United States District Court,

D. New Jersey.

Ralph DEMMICK, et al., Plaintiffs,

v.

CELLCO PARTNERSHIP, et al., Defendants.

 

Civil Action No. 06–2163 (JLL).

March 29, 2011.

 

OPINION

LINARES, District Judge.

This matter comes before the Court by way of a motion for judgment on the pleadings filed by Defendant Cellco Partnership, a Delaware General Partnership doing business as Verizon Wireless (“Verizon”), seeking dismissal of Plaintiffs’ claims arising under the Federal Communications Act (“FCA”). The Court has considered the submissions in support of and in opposition to the present motion and decides the matter without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons sets forth below, Verizon’s motion is denied.

 

I. BACKGROUND

On May 11, 2006, Plaintiffs, on behalf of themselves and all others similarly situated, filed a class action Complaint against Verizon. Plaintiffs filed their Second Amended Complaint on March 27, 2008, alleging claims under the FCA and the Declaratory Judgment Act (“DJA”), and also under New Jersey and Maryland state law. Plaintiffs’ allegations involve two distinct disputes related to Verizon’s Family Share Plan, which permits multiple cellular telephones to share minutes among a primary line and one or more secondary lines. First, Plaintiffs allege that Verizon failed to disclose how “after-allowance,” or “overage,” minutes would be distributed among primary and secondary lines, causing Plaintiffs to be billed “in excess of what they should have been charged.” (Second Am. Compl. ¶ 24.) Second, Plaintiffs allege that they were charged for “In–Network” calling between primary and secondary lines even though their service agreements provided that such calls would incur no charge. Plaintiffs state that both of these claims allege that Verizon billed Plaintiffs based on an “undisclosed policy” that contradicts the terms of the relevant service agreements. (Id. at ¶ 23; see CM/ECF Nos. 26 & 27, Opinion & Order, Mar. 13, 2007, at 7–8 (granting in part and denying in part Verizon’s motion to dismiss).)

 

On September 8, 2010, this Court certified two nationwide classes asserting claims under the DJA and FCA: an Overage Minutes Class and an In–Network/In–Family Class. The Overage Minutes Class also includes statewide New Jersey and Maryland subclasses asserting breach of contract claims, and the In–Network/In–Family Class includes a statewide Maryland subclass asserting breach of contract and Maryland Consumer Protection Act claims. On November 2, 2010 the Third Circuit denied Verizon’s petition for leave to appeal this Court’s class certification ruling, and on December 15 Verizon filed the instant motion for judgment on the pleadings.

 

II. LEGAL STANDARD

Rule 12(c) provides that “[a]fter the pleadings are closed-but early enough not to delay trial—a party may move for judgment on the pleadings.” Where, as here, a motion for judgment on the pleadings alleges that the complaint fails to state a claim upon which relief can be granted, the court applies the same standards as under Rule 12(b)(6). Turbe v. Government of Virgin Islands, 938 F.2d 427, 428 (3d Cir.1991).

 

For a complaint to survive dismissal under Rule 12(b)(6), it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, –––U.S. ––––, ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). The plausibility standard is not akin to a “ ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully;” mere consistency with liability is insufficient. Id. In evaluating the sufficiency of a complaint, a court must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving party. See Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008). But, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions[;][t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 129 S.Ct. at 1949. It is the underlying specific facts alleged in a complaint that should be treated as true and evaluated.

 

III. DISCUSSION

Verizon’s principal argument is that the law of the Third Circuit requires that claims under § 201(b) of the FCA, prior to being filed in federal court, must be brought to the Federal Communications Commission (“FCC”) for a determination regarding the reasonableness of the challenged conduct. Absent a prior determination by the FCC, Verizon argues, Plaintiffs’ claims must be dismissed. Plaintiffs concede that they did not seek FCC review before bringing the instant action but dispute that such review is required under Third Circuit precedent. Verizon alternatively argues that even if Plaintiffs’ FCA claims are properly before this Court, they should nonetheless be referred to the FCC under the doctrine of primary jurisdiction. Verizon finally argues that Plaintiffs’ “after-allowance claims” are not cognizable under the FCA.

 

A. Private Right of Action for Damages

Verizon cites Hoffman v. Rashid, No. 10–1186, 388 F. App’x 121 (3d Cir.2010) (per curiam), for the proposition that “under binding Third Circuit law” a prior determination by the FCC regarding a defendant’s conduct is “an essential prerequisite” for asserting claims under § 201(b) of the FCA. (Defs.’ Mot. Br. at 1.) As an initial matter, as it was decided by per curiam opinion, Hoffman is not “binding Third Circuit law,” but may be considered as persuasive authority. New Jersey, Dept. of Treasury, Div. of Inv. v. Fuld, 604 F.3d 816, 823 (3d Cir.2010). As Verizon bases its argument on Hoffman and no precedent appears to directly address the question of whether a prior determination by the FCC is “an essential prerequisite” for asserting claims under § 201(b), the Court begins by examining the language of the relevant statutes.

 

Section 201(b) of the FCA states that it is “unlawful” for common carriers to engage in any “charge, practice, classification, or regulation that is unjust or unreasonable.” 47 U.S.C. § 201(b). Section 206 in turn provides that a common carrier is “liable” for “damages sustained in consequence of” the carrier’s engaging in “any act, matter, or thing in this chapter prohibited or declared to be unlawful.” 47 U.S.C. § 206 (emphasis added). Section 207 then provides that “[a]ny person claiming to be damaged by any common carrier … may either make complaint to the Commission … or may bring suit … in any district court of the United States of competent jurisdiction” for “recovery of the damages for which such common carrier may be liable under the provisions of this chapter.” 47 U.S.C. § 207 (emphasis added). However, “such person shall not have the right to pursue both such remedies.” Id. With this statutory framework in mind, the Court now turns to the case law cited by Verizon.

 

In Hoffman, the Third Circuit considered a claim that a carrier’s practice of publishing certain “routing numbers” in its telephone records violated “some unspecified provision” the FCA. 388 F. App’x at 122. Ruling on a motion to dismiss, the District Court had held the plaintiff’s FCA claims to be time-barred, but went on to conclude that even if such claims were timely, they failed to state a claim under the FCA upon which the Court could grant relief. Hoffman v. Rashid, No. 07–3159, 2009 WL 5084098, at(E.D.Pa. Dec.9, 2009). The Court of Appeals summarily affirmed, stating that “even assuming, arguendo, that his claims were timely raised, we conclude that Hoffman’s claims under … the FCA are not viable because they do not demonstrate conduct by [the carrier] that could form the basis of an FCA violation.” Hoffman, 388 F. App’x at 123. The Court of Appeals began its analysis by noting that under § 201(b) business practices of common carriers may not be “unjust or unreasonable” and that the plaintiff had “ostensibly” claimed that the carrier’s publication of routing numbers violated this provision. Id. The Court then explained, “However, it is within the purview of the Federal Communications Commission, not [the plaintiff], ‘to determine whether a particular practice constitutes a violation for which there is a private right to compensation.’ ” Id. (quoting North County Commc’ns Corp. v. California Catalog & Tech., 594 F.3d 1149, 1158 (9th Cir.2010), cert. denied ––– U.S. ––––, 131 S.Ct. 645, 178 L.Ed.2d 479). It is this final statement regarding the availability of a “private right to compensation” upon which Verizon bases its argument.

