Weiss v. Smulders

• Decision Date: 26 August 2014
• Docket Number: SC 19158,SC 19151
• Court: Connecticut Court of Appeals
• Parties: RANDALL WEISS ET AL. v. MICHAEL D. SMULDERS ET AL.

RANDALL WEISS ET AL. v. MICHAEL D. SMULDERS ET AL.

SC 19151

SC 19158

COURT OF APPEALS OF THE STATE OF CONNECTICUT

Argued March 19, 2014

August 26, 2014

Palmer, Zarella, Eveleigh, McDonald and Beach, Js.

Benjamin M. Wattenmaker, with whom, on the brief, was John M. Wolfson, for the appellants in Docket No. SC 19151 and the appellees in Docket No. SC 19158 (plaintiffs).

Kirk D. Tavtigian, with whom, on the brief, was George M. Purtill, for the appellees in Docket No. SC 19151 and the appellants in Docket No. SC 19158 (defendants).

Opinion

McDONALD, J. These appeals arise out of a dispute between two specialty food businesses regarding the scope of their obligations under a distribution agreement and the legal effect of oral promises regarding the formation of a joint venture between the businesses. The plaintiffs, Randall Weiss and his company, Gourmet and Specialty Food Works, LLC (Food Works), commenced this action against the defendants, Michael D. Smulders and his company, Garden of Light Natural Food Markets, Inc. (Garden of Light), seeking to recover money damages for, inter alia, breach of an oral contract and promissory estoppel for failing to form the joint venture. The defendants filed counterclaims asserting, inter alia, that the plaintiffs had breached the parties' written contract by failing to pay for goods purchased. Following a bench trial, the court rendered judgment for the plaintiffs on their promissory estoppel claim against Smulders, but awarded limited damages on the ground that the plaintiffs had not proved the value of their share of the new venture to a reasonable certainty, and rendered judgment for the defendants on their breach of contract counterclaim. The plaintiffs and the defendants filed separate appeals from the judgment.¹ In their appeal, the plaintiffs claim that the trial court improperly: (1) found that the evidence adduced at trial was insufficient to establish their damages with reasonable certainty; (2) reversed its decision to hold a posttrial evidentiary hearing to allow the plaintiffs to present further evidence regarding damages; and (3) rendered judgment for the defendants on their breach of contract counterclaim because the defendants had committed prior material breaches. In their appeal, the defendants claim that the court improperly rendered judgment for the plaintiffs on their promissory estoppel claim because: (1) the plaintiffs lacked standing in light of Weiss' bankruptcy filing; and (2) that claim contradicts the fully integrated distribution agreement. We affirm the judgment of the trial court in all respects.

The trial court reasonably could have found the following facts.² Smulders and Weiss had their first business interaction in 2001. At that time, Smulders was the president and sole shareholder of Garden of Light, a company that owned and operated two natural foods grocery stores in Avon and Glastonbury and a bakery that produced natural granola products sold in those stores. Weiss was the owner and operator of Aegean International, an olive oil and balsamic vinegar distribution and marketing company. The business relationship between the two men began when Weiss approached Smulders about selling his olive oil in Garden of Light's Glastonbury store. Smulders agreed, and due to successful sales, Smulders continued to purchase olive oil from Weiss.

In the late spring or early summer of 2003, whileWeiss was visiting the Garden of Light grocery store, Smulders asked Weiss if he thought that Garden of Light's granola could be packaged for wholesale distribution. At that time, the granola products were being sold only in the two Garden of Light grocery stores, and were packed in a plastic bag bearing a plain black and white "scale" label. Weiss responded that, if properly packaged, the product potentially could do well. Smulders acknowledged that he did not have any wholesale marketing experience. He further indicated to Weiss that he would need Weiss' assistance in this area and that he had approached Weiss because of Weiss' olive oil marketing campaign. As a result of this conversation, the interest of both parties was piqued, and they had numerous subsequent conversations in the late spring or early summer of 2003, in which they agreed to work to distribute the granola products.

