Daylay Egg Farm, Inc. v A & W Egg Co.
Annotate this CaseDecided on October 30, 2008
Supreme Court, Nassau County
Daylay Egg Farm, Inc., Plaintiff,
against
A & W Egg Company, Defendant. x A & W Egg Company, Plaintiff, Daylay Egg Farm, Inc., Defendant.
A & W Egg Company, Plaintiff, - against -
against
Daylay Egg Farm, Inc., Defendant.
10883/2007
COUNSEL FOR DAYLAY EGG FARM, INC.
Durkin & Durkin
111 Broadway-4th Floor
New York, New York 10006
COUNSEL FOR A & W EGG COMPANY
Jack Dashosh, Esq.
425 Route Ten
Randolph, NJ 07869
Leonard B. Austin, J.
BACKGROUND
A & W Egg Company ("A & W") is a middleman or broker engaged in the business of supplying eggs to various wholesale distributors.
Daylay Egg Farms, Inc. ("Daylay") is engaged in the production and wholesale distribution of eggs and has maintained a business relationship with A & W for some 28 years.
Pursuant to that business relationship, A & W would regularly order trailer loads of eggs from Daylay on an "invoice-by-invoice" basis each week. Daylay would then ship the eggs directly to A & W's customers, which included Egg Depot and Jersey Lynne Farm.
A & W would then bill its customers for the eggs shipped by Daylay, which included a "profit margin for itself." A & W would thereafter pay the invoice price directly to Daylay. Apparently, Daylay was not the only producer of eggs with which A & W dealt in supplying its own customers. In fact, Daylay supplied only about 10% of A & W's product at the beginning of 2007.
It is undisputed that there was never any written contract in existence memorializing this arrangement, either between Daylay and A & W, or between A & W and its own customers. According to A & W, a "custom and practice" exists in the egg industry by which written contracts are generally not utilized. Instead, business is conducted more informally and on an "invoice-by-invoice" basis through telephone and facsimile orders.
Daylay contends that there was no contract, oral or otherwise, by which it was ever agreed that A & W would have the "exclusive" right to sell Daylay eggs to any particular customer. A & W disputes this assertion and argues that there was an oral understanding to this effect since the mid-1980'sthat Daylay would not directly sell eggs to A & W's customers.
Daylay further contends that between March and May of 2007, it shipped eggs ordered by A & W which were valued at an aggregate invoice amount of $312,789.29. To date, Daylay has not received payment from A & W for these shipments.
A & W does not dispute that it received the foregoing invoices and ordered the eggs on behalf of its customers, who received the eggs. However, A & W claims set-offs for various "short" deliveries and/or damaged eggs in the amount of $21,275.02.
In June 2007, based on the alleged indebtedness, Daylay commenced this action to recover the invoice amounts allegedly due and owing.
At approximately the same time, A & W commenced its own action against Daylay, interposing
claims sounding in negligent misrepresentation, breach of the
covenant of fair dealing and tortious interference with contract and/or business relations.
With respect to its claims, A & W asserts that, as early as 2005-2006, it heard rumors that Daylay "was about to sell its egg business". (A & W Cmplt. ¶ 5). According to Daylay's principal, Kurt Lausecker, he instructed his employees to tell the truth about the current sale situation when and if inquiries were made by third parties and/or Daylay customers. Notably, the fact that Daylay was for sale was generally known in the industry.
At some point in 2006, A & W's principal, Alan Witzer, contacted Daylay and made [*2]inquiries, but was allegedly informed that there was no "imminent" sale on the horizon and there was no need to locate alternate egg sources.
However, and despite the alleged assurance that no sale was "imminent", Daylay's assets were ultimately sold to New Day Farms, LLC in April 2007.
Witzer claims that Daylay belatedly informed him of the sale on April 27, 2007 and told him at the same time that the last trailer load of Daylay eggs would be delivered to A & W's customers only a few days later on May 2, 2007. Indeed, A & W contends that Daylay informed A & W's own customers about the sale before A & W received notice. Daylay, on the other hand, asserts that it offered to assist A & W in finding alternate sources of eggs.
In light of the short notice, A & W was allegedly unable to secure replacement eggs for its customers and sustained monetary damages as a result.
A & W also claims that, as early as 2005, and in violation of an alleged "covenant of fair dealing," Daylay's employees supposedly disclosed to certain A & W customers, Egg Depot and Jersey Lynne Farm, in particular, the price A & W paid Daylay for eggs.
