Opinion
1:01-CV-597 (HGM/DRH).
February 15, 2005
McCARTER ENGLISH, LLP JOSEPH R. DI SALVO, ESQ. New York, Attorneys for Plaintiff.
BILGORE, REICH, LEVINE, KROLL KANTOR THEODORE S. KANTOR, ESQ. Rochester, New York, Attorneys for Defendants.
MEMORANDUM — DECISION AND ORDER
INTRODUCTION
Currently before the court is plaintiff's motion seeking an order pursuant to Rule 56 of the Federal Rules of Civil Procedure granting summary judgment for amounts allegedly owed by defendants under certain agreements in effect between the parties. See Dkt. No. 15, Pl.'s Notice of Mot. Defendants oppose plaintiff's motion arguing generally that disputed material issues of fact remain and more specifically that plaintiff is an improper party, which seeks judgment on a note that it does not own or hold. See Dkt. No. 18, Defs.' Mem. of Law in Opp'n. For the reasons that follow below, plaintiff's motion is GRANTED.
BACKGROUND
I. The Parties and the Procedural History
Plaintiff, Sunrise Medical HHG, Inc. ("Sunrise"), is a California corporation with its principal place of business located at 7477 East Dry Creek Parkway, Longmont, Colorado. See Dkt. No. 1, Compl.; Dkt. No. 15, Ex.1.B. Together with its affiliates, Sunrise Medical Inc., and SunMed Finance, Inc., a Delaware corporation also located at 7477 East Dry Creek Parkway, Longmont, Colorado, Sunrise manufactures and distributes medical and hospital equipment. See Dkt. No. 15, Pl.'s Statement of Material Facts in Supp. of Summary J. at ¶ 1; Ex. 1.C. Defendant Health Focus of New York, LLC ("Health Focus") is an Arizona limited liability corporation with its principal place of business located in Scottsdale, Arizona. See Dkt. No. 16, Defs.' Statement of Material Facts in Opp'n at ¶ 1. Defendant Anthony Anderson ("Anderson") is now, and at all times relevant has been, a domiciliary of the State of Arizona residing at 13910 North Frank Lloyd Wright #24299, Scottsdale, Arizona 85260. See Dkt. No. 17, Anderson Aff. at ¶ 2; Dkt. No. 15, Ex. 1, Compl. at ¶ 3. Anderson is the sole member and manager of Health II, LLC, an Arizona limited liability company that owns Health Focus. See Dkt. No. 17, Anderson Aff. at ¶ 7.
Plaintiff contends that Health Focus' principal place of business is located at 1703 Union Street, Schenectady, New York 12309. See Dkt. No. 15, Pl.'s Statement of Material Facts in Supp. of Summ. J. at ¶ 3.
II. The Parties' Dispute
A. The Parties Meet and Reach Agreement
In early 2000, the former owners of Harvalan Drug. Co., a New York Corporation doing business as White's Homecare, located in Schenectady, New York, approached Anderson and offered him the opportunity to purchase their business. See Dkt. No. 17, Anderson Aff. at ¶ 3. Thereafter, White's Homecare and Anderson engaged in negotiations and by May of 2000, Anderson and Harvalan were close to finalizing Health Focus' stock acquisition of White's Homecare. See Dkt. No. 17, Anderson Aff. at ¶ 4. At this time, a representative of Sunrise, Dawn Beal ("Beal"), contacted Anderson by telephone and advised him that she was aware that he was to acquire White's Homecare. Beal expressed some concern over the acquisition, for it had been rumored that should such an acquisition occur, White's Homecare would discontinue the sale or lease of rehabilitation equipment for which Sunrise had been a longtime supplier. See id. at ¶¶ 5-6. Anderson confirmed that Health Focus, a subsidiary of his Health II company, was contemplating a stock acquisition of White's Homecare and explained the reluctance of his companies to sell or lease rehabilitation equipment. According to Anderson, his companies were not able to properly bill and collect from Medicare for sold and/or leased rehabilitation equipment. Beal assured Anderson that Sunrise could allay some of his concerns regarding White Homecare's continued relationship with Sunrise as a retailer of its rehabilitation equipment and suggested a telephone conference might assist to this end. See id. at ¶¶ 7-8. On May 22, 2000, Anderson and Sunrise representatives participated in a telephone conference in which the representatives highlighted Sunrise's consulting program designed to facilitate the approval of Medicare submissions on rehabilitation equipment. White's Homecare was already utilizing the consulting program at the time of the telephone conference. See Dkt. No. 17, Anderson Aff. at ¶¶ 9-11.
