Cedar Tree Books, Ltd., t/a Savory Sensations v. Sushi Rock, Inc., t/a Mikimoto's Sushi Bar & Japanese Restaurant ( 2014 )

IN THE COURT OF COMMON PLEAS FOR THE STATE OF DELAWARE
IN AND FOR KENT COUNTY
CEDAR TREE BOOKS LTD., )
A Delaware corporation t/a )
SAVORY SENSATIONS )
)
Plaintiff, )
)
v. ) C.A. No.: CPU4-13-002159
)
SUSHI ROCK, INC., a Delaware corporation, t/a )
MIKIMOTO’S SUSHI BAR & JAPANESE )
RESTAURANT, and THE ALE HOUSE, INC., )
a Delaware corporation, t/a WASHINGTON )
STREET ALE HOUSE, )
)
Defendants. )
Submitted: April 17, 2014
Decided: May 20, 2014
Paul E. Bilodeau, Esquire James F. Harker, Esquire
1813 North Franklin Street Nemours Building, Suite 1130
P.O. Box 1677 1007 North Orange Street
Wilmington, DE 19899 Wilmington, DE 19801
Attorney for Plaintiff Attorney for Defendant
DECISION AFTER TRIAL
This breach of contract action arises out of an agreement between Plaintiff Cedar
Tree Books Ltd., t/a Savory Sensations (“Savory Sensations”) and Defendants Sushi Rock,
Inc., t/a Mikimoto’s Sushi Bar & Japanese Restaurant (“Mikimoto’s”) and The Ale House,
Inc., t/a Washington Street Ale House (“The Ale House”) (collectively as “Defendants”).
Trial was held on March 26, 2014. At trial, the Court heard testimony from three
witnesses: Nicholas L. Cerchio, owner of Savory Sensations, and Joan Stevenson, a former
employee of Savory Sensations, testified during plaintiff’s case-in-chief. Darius Mansoory,
owner of Mikimoto’s and The Ale House was the sole witness to testify for the defense.
Also, documentary evidence was submitted by Savory Sensations. At the conclusion of trial, the
Court reserved decision and granted Savory Sensations leave to file an application for
attorney’s fees. This is the Court’s Final Decision and Order.
It is undisputed that an agreement existed between the parties, whereby Savory
Sensations created and routinely distributed informational cards for Defendants. It is also
undisputed that Defendants breached the agreement by failing to make payments. The
Court is called upon to determine at what point Defendants materially breached the
agreement and, if Savory Sensations has a duty to mitigate damages.
FACTS
Nicholas L. Cerchio (“Mr. Cerchio”), the owner of Savory Sensations,1 testified that
Savory Sensations prints informational cards for its clients, which it then distributes to card
racks in various locations, primarily hotels. The card racks are refilled as needed, generally
once or twice a month. The number of card racks to which distributions are made varies
along with fluctuations in the hotel market. Mr. Cerchio, testified that in 2012 Savory
Sensations stocked card racks at approximately 48 locations.
Mr. Cerchio testified that in 1999 Savory Sensations entered an agreement with The
Ale House and in 2000 it entered an identical agreement with Mikimoto’s (collectively as the
“Agreement”). Under the terms of the Agreement, Savory Sensations would design and
print 25,000 cards at the flat-rate of $800.00, and those cards would be displayed and
stocked in the various card racks at a rate of $200.00 per month. The artwork on the cards
1
Mr. Cerchio testified that Savory Sensations is a trade name, registered as a fictitious name.
2
was subject to prior approval before printing. The Agreement called for monthly payments
on the first day of each month, and stated that accounts thirty days delinquent would be
considered “past due.”2 The Agreement also provided that the contract could be terminated
by either party upon 30 days written notice of intent to terminate.3
Mr. Cerchio explained that Savory Sensations sent invoices to its clients when the
account was current in payments. When an account became past due, a notice accompanied
the invoice. Mr. Cerchio testified that monthly payments from Defendants were not always
prompt; from 2005 through 2007, payments were generally slow, and from 2008 to 2009 the
outstanding balance ran upwards of $1,200.00. According to Mr. Cerchio, when the
outstanding balance would accrue, Savory Sensations would contact Defendants by phone to
collect payments; however, Defendants ultimately stopped returning their phone calls.
Mr. Cerchio testified that in November 2012, Savory Sensations ran out of cards for
both Defendants. At that point, a balance of $1,800.00 remained outstanding on the
account for The Ale House, and a balance of $2,000.00 remained outstanding on the account
for Mikimoto’s. In light of the outstanding balances and the unsuccessful attempts to
contact Defendants, Savory Sensations did not print more cards for Defendants when it ran
out of cards. Savory Sensations delivered cards for the final time in November 2012.
