N.C. Business Court weighs in on a breach of contract action involving a wine bottle opener manufacturer and alleged counterfeiters.
How does one open a wine bottle clogged by an old half-crumbled cork? Plaintiff may have the solution, but since we’re in the business court, there is obviously a snag.
In Wining Taylors, LLC v. CE Precision, Inc. and Yuan Wang, 2019 NCBC 25 (N.C. Super. Ct. Apr. 5, 2019), Judge Conrad granted plaintiff’s summary judgment motion with respect to its conversion claim but denied it with respect to its claims for breach of contract, trademark infringement, and unfair and deceptive trade practices.
A takeaway: “Seesaw negotiations” through emails, rather than a formal purchase agreement, do not bode well for establishing at summary judgment that there was a meeting of the minds between the parties on the issues of whether the defendants produced goods that met quality standards or whether defendants agreed to not use patented and proprietary materials.
We all know the story too well in the business community. An American entrepreneur comes up with the latest and greatest idea and wants to sell it to the masses. The only problem? Manufacturing, and manufacturing for less. What is the only logical next step? To find component parts at a cheaper price. But as the plaintiff learned in this case, proceeding to China without a formal written agreement defining acceptable quality standards can lead to low quality products, and even worse, counterfeiting.
Wining Taylors, LLC, Plaintiff in this action, trademarked and sold a device called “the Durand,” which is used to extract stops or corks from wine bottles. The device specializes in removing compromised or fragile corks from older wine bottles. Plaintiff retained a Chinese company, Defendants, to manufacture component parts – a handle, a retainer, a twin blade, a stabilizer, and a corkscrew.
There was no formal purchase agreement between the parties; only a series of emails establishing the price per kit of component parts. It was undisputed that 20,000 kits were ordered for $4.31 per kit and that Plaintiff paid a deposit. It is less clear from the emails as to the other terms of the agreement, such as who would pay for the mold inserts or how the parties intended to allocate the costs of retooling. Notably absent was any discussion about the level of quality expected for the kits. Even though the UCC requires that goods be fit for a particular purpose, there was not enough evidence in the emails to establish whether baseline quality standards were met.
When Plaintiff received the samples, the parts had such poor die cast finishing that Plaintiff cancelled the agreement. By that point, defendant had already produced 2,000 kits. The cancellation of the order resulted in multiple months of negotiations between the parties. Plaintiff demanded a refund and a return of all of its property, including all faulty kits, molds, dies, and specifications. Defendants acknowledged that some refund was needed but it intended to keep some of the tooling because someone in China wanted to buy it. Plaintiff even submitted evidence that counterfeit versions of the Durand were being sold in China and on the internet and that Chinese authorities confiscated thousands of knock-off devices. Plaintiff alleged that Defendants were the source of the counterfeiting.
Plaintiff moved for summary judgment as to all claims but was only successful on its conversion claim. Plaintiff lost on the remaining claims because there was an issue of fact as to whether the parties’ negotiations resulted in a binding agreement, and if they did, what the terms of the agreement were. In essence, there was no meeting of the minds. Furthermore, plaintiff lacked evidence that Defendants were the perpetrators of the counterfeiting activities. All plaintiff could establish was that Defendants threatened to sell its proprietary materials to someone in China, but it could not prove that Defendants actually did.
The Court cautioned that it was essential to the formation of a contract that there was a mutual assent of the parties so as to establish a meeting of the minds, and the parties’ “seesaw negotiations” created a genuine issue of material fact as to whether a binding agreement existed.