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Rocheux International of New Jersey, Inc. v. U.S. Merchants Financial Group

September 29, 2010


The opinion of the court was delivered by: Brown, Chief Judge



This matter comes before the Court upon cross-motions for summary judgment. (Doc. Nos. 88, 92.) Defendants' cross-motion also seeks to redesignate affirmative defenses as counterclaims pursuant to Federal Rule of Civil Procedure 8(c)(2). Plaintiff also moves in limine to exclude certain defense expert witnesses pursuant to Federal Rule of Evidence 702. (Doc. No. 87.) This Court heard oral argument on these motions on September 16, 2010. For the following reasons, the Court will grant Plaintiff's motion in part without prejudice and deny Defendants' motion. The Court will allow Defendants to redesignate their affirmative defenses, but the Court will limit these counterclaims to the 2006 deliveries. The Court will also deny Plaintiff's motion in limine without prejudice and permit Plaintiff to refile in light of this Court's ruling with regard to the other motions.


This case involves a contract dispute between Plaintiff Rocheux International of New Jersey, Inc. ("Rocheux"), a distributor of raw plastic materials, and Defendants U.S. Merchants Financial Group, Inc., U.S. Merchants Inc. (d/b/a U.S. Merchants or The Merchant of Tennis, Inc.), and Diversified Repackaging Corporation, who are California-based providers of plastic product-packaging services. The dispute concerns large shipments of raw plastics delivered by Rocheux to Defendants between January and June 2006. For purposes of the parties' cross-motions for summary judgment, the Court draws all reasonable inferences in the light most favorable to the respective non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

A. Undisputed Facts

The Court begins with the uncontested facts. The parties agree that Defendants ordered large quantities of raw PVC and APET plastic from Rocheux in 2005 and 2006, as demonstrated by purchase orders 21920, 22190, 22897, P13295, P13300, P13302, 20188, 20491, 20564, 20583, and 22488 (hereinafter "2005--2006 purchase orders"). (Pl.'s 56.1 Statement ¶ 1; Defs.' 56.1 Resp. ¶ 1.) According to the parties' descriptions, the plastic was ordered by the pound and delivered in rolled-up form as more than 7,000 rolls of plastic the size of garbage cans. (Flood Decl. ¶¶ 3, 9; see also Pl.'s Br. at 1; Defs.' Resp. Br. at 6.) There is no dispute that Rocheux delivered to Defendants some of the plastic products related to the 2005--2006 purchase orders between January 2006 and June 2006 (hereinafter "2006 deliveries"), and that Rocheux sent Defendants invoices for these deliveries. (See Pl.'s 56.1 Statement ¶¶ 2, 6; Defs.' 56.1 Resp. ¶¶ 2, 6.) It is undisputed that Defendants did not pay for most if not all of the 2006 deliveries and that Defendants no longer possess the goods from the 2006 deliveries. (Pl.'s 56.1 Statement ¶¶ 8, 12; Defs.' 56.1 Resp. ¶¶ 8, 12.) According to Plaintiff, the outstanding balance for the 2006 deliveries is $2,116,571.76. (Pl.'s 56.1 Statement ¶ 9; Stephanoff Decl. ¶ 32 & Ex. A; Defs.' 56.1 Resp. ¶ 9.)

