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Slane & Slane Designs, LLC v. Narragansett Jewelry Co.


September 30, 2004


The opinion of the court was delivered by: Laura Taylor Swain, United States District Judge


This case, arising from alleged failures to manufacture and deliver jewelry in an accurate and timely fashion, is before the Court on Defendant's Motion for Summary Judgment. The Court has jurisdiction of this matter pursuant to 28 U.S.C. § 1332. The Court has considered thoroughly all submissions related to Defendant's motion. For the following reasons, Defendant's motion is denied.


Plaintiff, a jewelry design and sales business, was formed in 1996. Plaintiff and Defendant entered into a business relationship shortly after Plaintiff was formed, and this relationship continued until 2002, when Plaintiff commenced the instant litigation. In its Amended Complaint, Plaintiff alleges that Defendant: (1) failed to develop models and molds which were free from defects; (2) consistently delivered defective, substandard and poor quality goods; (3) failed to deliver molds, models and final products in a timely manner; and (4) failed to fill purchase orders. (Am. Compl. ¶¶ 21-51.) Plaintiff asserts claims of breach of contract, breach of express warranty, breach of implied warranty, negligence, negligent entrustment, negligent misrepresentation and breach of the covenant of good faith and fair dealing. (Id.)

Defendant now moves for summary judgment dismissing Plaintiff's claims. Defendant argues that Plaintiff cannot proffer sufficient admissible evidence supporting the damages element of its causes of action to warrant submission of its claims to the jury. Defendant also seeks summary judgment in its favor on its counterclaim, in which Defendant asserts that Plaintiff owes it $84,133.49 for goods delivered. (See Mem. of Law in Supp. of Def.'s Mot. for Summ. J. at 10.)

Although Plaintiff's Amended Complaint alleges that Plaintiff suffered various types of damages, the sole basis of damages that Plaintiff has asserted in opposition to Defendant's motion is lost sales. For purposes of the instant motion, Defendant does not contest liability, but instead argues that Plaintiff has failed to come forward with sufficient evidence to support a rational jury finding that Plaintiff has suffered lost sales as a result of any of Defendant's alleged conduct and that the case must therefore be dismissed.

On May 28, 2004, the Court heard oral argument on the limited issue of the sufficiency of Plaintiff's evidence of damages. Defendant argued that Plaintiff had proffered insufficient admissible proof of the factual and theoretical bases of this turn rate calculation to warrant submission of Plaintiff's damages claims to the jury. The Court then gave Plaintiff leave to provide supplemental submissions in order to clarify the factual basis of its damages claim. After thoroughly reviewing Plaintiff's supplemental submissions and Defendant's reply thereto, the Court finds that Plaintiff has made a showing sufficient to overcome Defendant's motion for summary judgment.


Summary judgment shall be granted in favor of a moving party where "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 moving party bears the burden of establishing the absence of any genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). "In determining whether a genuine issue of material fact exists, a court must examine the evidence in the light most favorable to, and draw all inferences in favor of, the non-movant." Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286 (2d Cir. 2002) (internal citations omitted). Nevertheless, "Rule 56(c) mandates the entry of summary judgment... against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

A party opposing a summary judgment motion cannot rely solely upon its pleadings. Fed. R. Civ. P. 56(e). Rather, it must proffer evidence containing "specific facts showing that there is a genuine issue for trial." Id. The proffered evidence, if sufficient, will "be based on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show... that the affiant is competent to testify to the matters stated therein." Id. Moreover, in evaluating the sufficiency of the evidence, it is not the Court's duty to "weigh the evidence and determine the truth of the matter." Anderson, 477 U.S. at 249. Instead, at the summary judgment stage, the Court need only "determine whether there is a genuine issue for trial." Id.

Before addressing the merits of the instant motion, the Court must determine what law applies. Both parties having presumed that New York law governs this action, the Court will apply New York law in rendering its decision. Tehran-Berkeley Civil Envtl. Eng'rs v. Tippetts-Abbett-McCarthy-Stratton, 888 F.2d 239, 242 (2d Cir. 1989) ("[I]mplied consent to use a forum's law is sufficient to establish choice of law.").