Daylay denies this assertion and argues that the customers in question contacted Daylay first in order to establish a new, direct relationship with Daylay.
A & W's contentions in this respect were repeatedly denied by Egg Depot's principal, William Nelms, who testified in his deposition that he affirmatively contacted Daylay when he discovered that a new competitor, Jack's Eggs, was selling Daylay eggs to the public at the same price he was paying A & W. Nelms further testified that, during his conversations with Daylay, he neither inquired nor was told about A & W's pricing structure, but rather, he asked Daylay personnel how and why the new competitor was receiving better pricing than he was receiving.
Nelms claims to have later ascertained that A & W had been remitting late payments with respect to Egg Depot's purchases and that this was one of the key reasons Egg Depot's prices were higher.
Nelms personally called Witzer and asked for a better price, which he ultimately received, but never said to Witzer that Daylay revealed A & W's pricing structure.
To avoid payment delays and to obtain lower pricing, Nelms subsequently sought to buy eggs directly from Daylay. Eventually, Nelms acquired additional trailer loads of eggs a week in direct shipments at lower prices from Daylay, thereby contributing to the reduction in the amount of eggs Egg Depot purchased from A & W. Notably, Nelms stated that there was no agreement or understanding that A & W was the only entity which could sell Daylay eggs to Egg Depot.
As a result of Daylay's alleged interference, A & W claims that "it had to" to lower its prices as early as 2005 and sustained further damage as a consequence. Moreover, since Daylay was direct-selling eggs at lower prices to Egg Depot, A & W's business with Egg Depot decreased, a claim Daylay does not dispute since it asserts that it had every right to sell eggs to whomever it chose, there being no agreement or contract which legally prevented it from doing so.
Issue has since been joined and discovery completed. The parties' related actions have been consolidated for joint trial by order of this Court, dated November 27, 2007.
Daylay now moves for: (1) summary judgment on its claim as Plaintiff in Action No. 1 for the open
invoice amounts; and (2) dismissal of A & W's counterclaims in Action No. 1 [*3]and of A & W's complaint in Action No. 2, both of which contain the
same causes of action.
DISCUSSION
A.Summary Judgment on Daylay's Complaint
Daylay has submitted relevant deposition testimony, invoices, affidavits and discovery materials, including A & W's responses to Daylay's Notice to Admit, which confirm that A & W received the eggs shipped under the invoices submitted, and that to date, A & W has failed to remit payment therefor. Boise Cascade Office Products Corp. v. Gilman & Ciocia, Inc., 30 AD3d 454, 455 (2nd Dept. 2006); Gallo Wine Distributor, LLC v. Millennium Liquor Corp., 303 AD2d 452 (2nd Dept. 2003); Becker v. Shore Drugs, Inc., 296 AD2d 515, 516 (2nd Dept. 2002); and Neuman Distributors, Inc. v. Falak Pharmacy Corp., 289 AD2d 310, 311 (2nd Dept. 2001). See also, Castle Oil Corp. v. Bokhari, 52 AD3d 762 (2nd Dept. 2008); and Drug Guild Distributors v. 3-9 Drugs Inc., 277 AD2d 197 (2nd Dept. 2000).
Indeed, A & W's principal, Alan Witzer, does not dispute that he received the invoices and the eggs, and that A & W has declined to make pay for the product which it received. Neuman Distributors, Inc. v. Falak Pharmacy Corp., supra; Becker v. Shore Drugs, Inc., supra at 516.
Nor has A & W established that it made timely and relevant objections to the invoices submitted in
connection with the goods. UCC 2-2602(1) requires seasonable rejection of non-conforming goods or
they are deemed accepted. See, Neuman Distributors, Inc. v. Falak Pharmacy Corp.,
supra at 311; Drug Guild Distributors v. 3-9 Drugs Inc., supra. See also, Fleming
v. Vassallo, 43 AD3d 278, 279 (1st Dept. 2007); Bartning v. Bartning, 16 AD3d 249, 250 (1st Dept. 2005); Star
Video Entertainment, LP v. J & I Video Distributing, Inc., 268 AD2d 423 (2nd Dept. 2000); and
Werner v. Nelkin, 206 AD2d 422 (2nd Dept. 1994). As a matter of law, the goods were
accepted and not paid for. Daylay is entitled to summary judgment on its complaint.
B.A & W's Complaint/Counterclaims
1.First Cause of Action/Counterclaim
A & W has failed to raise a triable issue of fact with its own, affirmatively asserted legal claims, in support of which it has not cited any legal authority.
