November 23, 2011
TALONA RIVIERE, PLAINTIFF-RESPONDENT,
CAROLINE FU, D/B/A CAROLINE DESIGN, INC., DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. DC-033766-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 31, 2011
Before Judges A. A. Rodriguez and Sabatino.
Defendant, Caroline*fn1 Fu ("Fu") appeals from a judgment entered against her on March 8, 2011, after a trial in the Special Civil Part. We affirm the judgment in part, reverse it in part, and remand the case for the entry of a modified judgment.
Plaintiff, Talona Riviere ("Riviere"), is a seller of children's clothing. Fu is a clothing designer who does business through her corporation, Caroline Design, Inc. ("CDI"). The case involves a dispute arising out of an oral agreement for Fu's company, CDI, to provide sample garments for Riviere to exhibit as part of her fall collection at two trade shows. The first trade show, "The Magic Show," was in August 2010 in Las Vegas, and the second show was the "ENK Children's Show" in October 2010 in New York City.
Riviere was disappointed in the quality of the sample garments that CDI provided her for the August show. Nevertheless, Riviere obtained three orders from customers totaling $3960 as a result of displaying those samples at the August show. However, CDI did not fill the customer orders.
Despite having reserved a display space at the Javits Center in New York City, Riviere did not attend the October show, allegedly because of CDI's failure to provide her with suitable garments. The Javits Center charged Riviere $2810 for reserving a space at the show. Riviere also incurred additional sums for fabrics and patterns.
The dispute over the samples prompted Riviere to bring a lawsuit against Fu in the Special Civil Part. Riviere asserted breach of contract claims relating to each show. She sought compensatory damages, including an initial claim of $5000 in alleged lost profits.*fn2 Fu denied liability, and asserted counterclaims against Riviere for unjust enrichment, contractual breach, and the intentional infliction of emotional distress.
After hearing the testimony of the parties, both of whom were represented by counsel at trial, the Special Civil Part judge concluded that there was an enforceable oral agreement for the production of samples at the two trade shows. With respect to the August 2010 show, the judge concluded that Riviere had been provided with conforming samples from the designer, consistent with what she had bargained for. However, the court found that the contract was breached with respect to the October 2010 show. The judge further concluded that the contract was also breached because of the designer's failure to fill customer orders generated from the August show.
Based on these findings, the trial judge entered final judgment in favor of Riviere against Fu. The judge awarded Riviere a total of $8,394.96 in damages. All but $1980 of that sum represents various out-of-pocket expenses, such as the costs of renting a booth at the August trade show and purchasing fabric. The $1980 was awarded as lost profits, half of the modified sum of $3960 in lost profits that Riviere had sought prior to trial. Defendant's counterclaim was denied.
On appeal, Fu raises two issues. First, Fu contends that it was improper for the court to impose personal liability upon her because she conducted business with Riviere through her corporation, CDI. Second, Fu contends that the award of lost profits was speculative and unsupported by the evidence. Fu does not contest the court's findings that the contract was breached in some respects. Nor does she challenge the out-of-pocket damages that were awarded, or appeal the court's dismissal of the counterclaims.
In opposition, Riviere argues that the final judgment against Fu is justified and supported in all respects by the evidence. Riviere has not cross-appealed the trial court's particular finding that the samples from the August show satisfied the contract.
We agree with Fu that the trial court should not have imposed personal liability upon her based on the facts adduced in the record. The judgment instead should have been entered solely against Fu's company, CDI.
"[A] corporation is a separate entity from its shareholders [and] a primary reason for incorporation is the insulation of shareholders from the liabilities of the corporate enterprise." N.J. Dep't of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 500 (1983) (citing Lyon v. Barrett, 89 N.J. 294, 300 (1982)). "In the absence of fraud or injustice, courts generally will not pierce the corporate veil to impose liability on the corporate principals." Lyon, supra, 89 N.J. at 300 (citing Frank v. Frank's, Inc., 9 N.J. 218, 224 (1952)).
The unrefuted evidence at trial shows that when Fu dealt with plaintiff, she was acting on behalf of her corporate entity, CDI. Fu asserted that corporate status repeatedly in the litigation, both in her answer and counterclaim, her interrogatory answers, and in her testimony at trial.
During her direct examination, Fu testified that her company had been established for more than ten years, that the name of her company is Caroline Design, Inc., and that when she does business in the fashion industry she always does so through under the corporation. These facts were not disputed by any competing testimony by Riviere. In fact, in her complaint, Riviere stated that she first met defendant, "Caroline Fu in 2005 at her place of business, Caroline Design Inc." (Emphasis added).
In sum, the record plainly shows that Fu entered into the agreement with Riviere though her corporation, CDI, and that the trial court erred in imposing liability on Fu individually. Also, there was no basis established to pierce the corporate veil. See Ventron, supra, 94 N.J. at 500 (observing that veil-piercing is only appropriate where the corporation's principals have misused the entity "to perpetrate fraud, to accomplish a crime, or otherwise to evade the law").
We are equally persuaded that the award of lost profits was unfounded. To be sure, "'[u]nder contract law, a party who breaches a contract is liable for all of the natural and probable consequences of the breach of that contract.'" Totaro, Duffy, Cannova and Co., L.L.C. v. Lane, Middleton & Co., L.L.C., 191 N.J. 1, 13 (2007) (quoting Pickett v. Lloyd's, 131 N.J. 457, 474 (1993)). Although a non-breaching party need not demonstrate "the exact amount of the loss," "the loss must be a reasonably certain consequence of the breach[.]" Id. at 14 (quoting Donovan v. Bachstadt, 91 N.J. 434, 445 (1982)). There must "'be a reasonably accurate and fair basis for the computation of alleged lost profits.'" J.L. Davis & Assocs. v. Heidler, 263 N.J. Super. 264, 276 (App. Div. 1993) (quoting Borbonus v. Daoud, 34 N.J. Super. 54, 61 (Ch. Div. 1955)).
The trial record lacks such a "reasonably accurate and fair basis" for the trial court's award to Riviere of $1980 in lost profits. Riviere testified without elaboration or documentary support, that it would have cost the designer about half of the customer's price to produce the garments. Based on that supposition, which was accepted by the trial judge, one-half of $3960 in customer orders would correspond to $1980 in lost profits.
We agree with the trial judge that it would be logical to assume that if Riviere was presenting the designer's samples at a trade show, Riviere would have naturally expected that the designer would fill potential customer orders rather than to have the ordered garments produced by another supplier. Hence, there is a reasonable basis to conclude that Riviere lost business as a result of the designer's breach.
However, Riviere's testimony regarding how she estimated the lost profits is terse, conclusory, and inadequate under the law. Riviere failed to present any proofs or written estimates of real manufacturing costs. Her testimony concerning the potential cost to produce the garments was a speculative and non-probative net opinion. See, e.g., Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344, 372-73 (2011) (citations omitted) (explaining than "an expert's bare opinion that has no support in factual evidence or similar data is a mere net opinion which is not admissible and may not be considered"). Although we are mindful that the amounts at stake in the Special Civil Part generally are relatively small, and the burdens of proving damages can be significant by comparison, the evidence to support plaintiff's lost profits claim in this case is too scant and conjectural to be upheld.
For these reasons, we affirm the trial court's unappealed finding of breach of contract, reverse its imposition of individual liability upon Fu, vacate the award of lost profits, and remand for the entry of a modified judgment consistent with this opinion.
Affirmed in part, reversed in part, and remanded.