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T.G. Plastics Trading Co. Inc. v. Toray Plastics (America), Inc.

United States District Court, D. Rhode Island

August 2, 2013

T.G. PLASTICS TRADING CO. INC., d/b/a NATIONAL PLASTICS TRADING CO.
v.
TORAY PLASTICS (AMERICA), INC

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For T G Plastics Trading Co., Inc., d/b/a National Plastics Trading Co., Plaintiff: Brooks R. Magratten, Michael J. Daly, LEAD ATTORNEYS, Ronald M. LaRocca, Pierce Atwood LLP, Providence, RI; James Ratzel, Ratzel & Associates, LLC, Brookfield, WI.

For Toray Plastics (America), Inc, Defendant: Jeffrey S. Brenner, Steven M. Richard, Nixon Peabody LLP, Providence, RI; Michael J. Daly, Pierce Atwood LLP, Providence, RI.

For Toray Plastics (America), Inc, Counter Claimant: Jeffrey S. Brenner, Nixon Peabody LLP, Providence, RI; Michael J. Daly, Pierce Atwood LLP, Providence, RI.

For T G Plastics Trading Co., Inc., d/b/a National Plastics Trading Co., Counter Defendant: Brooks R. Magratten, Michael J. Daly, LEAD ATTORNEYS, Pierce Atwood LLP, Providence, RI.

OPINION

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MEMORANDUM AND ORDER

John J. McConnell, Jr., United States District Judge.

Plaintiff T.G. Plastics Trading Co. Inc., d/b/a National Plastics Trading Co. (" National Plastics" ) sued Defendant Toray Plastics (America), Inc. (" Toray" ) for allegedly breaching the settlement agreement that arose from prior litigation. Toray countersued, also alleging a contract breach.

Although there are fourteen claims between the parties, in essence this is a claim by each party for allegedly breaching a contract. Both parties have moved for summary judgment seeking to dismiss all of the claims against them, respectively. (ECF Nos. 174 & 178.)

This Court GRANTS IN PART Toray's Motion for Summary Judgment (ECF No. 174) and dismisses Counts II, III, IV, and VII, and DENIES summary judgment for all other counts. This Court GRANTS IN PART National Plastics' Motion for Summary Judgment (ECF No. 178), and dismisses Counterclaims IV, V and VII, and DENIES summary judgment for all other counterclaims.

I. FACTS

Toray, a Rhode Island corporation, manufactures plastic film products. (ECF No. 175 at ¶ 1.) National Plastics, a Colorado corporation, purchases plastic film products and resells them to other companies for a profit. Id. at ¶ 2. These companies had a previous long-term business relationship; Toray would sell some of its second grade quality materials to National Plastics, which in turn resold them. (ECF No. 198 at ¶ 1.) At the heart of this dispute is the settlement agreement (" Agreement" ) that ended earlier litigation between the two companies in 2007. (ECF No. 175 at ¶ 13.)

The Agreement established the business relationship's terms proceeding from 2007 through 2024. (ECF No. 1, Exhibit A.) The Agreement requires Toray to sell certain materials (" agreed materials" ) exclusively to National Plastics. Id. The Agreement defines agreed materials as " scrap plastic, other scrap, second quality materials, downgraded materials, recyclable materials not reused internally and aged film." Id. at 3. None of the terms within this definition are further defined.

At National Plastics' request during the negotiations process, Toray sent National Plastics a list of materials that Toray sold. (ECF No. 175 at ¶ ¶ 30 & 31.) Toray made no representations about how it defined the materials on this list, but National Plastics asserts they believed that these materials would be included as the " agreed materials" under the Agreement. Id.

In exchange for Toray exclusively selling all of the agreed materials to National Plastics, National Plastics receives a " straight twelve percent (12%) of all sales generated by National Plastics." (ECF No. 1, Exhibit A at 4.) In addition, the Agreement requires National Plastics to use its best efforts to maximize pricing, tie the price to market conditions, and share

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its pricing method with Toray. Id. The Agreement gives each party the right to audit the other party on an annual basis, but does not define the audit's scope. Id. at 5. The Agreement also includes a disclaimer and an integration clause. Id.

Almost immediately, disputes arose over the proper pricing of the agreed materials and the definition of the agreed materials. As to the proper pricing, National Plastics' practice was to request pricing from its customers, communicate the pricing back to Toray, and ultimately charge its customers the price Toray invoiced for the agreed materials. (ECF No. 179 at 2-3.) National Plastics then retained twelve percent of Toray's invoice price for the agreed materials and remitted the remaining eighty-eight percent to Toray. Id. at 3. National Plastics charged its customers separately for transportation costs, and did not remit any payment to Toray based on payments received for transportation costs. Id. These transportation costs amounted to $499,518.40 in total. (ECF No. 194 at ¶ ¶ 13-20.)

In 2008, David Jose, Toray's Chief Financial Officer, sent a number of emails to Torge Goderstad, National Plastics' President, requesting that National Plastics increase the price it charged customers and stop charging customers separately for transportation costs. (ECF No. 194, Exhibits B-E.) Mr. Goderstad affirmed his desire to increase the agreed materials' price but never conceded that National Plastics had charged its customers any differently than the Agreement required. Id.

Since the parties entered into the Agreement, Toray has substantially increased its capacity to recycle its own plastic films. (ECF No. 175 at 8). Consequently, the volume of agreed materials that National Plastics received from Toray decreased. Id. The Agreement specifically envisions Toray's increased recycling and calls for Toray and National Plastics to adapt to these changes. (ECF No. 1, Exhibit A at 4.)

For accounting purposes, Toray defines film older than 13 months as aged film. Id. at 5. Though it charges the same price for aged film as it charges for newer film, Toray places a valuation reserve [1] on the aged film when it reaches 13 months, and another valuation reserve when it reaches 19 months. Id.

In 2008, National Plastics became concerned Toray was not exclusively selling a hundred percent of the agreed materials to National Plastics. (ECF No. 188, Exhibit 15.) In early 2009, National Plastics exercised its right under the Agreement to audit Toray. (ECF No. 1, Exhibits D-L.) While Toray partially complied with National Plastics' requests for documents, Toray refused to release many of the documents that National Plastics deemed necessary for an audit. (ECF No. 1, Exhibit H.) Toray refused to release the requested documents on the grounds that National Plastics' audit exceeded the scope envisioned by the Agreement. Id. This dispute led National Plastics to initiate this lawsuit. National Plastics has since tried to obtain these documents through discovery, however, Magistrate Judge Lincoln D. Almond denied National Plastics' request for these documents. (ECF No. 18.)

In 2011, National Plastics did not remove all the agreed materials at Toray's facilities that were ready for delivery. (ECF No. 122.) Toray then spent

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$5,406.50 to transport and store these materials in an off-site warehouse. Id.

This litigation began in 2009 when National Plastics sued Toray for breach of contract. (ECF No. 1.) In 2011, Toray filed counterclaims. (ECF No. 65-1.) National Plastics alleges seven counts in its Complaint:

1. Breach of contract with respect to definition of the agreed materials and scope of the audit,

2. Breach of duty to a partner or fiduciary,

3. Tortious interference with a third party contract,
4. Tortious interference with prospective business advantage,
5. Breach of the duty of good faith and fair dealing,
6. Negligent misrepresentation, and
7. Request for award of attorneys' fees.
Toray countersued alleging seven of its own counts:
1. Breach of contract for not charging the proper price of the agreed materials,
2. Breach of contract for not using best efforts to maximize the price of ...

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