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Lithuanian Commerce Corporation, LTD v. Sara Lee Hosiery

July 30, 2002

LITHUANIAN COMMERCE CORPORATION, LTD., PLAINTIFF,
v.
SARA LEE HOSIERY, SARA LEE HOSIERY INTERNATIONAL, SARA LEE INTERNATIONAL AND SARA LEE CORPORATION, DEFENDANTS,
v.
ALGIS VASYS AND LAIMA ZAJANCKAUSKIENE, ADDITIONAL COUNTERCLAIM-DEFENDANTS.



The opinion of the court was delivered by: Hon. Stephen M. Orlofsky

FOR PUBLICATION

OPINION

Having prevailed on their motion for judgment as a matter of law in the first trial of this matter almost six years ago, Defendants, Sara Lee Corporation and Sara Lee Hosiery, ("Sara Lee"), now, at the close of Plaintiff, Lithuanian Commerce Corporation's ("LCC"), case upon retrial, have again filed a Rule 50(a) motion, hoping that history will repeat itself. Sara Lee has moved for judgment as a matter of law on seven distinct grounds. In its motion, Sara Lee asks this Court to apply well-established doctrines of contract law to the distinct factual circumstances presented here, to predict that the New Jersey Supreme Court would extend the economic loss doctrine to bar, without exception, all tort claims premised upon the same underlying transactions as concurrently pursued contract claims, and, to conclude that LCC has failed to present "credible evidence" that Sara Lee engaged in fraudulent behavior, or acted in bad faith. For the reasons set forth below, I conclude that all but one of the grounds under which Sara Lee has moved for judgment as a matter of law, are without merit. I find that many of the legal principles which Sara Lee contends entitle it to judgment as a matter of law, would be inappropriately applied to the facts of this case. I further find that several of Sara Lee's arguments must be rejected because they would require me to weigh LCC's evidence and preempt the role of the jury, as the finder of fact in this case. Thus, I shall grant Sara Lee's Rule 50 motion on LCC's claim for breach of warranty for a particular purpose, N.J. Stat. Ann. § 12A:2-315, and deny the motion in all other respects.

I. BACKGROUND

I have previously set forth the factual and procedural history of this case in considerable detail numerous times, *fn1 and therefore will not repeat that tortured history here. All that is necessary for an understanding of Sara Lee's current Rule 50 motion are the following facts. This case was previously tried six years ago, and concluded in this Court when I granted Sara Lee's first Rule 50 motion at the conclusion of LCC's case-in-chief. In granting that motion, I found that LCC had failed to present sufficient evidence regarding lost profits to permit the jury to award compensatory damages with reasonable certainty. Lithuanian Commerce Corp. v. Sara Lee, 23 F. Supp. 2d 509 (D.N.J. 1998). LCC appealed my decision to the United States Court of Appeals for the Third Circuit. In an unpublished opinion, the Third Circuit affirmed in part and reversed in part, finding that "there was competent evidence at trial which established damages arising from the alleged breach of the Settlement Agreement." Lithuanian Commerce Corp. v. Sara Lee Hosiery, Nos. 99-5347 & 99-5742, slip op., at 16 (3d Cir. Sept. 11, 2000)[hereinafter "Remand Opinion"]. The Third Circuit vacated the judgment in favor of Sara Lee, and remanded this case for retrial in accordance with its Remand Opinion. Id. at 20-21. Since the parties could not agree about the scope of the trial on remand, I determined, in an unpublished opinion, dated February 13, 2002, that the Third Circuit's Remand Opinion permitted LCC to pursue its claims for breach of warranty under the Uniform Commercial Code ("U.C.C."); breach of the implied warranties of merchantability and fitness for a particular purpose under the U.C.C.; breach of contract; common law fraud; tortious interference with contract and prospective business relations; and, violations of the covenant of good faith and fair dealing. Lithuanian Commerce Corp. v. Sara Lee, Civ. A. No. 96-1949 (D.N.J. Feb. 13, 2002). Prior to trial, LCC voluntarily withdrew its claim for tortious interference with contact and prospective business relations. See Letter from Gregory D. Saputelli, Esq., dated June 21, 2002.