In addition to the 2006 deliveries, it appears that Rocheux delivered some of the goods related to the 2005--2006 purchase orders to a local warehouse so that Defendants would be able to access the goods as needed on short notice. These deliveries to the warehouse (hereinafter "warehouse goods") appear to have taken place between November 2005 and August 2006. (Pl.'s 56.1 Statement ¶¶ 262, 266, 270, 274, 277, 280, 283, 286, 289, 292, 295, 298, 301, 305, 308, 311, 314, 317, 320, 323, 326, 329, 332, 335, 338, 341, 344, 347, 350, 353; McRavin Decl. ¶¶ 275, 279, 283, 287, 290, 293, 296, 299, 302, 305, 308, 311, 314, 318, 321, 324, 327, 330, 333, 336, 339, 342, 345, 348, 351, 354, 357, 360, 363, 366; Defs.' Resp. ¶¶ 262, 266, 270, 274, 277, 280, 283, 286, 289, 292, 295, 298, 301, 305, 308, 311, 314, 317, 320, 323, 326, 329, 332, 335, 338, 341, 344, 347, 350, 353.) According to Rocheux Vice President and Chief Operating Officer Robert Stephanoff, the original purchase price for the warehouse goods was $1,582,282.31. (Stephanoff Decl. ¶ 28; see also Defs.' 56.1 Statement ¶ 3.) On September 24, 2006, Rocheux President Wendy Steed sent an email to Defendants' President and CEO Jeffrie Green requesting the delinquent payments for the 2006 deliveries and the warehouse goods by September 29, 2009, and notifying Defendants that their failure to pay would result in Rocheux selling the warehouse goods and seeking any deficiency from Defendants pursuant to UCC § 2-706. (Steed Decl. ¶ 14 & Ex. F.) Rocheux incurred $18,562.36 in freight charges and $56,622.67 in additional warehouse charges in attempting to re-sell the warehouse goods, and Rocheux eventually sold the warehouse goods to third parties for $1,194,582.68, resulting in a deficiency of $387,699.70 compared to the original purchase price for the warehouse goods. (Pl.'s 56.1 Statement ¶¶ 18--19; Stephanoff Decl. ¶¶ 28--29; Defs.' 56.1 Resp. ¶¶ 18--19.)

B. Disputed Facts

Although the parties do not contest the basic facts surrounding the 2006 deliveries and the warehouse goods, Defendants contest their liability for both, contending that the 2006 deliveries contained substantial amounts of unusable and/or nonconforming materials, and that Rocheux breached its contracts with Defendants when it resold the warehoused goods without Defendants' consent. With regard to the 2006 deliveries, Defendants contend that they either rejected or revoked acceptance of the goods within a reasonable time after discovering latent defects in the plastic. According to Defendants' Thermoforming Manager Nick Margaros, the plastic's medium-garbage can-sized rolls of plastic, delivered on large pallets-made it "impossible" to discover anything but external defects at the time of delivery. Rather, internal defects would only be discovered once Defendants used machines to unwind the plastic from the rolls and thermoform the plastic film into individual packaging parts. (Margaros Decl. ¶¶ 6--8.) Such flaws would manifest themselves in the thermoformed products as discoloration, flow marks, waviness, pitting, and scratches. (Id. ¶ 8.) Packaging products containing these flaws could not be sold to Defendants' customers, and thus had to be sold as scrap. (Id.) Other latent flaws, such as products' sealing capabilities, could not be discovered until later in the manufacturing process. (Id.) Mr. Margaros attests that Defendants discovered the above defects in a "substantial portion" of the plastic Rocheux sold to Defendants between 2000 and 2006 after processing the materials in the above fashion, and that the goods made with this plastic were useless for anything other than scrap. (Id. ¶ 9.) Catalin Oprisan, who works for Defendants' accounting department, also states that Mr. Margaros notified his department of problems with Rocheux's materials on "a number of occasions between 2000 and the end of 2006." (Oprisan Decl. ¶ 4.) Although Defendants do not identify specific conversations Mr. Margaros had with Rocheux about problematic shipments during this time period, Mr. Margaros asserts that he contacted Rocheux representatives-specifically Allison Tuan Lee and Michael Flood-whenever "there was a quality issue to report," and that "[o]n each such occasion, [he] explained to [Rocheux] the particular defects Defendants were experiencing, that Defendants could not use the defective material, and that Defendants did not want the unusable plastic." (Id. ¶ 11.) Mr. Margaros further generally asserts that, during the course of the parties' business relationship, Defendants set aside the defective plastic for a brief period before disposal so that Rocheux could inspect the product, but that Rocheux typically did not come for inspection. (Margaros Decl. ¶ 11 ("On each such occasion . . . . I asked [Rocheux] to come . . . to look at the defective and nonconforming Rocheux plastic. I also told them that the material would be set aside . . . for a short time in case they wanted to look at it. On many occasions they said [a Rocheux representative] would come by and look at the plastic, but he only came by on two or three occasions and generally did not do so.").) Mr. Margaros also states that, when Rocheux did not come to inspect goods, Defendants sold the defective goods as scrap. (See id.) He further contends that Rocheux representatives did not provide instructions regarding the defective materials, but that Rocheux "always and repeatedly assured that Defendants would receive credits to their account for any and all defective and/or nonconforming material." (Id. ¶¶ 11--12.)

