Foodbuy, LLC v. Gregory Packaging, Inc.
| Decision Date | 25 September 2018 |
| Docket Number | DOCKET NO. 3:16-cv-00809-FDW-DCK |
| Parties | FOODBUY, LLC, Plaintiff, v. GREGORY PACKAGING, INC., Defendant. |
| Court | U.S. District Court — Western District of North Carolina |
THIS MATTER is before the Court following a bench trial held before the undersigned on February 5-7, and 14, 2018. Plaintiff Foodbuy, LLC ("Foodbuy") brought two causes of action against Defendant Gregory Packaging, Inc. ("Gregory Packaging"): one for breach of contract for the alleged breach of agreement to pay amounts owed to Foodbuy, and another, in the alternative, for unjust enrichment. Part of the breach of contract claim, which alleged overcharging by Gregory Packaging to Foodbuy's Committed Customers, was dismissed for lack of subject matter jurisdiction prior to trial. (Doc. No. 55). Gregory Packaging brought nine counterclaims against Foodbuy. Two (for fraud and fraud by concealment) were dismissed at trial, but seven counterclaims remain: two counts for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment (in the alternative), tortious interference with contract, Unfair and Deceptive Trade Practices, and a Declaratory Judgment.
Pursuant to Rule 52(a)(1) of the Federal Rules of Civil Procedure, the following constitutes the Court's findings of fact and conclusions of law.
1. Plaintiff and counter-defendant Foodbuy is a Group Purchasing Organization wholly owned by Compass Group, a worldwide foodservice provider. (Doc. No. 68 at ¶ 1); (Trial Tr. 33:1 (Knight)).
2. Defendant and Counterclaimant Gregory Packaging is a manufacturer and supplier of juice cups to institutional customers, which are sold under the "Suncup" brand. (Doc. No. 68, ¶ 2); (Trial Tr. 203:8-17(Solado)) (referring to "Gregory Suncup").
3. In 2011, Foodbuy and Gregory Packaging negotiated the Foodbuy Supplier Agreement ("Agreement"). (Trial Tr. Vol. I, pp. 167-68.) Fernando Salado ("Mr. Salado") - the then Senior Sourcing Manager for Foodbuy - negotiated the Agreement with Gregory Goulet ("Mr. Goulet"), Gregory Packaging Vice President of Sales. (Id., pp. 168-70.) Gregory Packaging had full opportunity to review the Agreement and negotiate terms that were important to it. (Plaintiff Trial Exhibits 87-89; Trial Tr. Vol. III, pp. 510-13.) Gregory Packaging was represented by counsel to assist it with its negotiations with Foodbuy. (Trial Tr. Vol. III, p. 484.)
4. The Agreement was signed by Gregory Packaging, by its Vice President, Daniel J. Gregory, on November 4, 2011, and by Foodbuy, by its Chairman, Tony Shearer, on December 20, 2011. Nonetheless, the Agreement was retroactively effective as of March 1, 2011. (Def. Ex. 1).
5. The parties stipulate the Agreement dated March 1, 2011, is a valid and binding contract between the parties and governs the relationship between them. (Doc No. 68, p. 2).
6. Foodbuy drafted the Foodbuy Supplier Agreement. (Trial Tr. 465:20-21 (D. Gregory)). It was based on Foodbuy's template supplier agreement. (Trial Tr. 116:22-24 (Knight)). While Gregory Packaging requested changes to the draft agreement, Foodbuy did not accept thosechanges and accepted it as a "take it or leave it" contract. (Trial Tr. 524:8-11 (D. Gregory)). The Foodbuy cover page to the Agreement, which is not part of the Agreement, notes that the "Foodbuy or Compass contract template" was used. (Def. Ex. 1).
7. Gregory Packaging contends it entered into the Agreement to expand its sales and sell more cases of juice into new venues. (Trial Tr. 456:23-457:3 (D. Gregory)).
8. The term of the Agreement was originally March 1, 2011, to June 30, 2013. (Def. Ex. 1).
9. Gregory Packaging viewed the relationship as "successful" and wanted to renew it. (Plaintiff Trial Tr. Vol. III, p. 547; Pl. Trial Ex. 144.) The Agreement was amended on July 1, 2013, by the First Amendment to the Foodbuy Supplier Agreement ("Amendment"), which extended the Agreement for 2 years, until June 30, 2015. (Pl. Trial Ex. 2.) As with the Agreement, the Amendment was signed after its effective date - on November 27, 2013 by Gregory Packaging, and December 9, 2013 by Foodbuy. (Id.) In these interim periods, the parties continued to operate under the Agreement until it could be formally signed. (Trial Tr. Vol. 1, pp. 190, 215-16.) Sean Cahill ("Mr. Cahill") - the then Vice President of Sourcing for Foodbuy - thoroughly negotiated the Amendment with Vice President of Sales Gregory Goulet over the course of many months. (Id.) As with the Agreement, the Amendment was negotiated by Foodbuy and Gregory Packaging.
