Land Ocean Logistics, Inc. v. Aqua Gulf Corp.

• Citation: 68 F.Supp.2d 263
• Decision Date: 22 September 1999
• Docket Number: No. 97-CV-582A.,97-CV-582A.
• Parties: LAND OCEAN LOGISTICS, INC., Plaintiff, v. AQUA GULF CORPORATION and Aqua Gulf Transport, Inc., Defendants.
• Court: U.S. District Court — Western District of New York

68 F.Supp.2d 263

LAND OCEAN LOGISTICS, INC., Plaintiff, v. AQUA GULF CORPORATION and Aqua Gulf Transport, Inc., Defendants.

No. 97-CV-582A.

United States District Court, W.D. New York.

September 22, 1999.

COPYRIGHT MATERIAL OMITTED

Sullivan & Oliverio, Michael E. Appelbaum, of counsel, Buffalo, NY, for Plaintiff.

Brautigam & Brautigam, Daryl P. Brautigam, of counsel, Fredonia, NY, for Defendants.

ORDER

ARCARA, District Judge.

This case was referred to Magistrate Judge Leslie G. Foschio pursuant to 28 U.S.C. § 636(b)(1), on July 23, 1997. On January 15, 1999, defendants' filed a motion for motion for summary judgment. On June 28, 1999, Magistrate Judge Foschio filed a Report and Recommendation, recommending that defendants' motion for summary judgment be granted in part and denied in part.

Plaintiff filed objections to the Report and Recommendation on July 9, 1999. The parties waived oral argument on the objections.

Pursuant to 28 U.S.C. § 636(b)(1), this Court must make a de novo determination of those portions of the Report and Recommendation to which objections have been made. Upon a de novo review of the Report and Recommendation, and after reviewing the submissions of the parties, the Court adopts the proposed findings of the Report and Recommendation.

Accordingly, for the reasons set forth in Magistrate Judge Foschio's Report and Recommendation, defendants' motion for summary judgment is granted in part and denied in part. Counsel for the parties shall appear on September 30, 1999 at 9:00 a.m. for a meeting to set a trial date.

IT IS SO ORDERED.

REPORT and RECOMMENDATION

FOSCHIO, United States Magistrate Judge.

JURISDICTION

This matter was referred to the undersigned by the Hon. Richard J. Arcara, on July 23, 1997 for all pretrial matters. It is presently before the court on Defendant's motion for summary judgment, filed January 15, 1999 (Docket Item No. 30).

BACKGROUND AND FACTS¹

Plaintiff, Land Ocean Logistics, Inc., ("Land Ocean") ("Plaintiff"), a New York corporation with its principal place of business in the Town of Amherst, New York, is a transportation broker in the business of arranging and scheduling the shipment of various products from New York to Puerto Rico through the use of commercial trucking and sea transportation companies. Defendants Aqua Gulf Corporation ("Aqua Gulf") and Aqua Gulf Transport, Inc. ("Transport") ("Defendants") are New Jersey corporations with their principal places of business in Florida.

Aqua Gulf is engaged in the business of providing commercial trucking and transportation facilities to public and private businesses. Transport provides forwarding services using vessels from ports of the United States to Puerto Rico and return. Declaration of John Bruno, President of Transport, filed April 10, 1998, (Docket Item No. 17), ¶ 4. According to Bruno, although Aqua Gulf and Transport have their corporate headquarters at the same location in Boca Raton, Florida, the two corporations maintain separate corporate, financial, and accounting records, as well as separate employees at separate facilities. Declaration of John Bruno, dated January 8, 1999 ("Bruno Declaration"), attached as exhibit to Defendants' Motion for Summary Judgment, filed January 15, 1999 (Docket Item No. 30) ("Defendants' Motion"), ¶ 7.

The Complaint, filed June 13, 1997, alleges a breach of an agreement executed in New York, on or about June 16, 1992², whereby Land Ocean and Aqua Gulf agreed to share certain commissions, fees, and profits with respect to Land Ocean customers for transporting freight through Aqua Gulf's shipping arrangements with various steamship lines operating between New Jersey and Puerto Rico. Complaint, ¶ 9. As part of the agreement alleged by Land Ocean, Aqua Gulf agreed to compensate Land Ocean with a certain percentage of the commissions, fees, and net profits received by Aqua Gulf with respect to this business. Complaint, ¶ 10.

James Kelly³, President of Land Ocean, described the nature of Land Ocean's business and the circumstances of the agreement reached between Land Ocean and Aqua Gulf. Affidavit of James Kelley ("Kelly Affidavit"), attachment to Plaintiff's Statement of Material Facts, filed February 5, 1999 (Docket Item No. 33). Specifically, in 1989 Kelly incorporated a company known as TransCaribbean Trailer Transport, Inc. ("TTT"), a licensed general commodity, common, and contract carrier. Kelly Affidavit, ¶ 7. TTT was a land transporter of goods purchased by wholesalers and retailers in Puerto Rico from companies in the Western New York and Northern Pennsylvania area. Id. Through direct solicitation, Kelly established a customer base in Puerto Rico for TTT's services. Id., ¶ 8.

