Shahi Export House v Mervyn's, Inc.
Annotate this CaseDecided on January 26, 2006
Supreme Court, New York County
Shahi Export House, Plaintiff,
against
Mervyn's, Inc., Defendant.
603229/04
For Plaintiff:
Alonso, Andalkar & Kahn, P.C.
920 Broadway, 16th Floor
New York, New York 10010
(Mark J. Alonso)
For Defendant:
Orrick, Herrington & Sutcliffe, LLP
666 Fifth Avenue New York, New York 10103
(Brett S. Deutsch)
Bernard J. Fried, J.
Motion sequence numbers 001 and 002 are consolidated for dispostion.
The plaintiff Shahi Export House (Shahi) moves, pursuant to CPLR 3212, for an order granting summary judgment in favor of Shahi, and against the defendant Mervyn's, Inc. (Mervyn's) in the amount of $1,114,985.20, with interest thereon at the judgment rate computed from the dates of delivery of the merchandise, plus attorney's fees and collection costs.
The defendant Mervyn's moves, pursuant to CPLR 3212, for an order granting summary judgment on its counterclaims, and dismissing Shahi's complaint.
The plaintiff Shahi manufactures apparel in India. The defendant Mervyn's is a retailer that purchased 150,192 men's shirts from Shahi, for the total sum of $878,623.20. Non-party Associated Merchandising Corp. (Associated), served as Mervyn's buying agent in India. Another non-party, MTL-ACTS, Bureau Veritas Consumer Products Services Inc. (Bureau Veritas), is a worldwide independent third-party testing company offering compliance testing of products for importers and exporters.
This is an action by Shahi, to recover the purchase price of the shirts. The complaint sets forth causes of action for breach of contract and for goods sold and delivered. The answer sets [*2]forth a counterclaim for breach of contract, breach of the implied warranty of merchantability and breach of the implied warranty of fitness for a particular purpose.
The transaction is governed by the terms and conditions set forth in the following documents executed by the parties: the 12 separate purchase orders; Associated's vendor manual; and Mervyn's online website entitled the partners online system. Based on the parties' Rule 19-a statements the following facts are undisputed.
Shahi was required to submit to Bureau Veritas, samples of each color fabric for fabric tests of, inter alia, wrinkle resistance. A passing grade for wrinkle resistance after several washes, on a scale of 1 to 5 was either a 3.0 or a 3.5, with 5 being a top score. If the fabric samples passed, Shahi was to manufacture and submit actual shirts for wrinkle resistance testing. Upon Shahi's request, Mervyn's could override a failed test result, and issue a marginal approval.
On June 8 and 12, 2004, Bureau Veritas passed for wrinkle-resistance, 9 of the 10 color fabrics submitted, finding only the white fabric barely unsatisfactory. Upon Shahi's request, Mervyn's overrode the test results, and Bureau Veritas rated all of the fabric satisfactory "with comment."
Between June 15 and June 17, 2004, Bureau Veritas issued unsatisfactory test reports for wrinkle resistance for each of the 10 color shirts manufactured by Shahi. On June 18, 2004, upon Shahi's request, Mervyn's marginally accepted the wrinkle test results for one shirt color, rum cake. Mervyn's alleges that, at the time, it did not know that all of the colors had failed.
Two inspection reports created by the defendant Mervyn's factory inspection agent, Associated, releasing the shirts for shipment, dated July 6, 2004, indicate that the merchandise passed both the fabric and garment tests (Exhibit "5C" to Sara Shepherd's affidavit dated September 2005) .
On July 9, 2004 Shahi presented the first batch of shirts for shipping approval. An inspector at Shahi's factory, employed by Mervyn's agent Associated, issued a final random inspection form and a shipment release, authorizing Shahi to ship the first 52,836 shirts. On July 16, 2004, Shahi shipped the first batch of shirts.
On July 23, 2004, Shahi submitted six shirt colors to Bureau Veritas for re-testing. On July 27, 2004, Bureau Veritas issued re-test reports failing each of the six shirt colors for wrinkle resistance.
On July 23, and 30, 2004, Shahi shipped additional shirts to Mervyn's.
On August 6, and 12, 2004, Shahi submitted two additional shirt colors for re-testing. On August 10, and 12, 2004, Bureau Veritas issued failing re-test wrinkle resistance reports on the two additional colors.
On August 12, 2004, Shahi sent an e-mail requesting that Mervyn's waive, and marginally accept the August 10, 2004 re-test report. On August 13, 2004, Mervyn's denied Shahi's waiver request. Also on August 13, 2004, the inspector at Shahi's factory, employed by Mervyn's agent Associated, issued a final random inspection form and a shipment release, authorizing Shahi to ship the last 47,256 shirts.
On August 20, 2004, Mervyn's cancelled the order and rejected the shirts.
In support of its motion for summary judgment, the plaintiff Shahi argues that Mervyn's ordered the merchandise, inspected and approved it at every stage of the production process, and then, right before it was loaded onto the boat for shipment to the United States, inspected the merchandise and approved it again. It is alleged that while the merchandise was in transit, [*3]Mervyn's changed its mind and rejected the merchandise. Shahi also argues that Mervyn's waived the failed wrinkle resistance tests, and that Mervyn's should be estopped from now changing its position
In support of its motion for summary judgment, the defendant Mervyn's argues that it canceled the order, and refused to make payment, when it learned that the shirts had not passed required quality tests and were defective.
