Natl Util Ser Inc v. Cambridge-Lee Ind , 199 F. App'x 139 ( 2006 )

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
9-25-2006
Natl Util Ser Inc v. Cambridge-Lee Ind
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-2952
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 04-2952
NATIONAL UTILITY SERVICE, INC.
v.
CAMBRIDGE-LEE INDUSTRIES, INC.,
Appellant
On Appeal from the United States District Court
for the District of New Jersey
D.C. Civil Action No. 02-cv-3294
(Honorable Faith S. Hochberg)
Submitted Pursuant to Third Circuit LAR 34.1(a)
September 11, 2006
Before: SCIRICA, Chief Judge, SLOVITER and BARRY, Circuit Judges
(Filed: September 25, 2006 )
OPINION OF THE COURT
SCIRICA, Chief Judge.
Cambridge-Lee Industries, Inc., appeals the District Court’s judgment in favor of
National Utility Service, Inc., in a breach of contract action. We will affirm.
I.
On May 25, 1994, National Utility contracted with Cambridge-Lee to review
Cambridge-Lee’s monthly utility bills and recommend cost-saving changes to its services,
with National Utility entitled to 50% of savings realized by Cambridge-Lee for 60 months
through approval and implementation of any of those suggestions (after recapture of an
initial service fee). The contract was for a three-year term, automatically renewable
absent notice by Cambridge-Lee. It also entitled National Utility to 50% of savings
attributable to recommendations implemented after the contract’s expiration, and required
Cambridge-Lee to continue sending National Utility information and invoices covering
outstanding recommendations at expiration.
In May 1995, Cambridge-Lee stopped sending its monthly utility bills to National
Utility. On June 9, 1995, National Utility made an initial report to Cambridge-Lee, which
included a recommendation that Cambridge-Lee could save on telecommunications costs
by implementing AT&T’s UniPLAN consolidated billing format. Thereafter, National
Utility made nearly thirty requests between 1995 and 2001 that Cambridge-Lee resume
sending its billing records and provide information relating to the status of
recommendations already made by National Utility. On October 10, 1996, Cambridge-
Lee’s chief financial officer wrote to National Utility that Cambridge-Lee would no
longer be able to send utility bills to National Utility, and that Cambridge-Lee considered
the contract terminated. After the expiration of the contract’s term on May 24, 1997,
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Cambridge-Lee entered into an agreement with AT&T no later than August 25, 1998 to
implement the UniPLAN service.
National Utility sued Cambridge-Lee for breach of contract on July 10, 2002.
National Utility contended Cambridge-Lee breached by failing to submit monthly
invoices for National Utility’s review and analysis after National Utility made its initial
recommendations. National Utility also contended it was entitled to 50% of savings
Cambridge-Lee realized through implementation of the UniPLAN service for intra- and
interstate telephone service. Finally, although National Utility had not made a
recommendation that Cambridge-Lee implement AT&T’s UniPLAN service for
intraLATA (local) telephone service, it contended it would have done so before the end of
the contract term, had Cambridge-Lee not breached, and that it was also entitled to 50%
of savings from implementation of the UniPLAN service for local calls.
A bench trial followed. At the end of National Utility’s case-in-chief, Cambridge-
Lee moved to dismiss National Utility’s claims as time barred. The District Court denied
the motion without prejudice (reserving judgment) and invited counsel for Cambridge-
Lee to re-argue the issue at the conclusion of the case. Cambridge-Lee contended it had
not breached, and, alternatively, contended the statute of limitations barred National
Utility’s claims.
After the bench trial, the District Court again rejected Cambridge-Lee’s statute of
limitations argument. On three separate and independent grounds—all of which
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Cambridge-Lee now contends were raised sua sponte—the District Court declared
National Utility’s claims were not time barred. First, the District Court found Cambridge-
Lee attempted to terminate the contract prematurely through its October 10, 1996 letter.
Second, it found Cambridge-Lee’s failure to submit billing records to National Utility was
a “continuing breach” until August 25, 2003. Third, it found Cambridge-Lee’s failure to
remit National Utility’s 50% share of savings resulting from implementation of AT&T’s
UniPLAN service a “continuing breach” until August 2003. All three breaches, the court
found, occurred within the six-year statute of limitations.
