The opinion of the court was delivered by: Slomsky, J.
Before the Court are two Motions in limine filed by Plaintiff ECEM European Chemical Marketing B.V. ("ECEM") and three Motions in limine filed by Defendant The Purolite Company ("Purolite"). Plaintiff seeks in the Motions in limine to (1) preclude evidence of Defendant's alleged damage estimates (Doc. No. 65) and (2) preclude evidence that Plaintiff was obligated to supply Defendant with styrene, a chemical product, through March 2005 (Doc. No. 64). Defendant filed Responses to these Motions (Doc. Nos. 66 and 67), and Plaintiff submitted a supplemental brief in support of its Motion in limine to preclude evidence that Plaintiff was obligated to supply styrene through March 2005 (Doc. No. 78). Defendant also filed a supplemental brief in opposition to Plaintiff's two Motions in limine (Doc. No. 80).
In Defendant's three Motions in limine, Defendant seeks to (1) exclude evidence of settlement negotiations (Doc. No. 59); (2) bar the use of a document entitled: "Terms and Conditions of Sale" (Doc. No. 60); and (3) to exclude evidence of prior negotiations leading up to the 2004 contract between the parties, and evidence that the 2004 contract was not accepted and binding (Doc No. 61). Plaintiff filed Responses to these Motions (Doc. Nos. 70, 72, and 69). Thereafter, Defendant filed a Reply Brief on Parol Evidence Issues (Doc. No. 73) covered in the Motion to exclude the "Terms and Conditions of Sale" document and the Motion to exclude prior negotiations. Plaintiff also filed a supplemental brief in opposition to the Motion in limine to exclude evidence of settlement negotiations (Doc. No. 82) and a supplemental brief in opposition to the Motions in limine to exclude evidence of prior negotiations leading up to the 2004 contract and to exclude evidence of the "Terms and Conditions of Sale" document (Doc. No. 81). Finally, Defendant filed a supplemental brief in support of its three Motions in limine (Doc. No. 80).
The Court held oral argument on the five Motions in limine on October 20, 2009. For the reasons that follow, Plaintiff's Motions in limine will be granted in part and denied in part, and Defendant's Motions in limine also will be granted in part and denied in part.
Defendant Purolite is an international company with its principal place of business in the United States. Defendant manufactures ion exchange resins and polymers which are used to remove impurities from water and other liquid and gas media. Styrene Monomer is an essential ingredient used in the manufacture of resins and polymers. Plaintiff ECEM, with its principal place of business in the Netherlands, is a buyer and seller of industrial products such as styrene. Plaintiff purchases styrene directly from a manufacturer and then sells it to an end user such as Defendant.
Plaintiff and Defendant engaged in a series of agreements beginning in 2002 through which Plaintiff supplied Defendant with styrene for use in Defendant's production of resins and polymers.
During the relevant time period, Plaintiff supplied the styrene by delivery in rail tank cars ("RTC") from Plaintiff's supplier in Rotterdam, the Netherlands, to Defendant's plant in Victoria, Romania.
In December 2003, the parties began negotiations on an agreement for the year 2004. On December 16, 2003, Defendant submitted its Purchase Order for 2004, which was accepted by Plaintiff ("2004 Contract"). The 2004 Contract provided for a yearly delivery of 1200 tons of styrene, with deliveries of approximately 100 tons per month via two RTCs, for arrival at Defendant's plant in Victoria, Romania, during the third week of the month. In March 2004, the parties modified the 2004 Contract to require Plaintiff to deliver three (3) shipments of styrene per month via RTC. The parties agreed that Plaintiff would keep the third railcar in service for one year until March 2005, but the parties dispute whether the contract modification extended the entire contract by three (3) months to March 2005. Via email, the parties agreed that if Plaintiff committed to leasing a third rail tank car in March 2004 for twelve (12) months, Defendant would commit to purchase styrene from Plaintiff using at least one rail tank car for that same period.
