Nature's Prods., Inc. v. Natrol, Inc.

• Decision Date: 07 October 2013
• Docket Number: Case No. 11–62409–CIV.
• Citation: 990 F.Supp.2d 1307
• Parties: NATURE'S PRODUCTS, INC., Plaintiff, v. NATROL, INC. and FCC Products, Inc., Defendants. Natrol, Inc., Counter–Plaintiff, v. Nature's Products, Inc., Counter–Defendant, FCC Products, Inc., Third–Party Plaintiff, v. Commercial Proteins Corporation, Third–Party Defendant.
• Court: U.S. District Court — Southern District of Florida

990 F.Supp.2d 1307

NATURE'S PRODUCTS, INC., Plaintiff,

v.NATROL, INC. and FCC Products, Inc., Defendants.

Natrol, Inc., Counter–Plaintiff,

v.Nature's Products, Inc., Counter–Defendant,FCC Products, Inc., Third–Party Plaintiff,

v.Commercial Proteins Corporation, Third–Party Defendant.

Case No. 11–62409–CIV.

United States District Court, S.D. Florida.

Oct. 7, 2013.

Alan Rosenthal, Natalie Jessica Carlos, Charles W. Throckmorton, Carlton Fields Jorden Burt, P.A., Miami, FL, for Plaintiff.

Mesrop G. Khoudagoulian, Law Offices of Mesrop Khoudagoulian, Glendale, CA, Barton Stuart Sacher, Joseph Alan Sacher, Roy Mark Hartman, Michael F. Reese, Sacher, Zelman, Hartman, Paul, Beiley & Sacher, P.A., Miami, FL, for Defendant.

AMENDED¹OMNIBUS ORDER DENYING AND GRANTING, IN PART, CROSS MOTIONS FOR SUMMARY JUDGMENT

WILLIAM P. DIMITROULEAS, District Judge.

THIS CAUSE is before the Court upon Natrol, Inc.'s Motion for Final Summary Judgment (“Natrol's Motion for Summary Judgment”) [DE 202], filed herein on July 3, 2013, and Plaintiff, Nature's Products, Inc.'s Motion for Summary Judgment on Its Complaint and Against Defendant, Natrol, Inc. on Its Affirmative Defenses to Complaint and Counterclaim (“NPI's Motion for Summary Judgment”) [DE 212], filed herein on July 8, 2013. The Court has carefully considered the Motions [DE 202, 212], the Responses [DE 234, 238], the Replies [DE 252, 254], and the evidence submitted in the record. The Court is otherwise fully advised in the premises.

I. BACKGROUND

The parties have provided in their respective Statements of Material Facts [DE 203; DE 212 at 3–11] various factual assertions that are supported by the record. In some instances, the parties have not contested their adversaries' assertions. In other instances, the parties have contested their adversaries' assertions but without citing sufficient materials in the record to refute those assertions. The Court will deem all of these uncontested—or insufficiently contested—factual assertions to be admitted. See S.D. Fla. L.R. 56.1(b); Fed.R.Civ.P. 56(c), (e). The Court will now set forth the relevant admitted facts.

The parties to this action are Plaintiff Nature's Products, Inc. (“NPI”) and Defendants Natrol, Inc. (“Natrol”) and FCC Products, Inc. (“FCC”).² NPI and Natrol are both global manufacturers and distributors/suppliers of healthcare products. [DE 212 ¶ 1; DE 229 ¶ 1].

Natrol and NPI had business dealings from the late 1990's through 2011. [DE 212 ¶ 2; DE 239 ¶ 2]. In 2001, Natrol and NPI executed an open-ended indemnity agreement (the (“Indemnity Agreement” or “Agreement”), which “appl[ied] to any and all products (whether packaged for resale or in bulk) that Natrol may purchase from [NPI].” [DE 203 ¶ 3; DE 234 at 3–6; DE 47–1] ).

In 2009, NPI contracted with Natrol and assumed manufacturing responsibilities for certain of Natrol's ProLab brand products (the “ProLab Products” or “Products”). [DE 203 ¶ 5; DE 234 at 3–6; 212 ¶¶ 5, 9; DE 239 ¶¶ 5, 9]. ³ Century Foods, International (“Century Foods”) had been Natrol's previous manufacturer. [DE 203 ¶ 6; DE 234 at 3–6]. NPI manufactured the ProLab's products from approximately July 2009 to August 2011. [DE 212 ¶ 14; DE 239 ¶ 14]. Natrol provided NPI with the labels to be affixed to the ProLab Products. [DE 212 ¶¶ 15–16; DE 239 ¶¶ 15–16]. Those labels represented that the ProLab Products were wheat and gluten free. [DE 212 ¶¶ 15–16; DE 239 ¶¶ 15–16].

In March 2010, NPI returned to Natrol Finished Product Allergen Questionnaires (the “Questionnaires”)—as completed by NPI's Regulatory and Compliance Manager—which represented that the ProLab Products created by NPI were free of wheat and gluten allergens. [DE 203 ¶ 20; DE 234 at 3–6]. In June 2010, NPI began providing the completed ProLab Products to Natrol. [DE 203 ¶ 21; DE 234 at 3–6].

In September 2011, after an investigation by the United States Food and Drug Administration (the “USFDA”), NPI determined that the ProLab Products did contain wheat and gluten. [DE 203 ¶ 29; DE 234 at 3–6; DE 212 ¶¶ 17–18; DE 239 ¶¶ 17–18]. One ingredient of the ProLab Products was glutamine peptide, which contained the wheat and gluten. [DE 203 ¶¶ 15, 23, 29; DE 234 at 3–6; DE 212 ¶¶ 17–18; DE 239 ¶¶ 17–18]. NPI then informed Natrol of this discovery. [DE 203 ¶ 31; DE 234 at 3–6]. The ProLab products previously manufactured by Century Foods—Natrol's preceding manufacturer—had also contained wheat and gluten. [DE 212 ¶ 18; DE 239 ¶ 18].

