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C. A.I., Inc. v. Vitex Packaging Group, Inc.

United States District Court, D. Massachusetts

July 17, 2015

C.A.I., Inc., Plaintiff and Defendant in Counterclaim,
VITEX PACKAGING GROUP, INC. and VITEX PACKAGING, INC. Defendants and Plaintiffs-in-Counterclaim

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For C.A.I., Inc., Plaintiff: W. Paul Needham, LEAD ATTORNEY, W. Paul Needham, PC, Boston, MA; Mark A. Johnson, Needham & Johnson, Boston, MA.

For Vitex Packaging Group, Defendant: Edward J. Jacobs, LEAD ATTORNEY, PRO HAC VICE, Baker Hostetler LLP, New York, NY; Jaimie A. McKean, Sara G. Schwartz, Schwartz Hannum PC, Andover, MA.

For Vitex Packaging, Inc., Defendant: Edward J. Jacobs, LEAD ATTORNEY, PRO HAC VICE, Baker Hostetler LLP, New York, NY; Jaimie A. McKean, Schwartz Hannum PC, Andover, MA.

For Vitex Packaging Group, Counter Claimant: Edward J. Jacobs, LEAD ATTORNEY, PRO HAC VICE, Baker Hostetler LLP, New York, NY; Jaimie A. McKean, Sara G. Schwartz, Schwartz Hannum PC, Andover, MA.

For Vitex Packaging, Inc., Counter Claimant: Jaimie A. McKean, Schwartz Hannum PC, Andover, MA.

For C.A.I., Inc., Counter Defendant: W. Paul Needham, LEAD ATTORNEY, W. Paul Needham, PC, Boston, MA; Mark A. Johnson, Needham & Johnson, Boston, MA.

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Leo T. Sorokin, United States District Judge.


C.A.I., Inc. (" CAI" ), makes and sells commercial ink and ink products. Vitex Packaging Group, Inc. and Vitex Packaging, Inc., (collectively " Vitex" ), print tea labels and tea envelopes for its customers. From about September of 2010, to about December of 2010, Vitex purchased some inks from CAI on a " straight bill" basis. Vitex evaluated the ink products and decided to purchase more substantial quantities of ink from CAI. After some oral discussions, during which Vitex made clear it did not want to enter into a binding relationship of any set duration, Vitex and CAI agreed to a form of consignment arrangement. Beginning in early 2011, CAI shipped ink to Vitex. Each month, a CAI employee visited the Vitex plant to determine which ink containers Vitex had opened during the previous month.

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Armed with this information, CAI sent an invoice to Vitex for each container Vitex had opened. CAI issued the first invoice for consignment ink in February of 2011. Vitex paid this invoice. The parties repeated this process each month thereafter until March of 2013, when Vitex terminated the relationship. At the end of the relationship, Vitex refused to pay four invoices issued by CAI: February 28, 2013 (invoice # 64252); March 28, 2013 (invoice # 64545); April 4, 2013 (invoice # 64545A), and; April 15, 2013 (invoice # 64749).

CAI brought a one count Complaint for Breach of Contract against Vitex seeking as damages the amount of the four unpaid invoices. It now seeks Partial Summary Judgment on its Breach of Contract Claim as to three out of the four invoices. Vitex Cross-Moves for Summary Judgment on CAI's claim seeking payment for three invoices. The parties agree that Vitex had the right to return unopened containers of ink without charge or penalty. The dispute now concerns one or both of the following two categories of ink: (1) unopened containers Vitex decided to keep (and later used either for printing purposes or to prepare for this litigation); and, (2) so-called " work-off ink," which is ink that Vitex recovered from a printing run and saved for future use.

