Rgj Associates, Inc v. Stainsafe, Inc., No. CIV.A.01-10936-DPW.

• Court: United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
• Writing for the Court: Bowler
• Citation: 300 F.Supp.2d 250
• Parties: RGJ ASSOCIATES, INC. d/b/a Williamsville Products, Plaintiff, v. STAINSAFE, INC., Defendant.
• Docket Number: No. CIV.A.01-10936-DPW.
• Decision Date: 21 January 2004

300 F.Supp.2d 250 RGJ ASSOCIATES, INC. d/b/a Williamsville Products, Plaintiff,
v.
STAINSAFE, INC., Defendant. No. CIV.A.01-10936-DPW. United States District Court, D. Massachusetts. January 21, 2004.

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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

BOWLER, Chief United States Magistrate Judge.

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) (discussing UCC section identical to section 2-309 in the course of explaining the proper measure of damages in distributorship agreement); 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) (performance of supply contract governed by section 2-309). Section 2-309

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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) (applying Iowa law to similar agreement and recognizing that "`contract continues for a reasonable time'"); see also Anglo Fabrics, Inc. v. Town of Webster, 2002 WL 31187829 at * 10 (Mass.Super. July 1, 2002) ("contract which does not have a duration of term clause is not presumed to last in perpetuity or for an extended number of years unless there is an express term to that effect").

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) ("[u]nder Massachusetts law, a contract without a durational term is terminable at will by either party upon reasonable notice"); Labrecque v. Niconchuk, 442 F.2d 1094, 1098 (1st Cir.1971) ("It is well settled that, without a term specifying duration, a distribution contract is a contract at will"); Teitelbaum v. Hallmark Cards, Inc., 520 N.E.2d at 1336 (absent "express agreement preventing termination, the arrangement that existed was terminable at the will of either party"). 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 (because "Florida UCC requires reasonable notification prior to the termination of a terminable-at-will contract, it follows that the parties have an expectation that the contract will not end without such notification"); Shearon v. Boise Cascade Corp., 478 F.2d at 1117 (applying Iowa law and noting that contract granting distributorship for indefinite time period "`may be terminated without cause only upon reasonable notice'"); Swierczynski v. Arnold Foods Co., Inc., 265 F.Supp.2d 802, 810 (E.D.Mich.2003) (applying New Jersey law and noting that, "where an exclusive distribution agreement lasts for an indefinite period, the exclusive distributor is entitled to reasonable notice that the exclusive distributorship would be terminated"). 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) (inasmuch as "the exclusive distributorship contract could be terminated at will, ... the breach was the failure to give reasonable notice"); Conneaut Metalcasters, Inc. v. Emco Wheaton, Inc., 1997 WL 560054 at * 3 (6th Cir. Sept.5, 1997) (Emco breached the volume purchase commitment when it stopped its purchases "only to the extent that it failed to give reasonable notice when it did so") (unpublished opinion).⁴ The reasoning is

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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 (party should be placed in same position it would have been in but for "the failure to give proper notice;" nonbreaching party therefore entitled to lost profits "it would have made from the contract during the notice period") (emphasis added); King v. Exxon Co., U.S.A., 618 F.2d 1111, 1119 (5th Cir.1980) (proper measure of damages for "contract of indefinite duration terminable at will upon reasonable...