 

The Third Circuit’s statement regarding private rights of action under § 201(b) quotes North County Communications v. California Catalog & Technology, a recent decision from the Ninth Circuit, while also citing the Supreme Court’s 2007 decision in Global Crossing Telecommunications v. Metrophones Telecommunications, 550 U.S. 45, 127 S.Ct. 1513, 167 L.Ed.2d 422 (2007). In North County, a competitive local exchange carrier (“CLEC”) brought an action against certain commercial mobile radio service (“CMRS”) providers, seeking a declaratory judgment that it was entitled to compensation for the CMRS providers’ refusal to pay for services rendered by the carrier because such practice constituted an “unjust and unreasonable practice” in violation of § 201(b) of the FCA. 594 F.3d at 1153–54. The Ninth Circuit denied such relief, holding that § 201(b) does not permit a private right to compensation absent a prior determination by the FCC that “particular practice” complained of is unjust or unreasonable under the statute. Id. at 1158. The Court reasoned that “entry of a declaratory judgment ‘would … put interpretation of a finely-tuned regulatory scheme squarely in the hands of private parties and some 700 federal district judges, instead of in the hands of the Commission.’ ” Id. (quoting Greene v. Sprint Commc’ns Co., 340 F.3d 1047, 1053 (9th Cir.2003)). The Court further explained that the language of §§ 206 and 207, which creates liability for the “unlawful” activities of common carriers and permits “[a]ny person” to “bring suit for the recovery of the damages for which such common carrier may be liable … in any district court of the United States,” provides only “procedures for private parties to pursue claims in federal court, but does not establish an independent private right of action for compensation.” Id. at 1160. While noting that “[i]t is arguable that the plain language of § 201(b) contains an implication that private parties may pursue remedies for violations of the statute,” the Court in North County nonetheless concluded based on policy concerns that no independent right to compensation is available under § 201(b) absent a prior determination by the FCC as to liability. Id.

 

The Third Circuit also cited Prometheus Radio Project v. F.C.C., 373 F.3d 372, 391 (3d Cir.2004), in which the Court of Appeals described the periodic review provisions of § 202(h) and stated that “[u]nder 47 U.S.C. § 201(b) the Commission is authorized to ‘prescribe such rules and regulations [regarding services and charges of communications common carriers] as may be necessary in the public interest to carry out the provisions of this Act.’ ” (alteration in original).

 

Like the Third Circuit in Hoffman, the Ninth Circuit cited favorably to the Supreme Court’s decision in Global Crossing. In that case the Supreme Court addressed whether a particular FCC regulation had lawfully implemented § 201(b)’s “unreasonable practice” provision. Global Crossing, 550 U.S. at 54–55. In framing the issue, the Supreme Court observed, “The difficult question … is not whether § 207 covers actions that complain of a violation of § 201(b) as lawfully implemented by an FCC regulation. It plainly does.” Id. at 54. The Court explained that the “purpose of § 207 is to allow persons injured by § 201(b) violations to bring federal-court damages actions,” id. at 53, and that Congress “expressly linked” the substantive provisions of § 201(b) to the “right of action provided in § 207,” id. at 59. Extending this reasoning to the regulation at issue, the Court reasoned that “[a] Congress that intends the statute to be enforced through a private cause of action intends the authoritative interpretation of the statute to be so enforced as well.” Id. (quoting Alexander v. Sandoval, 532 U.S. 275, 284, 121 S.Ct. 1511, 149 L.Ed.2d 517 (2001)). Thus, on its way to holding that the FCC regulation at issue was lawful and that § 207 authorized the instant federal court damages action, the Supreme Court implicitly recognized a private right of action for compensation under §§ 201(b) and 207. The Court, however, did not explicitly address whether such right of action could be predicated upon the existence of a prior ruling by the FCC regarding the conduct challenged in that case.

 

Verizon counters that the Supreme Court’s statement that the language of § 207 “makes clear that the lawsuit is proper if the FCC could properly hold that a carrier’s failure to pay compensation is an ‘unreasonable practice’ deemed ‘unlawful’ under § 201(b),” Global Crossing, 550 U.S. at 52–53 (emphasis in original), does explicitly support the view adopted in North County. However, this reading focuses on the “if” but ignores the “could”; the sentence can hardly be read as mandating prior FCC review.

 

 

The Ninth Circuit distinguishes Global Crossing on this ground, framing the Supreme Court’s case as one in which a ruling under § 201(b) had already been made by the FCC. North County, 594 F.3d at 1160. The Ninth Circuit conversely framed North County as a case in which the FCC had “not determined that the CMRS providers’ lack of compensation to CLECs violate[d] § 201(b),” which in its view caused the CLECs’ claims to be “fatally flawed.” Id. at 1156. The FCC rulings at issue in Global Crossing were orders issued on February 4, 1999 and October 3, 2003 to promulgate and explain new rules regarding carriers’ reimbursement of payphone operators and to declare certain violations of those rules “unreasonable” within the meaning of § 201(b).  550 U.S. at 51–52. The FCC orders set forth generally applicable rules and guidelines and were not directed to the parties before the Supreme Court in Global Crossing or to the precise claims at issue there. See id. at 70 (“the FCC has never determined that petitioner is in violation of its regulation and ordered compliance. Rather, respondent has alleged such a violation and has brought that allegation directly to District Court without prior agency adjudication”) (Scalia, J., dissenting). The FCC orders in Global Crossing therefore did not determine the reasonableness of the defendant’s “particular practices,” as apparently required under North County, but instead announced a more general rulemaking. This Court therefore doubts that the facts of North County can be meaningfully distinguished on this basis from those of Global Crossing, as in neither case had the claims at issue under § 201(b) been previously adjudicated by the FCC.

 

See In re Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, 14 F.C.C.R. 2545, 2631–2632, ¶¶ 190–191 (1999) (setting compensation amount and describing methodology); In re the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, 18 F.C.C.R. 19975, 19990, ¶ 32 (2003) (providing that a “failure to pay in accordance with the Commission’s payphone rules, such as the rules expressly requiring such payment that we adopt today, constitutes both a violation of section 276 and an unjust and unreasonable practice in violation of section 201(b) of the Act”); see also 47 C.F.R. § 64.1300(d).

