Data

Date:: 12-03-2015
Country:: USA
Number:: 4 N.Y.S.3d 868
Court:: U.S. District Court, Southern District of New York
Parties:: U.S. Nonwovens Corp. v. Pack Line Corp. and Nuspark Engineering, Inc.

Keywords

APPLICATION OF CISG - CISG PREEMPTS DOMESTIC U.S. LAW ON CONTRACTS FOR THE SALE OF GOODS

REQUIREMENTS FOR BREACH OF CONTRACT UNDER CISG - SUBSTANTIALLY THE SAME AS THOSE TO BE FOUND IN THE UNIFORM COMMERCIAL CODE

ART. 35 CISG - MAY BE READ AS SUGGESTING IMPLIED WARRANTIES OF FITNESS AND MERCHANTABILITY TO BE FOUND IN THE UNIFORM COMMERCIAL CODE

NON CONFORMITY OF GOODS - NOTICE OF LACK OF CONFORMITY - WITHIN A REASONABLE TIME (ART. 39(1) CISG)

Abstract

A U.S. buyer concluded a contract with a Canadian seller for the supply and the installation of a custom made automatic filling and sealing machine to be used in the manufacturing of non-woven products. Later on, the buyer brought an action against the seller lamenting that the machine was defective. The seller challenged the buyer’s claims by asserting that CISG applied instead of domestic law, thus invalidating the buyer’s state of actions.

In ruling on the seller’s motion to dismiss, the Court found that CISG applied under its Art. 1(1)(a), thus pre-empting the application of domestic law (i.e., New York State law). Nonetheless, the Court denied that the buyer’s claims under domestic law had to be dismissed, as the requirements for breach of contract were substantially the same under both the Convention and the U.C.C.

In addition, the Court noted that, although the Convention does not specifically address implied warranties of fitness and merchantability, Art. 35 CISG could properly be read to suggest them.

Lastly, the Court considered the buyer’s assertion that it had promptly notified the seller of the lack of conformity as required by Art. 39 CISG as being adequately proven.

Fulltext

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Synopsis

Background: Buyer of custom automatic filling and sealing machine brought action against seller and manufacturer of machine’s conveyor system component, alleging breach of contract, breach of implied covenant of good faith and fair dealing, breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness, and unjust enrichment. Manufacturer moved to dismiss for failure to state a claim.

Holdings: The Supreme Court, Suffolk County, Emily Pines, J., held that:

Fact that complaint did not mention United Nations Convention on Contracts for the International Sale of Goods (CISG) was not fatal to claims;
CISG preempted unjust enrichment claim;
Claim for breach of implied covenant of good faith and fair dealing was duplicative;
Buyer sufficiently alleged that it gave notice of lack of conformity, as required by CISG; and
Breach of contract claim under the CISG accrued when installation of unit was complete, rather than upon delivery.
Motion granted in part and denied in part.

1. Sales

Allegations of breach as cause of action Treaties

Construction and operation of particular provisions

Fact that buyer’s complaint did not mention United Nations Convention on Contracts for the International Sale of Goods (CISG) was not fatal to its claims for breach of contract and breach of express and implied warranty against manufacturer of conveyor system component for custom automatic filling and sealing machine, since complaint sufficiently alleged breach of contract and breach of warranty claims under the CISG. United Nations Convention on Contracts for the International Sale of Goods, Art. 1 et seq., 15 U.S.C.A.App.

2. Sales

Nature and form Sales

Nature and form Treaties

Construction and operation of particular provisions

The elements of a breach of contract claim are the same under the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the Uniform Commercial Code (UCC); a plaintiff must show (1) the existence of a valid and enforceable contract containing both definite and certain terms, (2) performance by plaintiff, (3) breach by defendant and (4) resultant injury to plaintiff. United Nations Convention on Contracts for the International Sale of Goods, Art. 1 et seq., 15 U.S.C.A.App.; McKinney’s Uniform Commercial Code § 2–101 et seq.

