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TG Plastics Trading Co. v. Toray Plastics (America), Inc.

United States Court of Appeals, First Circuit

December 22, 2014

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

Page 32

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND. Hon. John J. McConnell, Jr., U.S. District Judge.

Sanford I. Weisburst, with whom Ryan S. Goldstein, Daniel H. Bromberg, Quinn Emanuel Urquhart & Sullivan, LLP, Jeffrey S. Brenner, and Nixon Peabody LLP were on brief, for appellant.

James Ratzel, with whom Michael J. Daly, Pierce Atwood LLP, and Ratzel, Pytlik & Pezze, LLC were on brief, for appellee.

Before Lynch, Chief Judge, Howard, Circuit Judge, and Saylor,[*] District Judge.

OPINION

Page 33

LYNCH, Chief Judge.

In 2007, Toray Plastics (America), Inc. (" Toray" ) of Rhode Island, a manufacturer of plastic film products, and T G Plastics Trading Co., Inc. (" National Plastics" ), a Colorado-based broker of plastic film products, entered into a Settlement Agreement to resolve a pending lawsuit. As part of the Settlement Agreement, Toray agreed to sell certain materials exclusively through National Plastics and to pay National Plastics a twelve percent commission on all sales of the materials thereby generated. National Plastics, believing that Toray had not held up its end of the bargain, sued Toray for breach of the Settlement Agreement. A jury found Toray liable and awarded National Plastics over $2 million in damages. Toray appeals, arguing that National Plastics had waived its right to a jury trial by a belated demand, and that the evidence was insufficient as a matter of law to support the jury's finding of liability or its calculation of damages. We affirm, sounding a cautionary note as to delayed demands for jury trials.

I.

Toray is a manufacturer of plastic films which are used in various food packaging and industrial applications. Toray's manufacturing processes produce excess materials, such as scrap left over after rolls of film are cut to a customer's specifications, and film that is damaged or otherwise rendered unusable during the manufacturing process. Toray has historically sold this material to plastics brokers. The brokers then resell the materials, often to businesses abroad or to customers in " secondary" or " commodities" markets, such as the floral industry.

National Plastics is a plastics broker that has purchased excess materials from Toray since 1988. In the mid-2000s, National Plastics allegedly fell behind on payments owed to Toray, and in May 2006, Toray filed a lawsuit to recover approximately $1.5 million in outstanding payments (" the First Lawsuit" ). National Plastics counterclaimed, alleging, among other things, that Toray had committed breach of contract and tortious interference with a business relationship.

After conducting " months of discovery," the parties eventually settled the First Lawsuit. The terms of the settlement were memorialized in a " Settlement Agreement and Release," signed on October

Page 34

15-16, 2007, which provided that, " [i]n full and final settlement of the [First Lawsuit] . . . Toray and National Plastics will enter into a long term business relationship . . . and National Plastics will pay Toray $1.5 million." As part of that " long term business relationship," Toray agreed that, for a period of seventeen years beginning on October 22, 2007, it would

exclusively sell to National Plastics one hundred percent (100%) of all scrap plastic, other scrap, second quality materials, downgraded materials, recyclable materials not reused internally and aged film. Because Toray does not have direct control over the end use or applications of these items . .., Toray cannot guarantee performance of this film in any application. During the Term, Toray will also regularly share all information with National Plastics on all persons or entities approaching Toray for purchase of Toray's scrap plastic, other scrap, second quality materials, downgraded materials, recyclable materials and aged film. National Plastics will be responsible for contacting all of these possible leads and following up with Toray on the outcome.

The Settlement Agreement further provided that, " [i]n order to insure that Toray is receiving competitive market pricing, National Plastics will work on a straight twelve percent (12%) of all sales generated by National Plastics." It also contained a provision giving each party the right to audit the other on an annual basis in order to ensure compliance.

The parties refer to the list of items Toray agreed to sell exclusively to National Plastics -- " scrap plastic, other scrap, second quality materials, downgraded materials, recyclable materials not reused internally and aged film" -- as the " agreed materials." The principals who negotiated the Settlement Agreement, Toray Chief Financial Officer David Jose and National Plastics owner Torge Goderstad, did not discuss the precise meaning of the words describing the agreed materials. In particular, the term " aged film" was added to the Settlement Agreement near the end of settlement negotiations and is not defined elsewhere in the agreement.

Soon after executing the Settlement Agreement, the parties began to dispute several aspects of its application, including, as relevant here, Toray's duty to sell aged film exclusively to National Plastics. In July 2009, National Plastics sued Toray 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, National Plastics moved to amend its complaint in June 2011 to add three additional claims and a request for a jury trial. The district court granted the motion for leave to amend over Toray's objection. Toray counterclaimed, alleging breach of the Settlement Agreement. However, by the time the case was submitted to the jury in January 2014 -- roughly thirty months after National Plastics filed its amended complaint -- the dispute had, for all practical purposes, been narrowed to a single issue: whether Toray had breached its duty under the Settlement Agreement to sell aged film ...


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