In order to recover lost profits for breach of contract under New York law, "the alleged loss must be capable of proof with reasonable certainty." Kenford Co., Inc. v. County of Erie, 67 N.Y.2d 257, 261 (1986). "Projections of future profits based upon a multitude of assumptions that require speculation and conjecture and few known factors do not provide the requisite certainty." Schonfeld v. Hilliard, 218 F.3d 164, 172 (2d Cir. 2000) (internal quotation marks and citation omitted). Furthermore, assumptions made must be supported by competent proof. See Greasy Spoon, Inc. v. Jefferson Towers, Inc., 75 N.Y.2d 792, 795-96 (1990) (evidence of profit level assumptions "was sufficient to remove plaintiff's lost profit claim from the realm of impermissible speculation"). However, there is "[n]o hard and fast rule in this regard," and the Court must consider all circumstances relating to an individual case in making its determination. NY Jur. 2d Damages § 104 (West 2004); see also Alexander's Dep't Stores, Inc. v. Ohrbach's, Inc., 56 N.Y.S.2d 173, 179 (1945) ("Plaintiff in a case like this is not restricted to the ordinary rules for measuring damages or obliged to prove its losses with mathematical certainty or accuracy.").

Plaintiff employs what it terms a "turn rate" formula to calculate its lost sales during 2001 and 2002. This principle estimates lost sales volumes based on extrapolations from Plaintiff's historic sales volumes. Where, for instance, six pieces of a particular item from its jewelry line were sold over a two-year time period, Plaintiff would estimate that the item had a "turn rate" of three pieces per year. (See Slane Aff. ¶¶ 19-20.) In a settlement demand letter, Plaintiff calculated its damages by taking the value of the merchandise ordered less the value of merchandise received, and multiplying that difference by a turn rate of three. (Letter from Pl.'s Counsel to Def. Counsel of 2/24/03, Adams Aff. Ex. F at 1.) Plaintiff represents that the turn rate of three constitutes a conservative estimate of its likely rates of sales of the jewelry in question. (See Slane Aff. ¶ 20.)

The sole issue presented by the instant motion is whether Plaintiff has proffered evidence from which a rational fact finder could conclude that Plaintiff suffered lost sales damages with the reasonable degree of certainty that is necessary under New York law. Plaintiff, in its initial opposition to the instant motion, submitted only two exhibits. First, Plaintiff submitted the Expert Report and Disclosure of Basil Imburgia ("Imburgia Report"), Defendant's expert witness. (Osborn Aff. Ex. A.) Plaintiff contends that "[Defendant's] own expert concluded that Slane & Slane suffered damages," (Pl.'s Mem. in Opp'n at 7), citing to a page of the report which refers to differences between the value of merchandise ordered by Plaintiff and the value of merchandise received. (See Imburgia Report at 7-8.) The expert's ultimate conclusion, however, was that "no documents provided... support any claims for lost revenues and related lost profits." (Id. at 16.) Indeed, Mr. Imburgia remarked that

I have reviewed the tax returns from Slane & Slane for the tax years ended 2001 and 2002 and noted that Slane & Slane's operating expense exceeded gross profits and therefore it was not profitable during 2001 and 2002. Further, Slane & Slane's inventory levels increased approximately 74% from 2001 to 2002, which may indicate that the company had enough stock on hand to fill customer orders.

(Id. at 14.) Accordingly, even if Imburgia's report indicates that Defendant may have failed to ship or ship timely certain items (issues not in dispute for the purposes of this motion), that report provided no support for Plaintiff's damage theory.

Plaintiff also proffered excerpts from the deposition transcript of Landon Slane, Plaintiff's Federal Rule of Civil Procedure 30(b)(6) witness-designee. (Osborn Aff. Ex. B.) Plaintiff argued that, although Landon Slane was not able to substantiate Plaintiff's methodology for calculating damages at the deposition, she had testified that certain other officers of Slane & Slane Designs, LLC would be more knowledgeable about these questions. (Pl.'s Mem. in Opp'n at 8.) Her deposition testimony provides no evidence from which a trier of fact could conclude that it is reasonably certain that Plaintiff lost sales. Instead, she conceded her lack of knowledge and referred to other people who would have better information. Plaintiff did not make any proffer as to what the testimony of those individuals would be, other than to state that they "have knowledge concerning the damages in this case." (Id.)

