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Cogan Imports, Inc. v. Dharod

United States District Court, W.D. Kentucky, Louisville Division

August 2, 2019

COGAN IMPORTS, INC. PLAINTIFF
v.
SUNIL DHAROD DEFENDANT

          MEMORANDUM OPINION AND ORDER

          GREG N. STIVERS, CHIEF JUDGE UNITED STATES DISTRICT COURT.

         This matter is before the Court on Defendant's Motion for Summary Judgment (DN 59), Plaintiff's Motion for Summary Judgment (DN 53), Plaintiff's Motion to Exclude the Defendant's Expert Witness (DN 52), Defendant's Objection to Magistrate Judge's Order on Motion for Sanctions (DN 82), and Defendant's Objection to Plaintiff's Bill of Costs (DN 83). For the reasons set forth below, Defendant's Motion for Summary Judgment is GRANTED, Defendant's Objection to Magistrate Judge's Order on Motion for Sanctions is OVERRULED, Defendant's Objection to Plaintiff's Bill of Costs is SUSTAINED, and the other motions are DENIED.

         I. STATEMENT OF FACTS

         Kevin Cogan (“Cogan”) collects luxury cars and established Plaintiff Cogan Imports, Inc. (“Cogan Imports”), a licensed motor vehicle dealer in Louisville, Kentucky. (Cogan Aff. ¶ 3, DN 21-2; Cogan Dep. 119:15-120:10, Sept. 27, 2017, DN 63-1; Def.'s Mot. Summ. J. Ex. 2, at 3, DN 59-3). Cogan was seeking financing for Cogan Imports' inventory and contacted Todd McNeill (“McNeill”), a loan broker with whom Cogan had dealt previously. (Cogan Aff. ¶ 4; McNeill Dep. 11:18-22, Jan. 24, 2018, DN 63-3). McNeill indirectly learned of Defendant Sunil Dharod (“Dharod”), who himself collected high-end cars, as a possible source of financing for Cogan Imports. (McNeill Dep. 12:15-13:9).

         On February 26, 2016, Cogan, McNeill, and an associate of Dharod's named John Fox (“Fox”) held a conference call in which they discussed Cogan's background and some of the cars in his collection. (McNeill Dep. 27:15-28-6). At some point, Cogan disclosed that he owned a 2003 Ferrari Enzo. (Fox Dep. 26:23-27:23, Nov. 2, 2017, DN 63-4). Fox later mentioned the Enzo to Dharod, and Dharod asked Fox to find out if Cogan Imports was interested in selling the vehicle. (Dharod Dep. 80:7-18, Dec. 7, 2017, DN 63-5).

         Fox sent an email to Cogan asking whether he would be interested in selling the Ferrari, stating: “We would like to offer you $2.7 million for the Enzo.” (Def.'s Mot. Summ. J. Ex. 9, at 4, DN 59-10 [hereafter Mar. 11 Emails]). Fox further indicated that if that price were agreeable to Cogan, Fox and Dharod would schedule a trip to Louisville “to spend a day going over details on that vehicle and other opportunities.” (Mar. 11 Emails, at 4). Cogan responded, stating that he believed a meeting was important and asking the earliest possible date for a visit to Louisville. (Mar. 11 Emails, at 3-4). Cogan also inquired whether the offer of $2.7 million was a “formal offer” and provided an overview of the Enzo's history. (Mar. 11 Emails, at 3-4). Fox replied to Cogan's email, confirming that the prior email was a formal offer. (Mar. 11 Emails, at 3). Cogan responded, “I am accepting the offer. We have a deal.” (Mar. 11 Emails, at 2-3).

