Cedar Petrochemicals Inc. v. Dongbu Hannong Chem. Co.
| Decision Date | 14 January 2011 |
| Docket Number | No. 06 Civ. 3972(LTS)(JCF).,06 Civ. 3972(LTS)(JCF). |
| Parties | CEDAR PETROCHEMICALS, INC., Plaintiff,v.DONGBU HANNONG CHEMICAL CO., LTD., Kumho P & B Chemicals, Inc., Defendant. |
| Court | U.S. District Court — Southern District of New York |
OPINION TEXT STARTS HERE
John Thomas Lillis, Jr., Thomas Michael Grasso, Kennedy Lillis Schmidt & English, New York, NY, for Plaintiff.Carolyn Traister Schiff, Robert A. Weiner, Michael Robert Huttenlocher, Jr., McDermott, Will & Emery, LLP, New York, NY, for Defendant.
Plaintiff Cedar Petrochemicals, Inc. (“Cedar”) brings this action against Dongbu Hannong Chemical Co., Ltd. (“Dongbu”) in order to recover for the breach of the terms of a sales contract for a quantity of phenol. The defendant now seeks (1) the imposition of sanctions against the plaintiff for failing to preserve samples of the phenol at issue and (2) the exclusion of evidence proffered by the plaintiff, including testimony, reports, a declaration from two expert witnesses, and an affidavit from another witness. For the reasons that follow, the defendant's motions are denied.
This case revolves around a contract for the sale and delivery of approximately 2000 metric tons of liquid phenol. (Second Amended Complaint (“2d Am. Compl.”), ¶ 1). Under the contract, dated May 17, 2005, Dongbu, a Korean corporation, agreed to deliver the phenol from the manufacturer to a ship called the Bow Flora in the port of Ulsan, South Korea, where Cedar would take possession of it. (Contract No. T250–P1–0505NYC (“Contract”), attached as Exh. 1 to Declaration of Cho Yong dated Sept. 10, 2010 (“Cho Decl.”); 2d Am. Compl., ¶¶ 20, 25–29). The contract incorporated by reference the manufacturer's “Guaranteed Sales Specs,” which called for the color of the phenol to be a maximum of five Hazen units on the Platinum–Cobalt scale at delivery; subsequently, both parties agreed to an amended maximum color of ten Hazen units. (Cho Decl., ¶¶ 10, 15–16, 19, 22; Contract; The Specification of Phenol, attached as Exh. 2 to Cho Decl.; Letter of Credit dated May 18, 2005, attached as Exh. 7 to Cho Decl.). The contract further stated that inspection of the phenol would be carried out by a “mutually acceptable/independent surveyor whose findings as to quantity/quality as per shoretank figures at loadport are final and binding on both parties.” (Contract).
On or about May 21, 2005, the phenol was loaded from the manufacturer's shore tanks onto the Green Pioneer, a ship chartered by the manufacturer, in the port of Yosu, South Korea. (Declaration of Hao–Lin Chu dated Feb. 2008 (“Chu Decl.”), attached as Exh. 4 to Omnibus Affidavit of Carolyn Traister Schiff dated July 30, 2010 (“Schiff Aff.”), ¶ 11). At that time, two independent surveyors—SGS Korea Co. Ltd. (“SGS Korea”), which had been hired by Cedar, and Global Surveyors and Inspectors Ltd. (“GSI”), which had been hired by the manufacturer—drew samples of the phenol from the manufacturer's shore tanks, which they tested and found to be within the specified color range. (Chu Decl., ¶¶ 10–11; GSI Certificate of Analysis dated May 24, 2005, attached as part of Exh. 1 to Omnibus Affidavit of John T. Lillis, Jr., dated Sept. 13, 2010 (“Lillis Aff.”); SGS Korea Certificate of Quality dated May 24, 2005, attached as part of Exh. 1 to Lillis Aff.; SGS Korea Certificate of Analysis dated May 24, 2005, attached as part of Exh. 1 to Lillis Aff.). GSI also drew two samples of the phenol from the Green Pioneer's tanks, delivering one sample to the manufacturer and retaining the second sample. (GSI Sample Report dated May 20, 2005, attached as part of Exh. 1 to Lillis Aff.).
The phenol was shipped from Yosu to Ulsan, where on May 24, 2005 it was transferred from the Green Pioneer onto the Bow Flora. (Chu Decl., ¶ 12; SGS Korea Time Report dated May 24, 2005, attached as part of Exh. 1 to Lillis Aff.). The independent surveyors sampled and tested the phenol several times as it was pumped between the Green Pioneer and the Bow Flora, and found it to be below the specified maximum for color at each test. (Chu Decl., ¶ 12; SGS Korea First Foot Certificate of Analysis dated May 24, 2005, attached as part of Exh. 1 to Lillis Aff.; SGS Korea Vessel Tank Certificate of Analysis dated May 24, 2005, attached as part of Exh. 1 to Lillis Aff.). GSI drew two extra samples of the phenol from the Bow Flora's tank, delivering one sample to the manufacturer and retaining the second sample. (GSI Sample Report dated May 24, 2005, attached as part of Exh. 1 to Lillis Aff.). SGS Korea drew a total of nine samples in Ulsan: four from the Green Pioneer and five from the Bow Flora. (SGS Korea Sample Report dated May 24, 2005 (“SGS Korea Sample Report”), attached as part of Exh. 1 to Lillis Aff.). Three of the samples were sent to SGS's lab for immediate analysis; two of the samples were placed on the Bow Flora to travel with the cargo; and four of the samples were retained by SGS. (SGS Korea Sample Report). The Sample Report generated by SGS indicated that the samples would “be retained only 90 days unless written instruction to the contrary” was received. (SGS Korea Sample Report).
