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Valjean Manufacturing Inc. A California Corporation, and Martin v. Michael Werdiger

September 5, 2012

VALJEAN MANUFACTURING INC. A CALIFORNIA CORPORATION, AND MARTIN GRUBER, PLAINTIFFS,
v.
MICHAEL WERDIGER, INC.,
DEFENDANT.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge:

OPINION & ORDER

Three motions are before the Court, two brought by Plaintiffs Valjean Manufacturing Inc. and Martin Gruber (collectively "Valjean") and a cross-motion brought by Defendant Michael Werdiger, Inc. ("MWI"). Valjean's first motion seeks to enforce the Court's Amended Judgment or requests sanctions against MWI. MWI cross-moves for relief from the Amended Judgment. Finally, Valjean moves to strike the Declaration of John A. Slavek (the "Slavek Declaration") filed in support of MWI's cross-motion. For the reasons set forth below, Valjean's motion to enforce the Amended Judgment and/or for Sanctions is DENIED in part, and I require additional briefing to determine a final figure. MWI's cross-motion is DENIED. Valjean's motion to strike is DENIED.

BACKGROUND

The lengthy factual and procedural background of this case is available in several earlier opinions from this Court and the Second Circuit, familiarity with which is assumed.*fn1 I summarize the relevant portions here. Valjean and MWI entered a Manufacturing and Security Agreement ("MSA") on October 3, 1994. See Valjean Mfg. Inc. v. Michael Werdiger Inc. ("Valjean II"), No. 03 Civ. 6185 (HB) 2004 WL 1948752, at *1 (S.D.N.Y. Sept. 2, 2004). Under the MSA, Valjean was to design jewelry that incorporated diamonds and precious metals provided by MWI, and MWI was to mark and sell the finished products (the "Jewelry"). Id. Section 5.2 of the MSA provided that "MWI may dismantle any Jewelry which MWI has held in inventory for more than 360 days and sell the component parts thereof and no Valjean Payment shall be made in respect of such scrapped Jewelry." MSA § 5.2. After disputes regarding MWI's accounting and the apportionment of debt among the parties, MWI terminated the MSA on June 30, 2003.*fn2 Valjean II, 2004 WL 1948752, at *1. Valjean sought damages from MWI for MWI's breach of the MSA. Id.

In February 2005, after a Bench Trial and post-trial memoranda, I issued an Order that required MWI to pay Valjean $6,612,486 in damages,*fn3 plus prejudgment interest from the date of filing, obligated MWI to "reimburse Valjean, pursuant to the terms of the MSA, its portion of the sales of inventory sold after July 31, 2004," and required Valjean to "deliver to MWI by February 15, 2005 all consigned materials currently in the possession of Valjean, Martin Gruber, Fred Gruber or any agent, party or interest thereto." Valjean Mfg. Inc. v. Michael Werdiger, Inc. ("Valjean IV"), No. 03 Civ. 6185 (HB), 2005 WL 356799, at *19 (S.D.N.Y. Feb. 14, 2005). The Amended Judgment issued in June 2008, after two appeals to the Second Circuit restated that the payments from MWI to Valjean for items sold after July 31, 2004 were to be made as items were sold going forward "pursuant to the terms of the MSA." Oct. 21, 2011 Mead Decl. Ex. 1, June 23, 2008 Amended Judgment. To date, Valjean has been paid $98,713. See Jan. 4, 2012 Slavek Decl. 4.

Beginning approximately one week before the October 2004 trial, MWI began melting down the Jewelry.Oct. 21, 2012Regan Decl. Ex. 7--7.1. On average, each item of Jewelry that MWI melted down was approximately 1,539 days old. Jan. 4, 2012 Slavek Decl. ¶¶19(b)--20(a). In total, MWI melted down approximately 67 percent of the Jewelry in its possession during the fourteen weeks before the initial post-trial ruling on January 31, 2005. Oct. 21, 2012 Regan Decl. Ex. 7--7.1.

DISCUSSION

I. Valjean's Motion to Enforce Amended Judgment and/ or for Sanctions against MWI

A. Compensation for Melted Inventory Is Not Required

Valjean seeks compensation for the Jewelry that MWI scrapped and argues that because that Jewelry is the subject of my judgment in Valjean's favor, it was improper. Pls.' Mem. to Enforce 9--10. I disagree.

"Court orders are construed like other written instruments, except that the determining factor is not the intent of the parties, but that of the issuing court." United States v. Spallone, 399 F.3d 415, 424 (2d Cir. 2006). Interpretation of court orders, like contracts, is restricted to the "four corners" of the document unless an ambiguity exists. Id. My June 23, 2008 Order required MWI to "reimburse Valjean, pursuant to the terms of the MSA, its portion of the sales of inventory sold after July 31, 2004." Oct. 21, 2011 Mead Decl. Ex. 1, June 23, 2008 Amended J. 2 (emphasis added). Valjean never sought an order that requested reports on MWI's scrapping activities or curtailed MWI's right to scrap as it is described in the MSA. MSA § 5.2 ("MWI may dismantle any Jewelry which MWI has held in inventory for more than 360 days and sell the component parts thereof and no Valjean Payment shall be made in respect of such scrapped Jewelry."). Although Valjean sought immediate payment of $7 million in projected income from the future sale of the Jewelry, I explicitly rejected this figure when I required payment to occur as MWI sold the Jewelry because I understood that the $7 million figure was speculative. See Valjean II, 2005 WL 221264, at *7 ("Both Valjean and MWI recognize that Valjean is entitled to the proceeds earned pursuant to the terms of the MSA after July 31, 2004. However, Valjean's $7,000,000 estimate is too speculative.").

Valjean's arguments that the scrapping was improper and that it ought to be compensated for the scrapped Jewelry are without merit. Valjean first argues that the scrapping was improper because MWI represented to the Court that it was trying to sell the Jewelry. However, what MWI's attorney actually represented to the Court was that its projected future sales were an estimate that depended on whether MWI was able to sell the goods and was paid for such sales. Oct. 21, 2011 Mead Decl. Ex. 8, Dec. 9, 2004 Post-Trial Hrg. Tr. 23: 11--19 ("Some money is being collected as it's collected. And if -- and that's a big [I]F then it will be paid. But that's only if Mr. Werdiger believes if anything goes right, if Crescent pays everything, if he's able to sell it all, that's how much would come through that would be attributable to Valjean. But there a lot of big ifs there, and you can't make any guess until it happens."). I previously acknowledged that MWI had the right to scrap, and that "If MWI chooses to scrap the Jewelry, Valjean is entitled to no payment whatsoever." Valjean II, 2004 WL 1948752, at *3. Although Valjean cites cases in support of the view that a party may not destroy objects that are the subject of the litigation, the cases cited are clearly distinguishable because here there was an explicit contract that gave MWI the right to scrap unsold inventory after a certain amount of time, MSA § 5.2, and an Order that expressly stated that Valjean was to be paid "pursuant to the terms of the MSA," which allows for scrapping.*fn4 Had Valjean sought and obtained an Order that precluded the scrapping allowed by the MSA, perhaps the result would be different, but having failed to do so, it cannot now complain that it ought to be paid for the scrapped Jewelry.

Because I conclude that MWI had a right to scrap the Jewelry, I must reject Valjean's argument that the scrapping is sanctionable. Pls.' Mem. to Enforce 10. Although MWI's conduct was not sanctionable, I decline MWI's invitation based on Local Rule 83.6*fn5 to award ...


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