For its part, Rocheux claims that it was not notified of problems with the 2006 deliveries until its president received an email from Defendants' president on September 6, 2006. (Steed Decl. Ex. D (Sept. 6, 2006 email from Jeffrie Green to Wendy Steed) (indicating that "there have been some problems with the materials which Rocheux supplied," and inquiring whether "[Rocheux's] other customers encountered sealing problems").) Prior to the September 6 email, Rocheux claims that Defendants had generally acknowledged that they owed payments for the 2006 deliveries. Rocheux's sales representative Michael Flood, who handled Defendants' account since 2000, contends that, with the exception of a handful of instances where Rocheux issued credits for "minor discrepancies in the quantity or weight of goods delivered [to Defendants]," Defendants never complained about the quality of goods delivered by Rocheux during the course of the parties' relationship. (Flood Decl. ¶ 5.) Mr. Flood further states that Defendants never rejected or otherwise indicated that they did not want to keep the 2006 deliveries (Flood Decl. ¶ 6), noting that, if they had, Rocheux would have requested an opportunity to inspect the goods, and that Rocheux would have returned any defective goods to the original manufacturer for credits (Flood Decl. ¶ 7). To support this claim, Rocheux notes that its representatives met with Defendants' president in California on three occasions: April 1, 2006 (Ms. Steed, Rocheux's president), May 31, 2006 (Mr. Stephanoff, Rocheux's vice president and COO), and July 17, 2006 (Ms. Steed, Mr. Flood, and Thompson Yeh, Rocheux's vice president of the Rigid Plastics Division). According to these representatives, Defendants never expressed any concerns with the 2006 deliveries at these meetings, and Defendants' president acknowledged that Defendants owed the amounts listed in Rocheux's invoices, but that the delay in payments for the 2006 deliveries was attributable to problems with Defendants' new accounting software. (Steed Decl. ¶¶ 5--6, 8; Stephanoff Decl. ¶¶ 22--23; Yeh Decl. ¶¶ 8--9.)

After Ms. Steed received the September 6 email, she replied the following day with an email asking Mr. Green to "please provide [Rocheux] full details" regarding his assertion of defects with delivered goods. (Steed Decl. Ex. E (Sept. 7, 2006 email from Wendy Steed to Jeffrie Green).) Her response further asserted "We stand behind our product and will send a team to investigate any problems you may be having with our material. Any defective materials should be returned for a full credit." (Id.) Ms. Steed asserts that Defendants never responded to her request for inspection or return of defective goods. (Steed Decl. ¶ 13.) Defendants concede that "the vast majority" of the 2006 deliveries had been discarded as scrap when they received Ms. Steed's September 7, 2006 email requesting the return or inspection of defective goods. (Margaros Decl. ¶ 15.) More than a year later, the parties met at Defendants' plant in California in November 2007 for an inspection of the defective goods Defendants still possessed. Defendants produced 33 rolls of plastic, "most of which, if not all, of which [we]re not part of the [2006 deliveries]." (Stephanoff Decl. ¶ 7; see also Margaros Decl. ¶ 15.)

The parties also dispute the applicability of additional terms for interest and attorneys' fees that Rocheux asserts it included in both its order confirmations and invoices to Defendants. (See Pl.'s 56.1 Statement ¶ 257; Defs.' 56.1 Resp. ¶ 257.) Rocheux's Supervisor of Customer Service Donna McRavin attests that Rocheux, by virtue of its document-producing software, automatically included a "Terms and Conditions" page as page 2 of every order acknowledgment it sent to Defendants in response to Defendants' purchase orders. (McRavin Decl. ¶ 11.) Paragraph 7 of the Terms and Conditions page provides for a service charge of 1.5% per month on "all . . . outstanding charges and invoices," and states that the purchaser will be responsible for "all costs and expenses of collection, including reasonable attorneys' fees of 25% of the outstanding balance, incurred by Rocheux in connection with [the parties' sales contracts] or in any action or proceeding against Customer for breach of [the parties' sales contracts]." (E.g., McRavin Decl. Ex. F.) Ms. McRavin included order confirmations containing Terms and Conditions pages for the 2005--2006 purchase orders. (See McRavin Decl. Exs. A--TTTTTTTT.)

