United States District Court, S.D. New York
April 27, 2004.
TRADAX ENERGY, INC., Plaintiff, -against- CEDAR PETROCHEMICALS, INC., Defendant
The opinion of the court was delivered by: VICTOR MARRERO, District Judge
DECISION AND ORDER
In this contract dispute, one commodities trader, defendant Cedar
Petrochemicals, Inc. ("Cedar"), failed to deliver a certain shipment of
methanol to another commodities trader, plaintiff Tradax Energy, Inc.
("Tradax"). Primarily at issue in the parties' cross motions for summary
judgment is whether there is a genuine issue of fact to suggest that
Tradax had repudiated the contract, thereby relieving Cedar's obligation
to deliver the methanol. The Court concludes that, as a matter of law,
Tradax did not repudiate. Cedar's motion is therefore denied.
Tradax's motion is granted only in part, however, because certain
documents necessary to proving Tradax's damages are not admissible.
Because that evidence suffers from a relatively technical defect, the
Court will permit Tradax to supplement its submissions. I. BACKGROUND*fn1
In September 2002, Tradax contracted to purchase 10,000 barrels of
methanol from Cedar, to be delivered to Houston, Texas, on a specific
date sometime in January 2003, which Tradax would later specify, upon at
least five days' notice. Cedar refused to deliver the methanol, which
Tradax ultimately obtained from another source. By its summary judgment
motion, Tradax seeks to recover from Cedar $184,380, an amount equal to
the difference in the contract price and the price Tradax asserts it
actually paid for the methanol. Cedar's cross motion asserts that Tradax
repudiated the contract in a December 2002 phone call, and Cedar seeks
judgment in its favor. The legal effect of that phone call is the central
issue to both motions.
In the phone call at issue, which occurred sometime in December 2002,
Tradax president Walter Huybregts ("Huybregts") spoke with Cedar
bookkeeper Linda Plevrites ("Plevrites") regarding a certain Texas state
tax form. Plevrites's account of the phone call, which Huybregts
disputes, is as follows:
Q: This one telephone call that you had, who
called who? A: The phone rang, I answered. It was Tradax. Q:
Who at Tradax was on the phone?
A: I don't recall. He probably said his name, I
Q: It was a man? A: It was a man.
Q: And what exactly was said in this conversation
maybe first of all, how long
was the conversation you had?
A: Oh, three minutes.
Q: And what, to the best of your memory, exactly
was said in that conversation?
A: Well, I can't tell you exactly, but this man
asked for our Texas sales certificate, or
whatever it's called, the certificate relating
to sales tax. And I told him we didn't have it
yet to give to him. And he was very annoyed
because they needed it and I knew that we were
going to get it, we hoped soon, but I had no
idea. And, you know, he urging me to
get on the ball and et cetera, and said that if
we didn't get it if we didn't get it to
them, then they wouldn't pay us.
Q: Did he use those words?
Q: And did you tell him you would get it to him?
Q: Do you remember anything else about the
A: No. He wanted that certificate and I knew we
could get it to him at some point and told him
Q: Did the person at Tradax say he was cancelling
the contract any contract? A: No.
Q: Did he say he was repudiating any contract?
Q: Do you know at any time, in connection with any
contract Tradax and Cedar had, whether Tradax
refused to pay on a contract?
A: I'm not aware of any anything related
(Huybregts Decl. Ex. 16, at 25-27)
Plevrites immediately informed her supervisors of the conversation, and
Cedar asserts it then considered the contract cancelled. However, Cedar
never alerted Tradax that it (Cedar) considered the contract cancelled
until after Tradax e-mailed Cedar on January 7, 2003, to specify a
delivery date of January 13. On the same day as Tradax's email, Cedar's
president sent Tradax a letter indicating, for the first time, that Cedar
considered the contract to have been cancelled:
When you called our office the first time and
advised that you were not going to pay us for this
transaction unless we had a tax exemption
certificate, which we did not have, we viewed your
refusal to pay as an anticipatory breach of the
(Huybregts Decl. Ex. 13)
The sales tax certificate referenced in the phone call and Cedar's
letter does not directly relate to the contract at issue here. Under
Texas law, a seller may avoid charging a buyer the otherwise applicable
state sales tax if the buyer furnishes the seller with a Texas Resale Certificate, which states
that the items purchased are for resale. Tradax had previously sold
commodities to Cedar (the reverse of the transaction at issue here), and
Tradax wanted Cedar to fill out a Texas Resale Certificate to reflect
that Tradax acted lawfully in not charging Cedar sales tax for those
After her conversation with Huybregts, Plevrites filled out the
one-page Texas Resale Certificate form for Tradax and dated it December
15, 2002. For reasons which are unclear, Plevrites never obtained the
required signature from the proper Cedar official, nor did she mail the
form to Tradax.
II. SUMMARY JUDGMENT STANDARD
The Court may grant summary judgment only "if the pleadings,
depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as
a matter of law." Fed.R.Civ.P. 56(c). The Court must first look to
the substantive law of the action to determine which facts are material;
"[o]nly disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude the entry of summary
judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). Even if the parties dispute material facts, summary judgment will be granted unless the
dispute is "genuine," i.e., "there is sufficient evidence
favoring the nonmoving party for a jury to return a verdict for that
party." Id. at 249.