The District Court attributed Cambridge-Lee’s implementation of AT&T’s
UniPLAN service to National Utility’s recommendation. It inferred that, had Cambridge-
Lee complied with its obligations to provide data, National Utility would have continued
to recommend the UniPLAN service for long-distance calls until the expiration of the
contract in May 1997. The court concluded the contract unambiguously provided for a
50% split of cost savings resulting from an implementation of a recommendation, for
sixty months, whether or not the implementation occurred during the contract term or
within a reasonable period of time thereafter. It found the (at most) one-year-and-three-
month period between the contract’s expiration and UniPLAN implementation to be
reasonable, and refused to infer UniPLAN implementation was “unrelated” to National
Utility’s recommendation. The District Court awarded damages to National Utility of
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$182,514.18, or one-half the proved savings (less the recaptured $12,000 service fee) plus
pre-judgment interest and costs from August 25, 1998.1 Cambridge-Lee appeals.
The District Court had diversity jurisdiction under 28 U.S.C. § 1332, and we have
jurisdiction under 28 U.S.C. § 1291. In an appeal of a final judgment following a bench
trial, we exercise plenary review over the District Court’s conclusions of law. Findings of
fact shall not be set aside unless clearly erroneous. Colliers Lanard & Axilbund v. Lloyds
of London, 458 F.3d 231, 236 (3d Cir. 2006) (citing Kosiba v. Merck & Co., 384 F.3d 58,
64 (3d Cir. 2004); Fed. R. Civ. P. 52(a)).
II.
Cambridge-Lee presents two issues on appeal. First, error in failing to find the
statute of limitations barred National Utility’s claims, and, second, error in finding
Cambridge-Lee’s contract with AT&T was an unlawful implementation of National
Utility’s recommendations.
As for the statute of limitations, the District Court found National Utility’s claims
were not barred under a continuing breach of contract theory. In New Jersey, the statute
of limitations on breach of contract claims is six years from the date of accrual. N.J. Stat.
Ann. § 2A:14–1 (West 2000). New Jersey courts “have generally stated that a claim
accrues, for statute of limitations purposes, on ‘the date on which the right to institute and
1
The District Court found National Utility had failed to sustain its burden of proof as
to damages from potential recommendation of UniPLAN service for local calls.
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maintain a suit’ first arose.” County of Morris v. Fauver, 153 N.J. 80, 107, 707 A.2d 958,
971 (1998) (quoting Rosenau v. City of New Brunswick, 51 N.J. 130, 137, 238 A.2d 169,
172 (1968)). But in the case of installment or continuous contracts, a cause of action
arises for each periodic breach that occurs, absent total repudiation. See Sons of Thunder,
Inc. v. Borden, Inc., 148 N.J. 396, 424, 690 A.2d 575, 589 (1997) (finding purchaser that
failed most weeks to purchase the minimum amount of clams specified in a renewable
one-year contract with supplier “continuously breached that contract”); Metromedia Co.
v. Hartz Mountain Assocs., 139 N.J. 532, 535, 655 A.2d 1379, 1381 (1995) (“In an
installment contract a new cause of action arises from the date each payment is missed.”);
9 Arthur L. Corbin, Corbin on Contracts § 956 (rev. ed. 2002) (“[C]ontracts . . . that have
been said to require continuing (or continuous) performance for some specified period of
time . . . are capable of a series of ‘partial’ breaches.”).
New Jersey courts have applied the “continuing breach” standard to allow claims
when the initial breach of a contract occurred outside the statutory period, but successive
breaches occurred within it. See Fauver, 153 N.J. at 108–09, 707 A.2d at 971–72 (citing
cases). The standard is typically applied in installment contracts, so that “a new cause of
action arises from the date each payment is missed.” Id. at 971. But it has also been
applied where a party has continuously breached a non-payment performance obligation.
See Ballantyne House Assocs. v. City of Newark, 269 N.J. Super. 322, 331–32, 635 A.2d
551, 555–56 (App. Div. 1993) (finding, when city of Newark failed to collect garbage
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under tax abatement agreement with limited dividend housing corporation, that its failure
“could be considered a series of continuing breaches for which plaintiffs could maintain
an action for any breach occurring within six years of the filing of the complaint, even if
more than six years had elapsed since Newark's initial breach”). Here, the contract
unambiguously obligated Cambridge-Lee to submit its utility bills to National Utility
every month during the contract term, as well as to send information and invoices on as
yet unimplemented recommendations after the expiration of the contract term.
