FINDINGS OF FACT AND CONCLUSIONS OF LAW
G.
MICHAEL HARVEY UNITED STATES MAGISTRATE JUDGE.
This is
the rare contract case in which two fairly sophisticated
parties-Plaintiff and Counter Defendant 3E Mobile, LLC
(“Plaintiff” or “3E”) and Defendant
and Counter Claimant Global Cellular, Inc.
(“Defendant” or “Global”)-entered
into an agreement about which they had such fundamentally
different understandings that it cannot be said that they had
the required “meeting of the minds” to form an
enforceable agreement. That failure of accord is evidenced
(and perhaps was exacerbated) in part by the vagueness of the
written agreement; but it was more clearly manifested by the
parties' discordant conduct during the approximately
eleven months that each behaved in keeping with its apparent
perception of the letter and spirit of the document. Upon
consideration of the record and the evidence and testimony
presented at trial, [1] the Court finds that no enforceable
agreement was formed, and that, therefore, neither can be
liable for breach.
I.
PROCEDURAL HISTORY
This
lawsuit arises from a dispute over a putative contract
between 3E and Global that was entered into in September
2013. In November 2014, 3E filed its complaint alleging that
Global had breached the contract, known as the Manufacturing
Agreement or the Manufacturer Agreement.[2] ECF No. 1. In
January 2015, Global filed a counterclaim alleging that 3E
had breached that agreement and the implied covenant of good
faith and fair dealing or that 3E had been unjustly enriched.
ECF No. 5 at 9-14. 3E then filed a motion to dismiss
Global's counterclaims or, in the alternative, to strike
its request for attorney's fees. ECF No. 11-2. Judge
Sullivan denied the motion to dismiss and motion to strike on
August 11, 2015.[3] See 3E Mobile, LLC v. Glob. Cellular,
Inc., 121 F.Supp.3d 106 (D.D.C. 2015).
An
initial scheduling order was entered in September 2015 (ECF
No. 26), and the parties engaged in discovery and attempted,
unsuccessfully, to mediate the dispute (ECF No. 31). A bench
trial was scheduled to begin on January 24, 2017. ECF No. 33
at 2. However, discovery disputes arose, and Global filed a
motion to compel 3E to respond to document requests and
interrogatories in August 2016 (ECF No. 38) and a motion for
sanctions in October 2016 (ECF No. 41). In light of the
pending motions, the trial date was adjourned sine
die. Minute Order dated Nov. 30, 2016. Noting that 3E
had not filed an opposition to Global's motion to compel,
Judge Sullivan granted it on December 22, 2016. Minute Order
dated Dec. 22, 2016. Judge Sullivan also granted in part and
denied in part Global's motion for sanctions, finding
that 3E's conduct did not merit issue-related sanctions,
such as an adverse evidentiary inference, but imposing
monetary sanctions in the form of attorney's fees. 3E
Mobile, LLC v. Global Cellular, 222 F.Supp.3d 50, 57
(D.D.C. 2016). The trial date was eventually rescheduled to
February 26, 2018. Minute Order dated Sept. 6, 2017.
Soon
after the trial date was rescheduled, the parties consented
to the jurisdiction of the undersigned for all purposes
pursuant to 28 U.S.C. § 636(c) and Local Civil Rule
73.1. Minute Order dated Oct. 20, 2017. Therefter, the date
for commencement of the bench trial was again rescheduled to
March 20, 2018. ECF No. 65. The trial began as scheduled on
that date and continued on April 19, and 20,
2018.[4] At trial, 3E called three witnesses: Tommy
Wang and Harry Wang, brothers who are the owners of 3E (ECF
No. 72 at 35), and Walter Tymoczko, its Chief Financial
Officer (id. at 178). Global also called three
witnesses: Konstantinos (known as “Taki”)
Skouras, CEO of Gobal (ECF No. 80 at 54-55), Joseph Brown,
Global's Chief Product Officer (ECF No. 81 at 76-77), and
Susan Duan, Global's Procurement and Logistics Manager
(ECF No. 79 at 10). After testimony concluded, the parties
simultaneously submitted proposed findings of fact and
conclusions of law on June 8, 2018 (ECF No. 86; ECF No. 87)
and responses on June 22, 2018 (ECF No. 88; ECF No. 89). The
Court then heard closing arguments on July 13, 2018.
II.
