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Sanuvaire, LLC v. Sutrak Corporation

United States District Court, D. Colorado

September 4, 2019

SANUVAIRE, LLC, Plaintiff,



         This matter is before the Court on Defendant's motion for summary judgment (ECF No. 955) and six other motions that are pending in this case (ECF Nos. 957-961, 993). Plaintiff filed this lawsuit after Defendant refused to pay a bill. The seventy-one-page complaint expands a relatively straightforward billing dispute to encompass multiple issues that have arisen throughout the parties' business relationship. But the fifteen asserted claims overlap significantly and, for the most part, lack merit. Therefore, as explained below, the Court grants in part and denies in part the motion for summary judgment, denies Plaintiff's motion to amend the complaint, grants Defendant's motion to strike two other pending motions, denies as moot Plaintiff's motion to supplement, and grants Plaintiff's motion for leave to file a corrected motion.


         Summary judgment is appropriate only if there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Gutteridge v. Oklahoma, 878 F.3d 1233, 1238 (10th Cir. 2018). Applying this standard requires viewing the facts in the light most favorable to the nonmoving party and resolving all factual disputes and reasonable inferences in its favor. Cillo v. City of Greenwood Vill., 739 F.3d 451, 461 (10th Cir. 2013). Whether there is a genuine dispute as to a material fact depends upon whether the evidence presents a sufficient disagreement to require submission to a jury or is so one-sided that one party must prevail as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986); Stone v. Autoliv ASP, Inc., 210 F.3d 1132, 1136 (10th Cir. 2000). “The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Scott v. Harris, 550 U.S. 372, 380 (2007). A fact is “material” if it pertains to an element of a claim or defense; a factual dispute is “genuine” if the evidence is so contradictory that if the matter went to trial, a reasonable jury could return a verdict for either party. Anderson, 477 U.S. at 248.

         Where, as here, the moving party does not bear the ultimate burden of persuasion at trial, it can meet its initial burden by pointing out the lack of evidence on an essential element of the nonmoving party's claim. Adams v. Am Guar. & Liab. Ins. Co., 233 F.3d 1242, 1246 (10th Cir. 2000). At that point, the burden shifts to the nonmoving party to identify sufficient evidence that is pertinent to the material issue by reference to an affidavit, deposition transcript, or specific exhibit. Id.


         Defendant manufactures heating, ventilation, and air conditioning (“HVAC”) units for transit buses. (ECF No. 1008-1 at ¶ 1.) Plaintiff sells air purification systems known as ultraviolet germicidal irradiation (“UVGI”) kits that can be installed in Defendant's HVAC units. (Id. at ¶ 11.)

         In 2010, North American Bus Industries, Inc. (“NABI”), a bus manufacturer, was awarded a contract to build several hundred buses for Dallas Area Regional Transit (“DART”). (Id. at ¶ 13.) The buses were to be purchased in phases and were to include Defendant's HVAC units installed with UVGI kits from JKA Company (“JKA”). (Id.) For years, Defendant ordered UVGI kits from JKA, installed them in its HVAC units, and sent them to NABI to fill DART's bus orders. (Id. at ¶ 19.) Defendant's price for each UVGI kit was $1, 575 and did not change even after Plaintiff acquired JKA and upgraded the UVGI kit with an improved ballast. (Id. at ¶ 32.)

         In 2014, NABI was acquired by New Flyer Industries (“New Flyer”). (Id. at ¶ 22.) New Flyer planned to fill DART's pending orders using the same design NABI had used, but it wanted to use a new design for future orders. (Id.) To get the new design approved by DART, New Flyer had to build two “pilot” buses for testing. (Id. at ¶ 26.)

         In July 2015, JKA's founder died and his stepdaughter began managing the business. (Id. at ¶ 23.)

         In October 2015, New Flyer ordered two HVAC units from Defendant for the pilot buses. (Id. at ¶ 27.) Defendant filled the order using UVGI kits it had previously received from JKA and shipped the HVAC units to New Flyer in December 2015. (Id. at ¶ 28.) DART ultimately approved the pilot buses, allowing New Flyer to implement the new design on its next order. (Id. at ¶ 56.) To fill that order, Defendant ordered 55 UVGI kits from JKA on February 12, 2016. (Id. at ¶ 31.)

