Garden Ridge, L.P. v. Advance International, Inc., and Herbert A. Feinberg

403 S.W.3d 432, 80 U.C.C. Rep. Serv. 2d (West) 548, 2013 WL 1410145, 2013 Tex. App. LEXIS 4497
CourtCourt of Appeals of Texas
DecidedApril 9, 2013
Docket14-11-00624-CV
StatusPublished
Cited by18 cases

This text of 403 S.W.3d 432 (Garden Ridge, L.P. v. Advance International, Inc., and Herbert A. Feinberg) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Garden Ridge, L.P. v. Advance International, Inc., and Herbert A. Feinberg, 403 S.W.3d 432, 80 U.C.C. Rep. Serv. 2d (West) 548, 2013 WL 1410145, 2013 Tex. App. LEXIS 4497 (Tex. Ct. App. 2013).

Opinions

OPINION

TRACY CHRISTOPHER, Justice.

Appellant Garden Ridge, L.P. (Garden Ridge) sued Advance International, Inc., and Herbert A. Feinberg (collectively, Advance) for breach of contract and a declaratory judgment that Garden Ridge had [435]*435complied with its contracts with Advance. Advance counterclaimed for breach of contract. The jury found in favor of Advance. Although Garden Ridge accepted two shipments of inflatable snowmen from Advance, Garden Ridge refused to pay anything for either shipment, claiming that one shipment was nonconforming. Garden Ridge based its refusal to pay on charge-back provisions outlined in the parties’ contracts. Advance argued that the chargeback provisions are unenforceable penalties.

On appeal, Garden Ridge argues that the trial court committed reversible error when it (1) refused to submit a question on prior material breach, (2) improperly instructed the jury on damages, and (3) commented on the weight of the evidence in its instructions on breach of contract. We conclude that the chargeback provisions as applied in this case are unenforceable as a matter of law as penalties, and we overrule Garden Ridge’s jury charge issues. We therefore affirm the trial court’s judgment.

I. Factual and Procedural Background

Garden Ridge is a Houston-based chain of housewares and home décor stores. Advance International, a company owned by Feinberg, is one of Garden Ridge’s vendors. In 2009, Advance sent Garden Ridge quote sheets for lighted inflatable holiday snowmen, which included a color photo of each item and described its cost, weight, dimensions, and packaging. The two snowmen on the quote sheets each wore a scarf, held a broom that stated “Merry Christmas” on it, and waved; one stood eight feet tall, and the other stood nine feet tall. We refer to this snowman as “waving snowman.” Advance then sent two sample snowmen1 to Garden Ridge; one of the samples did not match its quote sheet. The sample eight-foot snowman wore a Santa-type hat and held a “Merry Christmas” banner. We refer to this snowman as “banner snowman.”

Garden Ridge sent Advance two purchase orders, one for approximately 950 nine-foot waving snowmen (PO '721), and the other for approximately 3,500 eight-foot waving snowmen (PO '743), based on the quote sheets. Garden Ridge planned to sell each nine-foot waving snowman for $59.99, and each eight-foot waving snowman for $39.00. Garden Ridge planned to mark down the eight-foot waving snowmen to $20.00 each during its one-day Thanksgiving Shop-a-Thon sale, and it prepared and had printed an advertising circular promoting this special price and picturing the eight-foot waving snowman.

Five days before Thanksgiving, Garden Ridge realized that the eight-foot snowmen that Advance sent were not waving snowmen, but instead were banner snowmen. The nine-foot snowmen that Advance sent were waving snowmen. Garden Ridge decided to honor the $20.00 Shop-a-Thon price on the nine-foot waving snowmen. There were no customer complaints, and both the eight-foot banner snowmen and the nine-foot waving snowmen sold well.