LEGAL STANDARD
Pursuant
to Rule 52(a) of the Federal Rules of Civil Procedure, in an
action tried without a jury, the Court “must find the
facts specially and state its conclusions of law
separately.”[5] Fed.R.Civ.P. 52(a)(1). “In setting
forth the findings of fact, the court need not address every
factual contention and argumentative detail raised by the
parties, [n]or discuss all evidence presented at
trial.” Yah Kai World Wide Enters., Inc. v.
Napper, 292 F.Supp.3d 337, 344 (D.D.C. 2018) (alteration
in original) (quoting Moore v. Hartman, 102
F.Supp.3d 35, 65 (D.D.C. 2015)), appeal dismissed,
No. 18-7041, 2018 WL 4641349 (D.C. Cir. May 30, 2018).
“The Court is neither ‘require[d]' nor
‘encourage[d]' ‘to assert the negative of
each rejected contention as well as the affirmative of those
which they find to be correct.'” Paleteria La
Michoacana, Inc. v. Productos Lacteos Tocumbo S.A. de
C.V., 188 F.Supp.3d 22, 34 (D.D.C. 2016) (alterations in
original) (quoting Schilling v. Schwitzer-Cummins
Co., 142 F.2d 82, 84 (D.C. Cir. 1944),
aff'd, 743 Fed.Appx. 457 (D.C. Cir. 2018).
Instead, the Court need only “make brief, definite,
pertinent findings and conclusions on the contested
matters” that are “sufficient to allow the
appellate court to conduct meaningful review.” Yah
Kai World Wide Enters., 292 F.Supp.3d at 344 (quoting
Wise v. United States, 145 F.Supp.3d 53, 57 (D.D.C.
2015)). Such findings and conclusions “may be
incorporated in any opinion or memorandum of decision the
court may file.” Paleteria La Michoacana, 188
F.Supp.3d at 34 (quoting Defs. of Wildlife, Inc. v.
Endangered Species Sci. Auth., 659 F.2d 168, 176 (D.C.
Cir. 1981)).
III.
FINDINGS OF FACT
Global
is a product company and wholesaler that sells accessories
for mobile devices, such as cell phone cases, to a related
company, Cellairis Franchise, Inc. (“Cellairis”),
which franchises kiosks in the common areas of shopping
malls. ECF No. 80 at 55-56. Global, a Georgia corporation,
was founded in 2000 by Taki Skouras, who is the C.E.O. of
both Global and Cellairis, Joseph Brown, the Chief Product
Officer of Cellairis, and another partner. ECF No. 68-4 at 1;
ECF No. 80 at 56-57; ECF No. 81 at 76-77. Global obtains its
products both from manufacturers, which fabricate the
products Global orders, and from wholesalers, which generally
buy products that another manufacturer builds and sells them
to companies like Global. ECF No. 81 at 77-78. Most of the
manufacturers and wholesalers with which Global works are
located in the People's Republic of China. ECF No. 80 at
63; ECF No. 81 at 77.
In
2012, Crystal Icing, LLC (“Crystal Icing”), a
company that also sold cell phone cases, sued Global and
Cellairis in the U.S. District Court for the Western District
of New York alleging that certain of Global's cell phone
cases infringed on designs copyrighted by Crystal Icing. ECF
No. 80 at 64-65. In April or May of 2013, 3E, a Pennsylvania
company owned by brothers Tommy and Henry Wang through their
company TMD Holdings, [6] acquired Crystal Icing for a cash payment
of $10, 000, assumption of $25, 000 in leases, and payment of
an outstanding legal bill of approximately $30, 000 connected
with the infringement action against Global and Cellairis.
ECF No. 68-4 at 1; ECF No. 72 at 35-36, 42-43, 129, 197-98,
200. In that transaction, 3E acquired Crystal Icing's
trademarks and inventory as well as its copyright
infringement case. ECF No. 72 at 198-99. 3E also took on two
of Crystal Icing's employees. Id. 3E is not a
manufacturing company but was created for the sole purpose of
acquiring Crystal Icing and another mobile accessories
company (called Lex Mobile) and merging them together to
become the mobile accessories division of TMD. Id.
at 129.
A.
