Valley Juice Ltd., Inc. v. Evian Waters of France, Inc.

• Decision Date: 11 June 1996
• Docket Number: 1246 and 1247,D,Nos. 954,s. 954
• Citation: 87 F.3d 604
• Parties: VALLEY JUICE LTD., INC., Plaintiff-Appellant, v. EVIAN WATERS OF FRANCE, INC., Defendant-Appellee. EVIAN WATERS OF FRANCE, INC., Plaintiff-Appellee-Cross-Appellant, v. VALLEY JUICE LTD., INC., Defendant-Appellant-Cross-Appellee. ockets 94-7813, 94-7817 and 95-7709.
• Court: U.S. Court of Appeals — Second Circuit

Page 604

87 F.3d 604

VALLEY JUICE LTD., INC., Plaintiff-Appellant, v. EVIAN WATERS OF FRANCE, INC., Defendant-Appellee.

EVIAN WATERS OF FRANCE, INC., Plaintiff-Appellee-Cross-Appellant, v. VALLEY JUICE LTD., INC., Defendant-Appellant-Cross-Appellee.

Nos. 954, 1246 and 1247, Dockets 94-7813, 94-7817 and 95-7709.

United States Court of Appeals, Second Circuit.

Argued Jan. 24, 1996.

Decided June 11, 1996.

Carroll E. Ayers, Wakefield, MA, for Plaintiff-Appellant-Cross-Appellee Valley Juice Limited, Inc.

W. Michael Garner, New York City (Peter J. Schankowitz, Schnader Harrison Segal & Lewis, New York City, of Counsel), for Defendant-Appellee-Cross-Appellant Evian Waters of France, Inc.

Before: JACOBS, LEVAL, and PARKER, Circuit Judges.

LEVAL, Circuit Judge:

This dispute involves contract and other claims arising out of a business relationship between Valley Juice Limited, Inc. ("Valley") and Evian Waters of France, Inc. ("Evian"). The case was heard before a jury in the United States District Court for the District of Connecticut. Both parties appeal.

Background

Valley is a New England beverage distributor based in Boston, Massachusetts. Evian, a New York corporation with its principal place of business in Greenwich, Connecticut, imports and sells natural spring water. In late 1985, Valley began selling Evian's water in New England, purchasing the product from Evian's then-distributor. In 1987, Evian and Valley discussed Valley's becoming Evian's master distributor for New England. Valley claims that, at the urging of Evian, it made substantial investments to prepare itself for that task. In January 1988, Valley entered into a written distributorship agreement with Evian (the "Agreement"), pursuant to which Valley became (with certain specified exceptions) the exclusive New England distributor of Evian's water.

According to Valley's allegations, Evian violated its rights in numerous ways: In the summer of 1988, Valley claims it discovered that Evian sold to other distributors in Vermont and New Hampshire in violation of Valley's exclusivity agreement. Later that summer, Evian removed those two states from Valley's distribution area, in violation of the Agreement. In June 1989, Evian told Valley that other substantial business areas were being eliminated from its contractually assigned distribution territory. In December 1989, Evian pressured Valley to purchase a large quantity of water at the low-point of the selling season in order to ensure the continuation of the Agreement. But shortly thereafter, on January 29, 1990, Evian gave Valley written notice that the Agreement had expired, and that it would cease shipping water to Valley in thirty days. Valley thereafter stopped payment on Evian's most recent invoice.

In June 1990, Valley filed suit against Evian in Massachusetts State court (the "Valley action"), raising breach of contract and other claims. Evian responded by filing its own suit in Connecticut State court against Valley (the "Evian action"), alleging principally that Valley had failed to pay for purchased water. Both suits were removed to federal court by reason of diversity of citizenship. See 28 U.S.C. § 1441(b). Subsequently, the Valley action was transferred from the Massachusetts district court to the Connecticut district court pursuant to 28 U.S.C. § 1404, and the two cases were consolidated.

Valley's complaint presented four causes of action that are of relevance to this appeal. It alleged: (1) breach of contract; (2) unjust enrichment, or quantum meruit; (3) tortious interference with contract; and (4) violation of the Massachusetts Unfair Trade Practices Act ("MUTPA"), Mass.Gen.L. ch. 93A, § 1 et seq.

Evian's complaint alleged principally that it had delivered $367,907.03 worth of product to Valley, for which Valley had not paid. Evian's complaint makes essentially the same claim under two separate theories. Count I pleads goods sold and delivered; Count II pleads account stated. ¹ In addition, Evian sought declaratory relief that the distribution agreement had lawfully terminated (by expiration) as of January 31, 1989. ²

The case was tried to a jury in the Connecticut district court. After the close of evidence, the district court granted Evian's motion for a directed verdict on all four of Valley's claims. The court also ruled for Evian on its claim for declaratory judgment as a matter of law. The only issues submitted to the jury were Evian's claims for goods sold and account stated. The jury found against Evian on its claim for account stated, but in its favor on its claim for goods sold. The jury awarded damages of $185,676.85, approximately one half what Evian had sought. The district court denied Evian's subsequent motion for judgment as a matter of law on these counts, in which it sought full payment, and granted Evian's motion for prejudgment interest.

