Hanwha Corp.. v. Cedar Petrochemicals Inc.
| Decision Date | 18 January 2011 |
| Docket Number | No. 09 Civ. 10559(AKH).,09 Civ. 10559(AKH). |
| Citation | 760 F.Supp.2d 426 |
| Parties | HANWHA CORPORATION, Plaintiff,v.CEDAR PETROCHEMICALS, INC., Defendant. |
| Court | U.S. District Court — Southern District of New York |
OPINION TEXT STARTS HERE
Sooyung T. Lee, Costello, Cooney & Fearon, PLLC, Syracuse, NY, for Plaintiff.John Thomas Lillis, Jr., Kennedy Lillis Schmidt & English, New York, NY, for Defendant.
Plaintiff Hanwha Corporation (“Hanwha”) has sued Defendant Cedar Petrochemicals, Inc. (“Cedar”) in a two-count complaint alleging breach of contract. The complaint arises from the parties' disagreement about the choice of law to govern their contract for the sale and purchase of an amount of the petrochemical Toluene. Cedar now moves under Federal Rule of Civil Procedure 56 for summary judgment dismissing the complaint, contending the parties never formed a final contract; Hanwha cross-moves for summary judgment in its own favor. For the reasons that follow, I hold that because the parties could not agree on a choice of law, they did not form a contract. I therefore grant Cedar's motion for summary judgment dismissing the complaint, and I deny Hanwha's cross-motion.
From January 2003 to April 2009, Cedar, a New York corporation, and Hanwha, a Korean corporation, entered into twenty discrete transactions for the purchase and sale of various petrochemicals. In each of the twenty transactions, the parties formed contracts under the same procedure. First, Hanwha would submit a bid to Cedar for a given petrochemical at a given quantity and at a given price. Cedar would accept Hanwha's bid, forming what the parties describe as a “firm bid,” or an agreement regarding product, quantity, and price. Following formation of the firm bid, Cedar would transmit a package of contract documents to Hanwha, meant to incorporate and finalize all the terms of the contract. The package of documents contained two items: (i) a “contract sheet” that embodied the terms of the firm bid and a choice of law to govern the contract, and (ii) a set of “standard” terms and conditions incorporated by reference in the contract sheet. Cedar always signed the contract sheet when submitting these documents to Hanwha.
The contract sheets drafted by Cedar for the twenty contracts provide the same substantive information, which can be described in three parts. First, at the top, Cedar provided a provision stating, “We hereby confirm the following transaction between Hanwha Corp. and ... Cedar Petrochemicals, [The] [f]ollowing sets forth the entire agreement of the parties.” Declaration of William H. Sparke III in Support of Cedar Petrochemical's Summary Judgment Motion (“Spark Decl.”), Exs. 1–20. Second, in the body of the contract sheets, Cedar would identify the product, quantity, and price contemplated by the firm bid. Third, at the bottom, Cedar would provide a provision incorporating the standard terms and conditions by reference. This final provision also identified the laws Cedar chose to govern the contracts, and typically provided that New York law, the Uniform Commercial Code (“UCC”), and Incoterms 2000 1 governed the contract. This choice of law was reinforced by a provision in Cedar's standard terms and conditions, which also provided that New York law was to govern.
After Cedar would send these signed contract documents to Hanwha, Hanwha would do one of three things: it would countersign and return the contract sheet, accepting Cedar's terms; or modify the contract sheet, and then sign and return it for Cedar's consideration; or not sign at all. On three occasions, Hanwha modified the contract sheets by providing its own choice of law to govern the contracts. Whenever Hanwha modified the contract sheets and sent them back to Cedar, Cedar did not object to the changes—including Hanwha's choices of law—but did not countersign Hanwha's version. On all twenty occasions, upon completion of this process, Cedar and Hanwha both performed their obligations under their contracts.
The present case concerns the parties' efforts to form a twenty-first contract. On May 27, 2009, Hanwha submitted a bid for the purchase of 1,000 metric tons of the petrochemical Toluene at $640 per metric ton, the market rate at the time. Cedar accepted the bid, thus creating a firm bid for the purchase and sale of the Toluene. Cedar followed up its acceptance of the bid by sending Hanwha, via email, a signed contract sheet and a document setting forth Cedar's usual standard terms and conditions. As per usual, Cedar provided in the contract sheet that New York law, the UCC, and Incoterms 2000 would govern the contract, and also provided in the standard terms and conditions that New York law would govern. Hanwha did not immediately respond to the contract documents, but engaged with Cedar in preparing a bill of lading and nominating a vessel for the ocean carriage.