         The following day, Fox checked the history on the Enzo through Carfax and learned the car had over 4300 miles on it, [1] while Fox and Dharod previously understood the car's mileage to be only 444.[2] (Fox Dep. 73:18-74:6; Def.'s Mot. Summ. J. Ex. 8, at 2, DN 59-9; Def.'s Mot. Summ. J. Ex. 11, at 2-3). The source of Fox's misunderstanding is unclear. In an email to McNeill, Fox blamed himself for the miscommunication on his poor hearing but indicated his notes from the teleconference reflected the lower mileage. (Def.'s Mot. Summ. J. Ex. 12, at 2). Fox testified he was confident Cogan had represented the lower mileage and that Fox initially took responsibility for the misunderstanding hoping to preserve good relations between Dharod and Cogan. (Fox Dep. 75:3-21; Def.'s Mot. Summ. J. Ex. 11, at 2-3).

         After Dharod learned the Enzo's true mileage, Fox advised Cogan Imports that Dharod was no longer interested in purchasing the vehicle because of the mileage discrepancy. (Fox Dep. 74:7-12; Def.'s Mot. Summ. J. Ex. 10, at 2, DN 59-11). Cogan Imports subsequently took the position that the email correspondence with Fox represented a binding contract with no additional conditions. (Def.'s Mot. Summ. J. Ex. 13, at 2-4, DN 59-14). Dharod ultimately declined to purchase the Ferrari, and this litigation followed.

         During the course of this action, the parties attempted to resolve the dispute and entered into a “Final Settlement Agreement” on July 15, 2016 (“Settlement Agreement”). (2d Am. Compl. ¶¶ 11-12, DN 16; Pl.'s Resp. Def.'s Mot. Summ. J. Ex. M, DN 67-14). The Settlement Agreement provided for an inspection of the vehicle on July 18, 2016, following which Dharod was to elect whether to proceed to close on the purchase or to terminate the Settlement Agreement “in which event the Parties shall resume the positions they held immediately before the Agreement was executed.” (Pl.'s Resp. Def.'s Mot. Summ. J. Ex. M, at 2). Dharod allegedly objected to some minor repairs costing approximately $1300. (2d Am. Compl. ¶¶ 14-15). Cogan Imports declined to make the repairs and Dharod terminated the Settlement Agreement. (2d Am. Compl. ¶¶ 15-16; Pl.'s Resp. Def.'s Mot. Summ. J. Ex. N, at 2, DN 67-15). Cogan Imports then relented and agreed to make the repairs, but Dharod declined to rescind his election to terminate the Settlement Agreement. (2d Am. Compl. ¶¶ 18-19). Cogan Imports subsequently amended its Complaint to assert a breach by Dharod of the Settlement Agreement. (2d Am. Compl. ¶¶ 9-24).

         II. JURISDICTION

         This Court has subject-matter jurisdiction of this matter based upon diversity jurisdiction. See 28 U.S.C. § 1332.

         III. DISCUSSION

         A. Motions for Summary Judgment (DN 53, 59)

         The parties have filed competing motions for summary judgment. In ruling on a motion for summary judgment, the Court must determine whether there is any genuine issue of material fact that would preclude entry of judgment for the moving party as a matter of law. See Fed.R.Civ.P. 56(a). The moving party bears the initial burden of stating the basis for the motion and identifying evidence in the record that demonstrates an absence of a genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If the moving party satisfies its burden, the non-moving party must then produce specific evidence proving the existence of a genuine dispute of fact for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

         While the Court must view the evidence in the light most favorable to the non-moving party, the non-moving party must do more than merely show the existence of some “metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (citation omitted). Rather, the non-moving party must present specific facts proving that a genuine factual dispute exists by “citing to particular parts of the materials in the record” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute . . . .” Fed.R.Civ.P. 56(c)(1). “The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient” to overcome summary judgment. Anderson, 477 U.S. at 252.

         1. Breach of Contract to Purchase the Enzo

         Cogan Imports asserts that Dharod breached the parties' contract, which consists entirely of the March 11 Emails. “To prove a breach of contract, the complainant must establish three things: 1) existence of a contract; 2) breach of that contract; and 3) damages flowing from the breach of contract.” Metro Louisville/Jefferson Cty. Gov't v. Abma, 326 S.W.3d 1, 8 (Ky. App. 2009) (citing Barnett v. Mercy Health Partners-Lourdes, Inc., 233 S.W.3d 723, 727 (Ky. App. 2007)).