Vitex has brought its own claims against CAI. It has Counterclaims for: (1) Declaratory Judgment that the " Additional Terms" on CAI's invoices are not binding or enforceable; (2) Breach of Contract; (3) Breach of the Implied Covenant of Good Faith and Fair Dealing; (4) Breach of the Implied Warranty of Merchantability; (5) Breach of the Implied Warranty of Fitness for a Particular Purpose; (6) Breach of Express Warranty; (7) Deceptive Business Practices, Chapter 93A; (8) Tortious Interference with Contractual Relations; (9) Tortious Interference with Advantageous Relations; (10) Fraudulent Misrepresentation; and (11) Negligent Misrepresentation. Vitex now moves for Summary Judgment on all eleven (11) of its Counterclaims seeking over $1 million in damages. Finally, Vitex's Counterclaim for Declaratory Judgment that the " Additional Terms" listed on the back side of CAI's monthly invoices are not enforceable, presents a substantial dispute raised by Vitex's motion and CAI's opposition. The Court treats CAI's opposition as a cross-motion, on this issue only. The parties were notified of the Court's treatment on this one issue, and they were provided an opportunity for further briefing. The Court held a hearing on June 17, 2015. All pending motions relating to summary judgment are now ripe for decision.

II. Material Facts

The material facts set forth herein are undisputed except where otherwise noted.[1]

CAI, located in Georgetown, Massachusetts, is a family-owned company that manufactures inks and coatings for the printing industry. (Doc. 48 ¶ 3.) CAI was founded by Vincent Sartorelli and his son Michael Sartorelli in 1985. (Vince Sartorelli Aff. ¶ 1.) Vincent is CAI's President,

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his son, Mike Sartorelli is CAI's Technical Director, and another son, Paul Sartorelli is CAI's Treasurer. (RVSOF ¶ 1.) Vitex Packaging, Inc. is a subsidiary of Vitex Packaging Group, Inc., located in Suffolk, Virginia. (Doc. 47 at ¶ 2.) Vitex manufactures printed tea tags and envelopes for tea companies. (Id.) Vitex uses ink and ink products for printing its tea tags and tea bag envelopes, which Vitex then sells to its customers. (Id.)

In September of 2010, CAI began providing small amounts of water-based ink products to Vitex, on a " straight charge basis." (Ex. 3, Paul Sartorelli Depo. at 16.) At that time, CAI shipped the ink along with its invoice. (Id.) Then in January of 2011, Robert Hummel, on behalf of Vitex, went to CAI's manufacturing plant in Georgetown. (Ex. 76, Hummell Depo. at 52.) Hummel met with Hoyle Cecil of CAI. (Ex. 10, Cecil Depo. at 40.) Hummell testified at deposition that it was his idea to request that CAI provide ink to Vitex on a " consignment" basis. (Ex. 76, Hummell Depo. at 53.) According to Hummell, this arrangement allowed Vitex to " bring in product and basically it freed up cash for [Vitex] because it didn't hit [Vitex's] books until" after a " 55-gallon drum" was opened. (Id.) At that meeting, Cecil (on behalf of CAI) agreed to provide Vitex with whatever quantity of ink Vitex needed on a consignment basis. (Ex. 10, Cecil Depo. at 40.) Also at that time, the parties discussed contract pricing, technical support and notice in case of a pricing increase. (Ex. 76, Hummell Depo. at 52.) Cecil testified at deposition that he knew Vitex did not want to enter into a formal written agreement because it did not want to be bound to any supplier for any set period of time. (Ex. 10, Cecil Depo. at 41.) There is no testimony, no affidavit, no evidence submitted from anyone at Vitex regarding any discussions of other terms at that time.

Shortly after the meeting, CAI shipped ink to Vitex in accordance with the parties' oral arrangement reached at the January 2011 meeting. (Ex. 77.) According to Hummell, Vitex would order the ink from CAI, and CAI would ship the ink. (Ex. 76, Hummell Depo. at 53.) Then Vitex would " use" some containers of ink. At the end of every month, Cecil would go to Vitex's plant and with a representative of Vitex, and they would determine the amount of ink Vitex " used" that month. (VSOF ¶ ¶ 12, 137; CSOF ¶ 10.) For billing purposes, the undisputed facts establish that, for any pail, drum or tote of CAI ink opened during the month, CAI would bill Vitex for the entire pail, drum or tote rather than the specific quantity of ink actually used. (Id.)

The first invoice issued in connection with the consignment agreement was on February 28, 2011. (Ex. 77.) According to Vitex, CAI sent the same invoice to all its customers and Vince Sartorelli testified that he believed and hoped that the invoice was sent to all customers for CAI's protection. (Ex.1, Vince Sartorelli Depo. at 52.) The back of every invoice contained " Additional Terms." Approximately twenty eight (28) such invoices were sent to Vitex from between February of 2011, to March of 2013. (Ex. 77 and Exs. C, G, H.) During the parties' relationship, Vitex never raised any objection to the terms contained on CAI's invoice.

