New England Biz Law Update
A $2 million jury verdict holding a manufacturer of plastic film products liable for breaching a settlement agreement with a broker has been upheld by the 1st U.S. Circuit Court of Appeals even though the broker waited almost two years to make a jury demand.
The defendant manufacturer argued that the plaintiff broker waived its right to a jury trial by not making a jury demand until 23 months after filing suit.
The 1st Circuit disagreed.
“The time period that elapsed between [the plaintiff]’s filing of the initial complaint and its demand for a jury trial was significant, to be sure, and such a long delay would ordinarily counsel against excusing a jury waiver,” Chief Judge Sandra L. Lynch wrote for the unanimous 1st Circuit panel. “But we agree with the district court that the reason offered for the delay — emphasis on settlement negotiations — was valid in the context of this case.”
The 22-page decision is TG Plastics Trading Co., Inc. v. Toray Plastics (America), Inc.
Wisconsin attorney James Ratzel argued the appeal on behalf of the plaintiff. Sanford I. Weisburst of New York represented the defendant.
Settlement negotiations
In 2007, a settlement agreement was reached between defendant Toray Plastics (America), Inc. of Rhode Island, a manufacturer of plastic film products, and plaintiff TG Plastics Trading Co., Inc., doing business as National Plastics, a Colorado-based broker of plastic film products.
As part of the agreement, the defendant agreed to sell certain materials exclusively through National Plastics and to pay the plaintiff a 12 percent commission on all sales of the materials thereby generated.
The defendant agreed that, for a period of 17 years beginning on Oct. 22, 2007, it would exclusively sell to the plaintiff 100 percent of “all scrap plastic, other scrap, second quality materials, downgraded materials, recyclable materials not reused internally and aged film.” The term “aged film” was added to the settlement agreement near the end of settlement negotiations and was not defined elsewhere in the agreement.
The parties began to dispute several aspects of the agreement, including the defendant’s duty to sell aged film exclusively to the plaintiff.
In July 2009, the plaintiff sued the defendant in federal court in Rhode Island, claiming damages stemming from Toray’s alleged failure to sell 100 percent of the agreed materials to National Plastics and requesting specific performance of the settlement agreement’s auditing provisions.
The original complaint did not contain a jury demand.
After two years of settlement negotiations, which ultimately proved fruitless, the plaintiff moved to amend its complaint in June 2011 to add a request for a jury trial.
U.S. District Court Judge John J. McConnell Jr. granted the motion for leave to amend over the defendant’s objection.
The jury found the defendant liable for breach of the settlement agreement and awarded the plaintiff $2,020,428.95 in damages.
Jury demand
The 1st Circuit found that it was not an abuse of discretion for McConnell to allow the plaintiff to amend its complaint to add a jury demand.
“The district court found, and Toray does not contest, that the issues in this case were suited to jury determination,” Lynch said. “The allowance of the motion to amend did not disrupt the schedule of the litigation; at the time of the amendment, discovery was still in its early stages due to the parties’ earlier efforts ‘to resolv[e] the matter as opposed to litigat[e] it.’”
The defendant conceded that it suffered no prejudice as a result of the amendment in terms of its ability to prepare for trial, since it had two and a half years after the amended complaint was filed to ready its case.
The 1st Circuit said a court-imposed “moratorium” on discovery had been imposed with the goal of facilitating settlement negotiations. The discovery stay was later lifted on the understanding that the parties would not take any steps to interfere with settlement negotiations.
“It was thus reasonable for National Plastics to delay its request for a jury trial until it became clear that settlement would not be forthcoming,” Lynch stated. “This was not, as Toray would have it, simply a case of an unexplained last-minute change in tactics.”
She noted, however, that “a party takes a considerable risk in delaying the making of a jury demand.”
Damages
The defendant contended that the plaintiff failed to present sufficient evidence to allow a jury to conclude with reasonable certainty that National Plastics suffered more than $2 million in damages as a result of the defendant’s breach of the settlement agreement.
“In order to settle pending claims against each other, Toray and National Plastics agreed to do business together over a seventeen-year period pursuant to the terms of a Settlement Agreement honed through extensive negotiation,” Lynch said. “[A] jury could reasonably conclude, based on evidence of the parties’ intent, that twelve percent of Toray’s revenues from its breaching the Settlement Agreement was a reasonable estimate of National Plastics’ loss as a result of Toray’s refusal to do business according to the agreement’s terms. No more is required under Rhode Island law.”