 

In light of this potential conflict and considering both the plain language of the statute and the Supreme Court’s observation that Congress “expressly linked” the substantive provisions of § 201(b) to the “right of action provided in § 207,” the Court declines to follow the Ninth Circuit’s decision in North County, as arguably applied in the Third Circuit’s non-precedential opinion in Hoffman. Absent more conclusive guidance from the Court of Appeals, this Court is not persuaded that the administrative prerequisite argued for here can or should be read into this statutory scheme. Global Crossing did not involve a prior adjudication by the FCC, and even if the FCC rule at issue in that case were so precisely directed to the defendant’s “particular practice” as to operate effectively as an adjudication, nowhere did the Supreme Court predicate the statutory right of action under § § 201(b) and 207 on any regulatory act by the FCC. Instead, the Supreme Court made clear that the “purpose of § 207 is to allow persons injured by § 201(b) violations to bring federal-court damages actions.” This Court therefore concludes that Plaintiffs’ failure to plead a prior FCC determination as to the reasonableness of Verizon’s conduct is not fatal to their claims under the FCA. However, as discussed more fully below, the availability of a federal cause of action does not necessarily mean that federal court is the appropriate forum for such claims.

 

B. Primary Jurisdiction

Verizon argues that even if the FCA provides a private right of action to Plaintiffs, the doctrine of primary jurisdiction requires the Court to refer Plaintiffs’ FCA claims to the FCC for adjudication by that agency. (Defs.’ Mot. Br. at 11–12 n. 3.) The doctrine of primary jurisdiction is an abstention doctrine that “requires a court to transfer an issue within a case that involves expert administrative discretion to the federal administrative agency charged with exercising that discretion for initial decision.” Richman Bros. Records, Inc. v. U.S. Sprint Communications Co., 953 F.2d 1431, 1435 n. 3 (3d Cir.1991). Four factors that courts should consider when applying this doctrine are “(1) Whether the question at issue is within the conventional experience of judges or whether it involves technical or policy considerations within the agency’s particular field of expertise; (2) Whether the question at issue is particularly within the agency’s discretion; (3) Whether there exists a substantial danger of inconsistent rulings; and (4) Whether a prior application to the agency has been made.” Global Naps, Inc. v. Bell Atlantic–New Jersey, Inc., 287 F.Supp.2d 532, 548 (D.N.J.2003). Issues involving “abstract statutory terms such as ‘reasonable’ or ‘public interest’ ” are particularly well suited for transfer to an administrative agency. Alves v. Verizon, No. 08–3196, 2010 WL 2989988, at(D.N.J. July 27, 2010) (quoting FTC v. Verity Int’l, Ltd., 443 F.3d 48, 61 (2d Cir.2006)). However, “courts must balance the advantages of applying the primary jurisdiction doctrine against the potential costs resulting from complications and delay in the administrative proceedings.” Waudby v. Verizon Wireless Services, LLC, No. 07–470, 2007 WL 1560295, at(D.N.J. May 25, 2007).

 

In Alves, the District Court considered claims that various practices of a carrier, including charging the plaintiff for calls that she allegedly never made, violated § 201(b) as “charging unjust and unreasonable rates.” 2010 WL 2989988, at * 1–2, 9. The Court stated that “with respect to plaintiff’s claim for violation of … § 201(b), transfer to the FCC under the doctrine of primary jurisdiction is appropriate. This statute requires telephone service providers to utilize practices that are ‘just and reasonable.’ Claims ‘based on section 201(b) of the Communications Act are within the primary jurisdiction of the FCC.’ ” Id. at (quoting In re Long Distance Telecommc’ns Litig., 831 F.2d 627, 631 (6th Cir.1987); citing North County) (internal citation omitted). As in Alves, courts have consistently found that reasonableness determinations under § 201(b) lie within the primary jurisdiction of the FCC, because they involve policy considerations within the agency’s discretion and particular field of expertise. See, e.g., Richman Bros. Records, 953 F.2d at 1435; Palermo v. Bell Telephone Co. of Pa., 415 F.2d 298, 300 n. 4 (3d Cir.1969); Oh v. AT & T Corporation, 76 F.Supp.2d 551, 557 (D.N.J.1999); Telstar Res. Group, Inc. v. MCI, Inc., 476 F.Supp.2d 261, 272 (S.D.N.Y.2007); cf. Ambassador v. United States, 325 U.S. 317, 324, 65 S.Ct. 1151, 89 L.Ed. 1637 (1945) (noting that “where the claim of unlawfulness of a regulation is grounded in lack of reasonableness, the objection must be addressed to the [FCC] and not as an original matter brought to the court”).

 

Along with its analysis of private rights of action under the FCA, the Ninth Circuit in North County applied primary jurisdiction doctrine in dismissing the plaintiff’s § 201(b) claims. See 594 F.3d at 1162.

 

As Plaintiffs’ FCA claims here rest entirely upon a determination as to reasonableness, the first two factors of the primary jurisdiction inquiry weigh in favor of referral to the FCC. With respect to the third factor, while nothing on the record suggests that other district courts have addressed practices similar to those alleged here, the FCC has issued a notice of proposed rulemaking regarding disclosures made by carriers “at the point of sale.” See In re Truth–in–Billing and Billing Format, 20 F.C.C.R. 6448, 6476–77 (2005) (soliciting public comment on the tentative conclusion that “disclosure at the point of sale must occur before the customer signs any contract for the carrier’s services”) (emphasis in original). The third factor thus tips slightly in favor of referral, as the FCC’s proposed rulemaking may be relevant to Plaintiffs’ claims regarding Verizon’s alleged “undisclosed” billing practices. With respect to the fourth factor, however, Plaintiffs have made no prior application to the FCC regarding Verizon’s practices. Only where a prior application has been made does this factor support the application of primary jurisdiction doctrine, because in such cases the issue to be referred may already be pending before the agency. Telstar, 476 F.Supp.2d at 272–73. The fourth factor therefore weighs against referral in this case.

 

Where, as here, only the fourth factor weighs against applying the doctrine, courts have referred proceedings before them to the FCC, but have done so by means of a stay, rather than a dismissal. See, e.g., Telstar, 476 F.Supp.2d at 273 (citing cases). Entry of a stay is particularly appropriate in the class action context, as “the FCC rules do not provide for class actions or the award of attorneys’ fees, and hence [federal court] may provide the only forum capable of providing the remedy the plaintiff seeks.” Id.; see Waudby, 2007 WL 1560295, at(noting that following a decision by the FCC while an action was stayed, class action plaintiffs were entitled to return to the district court to “proceed to final judgment”); Oh, 76 F.Supp.2d at 557 (“because of potential prejudice to the plaintiffs, stay of an action pending an agency determination of liability is a more appropriate course than outright dismissal”). Here, stay of the proceedings would defer to the FCC’s discretion in determining the reasonableness of Verizon’s actions while permitting Plaintiffs to return to this Court to obtain the class action remedies they seek. Furthermore, while referral to the FCC might delay the ultimate resolution of this case, class notice and merits discovery have not yet begun, so the costs of delay are likely to be limited. Nor would entry of a stay necessarily complicate the resolution the overall action here, as Plaintiffs’ state law claims are based on the same underlying conduct as their FCA claims and may be subject to a preemption defense, should such federal claims be deemed cognizable. (See Defs.’ Mot. Br. at 15; Answer to Second Am. Compl. at 27.) Thus, balancing the advantages of referral against the costs of complication and delay, the Court concludes that Plaintiffs’ claims under § 201(b) lie within the primary jurisdiction of the FCC and that it is appropriate to stay this action and refer those claims to the FCC.