Where the moving party would bear the burden of persuasion at trial,
that party must first make a prima facie case by "support[ing]
its motion with credible evidence . . . that would entitle it to a
directed verdict if not controverted at trial." Celotex Corp. v.
Catrett, 477 U.S. 317, 331 (1986). Where the non-moving party would
bear the burden of persuasion at trial, the moving party can make its
prima facie case by either "submit[ting] affirmative evidence
that negates an essential element of the nonmoving party's claim" or
"demonstrat[ing] to the Court that the nonmoving party's evidence is
insufficient to establish an essential element" of the claim.
After such a prima facie showing, the non-moving party must
respond with "specific facts showing that there is a genuine issue for
trial." Fed.R.Civ.P. 56(e). To this end, "[t]he non-moving party may
not rely on mere conclusory allegations nor speculation, but instead must
offer some hard evidence showing that its version of the events is not
wholly fanciful." D'Amico. v. City of New York, 132 F.3d 145,
149 (2d Cir. 1998). In other words, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more
than simply show that there is some metaphysical doubt as to the material
facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986).
Throughout this inquiry, the Court must view the evidence in the light
most favorable to the non-moving party and must draw all inferences in
favor of that party. See Hanson v. McCaw Cellular Communications,
Inc., 77 F.3d 663, 667 (2d Cir. 1996).
As a threshold matter, the Court must determine which law to apply to
this diversity action. The contract at issue does not specify which law
to apply, and Tradax's brief asserts that it is entitled to judgment
under a straightforward application of the Uniform Commercial Code
("UCC"), the relevant provisions of which have been adopted in both Texas
and New York. Cedar does not appear to take a position on the choice of
law issue. The Court concludes that the dispute is governed by New York
To determine which law applies to this diversity action, this Court
applies the choice-of-law principles of the state in which the Court
resides: New York. See Klaxon Co. v. Stentor Electric Mfg. Co.,
313 U.S. 487, 496 (1941). Under New York law, the "`center of gravity' or
`grouping of contacts' choice of law theory applie[s] in contract cases." In re
Allstate Ins. Co. and Stolarz, 613 N.E.2d 936, 993 (N.Y. 1993). Five
key factors govern that determination: "the place of  contracting, 
negotiation and  performance; the  location of the subject matter
of the contract; and the  domicile of the contracting parties."
Id. at 940 (citing Restatement (Second) of Conflict of Laws
§ 188); see also Lazard Freres & Co. v. Protective Life Ins.
Co., 108 F.3d 1531, 1538-39 (2d Cir. 1997).
Tradax is a Delaware corporation with its principal place of business
is Texas. Cedar is a New York corporation with its principal place of
business in New York. The contract was arranged through a New York
broker. As stated, the methanol was intended to be delivered to Texas,
where Tradax is located. Cedar does not actually produce methanol (it
buys and resells it), so it does not make sense to describe the
"location" of the subject matter of the contract.
With these facts in mind, the Court concludes that the center of
gravity of this contract slightly favors New York over Texas. The Court
notes that Tradax, the party on whose behalf Texas would theoretically
have an interest in this litigation, has essentially conceded that New
York law may govern. Cf. Martin v. City of Cohoes,
332 N.E.2d 867, 869 (N.Y. 1975) ("[P]arties to a civil
litigation, in the absence of a strong countervailing public policy, may consent . . . by
their conduct, to the law to be applied."). In any event, the Court
agrees with Tradax that this case involves basic contract principles
which would apply under both New York and Texas law.
Under the UCC (adopted in New York), a party may "suspend his own
performance" under a contract if the other party "repudiates the contract
with respect to a performance not yet due the loss of which will
substantially impair the value of the contract to the" aggrieved party.
N.Y. U.C.C. § 2-610. "[A]nticipatory repudiation centers upon an
overt communication of intention or an action which renders performance
impossible or demonstrates a clear determination not to continue with
performance." Id. cmt. 1. The New York Court of Appeals has
held that a party may consider a statement as anticipatory repudiation
only where "the announcement of an intention not to perform was positive
and unequivocal." Tenavision, Inc. v. Neuman, 379 N.E.2d 1166,
1168 (N.Y. 1978).
A demand "for more than the contract calls for in the way of
counter-performance is not in itself a repudiation," but when such a
statement "amounts to a statement of intention not to perform except on
conditions which go beyond the contract, it becomes a repudiation." N.Y.
U.C.C. § 2-610 cmt. 2. Under New York law, the party asserting the anticipatory repudiation
bears the burden of persuasion. See Record Club of America, Inc. v.
United Artists Records, Inc., 890 F.2d 1264, 1275 (2d Cir. 1989).
Cedar argues that Huybregts's demand for the Texas Resale Certificate
added a condition "beyond the contract," N.Y. U.C.C. § 2-610 cmt. 2,
thereby counting as a repudiation. The Court disagrees.