Approximately a week after Cedar had sent Hanwha the contract documents for the Toluene sale, Hanwha returned them in modified form. On the contract sheet, Hanwha had modified the provision providing for governing law, crossing out New York law and the UCC, leaving only the provision that Incoterms 2000 was to govern the contract. Hanwha also provided a new set of “standard” terms and conditions; in relevant part, Hanwha's new set of conditions provided that Singapore law would govern the contract, rather than New York law. In summary, Hanwha struck Cedar's nomination of New York law, the UCC, and Incoterms 2000 to govern the contract, substituting instead Singapore law and Incoterms 2000.
When Hanwha returned the amended contract documents, it added an additional term, stated in the body of the email transmitting the amended documents. In the email, Hanwha provided that no contract would “enter into force” unless Cedar countersigned Hanwha's proposed version of the contract documents. Declaration of Cho Yong in Support of Cedar Petrochemical's Motion to Dismiss (“Cho Yong Decl.”), Ex. 6. Cedar refused to accept Hanwha's terms, and sent Hanwha an email explaining that the contract would be finalized only if Hanwha accepted Cedar's original terms. The email asked Hanwha to sign and return an unaltered version of the contract documents.
While Cedar waited for a response to this last request, the parties worked out the necessary letter of credit for the transaction. Hanwha submitted a letter of credit unsatisfactory to Cedar on June 8, 2009, and an acceptable letter of credit on June 10, 2009. However, the next day, June 11, 2009, Cedar advised Hanwha that because of its failure to sign the version of the contract tendered by Cedar, there was no contract between the parties, and Cedar had the right to sell the Toluene to another party. The price of Toluene as of that date, June 11, 2009, had risen from $640 per metric ton to $790.50.
In November 2009, Hanwha filed a two-count complaint in Supreme Court, New York County, alleging (i) breach of contract by Cedar for failing to deliver the Toluene at the agreed-upon price and (ii) anticipatory breach of contract for Cedar's statement of June 11, 2009 that the deal was void and it was free to sell the Toluene to another buyer. The complaint also stated that the dispute arose under United Nations Convention on Contracts for the International Sale of Goods (“CISG”), S. Treaty Doc. No. 9, 98th Cong., 1st Sess. 22 (1983), 19 I.L.M. 671, reprinted at 15 U.S.C. app. (1997), thus creating federal subject-matter jurisdiction under 28 U.S.C. § 1331. Cedar removed the case to this court, and Hanwha thereafter moved unsuccessfully to remand. Order Denying Motion to Remand, 09 Civ. 10559, Doc. No. 15 (S.D.N.Y. Apr. 21, 2010). The parties now move and cross-move for summary judgment.
Summary judgment is appropriate if “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c)(2). On cross motions for summary judgment, the district court is obligated to consider each motion on its own merits, “taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.” Byrne v. Rutledge, 623 F.3d 46, 52–53 (2d Cir.2010) (internal quotations omitted). In considering a motion for summary judgment, “the mere possibility that a factual dispute may exist, without more, is not sufficient to overcome a convincing presentation by the moving party.” Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980). Further, “to defeat summary judgment ... nonmoving parties must do more than simply show that there is some metaphysical doubt as to the material facts ... and they may not rely on conclusory allegations or unsubstantiated speculation.” Jeffreys v. City of N.Y., 426 F.3d 549, 554 (2d Cir.2005) (internal quotation omitted) (alteration in original).
III. Discussiona. Choice of Law
Before deciding whether the parties formed a contract, I must establish which law governs the analysis. Here, both parties are members of CISG signatory nations, but they have attempted to opt out of the CISG's substantive terms by designating other choices of substantive law. The question therefore arises whether the CISG, some other law, or both, governs the question of contract formation.
The CISG is a self-executing treaty, binding on all signatory nations, that creates a private right of action in federal court under federal law. Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024, 1027–28 (2d Cir.1995). As a treaty, the CISG is a source of federal law. See 28 U.S.C. § 1331(a); Usinor Industeel v. Leeco Steel Prods., Inc., 209 F.Supp.2d 880, 884 (N.D.Ill.2002); Asante Techs., Inc. v. PMC–Sierra, Inc., 164 F.Supp.2d 1142, 1147 (N.D.Cal.2001); Riccitelli v. Elemar New England...
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