The opinion of the court was delivered by: Ramon E. Reyes, Jr., U.S.M.J.
Plaintiff Singapore Recycle Centre Pte Ltd. ("SRC") brought this diversity action against defendants Kad International Marketing, Inc. ("Kad International" or "Kad") and Ashit Kadakia ("Kadakia") for breach of contract, fraudulent inducement, and conversion. SRC has moved for summary judgment on the First, Third and Fourth Claims in the complaint. This matter was referred to me for a report and recommendation pursuant to 28 U.S.C. § 636(b)(3). For the reasons set forth below, I respectfully recommend that SRC's motion be grantedin part and denied in part, and that partial judgment be entered against Kad International and Kadakia, jointly and severally, in the amount of $238,590, plus prejudgment interest of 9% (accruing as of March 12, 2005) against Kadakia only.
The Parties Plaintiff SRC is a Singapore corporation engaged in the import and export of, inter alia, scrap metal. (Compl. ¶ 8.) Defendant Kadakia (a/k/a Allen Kad) is the president and founder of defendant Kad International, a New York corporation (Id. ¶¶ 9-10, 13).
The Scrap Metal Contracts and Riders
On September 3, 2004, SRC and Kad International entered into a contract for the sale of scrap metal.*fn1 (Affidavit of Sophia Su ("Su Aff."), Ex. B at SRC00001.) The contract provided that Kad International would sell to SRC 30,000 metric tons of scrap metal at $195 per metric ton, for a total amount of $5.85 million. (Id. at SRC00002.) The parties entered into another contract dated October 20, 2004 for the sale of an additional 30,000 metric tons of scrap metal at $195 per metric ton. (Su Aff., Ex. A at SRC00023-24.) In riders to each contract dated October 28, 2004, the parties modified the price in both contracts from $195 to $202 per metric ton. (Su Aff., Ex. A at SRC00043 & Ex. B at SRC00020.) Both contracts required SRC to obtain a Letter of Credit ("LC"), subject to Kad International's approval, for the total contract price within seven banking days from the execution of the contract. (Su Aff., Exs. A and B at ¶ 7(a)-(d) & App. 1, ¶ 3.) In return, Kad International was required to issue an Indemnity Bond upon receipt of the LC. (Id. at ¶ 7(g) & App. 1, ¶ 4.) The rider to the October contract set a delivery date "within 75 days after the receipt of the . . . Letter of Credit." (Su Aff., Ex. A at SRC00042.) Both contracts also contained a remedy and damages limitation clause.*fn2
On October 29, 2004, SRC contracted to sell to Xiamen International Trade Group Corporation, Ltd. ("Xiamen International") and Xiamen C&D (collectively, "Xiamen Companies"), 60,000 total metric tons of scrap metal at $225 per metric ton. (Su Aff., Ex. P.)
On November 9, 2004, SRC's bank, First Commercial Bank of Singapore ("First Commercial Bank"), issued a LC ("November LC") to Kad International's bank, Citibank. (Affidavit of Ashit Kadakia ("Kadakia Aff."), Ex. A.) The November LC allegedly contained various terms not agreed upon, and thus Kad International requested that SRC amend the November LC. (Id. at ¶¶ 21-22.) Citibank rejected the November LC, and Kad International arranged for the November LC to be issued to Commerce Bank. (Id. at ¶ 23 & Ex. C.)
On December 2, 2004, Kad International requested an advance payment of $200,000 from SRC to defray it costs in obtaining the scrap metal. (Su Aff., Ex. E at SRC00090.) On December 9, 2004, the parties executed riders to each of the original contracts stipulating, inter alia, that (1) SRC would pay Kad International $200,000, (2) SRC would issue "back to back" LCs for the full contract prices by December 11, 2004, and (3) Kad International would refund to SRC the $200,000 in full in the event of non-delivery. (Su Aff., Ex. F.) On that same day, SRC transferred $200,000 to Kad International (Su Aff., Ex. E at SRC00107-08), which was deposited into Kad's business checking account, number 7917402609 ("Account 609"). (Plaintiff's Statement of Undisputed Facts ("Pl.'s 56.1 Stmt") ¶ 28; Affidavit of Jonathan Willens ("Willens Aff."), Ex. H at 195.) On December 13, 2004, Kad International transferred $100,000 of that amount into its business savings account, number 8916384103 ("Account 103"). (Pl.'s 56.1 Stmt ¶ 29; Willens Aff., Exs. G at 202 & H at 195.)