Mediation of Copyright Infringement Case
In June
2013, after 3E had acquired Crystal Icing, the parties to the
copyright infringement case engaged in a mediation of the
dispute in Rochester, New York. ECF No. 72 at 45, 48. Global
was represented by Mr. Skouras and Mr. Brown; 3E was
represented by Mr. Tymoczko and Tommy Wang. Id. at
45, 179-80; ECF 80 at 67; ECF 81 at 82. During the
discussions, Global became interested in 3E's
representations regarding its expertise in manufacturing and
sourcing products from China; 3E was intrigued by
Global's representations regarding the size of Cellairis
and the extent of their purchasing needs. ECF No. 72 at 45;
ECF No. 80 at 67-68. The parties discussed having 3E
manufacture product for Global as well as having 3E purchase
products from one of Global's suppliers and provide those
products to Global. ECF No. 72 at 45, 70, 160; ECF No. 80 at
72. One of the ways that the latter strategy would benefit
the parties was through a Chinese intra-country tax credit
(that is, a tax credit on transactions between Chinese
companies) that could be realized if 3E took a purchase order
from Global for goods to be sourced from China, substituted
one of 3E's affiliates located in China as the buyer, and
placed that modified purchase order with a Chinese supplier.
ECF No. 72 at 148-151, 159-60, 177; ECF No. 80 at 73-74, 76-
77; ECF No. 81 at 82. Even if 3E placed an order with one of
Global's then-current Chinese suppliers, the tax credit
would kick in, and 3E could share that credit with Global by
discounting the price of the order. ECF No. 72 at 159-60; ECF
No. 80 at 47-48, 74, 77-78.
After a
day of discussions, the parties signed a term sheet. ECF No.
68-2; ECF No. 72 at 47. As relevant here, the document
reflected the parties' agreement that the Crystal Icing
litigation would be dismissed once a settlement agreement was
executed and that Global would pay 3E $100, 000 within five
days of the dismissal, without admitting liability, and would
refrain from using the accused designs. ECF No. 68-2,
§§ 3-4, 6. The term sheet further stated that 3E
and Global would
enter into a comprehensive manufacturing agreement (the
“Manufacturing Agreement”), which will contain
the following terms:
a. For 12 months, Global will pay 3E Mobile $25, 000 per
month, with the first payment due on the 60th day after the
settlement agreement is signed.
b. For 24 months, beginning immediately after the 12-month
period referenced above, Global will pay 3E Mobile $20, 000
per month.
c. The payments referenced in a and b above[] will be held by
3E Mobile as a credit for use by Global in the event that
Global places an order (or orders) for product, as follows:
Global will receive a 20% credit on all orders placed with 3E
Mobile within three years and 60 days from the date of the
settlement agreement, to be paid by the credit funds
referenced above. . . . The purpose of these funds is to
guarantee 3E Mobile a 20% credit on $3.9 million in purchases
by Global.
d. At any time, Global can place orders with 3E Mobile. The
first $3.9 million of such orders will be governed in
accordance with the Manufacturing Agreement and used against
the credit terms above. . . .
e. If at the end of three years and 60 days from the date of
the Settlement Agreement Global has an unused credit with 3E
Mobile, such unused funds shall become the sole and exclusive
property of 3E mobile . . . .
Id., § 7. The document also included terms that
guaranteed the quality of products 3E provided to Global and
mandated a price equal to or less than Global then paid.
Id., § 7.j. It further addressed situations in
which “Global provides 3E Mobile a product to
manufacture, ”-requiring provision of a sample for
Global's approval and allowing that, if 3E could not
provide the product “for any reason, ” it would
“have the product produced by one of Global's
current manufacturers.” Id. In that event,
Global had the responsibility to provide 3E
“information sufficient to identify and contact current
manufacturers and to place orders with such
manufacturers.” Id. There was also a
notice-and-cure provision in the event of a default by either
party. Id., § 7.i.
B.
Manufacturing Agreement and Settlement Agreement
On
September 30, 2013, the parties entered into a
“Manufacturing Agreement” that closely tracked
the provisions describing the “comprehensive
manufacturing agreement” in the term sheet. The
document designated 3E as an approved manufacturer for
products to be sold to Global (and thereafter to be used in
or resold by Cellairis kiosks), and “contemplate[d]
that during the [36-month] Term [of the agreement] Global
shall purchase a minimum of three million nine hundred
thousand dollars ($3, 900, 000) in Product from [3E].”
ECF No. 68-4 at 1 & §§ 1, 4.A, 12. The
agreement could then be renewed for successive twelve-month
periods. Id., § 12.
Global
agreed to pay 3E “an advance against purchases of
Product to be made by Global” in the amount of $25, 000
per month for twelve months (beginning sixty days after
September 30, 2018, the effective date of the agreement) and
$20, 000 per month for the next 24 months, for a total of
$780, 000.[7] Id., §§ 4.B & C.
