Data

Date:: 09-02-2018
Country:: USA
Number:: 16-cv-1184 (JNE/TNL)
Court:: U.S. District Court, Minnesota
Parties:: Target Corp. v. JJS Developments LTD

Keywords

RELEVANT PLACE OF BUSINESS - PLACE OF BUSINESS WITH CLOSEST RELATIONSHIP TO CONTRACT (ART. 10(a) CISG)

Abstract

A U.S. discount retailer (seller) concluded several agreements with a buyer for the sale of TV and other electronic devices to be recycled or disposed of. A dispute arose between the parties as part of the price remained unpaid.

In determining the governing law, the Court denied that CISG applied. Although the buyer had its principal address in Canada, to respond to the seller’s needs the buyer had set up a new facility in Indianapolis where it had organized transportation, inspection, repair, and repackaging services. The Court then concluded that, for the purposes of the Convention, the buyer’s place of business was located in the United States and, therefore, the contract was to be considered as a domestic one.

Fulltext

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I. Background
Target is a discount retailer. In the course of its business, it acquires assets whose disposal it
seeks by recycling or other means. ERS is in the business of asset disposition services, asset
destruction auditing, data destruction, and material control services.
Non-TV Contracts
In 2014, Target issued several requests for quotes, seeking a purchaser of certain assets for
recycling or other disposition. The assets included electronics from Target's headquarters,
assets and electronics from Target's stores and distribution centers, and electronics that
Target accepted from its customers for recycling. ERS responded to Target's requests, and
Target awarded contracts to ERS. Target and ERS executed a Purchaser Qualification
Agreement, as well as three program agreements.1 Each program agreement had an effective
date of June 28, 2014, and an expiration date of June 30, 2016.
The Purchaser Qualification Agreement states that it "applies to and is incorporated into all
agreements relating to the sale . . . of merchandise and other assets (`Goods') and/or the work,
tasks or projects to be performed (`Services') between [ERS] and Target, including any
program agreement specific to the Goods and Services entered into the by the parties
(`Program Agreement')" and that the terms of a program agreement govern in the event of a

1 The parties referred to the three program agreements as the Non-TV Contracts.
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conflict between the program agreement and the Purchaser Qualification Agreement. The
Purchaser Qualification Agreement contains the following warranties by Target:
Target Warranties. Target has the right to sell the Goods; provided, however, that with
regard to any Goods that include embedded software or consist, in whole or in part,
of other computer software, Target makes no representation or warranty as to Target's
right to sell or Purchaser's right to use the embedded software or other computer
software. Target is consigning and/or selling the Goods AS IS, WHERE IS, WITH ALL
FAULTS, WITHOUT WARRANTY OR REPRESENTATION OF ANY KIND EXPRESSED OR
IMPLIED, INCLUDING ANY WARRANTY AS TO THE NON-INFRINGEMENT OR THE KIND,
SIZE, WEIGHT, QUALITY, CHARACTER, FUNCTIONALITY, DESCRIPTION, DURABILITY,
CONFORMITY WITH ANY SPECIFICATIONS OR CONDITION OF THE GOODS, THE
PACKAGING OR LABELING OF THE GOODS, THE MERCHANTABILITY OF THE GOODS OR
THEIR FITNESS FOR ANY PARTICULAR, SPECIAL OR INTENTED PURPOSE. Without
limiting the foregoing, the condition and use of the Goods shall be at the sole risk of
Purchaser. Target is not responsible for any damages to any person or property as a
result of the possible deficiencies or failures of the Goods.
DDTV
In July 2014, Target sought a purchaser of certain damaged or defective televisions. ERS
responded, and, in August 2014, Target awarded a contract to ERS.2 ERS agreed to pay $17
per television.
TV Unsaleables
A few months later, Target issued a request for quotes. It sought a purchaser of returned and
damaged televisions. Target anticipated an 18-month contract starting in December 2014. It
advised potential bidders of "substantial volume growth" in May 2015 "due to a change in
programs at Target." Target provided forecasts of the volume of televisions subject to the
program from the start of the contract to May 2015 and from May 2015 to the end of the
contract. Target also provided estimates of the screen sizes and damage rates. It advised
potential bidders that the estimates were not guaranteed: "Any volumes, conditions, mixes
provided in the sourcing event are not a guarantee. Estimates are provided for planning
purposes only and will vary with Target store openings and seasonal trends."
ERS responded to the request, and Target awarded the contract to ERS. Target and ERS
executed a program agreement for the "Purchase of TV Unsaleables." The agreement's
effective date was December 21, 2014, and its expiration date was June 20, 2016. The program
agreement acknowledged the estimates that Target had provided:
Target has made projections and forecasts of the amount of Goods that Target estimates may
be available (the actual amount may be less than or more than any projections or forecasts).
[ERS] understands and agrees that these numbers are estimates only and, unless otherwise
expressly stated in this Program Agreement, Target is not obligated to sell or consign any
specific quantity of Goods to Supplier. Goods may be sold or consigned by Target or by an
affiliate of Target, including Target's contracted service provider.