In addition to the Terms and Conditions pages Rocheux contends it included with the order confirmations, Rocheux asserts that it sent Defendants invoices after each delivery that contained essentially the same additional terms. (Pl.'s 56.1 Statement ¶¶ 258, 260.) A footnote in the invoices provides that "[d]elinquent accounts are subject to a service charge of 1.5% per month" and notifies the purchaser that it will be responsible for costs and "reasonable attorney's fees" if Rocheux has to institute legal proceedings to collect under the parties' sales contracts. (E.g., McRavin Decl. Ex. K.) Ms. McRavin included the invoices for the 2005--2006 purchase orders. (See McRavin Decl. Exs. A--TTTTTTTT.) Defendants deny that they ever received Terms and Conditions pages with the order confirmations that Rocheux sent. (Green Decl. ¶ 14; Oprisan Decl. ¶¶ 6--7.) According to Mr. Green, Defendants' president and CEO, he arranged Defendants' initial agreement to purchase plastics from Rocheux in a conversation or series of conversations with Rocheux salesman Mike Flood, ostensibly in or about 2000. (Green Decl. ¶¶ 10--11.) Mr. Green attests that his companies only purchase plastic materials "from suppliers [he] approve[s], on terms that [he] negotiate[s]," and that his companies "do not accept additional terms and conditions from [their] vendors." (Id. ¶ 11.) Mr. Green further alleges that he discussed these limitations with Mr. Flood when they first met, and that Mr. Flood "agreed that if we did business, it would be on the terms that I outlined." (Id.) Mr. Green denies being apprised of the additional terms for interest and attorneys' fees now sought by Rocheux at any point in the parties' business relationship, and Mr. Green further contends that, prior to the instant litigation, Rocheux never attempted to charge Defendants interest or attorneys' fees on past-due invoices. (Id. ¶¶ 14--15.) Defendants do not deny receiving invoices containing terms for interest and attorneys' fees,*fn1 but Defendants contest the legal significance of these invoices.

C. Procedural History

On December 21, 2006, Rocheux filed a six-count Complaint presenting claims for breach of contract (Counts I, V), claims on book accounts (Counts II, VI), unjust enrichment (Count III), and conversion of property (Count IV). Counts I--IV seek damages for the 2006 deliveries, and Counts V--VI seek damages for the warehouse goods. Defendants filed an Answer on February 28, 2007, that denied most of the allegations supporting Rocheux's claims and asserted a number of affirmative defenses, including that Rocheux's claims were barred by Rocheux's prior breach of contract, failure to supply conforming goods of merchantable quality, and breach of express and implied warranties. (Answer, Affirmative Defenses IV, VIII, IX.) Rocheux now moves for summary judgment on its claims for the 2006 deliveries and warehouse goods, seeking $4,635,761.18 in damages, interest, attorneys' fees, and costs.*fn2 Defendants oppose Rocheux's motion in its entirety, and cross-move: (1) to redesignate certain affirmative defenses as counterclaims pursuant to Federal Rule of Civil Procedure 8(c); (2) to estop Rocheux from receiving the full contract price of the 2006 deliveries on the basis of Rocheux's promises of credits for nonconforming goods; (3) for summary judgment on Rocheux's claims for the warehouse goods; and (4) for summary judgment under UCC § 2-207 on the additional terms for interest and attorneys' fees. In addition to the parties' cross-motions for summary judgment, Rocheux moves pursuant to Federal Rules of Evidence 702 and 703 to exclude the testimony of Defendants' proffered expert witnesses Arthur Buckle, Nick Margaros, and Barbara Luna.


