Counter v. Thione Int'l Inc.

• Decision Date: 25 August 2010
• Docket Number: No. 09-13151.,09-13151.
• Citation: 615 F.3d 1352
• Parties: ADVANCED BODYCARE SOLUTIONS, LLC, Plaintiff-Counter-Defendant-Appellant, v. THIONE INTERNATIONAL, INC., Defendant-Counter-Claimant-Appellee, Naturecity, LLC, Carl Pradelli, Third Party-Counter-Defendant.
• Court: U.S. Court of Appeals — Eleventh Circuit

615 F.3d 1352

ADVANCED BODYCARE SOLUTIONS, LLC, Plaintiff-Counter-Defendant-Appellant,

v.THIONE INTERNATIONAL, INC., Defendant-Counter-Claimant-Appellee,Naturecity, LLC, Carl Pradelli, Third Party-Counter-Defendant.

No. 09-13151.

United States Court of Appeals,Eleventh Circuit.

Aug. 25, 2010.

COPYRIGHT MATERIAL OMITTED.

Scott J. Topolski, Robert Edward Pershes, Buckingham, Doolittle & Burroughs, LLP, Boca Raton, FL, for Plaintiff.

James Clay Fuller, Daughtery, Crawford, Fuller & Brown, LLP, Columbus, GA, Charles E. Peeler, Flynn & Peeler, LLC, Albany, GA, for Thione Intern., Inc. Appeal from the United States District Court for the Southern District of Florida.

Before TJOFLAT, WILSON and EBEL, ^* Circuit Judges.

TJOFLAT, Circuit Judge:

This case arises out of a contract that required a company to make minimum purchases of products in exchange for an exclusive license to market and distribute them. Contending that products it initially received were defective, the purchaser did not make the additional minimum purchases the contract required. After attempts to negotiate a solution to the parties' differences failed, the purchaser brought suit against the supplier for breach of contract and for breach of an implied warranty. The supplier counterclaimed, seeking the profits it would have earned had the purchaser satisfied its obligations under the contract. A jury found for the supplier on the purchaser's claims and awarded it $2.5 million on its counterclaim.

The district court entered judgment for the supplier for $2.5 million and denied the purchaser's post-judgment motions for judgment as a matter of law and, alternatively, a new trial. The purchaser now appeals. We affirm.

I.

A.

On April 1, 2004, Advanced Body Care Solutions, LLC (“Advanced”) and Thione International, Inc. (“Thione”) entered into a Supply and Licensing Agreement (the “Licensing Agreement” or “Agreement”). This Agreement required Advanced to make minimum purchases of “Thione Antioxidant Complex” (the “Dietary Supplement”), which reduces free radical damage to the body, and Thione's “Free Radical Monitor Test Kit” (the “Test Kit”), which is a test kit for at-home use to monitor the body's free radicals. ¹ The Test Kits could be purchased as a whole or by their three components, one of which was free radical monitor ampoules. ² In exchange, Advanced received, for the duration of the Agreement, “the license and authority” “to advertise, promote, market, sell and otherwise distribute” the Dietary Supplement and the Test Kit on an exclusive basis. The Licensing Agreement was to remain in effect for a minimum of five years: April 1, 2004 to March 31, 2009. ³

The Licensing Agreement provided that either party could terminate the

Agreement upon thirty (30) days written notice thereof to the other party upon the breach by the other party of any of its material representations, warranties, covenants, or agreements contained in this Agreement. Upon the expiration of such notice period, this Agreement shall terminate without the need for further action by either party; provided, however, that if the breach upon which such notice of termination is based shall have been fully cured to the reasonable satisfaction of the terminating party within such 30-day period, then such notice of termination shall be deemed rescinded, and this Agreement shall be deemed reinstated and in full force and effect. Such right of termination shall be in addition to such other rights and remedies as the terminating party may have under applicable law. ⁴

Thione could also terminate the Agreement early on additional grounds, including if Advanced failed to make any of the minimum purchases the contract required. In that event, as provided in Paragraph 6B, the Agreement and the exclusive license granted to Advanced would,

as of such date, at the sole and absolute discretion of Thione: (1) be terminated; (2) be re-negotiated with respect to price, duration or similar aspect; or (3) be changed from an “exclusive” license to a “non-exclusive” license for the balance of the term of this Agreement .... Notwithstanding the foregoing, prior to exercising any of the afore-mentioned rights, Thione shall provide [Advanced] with thirty (30) days prior written notice to remedy any purchase deficiency and if [Advanced] cures such minimum dollar order shortfall within such 30 days period, the exclusive license shall remain intact.

Although Advanced was not required to meet a minimum purchase amount until the fourth quarter of 2004, it had to place its initial order within thirty days of the execution of the Agreement. ⁵ Finally, the Agreement would be governed by Georgia law.