With respect to those claims, A & W's first cause of action and its identical first counterclaim are apparently grounded on a negligent misrepresentation theory. That is, they are predicated, in part, upon the threshold assumption that, upon A & W's inquiries, Daylay owed it a duty of reasonable and timely disclosure with respect to the impending sale of its assets. A & W further asserts that Daylay employees misled it by allegedly and falsely assuring principal Alan Witzer that there was no "imminent" sale and, thus, there was no need to locate an alternate supplier of eggs. The Court disagrees.
It is settled that, "[a] cause of action based on negligent misrepresentation requires proof that a defendant had a duty to use reasonable care to impart correct information [*4]due to a special relationship existing between the parties, that the information was false, and that a plaintiff reasonably relied on the information." Fresh Direct, LLC v. Blue Martini Software, Inc.,7 AD3d 487, 489 (2nd Dept. 2004)(citation omitted). See also, Kimmell v. Schaefer, 89 NY2d 257, 263 (1996); Ford v. Sivilli, 2 AD3d 773, 774 (2nd Dept. 2003); Hamlet on Olde Oyster Bay Home Owners Ass'n, Inc. v. Holiday Organization, Inc.,12 Misc 3d 1182(A)(Sup. Ct. Nassau Co. 2006). Cf., Parrott v. Coopers & Lybrand, LLP, 95 NY2d 479, 483 (2000).
"This reliance must be justifiable, as a casual response given informally does not stand on the same legal footing as a deliberate representation for purposes of determining whether an action in negligence has been established' ". Kimmell v. Schaefer, supra at 263, quoting from Heard v City of New York, 82 NY2d 66, 74-75 (1993).
Moreover, "since a vast majority of commercial transactions are comprised of such casual statements and contacts" liability for negligent misrepresentation has been imposed in the commercial context only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified. Kimmell v. Schaefer, supra. See also, Murphy v. Kuhn, 90 NY2d 266, 270 (1997); Parisi v. Metroflag Polo, LLC, 51 AD3d 424 (1st Dept. 2008); WIT Holding Corp. v. Klein, 282 AD2d 527, 529 (2nd Dept. 2001); and Grammar v. Turits, 271 AD2d 644, 645 (2nd Dept. 2000).
Preliminarily, there is nothing inherent in the parties' commercial relationship which would require Daylay to inform A & W of the progress and/or "imminence" of a proposed asset sale. Indeed, although the parties had worked together for many years, the record supports the inference that there was no binding contractual relationship between the two entities beyond the "invoice-by-invoice" purchases which were made by A & W. It follows that Daylay was not obligated or otherwise required to make eggs available to A & W at any point in the future beyond the last invoiced order which A & W may have chosen to submit. Cf., Losquadro v. Gerrard, 276 AD2d 599, 600 (2nd Dept. 2000).
There has been no triable issue of fact demonstrated with respect to the claim that Daylay made actionable misrepresentations. The relevant testimony supports Daylay's assertion that its employees were, in fact, instructed to truthfully respond to customers' inquiries with respect to the sale. More particularly, there is nothing of a probative nature in the record supporting the opposing claim that Daylay employees misled A & W bymaking inaccurate, false statements or that the responses A & W receiveddid not accurately reflect the circumstances which existed at the time the statements were made.
It is also significant that both A & W and the industry in general were well aware for some time that
Daylay was being offered for sale. Accordingly, any definitive reliance upon alleged comments by
Daylay regarding "imminence", an imprecise term
within the factual context presented, would not be reasonable under the circumstances
presented. WIT Holding Corp. v. Klein, supra at 529.
Nor is there any indication in this commercial context, which involves non-professionals, [*5]that Daylay possessed "unique or specialized expertise, or was in a special position of confidence and trust" with respect to A & W. See, e.g., Able v. Doyle, 38 AD3d 1264, 1266 (4th Dept. 2007); Wright v. Zelle, 27 AD3d 1065, 1067 (4th Dept. 2006); and Gardianos v. Calcine Corp.,16 AD3d 456 (2nd Dept. 2005). Considering the uncertainties of private sale transactions and the nature of Daylay's invoice-by-invoice relationship with A & W, Daylay's employees owed no special duty to respond to A & W's unsolicited inquiries with factually nuanced or detailed progress reports relative to the purely internal corporate matter at issue.
Under these circumstances, A & W's first cause of action/first counterclaim must be dismissed.