 

Defendants’ counterclaims, sounding in breach of contract and unjust enrichment, also appear to arise from the same underlying conduct as Plaintiffs’ FCA claims. (See Answer to Second Am. Compl. at 31–33.)

 

Having so ruled, the Court declines to consider the remainder of Verizon’s arguments in support of its motion.

 

IV. CONCLUSION

For the foregoing reasons, Verizon’s motion for judgment on the pleadings is denied. However, this action will be stayed pending FCC review of Plaintiffs’ claims under the FCA. Because the FCA does not provide a mechanism by which the Court can directly refer this matter to the FCC, it is incumbent upon Plaintiffs to file an administrative complaint. An appropriate Order accompanies this Opinion.

United States District Court,

S.D. New York.

PHOENIX WAREHOUSE OF CALIFORNIA, LLC, Plaintiff,

v.

TOWNLEY, INC., Defendant.

and

Phoenix Warehouse of New Jersey, L.L.C., Phoenix Holding Group, L.L.C., Alan Antonucci and Christopher Antonucci, Additional Counterclaim–Defendants.

 

No. 08 Civ. 2856(NRB).

March 29, 2011.

 

MEMORANDUM AND ORDER

NAOMI REICE BUCHWALD, District Judge.

Phoenix Warehouse of California, LLC (“Phoenix”) initiated this action against Townley, Inc. (“Townley”) alleging that it is owed money for services rendered pursuant to a contract. Townley asserted two counterclaims against Phoenix, affiliated companies, and its principals, Alan and Christopher Antonucci. Phoenix moved for summary judgment on its breach of contract claim and to dismiss Townley’s counterclaims as seeking unrecoverable consequential damages. At oral argument on March 8, 2011, this Court denied Phoenix’s motion for summary judgment on its contract claim. However, we granted Phoenix’s motion to dismiss Townley’s counterclaims for any damages sought for injuries occurring prior to November 1, 2007. The Court reserved decision on whether to grant Phoenix’s motion dismissing Townley’s counterclaims in their entirety. For the reasons stated below, Phoenix’s motion is hereby granted inasmuch as Townley’s counterclaims attempt to recover damages for cancelled orders and chargebacks, credits, and other cash incentives. Townley’s counterclaims are not dismissed in their entirety, however, as there are outstanding issues of material fact regarding whether Phoenix is liable to Townley for overpayments as a result of Phoenix’s alleged breaches of contract.

 

FACTS

 

In their submissions to the Court, the parties focused much of their attention on allocating blame for the deterioration of the contractual relationship. While this issue was significant to the broad motion originally made by Phoenix, it is largely irrelevant to the relatively narrow question remaining before the Court. Only the facts pertinent to the present determination will be addressed here.

 

Townley is a company which supplies cosmetics and cosmetic gift sets to retailers such as Wal–Mart, Target, CBI, and Kohl’s. Pl.’s Statement of Facts (“Pl.’s SF”) ¶ 3. Townley’s goods are primarily imported from Asia. Id. ¶ 2. On June 6, 2001, Phoenix and Townley entered into a contract in which Phoenix undertook to provide warehousing and distribution services for Townley. Ex. 1 to Townley’s Opp’n Mem. of Law (“Opp’ n Mem.”). Pursuant to this agreement, Phoenix would store Townley’s merchandise and prepare goods for shipping to Townley’s retail customers. In return for these services, Townley made payments to Phoenix based on the amount of goods received and stored. Id. Phoenix’s shipping responsibilities included processing, packaging, ticketing, labeling, and assembling orders. In fulfilling these duties, Phoenix would often “pick and pack” orders for Townley. Pl.’s SF ¶¶ 8–11. Under this process, Townley would provide Phoenix with a “pick ticket” that contained specific instructions as to how to process an order. Id. ¶ 11. For example, the ticket would reflect whether the store preferred to receive goods in six or twenty-four piece sets. Id. Phoenix would prepare the order for shipping in compliance with these instructions, literally “picking” the goods off of the shelf and “packing” them for shipping.

 

On February 18, 2004, the parties revised their agreement in order to alter the method by which Phoenix was compensated. Under the new system, Townley paid Phoenix based on a percentage of sales to its customers. Specifically, Townley paid Phoenix 2% of the sales price for “Target, Holiday, Pick & Pack, In/Out Programs” and 5% for “other” services including “Kitting, Assembly, Ticketing, Sorting and like programs.” Ex. 2 to Opp’n Mem. Townley guaranteed ten million dollars in sales each year, and pledged to make monthly payments of twenty thousand dollars. Id.

 

Two elements of these contracts are particularly relevant to the issue before the Court. First, both agreements contained a clause which stated that Phoenix “shall be accountable for [chargeback] due to warehouse error, only if such error is unequivocally the responsibility of Phoenix” and that liability for a chargeback is limited to the “amount of work or work order performed.”  Exs. 1, 2 to Opp’n Mem. The 2004 agreement further required that chargebacks be “fully documented and presented for review and consideration.” Ex. 2 to Opp’n Mem. Chargebacks, which the parties agree are common in the retail goods industry, can occur when a retailer receives a shipment that does not perfectly comply with its request. For example, if a retailer received a shipment that was one or two pieces short of what it ordered or had a misplaced label, it could chargeback Townley, which would owe it money as a result.

 

Such a restriction on liability makes sense, given the limited role Phoenix plays in the distribution of Townley’s goods and the lack of control it has in ensuring goods arrive to retailers on time and without error. As stated by Phoenix in reply to Townley’s memorandum of law opposing this motion:

 

“The rationale for this limited liability emanates from the peculiar circumstances of the warehouse industry. The goods are shipped from Asia via steamship, must clear customs at the pier, are picked up by a trucking company, and delivered to the warehouse. There they remained until Townley issues an order for picking and packing. The goods are then picked up by another trucking company and delivered to a distribution center or a retail store. Virtually the entire transaction is beyond Phoenix’ [s] control. Phoenix has no ability to meet Townley’s deadlines without the goods on hand in a timely manner, which is out of Phoenix’ [s] control.”

 

Phoenix Mem. in Reply at 5.

