Reach Companies, LLC v. Newsert LLC

Background

This diversity case arose from efforts by Reach Companies, LLC and Newsert LLC to enter the hand-sanitizer market during the early months of the COVID-19 pandemic. Reach agreed to sell hand sanitizer to Newsert, which submitted 21 purchase orders between March 6 and April 13, 2020. The relationship ended about a month later.

Reach alleged that Newsert backed out of commitments to purchase several million dollars’ worth of hand sanitizer, refused further deliveries, and refused to pay. Newsert alleged that Reach generally failed to fulfill the purchase orders as written. David Serata was Newsert’s managing member.

Reach’s claims were breach of contract, promissory estoppel, and tortious interference with contract. Newsert asserted counterclaims for breach of contract, under Article 2 of the Uniform Commercial Code, unjust enrichment, conversion, fraud, and price gouging under New Jersey Statutes section 56:8-109. The court noted that Newsert had abandoned an additional counterclaim under the New Jersey Consumer Fraud Act and that Serata did not assert counterclaims individually.

Counterclaims and summary-judgment standard

Reach argued that summary judgment should be entered against Newsert’s counterclaims because Newsert had not reasserted them in its answer to Reach’s second amended complaint. The court rejected that argument. Newsert had timely asserted the counterclaims earlier, referred to them in its later responsive pleading, pursued them, and participated in discovery concerning them. The court therefore did not enter summary judgment against the counterclaims on that procedural ground.

Summary judgment is appropriate when the evidence shows no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment under the law. Because both sides moved for summary judgment, the court viewed the evidence favorably to the nonmoving party when considering each motion.

Contract and quasi-contract claims

The court denied both motions with respect to the parties’ contract claims. The parties appeared to agree that they had entered some contracts, but they disputed the contracts’ terms, including delivery dates, prices, and whether Newsert could reject shipments. The record also contained disputes about whether Newsert accepted price increases or waived defenses based on the statute of frauds, a rule requiring certain sales contracts to be supported by a signed writing.

The court also declined to enter summary judgment against Reach’s promissory-estoppel claim or Newsert’s unjust-enrichment claim. Those equitable claims might remain relevant if a jury determined that no enforceable contract governed some or all of the parties’ dealings or that no contract remedy was available. The court denied the parties’ motions as to the contract and alternative quasi-contract claims because factual disputes required a trial.

Reach’s tortious-interference claim

The court granted Newsert’s motion with respect to Reach’s tortious-interference-with-contract claim. Reach asserted that Newsert and Serata interfered with Reach’s relationships with two suppliers. But the evidence did not show that Reach had an existing contract with either supplier that Newsert or Serata could have caused to be breached. The court therefore found that the claim lacked trial-worthy evidence supporting its first required element.

Newsert’s conversion, fraud, and price-gouging counterclaims

The court granted Reach’s motion with respect to Newsert’s conversion counterclaim. Newsert based that claim on Reach’s alleged retention of advance payments sent by electronic wire transfer. Under the rule applied by the court, money can support a conversion claim only when it is tangible, segregated, or specifically identifiable. Newsert did not allege that the wired funds met those requirements.

The court granted Reach’s motion with respect to Newsert’s fraud counterclaim. Newsert relied on alleged promises that Reach would timely deliver goods, honor purchase-order prices, and meet labeling and packaging requirements. A later failure to keep a promise does not by itself establish fraud; the evidence must support that the promisor had no intention to perform when the promise was made. The court found that changing prices and shipping dates, unfulfilled promises, and inconsistent communications did not reasonably support that inference on this record.

The court also granted Reach’s motion with respect to Newsert’s price-gouging claim under New Jersey Statutes section 56:8-109. The court determined that Newsert was a wholesale buyer purchasing large quantities of hand sanitizer for resale, not a consumer purchasing for personal use. It further found that Reach and Newsert were experienced commercial entities that negotiated with no shown unequal bargaining position. On that basis, Newsert lacked statutory standing to assert the claim.

Order

Defendants’ motion for summary judgment was granted in part and denied in part: it was granted on Reach’s tortious-interference claim and denied in all other respects. Reach’s motion for summary judgment was likewise granted in part and denied in part: it was granted on Newsert’s conversion, fraud, and price-gouging counterclaims and denied in all other respects.