Kelly subsequently became interested in expanding TTT's operation to provide customers an intermodal shipping rate, which included the cost of land and ocean transportation, thus relieving the customer of the burden of arranging for separate ocean transportation. Kelly Affidavit, ¶ 9. Kelly also became interested in logistical services, which involved consolidating several container shipments to a single or smaller number of containers for transport, resulting in substantial savings in transportation costs for the customer. Id., ¶ 10.

For the purpose of entering the consolidation business and expanding TTT's customer base, Kelly acquired Tropical Transport, an ailing consolidation company. Kelly Affidavit, ¶ 12. According to Kelly, Tropical Transport had obtained an "ocean rate" with the steamship lines for the shipment of the goods it consolidated. Id. ¶ 11. However, Tropical Transport had been unable to make a profit, as it was charging customers an amount equal to the ocean rate assessed by the steamship lines. Id. Kelly then incorporated Land Ocean Logistics, Inc., a logistics company providing consolidation and shipping services to customers of TTT and Tropical Transport, on April 28, 1992. Id. Following the acquisition of Tropical Transport and formation of Land Ocean, Kelly's operations included direct and intermodal shipping as well as consolidation. Id.

Kelly alleges that he was approached in April 1992 by Robert J. Browne, owner of Aqua Gulf. Kelly Affidavit, ¶ 13. At the time, Aqua Gulf was a competing shipper and consolidator for Puerto Rican customers. Id. Kelly, intrigued by the level of ocean rate profits earned by Aqua Gulf, agreed to enter into what he described as a "joint venture — partnership agreement" with Aqua Gulf, in which Aqua Gulf performed consolidation services for Land Ocean, and the two parties divided the profits earned from the shared ocean rate and consolidation services. Id., ¶¶ 13-14. The parties signed an Understanding of Agreement ("the Agreement") formally establishing this arrangement on June 16, 1992. Id., ¶ 15; see Exhibit 2 to Defendants' Motion. Plaintiff also submitted what Kelly describes as an amended version of the Agreement, bearing the notation "8-13-92" on its face. Kelly Affidavit, ¶¶ 15-19; Exhibit E to Plaintiff's Statement of Material Facts.

According to Kelly, under the terms of the amended Agreement, Land Ocean would retain its customers and act as a consolidator. Kelly Affidavit, ¶ 15. Importantly, the Agreement provided that Land Ocean would bill Aqua Gulf Transport, a company also owned by Browne that conducted consolidation and shipping services, for consolidation charges, and the profits derived from Land Ocean's operations would thereafter be equally divided between Aqua Gulf and Land Ocean. Kelly Affidavit, ¶ 19. The parties also agreed that Aqua Gulf and TTT would not compete for existing customers, and that Land Ocean would rent office space from Aqua Gulf. Id.

According to Kelly, the parties began operating under the Agreement in June 1992. Kelly Affidavit, ¶ 16. Land Ocean subsequently moved its consolidation activities to Aqua Gulf's warehouse in Deptford, New Jersey. Id., ¶ 16. Aqua Gulf then assumed the actual consolidation operations. Kelly Affidavit, ¶ 16.

Accounting and bookkeeping regarding the Agreement was initiated and managed by Aqua Gulf. Kelly Affidavit, ¶ 16. Aqua Gulf's employees prepared invoices for Land Ocean, stating amounts owed by Transport to Land Ocean for consolidation and ocean shipping services. Id. Transport then invoiced the shipping and/or consolidation customers of Land Ocean, TTT, and Aqua Gulf. Id. Payments collected by Transport from the customers were sent to Land Ocean, in an amount equal to half the profit for the consolidation, ocean shipping, or both. Id.

Land Ocean received regular checks, invoices, and reports from Transport regarding the Agreement for approximately eleven months. Kelly Affidavit, ¶ 19. At this point, Kelly alleges that the reports were received with less frequency, and the payments from Transport stopped altogether in late August 1993. Id., ¶ 20. As a result, Kelly alleges "Aqua Gulf and Aqua Transport" "simply took [Land Ocean]'s customers and refused to comply with the [A]greement." Id.

Kelly threatened to bring legal proceedings against Defendants in Puerto Rico for payments not received. Kelly Affidavit, ¶ 20. Kelly met with Browne in September 1994 and requested Land Ocean's share of the net profits from September 1993 to September 1994. Id. At that time, Browne gave Kelly a bank check in the amount of $62,449.63, issued by Transport, to satisfy any outstanding debt owed by Aqua Gulf to Land Ocean. Id.; Exhibit H to Plaintiff's Statement of Material Facts.

Land Ocean contends that Aqua Gulf and Transport failed to make payments to Land Ocean under the Agreement for the periods September 1994 through September, 1996 in a total amount of $124,899.26. Complaint, ¶ 17, ¶ 21. After requesting payment by the mailing of invoices to Aqua Gulf and Transport, Land Ocean commenced the present action in New York Supreme Court on June 13, 1997. On July 18, 1997, Defendants removed the case to this court.

On January 15, 1999, Defendants moved for...