 

At his deposition, Alan Antonucci noted that “in this industry, customers are notorious for chargebacks for any reason.” Ex. 15 to Opp’n Mem. at 54. Eddie Habbaz, another agent of Phoenix, stated that Townley could “get a chargeback from their customer for some—either valid or frivolous charge. It could be a supposed error … it could be a physical thing or could not be a physical thing.” Ex. 19 to Opp’n Mem. at 36.

 

Second, neither agreement specified any time limits within which Phoenix was to perform any of its contractual duties. Despite the lack of any affirmative time obligations, it appears that both parties understood that Townley’s customers were allowed to cancel orders if they were not received by a certain date. Each order made by one of Townley’s customers had its own cancel date; if the customer did not receive the ordered goods by that date, for any reason, it had the right to cancel the order. See Transcript of Oral Argument at 9–10.

 

The relationship between Townley and Phoenix began to deteriorate in 2007. It is undisputed that sometime during that year, Townley began omitting the retail cost of the goods in its packing instructions to Phoenix, and that Townley’s account became past due by “August or September of 2007.” Pl.’s SF ¶ 45, 47. Furthermore, the parties agree that while Townley initially paid “specific invoices by check, earmarked to each Phoenix invoice,” eventually it “began paying Phoenix by lump sum wire transfers that were not earmarked to any particular Phoenix invoice.” Id. ¶¶ 49–50. Townley does not dispute these facts, but it does claim that Phoenix was able to obtain the pricing information by other methods, that Phoenix “began to fall behind on processing and shipping Townley’s orders to its customers beginning in or about June 2007,” and that “around” August 2007, Phoenix “began to fall behind in its invoicing to Townley.” Def.’s Statement of Facts (“Def.’s SF”) ¶¶ 45–47. According to Townley, invoices “were not received until months later, were received without backup, or were not received at all.” Id. ¶ 47. Townley claims that despite the fact that “Phoenix was not billing Townley accurately or timely,” Phoenix was “demanding payments from Townley.”  Id. Furthermore, Townley claims that it made lump sum payments “at Phoenix’s request,” that the payments were “ ‘prepayments’ and not against balance due,” and that Townley “ ‘had overpayments in [its] books’ because Townley ‘had no invoices.’ “ Id. ¶ 50 (quoting deposition of Wendy Abreau, Townley’s comptroller, Ex. H to Pl.’s Mot. for Summary Judgment (“Pl.’s Mot.”)).

 

The parties’ respective allegations raise a classic chicken-and-egg dilemma. It is not clear whether Townley’s failure to provide the retail costs of the goods constituted a material breach which led to Phoenix’s inability to properly bill Townley and Townley’s eventual default, or whether Phoenix should have obtained the information from other sources and breached first by either falling behind in preparing its shipments or providing appropriate invoicing. Resolution of this issue, however, is not necessary in order to reach a conclusion on this motion.

 

Regardless of which party breached the contract first, a question not presently before us, it is undisputed that in September and October 2007 the parties vigorously contested what amount, if any, Townley owed Phoenix for services rendered. This dispute culminated on October 12, 2007, when Phoenix’s CEO directed his employees to cease all work on Townley’s orders. Ex. 4 to Opp’n Mem. Four days later, on October 16, the parties entered into a third agreement which was to take effect on November 1. Ex. 5 to Opp’n Mem. The primary purpose of this contract was to return the parties to a method of billing similar to the first agreement. See Ex. 5 to Opp’n Mem.; Transcript of Oral Argument at 22. As in the 2001 contract, Phoenix would be compensated based on the amount of goods it received on behalf of Townley and prepared for shipping.

 

Phoenix’s complaint attaches and appears to rely on a contract dated September 7, 2007. This contract sets out different billing rates than the one entered into on October 16. It is not clear whether the parties ever operated under this agreement and, oddly, it appears to have been ignored by the parties in briefing the instant motion and making their presentations at oral argument.

 

The 2007 agreement contained two potentially significant distinctions from the previous contracts. First, there was no explicit mention of chargebacks.  Second, Phoenix promised to process Townley’s orders within certain timeframes. Specifically, in a section titled “Processing,” the agreement set forth:

 

We note that the agreement is styled as a “Schedule of Services and Rates to be effective November 1, 2007” and does not include any of the liability disclaimers or other affirmative duties included in the first two. Thus, one could easily conclude that the provisions from the 2001 and 2004 contract carried over, and that this agreement was only meant to supersede the billing method of the 2004 contract. Interestingly, neither party makes this argument in their submissions to the Court.

 

“assuming pick tickets, freight and all components are on hand, [turnaround] times shall be as follows and no overtime shall be billed:

 

Shippable inners and full case quantities for in/out and replenishment orders shall be two business days

 

Re-work orders shall be five business days”

 

Ex. 5 to Opp’n Mem. at 2.

 

After entering into this revised agreement, the parties continued to dispute the amount owed to Phoenix by Townley. On November 7 and 8, the parties’ lawyers exchanged a series of emails. In these emails, Townley sought to obtain Phoenix’s commitment to prepare their goods for shipping within certain time periods, and Phoenix demanded compensation for outstanding payments. Ex. 20 to Opp’n Mem.

 

To summarize, on November 7, Townley made an offer to place certain funds in escrow on the condition that Phoenix promise to meet certain shipping deadlines. Phoenix rebuffed Townley’s proposed conditions as “entirely unrealistic” and informed Townley that:

 

“Without payment of the current outstanding balance, $197,000, our position remains unchanged. Once we see the October numbers and that balance is paid, we can discuss anything your client suggests. The past due balance is a prerequisite.

 

We see no need for escrowing any portion of our past due monies, especially tied to impossible preconditions.”

 

Ex. 20 to Opp’n Mem. In response, Townley’s counsel provided the “October numbers,” requested that Phoenix’s counsel suggest goals that are “realistic in your client’s view,” and pointed out a number of “unexplained undocumented information that has given rise to this dispute” as the need for escrowing certain amounts.

 

The following morning, November 8, Phoenix’s counsel replied that he had forwarded the email to his client, but that “[u]nless the account is brought current, which is now $250,000, we will not release any freight and your personnel, at our facility will be asked to leave.” Phoenix’s counsel then pointed out why the issues with shipping and billing were the result of Townley’s failures to sign work orders and timely provide sales figures necessary for billing. He concluded that Phoenix was “ready, willing and able to resume release of the goods, upon the account being made current, with the same timetables and structure that the parties have operated under for the past seven years” and that the “entire situation was created by your client’s delinquency.” Id.

 

On November 8, just a few hours after Phoenix’s email refusing to release any goods until it received payment of the outstanding balance of $250,000, the parties reached an agreement over email under which Townley would pay Phoenix $200,000 immediately and would place $50,000 in escrow “until the mediation of the balance has occurred.” Ex. 22 to Opp’n Mem. In exchange for these payments, Phoenix accepted Townley’s terms that:

 

“-All goods on the floor get released immediately.

