Rgj Associates, Inc. v. Stainsafe, Inc.

• Decision Date: 30 September 2004
• Docket Number: No. CIV.A. 01-10936-MBB.,CIV.A. 01-10936-MBB.
• Citation: 338 F.Supp.2d 215
• Parties: RGJ ASSOCIATES, INC. d/b/a Williamsville Products, Plaintiff, v. STAINSAFE, INC., Defendant.
• Court: U.S. District Court — District of Massachusetts

338 F.Supp.2d 215

RGJ ASSOCIATES, INC. d/b/a Williamsville Products, Plaintiff, v. STAINSAFE, INC., Defendant.

No. CIV.A. 01-10936-MBB.

United States District Court, D. Massachusetts.

September 30, 2004.

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John Mark Dickison, Lawson & Weitzen, LLP, Boston, MA, Valerie L. Pawson, Lawson & Weitzen, LLP, Boston, MA, David A. Rich, Lawson & Weitzen, LLP, Boston, MA, Michael Williams, Lawson & Weitzen, LLP, Boston, MA, for Plaintiff.

Henry C. Dinger, Goodwin, Procter LLP, Boston, MA, Steven Ellison, Broad and Cassel, West Palm, FL, Jacob A. Labovitz, Palmer & Dodge, LLP, Boston, MA, Michael J. Lacek, New England Financial, Boston, MA, Michael J. Mott, Rose & Associates, Boston, MA, William C. Nystrom, Nystrom Beckman & Paris LLP, Boston, MA, Dana A. Zakarian, Goodwin, Procter LLP, Boston, MA, for Defendant.

MEMORANDUM AND ORDER RE: PLAINTIFF'S CHAPTER 93A CLAIM

BOWLER, United States Magistrate Judge.

On April 9, 2004, after a 17 day trial, the jury rendered a verdict in favor of plaintiff RGJ Associates, Inc. ("RGJ") d/b/a Williamsville Products ("Williamsville") on the breach of contract, breach of the implied duty of good faith, breach of goods sold and delivered and the promissory estoppel claims.¹ The jury awarded RGJ $33,632 on the breach of contract and breach of the implied duty of good faith claims, $72,000 on the breach of goods sold and delivered claim and $755,867 on the promissory estoppel claim. In answering a special verdict question with respect to the intentional misrepresentation claim, however, the jury determined that Williamsville failed to establish all of the necessary elements of the claim.

In accordance with a pretrial ruling, the factually similar portion of the chapter 93A claim was tried to this court simultaneously with the above jury claims. The parties submitted proposed findings on the chapter 93A claim shortly after the trial's conclusion. Accordingly, with the exception of any remaining, dissimilar facet of the chapter 93A claim not received during the jury trial, the chapter 93A claim is ripe for review.²

FACTUAL BACKGROUND³

Williamsville, a producer of quality furniture care products for the retail furniture industry, started doing business in the 1950s. Robert "Kip" Johnson ("Johnson"), President of RGJ, purchased the company in the early 1980s. At that time, Williamsville produced Williamsville wax, which retail purchasers used to preserve wood and leather furniture. Johnson proceeded to operate the business and acquired various clients including Scandinavian Design.

In the fall of 1985, Johnson attended a furniture market in High Point, North Carolina and met two officials of Troy Furniture Products ("Troy"), a company that sold fabric protection products. Johnson and the two officials informally agreed to form a partnership.

After two further meetings in November 1985 and January 1986, Troy and Williamsville cemented an arrangement whereby Troy would purchase all of the furniture care products it needed for the retail furniture care market in the United States exclusively from Williamsville. Troy also agreed to annually increase sales of the Williamsville product line which, at the time, included wood, leather and lacquer furniture care products. Williamsville, in turn, agreed to supply Troy with all of its needs for such products and not to compete with Troy in the retail residential furniture care market. Although the agreement did not contain a specified duration, Williamsville was given the option of terminating the agreement with 90 days written notice if the annual volume became flat or if Troy failed to pay for products within 90 days. The parties did not memorialize their agreement with a written contract.

In the summer of 1989, Troy and Williamsville began developing a furniture wood care kit for ArtVan Furniture ("ArtVan"), a residential furniture care dealer in the United States based in Michigan. ArtVan eventually became one of the premiere residential furniture care dealers in the United States and one of Stainsafe's largest purchasers of wood care kits. In June 1990, Johnson turned down an opportunity for Williamsville to sell furniture care products directly to ArtVan because of the agreement with Troy.