The Sunrise Consulting program involved a pre-screen of a contemplated invoice to be submitted to Medicare and a certification of that invoice for the purpose of avoiding difficulties in the processing of the claims by Medicare. See Dkt. No. 17, Anderson Aff. at ¶ 13.
Soon thereafter, Health Focus acquired White's Homecare. Anderson, relying on the ability of the Sunrise Consulting Program to facilitate proper billing and collection for sold and/or leased rehabilitation equipment, authorized the continued sale and leasing of Sunrise's rehabilitation equipment by White's Homecare. See Dkt. No. 17, Anderson Aff. at ¶¶ 12-15. As such, the parties signed a series of agreements, detailed below, which set forth their obligations to each other.
B. The Agreements
1. The Account Agreement and Continuing Guarantee
Sunrise Medical Inc., created a credit account with defendants in connection with its sale of durable medical goods to Health Focus for resale to end-users in the Upstate New York area. See Dkt. No. 15, Pl.'s Statement of Material Facts in Supp. of Summ. J. at ¶ 1, Ex. 1.A. On June 22, 2000, Anderson, as the Managing Member of Health Focus, executed an Account Agreement and Terms of Sale, which provides in pertinent part, that Health Focus
makes this application for credit to Sunrise Medical Inc. and/or any of its subsidiaries or affiliates now owned or hereafter acquired ("Creditor") . . . [Health Focus] agrees that all amounts payable on or before the due date as shown on each invoice will be paid, and if not paid on or before said date, [Health Focus] is then in default . . . In the event of default, [Health Focus] further agrees to pay all costs of collection, including reasonable attorney's fees, plus court costs and/or collection agency fees together with interest thereon at the maximum amount allowed by law to [Sunrise Medical Inc.] or its assignee.See Dkt. No. 15, Ex. 1.A. (emphasis added).
Defendants assert that Anderson is not a managing member of Health Focus. See Dkt. No. 16, Defs.' Statement of Material Facts. How ever, Anderson signed both the Account Agreement and Promissory Note Secured By Security Agreement on behalf of Health Focus as its "managing member."
In connection with the Account Agreement, Anderson also executed a Continuing Guarantee in his individual capacity, which provides that he, as guarantor, would "personally and individually, jointly and severally, unconditionally guarantee and promise to pay Creditor [Sunrise Medical Inc., and its subsidiaries or affiliates] on demand any and all present and future indebtedness, obligations, and liabilities owed by [Health Focus] to Creditor [Sunrise Medical Inc., and its subsidiaries or affiliates]." Dkt. No. 15, Ex. 1.A.
2. Guaranty
On June 22, 2000, Anderson also executed, in his individual capacity, a Guaranty in connection with the extension of credit by Sunrise Medical Inc., to Health Focus. The terms set forth in the Guaranty provide that Anderson will
Defendants assert that Anderson executed the Second Continuing Guaranty in connection with the Promissory Note Secured by Security Agreement, rather than in connection with the extension of credit by Sunrise Medical, Inc., as plaintiff asserts. See Dkt. No. 16, Defs.' Statement of Material Facts in Opp'n to Pl.'s Mot. for Summ. J. at ¶ 6.
unconditionally guarantee and promise to pay to Sunrise Medical Inc., and its current and future subsidiaries and affiliates (collectively the "Seller"), whose address is c/o Sunrise Medical HHG, Inc., 7477 East Dry Creek Parkway, Longmont, Colorado 80503 . . . all indebtedness of any kind of Health Focus of New York . . . and all divisions, subsidiaries and affiliates thereof . . ., including without limitation all debts, obligations, and liabilities of [Health Focus] to Seller [Sunrise Medical Inc. and its current and future subsidiaries and affiliates] currently existing or now or hereafter made, incurred or created, however arising or evidenced, whether direct or acquired by assignment or succession, whether due or not due, absolute or contingent, liquidated or unliquidated, whether recovery upon such debt may be or become barred by any statute of limitation or otherwise unenforceable . . . [Anderson] also promise[s] to pay all attorneys' fees and costs incurred in enforcing this Guaranty against [Anderson], regardless of whether any legal action is commenced against [Anderson].Id., Ex. 1.B. (emphasis added).
