Glenn Distributors Corp. v. Reckitt Benckiser LLC

J. A25031/15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
GLENN DISTRIBUTORS CORP., : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
v. :
:
RECKITT BENCKISER, LLC :
:
: No. 140 EDA 2015
Appeal from the Order Entered December 15, 2014
In the Court of Common Pleas of Philadelphia County
Civil Division No(s).: 121201574
BEFORE: DONOHUE, MUNDY, and FITZGERALD,* JJ.
MEMORANDUM BY FITZGERALD, J.: FILED December 22, 2015
Plaintiff/Appellant, Glenn Distributors Corp., appeals from the order
entered in the Philadelphia County Court of Common Pleas denying its
motion for summary judgment and granting the motion of
Defendant/Appellee, Reckitt Benckiser, LLC, for summary judgment. In this
breach of contract matter, Appellant argues the trial court erred in finding
the parties’ course of performance modified their agreements. We affirm.
The trial court summarized the underlying facts as follows.
[Appellant and Appellee] had a business relationship
between 2000 and 2012. [Appellant] purchased closeout
goods from [Appellee], a distributor of various retail
products. This is the process by which the goods were
purchased: [Appellee] would send an email to [Appellant]
*
Former Justice specially assigned to the Superior Court.
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(and frequently to other would-be purchasers at the same
time) notifying them of the availability of closeout
products. [Appellant] would respond with a bid, including
price and quantity. [Appellee] would respond notifying
[Appellant] that it won the bid, sometimes noting that the
quantity available had changed. [Appellant] would then
send a purchase order. [Appellee] would then send
[Appellant] an invoice or invoices (depending on whether
the goods were to be sent in different shipments),
[Appellant] would pay the amounts listed in the invoices,
and [Appellee] would ship the goods. The quantities listed
on the invoices often did not match the quantities in the
purchase orders. In dispute in the instant case are forty-
six transactions between 2008 and 2012[.]
Trial Ct. Op., 4/27/15, at 1-2.
On December 12, 2012, Appellant commenced the instant breach of
contract suit against Appellee. Appellant averred each of the purchase
orders were express and binding contracts, Appellee failed to provide all the
quantity of items set forth in them, and these “[s]hortages . . . cost”
Appellant more than $2 million in profits.1 Appellant’s Second Am. Compl.,
3/6/13, at ¶¶ 17, 18, 24. Appellant “did not allege that it paid for product
that it did not receive.” Trial Ct. Op., 4/27/15, at 2.
On July 11, 2014, both parties filed motions for summary judgment.
The court heard oral arguments on December 1, 2014, and on December
12th, entered the instant order granting Appellee’s motion for summary
judgment and denying Appellant’s motion. The trial court first found the
1
Specifically, Appellant claimed $2,086,749.06 in lost profits. Appellant’s
Second Am. Compl. at ¶ 24.
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purchase orders were contracts.2 However, it found these “contracts were
clearly modified by the parties’ course of dealing and course of
performance.” Trial Ct. Op., 12/11/14, at 3. It reasoned:
It is undisputed that over the parties’ multi-year
business relationship, [Appellee] would sometimes remove
some products from the list of products offered to
[Appellant], after [Appellant] submitted purchase orders
but before the products were shipped.
In the transactions at issue, many of the emails
between [Appellant’s] representative and [Appellee’s]
representative show that [Appellant] never raised an
objection to receiving less product . . . than were listed on
the purchase orders. It did not respond with demands for
fulfillment, merely with questions, acceptance, or mild
expressions of disappointment. [Appellant] would
sometimes offer to buy the same product in future bids,
indicating that it did not believe it was owed the remainder
listed in the purchase orders.
It is clear that this was the parties’ course of
performance, in which quantities may be pulled without
warning to sell at retail. If [Appellant] were going to
change the course of performance, it would have needed
to give reasonable notice to [Appellee], which it did not do.
[Appellant’s] behavior constituted a modification of the
agreements, and therefore it could not later maintain an
action for breach of contract against [Appellee] based on
modifications that it agreed to.
Id. at 3-4.
2
The trial found the purchase orders memorialized two types of agreements
as follows. In some cases, Appellee accepted Appellant’s “bid on a certain
quantity at a certain price,” and “a contract was formed with a definite price
and quantity term, memorialized in the purchase order.” Trial Ct. Op.,
4/27/15, at 2-3. In other cases, Appellant bid and Appellee “responded by
changing the quantity term.” Id. at 3. These responses were counteroffers,
and Appellant’s “purchase order constituted an acceptance.” Id.