Once again, at the close of LCC's case-in-chief in this second trial, Sara Lee has moved for judgment as a matter of law, pursuant to Fed. R. Civ. P. 50. Sara Lee argues that judgment as a matter of law is appropriate:

(1) on all of LCC's claims because LCC has failed to produce sufficient evidence to enable the jury to calculate LCC's damages with reasonable certainty;

(2) on LCC's claim for common-law fraud because the "economic loss" doctrine prohibits LCC from seeking recovery for fraud where an adequate contract remedy exists;

(3) on LCC's claim for common-law fraud because LCC has failed to produce any evidence of scienter or objectively reasonable reliance;

(4) on LCC's claim for punitive damages because LCC has failed to present clear and convincing evidence that Sara Lee acted with actual malice or in wanton or willful disregard of LCC's interests;

(5) on LCC's claim for breach of the implied warranty of merchantability, because the "predominant purpose" of the contract was a settlement of LCC's litigation claims, therefore the contract is not one for a sale of goods governed by Article 2 of the U.C.C.;

(6) on LCC's claim for breach of the implied warranty of fitness for a particular purpose because LCC has failed to produce any evidence that the pantyhose which are the subject of the contract were to be used for any "specialized" purpose; and,

(7) on LCC's claim for breach of the implied covenant of good faith and fair dealing because LCC has failed to establish that Sara Lee acted in bad faith.

II. THE LEGAL STANDARD GOVERNING JUDGMENT AS A MATTER OF LAW UNDER FEDERAL RULE OF CIVIL PROCEDURE 50

Federal Rule of Civil Procedure 50 provides, in relevant part:

If during a trial by jury a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue, the court may determine the issue against that party and may grant a motion for judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue. Fed. R. Civ. P. 50(a)(1).

"`[A] directed verdict is mandated where the facts and the law will reasonably support only one conclusion.'" Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 88 (3d Cir. 2000)(quoting McDermott Int'l, Inc. v. Wilander, 498 U.S. 337, 356 (1991)). A Court may only grant judgment as a matter of law if after "viewing the evidence in the light most favorable to the non-movant and giving it the advantage of every fair and reasonable inference, there is insufficient evidence from which a jury reasonably could find liability." Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1166 (3d Cir. 1993). "[T]he focus of [the] inquiry is not whether there is literally no evidence supporting the unsuccessful party, but whether there is evidence upon which a reasonable jury could properly base its verdict." Villanueva v. Brown, 103 F.3d 1128, 1133 (3d Cir. 1997). "`If the evidence is of such character that reasonable [persons], in the impartial exercise of their judgment may reach different conclusions, the case should be submitted to the jury.'" Id. (quoting J.I. Hass Co., Inc. v. Gilbane Bldg. Co., 881 F.2d 89, 92 (3d Cir. 1989)). "By such direction of the trial the result is saved from the mischance of speculation over legally unfounded claims." Brady v. Southern R.R. Co., 320 U.S. 476, 480 (1943).

Furthermore, in ruling on a motion for judgment as a matter of law, the Court is not free to: (1) weigh the evidence, (2) pass on the credibility of witnesses, or (3) substitute its judgment of the facts for that of the jury. Aloe Coal Co. v. Clark Equip. Co., 816 F.2d 110, 113 (3d Cir.), cert. denied, 484 U.S. 853 (1987); Tripodi v. Johnson & Johnson, 877 F. Supp. 233, 236 (D.N.J. 1995).

III. DISCUSSION

A. Reasonable Certainty in the Calculation of Damages

Sara Lee argues that it is entitled to judgment as a matter of law on all of LCC's claims because LCC has failed to present sufficient evidence to enable the jury to calculate LCC's damages with "reasonable certainty." Specifically, Sara Lee contends that the record "is entirely devoid of any evidence of either LCC's pre-recall sales of Mexican-made L'eggs product in 1995 or LCC's claimed recall of those pantyhose from the market in December 1995 (other than one internal order)," Def.'s Br. at 7, and therefore, Sara Lee contends that the jury cannot calculate the proper amount of "offset" in determining LCC's damages. Sara Lee focuses on the fact that LCC's evidence of its damages was predominantly in the form of in-house summaries of sales and returns of the Mexican-made pantyhose and on internal directives concerning those sales and returns, rather than on underlying invoices, which no longer exist. Def.'s Reply Br. at 5-15.

LCC counters that it has "presented detailed documentary evidence and oral testimony which establishes the disposition of all but 1,910 pairs of more than half a million pairs [of pantyhose] received from Sara Lee," and that the value of these missing 1,910 pairs represents less than 0.3% of the total product (510,360 pairs) provided by Sara Lee. Pl.'s Br. at 7. Thus, LCC argues that it has proved damages "with greater than 99% certainty." Id. at 1. LCC points to the Third Circuit's Remand Opinion which held that "there was competent evidence at trial which established damages arising from the alleged breach of the Settlement Agreement," Remand Opinion at 19, and the Court of Appeals' conclusion that the evidence presented at the first trial established that the "[l]iquidation proceeds, ostensibly the actual value of the pantyhose (the discounted sale of the defective pantyhose), totaled $35,853.00." Id. at 20.

