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

September 30, 2004

SLANE & SLANE DESIGNS, LLC., PLAINTIFF,
v.
NARRAGANSETT JEWELRY CO., INC., DEFENDANT.



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

MEMORANDUM OPINION AND ORDER

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.

BACKGROUND

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.

DISCUSSION

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 ...


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