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Appellant filed a motion for reconsideration and then this timely
appeal. Subsequently, the trial court denied the motion for reconsideration.
For ease of disposition, we first set forth the standard of review and
general principles concerning summary judgment and the Uniform
Commercial Code (“UCC”). This Court has stated:
Summary judgment properly is granted after the close of
the relevant pleadings “whenever there is no genuine issue
of any material fact as to a necessary element of the cause
of action or defense which could be established by
additional discovery or expert report” and the moving
party is entitled to judgment as a matter of law. Pa.
R.C.P. 1035.2(1). The standard of our review of an order
granting or denying a motion for summary judgment
pursuant to Rule 1035.2 is well established. In reviewing
an order granting summary judgment, an appellate court
must examine the record in the light most favorable to the
non-moving party. We will reverse only if there has been
an error of law or a clear abuse of discretion.
Morningstar v. Hallett, 858 A.2d 125, 128-29 (Pa. Super. 2004) (some
citations omitted). A contract for the sale of goods is governed by Article 2
of the UCC, which has been adopted in Pennsylvania. Allegheny Energy
Supply Co., LLC v. Wolf Run Mining Co., 53 A.3d 53, 62 (Pa. Super.
2012) (citing 13 Pa.C.S. § 2101 et seq.), appeal denied, 69 A.3d 599 (Pa.
2013).
At this juncture, we consider whether the case sub judice implicates a
course of dealing or course of performance. Section 1303 of the UCC
defines these terms as follows:
(a) Course of performance.—A “course of
performance” is a sequence of conduct between the parties
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to a particular transaction that exists if:
(1) the agreement of the parties with respect to the
transaction involves repeated occasions for performance
by a party; and
(2) the other party, with knowledge of the nature of
the performance and opportunity for objection to it,
accepts the performance or acquiesces in it without
objection.
(b) Course of dealing.— A “course of dealing” is a
sequence of conduct concerning previous transactions
between the parties to a particular transaction that is fairly
to be regarded as establishing a common basis of
understanding for interpreting their expressions and other
conduct.
13 Pa.C.S. § 1303(a)-(b) (emphasis added). The comment to Section 1303
states in pertinent part: “‘Course of dealing’ . . . is restricted, literally, to a
sequence of conduct between the parties previous to the agreement. A
sequence of conduct after or under the agreement, however, is a ‘course of
performance.’”3 13 Pa.C.S. § 1303, cmt. 2.
The trial court issued nearly identical opinions, one on December 12,
2014, contemporaneously with the order granting summary judgment in
favor of Appellee, and a Pa.R.A.P. 1925(a) opinion on April 27, 2015. The
December 2014 opinion stated, “[T]he contracts were clearly modified by
the parties’ course of dealing and course of performance” and
3
See also J.W.S. Delavau v. E. Am. Transp. & Warehousing, 810 A.2d
672, 684 (Pa. Super. 2002) (“‘Course of dealing’ ‘may supplement or qualify
terms of an agreement,’ 13 Pa.C.S.A. § 1205(c), whereas ‘course of
performance’ may be used only to interpret a contract.”).
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concluded, “It is clear that this was the parties’ course of dealing,” and “If
[Appellant] were going to change the course of dealing, it would have
needed to give reasonable notice to [Appellee], which it did not do.” Trial
Ct. Op., 12/11/14, at 3, 4 (emphases added). The corresponding
statements in the April 2015 opinion, however, differed: “[T]he contracts
were clearly modified by the parties’ course of performance,” “It is clear
that this was the parties’ course of performance,” and “If [Appellant] were
going to change the course of performance, it would have needed to give
reasonable notice to [Appellee], which it did not do.” Trial Ct. Op., 4/27/15,
at 3, 4 (emphases added). Neither opinion addressed the distinction
between course of dealing and course of performance, and the latter opinion
did not discuss why “course of performance” was substituted for “course of
dealing.”
In its brief, Appellant avers that a course of dealing is “inapt in this
case,” as that term pertains to conduct prior to the parties’ transaction.
Appellant’s Brief at 30. We agree, as the court’s analysis focused on the
parties’ conduct after each purchase order. Thus, we proceed on
Appellant’s argument that the court erred in finding a course of
performance that modified the parties’ purchase orders. See 13 Pa.C.S. §
1303(a)(1)-(2).
