Rgj Associates, Inc v. Stainsafe, Inc.
Decision Date | 21 January 2004 |
Docket Number | No. CIV.A.01-10936-DPW.,CIV.A.01-10936-DPW. |
Parties | RGJ ASSOCIATES, INC. d/b/a Williamsville Products, Plaintiff, v. STAINSAFE, INC., Defendant. |
Court | U.S. District Court — District of Massachusetts |
David A. Rich, Lawson & Weitzen, LLP, Boston, MA, J. Mark Dickison, Lawson & Weitzen, LLP, Boston, MA, for RGJ Associates, Inc. dba Williamsville Products, Plaintiff.
Henry C. Dinger, Dana A. Zakarian, Goodwin Procter, LLP, Boston, MA, Steven Ellison, Broad and Cassel, West Palm, FL, for Stainsafe, Inc., Defendant.
PROCEDURAL ORDER RE: DAMAGES MEASUREMENT
A review of the filings (Docket Entry 152, 155, 163 & 164) submitted in connection with the motion in limine by plaintiff RGJ Associates, Inc. ("RGJ"), d/b/a Williamsville Products ("Williamsville"), to preclude the testimony of Christopher Barry and the second motion in limine by defendant Stainsafe, Inc. ("Stainsafe") to preclude the testimony of Howard J. Gordon ("Gordon") evidences that the parties dispute the proper method to measure contract damages for breach of the unwritten requirements contract1 and for breach of the letter agreement. Clarification is therefore appropriate.
As explained in the June 2002 opinion, section 2-708 of the UCC, Mass. Gen. L. ch. 106, § 2-708 ("section 2-708"), governs the measure of contract damages. Where, as here, the difference between the market price and the unpaid contract price under section 2-708(1) would not place Williamsville "in as good a position as performance would have done,"2 section 2-708(2) allows RGJ to recover lost profits which Williamsville would have made from full performance, together with incidental damages and due allowance for reasonably incurred costs minus proceeds from any resale. (Docket Entry # 83, pp. 39-40; citing cases).
Damages for breach of contract are also governed by section 2-309 of the UCC, Mass. Gen. L. ch. 106, § 2-309 ("section 2-309"). See Maytronics, Ltd. v. Aqua Vac Systems, Inc., 277 F.3d 1317, 1320-1321 (11th Cir.2002) ( ); Pharo Distributing Co. v. Stahl, 782 S.W.2d 635, 638-639 (Ky.App.1989) (same); Teitelbaum v. Hallmark Cards, Inc., 25 Mass.App.Ct. 555, 520 N.E.2d 1333, 1336-1337 (1988) ( ). Section 2-309 states that an agreement providing for successive performances3 that is indefinite in duration is valid for a reasonable period of time. Mass. Gen. L. ch. 106, § 2-309(2). The parties did not place a time limit on the contract which is therefore valid only for a reasonable period of time. Mass. Gen. L. ch. 106, § 2-309(2); Teitelbaum v. Hallmark Cards, Inc., 520 N.E.2d at 1336 (quoting section 2-309(2)); accord Shearon v. Boise Cascade Corp., 478 F.2d 1111, 1117 (8th Cir.1973) ( ); see also Anglo Fabrics, Inc. v. Town of Webster, 2002 WL 31187829 at * 10 (Mass.Super. July 1, 2002) ().
Because the parties did not expressly agree to a durational term or to prevent termination, Massachusetts law construes the contract as terminable at will. Serpa Corporation v. McWane, Inc., 199 F.3d 6, 14 (1st Cir.1999) (); Labrecque v. Niconchuk, 442 F.2d 1094, 1098 (1st Cir.1971) (); Teitelbaum v. Hallmark Cards, Inc., 520 N.E.2d at 1336 ( ). Any termination, however, requires reasonable notice to the non-terminating party. Mass. Gen. L. ch. 106, § 2-309(3); Teitelbaum v. Hallmark Cards, Inc., 520 N.E.2d at 1336; accord Maytronics, Ltd. v. Aqua Vac Systems, Inc., 277 F.3d at 1321 ( ); Shearon v. Boise Cascade Corp., 478 F.2d at 1117 ( ); Swierczynski v. Arnold Foods Co., Inc., 265 F.Supp.2d 802, 810 (E.D.Mich.2003) ( ). In such circumstances, the breach is the failure to give reasonable notice of the termination rather than the termination itself. California Wine Association v. Wisconsin Liquor Co. of Oshkosh, 20 Wis.2d 110, 121 N.W.2d 308, 318 (1963) ( ); Conneaut Metalcasters, Inc. v. Emco Wheaton, Inc., 1997 WL 560054 at * 3 (6th Cir. Sept.5, 1997) ( )(unpublished opinion).4 The reasoning is best expressed as follows by the court in Pharo:
It is not the termination of an at-will contract that constitutes the breach; the right to terminate is inherent in the nature of the contract. Nor is it relevant that a party losing an at-will contract suffers losses. Again, this is an inherent probability. Rather, it is the failure to give reasonable notice before termination that constitutes breach.
Pharo Distributing Co. v. Stahl, 782 S.W.2d at 638.
Further, as uniformly held by the majority of courts, the amount of damages following the termination date is limited to the time period of what constitutes reasonable notice. Maytronics, Ltd. v. Aqua Vac Systems, Inc., 277 F.3d at 1321 ( )(emphasis added); King v. Exxon Co., U.S.A., 618 F.2d 1111, 1119 (5th Cir.1980) ( ); Swierczynski v. Arnold Foods Co., Inc., 265 F.Supp.2d at 810-811 ( ); California Wine Association v. Wisconsin Liquor Co. of Oshkosh, 121 N.W.2d at 318 ( ). Massachusetts law applying section 2-309 adheres to these principles. Teitelbaum v. Hallmark Cards, Inc., 520 N.E.2d at 1336 (); Serpa Corporation v. McWane, Inc., 199 F.3d 6, 14 (1st Cir.1999) (quoting Teitelbaum). Furthermore, any such damages must result from the inadequate notice of termination as opposed to the loss of the business due to the termination itself, Serpa Corporation v. McWane, Inc., 199 F.3d at 14 (); accord Pharo Distributing Co. v. Stahl, 782 S.W.2d at 638 ( ), and RGJ has the burden of proving the amount of the loss. Teitelbaum v. Hallmark Cards, Inc., 520 N.E.2d at 1336 ( ); accord Anglo Fabrics, Inc. v. Town of Webster, 2002 WL 31187829 at * 10 (Mass.Super. July 1, 2002) ().5
Determining what constitutes a reasonable notification of termination time as well as the date of termination is a question for the finder of fact. Swierczynski v. Arnold Foods Co., Inc., 265 F.Supp.2d at 811 (); Conneaut Metalcasters, Inc. v. Emco Wheaton, Inc., 124 F.3d 197, 1997 WL 560054 at * 4 (6th Cir. Sept.5, 1997) ( ). Under section 2-309, the reasonableness of the notice of termination is measured in terms of the amount of time "as will give the other party reasonable time to seek a substitute arrangement." Mass. Gen. L. ch. 106, § 2-309, Comment 8 (emphasis added); see Teitelbaum v. Hallmark Cards, Inc., 520 N.E.2d at 1336 (); accord Pharo Distributing Co. v. Stahl, 782 S.W.2d at 638 (...
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