In my meanderings through recently-reported decisions, I occasionally stumble upon a superficially-simple case that, upon examination, raises a panoply of issues worthy of a bar exam essay question. M. Slavin & Sons, Ltd. v. Penny Port, LLC, [2013 NY Slip Op 02054(U), 8/29/13 Sup. Ct. N.Y. Co., Rakower, J.) is just such a case.
The Back(fish) Story
Plaintiff, M. Slavin & Sons, Ltd. (“Slavin”), sued defendant, Penny Port, LLC d/b/a Michael Jordan’s Steakhouse (“Michael Jordan’s), for $73,976.23 for fish that Slavin sold to Michael Jordan’s in September 2011 and between March and June of 2012. Slavin alleged that Michael Jordan’s accepted, and did not reject, delivery of the fish.
Michael Jordan’s denied the material allegations of the complaint; and asserted ten affirmative defenses and two counterclaims. Michael Jordan’s claimed that the fish “[was] defective and inadequate for use by the restaurant” and sought $500,000 in damages. Slavin, in turn, denied the material allegations of the counterclaims and asserted seven affirmative defenses.
The parties cross-moved for summary judgment. Justice Rakower described the pleadings:
Plaintiff M. Slavin & Sons, Ltd. (“Plaintiff”), a wholesale fish sales business, brings this action to recover damages from defendant Penny Port, LLC d/b/a Michael Jordan’s Steakhouse (“Defendant”) based on Defendant’s alleged failure to pay for fish which Plaintiff sold and delivered to Defendant. The Complaint sets forth two causes of action: (1) breach of contract for failing to pay for fish sold and delivered to it; and (2) an account stated.
Defendant interposed an Answer and Counterclaims dated December 7, 2012. Defendant’s Answer raises the following affirmative defenses: (i) failure to state a cause of action, (ii) lack of agreement between plaintiff and defendant; (iii) unclean hands; (iv) plaintiff’s breach of contract; (v) excessive charges; (vi) failure to deliver conforming goods; (vii) failure to deliver the merchandise set forth on invoices and/or charging for merchandise not received; (viii) payment; (ix) plaintiff filed for bankruptcy and litigation must be stayed; and (x) defective goods.
Defendant also interposed the following two counterclaims: (i) delivery of defective fish and failure to deliver fish which Defendant purchased and paid for; and (ii) plaintiff instituted this lawsuit in bad faith.
Supreme Court summarized the facts:
As set forth in Herbert Slavin’s affidavit, on September 7, 2011, and between March 1, 2012 through June 20, 2012, Defendant purchased fish from Plaintiff on credit on seventy-six separate occasions…Slavin further avers that Defendant had the opportunity to inspect the fish, accepted the fish and never rejected any fish delivery, and did not object to the invoice price, quantity of the fish sold and delivered.
Slavin further avers that on January 10, 2012, Plaintiff engaged RHK Recovery Group, a debt collection firm, to recover from Defendant the debt at issue. Defendant entered into a payment plan, whereby Defendant would pay the entire debt in installments of $1,000 per week. Plaintiff states that Defendant subsequently made three separate payments of $1,000 each on account of these unpaid invoices but made no further payments. Plaintiff alleges that defendant owes a balance of $73,976.23[.]
And Justice Rakower described the pending motions:
Plaintiff now moves, pursuant to CPLR § 3212, for summary judgment in its favor and for a judgment in the amount of $73,976.23 against Defendant. Plaintiff also seeks to dismiss Defendant’s affirmative defenses and counterclaims.
Defendant opposes Plaintiff’s motion and cross-moves for summary judgment dismissing the Complaint. Defendant contends that Plaintiff lacks standing. Defendant further argues that Defendant rejected certain fish sold and delivered to it by Plaintiff and that Plaintiff’s motion is premature.
Issue No. 1:
Standing to Sue
Michael Jordan’s asserted that:
On February 14, 2011, Plaintiff filed a bankruptcy proceeding in the United States Bankruptcy Court for the Southern District of New York. In connection with its reorganization, Plaintiff filed a Third Amended Plan of Reorganization, dated November 24, 2011…Pursuant to Section 5.12 of the Plan, all property and assets of Plaintiff, including causes of action, were assigned to a Post Consummation Trust for the benefit of creditors, and only the Trust has authority to bring a collection action. That Plan was confirmed pursuant to an Order dated November 30, 2011…
Slavin’s countered that:
Upon Slavin’s exit from bankruptcy, it entered into a Plan of Reorganization (the ‘Plan’)…in which the only claims assigned to a Post Consummation Trust for the benefit of creditors were (i) ‘Avoidance Actions’ and (ii) ‘claims or causes of action of the Debtor and/or its Estate that arose before the Confirmation Date against the Existing Owners, officers, directors, employees, and agents of the Debtor’…
Defendant’s assertion…that the instant action is somehow an Avoidance Action/Trust Action is incorrect. Avoidance actions and accounts receivable actions are separate and distinct causes of action. See, In re Shea & Gould, 214 B.R. 730, 744 (Bank. Ct. SDNY 1997) (recognizing separate causes of action for accounts receivables and avoidance). Slavin’s account receivable causes of action were not assigned to the Post Consummation Trust.
Since accounts receivable claims (such as the instant action) were not assigned to the Post Consummation Trust for the benefit of creditors, plaintiff has standing to maintain this action.
Supreme Court found that Slavin had standing to sue:
…Defendant first contends that Plaintiff lacks standing to prosecute the instant “avoidance action/trust action” as it was vested in the Post Consummation Trust in Plaintiff’s bankruptcy proceeding. However, as Plaintiff states in its reply, this is an accounts receivable action, which is distinct from an avoidance action, and since accounts receivable claims such as the instant one was not assigned to the Post Consummation Trust for the benefit of the creditors, Plaintiff has standing to maintain this action.
