Olympic Junior, Inc. v. David Crystal, Inc.

• Decision Date: 22 June 1972
• Docket Number: No. 71-1440 to 71-1442.,71-1440 to 71-1442.
• Citation: 463 F.2d 1141
• Parties: OLYMPIC JUNIOR, INC., Appellant in No. 71-1440, et al. v. DAVID CRYSTAL, INC., et al. Appeal of Edward DeFABIO, in No. 71-1441. Appeal of Paul D'ALESSANDRO, in No. 71-1442.
• Court: U.S. Court of Appeals — Third Circuit

463 F.2d 1141 (1972)

OLYMPIC JUNIOR, INC., Appellant in No. 71-1440, et al. v. DAVID CRYSTAL, INC., et al.

Appeal of Edward DeFABIO, in No. 71-1441.

Appeal of Paul D'ALESSANDRO, in No. 71-1442.

Nos. 71-1440 to 71-1442.

United States Court of Appeals, Third Circuit.

Argued April 4, 1972.

Decided June 22, 1972.

Amedeo C. Jacovino, East Orange, N. J., for appellants.

Max Wild, Rubin, Wachtel, Baum & Levin, New York City, for appellees.

Before SEITZ, Chief Judge, HUNTER, Circuit Judge, and McCUNE, District Judge.

OPINION OF THE COURT

JAMES HUNTER, III, Circuit Judge.

This is a contract action brought by appellants Edward DeFabio and Paul D'Alessandro, and their corporation, Olympic Juniors, Inc. ("Olympic"), against appellees David Crystal, Inc. ("Crystal"), and Philip E. Crystal. After the action was commenced, Crystal was acquired by appellee General Mills, Inc., which was thereupon joined as a party defendant.¹

Count 2 of the amended complaint avers that an agreement existed among Olympic and the defendants that if Crystal were sold, Olympic would be included in the sale. Counts 3 and 4 aver that an agreement existed among DeFabio, D'Alessandro, and the defendants that DeFabio and D'Alessandro would be given five-year employment contracts in the event that Crystal were sold. Both these agreements are alleged to have been breached. After considering affidavits, depositions, briefs, and oral argument, the District Court granted partial summary judgment for the defendants on the three counts mentioned.² This appeal followed. We agree with the District Court that summary judgment was proper as to Counts 3 and 4 (the employment-contract counts), but we disagree that summary judgment was proper as to Count 2 (the sale count).

I. THE FACTS

In the early 1950's DeFabio and D'Alessandro, with the encouragement and financial support of Crystal, formed Olympic, the great majority of whose business was to make suits for Crystal. Apparently it is customary in the clothing industry for a "contractor," such as Olympic, to deal exclusively or almost exclusively with one "manufacturer," who supplies designs and materials and promotes the sale of garments that are actually tailored by the contractor.

During the years after formation of Olympic, relations with Crystal were beneficial to both corporations. But in late 1964 and early 1965, the owners of Crystal began negotiations to sell that company, and Olympic's owners felt that their security was threatened. To calm those fears, and perhaps to dissuade Olympic from seeking a merger partner, Crystal is alleged by the plaintiffs to have entered into an agreement with DeFabio and D'Alessandro, representing Olympic, whereby Crystal agreed that "if and when Crystal would be sold that Olympic would be part and parcel of that sale." (Complaint, Count 2, ¶ 2). Crystal is also alleged to have agreed with DeFabio and D'Alessandro that "if and when Crystal would be sold, DeFabio and D'Alessandro would be employed by Crystal for a period of five years after the sale takes place." (Complaint, Counts 3, 4, ¶ 2). No writing or other memorandum of the alleged agreement was made, however, except for the following letter:

"January 7, 1965 "Mr. Paul Dallesandro sic Olympic Juniors 221 Bergen Street Newark, New Jersey

"Dear Paul:

"As a result of the discussion we had in my office Thursday, January 7th, I am writing this letter to you to confirm the agreement that we reached at this time.

"The agreement constitutes a contract between us; if and when David Crystal is sold that Olympic Juniors will be part and parcel of that sale and that it will be at a price that will be satisfactory to both you and your partner. A working employment contract will be required from you and your partner at a salary suitable to both you and your partner for a period of five years after the sale takes place.

"You have been an important factor in the growth of our suit business over many years, and it is my earnest desire to see that you remain with us for years to come.

"Sincerely yours DAVID CRYSTAL, INC. /s/ Philip Crystal Philip Crystal Vice-President"

The defendants admit that the letter is genuine, but they deny that it represents a contract. They concede that at one time it was the intention of Crystal and its management to include Olympic in the contemplated sale of Crystal and to employ DeFabio and D'Alessandro thereafter, but they deny that any agreement to that effect was ever reached. Defendants also contend that if agreements were ever made, they are unenforceable for several reasons, and that there has been no breach of the alleged agreements.