Those payments were to be held by 3E “as a credit for
use by Global in the event that Global places an order (or
orders) for Product, ” such that Global would
“receive a twenty percent (20%) credit on all orders
placed with [3E] during the Term”; the purpose of the
payments was “to guarantee [3E] a twenty percent (20%)
credit on the three million nine hundred thousand dollars
($3, 900, 000) in purchases of Product by Global.”
Id., § 4.D. If Global placed orders in amounts
that outpaced the 20% credit Global had already paid in,
Global was relieved from making further advance payments
until the amount of the credit caught up to 20% of the amount
of the purchases.[8] Id., § 4.E. If Global
ordered $3.9 million in product from 3E, Global would recoup
(or be relieved from paying) the entire $780, 000 in
anticipated advance payments.[9] If there was unused credit at the
end of the 36-month term of the agreement, 3E would keep the
money. Id., § 4.F. This arrangement provided
security for 3E by ensuring payments of at least $780, 000
and encouraging Global to purchase the contemplated $3.9
million in products from 3E, thus cementing the relationship
between the two companies. ECF No. 72 at 160-61; ECF No. 80
at 69-71.
Under
Section 2.C of the Manufacturing Agreement, 3E could supply
products to Global by manufacturing the products itself or by
sourcing them from Global's existing suppliers. ECF No.
72 at 70, 262; ECF No. 80 at 51; ECF No. 81 at 31-32, 49. It
is worth quoting that section at some length, as it is at the
heart of this dispute:
If Global provides [3E] a Product to manufacture, [3E] shall
have thirty (30) days to create a mold and provide a sample
of such Product for approval by Global. Global shall pay the
cost of any such mold, which shall be at a cost less than or
equal to the costs for molds currently charged to Global by
its current manufacturers for the same molds . . . . After
the date of approval. [3E] shall provide the Product to
Global within a mass production time equivalent to
Global's then current manufacturers of equivalent
products. In the event [#E] cannot provide the product for
any reason, [3E] may arrange to have the Product produced by
one of Global's current manufacturers. In that event,
Global will provide [3E] with information sufficient to
identify and contact Global's current manufacturers and
to place orders with such manufacturers.
ECF No. 68-4. § 2.C. Thus, if Global “provide[d]
3E a Product to manufacture, ” 3E would have 30 days to
create a mold (at Global's expense) and send a sample to
Global for its approval. Id., § 2.C. If Global
approved a sample made by 3E, 3E was to send Global a written
document with the final specifications for the product. ECF
No. 68-4, § 2.E. 3E was also obligated to provide the
product to Global “within a mass production time
equivalent to that of Global's then current manufacturers
of equivalent products.” Id., § 2.C.
However, if 3E was unable to provide a requested product
“for any reason, ” it “may arrange to have
the Product produced by one of Global's current
manufacturers. In that event, Global [would] provide [3E]
with information sufficient to identify and contact
Global's current manufacturers and to place orders with
such manufacturers.” Id. In any case, 3E
agreed to sell products to Global “at a price less than
or equal to prices currently charged to Global . . . by its
current manufacturers.” Id., § 2.A.
Moreover, for products that 3E purchased “using one of
Global's then current manufacturer[s], ” payment
for the products would be “on the same terms and
conditions as the manufacturing agreement executed between
the parties for the manufacturer being utilized.”
Id., § 2.G. Those provisions provided
protection for Global by ensuring that, if 3E could not make
the products desired, it could purchase them from
Global's existing suppliers and sell them to Global on
the same or better terms. ECF No. 80 at 69-70, 90. Global
could “place orders with [3E] at any time during the
Term.” ECF No. 68-4, § 4.E. However, the
Manufacturing Agreement does not describe the manner in which
Global was to “provide” a product to 3E or
otherwise place an order.
The
default provision of the Manufacturing Agreement requires the
non-defaulting party to provide notice to the defaulting
party within ten days of the alleged default, after which the
defaulting party would have 30 days to cure. ECF No. 68-4,
§ 15. If a cure were not accomplished in that period,
the non-defaulting party could terminate the agreement.
Id. If Global defaulted on its advance payments
“and its failure to cure its default [led] to
termination, ” Global's advance payments would
become due immediately. Id.
