Yeatts v . Design Contempo, et a l . CV-01-259-M 06/11/03 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

James W . Yeatts; E . Bob Yeatts; Fedmark, Inc.; and Allied Contract, Inc., Plaintiffs

v. Civil N o . 01-259-M Opinion N o .

Design Contempo, Inc.; and Henry Kober, Defendants

O R D E R

Plaintiffs have sued defendants for violating the implied

covenant of good faith and fair dealing (Count B ) and for breach

of contract (Count C ) . 1 Defendants have counterclaimed,

asserting two counts of breach of contract. Before the court is

defendants’ motion for summary judgment on Counts B and C of

plaintiff’s complaint (document n o . 2 0 ) . Plaintiffs assert the

need for discovery before an adequate objection can be filed.

See F E D . R . C I V . P . 56(f). For the reasons given below,

defendants’ motion for summary judgment is denied.

1 By order dated May 2 1 , 2003, the Magistrate Judge granted plaintiffs’ motion to withdraw Count A , for tortious interference with contractual relations. Standard of Review

Summary judgment is appropriate when the record reveals “no

genuine issue as to any material fact and . . . the moving party

is entitled to a judgment as a matter of law.” FED. R . CIV. P .

56(c). “To determine whether these criteria have been met, a

court must pierce the boilerplate of the pleadings and carefully

review the parties’ submissions to ascertain whether they reveal

a trialworthy issue as to any material fact.” Perez v . Volvo Car

Corp.,

(1st Cir. 2001) (citing Grant’s Dairy-

Me., L L C v . Comm’r of M e . Dep’t of Agric., Food & Rural Res.,

, 14 (1st Cir. 2000)).

In defending against a motion for summary judgment, “[t]he

non-movant may not rely on allegations in its pleadings, but must

set forth specific facts indicating a genuine issue for trial.”

Geffon v . Micrion Corp.,

9 , 34 (1st Cir. 2001) (citing

Lucia v . Prospect S t . High Income Portfolio, Inc.,

7 0 ,

174 (1st Cir. 1994)). When ruling upon a party’s motion for

summary judgment, the court must “scrutinize the summary judgment

record ‘in the light most hospitable to the party opposing

summary judgment, indulging all reasonable inferences in that

2 party’s favor.’” Navarro, 261 F.3d at 94 (quoting Griggs-Ryan v .

Smith,

1 2 , 115 (1st Cir. 1990)).

Background

Taken in the light most favorable to the non-moving party,

the relevant facts are as follows.

Defendant Design Contempo, Inc. (“DCI”) is a furniture

manufacturer. Before it became involved with plaintiffs, DCI

sold furniture to the United States General Services

Administration (“GSA”) under a “multiple award” contract.

Plaintiff Fedmark, Inc. (“Fedmark”)2 is a sales representative

for furniture manufacturers. Plaintiff Allied Contract, Inc.

(“Allied”) 3 purchases furnishings from various manufacturers and

sells them to GSA, for use on military properties, as “whole room

packages.”

2 Fedmark is the corporate successor to the Yeatts/Brawley Group, Inc. and the Yeatts Group. For the sake of simplicity, the name “Fedmark” will be used in this order to denote both the current entity and any of its predecessors. 3 Allied is the corporate successor to Yeatts Contract, Inc. In this order, the name “Allied” will be used to denote both the current entity and its predecessors.

3 In May 1993, Jim Yeatts approached Henry Kober to discuss

whether DCI was interested i n : (1) having Fedmark become the

worldwide sales representative for DCI’s multiple award contract;

and (2) becoming the supplier of casegoods to be included in

whole room packages sold by Allied to GSA. Those discussions

bore fruit; DCI agreed to have Fedmark serve as its sales

representative and also agreed to supply casegoods for inclusion

in Allied’s whole room packages, under a five-year agreement

between Allied and GSA that went into effect in May 1996.

Moreover, it is undisputed that Fedmark did, indeed, generate

business for D C I , under the DCI/Fedmark agreement, and that DCI

did supply some casegoods to Allied under the DCI/Allied

agreement.

The full DCI/Fedmark agreement “was never committed to

writing.” (Def.’s Mem. of Law, Ex. 3 , J. Yeatts Dep., at 178.)

The DCI/Allied agreement was memorialized in a letter from Kober

to Barbara Douglas of GSA in which Kober stated:

This letter is to certify that DCI will provide Yeatts Contract [Allied’s predecessor] with a continuous source of supply for all casegood items offered under this solicitation for the duration of the contract period, so long as reasonable payment terms are met.

4 (Pl.’s Mem. of Law, Ex. 10.) Finally, a November 4 , 1996,

memorandum from Nelson Sweeney of DCI to Bob Yeatts established

that under both the DCI/Fedmark agreement and the DCI/Allied

agreement, Fedmark or Allied, as the case may b e , would receive a

six-percent commission “[b]eginning with new orders received

after 11/01/96.” (Pl.’s Mem. of Law, Ex. 13.)

The business relationships between DCI and Fedmark and

between DCI and Allied broke down shortly after they were

established. In January 1997, Allied applied for a second whole

room package contract from GSA which featured casegoods from

Modern Contract, one of DCI’s competitors. In June 1997, DCI

restricted the geographic areas in which Fedmark and Allied were

allowed to sell DCI’s furniture. In 1998, DCI began using

Fedmark’s sales representatives directly, without involving

Fedmark, and also stopped serving as a source of supply for

Allied. And in 1999, DCI obtained its own whole room package

contract from GSA.

