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Federated Retail Holdings, Inc. v. Sanidown

August 5, 2009

FEDERATED RETAIL HOLDINGS, INC., PLAINTIFFS,
v.
SANIDOWN, INC., DEFENDANT.



MEMORANDUM OPINION AND ORDER

This action, brought by Federated Retail Holdings, Inc. ("FRH"), Macy's Department Stores, Inc. ("Macy's"), Macys.com, Inc. ("Macys.com"), and Macy's Merchandising Group, Inc. ("MMG") (collectively, "Federated" or "Plaintiffs"), against Sanidown Inc. ("Sanidown" or "Defendant"), arises from a contract dispute. Defendant has interposed several counterclaims. This Court has jurisdiction of the action pursuant to 28 U.S.C. § 1332.

Plaintiffs now move, pursuant to Rule 56 of the Federal Rules of Civil Procedure, for summary judgment dismissing Defendant's counterclaims. The Court has reviewed thoroughly and considered carefully all of the parties' submissions and, for the reasons explained below, Plaintiffs' motion for summary judgment is granted in part and denied in part.

BACKGROUND

The following facts are undisputed unless otherwise noted. For approximately fifteen years, Defendant has supplied Plaintiffs with certain feather and down products, including pillows, comforters, and featherbeds. (Defendant's Response to Plaintiffs' Local Civil Rule 56.1 Statement ("Def. 56.1 St.") ¶ 1.)*fn1 Throughout the parties' business relationship, Sanidown and Federated would customarily agree, in advance, on certain specifications for the products and negotiate a price for each of the products based upon the specifications. (Id. at ¶ 7; Plaintiffs' Statement Pursuant to Local Civil Rule 56.1 ("Pl. 56.1 St.") ¶ 7.) The agreement as to the amount of goods, at a particular price, was memorialized in a projection sheet provided by Plaintiffs. (Affidavit of Jonathon D. Warner ("Warner Aff.") Ex. 18 Deposition of Marissa Nono ("Nono Dep.") 65; Def. 56.1 St. ¶ 7.)*fn2 The parties appear to refer to the projection sheets as "purchase orders" at times. Sanidown also agreed to adhere to Federated's shipping, labeling, and freight procedures, and agreed to incur expense offsets, or "chargebacks," for procedural non-compliance.*fn3

(Pl. 56.1 St. ¶ 49; Def. 56.1 St. ¶ 49.)

In November 2005, Plaintiffs agreed to purchase the Tahoe Comforter, Appalachian Comforter, Matterhorn Pillow, Matterhorn Featherbed, Mount Evans Pillow, Euro Square Pillow, and the Hotel Comforter from Defendant's lines for the Spring 2006 and Fall 2006 seasons and provided Defendant with projection sheets for those seasons. (Def. 56.1 St. ¶¶ 6, 7.) Defendant prepared to manufacture all of the goods specified on Plaintiffs' projection sheets by purchasing the necessary raw materials. (Affidavit of Suzanne Woodward, Esq. ("Woodward Aff.") Ex. C

Deposition of George Frenkel ("GF Dep.") 138-40.) Defendant's usual practice was to start ordering all raw materials for delivery upon receipt of Plaintiffs' projection sheets in order to lock in prices and delivery dates. (Id.)

In Spring 2006, after Defendant had shipped Plaintiffs all of the products ordered for Spring 2006, the American Down Association ("ADA") tested one of the Matterhorn Comforters. (GF Dep. 157-59.) The ADA found that the comforter did not contain the type of down identified on the label. (Id.) This finding led to a second, separate test conducted by the California Bureau of Home Furnishings and Thermal Insulation (the "Bureau") on another Matterhorn Comforter. (Id. at 157-61.) The Bureau subsequently issued a "withhold from sale" order on the failed lot of comforters. (GF Aff. ¶¶ 6, 7.) In response, Federated placed a "hold" on Sanidown's account, effectively suspending payment for the Spring 2006 shipment of goods. (Id.) Sanidown agreed to arrange for, and credit, Federated's return of all Matterhorn Comforters, irrespective of their compliance with industry standards. (GF Aff. ¶ 8.) After crediting Federated's account approximately $68,000 for the anticipated Matterhorn returns, Sanidown calculated that it was owed approximately $106,000 under the Spring 2006 agreement. (Id.)

In May 2006, Plaintiffs requested that Defendant commence shipment of the Fall 2006 goods. (GF Dep. 188-89.) Sanidown, however, refused to ship any additional merchandise unless and until Federated assured Sanidown that it would remit payment due and owing for the Spring 2006 shipment. (Id.) Nono contacted Plaintiffs' legal department to determine whether it was necessary to maintain the hold on Sanidown's account. (Nono Dep. 103.) The legal department then forwarded an email to Nono that stated: "[Sanidown] no longer needs to be on full account hold. Please maintain the hold for $110,000; any amount over that can be released." (Pl. 56.1 St. ¶ 14; GF Aff. Ex. 6.)*fn4 Nono forwarded this email to Sanidown on May 23, 2006. (Nono Dep. 138.) Nono then visited Sanidown's headquarters to urge Sanidown's principals to commence shipment of the Fall 2006 goods. (Def. 56.1 St. ¶ 15; Nono Dep. 144-45.) On May 24, 2006, Sanidown commenced the first shipment of goods under the Fall 2006 agreement. (Nono Dep. 183.) On June 14, 2006, Federated informed Sanidown that Sanidown's entire account was still on hold. (Id.) Between May 24 and June 14, Sanidown had shipped approximately $850,000 worth of goods in reliance on Federated's representations that, aside from the $110,000 withheld by Federated to cover the return of the Matterhorn Comforters, the hold had been lifted. (GF Aff. ¶ 10.) Federated failed to make any payments for the Fall 2006 goods. According to Federated, Federated rejected the shipped Fall 2006 goods and terminated all orders for additional Fall 2006 goods as a result of Sanidown's delivery of some non-conforming goods for the Spring 2006 season. (Nono Dep. 91-114.)

DISCUSSION

The standard governing motions for summary judgment is well-settled. Summary judgment should be rendered when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is therefore entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). For the purposes of summary judgment, the Court must construe the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of the non-moving party. In re "Agent Orange" Prod. Liab. Litig., 517 F.3d 76, 87 (2d Cir. 2008). 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). However, the non-moving party cannot avoid summary judgment through vague assertions regarding the existence of disputed material facts, or "defeat the motion through mere speculation or conjecture." W. World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990).

Sanidown's Counterclaims

General Damages

Defendant Sanidown claims that Federated breached their agreement by: failing to pay for goods ordered and delivered under the Spring 2006 and Fall 2006 agreements; improperly deducting "chargeback" costs from Federated's balance due; and subsequently terminating the agreement for Fall 2006 goods. Defendant's damages claims arising from the alleged breach include: the contract price of the goods actually shipped to Federated for which Federated failed to pay ("unpaid invoice damages");*fn5 the profits which Sanidown lost as a result of Federated's repudiation of its agreement to purchase an additional $6.5 million worth of goods for the Fall 2006 season, as evidenced by Federated's projection sheet ("lost profit damages");*fn6 the cost of the component parts purchased by Sanidown in reliance on Federated's agreement to purchase the additional $6.5 million worth of goods for the Fall ...


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