On December 14, 2004, First Commercial Bank issued a LC ("December LC") to Commerce Bank. (Su Aff., Ex. H at 000035, 37.) The December LC would become operative upon SRC's receipt of Kad International's Indemnity Bond. (Id.) The November LC was also issued to Commerce Bank. (Id. at 000050.) The parties negotiated amendments to the terms of both LCs (Su Aff., Ex. I), to which Kad International ultimately agreed on December 21, 2004 (Id. at SRC 00174).
On December 22, 2004, Kad International issued Indemnity Bonds to SRC in response to both LCs. (Su Aff., Ex. D.) These Indemnity Bonds provided that Kad International would pay to SRC 2% of the contract price ($121,200 for each contract) in the event of non-delivery. (Id.) The Indemnity Bonds were set to expire on February 20, 2005. (Id.) On December 22, 2004, First Commercial Bank confirmed that the November LC was operative. (Su Aff., Ex. H at 000052.) On December 27, 2004, First Commercial Bank confirmed that the December LC was operative.*fn3 (Id. at SRC00060.)
Despite their acceptance of the amendments to the LCs, Kad International still raised several issues regarding their terms, particularly that they had to be confirmed by Kad's bank. (Su Aff., Ex. I.) On January 11, 2005, a representative of Kad International requested SRC to pay an additional $40,000 for confirmation charges for both LCs. (Su Aff., Ex. G at SRC00247.) SRC transferred $40,000 to Kad International's Account 609 that same day. (Su Aff., Ex. G; Pl.'s 56.1 Stmt ¶ 30; Willens Ex. H at 190, 95.)
On March 11, 2005, both LCs expired. (Su Aff., Ex. H at 000044, 58.) On that same date, Kad International told SRC that they were experiencing delays in shipping the scrap metal. (Su Aff., Ex. L at SRC00292.) On March 15, 2005, past the delivery date, Kad International requested that SRC extend the LCs. (Su Aff., Ex. J.) Kad International failed to deliver any scrap metal to SRC. (Pl.'s 56.1 Stmt ¶ 20.) Consequently, SRC alleges that as a result of Kad International's failure to deliver the scrap metal, it was unable to fulfill its obligations in its contracts with the Xiamen Companies. (Pl.'s Memo Supp. Summ. J. at 17.) SRC also incurred bank charges amounting to SGD 127,557.71 (approximately $78,500) as a result of LC negotiations with the Xiamen Companies. (Pl.'s 56.1 Stmt ¶ 26; Su Aff., Ex. Q.)
On April 14, 2005, SRC demanded that Kad International refund the $240,000 in costs and confirmation charges it paid on December 2, 2004 and January 11, 2005. (Su Aff., Ex. N.) On November 7, 2005, Kad International sent to SRC post-dated checks made out to "Singapore Recycle (PTE) Ltd." totaling $240,000. (Su Aff., Ex. C at SRC00065, 67-68.) On November 17, 2005, Kad International requested that SRC cancel the previous checks, and sent to SRC additional post-dated checks for the same amount, this time made payable to SRC's correct name. (Id. at SRC00066, 69-70.) Kad International subsequently stopped payment on all checks before they were deposited by SRC. (Pl.'s 56.1 Stmt ¶ 22.)
I. Summary Judgment Standard
A motion for summary judgment will be granted where there is no genuine issue as to any material fact and it is clear that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The burden is on the moving party to demonstrate the absence of a genuine issue of material fact. Am. Int'l Group, Inc. v. London Am. Int'l Corp., 664 F.2d 348, 351 (2d Cir. 1981). In addition, the court must resolve all ambiguities and draw all reasonable inferences in favor of the opposing party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). If, however, the opposing party fails to make a showing of an essential element of its case for which it bears the burden of proof, summary judgment will be granted. Celotex, 477 U.S. 323; Smith v. Half Hollow Hill Cent. Sch. Dist., 349 F. Supp. 2d 521, 524 (E.D.N.Y 2004).
