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Rienzi & Sons, Inc., Plaintiff, Counterclaim-Defendant v. N. Puglisi & F. Industria Paste Alimentari S.P.A. and Francesco Pulejo

May 16, 2013

RIENZI & SONS, INC., PLAINTIFF, COUNTERCLAIM-DEFENDANT,
v.
N. PUGLISI & F. INDUSTRIA PASTE ALIMENTARI S.P.A. AND FRANCESCO PULEJO, DEFENDANTS, COUNTERCLAIM-PLAINTIFFS,



The opinion of the court was delivered by: Dora L. Irizarry, United States District Judge:

OPINION AND ORDER

On May 27, 2008, Rienzi & Sons, Inc. ("Rienzi") commenced the instant action against defendants N. Puglisi & F. Industria Paste Alimentari S.p.A. ("Puglisi") and Francesco Pulejo ("Pulejo") (collectively, "Defendants") by filing a summons and complaint in New York State Supreme Court, Queens County. (See Decl. of Evan Mandel ("Mandel Decl."), Ex. A, Complaint, Doc. Entry No. 67-4.) On June 25, 2008, Defendants properly removed the action to this Court pursuant to 28 U.S.C. §§ 1332 and 1441(a). (See Notice of Removal, Doc. Entry No. 1.) Defendants filed an answer and asserted a counterclaim against Rienzi for breach of contract. (See Answer, Doc. Entry No. 8.) Rienzi amended its complaint to assert one claim for breach of fiduciary duty, three claims for breach of contract, and one claim for breach of joint venture. (See Amended Complaint ("Am. Compl."), Doc. Entry No. 14.) Defendants' answer to the Amended Complaint denied Plaintiff's claims and re-asserted Puglisi's counterclaim against Rienzi for breach of contract. (See Answer to Amended Complaint, Doc. Entry No. 18.) Defendants amended their answer to include two additional affirmative defenses: failure to mitigate damages and waiver. (See Amended Answer to Amended Complaint ("Am. Answer"), Doc. Entry No. 52.)

Defendants now move for summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure, as to: Rienzi's breach of fiduciary duty and breach of joint venture claims, two of Rienzi's breach of contract claims, and Puglisi's counterclaim. (See Puglisi's and Pulejo's Mot. for Summ. J. ("Defs. Mot."), Doc. Entry No. 67.) Rienzi opposes Defendants' motion. (See Plaintiff's Mem. in Opp. to Defs. Mot. for Summ. J. ("Pl. Mem."), Doc. Entry No. 68.) For the reasons set forth below, Defendants' motion for summary judgment is granted.

BACKGROUND

Rienzi is an importer and distributor of Italian foods. (Plaintiff's Combined Response to Defendants' Statement of Material Facts and Counter-Statement of Additional Material Facts ("Pl. 56.1") ¶ 1, Doc. Entry No. 68-25; Puglisi and Pulejo's Rule 56.1 Statement ("Defs. 56.1") ¶ 1, Doc. Entry No. 67-27.) Michael A. Rienzi is the founder, President, and owner of Rienzi. (Decl. of Michael Rienzi Dated Aug. 24, 2011 ("M. Rienzi Decl.") ¶¶ 1, 6, Doc. Entry No. 68-1.) Puglisi is an Italian pasta manufacturer. (Pl. 56.1 ¶ 1; Defs. 56.1 ¶ 1.) In the early 1970s, Rienzi began purchasing pasta from Puglisi, which he imported and sold in the United States under the Rienzi brand. (Id.) At that time, Gino Puglisi and the Puglisi family owned and managed Puglisi. (Pl. 56.1 ¶ 2; Defs. 56.1 ¶ 2.) In or around 1995, the United States Department of Commerce ("U.S.D.O.C.") launched an investigation into Puglisi and other Italian pasta manufacturers for anti-dumping and/or countervailing customs duties owed on pasta ("U.S.D.O.C. Investigation"). (Am. Compl. ¶ 12; Pl. 56.1 ¶ 102; Defendants' Response to Plaintiff's Statement of Additional Facts ("Defs. Reply 56.1") ¶ 102, Doc. Entry No. 69-7.) In 2006, Pulejo purchased an equity interest in Puglisi and became its President. (Pl. 56.1 ¶ 2; Defs. 56.1 ¶ 2.) Rienzi imported and sold Puglisi pasta until 2007. (Pl. 56.1 ¶ 89; Defs. Reply 56.1 ¶ 89.)