 

-All pick and pack orders go out by Monday

 

-All work orders under production are expedited and a schedule is given

 

-Target and weekly replenishment customers get fulfilled as required

 

-Closeout orders (Electronic Emporium) goes out in full by Friday the 16th

 

-All goods not tied to orders (we will give you a list) get pulled and released by Friday the 16th

 

-Joe Shamie can be a good mediator, and I would trust him holding any of funds”

 

Ex. 22 to Opp’n Mem.

 

On November 14, the parties entered into a formal escrow agreement. Pursuant to that agreement, the parties stipulated that “Phoenix is in possession of certain goods which are subject to a warehouseman’s lien” and that “Townley wishes Phoenix to release that lien.” Ex. 21 to Opp’n Mem. Townley agreed to deposit $50,000  into an escrow account, where it would remain until the escrow agent was directed to deliver any portion of the funds. The parties agreed to mediate the outstanding issues before Joseph Shamie.

 

We note that some of the obligations Phoenix consented to undertake pursuant to the email exchange of November 8 were actually to be completed prior to November 14.

 

While the contemporaneous emails and formal escrow agreement presented to the Court state that the amount placed in escrow was $50,000, the parties’ statement of facts, affidavits, and representations at oral argument assert that the amount was $150,000. At oral argument, Phoenix’s counsel stated that “$50,000 was the first escrow deposit. Thereafter, after the parties had a little bit of time to discuss it, they increased the escrow to 150 [thousand] because Townley made it clear that they were emptying out the warehouse.” Transcript of Oral Argument at 40. As both parties claim the amount placed in escrow was $150,000, we will accept it as true despite the fact that the documentary evidence before the Court reflects otherwise.

 

Apparently the escrow agreement and mediation did not resolve the situation, as Phoenix initiated this proceeding on March 18, 2008. In its complaint, Phoenix alleged that it fully complied with the contractual and escrow agreements and was owed $401,002.12 in outstanding payments by Townley. 0 Townley responded by filing counterclaims, asserting that Phoenix breached its contractual obligations and was liable for damages in the form of overpayments, chargebacks suffered, and cancelled orders.

 

0. The amount Phoenix now seeks is $408,846.84. In addition, Phoenix’s complaint alleged that it was owed at least $500,000 under a quantum meruit theory.

 

As noted above, at oral argument this Court denied Phoenix’s motion for summary judgment on its contract claim, and granted its motion dismissing Townley’s claim for any damages pertaining to chargebacks or cancelled orders prior to November 1, 2007.

 

DISCUSSION

A. Summary Judgment Standard

Summary judgment is appropriate only where the parties’ submissions “show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). Summary judgment is inappropriate if the court, resolving all ambiguities and drawing all reasonable inferences against the moving party, finds that the dispute about a material fact is “such that a reasonable jury could return a verdict for the nonmoving party.” See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986).

 

To defeat a motion for summary judgment, the non-moving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Anderson, 477 U.S. at 249–50 (internal citations omitted). The nonmoving party may not rest upon mere conclusory allegations or denials, but must set forth “concrete particulars” showing that a trial is needed. Nat’l Union Fire Ins. Co. v. Deloach, 708 F.Supp. 1371, 1379 (S.D.N.Y.1989) (quoting R.G. Group, Inc. v. Horn & Hardart Co., 751 F.2d 69, 77 (2d Cir.1984) (internal quotation marks omitted)). It is thus insufficient for a party opposing summary judgment “merely to assert a conclusion without supplying supporting arguments or facts.” BellSouth Telecomms., Inc. v. W.R. Grace & Co., 77 F.3d 603, 615 (2d Cir.1996) (internal citations and quotation marks omitted). Further, while credibility determinations, weighing evidence, and drawing legitimate inferences from facts are functions that the court must leave to the jury, if the nonmoving party does not present evidence from which a reasonable jury could return a favorable verdict, then summary judgment is appropriate. See, e.g ., Golden Pac. Bancorp. v. F.D.I.C., 375 F.3d 196, 200 (2d Cir.2004).

 

B. Consequential Damages

In an action for breach of contract, a plaintiff “may seek two distinct categories of damages.” Schonfeld v. Hilliard, 218 F.3d 164, 175 (2d Cir.2000). First, a plaintiff is typically entitled to general damages, which compensate for “the value of the very performance promised.” Id. Second, a plaintiff might be entitled to consequential damages, which “seek to compensate a plaintiff for additional losses (other than the value of the promised performance) that are incurred as a result of the defendant’s breach.” Id. As a general rule, consequential damages are “not recoverable unless the party was on notice of those special damages at the time of contracting.” Jessica Howard Ltd. v. Norfolk S. Ry. Co., 316 F.3d 165, 170 (2d Cir.2003) (quoting Neptune Orient Lines, Ltd. v. Burlington N. & Santa Fe Ry. Co., 213 F.3d 1118, 1120 (9th Cir.2000)).

 

The leading New York case on the availability of consequential damages is Kenford Co. v. County of Erie, 73 N.Y.2d 312 (1989). In Kenford, the New York Court of Appeal’s noted that in order to be recoverable, consequential damages must have been “brought within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.” Id. at 319 (internal quotations and citations omitted). In order to determine the “reasonable contemplation of the parties, the nature, purpose, and particular circumstances of the contract known by the parties should be considered” as well as “what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made.” Id. (internal quotations and citations omitted). When the contractual provisions do not address whether certain damages are available, the “commonsense rule to apply is to consider what the parties would have concluded had they considered the subject.” Id. at 320 (emphasis in original).

 

The key consideration is not whether the breaching party could have foreseen that its counterparty might suffer the damages in question, but whether it “contemplated at the time of the contract’s execution that it assumed legal responsibility for these damages upon a breach of the contract.” Id. Indeed, “bare notice of special consequences which might result from a breach of contract, unless under such circumstances as to imply that it formed the basis of the agreement, would not be sufficient [to impose liability for special damages].” Id. at 320–21 (internal citations and quotations omitted) (brackets in original).

 

C. Townley’s Counterclaims

Townley brought two counterclaims against Phoenix. The first alleges that Phoenix and its affiliated companies breached the October 2007 agreement, which took effect on November 1.1 Specifically, Townley claims that Phoenix “fail[ed] to provide, fail[ed] to timely provide” and “negligently provid[ed] the Warehouse Services called for in the [2007 contract]” and “fail [ed] to properly and timely invoice Townley for the Warehouse Services.” Countercl. ¶ 24. The second counterclaim is substantively identical to the first, but is brought against the individual defendants, whom Townley claims exercised “complete domination and control” over the corporate entities. Id. ¶¶ 29–44.