Plaintiff has now used the opportunity provided by the Court to present supplemental submissions to address such evidentiary defects. Among other documents, Plaintiff has tendered three additional affidavits. With regard to the instant motion, the Court focuses on two, the affidavits of Landon Slane, co-owner of Slane & Slane ("Slane Aff."), and Jeffrey Evans, Slane & Slane's Special Project Coordinator ("Evans Aff."). The third, the affidavit of Plaintiff's counsel, Daniel A. Osborn, is disregarded to the extent it is nonevidentiary.

The affidavit tendered by Landon Slane provides sufficient evidence of the origin and significance of Plaintiff's turn rate theory, as it applies to its damages calculation. Ms. Slane now asserts that, as co-founder and co-owner of Slane & Slane, she has personal knowledge of both actual and historical sales and purchase orders, and can testify as to the factual and theoretical basis of her company's alleged damages. (See Slane Aff. ¶¶ 1-2.) Defendant challenges the sufficiency of Ms. Slane's affidavit primarily by attacking the credibility of the content of the reports on which Ms. Slane purports to have relied and the accuracy of the figures presented therein. (See, e.g., Def. Reply Mem. to Pl.'s Supp. Submission at 8-9.) However, the bulk of Defendant's arguments go to the weight of the evidence rather than its admissibility at trial. Plaintiff has met its burden as to the latter for purposes of this motion practice. See, e.g., Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

Jeffrey Evans's Affidavit and the reports referred to therein similarly provide evidence demonstrating that there is a genuine issue of material fact as to the damages element of Plaintiff's claim. Mr. Evans represents that he is Special Project Coordinator of Slane & Slane, and has personal knowledge of "all aspects of [Plaintiff's] finances, including inventory levels, costing, sales figures, and accounts payable and receivable." (Evans Aff. ¶ 2.) Mr. Evans states that, in his official capacity, he prepared reports for Laura Aman, former Chief Operating Officer of Slane & Slane, relating to the instant litigation that support Plaintiff's damages claims. (Id. ¶ 3; Slane Aff. ¶ 17.) The Evans Affidavit principally purports to authenticate those reports, which Mr. Evans represents were previously produced to Defendant in the course of discovery. (Id.)

Defendant argues that the Court should exclude Mr. Evans's affidavit as untimely, since he "was not disclosed as a potential witness in Plaintiff's Initial Disclosures" and "was never disclosed... as possessing knowledge relevant to this matter prior to the October 2003 discovery cut-off." (Def. Reply Mem. to Pl.'s Supp. Submission at 8.) Federal Rule of Civil Procedure 37(c)(1) provides, in pertinent part, that "[a] party that without substantial justification fails to disclose information... or to amend a prior response to discovery... is not, unless such failure is harmless, permitted to use as evidence at trial, at a hearing, or on a motion any witness or information not so disclosed." Fed. R. Civ. P. 37(c)(1). The Court will allow Defendant 21 days from the date of this order to conduct a deposition of Mr. Evans and pursue any discovery related to Exhibits F, H and I, which Defendant specifically contends were untimely disclosed. (See Def. Reply Mem. to Pl.'s Supp. Submission at 7, 9.)

Accordingly, because Plaintiff has proffered evidence sufficient to support a finding that it suffered lost sales damages, an essential element of Plaintiff's case, Defendant's summary judgment motion, insofar as it seeks dismissal of the Amended Complaint, is denied. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

Defendant's Counterclaim

Defendant's motion for summary judgment on its counterclaim is granted as unopposed. (See Pl.'s Mem. in Opp'n at 9.)


For the foregoing reasons, Defendant's motion for summary judgment is denied insofar as it is directed to Plaintiff's claims and is granted insofar as it concerns Defendant's counterclaim. A Final Pre-Trial Conference will be held on this matter on January 13, 2005, at 4:30 p.m. and the parties shall make their pre-conference submissions in advance of that date in accordance with the Pre-Trial Scheduling Order dated June 26, 2003. The parties are hereby directed to contact the chambers of Magistrate Judge Katz to schedule a settlement conference to take place no later than December 22, 2004.


LAURA TAYLOR SWAIN United States District Judge


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