To overcome a motion for summary judgment, the opposing party must show that there is an issue of material fact that is in dispute. That is, the disputed fact must be one which "might affect the outcome of the suit under the governing law." Anderson, 477 U.S. at 242. If the opposing party does not set forth specific facts showing that there is a genuine issue for trial, summary judgment is appropriate. FED. R. CIV. P. 56(c).
II. The Requirements of Local Rule 56.1
Local Rule 56.1 provides:
(a) Upon any motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, there shall be annexed to the notice of motion a separate, short and concise statement, in numbered paragraphs, of the material facts as to which the moving party contends there is no genuine issue to be tried. Failure to submit such a statement may constitute grounds for denial of the motion.
(b) The papers opposing a motion for summary judgment shall include a correspondingly numbered paragraph responding to each numbered paragraph in the statement of the moving party, and if necessary, additional paragraphs containing a separate, short and concise statement of additional material facts as to which it is contended that there exists a genuine issue to be tried.
(c) Each numbered paragraph in the statement of material facts set forth in the statement required to be served by the moving party will be deemed to be admitted for purposes of the motion unless specifically controverted by a correspondingly numbered paragraph in the statement required to be served by the opposing party.
(d) Each statement by the movant or opponent pursuant to Rule 56.1(a) and (b), including each statement controverting any statement of material fact, must be followed by citation to evidence which would be admissible, set forth as required by Federal Rule of Civil Procedure 56(e). (Emphasis added).
"The purpose of a Local Rule 56.1 statement is to streamline the consideration of summary judgment motions by freeing district courts from the need to hunt through voluminous records without guidance from the parties." Holtz v. Rockefeller & Co., Inc., 258 F.3d 62, 74 (2d Cir. 2001). A court "has broad discretion to determine whether to overlook a party's failure to comply with local court rules." Id. (quoting Monahan v. New York City Dep't of Corr., 214 F.3d 275, 292 (2d Cir. 2000)).
A. Defendants' Local Rule 56.1 Statement is Deficient
As an initial matter, defendants' Rule 56.1 Statement does not comply with the clear requirement of Local Rule 56.1(d) that "each statement controverting any statement of material fact, must be followed by a citation to evidence which would be admissible." Indeed, none of the statements in Defendants' Rule 56.1 Statement is supported by a citation to any evidence at all, let alone evidence which would be admissible. (E.g., Defendants' Rule 56.1 Statement ("Defs.' 56.1 Stmt"), ¶ 9 ("Defendants deny the statement contained in paragraph "9" of Plaintiff's Statement.")). This failure cannot be overlooked, especially in light of the fact that the defendants' very same Statement contains assertions of "Additional Material Facts" which do contain citations to evidence. (E.g., Defendants' Local Rule 56.1 Statement of Additional Material Facts, ¶¶1-3.) As a result of this omission, defendants' Rule 56.1 statement is wholly inadequate and must be disregarded. E.g., Larsen v. JBC Legal Group, PC, 533 F. Supp. 2d 290, 297 (E.D.N.Y. 2008); Fernandez v. DeLeno, 71 F. Supp. 2d 224, 227 (S.D.N.Y. 1999) (citing Titan Indem. Co. v. Triborough Bridge & Tunnel Auth., Inc., 135 F.3d 831, 835 (2d Cir. 1998)); see also Cooper v. Gottlieb, No. 95 Civ. 10543, 2000 WL 1277593, at *4 (S.D.N.Y. Sept. 4, 2000) (deeming the statements contained in movants' Rule 56.1 statement admitted where non-movants failed to cite to or submit any evidentiary support for the statements in their Rule 56.1 statement in opposition to motion).