 

1. Townley’s memorandum of law and positions at oral argument focused almost exclusively on the escrow agreement the parties entered into in November 2007 and the six tasks that Phoenix undertook in the email conversation of November 8. However, there is no mention of that agreement in Townley’s pled counterclaim. Rather, other than a passing reference to Phoenix breaching “the [2007 contract] and/or the parties’ other agreement(s),” it appears that Townley’s counterclaim is brought exclusively under the 2007 contract. Nonetheless, given the focus on the agreement of November 8, we will consider Phoenix’s potential breaches of that contract as well.

 

Townley seeks damages for three separate alleged injuries. First, it states that it overpaid Phoenix in excess of $456,994.39. Id. ¶ 26. Second, it complains that it incurred damages related to “cancellations of orders from Townley’s clients and customers” in excess of $1,606,879.66. Id. ¶ 27. Third, it alleges that it sustained damages “related to chargebacks, credits and other cash incentives required to be provided to Townley’s clients and customers in excess of $619,639.50.” 2 Id. ¶ 28.

 

2. A review of the chargebacks submitted by Townley reflects that several of them were incurred for shipments that “never arrived.” Townley does not clearly articulate why some orders which never reached their destination were cancelled, whereas others simply resulted in a chargeback. See Ex. 18 to Opp’n Mem.

 

Townley’s claim that it overpaid Phoenix for its services attempts to obtain compensation for the value of the very performance promised, and is thus appropriately viewed as requesting general damages. However, Townley’s effort to recover for the chargebacks and cancelled orders that it suffered goes beyond the value of the performance promised. Thus, they are consequential damages.

 

1. Phoenix’s Liability for “Chargebacks, Credits, and Other Cash Incentives” and Cancelled Orders

In order for Townley to recover for chargebacks and cancelled orders, it must convince a jury that Phoenix “contemplated at the time of the contract’s execution that it assumed legal responsibility for [chargebacks] upon a breach of contract.” Kenford, 73 N.Y.2d at 320. We find that no reasonable jury could reach such a conclusion.

 

At first glance, it might appear that the existence of time obligations in the 2007 contract and escrow agreement 3 and Phoenix’s awareness of the damage Townley would suffer through chargebacks and cancelled orders if its goods did not get out on time support a conclusion that Phoenix assumed liability for these types of damages. As we stated at oral argument, the “inclusion of time periods” along with the “common knowledge” that “retailers have a right to cancel, that they chargeback” potentially creates “a basis for Townley to argue that [it] can recover breach of contract damages for the failure to timely comply.” Transcript of Oral Argument at 24.

 

3. In using the phrase “escrow agreement” we are not only referring to the document signed November 14, but also the emails of November 8 in which Phoenix undertook six tasks in exchange for a payment of $200,000 and $150,000 placed in escrow.

 

However, an understanding of the parties’ respective bargaining positions at the time of these agreements precludes such a conclusion. When Phoenix consented to the third contract on October 16, 2007, and to undertake the tasks pursuant to the emails of November 8, it was operating under the assumption that it had a valid lien on Townley’s goods.4 Once Phoenix decided to hold Townley’s goods until back payments were made, it was in an extremely powerful negotiating position. Essentially, there were only three ways in which Townley could get its goods out of Phoenix’s warehouse. It could pay the amount that Phoenix claimed was due and otherwise comply with Phoenix’s demands, initiate legal proceedings, or reach a settlement. Townley opted for the third option and attempted to reach a settlement. Apparently, Phoenix was willing to take this course of action as well. However, given that Phoenix was operating under the belief that it was rightfully holding Townley’s goods, a fact which Townley later conceded,5 it would have been entirely irrational for Phoenix to give up its legal right to hold Townley’s goods in exchange for a payment of $200,000, with another $50,000 or $150,000 placed in escrow, and an assumption of liability for almost $3,000,000 in consequential damages. 6 In deciding to compromise, Phoenix determined that it was worth giving up its claim to Townley’s goods and immediate payment of the full amount it believed it was owed. A rational trier of fact cannot conclude, however, that Phoenix was willing to compromise further or to assume a risk as large as Townley suggests, given that simply maintaining the status quo would have left Phoenix is an enviable position.

 

4. There is a factual dispute as to whether Phoenix formally asserted such a lien or used the precise words “warehouseman’s lien” in its negotiations with Townley. See Def’s SF ¶ 48; Ex. G to Opp’n Mem. at 171 (deposition of Abraham Safdieh, CEO of Townley, testifying that he “never recall[s] Phoenix talking to [him] about a warehouseman’s lien”). However, there is no question that Phoenix informed Townley that it was holding its goods until it received what it believed to be past due amounts.

 

5. Obviously, since Townley stipulated that there was a warehouseman’s lien as of November 14, Phoenix cannot be liable for any damages prior to that date while the lien was in effect. It is true that after the lien was lifted by payment of $200,000 and an amount placed in escrow, Phoenix did not have the blanket protection of the lien. Nevertheless, no reasonable trier of fact could conclude that Phoenix exchanged that blanket protection for an assumption of consequential damages many times the amount it received to release the lien.

 

6. Phoenix’s counsel, who was involved in the contemporaneous negotiations, argues that in contrast to the damage claims made in this lawsuit, Townley’s agents represented at the time that the goods were worth $150,000. He claims that this is why the parties settled on placing $150,000 in escrow as collateral for the goods remaining in Phoenix’s warehouse. See Transcript of Oral Argument at 40.

 

Not only is this the only logical conclusion, but it is supported by the factual record. The emails exchanged between Townley and Phoenix in early November demonstrate that Townley was aggressively trying to get its goods out of Phoenix’s warehouse, and that Phoenix was willing to hold on to them until it received payment. Ex. 20 to Opp’n Mem. The concern exhibited by Townley is evidence that it did not believe it was protected by the law of consequential damages during this period. Logically, if one were to accept the argument Townley makes in this litigation, the November 7 and 8 pleas to Phoenix to release the goods from the warehouse would have been largely unnecessary, because any cancelled orders or chargebacks it suffered would be recompensed by Phoenix. Moreover, under Townley’s theory, in refusing to ship Townley’s goods in early November, Phoenix was assuming an astonishing risk. Essentially, Townley argues that Phoenix refused to release its goods until it received $250,000, even though it knew that by keeping the goods on its premises it was exposing itself to millions of dollars of potential liability in consequential damages if a court were to find that a lien was improper.7

 

7. We recognize that this argument only specifically rebuts Townley’s claim that the contract effective November 1 included consequential damages. However, this is rather significant, given that this is the agreement that Townley actually bases its counterclaim on. Furthermore, once one concludes that the November 1 agreement did not result in an assumption of liability for consequential damages by Phoenix, it follows logically, for the same reasons laid out above, that the November 8 email did not either. There is simply no basis to conclude that Phoenix agreed to a massive amount of liability on November 8 for the first time in the contractual relationship.

