Tobe Products v. Shapiro

Opinion

USCA1 Opinion

[Not for Publication]
                                [Not for Publication]

                            United States Court of Appeals
                            United States Court of Appeals
                                For the First Circuit
                                For the First Circuit
                                 ____________________
        No. 93-2322

                           TOBE PRODUCTS OF AMERICA, INC.,
                                 Plaintiff, Appellee,

                                          v.

                                 MURRAY SHAPIRO D/B/A
                             VINTAGE CREATIONS LTD, INC.,
                               Defendants, Appellants,

                                 ____________________

                             VINTAGE CREATIONS, LTD, INC.
                               Defendants, Appellants.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT
                           FOR THE DISTRICT OF RHODE ISLAND
                     [Hon. Ernest C. Torres, U.S. District Judge]
                                             ___________________
                                 ____________________

                                        Before

                            Cyr and Stahl, Circuit Judges,
                                           ______________
                             and Zobel,* District Judge.
                                         ______________

                                 ____________________

            David  B.  Wechsler with  whom  Hirsch  Weinig  was  on brief  for
            ___________________             ______________
        appellants.
            Thomas A. Tarro, III with whom Fortunato & Tarro was on brief  for
            ____________________           _________________
        appellee.
                                 ____________________

                                   August 29, 1994
                                 ____________________

        ____________________
        *Of the District of Massachusetts, sitting by designation.

STAHL, Circuit Judge.   Following  a two-day  bench
                      STAHL, Circuit Judge.
                             _____________

            trial, the district  court entered judgment in the  amount of

            $55,944.76, plus  interest and costs, in  favor of plaintiff-

            appellee  Tobe Products  of  America, Inc.,  ("Tobe") on  its

            breach of contract claim against  defendant-appellant Vintage

            Creations, Ltd.,  Inc. ("Vintage").  Vintage  challenges this

            order,  asserting  that the  court  erred  in making  certain

            underlying factual and mixed fact/law findings.  Vintage also

            argues that  the court  committed sundry  legal  errors.   We

            affirm.

                                          I.
                                          I.
                                          __

                                      BACKGROUND
                                      BACKGROUND
                                      __________

                      Tobe  is a  Rhode Island  importer of  glass stones

            used in the manufacture of jewelry.   Vintage is a New Jersey

            jewelry manufacturer.  In early 1991, Vintage entered  into a

            licensing  agreement  with  the  New  York  fashion  designer

            Kenneth Cole in which Cole  agreed to lend his name to  a new

            jewelry  line Vintage  would manufacture  and sell.   Shortly

            thereafter, Vintage  identified Tobe as a  possible source of

            the stones to be used in this new line.  Representatives from

            Tobe visited  Vintage, bringing  specimen boards  showing the

            various shapes,  sizes, and  colors of handmade  stones which

            Tobe could procure from Germany.

                      On April 24, 1991,  Vintage contracted with Tobe to

            purchase  approximately  40,000  stones,  in  various  sizes,

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styles, and colors,  for a  price of roughly  $100,000.   The

            contract  provided for a 5%  defect rate, and  Tobe agreed to

            credit Vintage for  any defective stones over  and above this

            rate.  The parties agreed that Tobe would ship the  stones to

            Vintage in lots whenever Vintage requested shipment, and that

            Vintage would  pay for each shipment  within forty-five days.

            The   contract  also   permitted  Vintage   to  maintain   an

            outstanding  credit balance of up to $15,000.  On October 31,

            1991,  Tobe  was  to ship  to  Vintage  any  stones on  which

            delivery had not yet been taken.

                      Throughout  the spring,  summer, and early  fall of

            1991, Vintage requested and accepted shipments of stones from

            Tobe.   It  paid its  bills on  these  shipments in  a timely

            manner.  Vintage returned a portion of one of these shipments

            because  it  did  not need  the  stones  until  later in  the

            production  run and  because it  had not  yet  requested that

            these stones be shipped.  Tobe issued Vintage a credit on the

            returned  stones.   During  this  same  time period,  Vintage

            informed  Tobe on at least one occasion  that more than 5% of

            the  stones it had received were of insufficient quality.  It

            did  not,  however, return  any  of  the allegedly  defective

            stones for credit or replacement.

                       On October 31, 1991, pursuant  to the terms of the

            contract, Tobe shipped to  Vintage all of the stones  it then

            had  on  hand,  together  with  an  invoice  for  $33,359.63.