10. Amendment was signed by Gregory Packaging, through Mr. Goulet, on November 27, 2013, and by Foodbuy, through its Chairman, Tony Shearer, on December 9, 2013. Nonetheless, the Amendment was retroactively effective as of July 1, 2013. (Def. Ex. 2).
11. The Amendment contained additional terms, updated pricing, and extended the Agreement until June 30, 2015. (Def. Ex. 2).
12. The Agreement, in Section 2 on the first page, provides:
2. PRODUCTS. This Agreement contains the terms and conditions for the sale of products specified on Attachment "A" attached hereto (the "Products"), at theprices specified on Attachment "A" (the "Prices") by Seller to Foodbuy Distributors (as defined in Section 3 below) purchasing on behalf of Committee Customers. The parties agree that this is a non-exclusive relationship, and there are no quantities committed by Foodbuy, the Committee Customers or the Foodbuy Distributors in either dollar value or Product items.
13. The Agreement defines the term "Committed Customer, and states:
As used in this Agreement, the term "Committed Customer" shall mean a client of Foodbuy that has agreed in writing to authorize Foodbuy to negotiate the commercial terms of purchasing contracts on its behalf or has outsourced all or a portion of its purchasing functions to Foodbuy by written agreement.
(Pl. Trial Ex. 1, p. 1). A list of Committed Customers was attached to the Agreement and replaced with a new attachment to the Amendment.
14. The financial components of the Agreement and Amendment are the contracted product pricing and the contracted volume allowance. (Trial Tr. 33:19-24 (Knight)).
15. In general, the most negotiated parts of Agreements between Foodbuy and Suppliers are: (1) the pricing of the products; (2) the volume allowance; and (3) the types of customers that are going to be enrolled in the program. (Trial Tr. 60:24-61:5 (Knight)).
16. The Agreement permits Foodbuy to provide the benefit of improved net cost—which is made up of price and volume allowance—back to Foodbuy Committed Customers. (Trial Tr. 34:3-14 (Knight)).
17. The Agreement contains a non-solicitation provision, which provides:
18. NON-SOLICITATION. During the Term of this Agreement, absent prior written consent from Foodbuy, Seller will refrain from (i) soliciting any Foodboy Committed Customer to procure products from seller outside of the Committed Customer's relationship with Foodbuy, or (ii) otherwise arranging any procurement relationship, directly, with any Committed Customer, wherein Seller procures products for such Committed Customer.
18. This provision is included because Foodbuy does not want "the supplier going directly to the committed customer without Foodbuy's consent and engaging them directly and excluding Foodbuy from the commercial relationship." (Trial Tr. 196:21-197:13 (Solado)); (see also Trial Tr. 43:17-22 (Knight)) ( that the Agreement is "nonexclusive" and Foodbuy's model is "to try to drive participation through demonstrating the benefits of buying through the program . . . .").
19. When the primary negotiator of the Agreement for Foodbuy was asked why the non-solicitation provision was included—since it is Foodbuy's position that Foodbuy is owed a volume allowance whether the product is sold through Foodbuy's program or not—he responded "I don't have a good answer for that." (Trial Tr. 202:24-203:21 (Solado)).
20. When the primary negotiator of the Amendment for Foodbuy was asked the same question, he said "I don't know" and that he would "prefer to consult with legal" to answer the question. (Trial Tr. 240:15-21 (Cahill)).
21. Attachment A to the contract includes a "market list price," and the Amendment includes a "Delivered into DC" price. (Def. Exs. 1, 2). That price is the price Foodbuy sends to food distributors so that distributors know the cost of a case of juice sold under the Foodbuy program. (Trial Tr. 234:5-10 (Cahill)). In other words, that price is the price to which the food distributor will deviate when the product is sold to a Foodbuy customer purchasing at Foodbuy's price. (Trial Tr. 711:15-18 (Early)).
22. While the Agreement was based on a Foodbuy template, (Trial Tr. 116:22-24 (Knight)), the pricing was negotiated between the Parties. (Trial Tr. 174:4-9 (Solado)).
23. Similarly, Gregory Packaging expressed concerns about entities included on the Committed Customer list and the Foodbuy Distributor list. (Trial Tr. 174:10-19 (Solado)).
24. However, Foodbuy's legal counsel would not permit any changes to the legal language of the document itself, only permitting changes to the attachments. (Trial Tr. 175:5-8 (Solado)).
25. Attachment A to the Foodbuy Supplier Agreement includes pricing. (Def. Ex. 1). Therein, "there's a whole mechanism in that goes through different steps that are outlined in Attachment A how that price can be changed and solicited for approval to Foodbuy." (Trial Tr. 175:12-21 (Solado)); (Def. Ex. 1).
26. During negotiations, Gregory Packaging expressed a "distinct need for an authorized distributor list (Attachment C) and communication of any changes." (Def. Ex. 154); (see ¶ 21, supra).
27. During the negotiations of the Agreement, in August of 2011, one Committed Customer, Navigator, indicated to Foodbuy that it ...
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