2.Second and Third Causes of Action/Counterclaims
A & W's second and third causes of action/counterclaims nominally sound in breach of the covenant of fair dealing and interference with "economic and contractual" relations. (Cmplt., ¶ 14).
Both theories rely upon essentially the same factual claims; namely, that: (1) Daylay employees allegedly disclosed A & W's pricing terms with Daylay to two of A & W's customers, Jersey Lynne Farm and Egg Depot; (2) the customers confronted A & W with Daylay's revelations; and (3) as a consequence, A & W allegedly "had to" lower its prices, thereby suffering damage as a result. A & W also asserts that Daylay engaged in tortious interference by dealing directly with its said customers. The Court agrees that both claims are lacking in merit.
"In New York, all contracts imply a covenant of good faith and fair dealing in the course of performance" (511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144, 153 [2002]; and Dalton v. Educational Testing Serv., 87 NY2d 384, 389 [1995]), which precludes a party from doing "anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Dalton v. Educational Testing Serv., supra. On the other hand, the doctrine "cannot be used to circumvent the parties' express agreement or to create a free-floating duty unattached to the underlying legal document." Lawlor v. Cablevision Systems Corp., ___Misc.3d___, 2008 WL 4212442 at *7 (Sup. Ct. Nassau Co. 2008); and JFK Family Ltd. Partnership v. Millbrae Natural Gas Dev. Fund 2005, L.P., ___Misc.3d___, 2008 WL 4308289 at *23 (Sup. Ct. Westchester Co. 2008]).
Here, A & W's reliance upon a "fair dealing" theory is miscast and inapposite, since the allegedly improper disclosures do not arise from the performance of the parties' invoice contracts, but rather, from an independent transaction involving certain third parties with whom A & W itself had been dealing.
Turning to the third cause of action sounding in interference with prospective economic and/or contractual relations, it is well settled that, "[i]n order to succeed on a cause of action to recover damages for tortious interference with contract, the plaintiff must establish... the existence of a valid contract between it and a third party, and that the defendant intentionally procured the third party's breach of that contract without justification". Dome Property Mgt, Inc. v. Barbaria, 47 AD3d 870 (2nd Dept. 2008)(citations omitted). See, Lama Holding Co. v. Smith Barney Inc., 88 NY2d 413, 424 (1996); Foster v. Churchill, 87 NY2d 744, 749-750 (1996); and New York Merchants Protective Co., Inc. v. Rodriguez, 41 AD3d 565, 566 (2nd Dept. 2007). See [*6]also, Carvel Corp. v. Noonan,3 NY3d 182,190 (2004).
Additionally,"[w]here there has been no breach of an existing contract, but only interference with prospective contract rights, however, plaintiff must show more culpable conduct on the part of the defendant"; namely, that the disputed conduct amounts "to a crime or an independent tort". Carvel Corp. v. Noonan, supra at 190. See also, NBT Bancorp Inc. v. Fleet/Norstar Fin. Group, Inc., 87 NY2d 614, 621 (1996); and Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 NY2d 183, 191 (1980).
Initially, A & W does not claim, and has not shown, that Daylay procured the breach of whatever oral arrangement it had with Egg Depot and Jersey Lynne Farm. John Hancock Life Ins. Co. v. 42 Delaware Ave. Assocs., LLC, 15 AD3d 939, 940 (4th Dept. 2005). Rather, A & W's effectively asserts interference with prospective contracts rights in that it lost anticipated business and future profits because of the alleged disclosures and its customers' demands for lower prices on subsequent invoice purchases.
The record establishes that A & W had no binding agreement with respect to future egg purchases with either Egg Depot and Jersey Lynne Farm, since both entities ordered eggs on a largely, invoice-by-invoice or weekly basis in much the same way A & W purchased eggs from Daylay. Accordingly, A & W's interference claim, if anything, sounds in alleged interference with prospective contract relations, which must be supported by evidence that the alleged misconduct is so egregious that it amounts "to a crime or an independent tort". Carvel Corp. v. Noonan, supra at 190; Phoenix Capital Invs. LLC v. Ellington Mgt. Group, L.L.C., 51 AD3d 549 (1st Dept. 2008); Barrett v. Toroyan, 39 AD3d 366, 367 (1st Dept. 2007); Lawrence v. Union of Orthodox Jewish Congregations of America, 32 AD3d 304 (1st Dept. 2006); and Cooper v. Hodge, 28 AD3d 1149, 1151 (4th Dept. 2006). There is clearly no such evidence here.