 

As noted above, in the “absence of an express contractual provision governing the availability of [consequential] damages for a breach of contract,” the “proper inquiry is …’to consider what the parties would have concluded had they considered the subject.’ “ Lava Trading, Inc. v. Hartford Fire Ins. Co., 03 Civ. 7037(PKC), 2004 U.S. Dist. LEXIS 7618 at *6–7 (S.D.N.Y. May 3, 2004) (quoting Trademark Research Corp. v. Maxwell Online, Inc., 995 F.2d 326 (2d Cir.1993)). In this case it is plainly obvious that had this question been considered by the parties, Phoenix would have refused to assume responsibility for such liability. If Townley had insisted that Phoenix take such responsibility, Phoenix would have ended negotiations and continued to hold on to Townley’s goods, as was its right.

 

We note that Townley presents no evidence to suggest that our analysis is incorrect, and that Phoenix did consciously assume liability for cancelled orders and chargebacks. Townley’s memorandum of law relies exclusively on the two facts identified at the beginning of this section; specifically, Phoenix undertook to provide the services within certain time periods and was aware that Townley’s customers “would impose chargebacks against Townley and/or cancel their orders” if Phoenix did not prepare Townley’s goods for shipping on time.8 Opp’n Mem. at 17. As was stated in Kenford, “bare notice of special consequences which might result from a breach of contract, unless under such circumstances as to imply that it formed the basis of the agreement, would not be sufficient” to impose liability for special damages. Kenford, 73 N.Y.2d at 320–21. Rather, the question is whether Phoenix “contemplated at the time of the contract’s execution that it assumed legal responsibility for these damages upon a breach of the contract.” Id. at 321. Since Townley has offered no actual evidence that Phoenix assumed such responsibility, and it appears to be so fundamentally irrational and at odds with its economic interest for it to have done so, Townley’s claims for these damages are unsustainable as a matter of law in these circumstances. In this regard, we note that while for purposes of this motion we grant Townley every reasonable inference and resolve all factual disputes in their favor, it is ultimately Townley’s burden at trial to demonstrate that Phoenix assumed this liability.

 

8. To clarify, this is the only evidence Townley submits regarding the specific question of what the parties contemplated at the time of the contract. Townley’s memorandum also argues that Phoenix cannot rely on the provisions of the Uniform Commercial Code protecting warehousers and the receipts it issued to Townley upon storage of goods. As was discussed at oral argument, we agree with this contention. See Transcript of Oral Argument at 28. Furthermore, Townley’s memorandum contends that the damages in question are not consequential, but rather seek to “make the parties finish in a position they would have been in had the contract been properly performed.” Opp’n Mem. at 19. Regardless of the accuracy of this claim, it is clear that since the damages sought go beyond the value of the very performance promised, they are only recoverable if they meet the standards of Kenford and the seminal case of Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854).

 

In addition, there is the fact that the 2001 and 2004 agreements contained provisions dealing with chargebacks, whereas the contracts that Townley alleges were breached do not. There are two potential conclusions that can be drawn from this, and neither favors Townley. First, as noted above, it is possible that the 2007 agreement establishing a new “Schedule of Rates and Services” intended to incorporate the preexisting contractual framework, and thus that the chargeback provisions were meant to apply going forward. 9 If this is the case, then Townley’s claims for chargebacks cannot survive for several arguable reasons. Townley has made no allegation that it “fully documented and presented [the chargebacks] for review and consideration” by Phoenix, and the damages requested here almost certainly go beyond the “amount of work or work order performed.” Ex. 2 to Opp’n Mem. Furthermore, it is far from clear that a delay in shipping is the sort of “warehouse error” contemplated by that agreement.0 Lastly, Townley made clear at oral argument that it did not bring counterclaims against Phoenix under the 2001 or 2004 agreements between the parties, even though it seeks damages for orders cancelled after the November 1 effective date of the 2007 contract which relied on cancel dates which preceded November 1.1 The only logical conclusion to draw is that Townley does not believe the 2001 and 2004 chargeback provisions allow it to recover for these damages, and thus only sued under the 2007 contract, which was facially ambiguous as to liability for chargebacks.

 

9. Again, we note that neither party actually takes this position, and we are not formally adopting it.

 

0. Chargebacks for delay in shipping constitute approximately half of the spreadsheet claims. Most of the others, namely those for shortages, are not developed in the record and have not been the thrust of Townley’s argument.

 

1. At oral argument, Townley relied on the fact that even though the cancel dates for those orders were prior to November 1, the customer had not actually cancelled by that date. Thus, it believed that Phoenix’s alleged assumption of liability for chargebacks on November 1 could apply to goods which were in its possession relating to pre-November 1 cancel dates but not yet cancelled by that date. We rejected this contention.

 

Alternatively, the fact that the 2007 agreement made no provision for chargebacks could mean that the parties specifically intended to remove the provision from their agreement. In this scenario, the trier of fact would have to determine whether the parties affirmatively omitted this provision in order increase or decrease the amount of liability assumed by Phoenix. For the reasons discussed above, we do not believe that a rational trier of fact could review the record before the Court and determine that Phoenix was assuming greater liability for chargebacks in 2007 than it had in the past. Given the respective bargaining positions of the parties, it would be completely illogical for Phoenix to have done so. Indeed, Townley provides absolutely no evidence to support such a conclusion.

 

2. Phoenix’s Liability for Overpayments

Townley’s claim that it overpaid Phoenix for its services is properly understood as seeking general damages, since it aims to compensate Townley for the value of the very performance promised. In its memoranda, Phoenix argues that Townley’s claim of overpayments should be dismissed as Phoenix did not breach its responsibilities to Townley under the contract, and Townley has not demonstrated any overpayments to Phoenix. However, just as we found at oral argument that there were material issues of fact as to whether Townley owes Phoenix the amounts claimed by Phoenix under its contract claim, there are similar issues of fact regarding whether Townley overpaid Phoenix for any of its services. Thus, Townley’s counterclaims are not dismissed inasmuch as they seek compensation for overpayments made to Phoenix.2

 

2. It is our hope that with the clarification from this opinion, the parties will, with the assistance of accountants if necessary, reconcile the payment issues (over or under) between them. The parties should report to the Court within three weeks on the status of the efforts. If the parties are unable to reach a resolution on their own, the Court will set a trial date.

 

CONCLUSION

To recapitulate, at oral argument we denied Phoenix’s motion for summary judgment on its contract claim, and granted Phoenix’s motion to dismiss Townley’s counterclaims for any damages incurred prior to November 1, 2007. And for the aforementioned reasons, Townley’s claims are dismissed inasmuch as they seek damages for injuries relating to chargebacks and cancelled orders. However, Townley’s counterclaims are not dismissed in their entirety, as there are outstanding issues of fact as to whether they overpaid Phoenix. Such damages, if proved, are recoverable.

 

Thus, the remaining issues in this case are Phoenix’s claim for breach of contract, and Townley’s counterclaim for overpayments.

 

SO ORDERED.