In or around August, 2003, the parties discussed working together as two separate companies to produce and distribute the granola products. Smulders also indicated that they would merge their companies to form a new enterprise if that relationship proved successful. Shortly thereafter, Weiss formed Food Works to distribute Garden of Light's granola products. In December, 2003, Garden of Light and Food Works executed a written "Master Distributorship Agreement" (distribution agreement), the purpose of which was to designate Food Works the exclusive distributor of granola products produced by Garden of Light. The distribution agreement expressly acknowledged that the parties had entered into discussions with respect to the formation of a new company. Subsequent to the execution of the distribution agreement and until approximately the time their relationship ended in 2006, Smulders made repeated representations to Weiss that he would spin off his bakery business from Garden of Light, merge it with Food Works, and that he and Weiss would be equal partners in the new company, which they referred to as "NEWCO."

In the period that followed the execution of the distribution agreement, Weiss wound down his olive oil business to focus primarily on the granola products business, expending many hours on marketing and research. Weiss also paid a brand manager $14,000 to promote that business. At some point during this period, Weiss and Smulders began labeling the granola products with the trade name Bakery on Main. While Food Works purchased and distributed Garden of Light's granola products, Weiss and Smulders continued to maintain their separate companies.

In September, 2006, Smulders sent an e-mail to Weiss, informing Weiss that he would not merge companies. At the same time, Smulders sent a letter to Weiss, asserting that Food Works was not in compliance with the distribution agreement because it had failed to compensateGarden of Light for products that had been purchased for distribution. As required by the distribution agreement, Smulders, acting on behalf of Garden of Light, gave Food Works thirty days to cure the breach. Thereafter, Garden of Light continued to fulfill Food Works' orders, as it was bound to do under the distribution agreement, and Food Works' debt continued to accumulate. After Food Works failed to make full payment within the thirty day period, Garden of Light formally terminated the distribution agreement.

The record reveals the following procedural history. The plaintiffs commenced this action against the defendants, alleging in the operative complaint: breach of oral contract and promissory estoppel as to Smulders; breach of written contract as to Garden of Light; and negligent misrepresentation, intentional misrepresentation, and unjust enrichment as to both defendants. The defendants asserted various special defenses and two counterclaims against the plaintiffs, alleging breach of contract and fraudulent misrepresentation.³

After the close of evidence, the defendants moved to dismiss the plaintiffs' breach of oral contract count in its entirety and portions of the remaining counts, including the promissory estoppel count, claiming that, because Weiss had filed for bankruptcy protection subsequent to the occurrence of some of the events that constituted the claims, those claims belonged to Weiss' bankruptcy estate, not to the plaintiffs. The trial court denied the motion, determining with respect to the promissory estoppel claim that this claim had not fully accrued in December, 2003, when Weiss filed his bankruptcy petition. In reliance on this finding, the court concluded that the plaintiffs, rather than the bankruptcy trustee, had standing to pursue the claim.

Thereafter, the court found in favor of the defendants on all of the plaintiffs' claims except promissory estoppel.⁴ With respect to that claim, the court found that the plaintiffs had met their burden of establishing that Smulders made promises regarding an eventual merger of their two companies and that Weiss acted in reliance on those promises to his detriment. With respect to the defendants' counterclaims, the court found that the defendants had met their burden of establishing that the plaintiffs breached the distribution agreement by failing to compensate Garden of Light for products that the plaintiffs had purchased for distribution, but found in favor of the plaintiffs on the defendants' claim of fraudulent misrepresentation.⁵

With respect to damages, the court awarded the defendants $110,463.50 in principal and interest for the plaintiffs' breach of the distribution agreement. As to the plaintiffs' damages for promissory estoppel, the court found that they were entitled to be compensated as if the companies had merged as promised and for costs expended on the venture that never came to be.With respect to the latter, the court found that Weiss was entitled to one half of the $14,000 that he had paid to the brand manager to promote the granola products, as he would have benefited from one half of those services as a partner in NEWCO. The court also found that Weiss was entitled to the value of a 50 percent share of NEWCO, but that neither party had offered sufficient evidence to demonstrate the value of NEWCO. In light of this deficiency, the court determined that further evidence of NEWCO's value was necessary and ordered the parties to return to court to present additional evidence on that issue. Subsequently, the defendants moved to reargue the court's decision to hold the additional hearing, and the plaintiffs moved for reconsideration of the court's decision that the plaintiffs had failed to...