Fluxo-Cane Overseas Ltd. v. E.D. & F. Man Sugar, Civil No. WDQ-08-356.

• Citation: 599 F.Supp.2d 639
• Decision Date: 24 February 2009
• Docket Number: Civil No. WDQ-08-356.
• Parties: FLUXO-CANE OVERSEAS LTD., Plaintiff, v. E.D. & F. MAN SUGAR INC., Defendant.
• Court: U.S. District Court — District of Maryland

599 F.Supp.2d 639

FLUXO-CANE OVERSEAS LTD., Plaintiff, v. E.D. & F. MAN SUGAR INC., Defendant.

Civil No. WDQ-08-356.

United States District Court, D. Maryland, Northern Division.

February 24, 2009.

COPYRIGHT MATERIAL OMITTED

Herbert Allen Black, III, Bryant E. Gardner, Winston and Strawn LLP, Washington, DC, for Plaintiff.

Robert A. Gaumont, DLA Piper U.S. LLP, Baltimore, MD, Stanley McDermott, III, DLA Piper U.S. LLP, New York, NY, for Defendant.

MEMORANDUM OPINION

WILLIAM D. QUARLES, JR., District Judge.

Plaintiff Fluxo-Cane Overseas Ltd. ("Fluxo-Cane") sued E.D. & F. Man Sugar Inc. ("Man Sugar") for breach of contract, conversion, and misappropriation of bills of lading and sugar cargo for Man Sugar's refusal to pay $6,013,149.93 for 17,727.060 metric tons of sugar. Pending are Fluxo-Cane's and Man Sugar's motions for summary judgment, Fluxo-Cane's motions for leave to file a surreply, and Man Sugar's motion to amend its motion for summary judgment. For the following reasons, Fluxo-Cane's motion for summary judgment and motion for leave to file a surreply will be denied, Man Sugar's motion for summary judgment will be granted in part and denied in part, and its motion to amend its motion for summary judgment will be granted.

I. Background

Man Sugar and E.D. & F. Man Commodity Advisers, Ltd. ("MCA") are subsidiaries of E.D. & F. Man Holdings, Ltd., a London-based group of companies that trade in commodities worldwide. Def. Cross. Mot. Summ. J. at 1. On February 1, 2005, Fluxo-Cane entered into a contract with MCA to trade commodities futures. Id. at Ex. A.

On January 7, 2008, Man Sugar agreed to buy 25,209.99 metric tons of sugar ("sugar contract") from Fluxo-Cane. Pl. Mot. Summ. J. Ex. 8. On January 28, 2008, Fluxo-Cane invoiced Man Sugar for $6,135,867.28 for the sugar. Pl. Mot. Summ. J. Ex. 14. On June 2, 2008, Fluxo-Cane issued a final invoice to Man Sugar for $6,597,456.62. Id. at 5.

Before February 4, 2008, MCA terminated the futures contract, liquidated Fluxo-Cane's account, and determined that Fluxo-Cane owed it $41,961,982.07.¹ Pl. Mot. Summ. J. Ex. 16. On February 4 2008, MCA assigned $6,013,149.14 of that amount to Man Sugar in exchange for $5,900,000, due upon Fluxo-Cane's satisfaction of the assigned debt. Id. On that day, Man Sugar also notified Fluxo-Cane that it was setting off its $6,135,867.28 debt under the sugar contract against the $6,013,149.40 assignment from MCA. Id. On February 7, 2008, Fluxo-Cane demanded payment. Pl. Mot. Summ. J. Ex. 17, 18. Man Sugar refused. Id. On February 8, 2008, Fluxo-Cane filed this suit. On June 10, 2008, Fluxo-Cane moved for summary judgment. On July 18, 2008, Man Sugar filed a cross motion for summary judgment. On September 12, 2008, Fluxo-Cane moved for leave to file a surreply. On September 19, 2008, Fluxo-Cane moved for leave to file a supplemental affidavit, which the Court granted on October 10, 2008. On November 26, 2008, Man Sugar moved to amend its cross motion for summary judgment with the most recent decision in the U.K. action.

II. Analysis

A. Summary Judgment Motions

1. Standard of Review

Under Rule 56(c), summary judgment is appropriate when there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The court must view the facts and reasonable inferences therefrom "in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (per curiam)). The opposing party, however, must produce evidence upon which a reasonable factfinder could rely. Celotex, 477 U.S. at 324, 106 S.Ct. 2548. A mere "scintilla" of evidence is insufficient to preclude summary judgment. Anderson, 477 U.S. at 252, 106 S.Ct. 2505.

When multiple parties file motions for summary judgment, the Court applies the same standard of review to each motion. ITCO Corp. v. Michelin Tire Corp., 722 F.2d 42, 45 n. 3 (4th Cir.1983). The Court must consider each motion "separately on its own merits to determine whether either of the parties deserves judgment as a matter of law." Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir.2003) (citing Philip Morris Inc. v. Harshbarger, 122 F.3d 58, 62 n. 4 (1st Cir.1997)). "When considering each individual motion, the [C]ourt must take care to resolve all factual disputes and any competing, rational inferences in the light most favorable to the party opposing that motion." Id. (citing Wightman v. Springfield Terminal Ry. Co., 100 F.3d 228, 230 (1st Cir.1996)).