Under New Jersey law, once a plaintiff has established an injury, it need prove the amount of damages only to a reasonable degree of certainty. Lightning Lube, 4 F.3d at 1176 (citing Tessmar v. Grosner, 23 N.J. 193, 203 (1957)). Indeed, New Jersey courts have consistently held that: "[t]he rule relating to uncertainty of damages applies to the uncertainty as to the fact of damage and not as to its amount, mere uncertainty as to the amount will not preclude the right of recovery." Tessmar, 23 N.J. at 203; accord Kozlowski v. Kozlowski, 80 N.J. 378, 388 (1979)("While the damages flowing from defendant's breach of contract are not ascertainable with exactitude, such is not a bar to relief."); American Sanitary Sales Co. v. Dep't of Treasury, 178 N.J. Super. 429, 435 (App. Div. 1981)("The ideal of a judicial system is perfect justice. However, in a case where, as here, absolute precision in fixing damages may not be attainable, we should not hesitate to seek essential justice. It would be a travesty to deny a plaintiff essential justice because the absence of means for precision precludes perfect justice."); Sandler v. Lawn-A-Mat Cermical & Equip. Corp., 141 N.J. Super. 437, 454 (App. Div. 1976)("Mere difficulty or lack of certainty in the proof or finding of the quantum of damages does not inhibit an award to the successful party.").

LCC's evidence of the liquidation proceeds it realized from the disposition of the Mexican-made pantyhose is based predominantly on in-house summaries of its sales and donations. Pl.'s Exs. 115; 115A; Tr. 2415-27. Sara Lee's observation that LCC has "lost" the invoices, receipts, and income records upon which these summaries were based is accurate. See e.g., Tr. at 1591-97; 1600-09; 1623-43. This fact, however, does not lead inexorably to the conclusion that LCC has failed to produce evidence from which a jury could calculate damages to a reasonable degree of certainty. It only means that the jury will have to decide what weight, if any, should be accorded to these summaries in light of the fact that the underlying documentation upon which they are based no longer exists. Sara Lee's challenge to this evidence goes to the weight the summaries are to be given, and, therefore, is clearly an improper basis for granting judgment as a matter of law.

Sara Lee is, of course, free to argue to the jury that LCC's failure to retain the invoices and receipts upon which the summaries are based, in the face of pending litigation with Sara Lee, makes the summaries suspect and unworthy of belief. This conclusion, however, is not the only reasonable one that may be drawn from the from facts in evidence. It is also quite possible for the jury to conclude that LCC discarded the underlying documentation as part of its normal business operations, and that no adverse inference can be drawn from their unavailability.

LCC admits that it could not account for 1,910 pairs of the Mexican-made pantyhose with detailed documentation. Tr. 2417:22-2418:7. With regard to these 1,910 pairs, however, Mr. Vasys ("Vasys"), LCC's President, testified that the maximum amount LCC could have received for the liquidation of the unaccounted-for 1,910 pairs was $9,072.00. Tr. 2418:10-2419:19. Vasys arrived at this figure by multiplying 1,910 by the price per pair which LCC charged for the most expensive L'eggs pantyhose, that is, "Sheer Energy," which sold for $4.75 per pair. Vasys then projected a maximum possible liquidation value by adding the estimated value of the unaccounted for 1,910 pairs ($9,072.00) to the known liquidation value of the remaining 508,450 pairs ($35,855.00). Thus, LCC has introduced evidence of a range of liquidation values from $35,855 to $44,927. Pl.'s Ex. 115A.

Although this evidence does not establish the liquidation value with exactitude, it does provide the jury with sufficient evidence to calculate the liquidation value of the Mexican-made pantyhose, and thus, to approximate to a "reasonable degree of certainty" the so-called "liquidation" offset to LCC's total amount of damages. Just as it is within the jury's province to decide what weight, if any, to give the summaries of sales which LCC introduced, so too it is the jury's duty to evaluate the credibility of Vasys's testimony concerning the liquidation proceeds of the 1,910 pairs of "unaccounted-for" pantyhose. Although some extrapolation and projection will be entailed in ...


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