On cross examination, Mr. Cerchio testified that the demand for the cards in the card
racks had decreased over time and, likewise, the need to print new cards diminished in
frequency. Both Mikimoto’s and The Ale House ordered new cards in July 2006 and again
2
Plaintiff’s Exhibit 2.
3
Id.
3
two years later in August 2008. However, the cards printed in August 2008 lasted over four
years, until November 2012.
The second witness to testify was Joan Stevenson (“Ms. Stevenson”), a former
employee of Savory Sensations. Ms. Stevenson worked for Savory Sensations in 2012,
where she was tasked with refilling the card racks. Ms. Stevenson testified that she restocked
the card racks for Savory Sensations in approximately 48 locations at least once a month.
The last time she filled the racks was in September 2012, at which point she was running low
on cards for Mikimoto’s and The Ale House.
The sole witness to testify during Defendants’ case-in-chief was Darius Mansoory
(“Mr. Mansoory”) owner and president of both Mikimoto’s and The Ale House. Mr.
Mansoory testified that he sees bills as they come into the office, but he did not recall ever
receiving a statement identifying his account with Savory Sensations as past-due. According
to Mr. Mansoory, he did not receive any written or oral communication indicating that the
accounts with Savory Sensation were delinquent. On cross examination, Mr. Mansoory
testified that he did have a bookkeeper for some time, and that the bookkeeper did pay bills
“sometimes.” However, the bookkeeper’s employment was terminated due to poor
performance, including miss-logging payments. Mr. Mansoory testified that in 2012 he
owned and operated a total of five businesses, however, he was hospitalized for a period,
which required him to work from home.
At the conclusion of trial, counsel for Savory Sensations requested an opportunity to
submit an application and affidavit for attorney’s fees. The Court granted Savory Sensations’
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request, and afforded counsel for Defendants an opportunity to submit a written response to
Savory Sensations application for attorney’s fees.
a. Parties Positions
It is the position of Defendants’ that its failure to make payments commencing in 2012
constituted a breach of the Agreement, which triggered a duty to mitigate damages on the
part of Savory Sensations. Defendants contend that Savory Sensations failed to mitigate
damages by continuing to deliver the cards at a monthly fee, and thus Defendants are not
liable for the amount of damages sought by Savory Sensations. It is the position of Savory
Sensations that, in light of Defendants lengthy history of late but ultimately effectuated
payment, Defendants’ behavior did not put Savory Sensations on notice of a material breach
of contract and, therefore, Savory Sensations was not under any duty to mitigate when
Defendants failed to make timely payment in 2012.
DISCUSSION
a. Plaintiff’s Claim and Duty to Mitigate Damages
To prevail on a claim for breach of contract, the plaintiff must prove, by a
preponderance of the evidence, that: (1) a contract existed between the parties; (2) breach by
defendant of an obligation imposed by the contract; and (3) damages to plaintiff resulting
from that breach.4
It is undisputed that an agreement existed between the parties. It is also undisputed
that Defendants failed to make payments for services rendered, as required by the
4
VLIW Technology, LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003); Gregory v.
Frazer, 2010 WL 4262030, *1 (Del. Com. Pl. Oct. 8, 2010).
5
Agreement. The sole question before the Court is whether Savory Sensations was obligated
to mitigate its damages and, if so, to what degree must damages be offset.
Under the common law of contracts, the amount of damages is attenuated by the rule
that the injured party must minimize his losses.5 Once a material breach of contract occurs,
a duty is imposed on the non-breaching party to mitigate damages.6 Whether a breach is
material is a fact-specific determination which requires “weighing the consequences in the
light of the actual custom of men in the performance of contracts similar to the one that is
involved in the specific case.”7
Defendants’ consistent pattern of late payment did not suddenly culminate in a
material breach of the Agreement in 2012. The Agreement called for payment of monthly
services on the first day of each month. The Agreement did not contain any provision
suggesting that late payment constituted a default; in fact, the Agreement only stated that
accounts delinquent for 30 days were considered “past due.” The language of the
Agreement does not indicate that late payment constituted a material breach.8 Furthermore,
the history of business between the parties suggests that Defendants’ failure to make timely
payment was not a material breach of the Agreement. Throughout their business
relationship, Defendants routinely made late payments to Savory Sensations, and those late
payments were never treated as a breach of the Agreement by either party. Accordingly, the
5
Katz v. Exclusive Auto Leasing, Inc., 282 A.2d 866, 868 (Del. Super. 1971).
6
Lowe v. Bennett1994 WL 750378, at *4 (Del. Super. Dec. 29, 1994).
7
Eastern Elec. and Heating, Inc. v. Pike Creek Professional Center, 1987 WL 9610, at *4 (Del.
Super. April 7, 1987) (citation omitted).
