33.) On March 18, 2004, Utica Alloys submitted written opposition, along with exhibits, to such application. (Docket No. 34.)

 II. DISCUSSION

  A. Amount of Scrap Shipped During Operative Months

  The parties do not appear to dispute the amount of scrap shipped by Alcoa and received by Utica Alloys in each of February, March, and April of 2002. In February of 2002, Alcoa shipped and Utica Alloys received 147,797 pounds of scrap turnings and 7,019 pounds of scrap solids. In March of 2002, Alcoa shipped and Utica Alloys received 68,705 pounds of scrap turnings. Finally, in April of 2002, Alcoa shipped and Utica Alloys received 211,041 pounds of scrap turnings. Page 3

  Alcoa, however, is also demanding damages for "123,480 pounds of scrap turnings, generated in April 2002, that it held and allegedly did not ship to Utica [Alloys] due to Utica[] [Alloys'] failure to pay contract terms." (Docket No. 33, ¶ 4.) This demand is rejected. Alcoa has submitted no evidence that Utica Alloys was aware of this scrap, neither during April nor during this litigation. Utica Alloys will not be penalized for that decision.

  Furthermore, under the purchase agreement, Utica Alloys has the option of inspecting shipped scrap upon receipt for "non-conformance," the finding of which would result in a discount of the purchase agreement price. (Docket No. 34, Purchase Agreement, attached.) Alcoa has submitted no evidence of the unshipped scrap's chemistries, to enable a determination by Utica Alloys as to its conformity. Any damages award for the unshipped scrap, aside from undercutting the basis of Alcoa's breach of contract claim — that it continued to operate under the purchase agreement, which required it to ship all scrap to Utica Alloys — would be entirely speculative and unduly punitive to Utica Alloys.

  B. Per Pound Purchase Agreement Price During Operative Months

  The parties also do not appear to dispute the monthly per pound purchase agreement price for the scrap Alcoa shipped and Utica Alloys received. With respect to the scrap shipped and received in February, the agreement price was $1.538 per pound for the scrap turnings, and $1.688 per pound for the scrap solids. With respect to the scrap turnings shipped and received in March, the agreement price was $1.535 per pound. With respect to the scrap turnings shipped and received in April, the agreement price was $1.630 per pound.

  C. Fair Market Value of Unprocessed Scrap During Operative Months

  One area in which the parties do not agree is the fair market value of unprocessed scrap during each of February, March, and April of 2002. Alcoa purports to derive such value Page 4 from two e-mails, dated March 12, 2002, and April 30, 2002, sent by Utica Alloys Vice President Anthony Marino ("Marino") to Alcoa representative Douglas O'Leary ("O'Leary"), in which Marino offered to pay Alcoa $0.91 and $1.03, respectively, per pound of scrap. According to Alcoa, therefore, the fair market value for unprocessed scrap in February and March was $0.91 per pound, and $1.03 per pound in April. (Docket No. 33, ¶¶ 5, 7.)

  Utica Alloys, on the other hand, purports to derive the fair market value of unprocessed scrap for the three months from, essentially, three separate sales of processed scrap that occurred in April and May of 2002. Specifically, it points out that all the scrap shipped and received during February, March, and April was eventually sold in May to high bidder Keywell, L.L.C. ("Keywell"), for $1.17 per pound, a price that Utica Alloys contends "is conclusive as to the floor of [the fair market] [v]alue." (Docket No. 34, ¶ 3A.) However, because like it Keywell was a "`middle man,' not an `end user'" — i.e., Keywell processes scrap and determines it chemistries before reselling it to an end user — Utica Alloys argues that even the $1.17 per pound price is insufficient to determine fair market value of unprocessed scrap, Id. at ¶ 3C. Instead, according to Utica Alloys, the fair market value of unprocessed scrap should be determined from a May of 2002 ...


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