B. First Claim for Relief -- Kad International Breached the Contracts with SRC
SRC argues that Kad International breached the contracts by failing to deliver the scrap metal as agreed. Under New York law, the elements of a breach of contract claim are: "(1) a valid contract; (2) plaintiff's performance; (3) defendant's failure to perform; and (4) damages resulting from the breach." Dupler v. Costco Wholesale Corp., No. 06 Civ. 3141 (JFB), 2008 WL 321776, *14 (E.D.N.Y. Jan. 31, 2008) (quoting Macaluso v. U.S. Life Ins. Co., No. 03 Civ. 2337 (GEL), 2004 WL 1497606, at * 3 (S.D.N.Y. July 2, 2004)). Critically, Kad International admits that it entered into valid contracts with SRC, that were never terminated (Defs.' 56.1 Stmt, ¶¶ 1-2, 13), and that it failed to deliver the scrap metal to SRC (Id., ¶ 20). Thus, the only questions are (1) whether SRC fully performed and (2) whether and to what extent SRC was damaged as a result of Kad International's breach.
1. The "Requirement" of "Confirmed" Letters of Credit
In opposition to SRC's summary judgment motion, Kad argues that notwithstanding its admitted failure to perform under the contracts, there remains a genuine issue of material fact as to whether its performance should be excused because SRC may have breached a material condition precedent to Kad's performance by failing "to provide Letters of Credit in compliance with the terms of the subject contracts." (Defendants' Memorandum of Law in Opposition to Plaintiff's Motion for Partial Summary Judgment ("Defs.' Br.") at 1.) Although Kad cites to a number of examples of how SRC's letters of credit were deficient (id. at 5-9), it acknowledges that it ultimately "accepted the substantive terms of [SRC's] Letters of Credit, [but] at no time did it waive the requirement that the Letters of Credit be confirmed." (Kadakia Aff., ¶ 48 (emphasis added).) Thus, Kad's sole argument in opposition to this aspect of SRC's summary judgment motion is that SRC materially breached a condition precedent to Kad's performance by failing to provide confirmed letters of credit as required by the contracts.*fn4
In deciding a motion for summary judgment, courts look to the plain meaning of the contractual language, "giving due consideration to the surrounding circumstances and apparent purpose which the parties sought to accomplish." Palmieri v. Allstate Insurance Co., 445 F.3d 179, 187 (2d Cir. 2006); see also Mellon Bank, N.A. v. United Bank Corp. Of New York, 31 F.3d 113, 115 (2d Cir. 1994) (determining whether contract is ambiguous is a matter of law to be decided by court). "Ambiguity resides in a writing when - after it is viewed objectively - more than one meaning may reasonably be ascribed to the language used." Id. If contractual language is ambiguous and subject to alternative reasonable interpretations, intent becomes an issue of fact, and summary judgment is not appropriate. Id. The burden is upon the movant to "establish that a contractual provision is not susceptible of at least two fairly reasonable meanings." Wards Co. v. Stamford Ridgeway Assocs., 761 F.2d 117, 120 (2d Cir. 1985). Here, there is no question that the contracts themselves did not unambiguously require SRC to provide "confirmed" letters of credit.
By their own terms, the contracts required SRC to provide an "unconditional, irrevocable transferable operative documentary Letter of Credit."*fn5 The term "confirmed" is conspicuously absent from the contracts. Apparently, Kad would have the Court believe that "unconditional, irrevocable and transferable" letters of credit are synonymous with "confirmed" letters of credit. They are not. A letter of credit, whether unconditional, irrevocable and/or transferable, is issued by a single bank and is an obligation to pay to a beneficiary a specified amount upon the beneficiary's presentation of conforming documents. NY UCC §§ 5-102(10), 5-106 (2001). A "confirmed" letter of credit is one on which at least two banks are obliged to make payment: the issuing bank and the confirming bank. See NY UCC § 2-325 ("[t]he term 'confirmed credit' means that the credit must also carry the direct obligation of ... an agency which does business in the seller's financial market"); NY UCC § 5-107 and Comment 2 ("a beneficiary who has received a confirmed credit has the independent ...