In early 1990, Stainsafe became interested in acquiring Troy. Marc Abrams ("Abrams"), who in 1990 was Stainsafe's President as well as a director and shareholder, together with Robert Sayre ("Sayre"), then Vice President,⁴ and two other partners formed Stainsafe in 1984 or 1985. Abrams and Sayre each acquired a 25% interest in the company.⁵ The company began as a Teflon distributor for fabric protection products sold to retail furniture stores. Before 1990, warranty protection plans were Stainsafe's most important product with other products constituting a minor part of the business vis-a-vis the warranty programs.

After Stainsafe approached Troy about acquiring the company, Larry Moses, Troy's President, agreed to the acquisition.⁶ In June 1990, Moses told Johnson about the acquisition and that Stainsafe wanted a written agreement of the parties' exclusive arrangement. Accordingly, in June 1990 Johnson spoke with both Sayre and Abrams who uniformly expressed their excitement about "partnering" with Williamsville.

Sayre drafted a written agreement that led to the June 27, 1990 letter agreement and sent the draft to Johnson in Massachusetts prior to a June 22 RGJ board meeting. RGJ, doing business as Williamsville, was at all relevant times based in Massachusetts, the locus of all of the company's manufacturing.

The RGJ board meeting took place at Johnson's house in Sudbury, Massachusetts. Johnson, his brother and then wife took part in the meeting. During the meeting, Johnson explained that Stainsafe wanted a written agreement under which Williamsville would exclusively sell certain products to Stainsafe. The board thereafter approved entering into the exclusive distribution contract with Stainsafe. Additional conversations took place resulting in the letter agreement dated June 27, 1990 ("the 1990 letter agreement" or "exclusive dealing contract").

Under the unsigned 1990 letter agreement,⁷ Stainsafe agreed to sell all of the products Williamsville supplied and to make a "conscious sales effort" to annually increase its sales of "the Williamsville product line." (Ex. 504). Under the parties' arrangement, Stainsafe agreed to buy exclusively from Williamsville all of the products it needed that were encompassed within "the Williamsville product line." Williamsville, in turn, agreed not to compete with Stainsafe in the residential furniture care market with the exception of a number of accounts. In essence, Stainsafe agreed to assume the duties performed by Troy under the prior agreement.

The 1990 letter agreement constitutes the parties' final, albeit not exclusive, expression of their agreement.⁸ See Mass. Gen. L. ch. 106, § 2-202. At the time the parties entered into the contract, Williamsville did not have a fabric furniture care protection product. It was only in the mid 1990s that Williamsville developed fabric protection products for Stainsafe. In 1990, therefore, the "Williamsville product line" consisted of wood, leather and lacquer care furniture care products.

After the acquisition, Williamsville tested various products such as wood and leather cleaners and produced wood and leather care kits for Stainsafe. Williamsville typically purchased wood care products in bulk, bottled and labeled them at its leased, Framingham, Massachusetts plant and sold them to Stainsafe. In the fall of 1990, Williamsville gave Stainsafe permission to use the Williamsville name. Sayre subsequently authorized Johnson to communicate directly with Stainsafe's clients.

In the summer of 1991, Stainsafe broached Williamsville in regard to performing its own bottling and labeling. Williamsville rebuffed the suggestion and accurately warned Stainsafe that if it began purchasing from Williamsville in bulk then we would "have to reconsider our current contract." (Ex. 507). Accordingly, relatively early in the parties' relationship, Stainsafe learned that Williamsville would object if Stainsafe reconfigured the parties' contract and performed its own bottling and labeling of products encompassed within the Williamsville product line. Consequently, it covertly developed the capacity, purchased product from other vendors and performed such compounding years later.

In the fall of 1991, Sayre visited Johnson in Massachusetts and toured the Framingham facility. In March 1992, Sayre made another trip to Massachusetts and, together with Johnson, visited Abbott Box in Randolph, Massachusetts, Williamsville's box supplier, and Andler Bottle Company in Everett, Massachusetts, Williamsville's bottle supplier. After visiting a local grocery store and seeing a Quaker Oats cereal box, Sayre and Johnson decided on a green and beige color scheme for Stainsafe's furniture care kits.

Initially, the business between Williamsville and Stainsafe grew at a relatively modest pace. Williamsville's total sales to Stainsafe in the 1990 calendar year amounted to $43,282 or 35% of Williamsville's entire sales. By 1992, however, Stainsafe's purchases increased to $261,541, a figure representing 70.2% of Williamsville's total sales. That figure increased to $487,183 or 78.5% and $582,526 or 85.6% in 1993 and 1994, respectively. Thereafter, Williamsville's reliance upon Stainsafe steadily swelled such that by 1998 sales to the company comprised almost 95% of Williamsville's business. During these years, Williamsville produced the majority of Stainsafe's products.

Williamsville's corresponding need for a larger facility and more equipment also grew. In 1992 and 1993, Johnson had various discussions with Sayre about leasing additional space. In January 1994, after Sayre advised Johnson that he was authorized to procure additional space,...