         Meanwhile, JKA was in the process of upgrading its UVGI kit with a new ballast. (Id. at ¶ 30.) Plaintiff was officially formed on February 18, 2016, and on the same day, it entered an agreement with JKA to acquire all its assets, including Defendant's latest order. (Id. at ¶¶ 31, 36.) Plaintiff informed Defendant about the acquisition on February 29, 2016, while stating that it was “doing business as” JKA. (Id. at ¶ 41.) In the months that followed, Plaintiff repeatedly represented that it was closely connected with JKA, including in its correspondence with Defendant. (Id. at ¶ 44.)

         On March 10, 2016, DART approved Plaintiff's upgraded UVGI kit for use in its buses. (Id. at ¶ 56.) Plaintiff shipped upgraded kits to Defendant in phases to fill its latest order. (Id. at ¶¶ 33, 51.) On March 28, 2016, Defendant amended that order to be for 49 kits instead of 55. (Id. at ¶ 31.) When Defendant installed an upgraded kit in one of the pilot buses, it discovered that Plaintiff had used butt-splice connectors in the ballast wiring, which DART's specifications did not allow. (Id. at ¶ 55.) In May 2016, Defendant informed Plaintiff about the wiring issue and returned 28 kits that had already been delivered. (ECF No. 1 at ¶ 48.) Plaintiff determined that 5 of the kits were completely damaged and unusable and shipped them back to Defendant so that it could investigate what had happened. (Id. at ¶ 53.) At a June 2016 meeting, Defendant refused to accept responsibility for damaging the kits while insisting that they were reparable. (Id. at ¶ 63.) Plaintiff told Defendant not to use the damaged kits. (ECF No. 1 at ¶ 103.) In addition, the parties were having trouble agreeing on terms of a nondisclosure agreement. (ECF No. 1008-1 at ¶¶ 68-71.)

         In August 2016, Plaintiff completed the order for 49 UVGI kits and sent Defendant a final invoice for $52, 754.63, the cost of 33 UVGI kits plus a handling fee. (Id. at ¶ 67.) Meanwhile, Defendant began an audit of its transactions with JKA and Plaintiff. (Id. at ¶ 61.) In connection with the audit, Defendant “request[ed] ‘proof of shipment' of the products listed on three specific invoices from JKA in 2013 and 2014” (id. at ¶ 64) that, according to Defendant, totaled $39, 375 (ECF No. 1 at ¶ 109). Plaintiff initially refused to provide “old shipping records” from “a different company.” (Id. at ¶ 110.) When Plaintiff sent a payment reminder regarding the final invoice, Defendant accused Plaintiff of overbilling, stating that according to its records it had received 494 kits from JKA and Plaintiff but had been billed for 519. (Id. at ¶ 115.) Defendant attached a spreadsheet it had created, showing details related to its transactions with JKA and Plaintiff going back to 2012. (Id.) According to the spreadsheet's bottom line, Defendant had been invoiced for 564 units but had received only 544 units. (ECF No. 1008-1 at ¶ 62.) Plaintiff requested documentation to support Defendant's claim of overpayment, but Defendant did not respond. (ECF No. 1 at ¶ 117.) Plaintiff also relented to Defendant's request for shipping receipts related to the disputed JKA invoices (id. at ¶ 119), but Defendant contends the documentation Plaintiff sent corresponds to the wrong invoices (ECF No. 1 at ¶ 120).

         Defendant issued a check to Plaintiff for $13, 379.63, which is $39, 375 less than the final invoice. (ECF No. 1008-1 at ¶ 67.) In a later e-mail, Defendant provided a new explanation for refusing to pay the final invoice in full, stating that based on its records, it had ordered a total of 543 kits but had paid for 544, resulting in a payment discrepancy of $33, 552.50. (ECF No. 1 at ¶ 124.) Plaintiff refused to accept the partial payment (ECF No. 1008-1 at ¶ 72), and this lawsuit followed.