Valley appeals from: (1) the district court's directed verdict in favor of Evian on Valley's four causes of action; (2) the grant of declaratory relief to Evian as to the lawful termination of the Agreement; and (3) the award of prejudgment interest to Evian. Evian cross-appeals from the district court's denial of judgment as a matter of law for the full amount sought as goods sold and account stated.

Discussion

I. Choice of Law

As a predicate to resolving any of the claims at issue in this appeal, we must determine what state's law applies to the case, which we hear in our diversity jurisdiction. 28 U.S.C. § 1332. The parties dispute the issue. Evian argues that, pursuant to the Agreement's choice of law clause, New York law applies. Valley argues principally that Massachusetts law applies, at least to the suit it initiated. The district court followed New York law with respect to both actions. On all issues save one, ³ we agree that New York law applies to the contract claims.

Because this was the consolidated trial of two suits, one filed in the Massachusetts state court and one in the Connecticut state court, the choice of law issue is unusually complex. As a general matter in diversity cases, we follow the substantive law of the state in which the district court sits, including its choice of law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). However, where--as here with respect to the Valley action--a case is transferred from one federal jurisdiction to another at the behest of the defendant pursuant to 28 U.S.C. § 1404, "a transferee court applies the substantive state law, including choice-of-law rules, of the jurisdiction in which the action was filed." Menowitz v. Brown, 991 F.2d 36, 40 (2d Cir.1993); see Van Dusen v. Barrack, 376 U.S. 612, 639, 84 S.Ct. 805, 821, 11 L.Ed.2d 945 (1964). We therefore apply Massachusetts choice of law rules to the Valley action, and Connecticut choice of law rules to the Evian action.

Our analysis is structured by the Agreement itself, which, as noted, specifies that it "is to be governed by the laws of the State of New York." This contractual choice is not determinative. We must first determine whether, under applicable state choice of law principles, that provision would be honored. We conclude that under the choice of law regimes of either Massachusetts or Connecticut, the parties' contractual choice of law would be respected, and that New York law therefore generally applies to this dispute.

As for the Valley action, we think it plain that Massachusetts choice of law rules would honor the parties' contractual choice of New York law. In Morris v. Watsco, Inc., 433 N.E.2d 886, 385 Mass. 672 (1982), the Supreme Judicial Court of Massachusetts made clear that it "acknowledge[s] and give[s] effect to the law reasonably chosen by the parties to govern their rights under contracts." Id. at 888. More recently, the State's highest court explained that it will apply the law of the state specified by the parties in a choice of law clause "in the absence of any substantial Massachusetts public policy reason to the contrary...." Jacobson v. Mailboxes Etc. U.S.A., Inc., 646 N.E.2d 741, 744, 419 Mass. 572, 575 (1995) (citing Watsco, 433 N.E.2d at 888, and Restatement (Second) of Conflict of Laws § 187 (1971 & rev. 1989) [hereinafter Restatement (Second) Conflict ]. See also Lambert v. Kysar, 983 F.2d 1110, 1118 (1st Cir.1993) (noting that Massachusetts "courts routinely enforce choice-of-law provisions unless the law chosen violates established public policy or bears no reasonable relationship to the contractual transaction").

We see no "Massachusetts public policy reason" not to enforce the parties' choice of law. Quite to the contrary, Massachusetts has a strong interest in enforcing such contractual provisions, which increase the capacity of parties to know ahead of time how a court might interpret the terms of their contract, thereby diminishing the need for costly litigation should a disagreement arise later. See Restatement (Second) Conflict § 187 cmt. e ("Prime objectives of contract law are to protect the justified expectations of the parties and to make it possible for them to foretell with accuracy what will be their rights and liabilities under the contract.").

And there is nothing unreasonable about the parties' choice of New York law. Valley argues that the choice of New York law is unreasonable because New York has no connection with the contract: The Agreement was not negotiated there, no business was conducted in New York, and neither company is based there. We disagree.

Even if Massachusetts required a showing of contacts, New York has more than sufficient connection with the contract because Evian is incorporated in New York. Valley cites to no Massachusetts authority suggesting that a contract provision which chooses the law of one party's state of incorporation is unreasonable. ⁴ Furthermore, the Restatement, upon which Massachusetts courts have expressly relied in resolving conflicts questions, ...