As an initial matter, the Court emphasizes that the allegedly demanded
condition was virtually trivial. The simple one-page form is available on
the internet and merely asks for the buyer's name, address, a description
of the items purchased, and a description of the type of business in
which the buyer is generally engaged.*fn2 The Court doubts that such a
trivial demand could amount to either a "positive and unequivocal"
intention not to perform on a contract worth more than $200,000,
Tenavision, Inc., 379 N.E.2d at 1168, or the type of demanded
additional condition contemplated under UCC § 2-610.
More fundamentally, however, Cedar agreed to the demand. Plevrites told Huybregts that she would provide the form.
In that regard, Cedar's focus on anticipatory repudiation is misplaced.
The brief conversation is better conceptualized as a modification of the
contract under UCC § 2-209. See N.Y. U.C.C. § 2-209
("An agreement modifying a contract within this Article needs no
consideration to be binding."). Cedar also overlooks UCC § 2-609
which if Cedar indeed doubted that Tradax would pay would
have permitted Cedar to secure adequate assurance of that payment.
See id. § 2-609(1) ("When reasonable grounds for insecurity
arise with respect to the performance of either party the other may in
writing demand adequate assurance of due performance and until he
receives such assurance may if commercially reasonable suspend any
performance for which he has not already received the agreed return.").
Because the Court concludes that Tradax did not repudiate the contract,
the Court grants Tradax's motion with respect to the issue of Cedar's
The parties also dispute the measure of Tradax's damages. Crucial to
this determination are documents, attached to Huybregts's affidavit,
which relate to Tradax's purchase of methanol from another source in an
effort to "cover" for Cedar's breach. Cedar correctly points out that
those documents would be inadmissible hearsay and hence cannot be part of
the Court's consideration. On a motion for summary judgment, supporting affidavits must state
facts which "would be admissible in evidence" at a trial. See
Fed.R.Civ.P. 56(e). The documents at issue are inadmissible hearsay
to the extent that they are offered to support the existence of the
transactions described for the purposes of establishing the amount of
damages recoverable. See Fed.R.Evid. 801.
Of course, business documents are routinely admitted into evidence at
trials under the business records exception of Federal Rule of Evidence
803(6). The business records exception permits courts to admit records
which would otherwise be hearsay if "the testimony of the custodian or
other qualified witness" shows that the records were "kept in the course
of a regularly conducted business activity," and that "it was the regular
practice of that business activity" to keep such records. Fed.R.Evid.
803(6). The custodian or other qualified witness
"need not have personal knowledge of the actual creation of the
document." Phoenix Associates III v. Stone, 60 F.3d 95,
101 (2d Cir. 1995) (quoting 4 Jack B. Weinstein & Margaret A. Berger,
Weinstein's Evidence ¶ 803(6)(b) , at 803-201-04 (1994)).
In this case, Huybregts's affidavit merely identifies the relevant
documents, without explaining whether they were kept in the ordinary
course of business; there is no other affidavit from a document custodian. The Court therefore cannot
consider the evidence. See Woods v. City of Chicago,
234 F.3d 979, 988 (7th Cir. 2000) ("[A]t the summary judgment
stage, the party seeking to offer the business record must attach
an affidavit sworn to by a person who would be qualified to introduce
the record as evidence at trial, for example, a custodian or anyone
qualified to speak from personal knowledge that the documents were
admissible business records.").
The Court recognizes that this defect is rather technical. In the
typical summary judgment motion involving business documents, the record
contains affidavits, almost certainly drafted by lawyers, in which the
relevant custodian makes a declaration tracking exactly the language of
Rule 803(6). Those affidavits may seem perfunctory and they may not
receive much attention either in the briefing or in the courts'
decisions, but those affidavits are necessary for admissibility under the
Federal Rules. Were the Court to excuse the defect, the Court would be
grafting a judicial exception upon the admissibility requirement of
Federal Rule of Civil Procedure 56(e).
Turning to the case at hand, the Court would not be surprised to learn
that Tradax, a commodities trading firm, keeps documents and contracts
relating to its trades in the ordinary course of its business. In an effort to efficiently
advance this litigation, the Court will permit Tradax ten days from the
date of this Decision and Order to offer appropriate additional
affidavits. The Court will also permit Cedar to make a brief response. If
the parties do not settle this matter before the parties' supplemental
submissions have been filed, the Court will issue a separate order
pertaining to damages.
For the reasons stated, it is hereby
ORDERED that the motion of Tradax Energy, Inc. ("Tradax"),
for summary judgment is granted in part and denied in part. The Court
finds that Cedar Petrochemicals, Inc. ("Cedar"), breached the parties'
September 2002 contract for the sale of methanol, and grants Tradax's
motion as to liability. The Court reserves its decision as to damages
until further submissions as provided herein; it is further
ORDERED that within ten (10) days of the date of this Order,
Tradax shall file affidavits, if any, pertaining to the admissibility of
documents relating to its "cover" purchase of methanol in January 2003,
and Cedar shall be permitted ten (10) days from the date of service of
those affidavits, if any, to file a letter response, no longer than three
pages, addressing any new issues raised by those affidavits; and it is finally
ORDERED that Cedar's motion for summary judgment is denied.