I. The Rienzi-Puglisi Business Relationship

The parties dispute whether the companies conducted business through oral agreements and course of dealing, or through written contracts. It is undisputed that the relationship between Rienzi and Puglisi began with a "handshake" and an oral agreement between Michael Rienzi and Gino Puglisi. (Mandel Decl., Ex. H, Deposition of Michael Rienzi Dated Jan. 28, 2010 ("M. Rienzi Dep. Tr.") at 17:21-19:8; M. Rienzi Decl. ¶ 6.) Moreover, it is undisputed that the parties described the nature of their relationship in an undated supplemental submission to the U.S.D.O.C. as follows:

"Maintaining a very close business and personal relationship for over 20 years, Mr. Mike Rienzi and Mr. Gino Puglisi do not conduct business pursuant to contracts. It has been customary for Mr. Rienzi and Mr. Puglisi (as with many Italian businessmen) to transact business pursuant to oral agreements and assurances. Most business is conducted over the phone or via fax and Mr. Rienzi and his son visit the Milazzo plant frequently to confer with the owners of Puglisi. Thus, the absence of physical documentation in the form of contracts or detailed agreements setting forth the purchasing, pricing or payment conductions on sales is not unusual.

No price agreements or contracts are in effect between Puglisi and Rienzi." (Decl. of Elliot G. Sagor ("Sagor Decl."), Ex. 10 at 3-4, Doc. Entry No. 68-2.)

Puglisi disputes that the contractual relationship was based on oral agreements and course of dealing, maintaining instead that agreements between the companies were memorialized in writing. In support of this contention, Puglisi provided the Court with copies of pasta invoices, a 2007 contract regarding the payment of legal fees for the U.S.D.O.C. investigation, and a 1995 right of first refusal letter between Michael Rienzi and Gino Puglisi. (Defs. Reply 56.1 ¶¶ 91, 110; see also Mandel Decl., Exs. E, G, AA.) Moreover, Puglisi asserts that there had been a material change in the companies' relationship since the U.S.D.O.C. Investigation submissions in the late 1990s.

Rienzi counters that, in 1971, the companies entered into an exclusive importation and supply arrangement based on an oral agreement and course of dealings under which Rienzi purchased dried pasta exclusively from Puglisi*fn1 and, although Puglisi sold pasta to other Italian-based distributors, it did not sell pasta to any pasta distributors in the United States other than Rienzi. (Pl. 56.1 ¶¶ 89-91; M. Rienzi Decl. ¶ 2; see Defs. Reply 56.1 ¶¶ 89-90 (denying any such exclusive agreement existed or was ever put in writing).) In a submission to the U.S.D.O.C. in connection with the U.S.D.O.C. Investigation, Puglisi stated: "Rienzi has been Puglisi's exclusive U.S. customer since 1971. Puglisi has sold no pasta to any U.S. customer other than Rienzi." (Sagor Decl., Ex. 8, U.S.D.O.C. Antidumping Questionnaire Dated Nov. 3, 1997 at 7, Doc. Entry No. 68-10.) A supplemental submission to the U.S.D.O.C. disclosed that:

"There is no formal exclusivity contract between the parties. The exclusivity is well understood by Puglisi. After two decades of doing business together, Puglisi has not sold to other U.S. customers. Puglisi does not approach potential U.S. customers and does not accept orders from them." (Sagor Decl., Ex. 10, U.S.D.O.C. Supplemental Questionnaire Response at 4, Doc. Entry No. 68-12.)

Over the years, the companies developed a method of conducting business. (Pl. 56.1 ¶ 94; Defs. Reply 56.1 ¶ 94.) Rienzi faxed, emailed, or called Puglisi to place a pasta order, indicating the amount of pasta requested. (Pl. 56.1 ¶ 95; Defs. Reply 56.1 ¶ 95; M. Rienzi Dep. Tr. 188:7-189:3.) Puglisi acknowledged the order by either a telephone call or a faxed confirmation letter and then shipped the pasta to Rienzi with a written invoice. (Pl. 56.1 ¶ 95; Defs. Reply 56.1 ¶ 95.) Rienzi then distributed the products to various supermarkets and retail stores for sale to the general public. (Id.)

The parties dispute when the contract for each pasta sale was formed and the time at which payments became due for pasta that was shipped and received. Rienzi asserts that an oral pasta sales contract was formed when it ordered pasta from Puglisi. (Pl. 56.1 ¶¶ 144-45.) Puglisi asserts that each pasta sales contract was formed when it shipped the pasta and concurrently issued a written invoice that served as the written sales contract. (Defs. Reply 56.1 ¶¶ 94-95.)