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Vintage made  partial payments on this  invoice from December

            1991 through February 1992, but failed to pay $20,621.85.  On

            November  15,  1991,  Tobe  received  from  Germany  a  late-

            arriving,  final shipment  of  stones.   Upon receiving  this

            shipment, Tobe  invoiced Vintage for an additional $35,322.91

            and requested  delivery instructions.  Vintage  failed to pay

            any  portion  of this  invoice,  and never  responded  to the

            request for delivery instructions.   Tobe never shipped these

            stones to Vintage.

                      All told, Tobe shipped Vintage approximately 32,000

            stones.  In April 1992, Vintage returned approximately 12,000

            of these stones  to Tobe, claiming that  they were defective.

            It continued to possess  approximately 19,000 stones received

            pursuant to  the contract.   At  trial, Vintage  claimed that

            because  of  the alleged  defects, it  was  able to  use only

            between six hundred  and one  thousand of the  stones in  the

            manufacture of the jewelry.

                      In  May  1992, Tobe  instituted  this suit  against

            Vintage to  recover the $55,944.76, plus  interest and costs,

            allegedly due it under  the contract.  In November  1993, the

            case  was tried  by Judge  Torres.   Tobe presented  its case

            through two witnesses.   Its sales manager, Alexandra Rainer,

            testified to the negotiations  and course of business between

            Tobe and Vintage.   She further testified that the  stones at

            issue  were   unique,  that   they   conformed  to   contract

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specifications,  and that  Tobe  had made  efforts to  resell

            them.  Tobe also produced an expert witness, Donald Donnelly,

            who testified that the stones were unique, conforming, and of

            very high quality.  

                      Vintage's only witness was its vice president, Drew

            Shapiro.  Shapiro testified  that he had personally inspected

            each of the shipped stones and found that 85-90% of them were

            defective.   He also testified  that he had  not returned the

            stones because he had  reached an oral agreement with  Tobe's

            director, Jurgen Feix, to retain all  of the defective stones

            for  a   final  accounting  once  each   side  had  completed

            performance of the contract.  Shapiro claimed that continuing

            to accept and pay for the stones was his only real option; he

            had invested approximately $300,000 in the jewelry into which

            the  stones were to be set, and risked losing that investment

            entirely unless  he continued to perform  under the contract.

            He  therefore   relied  on  Feix's   alleged  repeated,  oral

            assurances that Tobe ultimately  would provide Vintage with a

            sufficient number of quality stones to meet production needs.

                      On November  4, 1993,  Judge Torres issued  a bench

            decision awarding Tobe the full amount of damages sought.  In

            so doing, he specifically found that the disputed stones were

            unique  goods  identified  to  the contract,  and  that  they

            conformed  to contract  specifications.   He also  found that

            Tobe had  made reasonable  efforts to  resell the stones  and

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that  Tobe did not act  improperly by failing  to deliver the

            last  shipment.  Judgment entered on November 10, 1993.  This

            appeal followed.

                                         II.
                                         II.
                                         ___

                                      DISCUSSION
                                      DISCUSSION
                                      __________

                      The primary thrust of  Vintage's appellate brief is

            that the trial court  erred in finding that Tobe  had carried

            its  burden of proving that (1) the stones were unique goods;

            (2) the stones conformed  to contract specifications; and (3)

            it  had made  commercially reasonable  efforts to  resell the

            stones it  continues to  possess.  Vintage  also takes  issue

            with the court's determination  that Tobe acted reasonably in

            failing to  forward the final shipment of  stones to Vintage.

            Finally,  Vintage contends  that  Tobe's  failure to  provide

            evidence  of  market  price  and/or   lost  profits  requires

            reversal of  the district  court's decision.   After reciting

            the relevant standard of review, we discuss  each argument in

            turn.

            A.  Standard of Review
            A.  Standard of Review
            ______________________

                      Insofar  as  Vintage  is  challenging  the district

            court's  legal rulings,  our review  is, of  course, plenary.

            E.g., Williams v. Poulos,  11 F.3d 271, 278 (1st  Cir. 1993).
            ____  ________    ______

            We will  not set  aside a  court's factual  finding, however,

            unless it is shown to be  clearly erroneous.  Fed. R. Civ. P.