3. Contracts

Grounds of action

Under New York law, the elements of a cause of action for breach of contract are (1) formation of a contract between plaintiff and defendant, (2) performance by plaintiff, (3) defendant’s failure to perform, (4) resulting damage.

4. Implied and Constructive Contracts

Unjust enrichment Treaties

Operation as to laws inconsistent with or repugnant to treaty provisions

United Nations Convention on Contracts for the International Sale of Goods (CISG) preempted unjust enrichment claim by buyer of custom automatic filling and sealing machine brought action against manufacturer of machine’s conveyor system component, where express contract existed between buyer and manufacturer. United Nations Convention on Contracts for the International Sale of Goods, Art. 1 et seq., 15 U.S.C.A.App.

5. Treaties

Operation as to laws inconsistent with or repugnant to treaty provisions

Buyer’s claim for breach of implied covenant of good faith and fair dealing against manufacturer of conveyor system component for custom automatic filling and sealing machine would be dismissed as duplicative of breach of contract claim under United Nations Convention on Contracts for the International Sale of Goods (CISG), since it was based on the same underlying facts. United Nations Convention on Contracts for the International Sale of Goods, Art. 1 et seq., 15 U.S.C.A.App.

6. Sales

Mode and sufficiency of notice Treaties

Construction and operation of particular provisions

Buyer of custom automatic filling and sealing machine sufficiently alleged that it gave notice of lack of conformity to manufacturer of machine’s conveyor system component, as required by United Nations Convention on Contracts for the International Sale of Goods (CISG), where it alleged that immediately upon delivery, it made numerous complaints about the defective machine to manufacturer. United Nations Convention on Contracts for the International Sale of Goods, Art. 1 et seq., 15 U.S.C.A.App.

7. Limitation of Actions

Burden of proof in general

In moving to dismiss a cause of action as barred by the applicable statute of limitations, a defendant bears the initial burden of demonstrating, prima facie, that the time within which to commence the action has expired; the burden then shifts to the plaintiff to raise a question of fact as to whether the statute of limitations was tolled or was otherwise inapplicable, or whether the action was actually commenced within the applicable limitations period. McKinney’s CPLR 3211(a)(5).

8. Limitation of Actions

Burden of proof in general

To make a prima facie showing, on motion to dismiss, that time within which to commence an action has expired, defendant must establish, inter alia, when the plaintiff’s cause of action accrued. McKinney’s CPLR 3211(a)(5).

9. Limitation of Actions

Covenants and Conditions

Buyer’s breach of contract claim under the United Nations Convention on Contracts for the International Sale of Goods (CISG) against manufacturer of custom automatic filling and sealing machine accrued, triggering Uniform Commercial Code’s (UCC) four-year limitations applicable to actions for breach of contract for sale, when installation of unit was complete, rather than upon delivery of machine, since parties’ agreement clearly and unequivocally obligated manufacturer to perform the installation and commissioning of the integrated machine. United Nations Convention on Contracts for the International Sale of Goods, Art. 1 et seq., 15 U.S.C.A.App.; McKinney’s Uniform Commercial Code § 2–725.

Attorneys and Law Firms

Certilman Balin Adler & Hyman, LLP, M. Allan Hyman, Esq., Paul B. Sweeney, Esq., East Meadow, Attorney for Plaintiff.

Sichenzia Ross Friedman Ference LLP, Christopher P. Milazzo, Esq., New York, Attorney for Defendant.

Opinion by: EMILY PINES, J.

In this action to recover damages for, among other things, breach of contract and breach of warranty, defendant Nuspark Engineering, Inc. (“Nuspark”) moves (Mot. Seq. 002), pursuant to CPLR 3211 to dismiss the plaintiff’s complaint as asserted against it. The plaintiff opposes the motion.