Rienzi contends that it had an "open account" with Puglisi and Puglisi did not require Rienzi to make payments within a specific time period. (M. Rienzi Decl. ¶ 13.) Michael Rienzi testified that the course of dealings between the two companies was such that Rienzi paid Puglisi for pasta that was shipped and received "when it wanted to." (M. Rienzi Dep. Tr. at 137:5-11, 139:13-24.) He further clarified that an "open account" meant, "you pay when you feel like it." (Id. at 141:12-15.) In its submissions to the U.S.D.O.C., Puglisi averred that:

"[B]ecause of the unique nature of their relationship, Rienzi purchases from Puglisi on an open credit term basis without any fixed payment schedule. There are no set payment terms and no written agreement exists between the two companies regarding payment or credit. All invoices to Rienzi are printed with payment terms, "as agreed." Rienzi pays at his own convenience, with due regard to Puglisi's financial needs. There is no fixed rule as to when payment will be made." (Sagor Decl., Ex. 10 at 3, see also Ex. 8 at 8.)

Michael Rienzi and Pulejo first discussed the timeliness of payments in November 2006. Puglisi contends that the "pasta invoices at issue in this case provided that payment had to be made within 60 to 90 days." (Defs. Reply 56.1 ¶ 99.) Yet, Pulejo acknowledged that, in November 2006, Michael Rienzi indicated he would pay "perhaps more quickly, but [M. Rienzi] didn't say that he would pay . . . in 60 to 90 days." (Mandel Decl., Ex. J, Deposition of Francesco Pulejo Dated Jan. 20, 2010 ("Pulejo Dep. Tr.") at 85:9-86:2.) According to Rienzi, under the "open account" arrangement between the parties, the balance for outstanding pasta payments ranged from 1,000,000,000 to 2,000,000,000 lira. (Pl. 56.1 ¶ 101; see Defs. Reply 56.1 ¶ 101 (acknowledging that at various points in time the outstanding balance was in this range).)

II. U.S.D.O.C. Investigation and Legal Fees

In or about 1995, the U.S.D.O.C. launched investigations into anti-dumping and/or countervailing customs duties owed on pasta. (Am. Compl. ¶ 12; Pl. 56.1 ¶ 102; Defs. Reply 56.1 ¶ 102.) The investigation focused on whether Puglisi and other Italian pasta manufacturers were exporting products into the United States at prices below the home market value of goods, i.e., dumping product into the United States. (Pl. 56.1 ¶ 102; Defs. Reply 56.1 ¶ 102.) The parties agree that it was Rienzi, as importer, who would pay the customs duties at issue. (Pl. 56.1 ¶ 38; Defs. 56.1 ¶ 38.) It is disputed which company retained the law firm, Grunfeld, Desiderio, Lebowitz & Silverman LLP ("Grunfeld"), for the purpose of representation in the U.S.D.O.C. Investigation, and whether one or both companies were represented by Grunfeld. (Pl. 56.1 ¶¶ 39, 104; Defs. 56.1 ¶ 39; Defs. Reply 56.1 ¶ 104.)

Nonetheless, the companies agreed that Rienzi, at the outset, would pay the full amount of legal fees, which he did. (Pl. 56.1 ¶¶ 111-12; Defs. Reply 56.1 ¶¶ 111-12.). The parties dispute what portion of the fees Puglisi was obligated to reimburse Rienzi. (Pl. 56.1 ¶¶ 113-14; Defs. Reply 56.1 ¶¶ 113-14.). On November 27, 2004, Puglisi sent Rienzi a draft, unsigned agreement regarding legal fees. (Pl. 56.1¶ 40; Defs. 56.1 ¶ 40; Mandel Decl., Ex. M.) The agreement stated, inter alia, that Puglisi agreed to reimburse Rienzi for legal fees in the amount of $1 million U.S. dollars ("U.S.D.") and, in exchange, Rienzi agreed to release Puglisi from any other claims in connection with the legal fees. (Pl. 56.1 ¶¶ 40-41; Defs. 56.1 ¶¶ 40-41; Mandel Decl., Ex. M.) In a December 17, 2004 letter, Michael Rienzi responded concerning the draft agreement indicating he was "surprised, unhappy and even a bit offended" at the inclusion of a release in the agreement because "what could be more offensive to ask an old friend for. How can you imagine that I'd ask you for things that we didn't agree on or reopen questions already settled." (Pl. 56.1 ¶ 42; Defs. 56.1 ¶ 42; Mandel Decl., Ex. N.) The parties did not sign the 2004 draft agreement. (Pl. 56.1 ¶ 43; Defs. 56.1 ¶ 43.)

