Utica Alloys, Inc. v. Alcoa Inc.

• Decision Date: 28 January 2004
• Docket Number: No. 5:02-CV-972.,5:02-CV-972.
• Citation: 303 F.Supp.2d 247
• Parties: UTICA ALLOYS, INC. Plaintiff, v. ALCOA INC., Defendant.
• Court: U.S. District Court — Northern District of New York

303 F.Supp.2d 247

UTICA ALLOYS, INC.Plaintiff, v.ALCOA INC., Defendant.

No. 5:02-CV-972.

United States District Court, N.D. New York.

January 28, 2004.

COPYRIGHT MATERIAL OMITTED

Cohen & Cohen LLP, Utica, NY (Daniel S. Cohen, of counsel), for plaintiff.

Leboeuf, Lamb, Green & Macrae, Pittsburgh, PA(Brian P. Cuthbertson, John C. Cleary, of counsel), Mackenzie Hughes LLP, Syracuse, NY (Peter D. Carmen, of Counsel), for defendant.

MEMORANDUM-DECISION and ORDER

HURD, District Judge.

I.INTRODUCTION

PlaintiffUtica Alloys, Inc.("Utica Alloys, Inc." or "plaintiff") filed suit against defendantAlcoa Inc.("Alcoa Inc." or "defendant") in New York State Supreme Court, alleging claims of quantum meruit and unjust enrichment.After the case was removed to federal court, defendant filed an answer together with a counterclaim for breach of contract.

Defendant filed a motion for summary judgment pursuant to Fed.R.Civ.P. 56 on its counterclaim as well as plaintiffs two claims.Plaintiff opposed, and filed a cross-motion for summary judgment on defendant's counterclaim.Oral argument was heard January 9, 2004, in Utica, New York.Decision was reserved.

II.FACTUAL BACKGROUND

Alcoa Inc., through its business, generates a certain type of scrap metal.Part of plaintiff's business is buying and processing this type of scrap and selling it to its only user, General Electric, which utilizes it in land-based power turbines.On September 8, 2000, a purchase agreement was signed whereby Utica Alloys, Inc. agreed for nearly a one-year period to buy all of this type of scrap generated by Alcoa Inc.The purchase price was set, but the agreement contemplated it, along with processing and service, would be reviewed semiannually by the parties.

After the expiration of the initial agreement, a new purchase agreement was signed in late July of 2001, and was to run until August of 2003.The formula used for determining the monthly purchase price of the scrap, devised by Anthony Marino("Marino"), a vice president at Utica Alloys, Inc., was indexed to the price of nickel, as reported on the London Metal Exchange.The review clause again appeared in the agreement, as follows: "The pricing, servicing and processing will be reviewed approximately every six (6) months beginning in January 2002."(DocketNo. 24, Ex. D.)

In November of 2001, General Electric reduced its production of land-based power turbines, thereby deteriorating the market value of the type of scrap, after processing, at issue in the purchase agreement.Because, however, the purchase price formula in the purchase agreement was based on the value of nickel rather than the intrinsic or market value of the scrap, this market change was not reflected.Plaintiff claims it was therefore forced to absorb the losses caused by the change until January of 2002, when the first opportunity arose to invoke the review clause.

On February 13, 2002, Marino met with George O'Leary("O'Leary"), his primary contact at Alcoa Inc., in response to the former's request for a purchase price review.At the meeting, Marino informed O'Leary that Utica Alloys, Inc. could not pay the purchase price as it was calculated in the agreement, and presented O'Leary with several restructuring options.Plaintiff claims that O'Leary informed Marino that he would try to work something out with defendant's suppliers and that Utica Alloys, Inc. should continue to process the scrap it received.Defendant denies O'Leary told Marino that plaintiff should continue processing the scrap.There is no question that Alcoa Inc. continued to ship the scrap, and Utica Alloys, Inc. continued to process it.

The parties engaged in months of failed negotiations on the purchase price of the scrap.Early in the negotiations, after scrap had begun to build up at it's facility, plaintiff proposed to buy the scrap shipped to it in February and March for $0.91 per pound.O'Leary allegedly responded with a question regarding plaintiffs processing charges.Defendant maintains, however, that throughout the negotiation process, O'Leary told Marino of its position that the terms of the agreement were to apply while the purchase price was under review.

Also during the negotiation process, in April of 2002, O'Leary made Utica Alloys, Inc. the following offer: that Utica Alloys, Inc. pay Alcoa Inc., at the agreement purchase price, for the scrap shipped in February of 2002; that defendant would not charge plaintiff for any scrap shipped after February of 2002; and that defendant would pay the reasonable costs of processing the scrap.On April 23, 2002, Marino rejected the offer, stating plaintiff's inability to pay the purchase agreement price for the scrap shipped in February of 2002, as the company had already sustained significant losses.A few days prior, however, Marino offered to allow defendant to retain ownership of the scrap already shipped in exchange for the payment of the processing charges incurred by plaintiff to that point.¹On April 30, 2002, plaintiff offered to buy all the scrap that had been shipped since February of 2002 for $1.03 per pound, with the processing charges for such scrap waived.

