Kamco Supply Corp. v. On The Rigith Track, LLC

149 A.D.3d 275 (2017)

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Nature of the Case

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Facts

Southeastern Metal, Inc. (SEM), and P are, respectively, a licensee and sublicensee of a patented self-locking stud, track, and header partitioning system used in the construction industry and marketed as 'Trakloc,' which is owned by the third-party defendant Trakloc International, LLC (TI). SEM, P, and TI entered into two supply distribution agreements with D. D was required to purchase a minimum of 15 million linear feet of Trakloc by December 31, 2005. For the calendar year 2006, D was to purchase an annual minimum of 164.4 million linear feet of Trakloc, and, in the course of satisfying that annual minimum purchase requirement, to purchase a minimum of 8 million linear feet of Trakloc in each month of 2006. D was required to use their 'best efforts' to market, sell, and distribute Trakloc within the relevant territory and to increase sales volumes annually. The agreements contained a provision that no waivers would be effective unless pursuant to a written instrument signed by the party or parties waiving compliance. Ds did not meet their annual minimum purchase requirement for 2005 or any of their monthly minimum purchase requirements for 2006. Ds purchased just over 2% of the combined minimum annual purchase requirements for 2005 and 2006. Ds blamed problems on shipping, logistics, and pricing issues attributable to SEM. D approached P about ending the relationship. P and D agreed that D would return $47,709.92 worth of Trakloc to SEM. At no time or even during the following several weeks, did P or SEM ever send Ds a notice of default regarding their failure to meet the minimum purchase requirements, or a reservation of rights to seek damages for past breaches or require strict compliance with such requirements going forward. In November 2006, less than two months before the scheduled expiration of the agreements, D commenced this action against P seeking to recover damages for breach of contract. { asserted counterclaims, and, in a third-party action against Ds. TI, P, and SEM sought to recover substantial damages from Ds for failure to meet the minimum purchase requirements under the agreements. The Supreme Court ruled against P's and SEM's counterclaims. It concluded that P SEM had no right to sue for the breach because they waived the requirements. It held that the question of whether waiver occurred may be determined by consideration of words or conduct. Ps appealed.