Factual and Procedural Background

In March 2009, the plaintiff U.S. Nonwovens Corp. (“Plaintiff”) entered into separate agreements with defendant Pack Line Corp. (“Pack Line”) and defendant Nuspark Engineering Corp. (“Nuspark”) for the purchase of a custom automatic filling and sealing machine (“Auto Tubber”) for use in its business of producing non-woven products including sanitary disposables and wipes. The Auto Tubber was to be comprised of several distinct components, with a conveyor system designed and manufactured by Nuspark. Plaintiff agreed to pay Nuspark $150,000 for the conveyor and installation and commissioning of the integrated machine.

On May 21, 2014, Plaintiff commenced this action against Pack Line and Nuspark. Plaintiff alleges, among other things, that “[b]etween in or around December 2009 and August 2010, the Auto Tubber was delivered, set up, installed and tested in [Plaintiff’s] facility.” Plaintiff also alleges that “[u]pon completion of installation, Pack Line tested the Auto Tubber, and it was immediately apparent that the machine was completely defective and unsatisfactorily manufactured.” Plaintiff further alleges that “[i]mmediately upon delivery, [Plaintiff] made numerous complaints about the defective Auto Tubber to Pack Line and Nuspark.” Plaintiff asserts causes of action for breach of contract, breach of the implied covenant of good faith, breach of express warranty, breach of the implied warranty of merchantability, breach of the implied warranty of fitness, and unjust enrichment.

Nuspark now moves to dismiss the Verified Complaint as asserted against it. Nuspark initially contends that Plaintiff’s claims against it pursuant to New York State law fail to state causes of action because they are preempted by the United Nations Convention on Contracts for the International Sale of Goods (“CISG”). Additionally, Nuspark argues that Plaintiff’s claims are barred under the CISG because Plaintiff failed to notify Nuspark of any alleged nonconformity of the conveyor designed and manufactured by Nuspark prior to the commencement of this action. Finally, Nuspark contends that Plaintiff’s contractual claims are barred by the statute of limitations.

In opposition, Plaintiff concedes that the CISG applies to its contract with Nuspark and that it preempts its state law contract claims. However, Plaintiff argues that dismissal is not warranted because valid substantive claims for breach of contract, breach of implied covenant of good faith, and breach of implied and express warranty have been stated under New York law *871 and the UCC, which satisfies the similar substantive requirements under the CISG for such claims. Plaintiff contends that its Verified Complaint sufficiently alleges that it provided the requisite notice to Nuspark of the lack of conformity of the conveyor by alleging that “[i]mmediately upon delivery [Plaintiff] made numerous complaints about the defective Auto Tubber to ... Nuspark.” Finally, Plaintiff argues that its claims were commenced within the applicable four-year statute of limitations as its claims did not accrue under tender of delivery was complete which, Plaintiff alleges, occurred in August 2010 when the contractually required delivery, installation, integration and testing of the Auto Tubber were completed.

Discussion

As summarized by United States Senior District Judge Walls in Beth Schiffer Fine Photographic Arts, Inc. v. Colex Imaging, Inc., 2012 WL 924380 (U.S. Dist. Ct., N.J., March 19, 2012, Walls, J.):

“Ratified by the United States on December 11, 1986, the CISG ‘applies to contracts of sale of goods between parties whose places of business are in different States ... when the States are Contracting States.’ CISG Art. 1(1)(a). See Forestal Guarani S.A. v. Daros International, Inc., 613 F.3d 395, 397 (3d Cir.2010) ... The CISG is a self-executing treaty that preempts contrary provisions of Article 2 of the UCC and other state contract law to the extent that those causes of action fall within the scope of the CISG. U.S. Const., Art. VI; Medellin v. Texas, 552 U.S. 491, 504–05, 128 S.Ct. 1346, 170 L.Ed.2d 190 (2008). See American Mint LLC v. GOSoftware, Inc., No. 1:05–cv–650, 2005 WL 2021248, at *2–3 (M.D.Pa. Aug. 16, 2005) (noting that ‘if the CISG applies to the contract at issue, it will preempt domestic sale laws that otherwise would govern the contract.’). Outside the scope of the CISG, otherwise applicable state law governs the dispute. See Caterpillar Inc. v. Usinor Industeel, 393 F.Supp.2d 659, 676 (N.D.Ill.2005).”

