Whitesell Corp. v. Electrolux Home Prods.
| Decision Date | 10 June 2022 |
| Docket Number | 1:03-cv-00050-JRH |
| Parties | WHITESELL CORPORATION, Plaintiff, v. ELECTROLUX HOME PRODUCTS, INC., HUSQVARNA A.B. and HUSQVARNA OUTDOOR PRODUCTS, INC., Defendants. |
| Court | U.S. District Court — Southern District of Georgia |
Pursuant to the Court's Order of September 17, 2021, the undersigned Special Master herein submits his First Report and Recommendation:
My assignment, according to the Order of September 17, 2021, is two-fold. First, I am to “examine the facts presented by the parties and recommend summary judgment where appropriate and in accordance with Federal Rule of Civil Procedure 56.” Second, addressing whatever remains to be tried of the claims referred to me and the issues they involve, I am to consult with the parties “for the purpose of developing a detailed trial plan” and submit such a plan to the Court. Order of September 17, 2021, Dkt 1496, p. 2.
Since this will be my first Report and Recommendation to the Court, I make some preliminary observations:
1. Several of the issues the parties have presented to me are intertwined. Sometimes my determination on one issue would, strictly speaking, obviate the need for determination of another issue. Anticipating that, on the objections of a party to my conclusions and recommendations (which I am confident will be filed), the Court may disagree with some of my decisions, I intend to try to make a recommendation on as many issues as I can that might provide an alternative basis for resolution of any of the claims referred to me for pretrial purposes.
2. I intend to address the summary judgment motions that have been made in a proactive manner to the extent permitted by Rule 56 and my job as a special master. This may involve calling for extra briefing or even additional evidence. I have satisfied myself that if I were the Court in such a situation, I would be within my authority to do this, and that it will help me to accomplish my assignment as noted above and the resolution of the claims referred to me.
3. I am bound by the Court's prior determinations and rulings in this case. I have assumed the validity of all such Orders of the Court and have considered that my recommendations must be based, to the extent applicable, on these Orders and their necessary implications.
4. In particular, the Court's Order of October 14, 2008, Dkt. 212, found and concluded that the original Strategic Partnership Agreement, Dkt. 578-1 (the “SPA”) entered into by the parties was too vague to create an enforceable contract, because it did not sufficiently specify the items (the “parts”) which it covered. The Court found, however, that the settlement memorandum entered into by the parties as of May 28, 2003, Dkt. 578-2 (the “Settlement Memorandum”) did create an enforceable requirement contract between the parties as to certain categories of parts. In this and all succeeding reports and recommendations, I will refer to the SPA and the Settlement Memorandum as such, and I will call the resulting enforceable requirements contract, consisting of the SPA as modified by the Settlement Memorandum, the “Contract” between the parties.
5. Finally, I have kept a file (the “File List”) of document submissions made only to me (and in accordance with the terms of the Order appointing me, not filed with the Court). With this First Report and Recommendation, I am submitting the portions of the File List that pertain to the motions addressed herein, together with any necessary correspondence. The File List items will be identified with the numbers I have attached to each. Since this First Report deals with several motions and responses submitted by the parties, it seems necessary that the Court will have the complete submissions of the parties. The numbers will not be sequential, since my submissions will be limited to those items pertaining to the motions addressed herein.
In this first Report and Recommendation, I address the first two motions made to me: a motion for partial summary judgment submitted by Defendants (the “PSJ Motion,” File List 1), and a cross motion (the “Cross Motion,” File List 6) for partial summary judgment submitted by Plaintiff (“Whitesell”) in response to the PSJ Motion
Both the PSJ Motion and the Cross Motion relate to claims referred to me that involve Section 5.7 of the SPA and the remaining inventory of “obsolete” parts held by Whitesell (the “Obsolescence Claims”). Four other motions have been submitted to me. In this Report I will address two of these: the motion of Whitesell to strike a Declaration of Sadler submitted by Defendants, and Defendants' motion for partial summary judgment regarding prejudgment interest. The former pertains to the PSJ Motion and Cross Motion. The latter affects recovery on the Obsolescence Claims and on certain other claims submitted to me. The other two are motions for partial summary judgment from Whitesell, pertaining to claims other than the Obsolescence Claims. I will address these as soon as possible.
