USA Staffing Services LLC v. YDC, Inc.

Background

USA Staffing Services, LLC provided YDC, Inc. d/b/a REZI with employees on a temporary or contract basis under a June 17, 2021, contract. The contract required YDC to approve weekly time records, pay weekly invoices within 30 days, and give written notice of any invoice dispute within 10 days. An invoice not paid within 24 days after the payment deadline would be considered in default and would accrue interest. The contract also required the customer to pay the balance due, interest, collection costs, and reasonable attorneys’ fees.

USA Staffing submitted 279 invoices totaling $3,158,342.36. YDC paid $2,454,260.75 but did not fully or timely pay some invoices beginning in early 2023. The opinion states that a dispute between YDC and its lenders caused a cash-flow interruption. The parties tried, unsuccessfully, to negotiate payment of the arrears. USA Staffing continued providing services during the negotiations but withdrew its employees on September 26, 2023. USA Staffing filed this action on September 29, 2023, alleging breach of contract and an account-stated claim. An account-stated claim seeks payment based on a bill that was presented and kept without timely objection, implying acceptance of the amount owed.

USA Staffing moved for summary judgment before discovery. Summary judgment is a decision without a trial when the evidence shows no genuine dispute over a fact that could affect the result and the moving party is entitled to judgment as a matter of law.

Discovery Request

YDC argued that summary judgment was premature because it needed additional discovery. Under Federal Rule of Civil Procedure 56(d), a party opposing summary judgment must provide a sworn statement identifying the facts it seeks, how it would obtain them, why they could create a genuine factual dispute, and why it had been unable to obtain them. The court held that YDC’s affidavits did not provide this information. The court also determined that the proposed evidence about settlement discussions would generally be inadmissible to prove the validity or amount of USA Staffing’s claims, and that YDC could have submitted evidence of its own conduct without discovery. The court therefore proceeded to decide the motion.

Breach of Contract

The court granted summary judgment to USA Staffing on Count One. The parties did not dispute that a contract existed, and YDC did not dispute that its nonpayment caused monetary damage. The court found that USA Staffing performed by providing workers, timesheets, and bills.

YDC argued that USA Staffing failed to give written notice ending the contract. The court held that any such failure did not defeat USA Staffing’s claim. YDC’s failure to pay was a material breach because payment was central to the parties’ agreement, and that breach excused any failure by USA Staffing to provide written termination notice. The court also noted that YDC had not filed a counterclaim, shown damages from the lack of written notice, or argued that USA Staffing’s alleged breach excused YDC’s earlier nonpayment.

The court held that the contract did not require a separate notice of default. Under the contract, default occurred automatically after the specified period of nonpayment. The contract also required YDC to dispute an invoice in writing within 10 days; otherwise, the invoice was deemed undisputed, accepted, and payable. YDC did not claim that it had sent timely written disputes or that it had fully paid the invoices. The court therefore held that YDC breached the contract by failing to pay the undisputed invoices.

The court rejected YDC’s argument that the parties’ course of dealing changed the contract to allow oral invoice objections. The contract required modifications and waivers to be in writing, and YDC offered no admissible evidence of a written modification, waiver, consent, or forgiveness of the nonpayment. The court also found that the parties’ unsuccessful payment negotiations did not create an agreement changing YDC’s obligations.

The court rejected YDC’s force-majeure defense. The contract listed events such as labor disputes, strikes, fire, riots, war, terrorism, and acts of God, followed by a reference to other causes beyond the nonperforming party’s control. The court held that the record did not show that a dispute between YDC and its lenders was the same type of event as those listed, did not show that YDC’s nonpayment resulted from causes beyond its control, and did not adequately explain why the lenders’ actions occurred. The court further held that the contract’s reference to “Section 25” in the force-majeure provision was an obvious typographical error referring to the force-majeure section, and that the provision separately excluded YDC’s payment responsibilities from the defense.

The court also rejected YDC’s argument that USA Staffing failed to mitigate damages. Although USA Staffing could have stopped providing services sooner, the court found no evidence that continuing to provide services during negotiations was unreasonable. The court noted that YDC could not both argue that continued service was unreasonable and claim that USA Staffing acted unreasonably when it eventually stopped providing service.

Account Stated

The court granted summary judgment to USA Staffing on Count Two. The evidence showed that USA Staffing presented YDC with the invoices and that YDC never objected to the invoiced amounts, either in the manner required by the contract or otherwise. Communications between the parties focused on creating a payment plan rather than disputing whether the invoices were owed. YDC presented no evidence that it objected even orally to the amounts. The court therefore held that YDC’s retention of the invoices without objection supported USA Staffing’s account-stated claim.

The court also explained that the account-stated claim was not duplicative of the breach-of-contract claim because the contract provided for attorneys’ fees, while recovery on an account-stated claim ordinarily would not include such fees.

Disposition

The court granted USA Staffing’s motion for summary judgment on all claims. The court directed a separate referral to Magistrate Judge Figueredo for an inquest to determine damages consistent with the contract, including its provisions concerning default, interest, attorneys’ fees, and collection costs. The opinion did not state a final damages amount.