2 The parties referred to this program as the DDTV program.
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A statement of work, which was attached to the program agreement as an exhibit, described
the goods to be purchased by ERS: "Unsaleable TV's are items that have been either returned
to the store by a Target guest, classified as defective merchandise in store or on Target.com
returned items sent via mail." The statement of work also reiterated that "[a]ny volumes,
condition, or mixes provided in the sourcing event are not a guarantee. Estimates are provided
for planning purposes only and will vary with Target store openings and seasonal trends."
In the request for quotes, Target provided estimates of damage rates by brand. In total, it
estimated that 67.0% of the televisions would be "No Fault Found," that 9.2% would be
"Repairable," and that 23.8% would be "Salvage/Scrap." The condition of the televisions that
ERS bought from Target under the TV Unsaleables program did not conform to the estimates
provided by Target. For instance, a condition report, which was sent by ERS to Target in early
February and was based on approximately 5,500 televisions, indicated that approximately
43% of the televisions had cracked or broken glass, rendering the unit "a teardown/salvage
unit." An audit conducted by Target in April 2015 characterized 51% of the televisions as no
fault found, 13% as repairable, and 36% as damaged.
ERS notified Target of the discrepancies between the estimated and actual conditions of the
televisions and sought pricing concessions. Negotiations took place before and after ERS gave
90-day notice of termination in early March 2015. The parties did not agree to a modification.
The TV Unsaleables program agreement terminated in early June 2015. Target has not
received payment from ERS for several loads of televisions.
Termination of Non-TV Contracts
In September 2015, Target notified ERS that Target had discovered "listings by multiple pallet
salvagers that appear to be marketing full pallets of Target merchandise that should have been
recycled via ERS." Target directed ERS's attention to a section of the scope of work of the
electronics recycling program agreement for assets and electronics from Target's stores and
distribution centers. The section prohibits resale of merchandise "in original form." ERS
explained to Target that ERS had sent a small amount of goods to a subcontractor, that the
subcontractor had not properly handled the goods, and that ERS had taken steps to recover
the goods. According to ERS, Target advised ERS that Target would continue to honor the
contracts. Nevertheless, in October 2015, Target terminated the Non-TV Contracts.
II. Discussion
Summary judgment is proper "if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).
To support an assertion that a fact cannot be or is genuinely disputed, a party must cite "to
particular parts of materials in the record," show "that the materials cited do not establish the
absence or presence of a genuine dispute," or show "that an adverse party cannot produce
admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1)(A)-(B). "The court need
consider only the cited materials, but it may consider other materials in the record." Fed. R.
Civ. P. 56(c)(3). In determining whether summary judgment is appropriate, a court must view
genuinely disputed facts in the light most favorable to the nonmovant, Ricci v. DeStefano, 557
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U.S. 557, 586 (2009), and draw all justifiable inferences from the evidence in the nonmovant's
favor, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
A. Convention on Contracts for the International Sale of Goods
The parties disputed whether the United Nations Convention on Contracts for the
International Sale of Goods ("CISG") applies. "As `a self-executing [treaty] between the United
States and other signatories, including Canada,' the Convention supersedes state law when it
applies." VLM Food Trading Int'l, Inc. v. Ill. Trading Co., 748 F.3d 780, 787 (7th Cir. 2014)
(alteration in original) (quoting Chicago Prime Packers, Inc. v. Northam Food Trading Co., 408
F.3d 894, 897 (7th Cir. 2005)). 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). For purposes of the CISG, "if a party has more than one place of business, the place
of business is that which has the closest relationship to the contract and its performance,
having regard to the circumstances known to or contemplated by the parties at any time
before or at the conclusion of the contract." CISG art. 10(a).
Target maintained that the CISG does not apply because the parties' places of business are in
the United States. ERS maintained that the CISG does apply because Target's place of business
is in the United States and ERS's place of business is in Canada.
Although the Purchaser Qualification Agreement and each program agreement that ERS and
Target executed identifies a Canadian address as ERS's principal address, ERS acknowledged
that "[p]artnering with Target was a major opportunity for ERS; to accommodate Target's
product volume, ERS opened an Indianapolis facility and invested in substantial infrastructure
for transport, inspection, repair and repackaging, disassembly and recycling, rerouting and
disposal of TVs and other electronic products." The Court concludes that ERS's place of
business for the purposes of ERS's contracts with Target is in the United States. The CISG does
not apply.

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Source

Original in English:
- available at the University of Basel website, http://www.cisg-online.ch/}}