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Plastic Suppliers v. Cenveo

September 26, 2011

PLASTIC SUPPLIERS, INC, PLAINTIFF,
v.
CENVEO, INC, DEFENDANT.



Plaintiff Plastic Suppliers, Inc. commenced the instant action against Defendant Cenveo, Inc. asserting a claim for breach of contract. Presently before the Court is Plaintiff's motion for partial summary judgment pursuant to Fed. R. Civ. P. 56 on the issue of liability.

I. BACKGROUND

Defendant Cenveo manufactures envelopes that utilize plastic window films ("PWF"). Plaintiff Plastic Suppliers is a manufacturer and distributor of PWF. In the summer of 2009, the parties began discussing an agreement whereby Defendant would purchase PWF from Plaintiff. Beginning in August 2009, Defendant made purchases of PWF and used the products in production at its plants. From August 2009 through mid-November 2009, Defendant experienced some success with Plaintiff's PWF. Defendant also experienced some problems with the PWF. Some of the problems included cutting issues (the film was difficult to consistently cut), breaking/tearing issues (the PWF would break in the middle of a run); and speed issues (the PWF was difficult to run on Defendant's machines at higher speeds).

On November 16, 2009, Defendant executed a written Supply Agreement (the "Agreement") with Plaintiff. According to the terms of that Agreement, Defendant shall, beginning on the Effective Date through December 31, 2010, purchase from [Plaintiff], eighty percent (80%) of all of [Defendant's] requirements for the Products, subject to the terms and conditions of this Agreement. Beginning January 1, 2011, through the remainder of the Term (defined below) of this Agreement, purchase from Supplier ninety-eight percent (98%) of all of Purchaser's requirements for the Products, subject to the terms and conditions of this Agreement. . . .

Section 4 and Exhibit A contained, among other things, the parties' agreed upon warranties and remedies in the event of non-conforming goods.*fn1 Exhibit A of the Agreement provided as follows:

Seller warrants to Buyer that the products referenced on the front of this invoice (the "Products"), when shipped by Seller, will meet Seller's applicable published specifications. Buyer shall be solely responsible for determining the suitability for use of the Products and Seller shall in no event be liable in this respect. Seller's obligations and liabilities hereunder shall not be enforceable until title to the Products has passed pursuant to the provisions hereof. No Products may be returned without the prior written approval of Seller after a determination by Seller that the Products fail to meet Seller's applicable published specifications. Seller shall, at its own expense, repair or replace any Products it determines do not conform to its published specifications, provided Buyer notifies Seller of the failure to conform in writing with the time period set forth below in the paragraph entitled CLAIMS. THE FOREGOING OBLIGATIONS ARE IN LIEU OF ALL OTHER OBLIGATIONS AND LIABILITY OF SELLER RESPECTING THIS INVOICE OR THE PRODUCTS INCLUDING ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OR MERCHANTABILITY OF FITNESS FOR PARTICULAR APPLICATIONS OR PURPOSES WHICH ARE ESPRESSLY [sic] DISCLAIMED.

The "Claims" provision of the Agreement provided as follows:

Within thirty (30) days after tender of delivery to Buyer of any shipment and before any portion of the Products (except for reasonable test and inspection quantities) has been changed from its original condition, Buyer shall inform Seller in writing if any Products are believed to be defective or otherwise believed not to conform with Buyer's order. Any claims not made within such period of time shall be waived, and Buyer shall be deemed to have accepted Seller's shipment of Products. The weights, volumes, sizes and fares set forth in this Invoice shall govern in the event of a dispute unless proved erroneous. Material varying not more than ten percent (10%) in weight, quantity, size, width, thickness or length shall be deemed to be in compliance with this Invoice.

Section 4 of the Agreement also provided, in part, that:

The Products are subject to the standard limited warranted, if any, contained in Suppliers' Standard Terms. PURCHASER'S AND AGENT'S EXCLUSIVE REMEDY, AND SUPPLIER'S SOLE OBLIGATION, WITH RESPECT TO A BREACH OF THE FOREGOING WARRANTY, IS TO HAVE THE DEFECTIVE PRODUCE REPAIRED OR REPLACED. AS A CONDITION PRECEDENT TO SUCH REMEDY, PRIOR TO RETURNING ANY ALLEGEDLY DEFECTIVE PRODUCTS, PURCHASER OR AGENT, AS APPLICABLE, MUST OBTAIN FROM SUPPLIER'S AUTHORIZED REPRESENTATIVE WITHIN SIX (6) MONTHS OF THE DATE OF PURCHASE A RETURN AUTHORIZATION. WITH THE EXCEPTION OF THE FOREGOING WARRANTY, SUPPLIER MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS, AND SPECIFICALLY DISCLAIMS ALL WARRANTING IMPLIED AT LAW INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT.

Between September 2009 and March 2010, Defendant purchased approximately 2,507,077 pounds of PWF from Plaintiff. Plaintiff contends, and Defendant disputes, that every shipment of PWF met or exceeded Plaintiff's published specifications. While Defendant experienced some success in using Plaintiff's PWF, from November 16, 2009 to February 5, 2010, Defendant made some complaints about the shipments. Defendant's complaints were not stated in terms of failure to meet published specifications, but did identify various problems with the film. Defendant encountered continuous difficulties using Plaintiff's PWF.

Film was purchased from Plaintiff for several months through January 2010. In January 27, 2010, Defendant advised Plaintiff that it was using a competitor's film until Plaintiff could resolve its performance and quality issues. In February 2010, Defendant re-signed a Supply Agreement with terms that, for purposes of the instant motion, are identical to the original Agreement. Thereafter, the number of orders placed by Defendant decreased.

Plaintiff then commenced the instant action asserting claims of breach of contract and breach of the covenant of good faith and fair dealing. Plaintiff previously moved for summary judgment on the issue of whether the parties entered into an enforceable agreement. The Court held that the Agreement was enforceable. Currently before the Court is Plaintiff's motion for summary judgment on Defendant's liability for breach of contract.

II. DISCUSSION

Plaintiff moves for summary judgment claiming that Defendant breached the Agreement by failing to purchase the requisite amounts of Plaintiff's PWF as specified in the Agreement. Defendant opposes the motion on the grounds that: (1) Plaintiff did not adequately test the PWF to ensure it met published specifications; (2) the PWF supplied by Plaintiff did not meet those specifications; (3) Defendant demanded adequate assurances of performance, which Plaintiff refused; (4) the remedies under the Agreement failed their essential purpose; (5) Defendant adequately reported non-confirming goods to Plaintiff; and (6) Defendant properly terminated the Agreement.

Before addressing the specific arguments raised by the parties, it is helpful to set out the warranty process under the Agreement:

(i) Plaintiff warranted that the PWF would meet its own published specifications;

(ii) Defendant was solely responsible for determining the suitability for use of the PWF;

(iii) within thirty days after tender of delivery, Defendant had to inform Plaintiff in writing if any PWF was believed to be defective;

(iv) Defendant could not return any PWF unless: (a) Plaintiff determined that the PWF failed to meet published specifications; and (b) upon such a finding, ...


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