The Court first considers Defendants' request to redesignate certain affirmative defenses as counterclaims pursuant to Federal Rule of Civil Procedure 8(c)(2). This Rule provides in pertinent part: "If a party mistakenly designates a defense as a counterclaim, or a counterclaim as a defense, the court must, if justice requires, treat the pleading as though it were correctly designated, and may impose terms for doing so." Fed. R. Civ. P. 8(c)(2). Defendants intend to rely on their affirmative defenses of breach of warranty and breach of contract to seek offsets from any amount due under its contracts with Rocheux on the basis of Rocheux's failure to provide conforming goods between 2000 and 2006. According to Defendants, towards the beginning of the their business relationship, Rocheux expressly warranted that it would give Defendants the best prices on for all purchases and that it would always deliver "first quality virgin grade (non-recycled) material." (Defs.' Cross-Motion Br. at 4--5; Green Decl. ¶¶ 11--12.) Defendants allege that, in addition to shipping a substantial amount of unusable plastic, Rocheux also sold and delivered goods that did not conform to the "best-pricing" and "virgin-grade" warranties. Rocheux objects to Defendants' proposed counterclaims on the grounds that Defendants' requested modification would alter the "essential character" of the affirmative defenses by including "new counterclaim[s] that w[ere] not the subject of the complaint or the answer." (Pl.'s Reply Br. at 26--27.) The question before the Court, then, is whether Defendants' proposed modification redresses a simple mistaken designation, for which Rule 8(c)(2) provides the appropriate standard for relief, or whether Defendants' modification presents a new claim, for which leave to amend is governed by Federal Rule of Civil Procedure 15(a)(2). See Bozsi Ltd. P'ship v. Lynott, 676 F. Supp. 505, 515--16 (S.D.N.Y. 1987) (differentiating between "technical pleading error[s]," to which Rule 8(c) applies, and redesignations that would "alter[] the essential character of a case"); Wright & Miller, 5 Federal Practice & Procedure § 1275 (West 2010) ("The misdesignation provision in Rule 8(c) reflects the conscious attempt by the draftsmen to ignore pleading technicalities; it also promotes the liberality with which courts generally construe pleadings under the federal rules."). Consequently, the parties' pleadings provides the appropriate frame of reference.

Rocheux's Complaint alleges that Defendants breached contractual obligations to pay for goods delivered between January and June 2006. (Compl. ¶ 21.) Indeed, the Complaint generally avers that the parties had a business relationship prior to this time. (Compl. ¶¶ 12 (alleging that Defendants had purchased materials from Rocheux "[f]or the last several years," and that Rocheux "sought information concerning Defendants' creditworthiness" in 2004), 17 (alleging that the parties entered into a written agreement for the supply of G/A/G in March of 2005), 19 (asserting that Defendants made orders for PVC and G/A/G in 2005 and 2006).) However, the Complaint only alleges that Defendants breached contractual obligations to pay for goods delivered between January and June 2006. It does not specify an earlier period of breach.*fn3

Defendants' Answer denied the allegation of breaches occurring between January and June 2006 and asserted that Rocheux breached its contractual obligations. (Answer ¶ 21.) The affirmative defenses Defendants presently seek to redesignate as counterclaims state that "Rocheux's claims are barred, in whole or in part," by Rocheux's breach of contract, by Rocheux's "failure to provide conforming goods of merchantable quality," and by Rocheux's "breaches of express and implied warranties." (Id., Affirmative Defenses IV, VIII, IX.) Nowhere in the Answer do Defendants seek relief for nonconforming goods delivered between 2000 and 2005. During oral argument, Defendants argued that the pleadings opened the door for Defendants to claim offsets for nonconforming goods delivered during the parties' entire business relationship, because the parties' contractual agreement was an installment contract. However, this understanding of the parties' relationship is not reflected in the pleadings, and even if the parties had an installment contract relationship, Defendants did not allege that non-conformities occurred prior to the 2006 deliveries.*fn4

The pleadings thus unequivocally demonstrate that the parties' dispute concerned goods delivered between January and June 2006, as well as warehouse goods billed in September 2006.

The plausibility standard imposed by Federal Rule of Civil Procedure 8(a), see Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), which applies to counterclaims, see Fed. R. Civ. P. 8(a) (2007) and 2007 amendment note (noting "stylistic changes"), persuades this Court that Defendants' generic affirmative defenses did not expand the temporal scope of the legal claims. Therefore, Defendants' purported modification seeking offsets on the basis of nonconforming goods delivered between 2000 and 2005 is properly characterized as a motion to amend their Answer to include new counterclaims.

Federal Rule of Civil Procedure 15(a)(2) provides that, under the present circumstances, "a party may amend [its] pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires." This standard applies to affirmative and responsive pleadings alike. Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004). The Supreme Court identified several factors that guide the application of this Rule in Foman v. Davis:

If the underlying facts or circumstances relied upon by a [party] may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason-such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.-the leave sought should, as the rules require, be "freely given."

