Sanmina Corporation v. Dialight PLC

District Court, S.D. New York·Decided December 29, 2023·No. 1:19-cv-11710·Unknown

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK SANMINA CORPORATION, Plaintiff, -v.- 19 Civ. 11710 (KPF) DIALIGHT PLC, Defendant. SEALED OPINION AND ORDER DIALIGHT PLC, 19 Civ. 11712 (KPF) Plaintiff, -v.- SANMINA CORPORATION, Defendant. KATHERINE POLK FAILLA, District Judge: Sanmina Corporation (“Sanmina”) seeks reconsideration of the Court’s Sealed Opinion and Order of March 14, 2023, resolving Sanmina’s motion for partial summary judgment (the “MSJ Opinion” or “MSJ Op.”). Specifically, Sanmina seeks reconsideration of this Court’s denial of summary judgment

with respect to Sanmina’s breach of contract claim predicated on certain accounts receivable. For the reasons set forth in the remainder of this Opinion, the Court finds that limited reconsideration of its earlier decision is warranted, and thus grants the motion in part. BACKGROUND1 A. Factual Background The Court assumes familiarity with the factual and procedural histories of this litigation and incorporates by reference the facts set forth in its MSJ

Opinion. (Dkt. #121 (MSJ Op.)). The Court summarizes below only the facts essential to the adjudication of the instant motion. Dialight plc (“Dialight”) is a designer and manufacturer of industrial light-emitting diode (“LED”) light fixtures for use in a variety of high-risk environments, including factory floors, oil refineries, and telecommunications towers. (Dialight 56.1 ¶ 71). Dialight’s products are made-to-order, as opposed to mass-produced. (Id. ¶ 73). Dialight adheres to a “high mix, low volume” approach, producing relatively small quantities of a large variety of

products. (Id. ¶¶ 72-74). Sanmina, on the other hand, is one of the world’s largest contract manufacturers. (Sanmina 56.1 ¶ 1). Sanmina operates seventy-five manufacturing facilities in twenty-five countries. (Id.). Its Guadalajara, Mexico

1 References to docket entries in this Opinion are to the docket in Case No. 19 Civ. 11710 unless otherwise specified. The facts set forth in this Opinion are drawn from the parties’ submissions in connection with Sanmina’s motion for partial summary judgment. The Court draws primarily from Sanmina’s Local Civil Rule 56.1 Statement of Material Undisputed Facts (Dkt. #84 (“Sanmina 56.1”)) and Dialight’s Response to Sanmina’s Local Civil Rule 56.1 Statement and Statement of Additional Material Facts pursuant to Local Civil Rule 56.1(b) (Dkt. #93 (“Dialight 56.1”)). For ease of reference, the Court refers to Sanmina’s brief in support of its motion for partial summary judgment as “Sanmina MSJ Br.” (Dkt. #83) and to Dialight’s opposition brief as “Dialight MSJ Br.” (Dkt. #92). The Court refers to Sanmina’s brief in support of its motion for reconsideration as “Sanmina Recon. Br.” (Dkt. #130), to Dialight’s opposition brief as “Dialight Recon. Opp.” (Dkt. #133), to Sanmina’s reply as “Sanmina Recon. Reply” (Dkt. #135), and to Dialight’s sur-reply as “Dialight Recon. Sur-reply” (Dkt. #138). factories are dedicated to manufacturing lighting equipment, among other products. (Id. ¶ 5). The contract dispute at the heart of this litigation arose from Dialight’s

desire to outsource some of its manufacturing obligations to a third party. (Dialight 56.1 ¶¶ 75-77). In March 2016, Dialight and Sanmina entered into a “Manufacturing Services Agreement” (the “MSA”), which would govern Dialight’s relationship with Sanmina as its chosen outsourcing partner. (Id. ¶¶ 16, 46; see also generally Dkt. #30-1 (“MSA”)). Under the terms of the MSA, Dialight would send Sanmina periodic purchase orders; Sanmina would accept and fulfill such orders by manufacturing the subject products and delivering them to Dialight or its customers. (See MSA §§ 1, 3, 12). The MSA afforded

