CLC/CLI Liquidating Trust v Bloomingdale's, Inc.

[*1] CLC/CLI Liquidating Trust v Bloomingdale's, Inc. 2005 NY Slip Op 52077(U) [10 Misc 3d 1062(A)] Decided on December 14, 2005 Supreme Court, New York County Fried, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on December 14, 2005
Supreme Court, New York County

THE CLC/CLI Liquidating Trust and NICK DELIO, on behalf of themselves and all others similarly situated, Plaintiffs,

against

Bloomingdale's, Inc., a Division of Federated Department Stores, Inc., an Ohio Corporation; BURDENS, INC., a Division of Federated Department Stores, Inc., an Ohio Corporation; THE BON, INC., a Division of Federated Department Stores, Inc., an Ohio Corporation; MACY'S WEST, INC., a Division of Federated Department Stores, Inc., an Ohio Corporation; RICH'S DEPARTMENT STORES, INC., a Division of Federated Department Stores, Inc., an Ohio Corporation; STERN'S-MISC., INC., a Division of Federated Department Stores, Inc., an Ohio Corporation, Defendants.



603859/03



For Plaintiffs:

LIEFF, CABRASER, HEIMANN &

BERNSTEIN, LLP

Jonathan D. Selbin, Esq.

Daniel E. Seltz, Esq.

Rachel Geman, Esq.

780 Third Avenue, 48th Floor

New York, New York 10017

For Defendants:

JONES DAY

Mark R. Seiden, Esq.

Howard F. Sidman, Esq.

Sarah E. Lieber, Esq.

222 East 41st Street

New York, New York 10017

Bernard J. Fried, J.

In this action, plaintiffs, Nick DeLeo and the CLC/CLI Liquidating Trust ("CLC"), seek to represent a class of vendors, which sold clothing and other merchandise to defendants, a group of large retail department stores ("Bloomingdale's"). At this stage in the litigation, CLC asserts two causes of action under U.C.C. § 2-709: An action for the price based on alleged chargebacks improperly made by defendants; and an action for the price based on failure to pay the contract price in full and on time, in accordance with the terms of numerous contracts between defendants and plaintiffs.

In a previous motion, CLC moved to amend ("motion to amend" or "previous motion") their second cause of action, mentioned above, to include a claim for prejudgment interest under U.C.C. § 2-710 and to join Nick DeLeo as another plaintiff. Based upon CLC's submissions in support of that motion, on July 19, 2005 I granted CLC leave to amend the complaint.

Now, in motion sequence number 006, Bloomingdale's moves to dismiss the portion of the second cause of action, as amended, seeking prejudgment interest or, in the alternative, to re-argue the portion of the motion to amend regarding clarification of the second cause of action to include prejudgment interest. In support of their motion to dismiss or to re-argue, Bloomingdale's submitted copies of the second amended complaint, my prior decisions regarding a motion to dismiss and the motion to amend, transcripts of hearings with respect to those motions, the parties' memorandums of law regarding those prior motions, and a case offered by defendants as authority on the matter at issue, Associated Metals & Minerals Corporation v. Sharon Steel Corporation, (590 F. Supp. 18, 20-21 [S.D.NY 1983]). CLC opposes, submitting a memorandum in opposition and a reference to a treatise on contract law.

Motion to Dismiss

The second cause of action asserts that "[b]y engaging in a uniform practice of making late payments and taking timely payment discounts after the expiration of the payment due date, [d]efendants failed to pay the contract price due for goods at the time they made payment. Defendants also failed to pay interest on late payments." "Timely payment discounts" were discounts offered to Bloomingdale's on the condition that they pay CLC within a set period of time following placement of an order. CLC asserts that, under the terms of the contracts, Bloomingdale's owed the full price if they failed to pay during the period allotted for taking timely payment discounts.

Based on these allegations, CLC seeks to recover "the difference between the price [d]efendants agreed to pay and the price they actually paid for the goods accepted, as well as incidental damages in the form of interest due on late payments pursuant to U.C.C. § 2-710, prejudgment interest, and any other remedies that are just and proper." The contracts between CLC and Bloomingdale's do not provide for interest due on late payments; rather, CLC argues that statutory law provides for such interest.

When considering a motion to dismiss for failure to state a claim, it must be determined whether the allegations in the complaint, if assumed true, state a claim upon which relief can be granted. (E.g., CBS Corp. v. Dumsday, 268 AD2d 350, 352 [1st Dep't 2000]).

Bloomingdale's argues that CLC has not stated a valid claim for prejudgment interest on the portion of the price already paid, citing the Associated Metals case. They contend that a claim for incidental damages under § 2-710 alone cannot support a cause of action unless the claimant also has a valid cause of action under some other provision of Article 2 of the U.C.C., such as an action [*2]for the price under § 2-709. Because Bloomingdale's already paid a portion of the purchase price, they claim there is no valid action under § 2-709 for that portion of the purchase price, and, therefore, CLC may not recover prejudgment interest on the amounts already paid.