8
See Word v. Johnson, 2005 WL 2899684 (Del. Ch. Oct. 28, 2005) (finding that the agreement
was silent as to whether late payment constituted a material breach, the court declined to “imply
any agreement . . . that a mere late payment was to be treated as a material breach of the
contract”).
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Court finds that Defendants’ failure to make monthly payments did not constitute a material
breach of the Agreement.
Once late payment developed into non-payment, Savory Sensations did mitigate
damages. Unable to reach Defendants, Savory Sensations did not print more cards at an
additional expense to Defendants, and monthly delivery services ceased. Therefore, the
Court finds that at the point Savory Sensations was under an obligation to mitigate damages,
it took appropriate steps to minimize its losses. Accordingly, there is no basis to offset the
amount of damages sought by Savory Sensations.
b. Attorney’s Fees
In its application and affidavit for attorney’s fees, Savory Sensations seeks compensation in
the amount of $5,350.80, for attorney’s fees incurred in this litigation. As a basis for an award of
attorney’s fees, Savory Sensations points to the Agreement which states:
Advertiser and/or its agency agrees to pay any and all costs that may be deemed
necessary to collect and monies due and payable including but not limited to all
collection fees and reasonable attorney fees.
Defendants argue that an award of attorney’s fees is not warranted because Savory
Sensations failed to mitigate damages. Defendants suggest that, had Savory Sensations
“provided notice of the default and properly calculated its damages, litigation may have been
avoided.”
Delaware follows the “American Rule”9 requiring each litigant to pay his or her own legal
fees “unless clearly provided for by statute or contract.”10 In determining whether attorney’s
9
TransSched Systems Ltd. v. Versyss Transit Solutions, LLC, 2012 WL 1415466, at *1 (Del.
Super. March 29, 2012) (citing Maurer v. International Re–Insurance Corp., 95 A.2d 827, 830
(Del. Ch.1953)).
10
Honaker v. Farmers Mut. Ins. Co., 313 A.2d 900, at 904 (Del. 1973).
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fees are reasonable, the Court considers the following eight factors set forth in Rule 1.5 of the
Professional Rules of Conduct:
(1) the time and labor required, the novelty and difficulty of the questions
involved, and the skill requisite to perform the legal service properly; (2) the
likelihood, if apparent to the client, that the acceptance of the particular
employment will preclude other employment by the lawyer; (3) the fee
customarily charged in the locality for similar legal services; (4) the amount
involved and the results obtained; (5) the time limitations imposed by the
client or by circumstances; (6) the nature and length of the professional
relationship with the client; (7) the experience, reputation, and ability of the
lawyer or lawyers performing the service; and (8) whether the fee is fixed or
contingent.11
The Agreement expressly calls for recovery of reasonable attorney’s fees in the event
of collection. Defendants’ argument that attorney’s fees are not appropriate because Savory
Sensations failed to mitigate damages is inapposite. Savory Sensations was under no duty to
mitigate the damages it seeks to recover. The Court finds that Savory Sensations is entitled
to reasonable attorney’s fees as provided for in the Agreement.
The Court finds $4,995.00 to be a reasonable award of attorney’s fees under the
circumstances.12 This action was commenced nearly nine months prior to trial, and involved
counsel’s representation in all filings and proceedings leading up to and including the trial. In its
application and affidavit for attorney’s fees, Paul E. Bilodeau, Esquire, attorney for Savory
Sensations, states that he billed Savory Sensation over 27 hours of time at a rate of $185.00 per
hour. The Court finds Mr. Bilodeau’s hourly rate and number of hours expended on this case to
be reasonable.
11
Atterol, Inc. v. Wingart, 2005 WL 3073582 at *1 (Del. Com. Pl. June 9, 2005).
12
This figure is calculated on Mr. Bilodeau’s representation that he billed 27 hours at a rate of
$185.00 per hour.
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CONCLUSION
For the foregoing reasons, IT IS HEREBY ORDERED:
1) Judgment is hereby entered in favor of Plaintiff Savory Sensations and against
Defendant Sushi Rock, Inc., t/a Mikimoto’s Sushi Bar & Japanese Restaurant in the
amount of $ 2,000.00;
2) Judgment is hereby entered in favor of Plaintiff Savory Sensations and against
Defendant The Ale House, Inc., t/a Washington Street Ale House in the amount of
$1,800.00, and;
3) Based upon the contractual agreement, the Court awards against Defendant Sushi
Rock, Inc., t/a Mikimoto’s Sushi Bar & Japanese Restaurant and Defendant The Ale
House, Inc., t/a Washington Street Ale House jointly and severally attorney’s fees
incurred by Savory Sensations in the amount of $4,995.00.
4) Judgment is also entered for Savory Sensations costs and post-judgment interest at
5.7%, until paid.
IT IS SO ORDERED this 20th day of May, 2014.
____________________________________
Alex Smalls, Chief Judge.
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