                                                                                                                           Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-26-2008

Phibro Animal Health v. Cornerstone AG Prod
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-4278




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"Phibro Animal Health v. Cornerstone AG Prod" (2008). 2008 Decisions. Paper 1384.
http://digitalcommons.law.villanova.edu/thirdcircuit_2008/1384


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                                                             NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 _____________

                                     No. 06-4278
                                    _____________

                       PHIBRO ANIMAL HEALTH U.S., INC.

                                            v.

                          CORNERSTONE AG PRODUCTS,

                                                             Appellant
                                    _____________

                    On Appeal from the United States District Court
                              for the District of New Jersey
                                 (D.C. No. 03-cv-02664)
              District Judge: Honorable Garrett E. Brown, Jr., Chief Judge
                                     _____________

                     Submitted Under Third Circuit L.A.R. 34.1(a)
                                  March 11, 2008
                                  _____________

          Before: FUENTES, CHAGARES AND ALDISERT, Circuit Judges
                            (Filed: March 26, 2008)

                                    _____________

                                      OPINION
                                    _____________

ALDISERT, Circuit Judge

      Appellant Cornerstone Ag Products (“Cornerstone”) appeals from an order of the

United States District Court for the District of New Jersey granting summary judgment in
favor of Appellee Phibro Animal Health U.S., Inc., (“Phibro”) on all claims raised in

Phibro’s complaint and all counterclaims raised by Cornerstone. We will affirm.

       Because we write exclusively for the parties and the parties are familiar with the

facts and proceedings below, we will not revisit them here.

                                             I.

       We are satisfied that the District Court properly granted summary judgment in

favor of Phibro on all of the claims asserted in Phibro’s complaint. Phibro first asserted

claims for breach of contract, unjust enrichment, account stated and conversion. The New

Jersey Uniform Commercial Code states that a buyer “must pay at the contract rate for

any goods accepted.” N.J. Stat. Ann. § 12A:2-607(1). In this case, there is no dispute that

Phibro delivered goods to Cornerstone and that Cornerstone accepted those goods in

accordance with the parties’ Distributorship Agreement. Indeed, Cornerstone does not

dispute that it received, accepted and resold the goods identified in the November 26,

2001 invoice. Additionally, Cornerstone does not dispute that it has failed to pay Phibro

for these goods. As Cornerstone has accepted goods from Phibro, the New Jersey

Uniform Commercial Code mandates that Cornerstone pay the contract price for the

goods. Accordingly, the District Court did not err in granting summary judgment in favor

of Phibro on Phibro’s breach of contract, unjust enrichment, account stated and

conversion claims. See Electro-Catheter Corp. v. Surgical Specialties Instrument Co., 587

F. Supp. 1446, 1456 (D.N.J. 1984) (finding that summary judgment was appropriate, even



                                             2
in light of the defendant’s claim for an offset, where there was no genuine dispute as to

the plaintiff’s right to recover on the particular invoices).

       Phibro also asserted a claim for declaratory relief in its complaint. The terms of the

Distributorship Agreement provided that the agreement would terminate on June 30,

2002. If sales of Rumatel to Cornerstone under the agreement exceeded $380,000 in

2001, however, the agreement would automatically renew for an additional one-year term.

Although Cornerstone contends that it made purchases of at least $393,000 in 2001, this

amount includes $140,400 worth of Rumatel shipped in November 2001 for which

Cornerstone has yet to make payment. Thus, sales to Cornerstone cannot be said to have

exceeded $380,000 in 2001. Therefore, the District Court properly determined that the

agreement between Phibro and Cornerstone terminated on June 30, 2002, and did not err

in granting summary judgment on this claim in favor of Phibro.

                                               II.

       Cornerstone asserted a number of counterclaims against Phibro arising from

Phibro’s alleged breach of the exclusivity provision of the Distributorship Agreement. We

are satisfied that the District Court properly granted summary judgment in favor of Phibro

on these counterclaims as well.

       First, Cornerstone asserted that Phibro breached the Distributorship Agreement by

contacting Archer Daniels Midland (“ADM”) in or around March 2003 regarding the sale

of Rumatel to ADM. As discussed above, however, the Distributorship Agreement



                                               3
expired by its own terms on June 30, 2002. Thus, any contact between Phibro and ADM

subsequent to the agreement’s termination does not violate the agreement. Because the

contact between Phibro and ADM occurred after the termination of the Distributorship

Agreement, the District Court properly granted summary judgment in favor of Phibro on

this counterclaim.

       Second, Cornerstone asserted that Phibro intentionally interfered with its

prospective economic advantage by dealing directly with ADM while Cornerstone was in

negotiations with ADM to assign ADM its rights under the Distributorship Agreement.

Cornerstone’s attempt to assign its rights occurred in early 2003. At that time, however,

Cornerstone had no rights in the Distributorship Agreement to assign to ADM as the

agreement terminated on June 30, 2002. Because Cornerstone had no rights to assign,

Cornerstone had no reasonable expectation of prospective economic advantage with

which Phibro interfered. The District Court therefore did not err in granting summary

judgment in favor of Phibro on this counterclaim.

       Third, Cornerstone sought reformation of the Distributorship Agreement to reflect

the parties’ alleged intention to grant Cornerstone the exclusive rights to manufacture,

label, market, distribute and sell Rumatel in a 0.44 g/lb concentration. The language of

the agreement, however, clearly appointed Cornerstone as the exclusive distributor of

Rumatel under a goat-specific label. In addition, the Distributorship Agreement contained

a clause stating that it represented the entire agreement and understanding between the



                                             4
parties. This Court has expressed its hesitation about reforming contracts with clear

language and has stated that “[t]he power of reformation should be used only when the

mistake is material, when there would not be prejudice to the other party (besides loss of

the bargain), and upon a showing that the [party seeking reformation] exercised

reasonable care.” Raiczyk v. Ocean County Veterinary Hosp., 377 F.3d 266, 270 (3d Cir.

2004). As the Distributorship Agreement was clear in its terms and Cornerstone cannot

show that no prejudice to Phibro would result from reformation, the District Court

correctly determined that reformation was inappropriate in this case and properly granted

summary judgment in favor of Phibro.

       Fourth, Cornerstone sought injunctive relief prohibiting Phibro from selling

Rumatel to ADM or other companies in violation of the Distributorship Agreement. As

previously discussed, the Distributorship Agreement expired in 2002. Thus, any sales by

Phibro to other companies after that date do not violate the agreement. Because the

Distributorship Agreement has been terminated by its terms, Cornerstone’s claim for

injunctive relief prohibiting Phibro from selling Rumatel to other companies is

unavailing, and the District Court properly granted summary judgment in favor of Phibro.

       Fifth, Cornerstone asserted a claim for restitution, notwithstanding its own breach

of the agreement, for the benefit conferred on Phibro through its agreement with ADM.

As previously discussed, when Phibro engaged in negotiations with ADM, the

Distributorship Agreement between Phibro and Cornerstone had expired. Because the



                                             5
agreement had terminated, Cornerstone had no rights to transfer to ADM and thus

suffered no loss when Phibro contracted with ADM directly. In addition, the

Distributorship Agreement specifically prevents Cornerstone from recovering

consequential, incidental, special or indirect damages – the kind of damages sought by

this claim. Accordingly, the District Court did not err in granting summary judgment in

favor of Phibro.

       We have considered all contentions raised by the parties and conclude that no

further discussion is necessary.

       The judgment of the District Court will be affirmed.




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