On or about May 25, 2007, the companies signed a written agreement concerning the legal fees for the U.S.D.O.C. Investigation (the "2007 Agreement"). (Pl. 56.1 ¶ 44; Defs. 56.1 ¶ 44; Mandel Decl., Ex. G.) The parties dispute who drafted the agreement. (Defs. 56.1 ¶ 45 (stating it was drafted by Rienzi's lawyer or accountant); Pl. 56.1 ¶ 45 (disputing Defendants' statement and maintaining it was written by a Puglisi accountant with the assistance of a part-time Rienzi accountant).) The 2007 agreement provided that Rienzi had paid all the Grunfeld legal fees, totaling $2,010,000 U.S.D., and Puglisi agreed to pay Rienzi immediately half of the legal fees by deducting $1,005,000 U.S.D. from the amount Rienzi owed Puglisi for unpaid pasta shipments. (Pl. 56.1 ¶¶ 46-47; Defs. 56.1 ¶¶ 46-47.) The agreement also provided that:

"The amount set forth above must be understood as a proposal for a settlement, through which both parties waive any other and/or additional claims, regarding all the related or resulting financial charges or those which in any case can make reference to the facts stated above and in any case, does not represent any acknowledgment whatsoever of the claims put forth in this regard." (Pl. 56.1 ¶ 48; Defs. 56.1 ¶ 48.) The parties dispute whether this provision constituted a release from any further claims related to the U.S.D.O.C. Investigation. (Id.) On May 2007, Puglisi deducted $1,005,000 U.S.D. from the amount Rienzi owed Puglisi for the specific pasta invoices listed in the 2007 Agreement. (Pl. 56.1 ¶ 49; Defs. 56.1 ¶ 49; Mandel Decl., Ex. G.)

The parties also dispute whether Puglisi orally agreed to pay the remaining half of the legal fees if the business relationship ended. (Pl. 56.1 ¶ 130; Defs. Reply 56.1 ¶ 130.) Rienzi claims that, over time, the parties developed an oral understanding regarding the reimbursement of legal fees, which Rienzi terms the "Payment Offset Agreement." (Pl. Mem. at 3-4.) Pursuant to this agreement, Rienzi agreed to advance funds to cover all the Grunfeld legal fees, provided Puglisi repaid him 50% of the legal fees as soon as possible through pasta offsets and the remaining 50% if, and when, the two companies stopped doing business together. (Id.) Furthermore, pursuant to the Payment Offset Agreement, Rienzi was permitted to maintain an "Open Credit Balance" equal to the amount of unreimbursed legal fees. (Pl. 56.1 ¶ 115.) Puglisi disputes the existence and terms of this oral understanding and maintains that the agreement always was to split the fees equally and any oral discussions were memorialized in writing in the 2007 Agreement. (Defs. Reply 56.1 ¶¶ 112-15.) Lastly, the parties dispute whether the total amount of legal fees Rienzi paid was $2,525,000 or $2,010,000. (Pl. 56.1 ¶¶ 123, 131; Defs. Reply 56.1 ¶¶ 123, 131.)

III. The Rienzi-Puglisi Business Relationship Ends

In 2006, Pulejo acquired an equity interest in Puglisi and later became its President. (Pl. 56.1 ¶ 3; Defs. 56.1 ¶ 3.) The Rienzi-Puglisi business relationship began to sour because of the legal fees dispute, allegations of Puglisi shipping short and untimely orders, and Rienzi failing to pay invoices in a timely manner. (Pl. 56.1 ¶¶ 32-37, 117, 141-47, 156; Defs. 56.1 ¶¶ 32-37; Defs. Reply 56.1 ¶¶ 117, 141-47, 156; Sagor Decl., Ex. 3, Deposition of Antonio Sorrentino Dated May 10, 2010 ("Sorrentino Dep. Tr.") 58:22-61:8.) In April or May 2007, Antonio Sorrentino, an employee of the Unigrani Group that included Puglisi, and Pulejo traveled to New York to meet with Michael Rienzi to discuss the strained business relationship. (Sorrentino Dep. Tr. at 6:22-7:6, 58:9-21; Pl. 56.1 ¶ 131.)

The parties dispute when Rienzi's invoices were due and whether Rienzi failed to make timely payments. Rienzi claimed there was an "open account" relationship and, pursuant to the alleged Payment Offset Agreement, any outstanding invoices should have gone towards the open credit balance representing the unpaid legal fees. (Pl. 56.1 ¶¶ 115, 124-25.) Puglisi claimed payment of each invoice was due within sixty or ninety days, depending on the invoice, and no such open credit balance existed. (Defs. Reply 56.1 ¶¶ 115, 124-25.)

The parties agree that, in January 2008, via email, Rienzi terminated the relationship with Puglisi. (Pl. 56.1 ¶ 157; Defs. Reply 56.1 ¶ 157.) Rienzi also requested repayment of the remainder of the legal fees not already offset pursuant to the 2007 Agreement. (Pl. 56.1 ¶ 158.) The parties agree that Pulejo claimed he was "surprised" by the request and that Puglisi attempted to persuade Rienzi to continue the relationship. (Pl. 56.1 ¶ 159; Defs. Reply 56.1 ¶ 159.) Puglisi ...


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