            52(a); Poulos, 11 F.3d at 278.  Nor will we  overturn a trial
                   ______

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court's  determination of  a  fact-dominated  mixed  law/fact

            question  unless  we  are  persuaded  that the  determination

            constituted  clear error.  Poulos,  11 F.3d at  278 and n.11.
                                       ______

            And,  in cases  like this one  where the  challenged findings

            "are  based on  determinations regarding  the  credibility of

            witnesses, Rule 52 demands that the appeals court accord even

            greater deference to the trial court's findings."  Rodriguez-
                                                               __________

            Morales v.  Veterans  Admin., 931  F.2d  980, 982  (1st  Cir.
            _______     ________________

            1991); see also Fed. R. Civ. P. 52(a).
                   ___ ____

            B.  Factual Findings Regarding Burden of Proof
            B.  Factual Findings Regarding Burden of Proof
            ______________________________________________

                      The parties  agree that  Rhode  Island law  governs

            this dispute  and that  R.I. Gen.  Laws    6A-2-709(1), which

            codifies    2-709(1) of the Uniform  Commercial Code, applies

            to this  action for the contract  price of the stones.*   The

            parties also agree that, as a prerequisite to recovery of the

            contract  price under    6A-2-709(1),  Tobe had  to establish

            that the stones were unique, that they  conformed to contract

            specifications,  and that it had made commercially reasonable

            efforts  to resell them.  See Taft-Peirce Mfg. Co. v. Seagate
                                      ___ ____________________    _______

____________________

          *.  
            In relevant part, R.I. Gen. Laws   6A-2-709(1) provides:

                 Action for the price.- (1) When the  buyer fails to
                 Action for the price.-
                 pay the  price as  it  becomes due  the seller  may
                 recover . . . the price,
                      (a) Of goods accepted . . .; and
                      (b) Of goods  identified to the  contract
                      if the seller  is unable after reasonable
                      effort to   resell them  at a  reasonable
                      price . . . . 

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                                          7

Technology,  Inc.,  789 F.  Supp.  1220,  1228 (D.R.I.  1992)
            _________________

            (setting forth conditions precedent to recovery under   6A-2-

            709(1)).    Their  only  disagreement  is  over  whether  the

            districtcourt erred in concludingthat Tobe hadmet its burden.

                      Certainly, Tobe  did not  overwhelm the court  with

            evidence  tending to  establish the  conditions precedent  to

            recovery under    6A-2-709(1).  Mindful  of the deference  we

            must  accord both  the district  court's resolution  of fact-

            dominated  mixed  fact/law   questions  and  its  credibility

            determinations,  however,  we  cannot  say  that  the   court

            committed  clear error in making its rulings.  With regard to

            whether the stones were unique,  the court heard and credited

            testimony from Tobe's sales  manager, Alexandra Rainier, that

            Tobe did not  carry the stones at issue in  stock, but rather

            ordered them specially from German  manufacturers.  Moreover,

            the  court  heard  and  credited  testimony from  plaintiff's

            expert,  Donald  Donnelly, that  the  stones  had unique  and

            uncommon   shapes   and  colors.**      Finally,  the   court

____________________

          **.  
            In a footnote, Vintage makes a half-hearted argument that the
            court committed reversible error  in allowing Mr. Donnelly to
            testify as  an expert pursuant to  Fed. R. Evid. 702.   It is
            well  settled that  a court's  admission of  expert testimony
            under  Rule 702  will  be  reversed  only  for  an  abuse  of
            discretion.   See, e.g., Navarro de Cosme  v. Hospital Pavia,
                          ___  ____  ________________     ______________
            922 F.2d  926, 931  (1st Cir.  1991).   We have reviewed  the
            trial transcript and  are of the view that the  court did not
            abuse  its discretion  in determining  that Mr.  Donnelly, by
            virtue of  his twenty-eight years of  experience in importing
            glass stones from Germany, would provide testimony that would
            assist  it in  "understand[ing]  the  evidence  or    .  .  .

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                                          8

specifically noted that it found Ms. Rainier and Mr. Donnelly

            to  be  credible witnesses,  and that  it  did not  find Drew

            Shapiro, the only person who  testified on behalf of Vintage,

            to be a  credible witness.   No more was required  to support

            its uniqueness determination.***

                      With regard  to whether the stones  were conforming

            and  whether Tobe  made  commercially  reasonable efforts  to

            resell them, the evidence,  though thin, also was sufficient.

            The court  heard and credited testimony from Ms. Rainier that

            (1) she randomly inspected the shipments  of stones when they

            came  from  Germany;  (2)   the  stones  she  inspected  were

            conforming;****  (3)   the  stones  returned  by  Vintage  in

____________________

            determin[ing]  a fact in  issue . .  . ."  See  Fed. R. Evid.
                                                       ___
            702.   Accordingly, we  reject Vintage's claim  of reversible
            error.