In any event, and apart from A & W's claims, there is nothing of a probative nature in the record establishing that Daylay actually divulged A & W's pricing methods to Egg Depot and Jersey Lynne Farm. Each and every Daylay witness identified by A & W categorically denied making any such disclosures.
Non-party witness William Nelms, Egg Depot's principal, upon whom A & W relies in making its claims, expressly testified that he: (1) never inquired of Daylay about A & W's pricing; (2) was never given any information concerning that pricing by the Daylay personnel he spoke to; and (3) never told Alan Witzer that Daylay made any alleged pricing disclosures. Furthermore, A & W has been unable to secure any testimony from the principal of Jersey Lynne Farm with respect to claims of improper pricing disclosure by Daylay.
Even assuming, arguendo, that the disclosures were made, the causal nexus between these alleged revelations and the injury which supposedly ensued is tenuous and disjointed at best. That is, the claim is essentially that because certain third parties were made aware of pricing data, A & W necessarily "had to" lower its own prices to the extent that it sustained compensable economic injury. (Cmplt. ¶ 12). A plaintiff must support a tortious interference claim "with more than mere speculation". Burrowes v. Combs, supra at 373; and Chestnut Hill Partners, LLC v. Van Raalte, 45 AD3d 434, 435-436 (1st Dept. 2007). See also, Black Car and Livery Ins., Inc. v. H & W Brokerage, Inc., 28 AD3d 595 (2nd Dept. 2006); and Washington Ave. Assoc., Inc. v. [*7]Euclid Equipment, Inc., 229 AD2d 486, 487(2nd Dept. 1996).
A & W's frequently repeated assertion that orders in the egg industry are typically placed through facsimile or telephone media, as opposed to written agreements, and that written agreements are not used in the industry, even if true, does not support the qualitatively different assertion that A & W thus possessed an unwritten, "exclusive" arrangement with its customers which precluded Daylay from making direct eggs sales thereto. There is no proof of that claim, written or otherwise, which supports the assertion that A & W was ever affirmatively granted a binding contractual or "exclusive" right to sell Daylay eggs to any particular customer.
Lastly, the "custom and usage" opinion evidence offered by A & W's expert in order to support its claims is lacking in probative import inasmuch as the affidavit submitted is conclusory, speculative as applied to the instant transaction and inconsistent with the record testimony relating to, among other things, the alleged weekly eggs commitments and obligations of brokers, producers and distributors.
The Court notes further that the expert, who clearly lacks personal knowledge of the parties' dealings, was not produced to elucidate or explain an ambiguous or disputed provision in a written agreement. See, Uribe v. Merchants Bank of New York, 91 NY2d 336, 342 (1998). In actuality, the opinion submitted attempts to craft and establish the principal terms of the alleged oral contract itself.
In any event, A & W has failed to otherwise sustain its burden of showing that "the omitted term is fixed and invariable' in the industry in question;" to wit: that "the existence of the usage...is so notorious that a person of ordinary prudence in the exercise of reasonable care would be aware of it". Reuters Ltd. v. Dow Jones Telerate, Inc., 231 AD2d 337, 343 (1st Dept. 1997). See gen'lly, Wise & Co. v. Wecoline Products, 286 NY 365, 371 (1941); and Belasco Theatre Corp. v. Jelin Productions, 270 A.D. 202, 206 (1st Dept. 1945).
The Court has considered A & W's remaining contentions and concludes that they are insufficient to demonstrate the existence of a triable issue of fact so as to defeat Daylay's motion for summary judgment.
Accordingly, it is,
ORDERED that the motion of Daylay Egg Farm, Inc. for summary judgment pursuant to CPLR 3212 for an order granting it a money judgment in the sum of $312,789.29 is granted and the County Clerk of Nassau County is hereby directed to enter a Clerk's judgment in favor of Daylay Egg Farm, Inc. and against A & W Egg Company in the sum of$312,789.29 together with interest from the date of commencement, June 18, 2007 (CPLR 5001), and costs and disbursements as taxed by the Clerk; and it is futher,
ORDERED that the motion of Daylay Egg Farm, Inc. for summary judgment pursuant to CPLR 3212 for an order dismissing the complaint and counterclaims interposed by A & W Egg Company, is granted.
This constitutes the decision and order of the Court.
Dated: Mineola, NY
October 30, 2008____________________________
Hon. LEONARD B. AUSTIN, J.S.C.
X X X
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