Cambridge-Lee failed to submit monthly information to National Utility from May 1995
through August 25, 2003 (sixty months from implementation of the UniPLAN service).
Accordingly, Cambridge-Lee was in continuing breach of contract within the six-year
statute of limitations period.
Cambridge-Lee also contends its initial failure to submit monthly invoices, in May
1995, constituted a repudiation of the contract. If true, National Utility’s claims might be
time barred, because repudiation could operate as a “single total breach.” Corbin, supra,
§ 956; see also Metromedia, 139 N.J. at 535, 655 A.2d at 1381 (noting that, in the case of
continuing breach of an installment contract, “absent a repudiation, a plaintiff may sue for
each breach only as it occurs, and the statute of limitations begins to run at that time”).
But the District Court did not err in rejecting Cambridge-Lee’s contention that a total
breach occurred in May 1995, because Cambridge-Lee failed to establish that its actions
constituted a repudiation at that time. Repudiation “entails a statement or ‘voluntary
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affirmative act’ indicating that the promisor ‘will commit a breach’ when performance
becomes due.” Franconia Assocs. v. United States, 536 U.S. 129, 143 (2002) (quoting
Restatement (Second) of Contracts § 250 (1981)). In a continuous or installment
contract, the first instance of a continuing breach alone is not a “total breach” unless
accompanied by an anticipatory repudiation of performance due in the future. Corbin,
supra, § 954. Accordingly, while Cambridge-Lee’s continuing breach as to its obligation
to submit information to National Utility might have begun in May 1995, there was no
repudiation or total breach at that point, because there was no indication then that
Cambridge-Lee would not fulfill its future obligations under the contract. In fact, after
National Utility submitted its initial recommendations in June 1995, Cambridge-Lee told
National Utility that same month that it would designate an employee to submit
information to National Utility. National Utility continually requested the information
thereafter.2
Cambridge-Lee also contends the District Court improperly raised the theory of
continuing breach sua sponte in its ruling “without giving [Cambridge-Lee] the
opportunity to offer a legal or factual defense,” violating Cambridge-Lee’s right to
procedural due process. The record belies this argument. Cambridge-Lee raised the
affirmative statute of limitations defense in its answer and later moved to have National
2
Cambridge-Lee’s October 10, 1996 letter may have constituted a repudiation and
total breach, but we need not address the District Court’s separate and independent
holding that Cambridge-Lee breached the contract through that letter.
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Utility’s claims dismissed as time-barred. Once during National Utility’s case-in-chief
and again at its conclusion, the District Court informed counsel continuing breach would
be an issue in any statute of limitations defense. Due process requires that parties be
given a full and fair opportunity to litigate issues critical to their case. Luxliner P.L.
Export Co. v. RDI/Luxliner, Inc., 13 F.3d 69, 72, 75 (3d Cir. 1993). Cambridge-Lee had
such an opportunity on the issue of continuing breach.
As for finding Cambridge-Lee’s contract with AT&T was an unlawful
implementation of National Utility’s recommendations, the District Court did not err.
The finding that National Utility would have continued to recommend UniPLAN until
May 1997 if Cambridge-Lee had fulfilled its obligations was not clearly erroneous. As
the District Court stated, the contract unambiguously provided that cost savings would be
split between the parties, whether or not recommendations were implemented during or
after the contract term. We need not decide whether there was a temporal limitation on
this provision.3 A contract whose obligations are of indefinite duration should be
interpreted to require performance for a reasonable period of time. Aboczky v. Stier, 126
3
Cambridge-Lee’s reliance on National Utility Service v. Whirlpool Corp., 325 F.2d
779 (2d Cir. 1963), is misplaced. The Court of Appeals there did conclude National
Utility was not entitled to a percentage of savings from implementation of its
recommendations by defendant at two manufacturing plants after expiration of the
contract term. But as to the first plant, the holding was based on a contractual provision
explicitly excluding savings resulting from an increased power factor, whether or not it
had been recommended. As to the second plant, the holding was based on defendant’s
explicit rejection of the recommendation and the absence of any indication that it had
been implemented.
9
N.J.L. 109, 111, 18 A.2d 262, 263 (N.J. 1941). The District Court did not err in finding
the period between May 1997 and August 1998 reasonable.
III.
We will affirm the District Court’s judgment.
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