3. Promissory Note
On June 26, 2000, Anderson executed, on Health Focus' behalf, a Promissory Note (the "Note" secured by Security Agreement valued at $189,006.48. The Note, payable to the order of SunMed Finance, Inc., set forth an agreed upon schedule of repayment to SunMed Finance, Inc., for the principal amount of $156,255.31 of debt incurred by Health Focus to Sunrise. Interest on the principle accrued at a rate of nineteen percent. Health Focus was to pay the amount owed under the Note in twenty-four monthly installments of $7,875.27, plus interest accrued. The Note required payments to commence on July 15, 2000, and continue through June 15, 2002, at which time the entire remaining principal amount and all accrued interest would become due and payable in full. See Dkt. No. 15, Pl.'s Statement of Material Facts in Supp. of Mot. for Summ. J. at ¶¶ 10-14 and Ex. 1.C. In its final paragraph, the Note indicates that it is "secured by a Security Agreement dated as of May 3, 2000, between Lender [SunMed Finance, Inc.] and the undersigned [defendants], as Debtor." See Dkt. No. 15, Ex. 1.C. The Note also provides that its holder "shall have the right to sell, assign or otherwise transfer, either in part or in its entirety, this Note and any instrument or agreement securing this Note, to one or more persons without the undersigned's [defendants'] consent." Id. SunMed Finance, Inc., subsequently assigned the Note to Sunrise. See Dkt. No. 19, Ex. A. Hopp. Aff. at ¶ 3.
Anderson insists that but for the assurances made by the Sunrise Consulting Program, he would not have signed these three agreements. He also emphasizes that he negotiated and executed the three agreements in Scottsdale, Arizona, and that his wife was not a signatory to the Guaranty. See Dkt. No. 17, Anderson Aff. at 16-18.
4. The Security Agreement
On May 3, 2000, Health Focus executed a Security Agreement with Sunrise Medical Inc., and its current and future subsidiaries and affiliates granting them a security interest in the personal property identified as "all inventory of goods and merchandise, and all equipment, wherever located, now held or hereafter acquired by [Health Focus] from any Secured Party" and, inter alia, all proceeds of such property. See Dkt. No. 15, Ex. 1.D. C. Sale and Delivery of Goods from Sunrise to Health Focus and Amount Owed
From June 2000, through September 2000, Sunrise sent over 110 invoiced shipments of goods and services to Health Focus doing business as White's Homecare in Schenectady, New York. See Dkt No. 15, Ex. 1.E. While Health Focus apparently accepted the shipped goods without objection, it made only one payment in the amount of $55.16 against $102,102.43 of outstanding account balance. See id., Pl.'s Mem. of Law in Supp. of Mot. at 5-6. Sunrise contends that defendants, pursuant to the Account Agreement, the Continuing Guarantee, the Guaranty, Promissory Note and Security Agreement, owe it at least $255,767.25 plus interest, which continues to accrue. See Dkt. No. 15, Pl.'s Statement of Material Facts in Supp. of Summ. J. at ¶ 22. Sunrise now moves for summary judgment on this outstanding indebtedness.
DISCUSSION
I. Summary Judgment Standard
The standard for summary judgment is well-settled. Rule 56 allows for summary judgment where the evidence demonstrates that "there is no genuine issue of any material fact and the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). Summary judgment is properly regarded as an integral part of the Federal Rules as a whole, which are designed "to secure the just, speedy and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S. Ct. 2548, 2554, 91 L. Ed. 2d 265 (1991) (quoting Federal Rule of Civil Procedure 1). A court may grant a motion for summary judgment when the moving party carries its burden of showing that no triable issues of fact exist. See Thompson v. Gjivoje, 896 F.2d 716, 720 (2d Cir. 1990). In light of this burden, any inferences to be drawn from the facts must be viewed in the light most favorable to the non-moving party. See id.; United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 994, 8 L. Ed. 2d 176 (1962) (per curiam). If the moving party meets its burden, the burden shifts to the non-moving party to come forward with "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). To defeat a motion for summary judgment, however, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts."Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). A dispute regarding a material fact is genuine "if evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson, 477 U.S. at 248, 106 S. Ct. at 2510. When reasonable minds could not differ as to the import of the evidence, then summary judgment is proper. See Anderson, 477 U.S. at 250-251, 106 S. Ct. at 2511.