On May 26, 2004, Advanced placed an order for 25,000 ampoules, for which it paid $41,250. It received about 20,000 ampoules on September 1. It was immediately apparent that 200-300 of the 20,000 were broken, and about 1,000 were pink, indicating that they were defective. ⁶ The following day, Dr. Stephen Perry, Advanced's liaison with Thione, sent an email to Dr. Mark Hersh, the CEO and chief scientist of Thione, stating that, “Carl [Pradelli, Advanced's managing member,] received some vials that are pink,” and inquiring, “Do we have a production issue?” Advanced received the outstanding 5,000 (of the 25,000) ampoules on November 9. At the end of 2004, Advanced was $144,900 short on its minimum purchase obligation of $201,450 for the quarter. ⁷

On January 7, 2005, Advanced made a payment of $72,450 to Thione-half of the balance due on the previous quarter's minimum payment. Advanced did not specify what it sought to purchase; rather, an accompanying email from Pradelli to Hersh stated that the amount of the wire was “for $72,450 representing a 50% deposit on a $144,900 purchase order. We previously purchased $56,550 worth of product, the current [purchase order] gets us to the 2004 threshold of $201,450. I hope to get specifics on the number of ampoules versus [the Dietary Supplement] in the next 10-14 days.”

As of March 2005, Thione had not yet identified the source of the problem with the first shipment of 20,000 ampoules, and Advanced had placed no subsequent orders. ⁸ On March 18, Pradelli sent Hersh a “summary report of [Advanced's] marketing efforts for” the Test Kit. Following five pages on that subject was a section of the letter entitled “The Lingering Black Cloud.” This section asserted and stressed that Advanced's “biggest concern” was the defective ampoules and that it could not launch any additional marketing initiatives until satisfied that the problem was permanently solved. Following the receipt of this letter, Hersh sent an email to Pradelli on March 28. In the email, Hersh acknowledged that 1,440 of the initial 20,000 shipped were defective and told Pradelli that they would be replaced. After Pradelli responded that 4,000 ampoules had turned pink, Hersh asked Pradelli to return these ampoules and offered to send replacements immediately. He also assured Pradelli that the problem had been identified and all of the ampoules other than those received in the initial shipment of 20,000 were fine. Pradelli then replied that the problem went beyond the 4,000 defective ampoules; as ampoules were continuing to turn pink, he could not tell how many would ultimately prove defective. Pradelli did not return the defective ampoules, but Thione sent Advanced 6,700 replacement ampoules in November 2005.

During the summer of 2006, Advanced and Thione attempted to renegotiate the Licensing Agreement. The renegotiation efforts failed.

B.

On September 26, 2006, Advanced filed suit against Thione for damages in the Circuit Court of Palm Beach County, Florida. In its complaint, Advanced claimed that Thione had breached the Licensing Agreement and an implied warranty by providing Advanced with defective ampoules. ⁹ Thione timely removed the case to the Southern District of Florida, ¹⁰ and after the district court denied its motion to dismiss the action, Thione answered Advanced's complaint and filed a counterclaim.

The answer denied that Thione breached the Licensing Agreement and any implied warranty. The counterclaim alleged that Advanced breached the Agreement by failing to make the minimum purchases the Agreement required and that Thione was entitled to recover the profits it would have earned had Advanced made the purchases. ¹¹ Advanced's answer to Thione's counterclaim denied the breach. The answer also asserted that Thione's breach of the Agreement relieved Advanced of its minimum purchase obligations and, addressing Thione's claim for lost profits, alleged that Thione had failed to mitigate the loss.

Prior to trial, Advanced moved the district court in limine to prevent Thione from presenting any evidence of lost profits to the jury on two alternative grounds: (1) the Agreement, by its terms, precluded the recovery of lost profits; and (2) the testimony of the witness Thione planned to call to calculate the loss, Dr. Robert D. Coston, an economics professor, could not qualify as expert testimony. The court denied the motion without prejudice to Advanced's right to object to the introduction of such evidence at trial.

On April 14, 2009, the case proceeded to trial on Advanced's claims for breach of contract and implied warranty and Thione's counterclaim for breach of contract. Advanced presented testimony relating to the circumstances surrounding the execution of the Licensing Agreement, its subsequent receipt of the defective ampoules, and the steps it took to have Thione remedy the problem. Then, after calculating the damages it incurred as a result of Thione's alleged breaches, some $2.075 million, Advanced rested its case.

Thione, in its case, presented evidence to support its view of the parties' respective performances of the Agreement, and, over Advanced's renewed objection to the admissibility of his anticipated testimony, called Dr. Coston to the witness stand to establish the profits...