International Meat Traders, Inc. v. H & M Food Systems, 94-10987

Decision Date05 December 1995
Docket NumberNo. 94-10987,94-10987
Citation70 F.3d 836
Parties, 28 UCC Rep.Serv.2d 511 INTERNATIONAL MEAT TRADERS, INC., etc., Plaintiff-Appellant-Cross-Appellee, v. H & M FOOD SYSTEMS, etc., et al., Defendants, H & M Food Systems, etc., et al., Defendants-Appellees, H & M Food Systems Co., Inc., Defendant-Appellee-Cross-Appellant. H & M FOOD SYSTEMS CO., INC., Plaintiff-Appellee-Cross-Appellant, v. CKS, INC., d/b/a Intertrade, et al., Defendants, International Meat Traders, Inc., d/b/a Intertrade, Defendant-Appellant-Cross-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Jack L. Coke, Jr., Dallas, TX, for Appellants.

George Parker Young, Jonathan Suder, Friedman Young & Suder, Ft. Worth, TX, for Appellees.

Appeals from the United States District Court for the Northern District of Texas.

Before POLITZ, Chief Judge, and WISDOM and STEWART, Circuit Judges.

STEWART, Circuit Judge:

Plaintiff International Meat Traders, Inc., ("Intertrade") appeals the district court's final judgment on its breach of contract claim against defendant H & M Food Systems. It also appeals the order granting partial summary judgment on behalf of H & M, as well as costs and fees assessed by the court. H & M cross-appeals the denial of its motion for judgment as a matter of law and that part of the final judgment not granting relief on its counterclaims. For the following reasons we find no error by the district court and affirm its final judgment.

BACKGROUND

Intertrade is a large wholesale supplier and trader of meats. During 1991, Intertrade sold meat products to H & M Food Systems and the other defendant companies. H & M processed the meat products to make, inter alia, pepperoni and sausage for resale.

Prior to the instant dispute, Intertrade and H & M dealt with each other by phone. Steve Dial, H & M's purchasing agent, would submit orders for the meat products to Jerry Knoepfler of Intertrade. Knoepfler would then forward a written confirmation of the order to Dial. Sometimes Dial would sign the confirmations and return them to Knoepfler. Other times he would send Intertrade purchase orders stamped "confirmation of phone orders." At still other times he would remit nothing.

In late 1990, H & M was looking for a less expensive replacement for the domestic lean pork used in its pepperoni manufacture. To that end, he placed initial written orders with Knoepfler for imported Danish pork skirt and diaphragm meat. In February of 1991, based on his satisfaction with the initial deliveries and Knoepfler's representations about the dramatically increasing demand for Danish pork skirt and diaphragm meat, Dial placed large written orders for the substitute ingredients for delivery. Intertrade says Dial was trying to take advantage of current prices before the rise he expected for later that year. Instead of inflating, however, prices in the industry fell in the summer of 1991.

Around this time H & M was also having problems with its pepperoni production and had to reformulate its recipes. The problem was oxidative rancidity, which affected the taste and color of the pepperoni but did not affect its fitness for human consumption. After investigation, H & M concluded that Intertrade had delivered pork "diaphragms" instead of the agreed "Danish pork skirt and diaphragm meat," and that this difference contributed to its rancidity problems. Consequently Intertrade alleges that H & M began to refuse both to accept meat ordered from Intertrade and to pay on the purchase contracts on product to be delivered from October 1991 through January 1992. Intertrade also alleges that a substantial portion of the orders Dial placed from February through April 1991, included commitments to purchase diaphragm meat.

                H & M informed Intertrade and Knoepfler that it would not accept delivery of any more imported pork skirt and diaphragm meat after June 1, 1991.  In a conversation around May 2, 1991, Knoepfler agreed to substitute 60% of H & M's then outstanding orders for imported Danish pork skirt and diaphragm meat with domestic lean pork. 1  Therefore, as of May 2, 1991, approximately 40% of the then outstanding Intertrade confirmations for pork skirt and diaphragm meat did not allow replacement or substitution, and approximately 60% had language allowing substitution of "equal or better."
                

Intertrade sued H & M for breach of contract in federal court in New Jersey. About a month later, H & M countersued in Texas state court based on breach of express warranty and breach of implied warranty of merchantability and fitness for a particular purpose. Both cases were removed and consolidated in federal district court in Fort Worth, with H & M's suit included as a counterclaim.

H & M filed a motion for partial summary judgment against Intertrade claiming that the Intertrade confirmations which had not been signed and returned by H & M did not conform to the Texas Statute of Frauds. The trial court granted H & M's motion, holding that the 100 or so confirmations which were unsigned and not returned to Intertrade constituted merely unsigned, unenforceable offers. The case proceeded to a jury trial for breach of the confirmations that H & M did sign and return to Intertrade. The jury found against Intertrade on those written contracts.

Intertrade argues on appeal that the Merchants' Exception to the Statute of Frauds rendered the confirmations enforceable oral contracts. Intertrade also asserts that H & M admitted that the orders constituted "commitments made." Intertrade argues that the district court's error in granting partial summary judgment prejudiced its case before the jury, making reversal and remand necessary.

Intertrade moved for judgment on the counterclaim of H & M on the basis that the cause of action, if any, was no longer the property of H & M-Texas and had not been transferred to H & M-Delaware. The trial court's denial of the motion, Intertrade asserts, prejudiced its case and requires reversal and remand.

Finally, Intertrade claims that the jury verdict form was unclear on the question of liability. Intertrade contends that the jury verdict was actually in its favor and that the district court misinterpreted it, requiring remand for a calculation of damages.

H & M cross appeals the district court's ruling on the written contracts only if we reverse and remand on the issue of the course of dealing between the parties as to the written contracts.

DISCUSSION
Partial Summary Judgment

We review a district court's grant of summary judgment de novo. Weyant v. Acceptance Ins. Co., 917 F.2d 209, 212 (5th Cir.1990). We consider all the facts contained in the summary judgment record and the inferences to be drawn therefrom in the light most favorable to the non-moving party. Id.

As noted above, the district court granted H & M's motion for partial summary judgment, finding that the "verbal orders" were unenforceable because the only documentation to support them were Intertrade's confirmations, which H & M never signed and returned. Intertrade disagrees, claiming that these orders are the very agreements the Merchants Exception to the Texas Statute of Frauds contemplates.

The Texas Statute of Frauds provides:

(a) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon by the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.

(b) Between merchants, if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of Subsection (a) against such party unless written notice of objection to its contents is given within ten days after it is received.

(c) A contract which does not satisfy Subsection (a) but which is valid in other respects is enforceable ... (2) if the party against whom enforcement is sought admits in his pleading, testimony, or otherwise in court that a contract for sale was made but the contract is not enforceable under this provision beyond the quality of goods admitted; or....

Tex.Bus. & Com. Code Ann. Sec. 2.201 (West 1968).

It is undisputed that the value of each of the alleged verbal orders was greater than $500 and that H & M neither signed the confirmations at issue nor issued purchase orders of its own.

Intertrade argues that the Texas legislature designed the Merchants Exception, subsection (b) above, to address situations like the one before us, where a buyer may enforce an agreement against a seller but the seller may not do likewise because the only writing in existence is the written confirmation by the seller. Intertrade reads the statute to eliminate the buyer's ability to gamble upon the market by obliging the buyer to the contract unless the buyer communicated his objections within ten days after receipt of the confirmation.

H & M counters that the Merchants Exception does not apply when a seller's...

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