2. Applicable Law

In diversity jurisdiction cases, a federal court must apply the choice of law rules of the state in which it sits. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Maryland follows the principle of lex loci contractus, which applies the law of the state where the contract was made. Allstate Ins. Co. v. Hart, 327 Md. 526, 528, 611 A.2d 100, 101 (Md.1992). Maryland also follows the principle of lex loci delicti, which applies the law of the state where the injury occurred. Laboratory Corp. of America v. Hood, 395 Md. 608, 615, 911 A.2d 841, 845 (Md.2006). The sugar contract between Fluxo-Cane and Man Sugar was made under the Domino Sugar Rules,² and is governed by New York law. Pl. Mot. Summ. J. Ex. 8, Ex. 10 § 15. The commodities contract between Fluxo-Cane and MCA was formed in the United Kingdom and is governed by its law.³ Def. Cross Mot. Summ. J. Ex. A at 1, 21. The alleged conversion occurred in Maryland, where Man Sugar sold the sugar to a third party, despite Fluxo-Cane's demands for its return. Compl. ¶ 27. Thus, Maryland tort law governs the issue of conversion.

3. Fluxo-Cane's Motion for Summary Judgment

a. Set-Off

Fluxo-Cane seeks summary judgment on the contract claim on the ground that the sugar contract prohibits set-off. At trial, Man Sugar will bear the burden of proving the affirmative defense of set-off. See Ruhlmann v. Smith, 323 F.Supp.2d 356 (N.D.N.Y.2004).

"If the language of a contract is clear and unambiguous, its interpretation is a question of law and left to the court." Scott v. New York Health and Human Services Union, No. 00 Civ. 9381(JFK) 2003 WL 359534, *9 (S.D.N.Y. Feb. 6, 2003). "If, however, the contract's language is ambiguous and susceptible to differing, reasonable interpretations, the contract's interpretation becomes a question of fact for a jury or trier of fact," provided there is extrinsic evidence of the contract's meaning. Id.; Revson v. Cinque & Cinque, P.C., 221 F.3d 59, 66 (2nd Cir.2000).⁴

Fluxo-Cane argues that the payment clause of the sugar contract unambiguously prohibits set-off. Pl. Mot. Summ. J. Ex. 8. Under the heading "Payment," the sugar contract states, "cash against presentation of original shipping documents." Id. Fluxo-Cane argues that this provision requires Man Sugar to pay in full.

Alternatively, Fluxo-Cane argues that if the payment clause does not unambiguously address set-offs, the contract's silence indicates that set-offs are not allowed. Fluxo-Cane relies on the ICE Sugar No. 14 Rules,⁵ which governed previous contracts between Fluxo-Cane and Man Sugar and prohibit set-off. Pl. Mot. Summ. J. Ex. 1 at 14.06(c)(1); Cipriani Aff. ¶ 5. Fluxo-Cane argues that the ICE Sugar Rules prohibition is an industry norm incorporated in the payment clause.

Man Sugar does not dispute that the industry norm prohibits set-off, but argues that (1) Fluxo-Cane stretches the payment clause—that addresses the manner and time of payment—beyond its ordinary meaning; (2) the contract's silence indicates that setoffs are allowed under the common law of contracts; and (3) the ICE Sugar No. 14 Rules do not apply because the sugar contract incorporates the "Domino Rules," which Man Sugar argues—and Fluxo-Cane does not dispute—permit setoffs. Pl. Mot. Summ. J. Ex. 8.

Fluxo-Cane asserts that the Domino Rules are "general contract provisions" which were made inapplicable by the contract's payment clause, which differs from the Domino Rules' time and method of payment provisions. Pl. Mot. Summ. J. at 3, Ex. 10.

The payment clause does not bar set-offs. First, although the clause states Man Sugar shall pay "cash," the clause does not void the common law right of setoff, which allows a debtor to offset his payment obligation with debts owed to him. See Matter of Midland Ins. Co., 167 A.D.2d 75, 78, 569 N.Y.S.2d 951 (N.Y.App. Div.1991).

Further, the payment clause does not expressly override the Domino Sugar Rules. Fluxo-Cane is correct that the Domino Sugar Rules are "general contract provisions." Pl. Mot. Summ. J. Ex. 10. The payment provision of the Domino Sugar Rules recognizes that "special contract provisions" may alter the person who may receive payment for the seller. Pl. Mot. Summ. J. Ex. 10 § 10. This "special contract provisions" clause does not bar setoff.

Finally, Fluxo-Cane's contention that the ICE Sugar No. 14 Rules bar set-offs is not persuasive. The sugar contract expressly incorporates the Domino Sugar Rules and does not mention the ICE Sugar No. 14 Rules. Pl. Mot. Summ. J. Ex. 8. A reasonable jury would not be required to find that the sugar contract's payment provision bars a set-off.

Fluxo-Cane has argued that its course of dealing with Man Sugar shows that the sugar contract incorporates the ICE Sugar No. 14 Rules. Jose Luiz Cipriani, Fluxo-Cane's Director of Operations and Futures, stated in an affidavit that "[r]ecent contracts between Fluxo-Cane and Man Sugar for the sale of U.S....