The definition of “course of performance” under Section 1303(b) is set
forth above. Section 1303(f) provides:
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(f) Waiver or modification.–Subject to section 2209
(relating to modification, rescission and waiver), a course
of performance is relevant to show a waiver or
modification of any term inconsistent with the course of
performance.
13 Pa.C.S. § 1303(f). Section 2209, in turn states in pertinent part:
(b) Writing excluding modification or
rescission.—A signed agreement which excludes
modification or rescission except by a signed writing
cannot be otherwise modified or rescinded, but except as
between merchants such a requirement on a form supplied
by the merchant must be separately signed by the other
party.
(c) Compliance of modified contract with statute
of frauds.—The requirements of section 2201 (relating to
formal requirements; statute of frauds) must be satisfied if
the contract as modified is within its provisions.
(d) Ineffective modification or rescission as
waiver.—Although an attempt at modification or
rescission does not satisfy the requirements of subsection
(b) or (c) it can operate as a waiver.
See 13 Pa.C.S. § 2209(b)-(d).
Sections 2209(b) through (d) are identical—with exception in the
numbering of the subsections—to Sections 2209(2) through (4) of the UCC.
The official comments to UCC’s Section 2209 explain in pertinent part:
3. Subsections (2) and (3) are intended to protect
against false allegations of oral modifications.” . . .
The Statute of Frauds provisions of [the UCC] are
expressly applied to modifications by subsection (3).
* * *
4. Subsection (4) is intended, despite the provisions of
subsections (2) and (3), to prevent contractual provisions
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excluding modification except by a signed writing from
limiting in other respects the legal effect of the parties’
actual later conduct.
Unif. Commercial Code § 2-209, cmts. 3-4.
On appeal, Appellant agrees with the trial court’s finding that the
purchase orders were contracts. See Appellant’s Brief at 7. However, it
avers the trial court erred in: (1) finding the parties’ course of performance
modified their contracts and (2) granting summary judgment in favor of
Appellee.4 We address its arguments seriatim.
First, Appellant avers “[m]odification subject to 2209(d) must always
begin with a legally insufficient (under 2209(b)/(c)) ‘attempt at modification’
to operate as a waiver.” Appellant’s Brief at 22 (citing 13 Pa.C.S. § 2209(b)-
(d); Inwood Knitting Mill Co. v. Budge Mfg. Co., 29 Pa. D. & C.2d 462,
463 (Pa. Com. Pl. 1962)).5 It asserts that in the instant case, however,
“[t]here were no attempts at modification” and “no record evidence of
[Appellee] affirmatively requesting a change to the terms of the parties’
4
Although Appellant’s statement of questions involved presents three issues,
the argument section sets forth two issues, the first of which is divided into
five sub-issues. See Pa.R.A.P. 2119(a) (requiring argument section to “be
divided into as many parts as there are questions to be argued”).
Nevertheless, all of Appellant’s issues overlap and thus we consider them
together.
5
“[W]hile appellate courts are not bound by the decisions of the Courts of
Common Pleas, they may be considered for their persuasive authority.”
Sysco Corp. v. FW Chocolatier, LLC, 85 A.3d 515, 520 n.2 (Pa. Super.
2014).
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contracts before shipping [the] products,” and instead, “the typical pattern
was for [Appellee] to simply ship nonconforming products to [Appellant]
without ever informing [Appellant] that no further shipments of contracted
for products would be made.”6 Appellant’s Brief at 22-23. Appellant’s
second and third arguments are that in the alternative, (1) “[a]ny purported
modification of the parties’ contracts, or waiver of [Appellee’s] obligations,
fail the good faith test imposed by the UCC;” and (2) there is no evidence
that Appellee “reasonably relied on” any modification. Id. at 26 (citing 13
Pa.C.S. § 1201(19), 29). We find no relief is due.
First, we disagree with Appellant that Subsection 2209(d) and findings
of modification or waiver are applicable in this case. While the trial court’s
opinion quoted Subsection 2209(d), it made no further mention of it, or
waiver, in its analysis. Instead, its holding was based solely on a finding
that Appellant’s “behavior constituted a modification of the [parties’]
agreements.” Id. at 3-4. Additionally, the UCC comment states that
Subsection 2209(4) “is intended . . . to prevent contractual provisions
excluding modification—except by a signed writing—from limiting . . . the
parties’ actual later conduct.” Unif. Commercial Code § 2-209, cmt. 4
6
Appellant further argues, “At the very least, the issue should be sent to a
jury.” Appellant’s Brief at 24. This contention, along with other arguments
that other factual issues should be heard by a jury, ignore or overlook the
fact that Appellant itself had filed a motion for summary judgment. See
Morningstar, 858 A.2d at 128 (stating summary judgment is proper when
there is no genuine issue of any material fact).