         The disputed contract involves the sale of goods, so the transaction is governed by Kentucky's enactment of Article 2 of the Uniform Commercial Code (“UCC”), KRS 355.2-101 to 355.2-725. See Princesse D'Isenbourg Et Cie Ltd. v. Kinder Caviar, Inc., No. 3:09-29-DCR, 2011 WL 720194, at *4 (E.D. Ky. Feb. 22, 2011); A&A Mech., Inc. v. Thermal Equip. Sales, Inc., 998 S.W.2d 505, 509 (Ky. App. 1999). Under the UCC, “[a] contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.” KRS 355.2-204(1).[3]

         “The fundamental elements of a valid contract are ‘offer and acceptance, full and complete terms, and consideration.'” Energy Home, Div. of S. Energy Homes, Inc. v. Peay, 406 S.W.3d 828, 834 (Ky. 2013) (quoting Commonwealth v. Morseman, 379 S.W.3d 144, 149 (Ky. 2012)). Ordinarily, a valid contract must describe the parties' obligations in sufficiently definite and certain terms. Kovacs v. Freeman, 957 S.W.2d 251, 254 (Ky. 1997). As a sister court has explained:

The content, oral or written, must detail adequately the material or “essential” terms on which the parties purportedly have agreed. By and as part of the agreement, the parties must themselves sufficiently point to the standards for measuring the fulfillment and boundaries of each material item. As it relates to the key issue of open material terms and prospective negotiation, Kentucky takes an all or nothing approach to contracting. Thus, while the modern contracting trend would enforce a preliminary agreement that essentially binds the parties to good faith negotiations on open terms, Kentucky treats a preliminary agreement-even one evincing intent to be bound-as unenforceable if material terms remain subject to future or further negotiation.”

First Tech. Capital, Inc. v. JPMorgan Chase Bank, N.A., 53 F.Supp.3d 972, 984 (E.D. Ky. 2014) (citing Cinelli v. Ward, 997 S.W.2d 474, 478 (1998)).

         The UCC, however, takes a liberal view on the requirement that a contract must be specific regarding essential terms, including the identity of the parties, the subject matter of the contract, consideration, quantity, and even price. See 77A C.J.S. Sales § 26. Although the UCC allows for some open contract terms and provides “gap-fillers” where parties have failed to agree on others, it also makes clear that the parties to a contract must express their intent to be bound. KRS 355.2-204(3) (“Even though one (1) or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.”).

         While the UCC requires an expression of the parties' intent to form a contract, it does not define what words or actions constitute intent. Compare KRS 355.2-204(3), with KRS 355.2-106. Further, when Kentucky adopted the UCC the legislature included a provision stating that, where not specifically defined by the UCC, Kentucky's common law would govern interpretation. KRS 355.1-103(2). Thus, Kentucky common law must answer whether the parties intended to enter into a contract in this case.

         The Court's review of the putative contract “must begin with an examination of the plain language of the instrument.” Ky. Shakespeare Festival, Inc. v. Dunaway,490 S.W.3d 691, 694 (Ky. 2016). “‘In the absence of ambiguity, a written instrument will be enforced strictly according to its terms,' and a court will interpret the contract's terms by assigning language its ordinary meaning and without resort to extrinsic evidence.” Wehr Constr., Inc. v. Assurance Co. of Am., 384 S.W.3d 680, 687 (Ky. 2012) (quoting Frear v. P.T.A. Indus, Inc., 103 S.W.3d 99, 106 (Ky. 2003)). Absent ambiguity, the contract terms are to be enforced in accordance with their ordinary meaning without resort to extrinsic evidence. See Frear, 103 S.W.3d at 106 (citing Hoheimer v. Hoheimer,30 ...


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