Since this is a diversity case, we look to state law for the applicable substantive law. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Waldron v. Aetna Casualty & Surety Co., 141 F.2d 230 (3d Cir. 1944); Moran v. Pittsburgh-Des Moines Steel Co., 166 F.2d 908 (3d Cir.), cert. denied, 334 U.S. 846, 68 S.Ct. 1516, 92 L.Ed. 1770 (1948); Lind v. Schenley Industries, Inc., 278 F.2d 79 (3d Cir.), cert. denied, 364 U.S. 835, 81 S.Ct. 58, 5 L.Ed.2d 60 (1960); New Amsterdam Casualty Co. v. First Pennsylvania Banking & Trust Co., 451 F.2d 892 (3d Cir. 1971). Although the forum state is New Jersey, the alleged contracts may have been made in New York. Under the rule in Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), we look to the choice-of-law rules of New Jersey to determine whether that state would choose to apply its own substantive rule or the New York rule to each of the issues in this case. E. g., Boase v. Lee Rubber & Tire Corp., 437 F.2d 527 (3d Cir. 1970); Goodemote v. Mushroom Transportation Co., 427 F.2d 285 (3d Cir. 1970); Slaughter v. Philadelphia National Bank, 417 F.2d 21 (3d Cir. 1969). Here, however, the law of New York is the same as that of New Jersey in every material respect, and we are spared the task of choosing which state's substantive law to apply.

II. THE EMPLOYMENT CONTRACTS

Counts 3 and 4 of the Complaint are grounded upon alleged breaches of agreements to employ DeFabio and D'Alessandro, respectively, for a period of five years after the contemplated sale of Crystal. Such agreements fall within the statute of frauds provision making agreements that are "not to be performed within one year from the making thereof" unenforceable unless they are evidenced by a sufficient memorandum. N.J.Stat.Ann. 25:1-5(e) (1940); N.Y. General Obligations Law, McKinney Consol.Laws, c. 24-A, § 5-701(1) (McKinney 1964).³ In both New Jersey and New York a writing or memorandum does not suffice under the statute of frauds unless the writing itself contains the essential terms of the agreement, including the price or salary to be paid.⁴ Here there is no genuine issue that the only writing is the letter quoted above. That letter contains no definite salary term, and therefore does not satisfy the requirements of the statute of frauds. Thus the District Court was correct in granting summary judgment for the defendants on counts 3 and 4.

III. THE CONTRACT TO INCLUDE OLYMPIC IN THE SALE OF CRYSTAL

Count 2 of the Complaint alleges a breach of an agreement to include Olympic in the contemplated sale of Crystal, and with respect to this agreement the issues are more difficult.

1. The Statute of Frauds. There can be little doubt that the alleged agreement to include Olympic in the sale of Crystal would be a "contract for the sale of personal property" within the meaning of Section 1-206 of the Uniform Commercial Code, N.J.Stat.Ann. 12A:1-206 (1962), N.Y.U.C.C. § 1-206 (McKinney 1964).⁵ Section 1-206 states, in pertinent part:

"A contract for the sale of personal property is not enforceable by way of action or defense beyond five thousand dollars in amount or value of remedy unless there is some writing which indicates that a contract for sale has been made between the parties at a defined or stated price, reasonably identifies the subject matter, and is signed by the party against whom enforcement is sought or by his authorized agent."

Thus the writing required by the section must contain a "defined or stated price." Since the only writing in the present case contained no such term, Section 1-206 acts to deny full enforcement to the alleged contract.

It will be noted, however, that Section 1-206 does not act in a way that would bar the contract completely. Section 1-206, unlike the usual statute of frauds, merely makes the contract unenforceable beyond $5,000.⁶ The conclusion is inescapable that unless the alleged contract is unenforceable for some other reason, the applicable statute of frauds would be no bar to enforcement of the contract to the extent of $5,000, regardless of the value of the property to be sold under the contract.

2. Nonexistence of a Contract. In support of the defendants' motion for summary judgment, Philip E. Crystal described the circumstances under which he wrote the letter of January 7, 1965. The affidavit, if believed, established that no contract was made on that date, and that the letter was merely a letter of intent.⁷ Mr. Crystal also denied that the parties had at any other time reached final agreement on the terms of including Olympic in the sale of Crystal.⁸

Philip E. Crystal's affidavit and deposition alleged facts which were sufficient to establish that no contract ever existed for the inclusion of Olympic in the sale of Crystal. Faced with these allegations, to avoid summary judgment defendants were required under Rule 56(e), Fed.R.Civ.P., to

"come forward with affidavits setting forth specific facts showing that there was a genuine issue for trial."

Tripoli Co. v. Wella Corp., 425 F.2d 932, 935 (3d Cir.), cert. denied, 400 U.S. 831, 91 S.Ct. 62, 27 L.Ed.2d 62 (1970); accord, Lockhart v. Hoenstine, 411 F.2d 455 (3d Cir.), cert. denied, 396 U.S. 941, 90 S.Ct. 378, 24 L.Ed.2d 244 (1969). Conclusory statements, general denials, and factual...