Nearly two months later, on or about July 19, 2005, the phenol arrived via the Bow Flora in Rotterdam, the Netherlands, where tests revealed that its color had degenerated to over 500 Hazen units, a value significantly above the maximum specified by the parties' contract. (2d Am. Compl., ¶¶ 47–48; SGS Netherlands Analytical Report 62681–022513–1–02–D, dated July 20, 2005, attached as part of Exh. 1 to Lillis Aff.). Subsequent testing of the phenol by SGS Nederland B.V. (“SGS Netherlands”) confirmed that it had gone substantially off-color. (2d Am. Compl., ¶ 51; SGS Netherlands Analytical Reports 62681–022750–1–01, 62681–022750–1–02, 62681–022750–1–03, and 62681–022750–1–05, dated July 28, 2005, attached as part of Exh. 1 to Lillis Aff.).
On July 29, 2005, SGS Netherlands carried out an analysis in its laboratory of samples of the phenol drawn in Rotterdam, as well as the samples that had been drawn in Ulsan and retained on the Bow Flora (the “Rotterdam Samples”). (2d Am. Compl., ¶ 52; SGS Netherlands Witnessing Report dated July 29, 2005 (“SGS Netherlands Witnessing Report”), attached as part of Exh. 1 to Lillis Aff.). 1 The tests indicated that all nine samples were well above the specified maximum color value, although the samples taken in Rotterdam were substantially further from the maximum than most of the samples drawn earlier. (SGS Netherlands Analytical Results). A report issued to the end buyer of the phenol by SGS Netherlands for the period July 19–22, 2005 indicated that “[a]ll samples drawn in relation to the above inspection will be kept in retain [sic] for a period of three months unless otherwise agreed.” (SGS Netherlands Discharge Report dated July 25, 2005, attached as part of Exh. 1 to Lillis Aff., at 2).
On July 21, 2005, Cedar's representative in South Korea notified Dongbu that the phenol had tested off-specification in Rotterdam and that Cedar was holding Dongbu responsible for the discolored phenol. (Cho Decl., ¶ 25; Chu Decl., ¶ 15; E-mail of Cho Yong dated July 21, 2005 (“Cho E-mail 7/21/05”), attached as Exh. 10 to Cho Decl.; Letter of Dongbu Hannong Chemical Co., Ltd. dated July 21, 2005 (“Dongbu Letter 7/21/05”), attached as Exh. 11 to Cho Decl.). The parties subsequently arranged a joint analysis of the samples that had been drawn and retained in Ulsan (the “Ulsan Samples”). (2d Am. Compl., ¶ 54; Cho Decl., ¶¶ 26–27; E-mail of Cho Yong dated Aug. 4, 2005, attached as Exh. 12 to Cho Decl.; E-mail of Cho Yong dated Aug. 4, 2005, attached as Exh. 13 to Cho Decl.). The joint analysis, which was carried out in the SGS Korea laboratory on August 8, 2005, was attended by, among others, representatives of Dongbu, Cedar, and the consulting firm Minton, Treharne & Davies (“MTD”). (2d Am. Compl., ¶¶ 57–68; Cho Decl., ¶¶ 28–35; SGS Korea Analytical Report dated Aug. 8, 2005 (“Aug. 8 Report”), attached as part of Exh. 1 to Lillis Aff.), The analysis revealed that one of the retained samples drawn from the Bow Flora and the retained sample drawn from the Green Pioneer were well off-specification for color; that one of the retained samples drawn from the Bow Flora (which had been drawn as the phenol was being transferred between the Green Pioneer and the Bow Flora) was at the agreed-upon maximum specification for color, 10 Hazen units; and that the retained sample drawn from the shore tanks before the phenol was loaded onto the Green Pioneer had remained on-specification, yielding a result of between 3 and 5 Hazen units. (Aug. 8 Report). The sample drawn from the Green Pioneer was observed to contain small particles of an unidentified substance, while the other samples were all determined to be “[c]lear free from suspended matter.” (Aug. 8 Report). All of the parties in attendance at the joint analysis signed the analytical report prepared by SGS Korea. (Aug. 8 Report).
On May 24, 2006, Cedar commenced the instant action. (Complaint). After substantial discovery and numerous disputes, the defendant filed a Motion for Summary Judgment, a Motion for Sanctions for the Spoliation of Evidence, and a Motion in Limine to Exclude the Expert Reports of Martin East and John Minton. (Schiff Aff., ¶ 1). The defendant then filed a Cross–Motion for Summary Judgment. (Notice of Cross–Motion). Finally, the plaintiff filed a Motion to Strike the Declaration of Martin East and the Gijbels Affidavit. (Notice of Motion to Strike the Declaration of Martin East and the Gijbels Affidavit). This decision addresses all of the pending motions except those seeking summary judgment.
Dongbu challenges various pieces of evidence submitted to this Court by the plaintiffs. First, Dongbu argues that the June 3, 2010 supplemental report of the plaintiff's expert John Minton...
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