The parties’ contracts consist of the purchase orders, the vendor cover letter, and the vendor compliance manual. Based on liquidated-damages provisions outlined in the vendor compliance manual, Garden Ridge assessed chargebacks against Advance for its alleged noncompliance violations. For Advance’s “purchase order” violation — by sending the eight-foot banner snowman instead of the waving snowman, Garden Ridge charged back to Advance the entire merchandise cost plus the cost of freight on PO '743 as a “unauthorized substitution” chargeback, which totaled [436]*436$49,176.00. In addition to paying nothing for the eight-foot banner snowmen, Garden Ridge paid nothing for the nine-foot waving snowman despite the fact that those snowmen complied with PO '721. Garden Ridge charged back to Advance the entire merchandise cost plus the cost of freight on the nine-foot waving snowmen as a “merchant initiated” chargeback, which totaled $29,178.00. Additionally, from September through November 2009, Garden Ridge assessed another $13,241.84 in noncompliance chargebacks to Advance on other merchandise for “ticketing/packing” violations involving not marking cartons sequentially or otherwise mislabeling them, and for “purchase order” violations involving short or incomplete orders.

Advance demanded payment for its snowmen and other items and staged protests at Garden Ridge’s headquarters. Thereafter, Garden Ridge sued Advance for breach of contract and a declaratory judgment that Garden Ridge had complied with the contracts. Advance counterclaimed for breach of contract and asserted that Garden Ridge’s claims were barred because the chargeback provisions are unenforceable as penalties. Garden Ridge defended against Advance’s counterclaim by asserting that Advance breached the contracts first.

At trial, Garden Ridge’s divisional merchandise manager/viee president Linda Troy admitted that Garden Ridge made approximately $113,000 in profit on the snowmen it received from Advance, and further testified that Garden Ridge made all the money it would have made if the snowmen were delivered exactly as ordered. One of Garden Ridge’s buyers, Sheria Cole, admitted she did not know of any dollar amount that Garden Ridge was harmed by the snowmen shipment and that Garden Ridge had less-than-zero receipt cost for the snowmen. Cole also testified that she was unaware of anyone at Garden Ridge having done any actual-harm calculations from the unauthorized substitution of the eight-foot banner snowmen or any calculations to determine whether Garden Ridge’s chargebacks were reasonably proportional to any actual harm it suffered. Garden Ridge acknowledges that it did not argue any amount of actual damages other than zero and that the record reflects no actual damages resulting from Advance’s noncompliance violations.

The trial court granted Advance’s motion for directed verdict on Garden Ridge’s breach-of-contract claim because of lack of evidence on damages resulting from Advance’s noncompliance violations, but did not grant Advance’s motion for directed verdict on Garden Ridge’s declaratory-judgment claim or Advance’s motion for directed verdict seeking to have Garden Ridge’s chargeback provisions declared legally unenforceable as penalties.

The trial court submitted to the jury questions on Garden Ridge’s declaratory-judgment claim and on Advance’s breach-of-contract claim, but refused to submit a question on Garden Ridge’s prior-material-breach defense. On Garden Ridge’s declaratory-judgment claim, the jury found that Garden Ridge did not comply with the terms of the three listed agreements (to purchase the eight-foot snowmen, to purchase the nine-foot snowmen, and to purchase other items listed in the “summary of chargebacks” exhibit). On Advance’s breach-of-contract claim, the jury found that Garden Ridge failed to comply with these agreements by failing to pay for the eight-foot snowmen, the nine-foot snowmen, and other items listed in the charge-back exhibit. The jury, in separate findings, awarded Advance damages in the amount of $49,176.00 for the eight-foot snowmen, $29,781.00 for the nine-foot snowmen, and $500.00 for other items listed in the chargeback exhibit. The trial [437]*437court rendered final judgment on the jury’s verdict and on a stipulation for legal fees.

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Bluebook (online)
403 S.W.3d 432, 80 U.C.C. Rep. Serv. 2d (West) 548, 2013 WL 1410145, 2013 Tex. App. LEXIS 4497, Counsel Stack Legal Research, https://law.counselstack.com/opinion/garden-ridge-lp-v-advance-international-inc-and-herbert-a-feinberg-texapp-2013.