In contract actions, summary judgment is appropriate where the contract's language is unambiguous. See Metropolitan Life v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir. 1990). "Contract language is unambiguous if it has 'a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion.'" Id. (quoting Breed v. Ins. Co. of N. Am., 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 355, 385 N.E.2d 1280, 1283 (1978)) cf. Krumme v. W. Point Stevens Inc., 238 F.3d 133, 138-39 (2d Cir. 2000) ("The language of a contract is ambiguous if it is 'capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement.'") (quoting Seiden Assocs. v. ANC Holdings, 959 F.2d 425, 428 (2d Cir. 1992)). Similarly, in an action on a promissory note, "upon a showing of no material question concerning execution and default, summary judgment is appropriate." Royal Bank of Canada v. Mahrle, 818 F.Supp 60, 62 (S.D.N.Y. 1993).
II. Jurisdiction and Venue
As basis for the court's jurisdiction, Sunrise asserts diversity of citizenship and that the matter in controversy exceeds $75,000 exclusive of interests and costs pursuant to 28 U.S.C. § 1332(a), which provides in pertinent part that: "[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between — (1) citizens of different States." 28 U.S.C. § 1332(a)(1). As indicated above, none of the parties are domiciled or incorporated in the State of New York. That Sunrise, a California Corporation, has brought suit in the Northern District of New York on behalf one of its affiliates, a Delaware corporation, against defendants, an Arizona Corporation and domiciliary respectively, doing business in New York, suggests that a review of jurisdiction and venue is appropriate.
A. Jurisdiction
In the present case, Sunrise relies upon New York's long-arm statute, N.Y.C.P.L.R. § 302(a), as a basis for this court's exercise of personal jurisdiction over defendant. Section 302 states in pertinent part, "[a]s to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent: (1) transacts any business within the state or contracts anywhere to supply goods or services in the state . . ." N.Y.C.P.L.R. § 302(a)(1). "This subsection thus has two prongs, either of which can form a basis for the exercise of personal jurisdiction over a non-domiciliary." Bank Brussels Lambert v. Fiddler Gonzalez Rodriguez, 171 F.3d 779, 786 (2d Cir. 1999) (citing Holness v. Maritime Overseas Corp., 251 A.D.2d 220, 676 N.Y.S. 2d 540, 544 (1st Dep't 1998); Ettra v. Matta, 61 N.Y.2d 455, 458-59, 474 N.Y.S.2d 687, 463 N.E.2d 3 (1984)).
1. Transaction of Business Prong of § 302(a)(1)
"[F]or a court to obtain personal jurisdiction over a party under the 'transaction of business' prong of § 302(a)(1), the party need not be physically present in the state at the time of service." Id. at 787 (citation omitted). Instead, "§ 302(a)(1) extends the jurisdiction of New York state courts to any nonresident who has 'purposely availed [himself] of the privilege of conducting activities within New York and thereby invoked the benefits and protections of its laws . . .'" Id. (quotation omitted). "'[A] single transaction would be sufficient to fulfill this requirement,' . . ., so long as the relevant cause of action also arises from that transaction." Id. (internal quotations, citation and footnote omitted).
To determine whether a non-domiciliary has transacted business in New York within the meaning of § 302(a)(1), "the court must consider the totality of the circumstances surrounding the contract action." Great Northern Ins. Co. v. Constab Polymer-Chemie GMBH Co, No. 5:01-CV-882, 2002 WL 31084727, *4 (N.D.N.Y. Sept. 17, 2002) (citation omitted). In making this determination, the court may consider the following factors: whether the defendant has an ongoing contractual relationship with a New York business; whether the contract was negotiated or executed in New York; whether the defendant visited New York to meet with the parties to the contract regarding performance thereof after the execution of the contract; and whether the contract required the defendant to send notices and payments into New York or otherwise perform in New York. Great Northern Ins. Co., 2002 WL 31084727, at *4 (citation omitted). Applying these factors, courts have found that "[w]here a plaintiff's cause of action is based upon a contract, negotiation of the contractual terms by phone, fax or mail with the New York party is generally insufficient to support a finding of the transaction of business in New York." United Computer Capital Corp. v. Secure Prods., L.P., 218 F.Supp. 2d 273, 278 (N.D.N.Y. 2002) (citation omitted); see also Ferrante Equip. Co. v. Lasker-Goldman Corp., 26 N.Y.2d 280, 284 (1970) (finding that there was no transaction of business when defendant was a non-domiciliary who conducted his personal business activities out of state, had no office, bank account or telephone listings in New York, and neither solicited business in the state nor "entered th[e] State in connection with his dealings"); C-Life Group Ltd. v. Generra Co., 652 N.Y.S. 41, 235 A.D.2d 267 (1st Dep't 1997) (finding that the parties' initial 45-minute meeting in New York, which was clearly exploratory in nature and which led to nothing more than a proposal that was itself the subject of further negotiations over the phone, by mail, and in meetings outside New York, did not constitute the transaction of business within the meaning of § 302(a)(1)).