It is correct that, as discussed in Associated Metals, there can be no recovery of incidental damages under § 2-710 without a valid action under another provision of Article 2 of the U.C.C. (See also Bulk Oil (U.S.A.), Inc. v. Sun Oil Trading Co., 697 F.2d 481, 483-84 [2nd Cir. 1983]). Associated Metals disallowed a claim under § 2-710 for incidental damages, including interest arising from late payments, because plaintiffs in that case had no valid cause of action under any other provision of Article 2. There had been full, but late, payment of the contract price. Although late payment was found to be a breach of contract, it was not a breach that supported a valid cause of action under Article 2; thus, the plaintiff could not recover incidental damages under § 2-710.

However, the inverse of defendant's argument is that plaintiff may assert a claim for incidental damages under § 2-710 when such a claim is tied to a valid cause of action under Article 2. Indeed Associated Metals distinguished Atlas Concrete Pipe, Inc. v. Roger J. Au & Son, 467 F. Supp. 830 (E.D. Mich. 1979), rev'd on other grounds, 668 F.2d 905 (6th Cir. 1982), a case where incidental damages were allowed under § 2-710, when there was also a valid action for the price under § 2-709.

Here, unlike Associated Metals, CLC seeks prejudgment interest under § 2-710 and asserts a valid cause of action for the price under § 2-709 of the UCC, alleging that Bloomingdale's failed to pay in a timely fashion the full purchase price under the various contracts.

Bloomingdale's argues that even if CLC may recover prejudgment interest on the unpaid portion of the purchase price, they cannot recover prejudgment interest on the portion defendants paid late, an argument that seems to suggest that there exist two separate breaches. But plaintiffs assert, in their second cause of action, only one action for the price, not one based on the portion of the payment paid late and another based on the portion yet to be paid. CLC's action for the price is tied to a particular alleged breach of contract, a breach consisting of the failure of defendants to pay the price they agreed to pay when that payment became due. Assuming CLC's allegations to be true, that breach has continued since the time when full payment became due. The fact the Bloomingdale's made late partial payments does not make divisible or extinguish any part of the alleged breach. Partial payment may reduce the extent of any damages awarded to CLC, should they prove their claim, but CLC seeks incidental damages for an alleged breach consisting of a partial payment made late resulting in a sum remaining unpaid, allegations that, if true, support a valid cause of action under § 2-709.

Thus, Bloomingdale's motion to dismiss is denied.

Motion to Re-argue

Bloomingdale's, in the alternative, moves to re-argue that portion of my decision of July 18, 2005 that allowed CLC to amend the complaint to include a claim for prejudgment interest. They contend that re-argument should be granted because CLC limited the scope of the second cause of action to that provided under §§ 2-709 and 2-710 only when submitting reply papers on the motion to amend, and Bloomingdale's, although allowed the opportunity to file a sur-reply, did not receive an adequate opportunity to oppose. They also claim that their motion to re-argue presents "new arguments and authority not yet considered by the Court."

In opposition, CLC argues that Bloomingdale's does not deserve "another bite at the apple," [*3]because they were already provided with the opportunity to discuss this matter during the "three months, two hearings, and an extended round of briefing after [p]laintiff's motion to amend was filed. . . ."

CPLR 2221 provides a court with discretion to allow re-argument of a motion. (Frisenda v. X Large Enterprises, Inc., 280 AD2d 514, 515 [1st Dep't 2001]; Foley v. Roche, 68 AD2d 558, 567-68 [1st Dep't 1979]). It is an opportunity for one party "to show that the court misapplied the law." Such motions "shall be based upon matters of fact and law allegedly overlooked or misapprehended by the court in determining the prior motion, but shall not include any matters of fact not offered on the prior motion. . . ." (CPLR § 2221 [d] [2]). A motion to reargue will be denied where the movant fails to "show[] how the motion court misconstrued relevant facts or misapplied governing law." (DeSoignies v. Cornasesk House Tenants' Corp., 21 AD3d 715 [1st Dep't 2005])

Bloomingdale's motion to reargue is based on the same grounds originally made in support of their motion to dismiss: CLC does not have a valid action for that portion of the price already paid, regardless of any breach resulting from the lateness of that partial payment. As discussed above, CLC does not assert, in their second cause of action, two separate actions for the price nor do they allege two separate breaches of contract, one for the amount paid late and another for the amount that remains unpaid; rather, they assert one "action for the price" under § 2-709 based on one alleged breach consisting of Bloomingdale's alleged failure to timely pay the full purchase price. If they prove their claim, they are allowed to recover incidental damages, including prejudgment interest, under § 2-710. This is what I previously held.

Furthermore, New York courts do not "limit the scope of incidental damages' to include only the activities enumerated in § 2-710." (Bulk Oil, Inc. v. Sun Oil Trading Company, supra, 697 F.2d at 484). Rather, "the purpose of the Commercial Code is to put the aggrieved party in as good a position as if the other party had fully performed.'" (Id.)(citing U.C.C. 1-106(1)). In the context of an action for the price under § 2-709, "where a right of action for incidental damages is granted by the U.C.C., the scope of such incidental damages is quite broad." (Associated Metals & Minerals Corp. v. Sharon Steel Corp., supra, 590 F. Supp at 21).

Bloomingdale's has failed to demonstrate that I misconstrued relevant facts or misapplied the law. Thus, the motion for re-argument is denied.

Accordingly, it is

ORDERED that the motion is, in all respects, denied.

Dated: ____________

ENTER:

_________________________

J.S.C.