In considering a motion to dismiss a complaint pursuant to CPLR 3211(a)(7):

The complaint must be liberally construed and the plaintiff given the benefit of every favorable inference (citations omitted). The court must also accept as true all of the facts alleged in the complaint and any factual submissions made in opposition to the motion (citations omitted). If the court can determine that the plaintiff is entitled to relief on any view of the facts stated, its inquiry is complete and the complaint must be declared legally sufficient (citations omitted). While factual allegations contained in the complaint are deemed true, bare legal conclusions and facts flatly contradicted on the record are not entitled to a presumption of truth (citations omitted). (Symbol Tech., Inc. v. Deloitte & Touche, LLP, 69 A.D.3d 191, 193–195, 888 N.Y.S.2d 538 [2d Dept.2009] ).

[1] [2] [3] Here, as mentioned above, Plaintiff concedes that the CISG applies and preempts its state law contract claims. Thus, the issue is whether the claims as asserted in the Verified Complaint should be dismissed because they fail to state causes of action. The Court agrees with Plaintiff that dismissal of the claims for breach of contract and breach of express and implied warranties is not warranted. “The elements of a breach of contract claim are the same [under the CISG and the UCC]; a [plaintiff] must show: ‘(1) the existence of a valid and enforceable contract containing both definite and certain *872 terms, (2) performance by plaintiff, (3) breach by defendant and (4) resultant injury to plaintiff.’ ” (Maxxsonics USA, Inc. v. Fengshun Peiying Electro Acoustic Co., Ltd., 2012 WL 962698, U.S. Dist. Ct., N.D.IL., March 21, 2012, Leinenweber, J., quoting Magellan Intern. Corp. v. Salzgitter Handel GmbH, 76 F.Supp.2d 919, 924 (N.D.Ill.1999)). Under New York law, “[t]he elements of a cause of action for breach of contract are (1) formation of a contract between plaintiff and defendant, (2) performance by plaintiff, (3) defendant’s failure to perform, (4) resulting damage” (2 N.Y. PJI2d 4:1, at 676 [2013] ). Additionally, although the CISG does not specifically include the implied warranties of fitness and merchantability, CISG Article 35 may properly be read to suggest them (Norfolk Southern Railway Co. v. Power Source Supply, Inc., 2008 WL 2884102, U.S. Dist. Ct., W.D.Pa., July 25, 2008, Gibson, J.; Electrocraft Arkansas, Inc. v. Super Elec. Motors, Ltd., 2009 WL 5181854, U.S. Dist. Ct., E.D.Ark., Dec. 23, 2009, Wright, J.). The fact that the Verified Complaint does not mention the CISG is not fatal to Plaintiff’s claims for breach of contract and breach of express and implied warranties (see Citgo Petroleum Corp. v. Odfjell Seachem, 2013 WL 2289951, U.S. Dist. Ct., S.D.Tex., May 23, 2013, Miller, J.), as the Verified Complaint sufficiently alleges breach of contract and breach of warranty claims under the CISG (Id.; Electrocraft Arkansas, Inc. v. Super Elec. Motors, Ltd., 2009 WL 5181854, U.S. Dist. Ct., E.D.Ark., Dec. 23, 2009, Wright, J.). Accordingly, to the extent that Nuspark’s seeks dismissal, pursuant to CPLR 3211(a)(7), of the claims for breach of contract, breach of express warranty, breach of the implied warranty of merchantability, and breach of the implied warranty of fitness, the motion is denied.

[4] [5] However, because an express contract exists between Plaintiff and Nuspark, the CISG preempts Plaintiff’s claim for unjust enrichment and such is dismissed (see Semi–Materials Co., Ltd. v. MEMC Elec. Materials, Inc., U.S. Dist. Ct., E.D.Mo., Jan. 10, 2011, Buckles, M.J.). Similarly, Plaintiff’s claim for breach of the implied covenant of good faith is also dismissed because it is duplicative of the claim for breach of contract as it is based on the same underlying facts (see Weihai Textile Group Import & Export Co., Ltd. v. Level 8 Apparel, LLC, 2014 WL 1494327, U.S. Dist. Ct., S.D.N.Y., March 28, 2014, Carter, J.).