This case arises from Defendant's failure to pay for five shipments of styrene received in the last quarter of 2004 for which payment was apparently due in late 2004 or the first quarter of 2005. Plaintiff filed this action in June 2005 seeking payment of principal, interest, and fees and costs stemming from the five unpaid deliveries (Invoice Numbers 44247,44656, 44817, 44818, and 45046). The 2004 Contract provided that the delivery terms were "DDU Victoria," which stands for "Delivery Duty Unpaid," Victoria, Romania. Under the DDU agreement, Plaintiff was required to bear the costs and risks involved in bringing the goods to Victoria, Romania from Rotterdam, the Netherlands. The 2004 Contract required under the provision for "Payment Terms" that payments were due ninety (90) days from the date of invoice. Pursuant to the agreement, two (2) invoices were to be issued by Plaintiff, (1) a pro forma invoice, which is generated for customs purposes when the material is set to be shipped, and (2) a commercial invoice, which is provided to the customer after delivery is made to the place of destination. Plaintiff maintains that Defendant consistently failed to pay invoices within ninety (90) days of issuance in late 2004. Due to Defendant's tardiness in remitting payment, Plaintiff did not accept Defendant's purchase order in December 2004 for the 2005 calendar year and did not ship styrene to Defendant after December 2004.
Defendant maintains that based on the DDU term of the 2004 Contract, title to the styrene did not pass until the materials reached Defendant's plant in Victoria, Romania. The ninety (90) day period for payment could not start, therefore, until the goods reached Victoria. Plaintiff does not agree to this start date and argues that the ninety (90) day period began from the date of the initial pro forma invoice, rather than the date of delivery. Based on Plaintiff's claim, Defendant became delinquent on five unpaid deliveries in late 2004. As noted, Plaintiff ceased styrene deliveries to Defendant after December 2004, which Defendant submits was a breach of the 2004 Contract modification which obligated Plaintiff to continue deliveries until March 2005.
In ¶12 of Defendant's Answer, Defendant raised the affirmative defense that "[ECEM] has breached the agreement and is not entitled to the sum it demands, if any." Defendant maintains that it is not obligated to pay for the five (5) deliveries because Plaintiff failed to deliver two (2) RTCs of styrene in November 2004, as required by the March 2004 Contract modification. In November 2004, Plaintiff shipped three (3) rail tank cars of styrene to Defendant. One shipment was sent on November 9 and received in Victoria, Romania, on November 19 (RTC 288.6). Two additional rail tank cars of styrene (RTC 613.4 and RTC 616.7) were shipped on November 25 and were accidentally routed by the common carrier to another location. As a result, Defendant only received one (1) rail tank car of styrene at the Victoria plant for November. The misdirected shipment allegedly caused Defendant's styrene supply to be depleted on December 14, 2004. Plaintiff asserts that it offered to compensate Defendant with road truck deliveries of styrene after the error in the rail tank car shipment became apparent, but Defendant rejected this offer.
The two rail tank cars containing styrene shipped on November 25 were finally received by Defendant on December 21, 2004. Defendant alleges that after these untimely deliveries, Plaintiff terminated the 2004 Contract with Defendant. According to Defendant, the parties subsequently entered into settlement negotiations in order to avoid litigation. These discussions were ultimately unsuccessful.
Defendant has filed a counterclaim in this matter, asserting that Plaintiff failed to deliver two rail tank cars of styrene until approximately one week after Defendant's styrene supply had been depleted. Defendant alleges that during this week, it could not produce polymers and resins it had planned to produce on two of its nine production lines and suffered damages. Plaintiff maintains that Defendant did not mention the alleged shut-down in production nor any alleged loss until Defendant filed the counterclaim on February 8, 2006.
A. Plaintiff's Motion in Limine to Preclude Evidence Of Defendant's Alleged Damage Estimates
Plaintiff contends that the evidence and methodology of calculating Defendant's alleged damage claim should be precluded from evidence at trial. In December 2004, Defendant planned to produce polymers and resins with styrene delivered by Plaintiff. However, Plaintiff failed to timely deliver two rail tank cars of styrene. The styrene eventually arrived approximately one week after Defendant's supply of styrene had been depleted, causing Defendant to cease polymer and resin production until the styrene arrived at Defendant's plant in Victoria, Romania.
Defendant submits that its factories run 24 hours a day, 7 days a week, and that as a direct result of the late delivery of styrene, it was forced to pay normal recurring costs for overhead which did not result in production of resins or polymers and suffered a loss. Defendant describes the methodology of its damage calculation as follows:
Quite simply, Purolite prepares a "recipe" for each product that it plans to make in a given year, which identifies in detail the components of time and materials to produce that product. Overhead costs are determined in the aggregate for each line item of cost for the year. The capacity of Purolite's plant has a defined limit for each production line. Overhead costs are then allocated to products based on the time and materials needed to produce that product. The total of overheads per unit times the volume to be produced equals total overhead absorbed in production.