Issue No. 2:
The Summary Judgment Motion Standard
Slavin argued that:
Michael Jordan’s affirmative defenses and counterclaims are conclusory, boilerplate and a sham, designed solely to frustrate and delay Slavin’s recovery for the fish it sold to defendant with the good faith expectation that payment would be made.
Michael Jordan’s countered that:
[P]ursuant to CPLR § 3212, a party may only move for summary judgment when they have shown that there are no triable issues or facts that necessitate a trial, and as such, are entitled to judgment as a matter of law. The burden of proving this is strictly upon the movant.
Justice Rakower set forth the applicable law with respect to motions for summary judgment:
The proponent of a motion for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law. That party must produce sufficient evidence in admissible form to eliminate any material issue of fact from the case. Where the proponent makes such a showing, the burden shifts to the party opposing the motion to demonstrate by admissible evidence that a factual issue remains requiring the trier of fact to determine the issue. The affirmation of counsel alone is not sufficient to satisfy this requirement. (Zuckerman v. City of New York, 49 N.Y.2d 557 ). In addition, bald, conclusory allegations, even if believable, are not enough. (Ehrlich v. American Moniger Greenhouse Mfg. Corp., 26 N.Y.2d 255 , Edison Stone Corp. v. 42nd Street Development Corp., 26 N.Y.2d 255 , Edison Stone Corp. v. 42nd Street Development Corp., 145 A.D.2d 249, 251-252 [1st Dept. 1989]).
Issue No. 3
The Breach of Contract Claim
Slavin asserted that , “[d]espite repeated demands, Michael Jordan’s failed to pay the balance due and owing for the fish sold and delivered to it herein in the sum of $73,976.23[.]”.
Michael Jordan’s countered that:
[d]efendants do not dispute that it ordered goods from Plaintiff, that the Defendant received goods from Plaintiff, and that the Defendant used certain of such goods in the ordinary course of its business. However, defendant expressly states in its answer and counterclaims that certain of the goods were defective, inadequate and unacceptable. Accordingly, Defendant is entitled to an off-set of the amount owed to Plaintiff.
Supreme Court then set forth the elements of causes of action for breach of contract and account stated:
The elements of a breach of contract claim are formation of a contract between the parties, performance by the plaintiff, the defendant’s failure to perform, and resulting damage. (Flomenbaum v. New York Univ., 71 A.D.3d 80, 91 [1st Dept. 2009].
An account stated is an agreement between the parties to an account based upon prior transactions between them with respect to the correctness of the separate items composing the account and the balances due, if any, in favor of one party or the other…In this regard, receipt and retention of plaintiff’s accounts, without objection within a reasonable time, and agreement to pay a portion of the indebtedness, [gives] rise to an actionable account stated, thereby entitling plaintiff to summary judgment in its favor. (Shea & Gould v. Burr, 194 A.D.2d 369, 370 [1st Dept. 1993]).
Issue No. 4
Acceptance/Rejection of Goods
Slavin’s argued that:
[A] buyer who keeps the goods and does not object to their conformity with the contract after a reasonable period of time for inspection, has “accepted” the goods and is precluded under UCC § 2-607(2) from rejecting them after acceptance.
Michael Jordan’s countered that:
Defendant has asserted a number of defenses to Plaintiff’s claim and accordingly, discovery is plainly necessary to flesh out these material issues of fact that are in dispute.
As to discovery, the Court stated that:
…Defendant contends that there are issues of fact concerning the quality of fish delivered. However, Defendant does not produce any evidence in admissible form as to support their allegations that the fish delivered by Plaintiff was defective.
Defendant also argues that Plaintiff’s motion is premature in light of there having been no discovery. Where facts essential to justify opposition to a motion for summary judgment are within the exclusive knowledge and possession of the moving party, summary judgment should be denied. (See CPLR § 3212(f) However, the opposition must offer more than mere hope that it might be able to uncover some evidence during the discovery process which will impeach the facts asserted by movant. See Pow v. Black, 182 A.D.2d 484, 485 (1st Dept. 1992). It is incumbent upon the party opposing a motion on CPLR § 3212(f) grounds to provide a proper evidentiary basis supporting its request for further discovery. Here, Defendant does not specifically identify what discovery it seeks or needs in order to defend this action.
And Justice Rakower set forth the relevant and governing provisions of the Uniform Commercial Code:
Pursuant to UCC § 2-607, a buyer who “accepts goods” must pay for them. Acceptance occurs under UCC § 2-606(b) “when the buyer…fails to make an effective rejection…but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them.” A buyer who retains the goods and does not object to their conformity after a reasonable period of time for inspection has accepted the goods and is precluded under UCC §2-607(2) from rejecting them after acceptance. See e.g., New York City Off-Track Betting Corp. v. Safe Factory Outlet, Inc., 28 A.D.3d 175, 178 [1st Dept. 2006].
The Legal “Catch” of the Day
Justice Rakower granted Slavin’s motion, and denied Michael Jordan’s cross-motion, for summary judgment; dismissed the counterclaims; and directed entry of judgment in favor of Slavin in the sum of $73,976.23.
Slavin – a simple action for breach of contract/account stated – nevertheless raised an array of real [or manufactured] legal and factual issues relating to standing to sue, summary judgment, breach of contract and U.C.C. acceptance/rejection. Even a so-called “garden variety” collection case may be subject to a systematic and linear review that generates justiciable legal issues and factual disputes for adjudication by the Court.