Foman, 371 U.S. 178, 182 (1962); see also Arthur v. Maersk, Inc., 434 F.3d 196, 204--05 (3d Cir. 2006). The Third Circuit has explained that "[d]elay alone is not sufficient to justify denial of leave to amend." Arthur, 434 F.3d at 204; see also Howze v. Jones & Laughlin Steel Corp., 750 F.2d 1208, 1212 (3d Cir. 1984). "[H]owever, at some point, the delay will become 'undue,' placing an unwarranted burden on the court, or will become 'prejudicial,' placing an unfair burden on the opposing party." Adams v. Gould Inc., 739 F.2d 858, 868 (3d Cir. 1984). "The question of undue delay, as well as the question of bad faith, requires that [the court] focus on the plaintiffs' motives for not amending their complaint to assert this claim earlier; the issue of prejudice requires that we focus on the effect on the defendants." Id.; see also Cureton v. Nat'l Collegiate Athletic Ass'n, 252 F.3d 267, 273 (3d Cir. 2001). It is well established in this Circuit that "prejudice to the non-moving party is the touchstone for the denial of an amendment," e.g., Arthur, 434 F.3d at 204, but "the longer the unexplained delay, the less the [non-moving party] must show in terms of prejudice" to defeat the motion to amend, Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004) (citing Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993)). Rocheux argues that Defendants' motion to redesignate should be denied because of undue delay, prejudice, and futility.

With regard to delay, the undisputed record demonstrates that Defendants did not seek to add the proposed counterclaims until it opposed Rocheux's motion for summary judgment on April 16, 2010, more than three years after they filed their Answer on February 28, 2007, and more than 16 months after the close of discovery on November 28, 2008. (See Doc. No. 41 (July 29, 2008 Revised Scheduling Order).) Furthermore, based on Defendants' representation that their answers to interrogatories notified Rocheux as early as August 2007 that they intended to seek offsets for nonconforming goods delivered before January 2006 (see Defs.' Cross-Motion Br. at 16--17), the Court may deduce that Defendants knew of their potential counterclaims in August 2007, more than 30 months prior to moving to include these counterclaims. Other than arguing their understanding that the parties' installment contract opened the door for offsets in prior years, Defendants did not provide an explanation for their delay in seeking redesignation in either their motion briefs or during oral argument. As noted above, Defendants' unpled understanding regarding the parties' installment contract did not expand the scope of the pleadings, and the Court does not find that Defendants were justified in believing that it did. As the Court notes below, Defendants' purported redesignation would drastically change the scope of the claims before the Court. Defendants' delay in presenting these counterclaims has been substantial, and because Defendants have not provided a satisfactory explanation, the Court finds Defendants' delay undue. See, e.g., In re Madera, 586 F.3d 228, 234 (3d Cir. 2009) (finding motion to amend "untimely" where the party waited until its adversary's motion for summary judgment to seek leave to amend, and the proposed claims "[we]re not based on evidence that came to light after discovery").

It further appears that Rocheux would suffer prejudice by such a dramatic expansion of the pleadings at this late stage of the game. According to the findings of Defendants' damages expert Dr. Barbara Luna, Defendants seek offsets from Rocheux's invoices in the amount of $1,917,432 (more than $2 million with interest). (McAlindin Certif., Ex. C ("Luna Report") at 11.) Of this total offset amount, only a small portion (less than 15%) relates to alleged non-conformities with the 2006 deliveries that are the subject of Rocheux's Complaint. (See id. scheds. 2 (approximately $147,000 offset for lost material in 2006), 3 (approximately $51,000 offset for improper pricing in 2006), 4 (approximately $33,000 offset for goods quality in 2006), 6 (approximately $10,000 offset for lost material, improper pricing, and goods quality for deliveries missing invoices in 2006).) Thus, notwithstanding defense counsel's characterization of the proposed redesignation, it appears that Defendants seek to pursue claims that, for the most part, differ from the 2006 deliveries and warehoused goods that were the subject of the pleadings. Rocheux's counsel asserts that he did not know that Defendants would seek nearly $2 million in offsets for goods delivered between 2000 and 2005 until he was served with Dr. Luna's Report on October 1, 2008, after the close of fact discovery on August 29, 2008. (Pl.'s Reply Br. at 28.) Because fact discovery had already closed, Rocheux's counsel contends that he was deprived of an opportunity to request documents and conduct supplemental depositions related to Defendants' allegations about the nonconforming goods delivered between 2000 and 2005 and Rocheux's promises of credits. (Pl.'s Reply Br. at 28; McAlindin Decl. ¶¶ 15.)