Health Focus owns and operates White's Homecare in Schenectady, New York; thus it would appear that defendants availed themselves of the privilege of conducting business activities within New York and thereby invoked the benefits and protections of its laws.
2. Supplying Goods or Services Prong of § 302(a)(1)
The second prong of § 302(a)(1), extending jurisdiction to defendants who "contract anywhere to supply goods or services in the state," was added to "'ease the plight of New York residents seeking to obtain jurisdiction over those outside its borders who may be deemed virtually or constructively to do business in this state.'" Bank Brussels Lambert, 171 F.3d at 789 (quoting Waldorf Assoc., Inc. v. Neville, 141 Misc. 2d 150, 533 N.Y.S.2d 182, 185 (Sup.Ct. 1988)). "This provision captures cases where there are minimal contacts in New York, and, for example, a contract is made elsewhere for goods to be delivered or services to be performed in New York." Bank Brussels Lambert, 171 F.3d at 789 (citation omitted). "Thus, even if a defendant never enters the state to negotiate one of these contracts, to complete performance or for any other reason, the second prong of § 302(a)(1) can provide long-arm jurisdiction over a defendant who has minimal contacts with the state and who has entered a contract anywhere to supply goods or services in the state." Id. (citation omitted).
In applying this provision, courts may consider whether the purchase orders and other documents provide for shipment to New York; whether the defendant collected New York sales tax in connection with the transaction; whether the defendant solicited the contract in New York; whether the defendant entered New York for purposes of performing the contract; and any other factor showing that defendant voluntarily and purposefully availed itself of the privilege of transacting business in New York. Great Northern Ins. Co., 2002 WL 31084727, at *4 (citation omitted).
It appears that defendants satisfy the second prong as well, for they have contracted to receive shipments of durable medical goods and equipment in New York. Consequently, jurisdiction is proper under 28 U.S.C. § 1332 and New York's long-arm statute.
B. Venue
In its complaint, Sunrise asserts that venue is proper in the Northern District of New York pursuant to 28 U.S.C. § 1391(a)(1), which states: "[a] civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in a judicial district where any defendant resides, if all defendants reside in the same state." Subsection (a)(1), however, does not provide for venue in the Northern District of New York, for while Health Focus, inasmuch as it conducts business as White's Homecare in Schenectady, New York, is a resident of New York, Anderson is not a resident of New York, but rather is a domiciliary of Arizona; therefore, all defendants do not reside in the same district. The court's inquiry does not end there, however, for subsection (a)(2) states that venue is proper in "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated." 28 U.S.C. § 1391(a)(2). As explained below, the security agreement provides plaintiff with a security interest in Health Focus' inventory of goods, merchandise, and equipment, the bulk of which is located at White's Homecare in Schenectady New York. Therefore, Sunrise properly selected the Northern District of New York as a proper venue in which to file its claims.
III. Sunrise as Proper Party
In order to determine whether plaintiff is a proper party to bring this action against defendants, the court examines the parties' agreements.
A. The Account Agreement and Continuing Guarantee
The Account Agreement and Terms of Sale, here provides in pertinent part, that Health Focus
makes this application for credit to Sunrise Medical Inc. and/or any of its subsidiaries or affiliates now owned or hereafter acquired ("Creditor"). . . . In the even of default, [Health Focus] further agrees to pay all costs of collection, including reasonable attorney's fees, plus court costs and/or collection agency fees together with interest thereon at the maximum amount allowed by law to [Sunrise Medical Inc.] or its assignee.See Dkt. No. 15, Ex. 1.A. (emphases added). Therefore, contrary to defendants' assertion, plaintiff, as an affiliate of Sunrise Medical Inc., is a proper party to assert claims against defendants as to the Account Agreement.