          ***.  
            Vintage also argues that the court, in allowing Tobe to argue
            at  trial  that  the  stones were  unique,  effectively  (and
            prejudicially)  allowed Tobe  to amend  its complaint  at the
            eleventh hour.  The  complaint, however, seeks contract-price
            damages (the recovery of  which requires a uniqueness showing
            under the Uniform Commercial  Code) and refers to the  stones
            as "specific goods and  merchandise."  In our view,  this was
                ________
            sufficient to put  Vintage on notice  that the uniqueness  of
            the stones would be  an issue at trial.   Generally speaking,
            no  more is required under  Fed. R. Civ. P. 8.   See Boston &
                                                             ___ ________
            Maine Corp. v. Town  of Hampton, 987 F.2d 855, 865  (1st Cir.
            ___________    ________________
            1993)  (discussing  the   "minimal"  requirements  of  notice
            pleading under Rule 8).  Tobe's uniqueness argument therefore
            should  not  be  regarded as  a  de  facto  amendment to  the
                                             __  _____
            complaint.

          ****.  
            In  its brief  and  at oral  argument, Vintage  asserted that
            there  was a complete  absence of evidence  that the shipment
            which  Tobe received in November  1991 but never forwarded to

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                                          9

April  1992 were conforming; (4)  many of the  boxes of these

            allegedly non-conforming  stones  had never  been  opened  by

            anyone  at Vintage; and (5)  she had attempted  to resell the

            stones to other customers,  but had been unsuccessful because

            they were very expensive and came in unusual colors.  It also

            heard  and credited testimony from Mr.  Donnelly that many of

            the boxes of  stones returned  in April 1992  had never  been

            opened  and  that  the  allegedly  non-conforming  stones  he

            inspected  were   not   defective.     Finally,   the   court

            specifically rejected  the only evidence  offered by  Vintage

            which tended to indicate that the stones were not conforming:

            the  testimony of  Mr. Shapiro.*****   In  our view,  this is

            enough    to   insulate   its   conformity   and   commercial

            reasonableness rulings from reversal on appeal.

            C.  Other Matters
            C.  Other Matters
            _________________

                      The other issues raised  by Vintage can be disposed

            of  summarily.   Vintage's  first  argument,  that the  court

            committed  reversible  error   in  ruling  that   Tobe  acted

____________________

            Vintage (as distinct from the stones Vintage returned to Tobe
            in April  1992) was conforming.   This simply is not  so.  In
            the course of  stating her opinion that the  stones conformed
            to contract  specifications, Ms.  Rainier gave  the following
            testimony:   "I  randomly inspected  the shipments  when they
            come  [sic] from Germany  and I  also randomly  inspected the
            merchandise that came back from Vintage just to make sure."  

          *****.  
            Vintage offered no evidence  which either tended to undermine
            Ms. Rainier's  testimony that she  had been unable  to resell
            the  stones or which tended to show that her efforts were not
            commercially reasonable.

                                         -10-
                                          10

reasonably  in failing to forward to Vintage the final lot of

            stones, is premised entirely upon a contention that the court

            erroneously interpreted the  contract's $15,000 credit limit.

            We  need not  reach the merits  of this  contention, however,

            because the court also based its reasonableness determination

            on  a supportable,  alternative  finding  that Vintage  never

            responded  to  Tobe's   request  for  shipping   instructions

            regarding the final lot.   And, upon carefully reviewing  the

            record, we can discern  no clear error in either  the finding

            that  Vintage did not respond  to the instructions  or in the

            determination   that  this  failure  to  respond  provided  a

            reasonable basis for Tobe's failure to ship.

                      Vintage's   second   argument,  that   reversal  is

            required  because  Tobe failed  to  provide  any evidence  of

            market price and/or lost profits, is specious.   The argument

            is based entirely upon an incorrect reading of Karen v. Cane,
                                                           _____    ____

            578 N.Y.S.2d  85 (Cir. Ct. 1991).  Karen notes the need for a
                                               _____

            seller to establish  market price  in order to  prevail on  a

            claim  under  Uniform Commercial  Code    2-708; it  does not
                                                                      ___

            establish this as a  requirement in the context of  an action

            for the price under   2-709(1). Such a requirement would make

            no sense  in the context  of    2-709(1), which, by  its very

            nature, allows a  seller to recover damages  established by a

            previously agreed-upon sale price when certain conditions are

            met.

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III.
                                         III.
                                         ____

                                      CONCLUSION
                                      CONCLUSION
                                      __________

                      For  the  reasons  stated  above,  we  affirm   the

            district  court's entry of judgment  in favor of  Tobe on its

            breach of contract claim.

                      Affirmed.  Costs to appellee.
                      Affirmed.  Costs to appellee.
                      _________  __________________

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