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issue of fact from the case (JMD Holding Corp. v Congress Financial Corp., 4 NY3d 373 [2005]; Alvarez v. Prospect Hosp., 68 NY2d 320 [1986]; Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065 [1979]). The failure to make such showing requires denial of the motion, regardless of the sufficiency of the opposing papers (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985]). Once this showing has been made, however, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action. Mere conclusions, expressions of hope, or unsubstantiated allegations are insufficient for this purpose (Zuckerman v City of New York, 49 NY2d 557 [1980]).
It is undisputed that the purchase orders required Shahi to submit samples of each color of the shirts to Bureau Veritas for testing, and that the shirts had to pass each test, including wrinkle resistance.
UCC 2-313 provides that: 1) Express warranties by the seller are created as follows: (a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. (b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
Here, Mervyn's, by citing the express warranties set forth in the purchase orders, Associated's vendor manual, and Mervyn's online partners website, and by citing the shirts inability to pass the wrinkle resistance tests, satisfied its burden of producing evidence which, if uncontroverted, is sufficient to warrant judgment in its favor as a matter of law. However, the plaintiff Shahi, has met its burden of demonstrating that there are material triable issues of fact.
Contrary to Mervyn's assertion, taking the evidence as a whole, there is evidence that Mervyn's may have waived the failed wrinkle resistance test results. The undisputed facts establish that Mervyn's waived the failed wrinkle resistance test for one shirt color, rum cake. In addition, an e-mail dated August 24, 2004 from Sudha Tiwari of Associated, tends to confirm Shahi's contention that the wrinkle resistance question was waived by Mervyn's (Exhibit "Z" to Shahi's motion). The e-mail states that the garments were "failing for Wrinkle Resistance and based on over ride; goods were shipped." Finally, the two inspection reports created by the defendant Mervyn's factory inspection agent Associated, releasing the shirts for shipment, dated July 6, 2004, indicate that the merchandise passed both the fabric and garment tests (Exhibit "5C" to Sara Shepherd's affidavit dated September 2005).
Waiver is the intentional relinquishment of a known right and should not be lightly presumed [*4](Nassau Trust Co. v Montrose Concrete Prods. Corp., 56 NY2d 175 [1982]; S&E Motor Hire Corp. v New York Indem. Co., 255 NY 69 [1930]). Shahi offers evidence from which a clear manifestation of intent by Mervyn's to relinquish the contract's requirement, that all of the shirts pass independent wrinkle resistance tests, could reasonably be inferred.
Generally all rights and privileges to which one is legally entitled may be waived. A waiver may be accomplished by express agreement or by such conduct or failure to act as to evince an intent not to claim the purported advantage (Hadden v Consolidated Edison Co. of New York, Inc., 45 NY2d 466 [1978]). On these papers, summary judgment cannot be granted to Mervyn's. From the documentary evidence proffered, I find that there is a triable issue concerning whether there was an intention on Mervyn's part to waive the wrinkle resistance contractual provision (General Motors Acceptance Corp. v Clifton-Fine Cent. School Dist., 85 NY2d 232 [1995]).
Furthermore, an estoppel rests upon the word or deed of one party upon which another rightfully relies and so relying changes its position to its injury (Triple Cities Constr. Co. v Maryland Cas. Co., 4 NY2d 443 [1958]). The evidence supporting waiver and estoppel consists of the report from Associated's factory inspector, the waiver admittedly issued for one of the shirt colors, the e-mail dated August 24, 2004 from Sudha Tiwari of Associated, and the two inspection reports dated July 6, 2004 releasing the shirts for shipment. The foregoing all tends to support Shahi's contention that it may have rightfully relied on Mervyn's' waiver of the failed wrinkle resistance tests. Therefore Mervyn's' motion for summary judgment must be denied.
Turning to Shahi's motion for summary judgment, UCC 2-606 provides that an: (1) Acceptance of goods occurs when the buyer (a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their non-conformity; or (b) fails to make an effective rejection (subsection (1) of Section 2-602), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or (c) does any act inconsistent with the seller's ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him.(2) Acceptance of a part of any commercial unit is acceptance of that entire unit.
A conditional communication of acceptance always remains subject to its expressed conditions. Although a buyer must pay for any goods accepted (UCC 2-607 [1]) and is precluded from rejecting the accepted goods (UCC 2-607[2] ), acceptance does not in and of itself impair any other remedy provided by UCC Article 2 for nonconformity (UCC 2-607 [2]). Thus, "acceptance leaves unimpaired the buyer's right to be made whole, and that right can be exercised by the buyer not only by way of cross-claim for damages, but also by way of recoupment in diminution or extinction of the [purchase] price" (UCC 2-607, official comment 6; Sears, Roebuck & Co. v Galloway,195 AD2d 825 [3d Dept 1993]).
Here, the defendant Mervyn's asserts counterclaims for breach of contract and warranties, and raises a significant issue regarding the nonconformity of the goods shipped to it by the plaintiff Shahi, which, if established, could significantly diminish, or negate Shahi's recovery (UCC 2- 607, 2-714, 2-717; Flick Lbr. Co. v Breton Indus., 223 AD2d 779 [3d Dept 1996]). Thus, the award of summary judgment to plaintiff Shahi would also be premature (Hooper [*5]Handling, Inc. v Jonmark Corp., 267 AD2d 1075 [4th Dept 1999]). Contrary to Shahi's assertion, there is no basis for concluding that the defendant Mervyn's acted in bad faith, or unreasonably, in deciding that the results of the inspection were unacceptable.
Accordingly, it
ORDERED that both motions for summary judgment are denied.
Dated:________________
ENTER:
_________________________
J.S.C.
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