Defendants assert that Anderson is not a managing member of Health Focus. See Dkt. No. 16, Defs.' Statement of Material Facts. How ever, Anderson signed both the Account Agreement and Promissory Note Secured By Security Agreement on behalf of Health Focus as its "managing member."
As noted above, in connection with the Account Agreement, Anderson also executed a Continuing Guarantee in his individual capacity, which provides that he, as guarantor, would "personally and individually, jointly and severally, unconditionally guarantee and promise to pay Creditor [Sunrise Medical Inc., and its subsidiaries or affiliates] on demand any and all present and future indebtedness, obligations, and liabilities owed by [Health Focus] to Creditor [Sunrise Medical Inc., and its subsidiaries or affiliates]." Id. Therefore, contrary to defendants' assertion, plaintiff, as an affiliate of Sunrise, is a proper party to assert claims against defendants as to the Continuing Guarantee. See Dkt. No. 15, Di Salvo Aff., Ex. 3 at ¶ 2.
The Account Agreement and Continuing Guarantee appear in the same document on a single page wherein "Creditor" was defined so as to Sunrise "and/or any of its subsidiaries or affiliates now owned or hereafter acquired." Dkt. No. 15, Ex. 1.A.
B. Guaranty
Also on June 22, 2000, Anderson executed, in his individual capacity, a Guaranty in connection with the extension of credit by Sunrise Medical Inc., to Health Focus. The terms set forth in the Guaranty provide that Anderson will
Defendants assert that Anderson executed the Second Continuing Guaranty in connection with the Promissory Note Secured by Security Agreement, rather than in connection with the extension of credit by Sunrise Medical, Inc., as Sunrise asserts. See Dkt. No. 16, Defs.' Statement of Material Facts in Opp'n to Pl.'s Mot. for Summ. J. at ¶ 6.
unconditionally guarantee and promise to pay to Sunrise Medical Inc., and its current and future subsidiaries and affiliates (collectively the "Seller"), whose address is c/o Sunrise Medical HHG, Inc., 7477 East Dry Creek Parkway, Longmont, Colorado 80503 . . . all indebtedness of any kind of Health Focus of New York . . . and all divisions, subsidiaries and affiliates thereof . . ., including without limitation all debts, obligations, and liabilities of [Health Focus] to Seller [Sunrise Medical Inc. and its current and future subsidiaries and affiliates] currently existing or now or hereafter made, incurred or created, however arising or evidenced, whether direct or acquired by assignment or succession, whether due or not due, absolute or contingent, liquidated or unliquidated, whether recovery upon such debt may be or become barred by any statute of limitation or otherwise unenforceable . . . [Anderson] also promise[s] to pay all attorneys' fees and costs incurred in enforcing this Guaranty against [Anderson], regardless of whether any legal action is commenced against [Anderson].See Dkt. No. 15, Ex. 1.B. (emphasis added). Therefore, contrary to defendants' assertion, plaintiff, as an affiliate of Sunrise Medical Inc., is a proper party to assert claims against defendants as to the Guaranty. See Dkt. No. 15, Di Salvo Aff., Ex. 3 at ¶¶ 2, 9, and 14.
C. The Note
As noted above, on June 26, 2000, Anderson executed, on Health Focus' behalf, a Note secured by Security Agreement. In its final paragraph, the Note indicates that it is "secured by a Security Agreement dated as of May 3, 2000, between Lender [SunMed Finance, Inc.] and the undersigned [Anderson], as Debtor." See Dkt. No. 15, Ex. 1.C. The Note also provides that its holder "shall have the right to sell, assign or otherwise transfer, either in part or in its entirety, this Note and any instrument or agreement securing this Note, to one or more persons without the undersigned's [defendant's] consent." Dkt. No. 15, Ex. 1.C. SunMed Finance, Inc., subsequently assigned the Note to plaintiff. See Dkt. No. 19, Ex. A. Hopp. Aff. at ¶ 3. Therefore, contrary to defendants' assertion, plaintiff, as SunMed Finance Inc.'s assignee of the Note, is a proper party to assert claims against defendant as to the Note.
