Brands International Corporation v. Reach Companies, LLC

Background

Brands International Corporation manufactures beauty and hygiene products, including hand sanitizer. Reach Companies, LLC distributes consumer goods. Five Below contacted Reach during the beginning of the COVID-19 pandemic about purchasing a large quantity of hand sanitizer. Reach then contacted Brands, and the parties agreed on the products, prices, quantities, and cash-on-delivery payment terms. Their agreement was memorialized in a purchase order for 500,000 two-ounce units at $0.44 each and 500,000 eight-ounce units at $0.69 each, for a total of $565,000.

Brands made three deliveries to Five Below locations: 55,296 units on March 11, 63,936 units on March 12, and 13,824 units on March 16, 2020. The shipments were accepted, and their total value was $89,072.64. Five Below paid Reach $263,715.84 for the three shipments, but Reach did not pay Brands. Brands later sent invoices and requested payment, but Reach never paid.

Brands sued Reach for account stated, unpaid goods and services, breach of contract, and unjust enrichment. Reach asserted counterclaims for breach of contract, breach of an installment contract, and tortious interference with a contract. The parties filed cross-motions for summary judgment after discovery. Summary judgment is a decision without a trial when the evidence shows there is no genuine dispute about a fact important to the outcome and a party is entitled to judgment under the law.

Governing law

The court held that the United Nations Convention on Contracts for the International Sale of Goods, an international treaty governing certain international sales contracts, applied to the contract claims because Brands and Reach were in countries that had ratified the treaty and the parties had not disclaimed it. The court applied Minnesota law to the non-contract claims.

Contract claims

The court found that the parties had formed a valid contract. They agreed on the essential terms, including the goods, quantities, and prices, and later recorded those terms in the purchase order.

Reach argued that receiving an invoice was a condition precedent to its duty to pay. A condition precedent is an event that must occur before a contractual duty becomes due. The court rejected that argument because the purchase order did not clearly make an invoice a condition of payment. The court held that cash on delivery meant payment when the goods were delivered, and that Reach knew or could determine the amount owed from the shipment information and bills of lading.

The court ruled that Brands performed its obligations by making the three deliveries and that Reach breached the contract by failing to pay upon delivery. Because the breach was fundamental, meaning it substantially deprived Brands of what it was entitled to receive under the contract, Brands was entitled to stop producing and avoid the contract as to the remaining unshipped goods. The court therefore granted summary judgment for Brands on both the parties’ competing breach-of-contract claims.

The court also granted summary judgment for Brands on Reach’s breach-of-installment-contract claim. Assuming the agreement was an installment contract, Reach’s failure to pay for the first three shipments gave Brands reasonable grounds to conclude that Reach would not pay for future shipments, allowing Brands to suspend performance.

Alternative and other claims

The court granted summary judgment for Reach on Brands’ unjust-enrichment and account-stated claims. Unjust enrichment was unavailable because the parties had a valid contract governing the dispute. Account stated, which concerns agreement or acquiescence concerning the amount owed, was also unavailable because the written contract governed the account.

The court dismissed Brands’ unpaid-goods-and-services claim and Reach’s tortious-interference-with-contract claim. The opinion states that Brands conceded its unpaid-goods-and-services claim was redundant and that Reach agreed to dismissal of its tortious-interference claim.

Attorney’s fees and judgment

The court held that the treaty’s damages provision could include reasonable attorney’s fees when those fees were a reasonably foreseeable loss caused by the breach. It found that litigation was foreseeable because Reach failed to pay for the delivered goods and ignored Brands’ payment requests. The court awarded Brands $89,072.64, plus prejudgment and post-judgment interest, reasonable attorney’s fees, and costs. Brands was required to file a fee motion under Federal Rule of Civil Procedure 54(d) within 14 days so the court could determine the reasonable amount.

The order granted in part and denied in part Brands’ motion for summary judgment, and granted in part and denied in part Reach’s motion for summary judgment. It directed that judgment be entered accordingly.