On May 6, 2002, Alcoa Inc. solicited bidders to purchase the scrap it had shipped to Utica Alloys, Inc. from February through April of 2002.O'Leary asked Marino if he could match the high bid.

On May 7, 2002, Marino sent O'Leary a proposed invoice for payment of the charges incurred by plaintiff in processing the scrap defendant had shipped.The proposed price for the processing, including inbound freight charges, was 884,293.35.Defendant did not respond to this proposed invoice.

On May 11, 2002, Marino advised O'Leary that it would match the high bid purchase price, but that Utica Alloys, Inc. expected to be paid $0.15 per pound for the scrap it had processed.O'Leary rejected payment of the processing charges and demanded a return of all the scrap Alcoa Inc. had shipped to Utica Alloys, Inc. since February of 2002.Marino responded that if the processing charges were not paid, the scrap would not be returned.

On May 15, 2002, Alcoa Inc. claims O'Leary re-extended both of its prior offers — the April of 2002 three-part offer, and the offer for plaintiff to match the high bid price with no offset for processing charges.The offers were left open for one week, and O'Leary allegedly advised Marino of defendant's belief that plaintiff had breached the agreement and that refusal to accept one of the offers would result in a collection action under the terms of the purchase agreement.Marino reiterated that plaintiff expected to be paid for the processing charges, and indicated a desire to continue the companies' relationship in the event the market became favorable again.O'Leary acknowledged his past overture that Alcoa Inc. would pay the processing charge as a part of the April of 2002 offer, but plaintiff claims he nevertheless responded that the contract was over and no more scrap would be shipped.Utica Alloys, Inc. thereafter permitted Alcoa Inc. to retrieve the processed scrap.

On May 20, 2002, defendant sent two purchase agreements to another buyer.In the first, it offered to sell the scrap that Utica Alloys, Inc. had processed for $1.17 per pound.In the second, it offered to sell unprocessed scrap for $1.19 per pound.This lawsuit followed.

III.DISCUSSION

As noted above, Alcoa Inc. has moved for summary judgment on both its counterclaim and plaintiffs claims pursuant to Fed.R.Civ.P. 56.Utica Alloys, Inc. has opposed defendant's motion as to its claims, contending that factual issues preclude summary judgment, and cross-moved for summary judgment on the counterclaim.

A.Summary Judgment Standard

Summary judgment must be granted when the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue as to any material fact, and that the moving party is entitled to summary judgment as a matter of law.Fed.R.Civ.P. 56;Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202(1986);Richardson v. New York State Dep't of Correctional Serv.,180 F.3d 426, 436(2d Cir.1999).Facts, inferences therefrom, and ambiguities must be viewed in a light most favorable to the nonmovant.Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538(1986);Richardson,180 F.3d at 436;Project Release v. Prevost,722 F.2d 960, 968(2d Cir.1983).Once the moving party has met the initial burden of demonstrating the absence of a genuine issue of material fact, the nonmoving party"must set forth specific facts showing that there is a genuine issue for trial."Fed.R.Civ.P. 56;Liberty Lobby, Inc.,477 U.S. at 250, 106 S.Ct. 2505;Celotex Corp. v. Catrett,477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265(1986);Matsushita Elec. Indus. Co.,475 U.S. at 587, 106 S.Ct. 1348.At that point the nonmoving party"must do more than simply show that there is some metaphysical doubt as to the material facts."Matsushita Elec. Indus. Co.,475 U.S. at 586, 106 S.Ct. 1348.To withstand a summary judgment motion, sufficient evidence must exist upon which a reasonable jury could return a verdict for the nonmovant.Liberty Lobby, Inc.,477 U.S. at 248-49, 106 S.Ct. 2505;Matsushita Elec. Indus. Co.,475 U.S. at 587, 106 S.Ct. 1348.

B.The Counterclaim — Breach of Contract

In its counterclaim, Alcoa Inc. claims that Utica Alloys, Inc. breached the purchase agreement by refusing to pay the purchase agreement price for the scrap it shipped from February of 2002 to April 2002.The success of this claim revolves around the interpretation of the review clause, which as noted, states: "The pricing, servicing and processing will be reviewed approximately every six (6) months beginning in January 2002."(DocketNo. 24, Ex. D.)

Utica Alloys, Inc.'s argument can be summarized as follows: The clause is ambiguous because it can be...