Interestingly enough, unlike the Account Agreement, Continuing Guarantee, and Guaranty, the Note contains a choice-of-law provision in its second to last paragraph, which states that the Note is to be "construed and enforced in accordance with and governed by the laws of the State of Colorado." See Dkt. No. 15, Ex. 1.C. Neither party references the Note's choice-of-law provision.
Sunrise seeks to enforce the Note in the Northern District of New York even while the Note specifies Boulder County, Colorado as the exclusive venue for any and all legal proceedings based upon or arising out of the Note. Dkt. No. 15, Ex. 1.C. No matter, the Sunrise brought the case in the Northern District of the New York and the court has determined that it has jurisdiction, that venue is proper, and Sunrise is a proper party to enforce the agreements at issue.
Anderson insists that but for the assurances made by the Sunrise Consulting Program, he would not have signed these three agreements. He also emphasizes that he negotiated and executed the three agreements in Scottsdale, Arizona, and that his wife was not a signatory to the Guaranty. See Dkt. No. 17, Anderson Aff. at 16-18.
D. The Security Agreement
On May 3, 2000, Health Focus executed a Security Agreement with Sunrise Medical, Inc., and its current and future subsidiaries and affiliates granting them a security interest in the personal property identified as "all inventory of goods and merchandise, and all equipment, wherever located, now held or hereafter acquired by [Health Focus] from any Secured Party" and, inter alia, all proceeds of such property. See Dkt. No. 15, Ex. 1.D. Therefore, contrary to defendants' assertion, Sunrise, as an affiliate of Sunrise Medical Inc., is a proper party to assert claims against defendants as to the Security Agreement.
Although addressed by neither party, like its companion document the Note, the Security Agreement contains a choice-of-law provision. Oddly enough, however, whereas the Note selects Colorado law as controlling, the Security Agreement selects California law as controlling. See Dkt. No. 15, Ex. 1.D. ("This Agreement shall be governed by the laws of the State of California (without regard to the rules regarding conflict of laws) and, unless otherwise defined or provided, herein, all words used in this Agreement shall have the meanings given them in the California Uniform Commercial Code.").
By signing the Security Agreement, debtor consented to venue in the state and federal courts of San Diego County, California and Boulder County, Colorado for the resolution of all matters relating to its enforcement or interpretation. Dkt. No 15, Ex. 1.D. Again this need not detain the court long, for it has jurisdiction, venue is proper, and Sunrise is a proper party to enforce the agreements at issue.
Sunrise is a proper party to assert the claims under the Account Agreement and Continuing Guarantee, the Guaranty, the Note and Security Agreement against defendants in this action.
IV. Choice of Law
In diversity actions, federal courts apply the conflict-of-law rules of the state in which they sit. See Cantor Fitzgerald Inc. v. Lutnick, 313 F.3d 704, 710 (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)); see also Stuart v. American Cyanamid Co., 158 F. 3d 622, 626 (2d Cir. 1998) (explaining that where "jurisdiction rests upon diversity of citizenship, a federal court sitting in New York must apply the New York choice-of-law rules and statutes of limitations") (citing Guaranty Trust Co. v. York, 326 U.S. 99, 108-09, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945)); Barkanic v. Gen. Admin. of Civil Aviation of the People's Republic of China, 923 F.2d 957, 960 (2d Cir. 1991) ("To be sure, federal courts are required to apply state choice of law rules only when the issues before it are governed by state substantive law under Erie R.R. Co. v. Tompkins, 58 S.Ct. 817, 82 L.Ed 1188 (1938)).