Defendants respond that their answers to interrogatories in 2007 and 2008 timely notified Rocheux of their intent to seek offsets for nonconforming goods delivered before 2006.*fn5 (Defs.' Cross-Motion Br. at 16--17.) Yet, the interrogatory answers upon which Defendants rely do not expressly indicate that Defendants would present counterclaims for delivery of nonconforming goods before 2006. The only answer that could be read to encompass such goods was Defendants' amended answer to interrogatory number 5, which asserts that "defects occurred at various times throughout the business relationship" (see McAlindin Cert. Ex. C), but this response does not expressly notify Rocheux of Defendants' intent to expand the temporal scope of the action. However, even if Rocheux had some notice that Defendants would seek offsets on the basis of goods delivered between 2000 and 2005 prior to the close of discovery, it was still prejudiced by the fact that it did not have fair notice of the factual and legal bases of Defendants' proposed counterclaims until it received Defendants' cross-motion. By that point, Rocheux's counsel had already expended significant resources in preparing Rocheux's motion for summary judgment. Although Plaintiff's summary judgment brief demonstrates an attempt to forecast and counter Defendants' proposed counterclaims (see, e.g., Pl.'s Br. at 22 n.4), Rocheux was deprived of an opportunity to address these counterclaims head-on. At this late stage, such a substantial amendment to Defendants' pleadings would unduly prejudice Rocheux.

Although substantial delay and prejudice alone warrant denying Defendants' motion to redesignate, the Court also notes that Defendants' proposed counterclaims appear to be time-barred. New Jersey law provides a four-year limitations period for contract and warranty claims arising under New Jersey's Uniform Commercial Code (UCC) provisions. N.J. Stat. Ann. § 12A:2-725; see also Spring Motors Distrib., Inc. v. Ford Motor Co., 98 N.J. 555, 561 (1985) (explaining that the UCC's four-year statute of limitations applies to breach of warranty claims brought by "a commercial buyer seeking damages for economic loss resulting from the purchase of defective goods"). This provision states that "[a] cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach," but notes that "[a] breach of warranty occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered." N.J. Stat. Ann. § 12A:2-725(2). Section 12A:2-725(2) thus operates as an exception to the general discovery rule. See, e.g., South Jersey Gas Co. v. Mueller Co., Ltd., No. 09-4194, 2010 WL 1742542, at *5 (D.N.J. Apr. 27, 2010). Here, Defendants' purported counterclaims for breach of warranty (i.e., the "best-price" and "virgin-grade" warranties) do not rely on a warranty regarding future performance. Cf. Comm'rs of Fire Dist. No. 9 v. Am. La France, 176 N.J. Super. 566, 573 (App. Div. 1980) ("The key requirement in finding a warranty of future performance is that it makes specific reference to a future time here, a period of at least one year. This type of warranty cannot be characterized as a mere representation of the product's condition at the time of delivery . . . ."); see also South Jersey Gas, 2010 WL 1742542, at *5. Therefore, Defendants' cause of action for breach of warranty "occur[red] when tender of delivery [was] made." N.J. Stat. Ann. § 12A:2-725(2). Defendants did not seek to include counterclaims for nonconforming goods sold and delivered before 2006 until they filed the instant cross-motion on April 16, 2010, more than four years after the tender of delivery of any such goods. Defendants have provided no legal or equitable reason why the statute of limitations should be tolled for these counterclaims. Because Defendants' proposed counterclaims appear to be time-barred, redesignation would be futile. See, e.g., Arab African Int'l Bank v. Epstein, 10 F.3d 168, 174--75 (3d Cir. 1993) (affirming district court's denial of leave to amend on the grounds of futility where the proposed claim was time-barred).

