The Avon Company v. Fareva Morton Grove, Inc.
- Alvin Hellerstein
- 1:22-cv-04724
- U.S. District Court · Southern District of New York
- 2
In The Avon Company v. Fareva Morton Grove, Judge Hellerstein amended liquidated-damages briefing instructions without deciding whether the clauses were enforceable.
The plaintiffs and defendants, particularly Plaintiff Avon, which the court stated bears the burden of proving anticipated damages; their counsel must address the specified liquidated-damages issues on the court’s schedule.
What happened
The Avon Company v. Fareva Morton Grove, Inc. concerns two contract provisions requiring liquidated damages. The court’s October 16, 2023 order amended an earlier order’s instructions about how the parties should address those provisions.
The court said the provisions must be reasonable when the contract was made and in light of actual damages. The parties must address communications and surrounding circumstances, as well as whether Avon could have reasonably bought replacement goods when Fareva did not supply them on time.
Judge Hellerstein vacated the earlier order’s second paragraph and set new dates for the parties’ submissions. He stated that Avon bears the burden of proving anticipated damages, but did not decide whether either liquidated-damages provision is enforceable.
The detailed version
- The Avon Company v. Fareva Morton Grove, Inc. · No. 1:22-cv-04724
- Alvin Hellerstein
- Oct. 16, 2023
Background
The order concerns a contract dispute between The Avon Company and LG H&H Co., Ltd., as plaintiffs, and Fareva Morton Grove, Inc. and Fareva S.A., as defendants. It amends the second paragraph of Judge Hellerstein’s October 12, 2023 order, which had set a briefing schedule concerning liquidated damages.
The contract contains two liquidated-damages provisions: Section 13.3(d) and Schedule D. The order does not state the amount of damages sought or decide whether either provision is enforceable.
Legal standard and required proof
The court explained that under New York law, a liquidated-damages provision is valid only if the amount is reasonable in light of the expected or actual harm from the breach, the difficulty of proving the loss, and the difficulty of obtaining another adequate remedy. The court also stated that a provision may be invalid if it is so large that it operates as a penalty rather than as a good-faith estimate of damages.
The court said reasonableness must be shown separately and together for the two provisions, both based on anticipated damages and in relation to actual damages. Anticipated damages must be supported by communications exchanged while the parties formed the contract and by surrounding circumstances. The court stated that Plaintiff Avon has the burden of proving anticipated damages.
For actual damages, the relevant evidence must show whether market sources would have allowed Avon reasonably to obtain replacement goods that Fareva failed to supply on time. The court directed counsel to advise who should bear the burden of proof on that issue.
Ruling and schedule
The second paragraph of the October 12 order, which required counsel to advise the court about the enforceability of the liquidated-damages provisions, was vacated. Counsel were ordered to submit their views on the questions in this order by October 30, 2023, with any opposition due by November 9, 2023. The first paragraph of the October 12 order remained in effect on its original schedule. Judge Hellerstein also stated that the preceding legal and evidentiary statements would be treated as the law of the case unless counsel identified disagreements.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.