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(dashes added). Thus, Section 2209(d) is not applicable in this case for the
additional reason that the purchase orders did not include any term
excluding modification. We hold Appellant’s reliance on Section 2209 is
misplaced.
We next consider Appellant’s argument concerning the parties’ conduct
following the issuance of a purchase order. Appellant alleges the following.
When it “inquired about undelivered products,” Appellee “misled [Appellant]
into believing [it] was attempting to rectify [Appellant’s] grievances.” 7
Appellant’s Brief at 26-27. When Appellant sent “a more formal demand[,
Appellant] received a vague response [and] did not receive a clear
statement [from Appellee] repudiating its obligation to ship the purchase
order quantities.” Id. at 27. Appellee “act[ed] this way” because it “knew”
“it had power in [this] relationship [and] that [Appellant] needed [Appellee]
more than [Appellee] needed [Appellant].” Id. at 27. Furthermore, both
parties “knew” that if Appellant were “forceful in its demands” or accused
Appellee of “breach[ing] its contract,” Appellee “would have ended the
parties’ business relationship immediately.” Id. at 28; see also id. at 25
(“Davids must tread carefully around Goliaths.”).
7
Appellant asserts, “There were very rare occasions where, in response to
[Appellant’s] inquiry, [Appellee] admitted . . . that contracted for products
would not be shipped[. O]n those rare instances, the parties expressly
modified the contract by [Appellee] submitting a ‘new’ purchase order[.]”
Appellant’s Brief at 23.
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A careful review of Appellant’s argument reveals it does not dispute
the court’s finding that when Appellee shipped a quantity of goods different
from what was indicated in the purchase orders, Appellant failed to “respond
with demands for fulfillment, [and instead] merely with questions,
acceptance, or mild expressions of disappointment.” See Trial Ct. Op. at 3-
4. Indeed, Appellant’s explanations—for why it did not act “forceful in its
demands” and assert Appellee “breached its contract”—corroborates the
court’s finding. See Appellant’s Brief at 28.
Before considering Appellant’s final claim, we reiterate the court’s
summary of the sequence of parties’ transactions: after Appellant
transmitted a purchase order, Appellee sent Appellant an invoice with
quantities that “often did not match the quantities in the purchase orders,”
Appellant paid “the amounts listed in the invoices,” and Appellee shipped the
goods. Trial Ct. Op., 4/27/15,a at 1-2.
On appeal, Appellant asserts “[t]he trial court misconstrued the facts
in the record” in finding it “waited for the invoices and paid [Appellee] in
response to those.” Appellant’s Brief at 31-32. Appellant maintains that
instead, it “did not pay based on the invoices in every instance.” Id. at 32.
It claims Appellee admitted Appellant paid “based on what had been
communicated” and Appellant “paid in advance of [Appellee] shipp[ing]
products.” Id. Furthermore, some invoices had an “invoice date” which fell
after the “shipped date.” Id. We find no relief is due.
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Appellant does not aver that it refused to pay for any order or that it
ever declared any purchase order or invoice void or breached. Instead, on
appeal, Appellant merely states that in some orders, it did not pay according
to the invoice. We hold this argument does not overcome the court’s finding
that Appellant failed to challenge Appellee’s shipments of goods and failed to
demand Appellee to correct the quantity of goods.
For the foregoing reasons, we do not disturb the court’s finding that
Appellant’s conduct, in forty-six transactions over a period of four years, was
a course of performance that modified the parties’ contracts. The parties’
“transaction[s] involve[d] repeated occasions for performance by” Appellee,
and Appellant, “with knowledge of the nature of the performance and
opportunity for objection . . . , accept[ed] the performance or acquiesce[d]
in it without objection.” See 13 Pa.C.S. § 1303(a)(1)-(2). We affirm the
order of the trial court granting Appellee’s motion for summary judgment
and denying Appellant’s motion for summary judgment.
Order affirmed.
Judge Mundy joins the memorandum.
Judge Donohue files a concurring memorandum in which Judge Mundy
joins.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 12/22/2015
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