In mid-September 2011, Natrol initiated a recall of the ProLab Products. [DE 203 ¶ 39; DE 234 at 5–6]. NPI and Natrol discussed the possibility of relabeling the recalled products. [DE 212 ¶¶ 19–20; DE 239 ¶¶ 19–20]. However, Natrol subsequently cancelled all existing purchase orders with NPI and destroyed the recalled ProLab Products. [DE 212 ¶ 20; DE 239 ¶ 20].

NPI initiated this action on November 10, 2011, bringing claims against Natrol for breach of contract and unjust enrichment for Natrol's failure to pay NPI's invoices. See [DE 1]. Natrol brought counterclaims against NPI for breach of contract, breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, breach of the Florida Deceptive and Unfair Trade Practices Act, and civil remedies for violations of Lanham Act. See [DE 47]. NPI now seeks summary judgment on its breach of contract claim arising from for $1,025,398.73 in unpaid invoices issued to Natrol, as well as summary judgment in its favor on each of Natrol's counterclaims. [DE 212]. Natrol, in turn, seeks summary judgment on each of its counterclaims, with an award of $5,636,196.00 in damages, including prejudgment interest.⁴See [DE 202].

II. STANDARD OF REVIEW

Under Rule 56(a), “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The movant bears “the stringent burden of establishing the absence of a genuine issue of material fact.” Sauve v. Lamberti, 597 F.Supp.2d 1312, 1315 (S.D.Fla.2008) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).

“A fact is material for the purposes of summary judgment only if it might affect the outcome of the suit under the governing law.” Kerr v. McDonald's Corp., 427 F.3d 947, 951 (11th Cir.2005) (internal quotations omitted). Furthermore, “[a]n issue [of material fact] is not ‘genuine’ if it is unsupported by the evidence or is created by evidence that is ‘merely colorable’ or ‘not significantly probative.’ ” Flamingo S. Beach I Condo. Ass'n, Inc. v. Selective Ins. Co. of Southeast, 492 Fed.Appx. 16, 26 (11th Cir.2012) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). “A mere scintilla of evidence in support of the nonmoving party's position is insufficient to defeat a motion for summary judgment; there must be evidence from which a jury could reasonably find for the non-moving party.” Id. at 26–27 (citing Anderson, 477 U.S. at 252, 106 S.Ct. 2505). Accordingly, if the moving party shows “that, on all the essential elements of its case on which it bears the burden of proof at trial, no reasonable jury could find for the nonmoving party” then “it is entitled to summary judgment unless the nonmoving party, in response, comes forward with significant, probative evidence demonstrating the existence of a triable issue of fact.” Rich v. Sec'y, Fla. Dept. of Corr., 716 F.3d 525, 530 (11th Cir.2013) (citation omitted).

III. DISCUSSION

A. NPI's Motion for Summary Judgment

1. NPI's Claim Against Natrol for Breach of Contract

NPI seeks summary judgment on its breach of contract claim against Natrol. That claim arises from open invoices for various products—including the ProLab Products—that NPI delivered to Natrol.

Because federal courts sitting in diversity generally apply state law to questions of contract, the Court applies Florida law to the instant breach of contract claim. See Centennial Bank v. Falke, No. 5:12cv114/RS/EMT, 2013 WL 950943, at *3 (N.D.Fla. Feb. 8, 2013) (citing In re Chira, 567 F.3d 1307, 1311 (11th Cir.2009)). “Under Florida law, the elements of a breach of contract action are (1) a valid contract, (2) a material breach, and (3) damages.” Id. (citing Beck v. Lazard Freres & Co., LLC, 175 F.3d 913, 914 (11th Cir.1999)).

Although contract interpretation is generally a question of law for the Court, “[i]f the contract contains ambiguities [ ] a question of fact for the jury may be presented.” PartyLite Gifts, Inc. v. MacMillan, 895 F.Supp.2d 1213, 1232 (M.D.Fla.2012) (citing Quayside Assocs., Ltd. v. Harbour Club Villas Condo. Ass'n, Inc., 419 So.2d 678, 679 (Fla. 3d DCA 1982)). “ ‘Where the wording of an agreement is ambiguous, its interpretation involves [a] question of fact, precluding summary disposition.’ ” PartyLite Gifts, Inc., 895 F.Supp.2d at 1235 (quoting Smith v. Shelton, 970 So.2d 450, 451 (Fla. 4th DCA 2007)); see also Hibiscus Assocs. Ltd. v. Bd. of Trs. of Policemen and Firemen Ret. Sys. of Detroit, 50 F.3d 908, 919 (11th Cir.1995) ( “Generally, the proper construction of an ambiguous contract term is a question of fact which should be reserved to the jury.” (citing Fecteau v. Se. Bank, N.A., 585 So.2d 1005, 1007 (Fla. 4th DCA 1991))). Moreover, “[u]nder Florida law, extrinsic evidence is admissible regarding the intent of parties to a contract if a latent ambiguity exists.” PartyLite Gifts, Inc., 895 F.Supp.2d at 1233 (citing United States on Behalf of Small Bus. Admin. v. S. Atl. Prod. Credit Ass'n, 606 So.2d 691, 695 (Fla. 1st DCA 1992)). “A latent ambiguity ... is said to exist where a contract fails to specify the rights or duties of the parties in certain situations and extrinsic evidence is necessary for interpretation or a choice between two possible meanings. In such instance, this evidence is required because...