Red Pocket Inc. v. The Hanover Insurance Group

Background

Red Pocket, Inc. sued Interactive Communications International, Inc. over SIM Airtime Bundle Kits—packaged mobile-service cards—that the companies manufactured, packaged, and distributed. Red Pocket alleged breach of contract, breach of bailment, and conversion. Interactive distributed approximately 48,900 kits to Target distribution centers in 2014 and early 2015. Target later removed the kits from its stores, and began destroying unsold kits in May 2015.

The parties’ 2014 Distribution Agreement used the term “consignment” and required Interactive to keep consigned kits identifiable as Red Pocket’s property and to safeguard them with reasonable care. The agreement also said that Red Pocket would not accept physical returns from retailers unless the parties agreed otherwise in writing. The parties disputed whether that provision concerned unsold kits or only customer-service returns after a sale. Red Pocket argued that the agreement created a consignment and that Interactive, as a bailee, had duties regarding the kits. Interactive argued that the agreement did not require it to retrieve or return unsold kits.

Summary-judgment standard

Summary judgment is a decision without a trial when the evidence shows no genuine dispute about an important fact and the moving party is entitled to judgment under the law. The court explained that it could not weigh evidence or decide which witnesses were more credible at this stage. Instead, disputed factual issues generally must be resolved by a fact-finder.

Consignment issue

The court held that the Distribution Agreement had contradictory features. It called itself a consignment agreement, and Interactive was compensated through a commission based on the kits’ face value. Those features supported Red Pocket’s position. But the agreement also described Red Pocket as selling the kits to Interactive for resale, did not clearly state who held title after delivery, and did not clearly assign responsibility for retrieving unsold kits. The record was also unclear about which party had the right to set the retail price and whether the parties’ conduct showed an agency relationship.

Because the contract was not wholly unambiguous and the evidence presented factual disputes about the parties’ intent and relationship, the court could not decide as a matter of law whether the agreement was a consignment. The court therefore denied both parties’ motions for summary judgment on that issue.

Damages

Interactive argued that Red Pocket should be limited to direct damages. Red Pocket stated that it sought the production cost of the lost or discarded kits rather than lost profits. The court explained that the value of destroyed property, if proven with reasonable certainty, could constitute direct or general breach-of-contract damages in a consignment case.

The opinion states that Red Pocket calculated the value of its loss as $121,320 plus statutory interest. The court found factual disputes concerning the accuracy and credibility of that amount and held that those issues should be addressed at trial rather than resolved on summary judgment.

Disposition

The court denied both parties’ motions for summary judgment and directed the Clerk of Court to terminate the pending motions. The opinion also stated that the court would hold a status conference on March 5, 2020, at noon.