         A. Breach of Contract (First and Second Causes of Action)

         To state a claim for breach of contract under Colorado law, a plaintiff must show (1) the existence of a contract, (2) performance by the plaintiff or some justification for nonperformance, (3) failure to perform the contract by the defendant, and (4) resulting damages to the plaintiff. W. Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058 (Colo. 1992) (en banc).

         In its first two causes of action, Plaintiff alleges that it performed its contractual obligations by delivering the UVGI kits that Defendant ordered, yet Defendant refuses to pay in full the final invoice for $52, 754.63. Defendant contends that it is entitled to a credit of $39, 375 (i.e., the cost of 25 UVGI kits). But granting summary judgment in Defendant's favor on these claims would require the Court to find there is no genuine issue that Defendant paid for 25 more UVGI kits than it received. The current record provides no basis for such a conclusion.

         Defendant's reliance on the spreadsheet mentioned above is insupportable. The spreadsheet contains empty fields, unclear entries, and unexplained notations.[1] By no means does it establish the relevant transaction history as a matter of undisputed fact. But even were the Court to accept the spreadsheet's bottom line at face value, it still does not support Defendant's position. According to the spreadsheet, Defendant received 20 fewer UVGI kits than it was billed for, yet Defendant currently claims it is entitled to a credit for the cost of 25 kits. The spreadsheet indicates Defendant was billed for $33, 352.50 more than it paid, yet Defendant currently claims it is entitled to a credit of $39, 375. In other words, the spreadsheet sheds absolutely no light on whether Defendant's failure to perform by paying the final invoice is justified.[2]

         Nor do Defendant's other contentions show the absence of a genuine issue on Plaintiff's breach of contract claims. Defendant contends that Plaintiff “refused to provide any assistance in clarifying the billing questions” it had. (ECF No. 955 at 11.) But Defendant's “billing questions” do not establish the absence of a genuine issue as to whether it may justifiably claim a $39, 375 credit on Plaintiff's final invoice. Although Defendant concedes that it owes Plaintiff $13, 379.63 (ECF No. 955 at 11), there clearly is a genuine issue as to what additional amount, if any, Defendant owes Plaintiff. Accordingly, Defendant is not entitled to summary judgment on these claims.

         B. Breach of Implied Covenant of Good Faith and Fair Dealing (Third Cause of Action)

         The duty of good faith and fair dealing applies when one party to a contract “has discretionary authority to determine certain terms of the contract, such as quantity, price, or time.” ADT Sec. Servs., Inc. v. Premier Home Prot., Inc., 181 P.3d 288, 293 (Colo.App. 2007). “[T]he implied covenant of good faith and fair dealing is breached when a party uses discretion conferred by the contact to act dishonestly or to act outside of accepted commercial practices to deprive the other party of the benefit of the contract.” Id.

         Plaintiff asserts that Defendant breached the covenant by several means. Defendant argues that Plaintiff fails to establish the existence of any discretionary term that would support such a claim. The Court finds that Defendant is entitled to summary judgment on this issue because Plaintiff has not identified any discretionary contractual term that corresponds to any of Defendant's alleged misconduct and because the conclusory allegations in the complaint are insufficient to show the existence of a genuine issue with respect to this claim.

         First, Plaintiff contends Defendant failed to update a purchase order to reflect Plaintiff's name rather than that of JKA. But it is undisputed that the February 12, 2016, purchase order was placed six days before Plaintiff was officially formed and weeks before Plaintiff formally introduced itself to JKA's customers. (ECF No. 1008-1 at ¶¶ 36, 41-42.) Moreover, Plaintiff fails to explain how it was deprived of a benefit of its contract with Defendant by its alleged refusal to change the name on an invoice-particularly where Plaintiff continued to represent that it was “doing business as JKA” in its correspondence with Defendant. (See Id. at ¶ 44.)

         Second, Plaintiff contends Defendant provided inconsistent reasons for refusing to pay the final invoice. But the Court has already determined that there are genuine issues of material fact with respect to whether Defendant breached its contractual obligations to Plaintiff by refusing to pay the final invoice. Plaintiff's damages for those claims depend on Defendant's nondiscretionary contractual obligations. Plaintiff has not identified a discretionary obligation that Defendant might also have violated under the circumstances. ...

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