Beginning in March of 2012, after Vitex had received and paid approximately fourteen monthly invoices, (Ex. 77), Vitex did make complaints regarding the quality of CAI's products. (VSOF ¶ 30.) However, it voiced no concern or objection about the additional terms. At no time, until this litigation, did Vitex complain about the terms of the invoice or seek any accommodation from CAI with respect to its ink

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that might otherwise indicate an implicit objection to (or acceptance of) the terms. In addition, Vitex has submitted no affirmative evidence denying knowledge of the terms on the invoices, nor has it submitted or identified any evidence suggesting it was otherwise unaware of the additional terms on the invoices. There is also no evidence of express agreement by Vitex, and no evidence CAI discussed the terms with Vitex.

During the course of the parties' relationship, Vitex purchased from CAI ink bases which are colors that can be mixed to produce additional colors, and a varnish or coating known as a " clay extender." (VSOF ¶ 5.) " Virgin ink" is ink that was not mixed with any other ink. (VSOF ¶ 128.) " Work-off ink" was ink that was essentially left over from a printing run and used again--sometimes mixed with virgin ink and sometimes mixed with other work-off ink. (RVSOF ¶ 6.) From approximately January of 2011, to approximately March of 2013, Vitex purchased over 900,000 pounds of ink from CAI, (Ex. 77 and Ex. C, G and H), and 475,000 pounds of ink products from other ink suppliers. (RVSOF ¶ 3.)

Vitex claims that CAI's ink was " contaminated" with mold and bacteria which caused the tags or other printed materials to smell bad, which in turn caused them substantial damages. (Vitex Memo SJ at 4-5.) The undisputed evidence demonstrates that out of Vitex's 100 or more customers, three of Vitex's customers' complained about odor. (RVSOF ¶ 2.) CAI denies that the virgin ink it provided to Vitex was contaminated. CAI points to evidence indicating many other possible causes for the any alleged bad smell. First, CAI argues that the undisputed evidence shows that Vitex regularly used work-off ink for which Vitex had no quality control. For instance, an orange ink that was used for Bigelow was made exclusively with work-off ink. (Ex. 78.) According to CAI, Vitex has no way of knowing whether this work-off ink, or any other press run made exclusively with work-off ink, contained (exclusively) CAI ink or extender. (RVSOF ¶ 6.) When CAI took over as Vitex's ink supplier, Vitex had a large amount of workoff ink in its ink room that could only have been comprised of ink from previous suppliers. (Ex. 80, Cecil Depo. at 121-123.) It also had ink that was specifically labeled as the property of previous suppliers, including a supplier that had, by that time, not been Vitex's ink supplier for approximately four years. (Id.). The lack of ability to specifically track or trace work-off ink is consistent with testimony from Vitex representatives. (Ex. 76, Hummel Depo. at 67-68.) (Ex. 88, Johnson Depo. at 44-43.) There is also evidence that the cleanliness and organization in Vitex's ink room was sub-standard. (Ex. 88, Johnson Depo. at 36- 37; Ex. 80, Depo. Cecil at 124.) Vitex puts forth no evidence disputing the described condition of its facility, nor has Vitex submitted contrary evidence directly disputing the basis for these witness' testimony, nor any other evidence suggesting the conditions were other than as described.

The crux of Vitex's claims, is that CAI attempted to add " biocides" to its ink which inhibits the growth of mold and bacteria, but it did this without Vitex's knowledge and in an effort to hide the fact that CAI's ink was contaminated. (Vitex Memo SJ at 4-5.) CAI denies these allegations, and states its products always had the requisite biocides. (RVSOF ¶ 15.) While both parties point to some evidence in the voluminous record supporting their respective positions regarding contamination, the parties hotly dispute the significance of certain test results, the context in which tests were reported, the methodology used to test samples, the import and

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meaning of communications relating to quality and testing of the ink, as well as the authenticity of statements made during meetings relating to ...

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