Prompt Apparel LA, Inc. v. Chic Home Design LLC

Background

Prompt operated a warehouse in Ontario, California. Prompt and Chic entered into a written agreement in November 2017 under which Chic stored merchandise at the warehouse and paid monthly storage and service fees. The agreement initially ran through January 1, 2019, but the parties continued performing under it afterward. Prompt issued invoices payable within 30 days.

In February 2019, Chic asked Prompt to include YX1 Logistics LLC in receiving reports and invoices. Prompt did so, but YX1 did not sign the warehousing agreement. In May 2023, Prompt and Chic agreed to increase the storage rate from $0.24 to $0.29 per cubic foot, effective June 1, 2023. The parties continued negotiating other terms, but Chic did not agree to Prompt’s later proposal for additional rate increases.

Prompt also performed work connected to goods shipped to Bed Bath & Beyond and sent Chic a $12,500 invoice that Chic did not pay. On August 23, 2023, Prompt notified Chic that it was terminating the agreement effective October 31, 2023. The notice stated that Chic would be charged $0.43 per cubic foot for storage beginning November 1, 2023, if its merchandise remained in the warehouse. Chic disputed that rate, paid only part of one invoice based on the $0.29 rate, and did not remove its remaining goods.

Prompt later held the inventory as security for amounts it believed Chic owed. In mid-2024, Prompt considered auctioning the inventory, but Chic threatened litigation and Chic’s lender, Israel Discount Bank, filed a separate lawsuit seeking to stop the auction. A January 7, 2025 settlement in that lawsuit allowed an auction to proceed. Prompt then decided for business reasons not to conduct the auction.

Trial and Claims

The case was removed from New York state court based on diversity jurisdiction. The parties consented to a United States Magistrate Judge’s jurisdiction, and the court held a bench trial on April 7 and 8, 2025, followed by closing arguments on May 21, 2025. Prompt asserted a breach-of-contract claim and alternative claims seeking the reasonable value of its warehousing services. Chic disputed Prompt’s right to recover and raised claims concerning Prompt’s retention of the inventory. YX1 argued that it was not liable because it had no agreement with Prompt.

Court’s Analysis

The court found by a preponderance of the evidence—the standard requiring a fact to be more likely true than not—that Chic breached the agreement by failing to pay the $12,500 invoice. Prompt was therefore entitled to $12,500 in damages. The court also awarded prejudgment interest, meaning interest accruing before judgment, at New York’s statutory rate of nine percent per year beginning August 14, 2023, when payment on the invoice was due.

The court found that the agreement had no termination provision and that Prompt’s 69-day notice was reasonable. Prompt therefore properly terminated the agreement effective October 31, 2023. Chic’s failure to remove its goods did not show that Chic accepted the new terms in Prompt’s termination notice, so the court found that no new contract was formed at that time.

For the post-termination storage services, the court awarded Prompt the reasonable value of the services under its alternative unjust-enrichment and reasonable-value claims. The court found that $0.43 per cubic foot was reasonable because the evidence showed that holdover storage commonly costs one-and-a-half to two times the normal storage rate. The court limited the award to invoices through January 1, 2025, including the full January monthly invoice. It found that Prompt reasonably refrained from auctioning the inventory before January 7, 2025 because of the threatened and actual litigation, but nothing prevented Prompt from pursuing an auction after the settlement permitted one.

The court awarded $1,603,662.36 for the reasonable value of services from November 2023 through January 2025, after accounting for payments Chic made. The court did not award Chic damages based on Prompt’s retention of the inventory because Chic did not present evidence establishing entitlement to those damages. The opinion states that Prompt’s retention was reasonable under the circumstances.

The court declined to award damages against YX1. YX1 was not a signatory to the agreement, and the evidence did not show that it assumed Chic’s contractual obligations. The evidence also did not establish that Prompt conferred a benefit on YX1, rather than Chic, or that YX1 benefited from the warehousing services.

Disposition

Judge Stewart D. Aaron ordered the Clerk to enter judgment for Prompt Apparel LA, Inc. against Chic Home Design LLC for $1,616,162.36, consisting of the $12,500 contract award and the $1,603,662.36 reasonable-value award. The judgment also includes prejudgment interest on the $12,500 award at nine percent per year from August 14, 2023, through the date judgment is entered. The court directed that the case be closed. No damages were awarded against YX1.