MacDraw, Inc. v. CIT Group Equipment Financing, Inc.
| Citation | 157 F.3d 956 |
| Decision Date | 10 December 1997 |
| Docket Number | Docket No. 97-7029 |
| Parties | MacDRAW, INC., Plaintiff-Appellant, v. THE CIT GROUP EQUIPMENT FINANCING, INC., and Richard Johnston, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Lawrence W. Schilling, New York, NY (Ramsey Clark, on the brief), for Plaintiff-Appellant.
Susan G. Rosenthal, Winick & Rich, New York, NY (Jeffrey H. Weinberger, Bruce C. Anderson, of counsel), for Defendants-Appellees.
Before: CABRANES, Circuit Judge, and PARKER, District Judge. **
Plaintiff-appellant MacDraw, Inc. ("MacDraw") appeals from partial summary judgment entered in the United States District Court for the Southern District of New York by Judge Shirley Wohl Kram in favor of defendants-appellees The CIT Group Equipment Financing, Inc. and Richard Johnston (collectively, "CIT"), dismissing MacDraw's claim of "unjust enrichment." It also appeals from a subsequent order entered by Judge Denny Chin granting CIT judgment as a matter of law, pursuant to Fed.R.Civ.P. 52(c), on MacDraw's promissory estoppel and fraud claims and from Judge Chin's denial of MacDraw's motions to amend its complaint to include a claim for negligent misrepresentation and to reassert a breach of contract claim. In addition, MacDraw challenges Judge Chin's impartiality. We affirm in all respects.
The factual background and procedural history of this matter are set forth in two previous opinions of this Court, with which we assume familiarity. See MacDraw, Inc. v. CIT Group Equipment Financing, Inc., 73 F.3d 1253 (2d Cir.1996) ("Mac Draw I" ); MacDraw, Inc. v. CIT Group Equipment Financing, Inc., 138 F.3d 33 (2d Cir.1998) ("MacDraw II" ). The background information pertinent to this appeal is as follows.
For purposes of this appeal, the following facts are not in dispute. This case arose from a dispute over CIT's financing of a sale of industrial equipment by MacDraw to nonparty Laribee Wire Manufacturing Company, Inc. ("Laribee"). In July 1989, Laribee ordered certain wire-drawing equipment from MacDraw for a purchase price of approximately $7,000,000, to be paid in installments. Laribee approached CIT to finance the purchase. Under a Loan and Security Agreement between Laribee and CIT, dated as of July 2, 1990, CIT agreed to provide a series of interim loans upon which Laribee could draw to meet its payment schedule. CIT also received and perfected a security interest in the equipment.
The financing agreement required that, prior to each disbursement, Laribee attest to its solvency and creditworthiness and continue to make payments on previous disbursements. In addition, CIT required that Laribee execute a Vendor's Consent and Agreement, under which Laribee permitted CIT to disburse funds directly to MacDraw. The Vendor's Consent and Agreement contained the following clause:
[Laribee] shall in all events remain obligated to [MacDraw] under the Purchase Agreement, and CIT assumes no obligations thereunder, it being a successor to [Laribee's] rights but not [its] obligations.
MacDraw completed its delivery of the equipment by July 30, 1990, but continued for several months thereafter to perform work installing and up-grading the equipment. By September 1990, MacDraw had received payment for ninety percent of the cost of the equipment, leaving $711,863 of the total purchase price unpaid. On November 16, 1990, a Laribee officer notified CIT that Laribee had accepted the machinery delivered and installed by MacDraw and authorized CIT to transfer the final ten percent balance to MacDraw. Before releasing the final balance, however, CIT discovered that Laribee had failed to keep current on a revolving line of credit with Banker's Trust, an event that also constituted a default of Laribee's financing agreement with CIT. Accordingly, CIT refused to disburse the final payment to MacDraw.
On December 12, 1990, having failed to satisfy its obligations to Banker's Trust, Laribee informed CIT that it would be unable to meet the criteria for disbursement of the final payment to MacDraw. Two days later, CIT consolidated all of the debt owed to it by Laribee (including debt unrelated to the MacDraw transaction) into a single note, which was secured by the equipment. Laribee filed for bankruptcy on February 7, 1991, and MacDraw and CIT each filed a proof of claim in the proceedings that ensued. 1 The bankruptcy trustee eventually released the equipment to CIT, which then foreclosed on its security interest in the equipment and sold the machinery to a third party in September 1991.