5 In their complaint, plaintiffs accuse defendants of a

variety of wrongdoing. In Count B , plaintiffs assert that

defendants breached the implied covenant of good faith and fair

dealing by: (1) hiring away several of Fedmark’s key employees

(Compl. ¶ 2 7 ) ; (2) withholding casegoods that Allied needed to

fulfill its whole room package agreement with GSA; (3) securing

their own whole room package contract from GSA, in direct

competition with Allied (Compl. ¶ 2 8 ) ; and (4) delaying or

failing to make commission payments and quibbling over the amount

of commissions due to Fedmark and/or Allied (Compl. ¶ 2 9 ) . In

Count B , plaintiffs claim as damages the future commissions that

Fedmark and Allied would have earned had their agreements with

DCI not broken down. In Count C , plaintiffs assert that

defendants breached the DCI/Fedmark agreement by failing to pay

Fedmark $312,000 in commissions it had earned.

Discussion

Defendants move for summary judgment on Counts B and C ,

invoking both the statute of frauds and the statute of

limitations.

6 I. Statute of Frauds

Defendants argue that the DCI/Allied agreement is legally

unenforceable because, as plaintiffs allege, the agreement was

for five years but (as conceded) was never committed to writing.

Plaintiffs say the agreement was committed to writing.

It is important to bear in mind that this case involves two

separate agreements, the DCI/Fedmark agreement and the DCI/Allied

agreement. (As a contract for services, the DCI/Fedmark

agreement is subject to the general statute of frauds, N . H . R E V .

STAT. A N N . (“RSA”) § 506:2, while the DCI/Allied agreement, which

pertains to the sale of goods, is subject to New Hampshire’s

version of the Uniform Commercial Code’s (“UCC”) statute of

frauds, R S A 382-A:2-201.) Defendants contend that the statute of

frauds bars plaintiff’s action because the DCI/Allied agreement

was for five years and was not committed to writing.4 However,

viewed in the light most favorable to plaintiffs, the non-moving

party, the Jim Yeatts deposition testimony about an agreement

4 In other words, defendants invoke the general statute of limitations rather than the UCC statute of limitations. See RSA 506:2 (a writing signed by the party to be charged is required to enforce “any agreement . . . not to be performed within one year from the time of making i t ” ) .

7 “never committed to writing” concerned the DCI/Fedmark agreement,

not the DCI/Allied agreement. Thus, for purposes of summary

judgment, the record does not support a finding that plaintiffs

have conceded that the five-year DCI/Allied agreement was

unwritten.

Plaintiffs argue, to the contrary, that the May 6, 1996,

“continuous source of supply” letter, in conjunction with various

other documents, meets the writing requirement of the UCC statute

of frauds – the one that governs enforcement of the DCI/ Allied

agreement. Defendants disagree, pointing out that the May 6

letter lacks a quantity term and does not constitute a valid

requirements contract.

All parties agree that there has been partial performance

under the DCI/Allied agreement. And, under the UCC’s statute of

frauds, “[a] contract which does not satisfy the [writing]

requirements of [the UCC statute of frauds] but which is valid in

all other respects is enforceable . . . with respect to goods for

which payment has been made and accepted or which have been

received and accepted.” RSA 382-A:2-201(3)(c). Because Allied

8 received and accepted casegoods from D C I , the DCI/Allied

agreement is enforceable with respect to those goods and any

contractual obligations DCI may have assumed in connection with

them.

Regarding the DCI/Fedmark agreement, it is not at all clear

that defendants have even invoked the statute of frauds. Their

motion for summary judgment does not mention that agreement, and

they identify no factual basis for arguing that the DCI/Fedmark

agreement would be unenforceable absent a writing, under the

general statute of frauds. Moreover, to the extent plaintiffs

are claiming commissions due for DCI products sold by Fedmark,

relief is available, at the very least, under a theory of quantum

meruit. Thus, the absence of a writing would appear not to bar

Fedmark from recovering commissions it earned but was not paid.

In sum, the statute of frauds provides no basis for granting

defendants’ motion for summary judgment.

9 II. Statute of Limitations

Defendants also argue that Counts B and C are barred by the

statute of limitations. Their argument is based on “admissions”

made by both Bob and Jim Yeatts in deposition testimony, that DCI

breached the DCI/Allied agreement, and perhaps the DCI/Fedmark

agreement, in June 1997, when DCI limited the geographical range

in which Allied and Fedmark were allowed to sell DCI’s furniture.

The problem with defendants’ argument is that plaintiff’s

complaint does not identify the June 1997 market limitation as a

factual basis for either Count B or Count C . Indeed, that event

is not mentioned at all in plaintiffs’ complaint. Because the

complaint, rather than plaintiffs’ deposition testimony, is the

source of plaintiffs’ claims, the “admissions” on which

defendants base their statute of limitations argument are simply

not relevant, and provide no basis for defendants’ statute of

limitations defense.

Conclusion

For the reasons given, defendants’ motion for summary

judgment (document n o . 20) is denied.

10 SO ORDERED.

Steven J. McAuliffe United States District Judge

June 1 1 , 2003

cc: Robert H . Miller, Esq. Bret D. Gifford, Esq.

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