Thus, Purolite calculates its damages by identifying each polymer and resin that was scheduled to have been produced, and the quantity of each polymer and resin that would have been produced, and identifying the overhead per metric ton for each polymer and resin to be produced. (Defendant's Memo of Law in Opposition to Plaintiff's Motion in Limine to Exclude Evidence of Damages, 5.) Defendant asserts that this data is compiled utilizing the "standard cost" method of accounting in accordance with generally accepted accounting principles established by the Financial Accounting Standards Board. Using these principles, Defendant calculates that it incurred and lost $498,131 in overhead to maintain the plant during the week it was not able to produce the polymers and resins due to Plaintiff's untimely delivery of styrene. In opposing this method of calculating damages, Plaintiff argues that it fails to accurately measure costs incurred or profits lost, and that this calculation provides no reasonable certainty of the amount of damages sustained.
Under Pennsylvania law, evidence of damages may only be precluded from trial as "speculative" if "the uncertainty concerns the fact of damages not the amount." Carroll by Burbank v. Phila. Hous. Auth., 650 A.2d 1097, 1100 (Pa. Cmmw. Ct. 1994) (emphasis added). "Damages are considered remote or speculative only if there is uncertainty concerning the identification of the existence of damages rather than the ability to precisely calculate the amount or value of damages." Kituskie v. Corbman, 714 A.2d 1027, 1030 (Pa. 1998). Moreover, "overhead should be treated as a part of gross profits and recoverable as damages." Vitex Mfg. Corp. v. Caribtex Corp., 377 F.2d 795, 798 (3d Cir. 1967).
Plaintiff argues that Defendant's damage calculation is speculative because Defendant's method of calculating damages fails to accurately measure costs incurred or profits lost. Defendant has stated, however, that it will produce at trial witnesses with personal knowledge of Purolite's business, expenses and accounting to explain its theory of damages. Based upon the methodology offered by Defendant, there does not appear to be any uncertainty of the fact of damages. The validity of Defendant's damage calculation is a question of fact, and Plaintiff will be afforded the opportunity to cross-examine Defendant's witnesses on damages, to present its own witnesses, and to assert arguments concerning alleged infirmities in Defendant's damage calculation. Consequently, Plaintiff's Motion in limine (Doc. No. 65) will be denied.
B. Plaintiff's Motion in Limine to Preclude Evidence and/or Testimony That Plaintiff Was Obligated to Supply Defendant With Styrene Through March 2005.
1. Defendant Has Raised This Claim and/or Defense Timely.
Plaintiff argues that the first time Defendant claimed that the 2004 Contract between the parties was modified in March 2004 to extend the contract date by three (3) months was in the Response to Plaintiff's Motion for Partial Summary Judgment (Doc. No. 39). Plaintiff contends that Defendant has never requested discovery regarding this claim or defense, nor has Plaintiff had the opportunity to seek discovery regarding this claim or defense. As such, Plaintiff argues that Defendant has waived this claim and seeks to preclude evidence on this alleged contract modification, which would have required Plaintiff to supply Defendant with styrene through March 2005.
Defendant maintains that the March 2004 contract modification and the alleged extension were discussed during the deposition of Matthew Rigby, Plaintiff's Managing Agent, which took place during discovery in August 2007. Defendant submits that Mr. Rigby's testimony confirmed that the March 2004 contract modification placed a third rail tank car in service, and that the third rail tank car would remain in service to supply monthly styrene deliveries to Defendant until March 2005. Mr. Rigby's deposition testimony provides, in part, as follows:
Q: Okay. And the modification was that ECEM would now provide a third railcar, which would provide three railcars per month, and in return Purolite would commit to an extra year from March of 2004; isn't that correct?
**[objection by counsel]**
A: I understand. It's an extra year on this one railcar. For the other two railcars, it was finished on 31st December, 2004.
Rigby Dep., 163:24-164:20. Moreover, Defendant points out that Mr. Rigby explained on March 12, 2004, in an email to Brian Wareham, Defendant's ...