MacDraw commenced this action against CIT and Johnston in August 1991, seeking, inter alia, the $711,863 final installment owed to it. MacDraw premised its various theories of liability on the common factual predicate that defendant Johnston, the CIT employee handling the Laribee account, had on numerous occasions assured MacDraw vice president Massimo Colella that CIT would pay MacDraw the final installment as soon as Laribee accepted the equipment. MacDraw's complaint alleged that Johnston and CIT had engaged in common law fraud by misrepresenting CIT's intention to make the final payment, thereby inducing MacDraw to spend additional funds to "fine-tune" the equipment after installation (Count 1); that MacDraw was an intended third-party beneficiary of the agreement between Laribee and CIT (Count 2); that the doctrines of promissory estoppel and unjust enrichment precluded CIT from withholding the final payment from MacDraw (Count 3); that CIT had breached a unilateral contract with MacDraw (Count 4); and that CIT had breached a contract implied-in-fact between CIT and MacDraw based on their course of dealing (Count 5). Under each count, MacDraw also sought more than $270,000 in damages for costs that MacDraw had purportedly incurred upgrading the equipment in reliance on CIT's promise to pay the final installment. Following discovery, MacDraw moved for partial summary judgment on Counts 2 through 5 of its complaint. CIT cross-moved for summary judgment dismissing the complaint in its entirety and for sanctions for MacDraw's purportedly frivolous motion practice.
In an unpublished Memorandum Opinion and Order of January 17, 1994, Judge Kram denied MacDraw's motion for partial summary judgment in its entirety and granted CIT's cross-motion on three of the five counts, dismissing all but MacDraw's fraud and promissory estoppel claims. Judge Kram also granted CIT's motion for sanctions, on the grounds that MacDraw's motion for partial summary judgment was patently meritless with regard to three of the five counts and that certain of MacDraw's damages claims lacked any factual basis. Finally, Judge Kram acknowledged MacDraw's request to file a "motion for voluntary recusal" on the ground that the court had "prejudged the case against [MacDraw]." Judge Kram invited the parties to prepare a schedule for submission of the recusal motion, but MacDraw never filed the motion.
MacDraw and its then-counsel, Larry Klayman, subsequently appealed the imposition of sanctions, and we reversed. See MacDraw I, 73 F.3d at 1262. However, we MacDraw II, 138 F.3d at 35. In addition, we observed that
[o]ur discussion should not be taken to suggest that we find the conduct of plaintiff's counsel throughout this litigation to be acceptable. Indeed, we note our sympathy with the district court's frustration; in pursuing this appeal, plaintiff's counsel submitted briefs that included inaccurate characterizations of the record and comments that we consider entirely inappropriate.
Following remand to the district court, the case was transferred to Judge Chin on November 14, 1995. On September 20, 1996, MacDraw filed a motion for leave to amend its complaint to add a claim for negligent misrepresentation. The district court denied that motion by order dated October 24, 1996.
Judge Chin presided over a bench trial held on November 6, 7, 12, and 13, 1996, at which MacDraw was represented by Klayman and Paul Orfanedes. MacDraw's two witnesses at trial were Colella and MacDraw comptroller Patricia Walter. After MacDraw rested, CIT moved pursuant to Rule 52(c) for judgment as a matter of law. 2 The district court denied the motion, indicating that it wished to hear the testimony of defendant Johnston. After it presented Johnston's testimony, CIT renewed its Rule 52(c) motion. At the same time, MacDraw moved to reassert a breach of contract claim, but the court promptly denied MacDraw's motion. The next day, November 13, 1996, in a decision from the bench, the district court granted CIT's motion for judgment as a matter of law.
The district court's grant of judgment in CIT's favor was followed by a series of events that we have described in detail in MacDraw II, 138 F.3d at 35-37. First, at the conclusion of the trial, Klayman initiated an argumentative colloquy in open court during which he challenged the merits of the district court's decision. Then, on December 9, 1996, Klayman and Orfanedes wrote the district court a letter questioning its impartiality. In the letter, they suggested that the district court was biased against them because of their participation in campaign financing litigation against other Asian American appointees of the Clinton Administration. After giving Klayman and Orfanedes the opportunity to explain their December 1996 letter both at an oral hearing and through written submissions to the court, on February 5, 1997 Judge Chin sanctioned the two attorneys for having violated Disciplinary Rules 1-102(A)(5) and 7-106(C)(6) of the Code...
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