The
Manufacturing Agreement contains an integration clause
stating that the document “constitutes the entire
Agreement between Global and [3E] regarding the Approval [of
3E as a manufacturer for Global] and supersedes any and all
prior negotiations, understandings, and/or agreements, oral
or written, between the parties hereto with respect to the
subject matter hereof.” Id., § 23. It
further requires any modifications to be set out in “an
instrument in writing signed by the parties.”
Id., § 21. The document also chooses this
District as the exclusive forum for “disputes regarding
the Manufacturing Agreement” and chooses Pennsylvania
law to govern its interpretation. Id., § 20.
On
October 3, 2013, 3E and Global entered into the
“Settlement Agreement.” ECF No. 68-5 at 1, 7.
That document recites that the parties desired to settle the
Crystal Icing action and had entered into a term sheet on
June 25, 2013, “which contemplates the Parties'
execution of certain formal agreements.” The parties
agreed to settle and dismiss the case for a payment from
Global to 3E of $100, 000 and a promise that Global would
stop selling the designs at issue in the action.
Id., §§ 1-4, 6. The Settlement Agreement
also states that “3E and Global will enter into a
manufacturing agreement, ” which was to be attached to
the Settlement Agreement as an exhibit.[10]Id.,
§ 7. The Settlement Agreement contains an integration
clause asserting that it “contains the entire agreement
between the Parties with respect to the subject matter hereof
and supersedes all prior negotiations or agreements between
the Parties.” Id., § 16. Unlike the
Manufacturing Agreement, however, it does not mandate an
exclusive forum to adjudicate any disputes that may arise or
a governing body of law.
C.
Post-Agreement Conduct
Soon
after the effective date of the Manufacturing Agreement, at
the end of October 2013, Susan Duan, Global's Purchasing
Team Lead, reached out to 3E via email with a request to
produce an injection mold for one of Global's cell phone
cases. ECF No. 68-7; ECF No. 79 at 16- 18. Later that month,
Global made a similar request in connection with two other
cases. ECF No. 68-14; ECF No. 79 at 18-19. Neither of those
projects came to fruition; that is, 3E neither manufactured
the products nor purchased them from Global's current
suppliers. ECF No. 79 at 18-19, 36-37.
Consequently,
in November 2013, the parties began discussions to
“nail down the ordering process.” ECF No. 68-17;
ECF No. 79 at 36; ECF No. 80 at 79. In mid-November, the
parties held a meeting attended by Mr. Brown and Ms. Duan
from Global and, from 3E Henry Wang and Lisa Kennedy,
3E's director of sourcing. ECF No. 72 at 103, 214; ECF
No. 79 at 36-37; ECF No. 80 at 82-83. At that meeting, 3E
stated that it would help come up with a new process by which
Global could order products from 3E and help Global reduce
costs by finding new manufacturers for its products. ECF No.
79 at 37-38. 3E later proposed a system in which Global would
“carbon copy” 3E on its purchase orders, thus
allowing 3E access to those orders. ECF No. 72 at 270; ECF
No. 79 at 39-41; ECF No. 81 at 83-84.
In
December 2013, Global asked 3E to manufacture packaging for a
new product launch. ECF No. 79 at 25-27. 3E provided a sample
to Global in May 2014, but the quality was sub-par.
Id. at 30. Global eventually ordered the packaging
from one of its then-current suppliers. Id. at
31-32.
In
January 2014, Ms. Duan emailed Ms. Kennedy noting that she
had sent a sample shirt to 3E so that 3E would manufacture
shirts to be worn by Cellairis sales associates. ECF No. 68-
21 at 2; ECF No. 72 at 73. On February 13, 2014, in response
to a request from Ms. Kennedy, Ms. Duan sent Ms. Kennedy an
email providing an estimate of the quantities of each shirt
size sought. ECF No. 68-21 at 1-2. At the end of the message,
Ms. Duan wrote, “Joseph [Brown] would like to start the
new process ASAP. So we can send the order to [3E] and [3E]
send it to our factory. Can you please let me know when we
can start this process?” Id. at 2. In a draft
response sent to Henry Wang, Ms. Kennedy wrote:
Please see my proposed response to Susan below . . . . Let me
know if this is acceptable or if you want to make any
changes.
Hi Susan:
I have spoken at length with both Tommy and Henry about the
PO's moving forward.
1) What we propose is for you to continue to place your
orders for existing product directly to your factory. Please
send us hard samples and a PO to the factory. We will then
work with our factories or your existing suppliers to see if
we [can] further reduce the cost or provide other
improvements. As Henry discussed when we were in Atlanta [for
the November 2013 meeting], our goal would be to ...