[6] Although Nuspark cites no authority in support of its contention that a plaintiff must plead compliance with the notice requirement of Article 39 of the CISG, the Verified Complaint sufficiently alleges notice of lack of conformity to Nuspark as Plaintiff alleges that immediately upon delivery it made numerous complaints about the defective Auto Tubber to Nuspark. Thus, that branch of Nuspark’s motion which seeks to dismiss the claims as asserted against it pursuant to CPLR 3211(a)(7) because Plaintiff failed plead that it gave notice of lack of conformity to Nuspark is denied.

[7] [8] “In moving to dismiss a cause of action as barred by the applicable statute of limitations, a defendant bears the initial burden of demonstrating, prima facie, that the time within which to commence the action has expired (see Jalayer v. Stigliano, 94 A.D.3d 702, 703, 941 N.Y.S.2d 243; Fleetwood Agency, Inc. v. Verde Elec. Corp., 85 A.D.3d 850, 925 N.Y.S.2d 576; Rakusin v. Miano, 84 A.D.3d 1051, 923 N.Y.S.2d 334). The burden then shifts to the plaintiff to raise a question of fact as to *873 whether the statute of limitations was tolled or was otherwise inapplicable, or whether the action was actually commenced within the applicable limitations period (see Jalayer v. Stigliano, 94 A.D.3d at 703, 941 N.Y.S.2d 243; Williams v. New York City Health & Hosps. Corp., 84 A.D.3d 1358, 923 N.Y.S.2d 908). To make a prima facie showing, the defendant must establish, inter alia, when the plaintiff’s cause of action accrued (see Swift v. New York Med. Coll., 25 A.D.3d 686, 687, 808 N.Y.S.2d 731).” (Loiodice v. BMW of N. America, LLC, 125 A.D.3d 723, 4 N.Y.S.3d 102 [2d Dept.2015] ).

[9] Here, the parties agree that because the CISG does not provide a statute of limitations, the four-year statute of limitations set forth in UCC 2–275 applies in this case. That section provides, in relevant part:

(1) An action for breach of any contract for sale must be commenced within four years after the cause of action has accrued.

(2) A cause of action accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach. 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.

Plaintiff claims that the breach of contract cause of action against Nuspark accrued in August 2010 when, as alleged in the Verified Complaint, the installation, integration and testing of the Auto Tubber machine was complete. Nuspark claims that Plaintiff’s claims accrued in December 2009 upon delivery of the Auto Tubber. However, Nuspark’s agreement with Plaintiff clearly and unequivocally obligated Nuspark to perform the installation and commissioning of the integrated machine. As such, the Plaintiff’s causes of action accrued when installation of the unit was complete (see Franklin Nursing Home v. Power Cooling, Inc., 227 A.D.2d 374, 375, 642 N.Y.S.2d 80 [2d Dept.1996] ). Accepting Plaintiff’s allegation that installation was not completed until August 2010 as true, as the Court must do, Nuspark has not met its burden of demonstrating that the time within which to commence the action expired before the action was commenced in May 2014. Although Nuspark may ultimately prevail on this defense, it has not demonstrated entitlement to dismissal under CPLR 3211(a)(5) on this pre-answer motion. Accordingly, it is

ORDERED that Nuspark’s motion is granted to the extent that the second and sixth causes of action as asserted against it are dismissed, and the motion is otherwise denied; and it is further

ORDERED that a preliminary conference before the Court is hereby scheduled for April 6, 2015, at 10:00 a.m.

This constitutes the DECISION and ORDER of the Court.}}

Source

Original in English:
- available at the University of Pace law website, http://cisgw3.law.pace.edu}}