The Court will permit Defendants to redesignate Affirmative Defenses IV, VIII, and IX as counterclaims to seek offsets related to the goods that are the subject of Rocheux's Complaint and Defendants' Answer: goods delivered between January 2006 and June 2006.*fn6 However, to the extent that Defendants' cross-motion attempts to expand these Affirmative Defenses into counterclaims seeking offsets for goods delivered before 2006, the Court will deny Defendants' motion on the grounds of undue delay, prejudice, and futility.


A party seeking summary judgment must "show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Hersh v. Allen Prods. Co., 789 F.2d 230, 232 (3d Cir. 1986). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (noting that no issue for trial exists unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict in its favor). An issue is "genuine" if a reasonable jury could possibly hold in the non-movant's favor with regard to that issue. Id.

The substantive law identifies which facts are "material." Anderson, 477 U.S. at 247--48. Therefore, "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Id. at 248. In deciding whether triable issues of fact exist, the court must view the underlying facts and draw all reasonable inferences in the light most favorable to the non-moving party. Matsushita, 475 U.S. at 587; see also Peters v. Del. River Port Auth. of Pa. & N.J., 16 F.3d 1346, 1349 (3d Cir. 1994). The court may not resolve factual disputes or make credibility determinations at the summary judgment stage. Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992). However, "if the non-movant's evidence on any essential element of the claims asserted is merely 'colorable' or is 'not significantly probative,' the court should enter summary judgment in favor of the moving party." Peterson v. AT&T, No. 99-4982, 2004 WL 190295, at *3 (D.N.J. Jan. 9, 2004) (quoting Anderson, 477 U.S. at 249). To present a genuine issue of material fact, the summary judgment opponent "'need not match, item for item, each piece of evidence proffered by the movant,' but simply must exceed the 'mere scintilla' standard." Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., Inc., 998 F.2d 1224, 1230 (3d Cir. 1993); see also Anderson, 477 U.S. at 252 ("The mere existence of a scintilla of evidence in support of the [non-movant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-movant].").

With the present case, both parties present multiple theories in favor of or against summary judgment with regard to two distinct sets of goods (2006 deliveries and warehouse goods) and the disputed interest and attorneys' fees provisions Rocheux claims were part of their contracts with Defendants. Accordingly, the Court will assess the parties' arguments as they relate to these disputed claims, shifting the summary judgment standard as necessary to account for the arguments raised on cross-motion. Rocheux contends, and Defendants do not dispute, that New Jersey law applies to this action. Accordingly, the Court will apply New Jersey law to the claims at issue in these motions. See, e.g., Am. Cyanamid v. Fermenta Animal Health Co., 54 F.3d 177, 180 (3d Cir. 1995). Because this case involves the application of New Jersey's UCC provisions, this Court may consult the decisions of other courts that have applied their state's UCC provisions to the extent that such decisions are persuasive and do not conflict with the decisions of New Jersey courts. Green Constr. Co. v. First Indem. of Am. Ins. Co.,735 F. Supp. 1254, 1260 & n.2 (D.N.J. 1990); see also Menichini v. Grant, 995 F.2d 1224, 1229 (3d Cir. 1993) (applying Pennsylvania law). This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a) because the parties are of diverse citizenship and the amount in controversy exceeds $75,000.

A. 2006 Deliveries

Rocheux argues that Defendants are liable for the purchase price of the 2006 deliveries because (1) Defendants accepted the goods; (2) Defendants violated N.J. Stat. Ann. §§ 12A:2-515 and 12A:2-603 because they resold the goods without notifying Rocheux and failed to credit Rocheux's account; and (3) Defendants have stated an account in favor of Rocheux. Defendants respond (1) that Rocheux is estopped from obtaining judgment for the 2006 deliveries; (2) that Defendants have presented evidence creating a genuine issue of fact regarding whether Defendants rejected or revoked acceptance of a portion of the 2006 deliveries;*fn7 (3) that Defendants have presented evidence that they exercised their right under N.J. Stat. Ann. § 12A:2-717 to withhold offsets for nonconforming goods; (4) that §§12A:2-515 and 12A:2-603 do not apply to the facts of this case; and (5) that Rocheux's account stated claim is procedurally improper and subject to genuine issues of fact. Of Defendants arguments, only the first appears to seek affirmative relief on an affirmative defense via cross-motion, and ...

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