The issues presented by the PSJ Motion and the Cross Motion turn on the interpretation of Section 5.7 of the SPA. SPA, Dkt. 1 Exhibit 2. A copy of Section 5.7 is also attached to the PSJ Motion as Exhibit 1. File List Item 2. Section 5.7 addresses payment by Defendants to Whitesell for certain amounts “at a minimum” of remaining inventory of parts covered by the Contract which Whitesell has on hand because the parts have become “obsolete” and thus no longer needed by Defendants. These are the Obsolescence Claims.
Section 5.7 consists of three paragraphs.[1] The first is somewhat general in nature, but it does provide that “Whitesell shall receive from Electrolux formal written notification of a Good going inactive or Obsolete.” It also states that “Whitesell will make every effort to minimize and eliminate Obsolete Goods and yet not run out of Goods for production.” Later in Section 5.7, in what appears to be a second paragraph, it is further stated that “[a]s soon as Whitesell receives formalized notice that a Good will be Obsolete, it shall interrupt production, seek alternative buyers, cancel purchase requirements, and do whatever is necessary to rapidly respond.”
The apparent second paragraph of Section 5.7 provides the measure for an amount of Whiteside's remaining inventory for which Defendants shall pay Whiteside. The measure is separated into a higher amount (the “Higher Prong”) that applies “until all Good(s) have been transitioned to Whitesell” and a lower amount (the “Lower Prong”) that applies “after the transition is complete.”
The parties agree as to the number of Obsolescence Claims against each Defendant, the parts involved, and amounts claimed by Whitesell for each. They have also confirmed to me that the claims referred to me other than the Obsolescence Claims do not involve the interpretation of Section 5.7. Finally, they agree that as to some of the Obsolescence Claims, formal written notification was properly given by Defendants. I refer below to those Obsolescence Claims as to which Whitesell denies that formal written notification was given as the “Disputed Notice Obsolescence Claims.
Saying that Defendants “seek a ruling on two threshold, contract interpretation questions that have significant, if not dispositive, importance” on the Obsolescence Claims, the PSJ Motion asks for a determination of the meaning and effect of Section 5.7 in two respects: (1) “that the Obsolescence Calculation in the second paragraph of Section 5.7 of the SPA governs Whitesell's obsolescence invoice claims and is not rendered meaningless in the absence of formal written notification”; and (2) “that the transition of Good(s) referenced in Section 5.7 is complete and therefore the lower prong of the Obsolescence Calculation should be used when calculating Whitesell's obsolescence invoice claims.” Defendants' PSJ Motion, File List 1, p. 3. Defendants' resulting position is that the measure of the amount of inventory for which Defendants must pay on Whitesell's Obsolescence Claims is provided by the Lower Prong of Section 5.7. See id.
On the other hand, Whitesell contends that (1) Defendants repeatedly breached the Contract by failing to give formal written notification of obsolescence in the case of four of Whitesell's Obsolescence claims against Defendant Electrolux Home Products, Inc. (“EHP”) and in the case of all of its Obsolescence Claims against Husqvarna Outdoor Products, Inc. (“Husqvarna”) (these being collectively the Disputed Notice Obsolescence Claims as I have defined them above); (2) as a result of these contract breaches by Defendants, Whitesell is entitled to payment for its entire remaining inventory of the parts covered by the Disputed Notice Obsolescence Claims; and (3) to the extent that any of the Obsolescence Claims are governed a choice between the Higher and Lower Prongs, the Higher Prong applies rather than the Lower Prong. See generally, Plaintiff's Cross Motion, File List 6.
In summary, I have found and concluded as follow:
1. Defendants failed to give formal written notification as required by Section 5.7, as to all parts on which the Disputed Notice Obsolescence Claims are based. This is a breach of the Contract by Defendants. It is unnecessary to determine whether Defendants' breaches of the Contract are material breaches, because Whitesell affirmed the Contract, after its knowledge of breach by Defendants, by continuing to perform under the Contract and accepting benefits under the Contract.
2. Whitesell is not estopped to claim that Defendants breached the Contract by failure to give...
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