Dialight fifteen business days after receipt of each shipment to reject non- compliant goods, after which point Dialight was deemed to have accepted the shipment. (Id. § 3.6). Dialight would then pay invoices received from Sanmina within thirty days of the date of shipment, but could withhold any payments disputed in good faith. (Id. §§ 11.1-2). By the fall of 2016, Dialight had begun transferring certain of its product lines to Sanmina for production. (Dialight 56.1 ¶¶ 16, 46). Thereafter, according to Dialight, Sanmina repeatedly failed to meet its obligations under

the MSA, including by failing to fulfill orders in a timely fashion and by fulfilling orders with substandard products. (Id. ¶¶ 164-265). According to Sanmina, however, it was Dialight who breached the MSA by failing to pay approximately $5.3 million in invoices issued by Sanmina for goods accepted by Dialight, among other things. (Sanmina MSJ Br. 23-24). Following a rocky, two-year outsourcing relationship, Dialight formally terminated the MSA on September 27, 2018. (Dialight 56.1 ¶¶ 266-267).

B. Procedural Background On December 20, 2019, the parties filed competing lawsuits against each other. (See Dkt. #1 (Sanmina Complaint); 19 Civ. 11712 Dkt. #2 (Dialight Complaint (“Dialight Compl.”))).2 On January 7, 2020, the Court accepted the two cases as related. (19 Civ. 11712, Minute Entry for January 7, 2020; see also Dkt. #7-8). On February 3, 2020, Sanmina amended its complaint. (Dkt. #18 (“Sanmina AC”)). On May 15, 2020, the Court entered the parties’ proposed case management plan (Dkt. #37) and the consolidated action

proceeded to discovery. Following extensive discovery — complicated in part by efforts to collect evidence from other countries (see, e.g., Dkt. #46-47, 57-58 (requesting the assistance of British, Canadian, and Mexican courts in the taking of foreign evidence)) — the parties participated in a private mediation at the end of 2021 (Dkt. #67). In January 2022, after the mediation proved unsuccessful (Dkt. #69), Sanmina expressed its intention to file a motion for partial summary judgment (Dkt. #71). With the Court’s consent, Sanmina filed its motion for partial

summary judgment and accompanying papers on May 2, 2022. (Dkt. #81, 83- 88). Dialight filed its opposition and accompanying papers on June 16 and 17,

2 Most documents filed after the Court accepted Case No. 19 Civ. 11712 as related to Case No. 19 Civ. 11710 appear on the dockets of both cases. As noted, the Court refers to the docket of the earlier-filed action (No. 19 Civ. 11710) unless otherwise specified. 2022. (Dkt. #92-99). Sanmina then filed its reply and accompanying papers on July 18, 2022. (Dkt. #102-111). Sanmina’s motion for summary judgment involved only a subset of the

claims set forth in the parties’ lawsuits. (Sanmina MSJ Br. 1-2). By way of background, Sanmina’s 2019 Complaint brought two distinct claims against Dialight: (i) breach of contract for failure to pay approximately $5.3 million in outstanding invoices for delivered goods (the “Accounts Receivable Claim” or “A/R Claim” (Sanmina AC ¶¶ 27-34)); and (ii) breach of contract for failure to pay approximately $4.55 million for excess and obsolete materials ordered in accordance with Dialight’s forecasts but never utilized (the “E&O Claim” (id. ¶¶ 35-42)). Dialight’s Complaint, in contrast, brought three claims against

Sanmina: (i) fraudulent inducement to enter the MSA (Dialight Compl. ¶¶ 67- 74); (ii) breach of contract for, inter alia, failing to ship complete, timely, and conforming orders (id. ¶¶ 75-100); and (iii) gross negligence/willful misconduct for failure to discharge its duty to refrain from negligently or intentionally harming Dialight’s business operations (id. ¶¶ 101-107). Sanmina moved for summary judgment as to only three of the five claims: Dialight’s first and third claims for fraudulent inducement and willful misconduct, respectively, and Sanmina’s Accounts Receivable Claim. (Sanmina MSJ Br. 1-2).

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