Under New York law, "'[t]he first step in any case presenting a potential choice-of-law issue is to determine whether there is an actual conflict between the laws of the jurisdictions involved.'" Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 313 F.3d 70, 85 (2d Cir. 2002) (quoting In re Allstate Ins. Co. Stolarz, 81 N.Y.2d 219, 223, 597 N.Y.S.2d 904, 905, 613 N.E.2d 936, 937 (1993)). If the court finds such a conflict, then it must classify the conflicting laws by subject matter with reference to New York law. See Booking v. Gen. Star Mgmt., 254 F.3d 414, 420 (2d Cir. 2001) (citingTanges v. Heidelberg N. Am., Inc., 93 N.Y.2d 48, 54, 687 N.Y.S.2d 604, 606, 710 N.E.2d 250 (1999)). The parties' briefs have obviated the need for the court to conduct analysis in this regard, however, because they assume that New York's "grouping of contracts" or "center of gravity" approach applies. See Dkt. No. 19, Pl.'s Reply Mem. of Law in Supp. of Mot. for Summ. J. at 9; Dkt. No. 18, Defs.' Mem. of Law in Opp'n to Pl.'s Mot. for Summ. J. at 10. The parties' "implied consent . . . is sufficient to establish choice of law." Krumme, 238 F.3d at138 (2d Cir. 2000).
New York courts apply a "'center of gravity' or 'grouping of the contacts' approach to choice-of-law issues in contract cases. Under this approach, courts may consider a variety of significant contacts, including the place of contracting, the places of negotiation and performance, the location of the subject matter, and the domicile or place of business of the contracting parties." Tri-State Employment Serv., Inc. v. Mountbatten Sur. Co., Inc., 295 F.3d 256, 261 (2d Cir. 2002) (citing Stolarz, 81 N.Y.2d at 226, 597 N.Y.S.2d 904, 613 N.E.2d 936). In this analysis, courts are to place particular emphasis on the traditional choice-of-law factors — the places of contracting and performance — but "may also consider public policy 'where the policies underlying conflicting laws in a contract dispute are readily identifiable and reflect strong governmental interests.'" Id.
Because the Note specifies Colorado law as controlling, the court will apply Colorado law where necessary in its analysis of the Note; similarly, because the Security Agreement specifies California law as controlling, the court will apply California law where necessary in its analysis of the Security Agreement. With respect to the Account Agreement, Continuing Guarantee, and Guaranty, however, the court must apply the New York's grouping of the contracts methodology. While the parties agree that the court is to apply this methodology, they disagree as to the result of its application, for whereas plaintiff contends New York law governs, defendants contend Arizona law governs.
A. Grouping of the Contracts
1. Place of Contracting
The Account Agreement and Continuing Guarantee indicate no location or address, but the Guaranty indicates plaintiff's address: 7477 East Dry Creek Parkway, Longmont, Colorado. See Dkt. No. 15, Exs. 1.A. and 1.B. Although the place of execution is not explicitly indicated on the face of the documents, Anderson avers that he signed the Account Agreement, Continuing Guarantee, and Guaranty in Scottsdale, Arizona. See Dkt. No. 17, Anderson Aff. at ¶ 16. The first factor, "given heavy weight," tips in favor of defendants' preference for Arizona. See Tri-State Employment Serv., 295 F.3d at 261.
2. Place of Negotiation
Anderson negotiated the Account Agreement, Continuing Guarantee, and Guaranty in Scottsdale, Arizona. See Dkt. No. 17, Anderson Aff. at ¶ 16. Although not addressed by either party, plaintiff presumably negotiated the agreements in Longmont, Colorado. As between the parties' respective choices-of-law, New York and Arizona, Arizona has the stronger interest here. The second factor tips in favor of defendants' preference for Arizona.
3. Place of Performance
Plaintiff's affiliate, doing business in Colorado, supplies durable medical goods and equipment to Health Focus doing business as White's Homecare in Schenectady, New York. In turn, under the agreements in issue, defendants, doing business in Arizona, are to reimburse plaintiff, doing business in Colorado. The third factor, "given heavy weight," tips in favor of Sunrise's preference for New York. See Tri-State Employment Serv., 295 F.3d at 261.
4. Location of the Subject Matter
The subject matter of the Continuing Guarantee and Guaranty pertain exclusively to commerce and commercial activity taking place in New York. The fourth factor tips decidedly in favor of Sunrise's preference for New York.
5. Domicile or Place of Business of the Contracting Parties
Sunrise is a California Corporation with its principal place of business in Longmont, Colorado. Health Focus is an Arizona Corporation doing business as White's Homecare in Schenectady, New York. Anderson is an Arizona domiciliary. As between the parties' respective choices-of-law, New York and Arizona, New York has the stronger interest here, and the fifth factor tips in favor of Sunrise's preference for New York.
B. The Court Applies New York Law with Respect to the Account Agreement, Continuing Guarantee, and Guaranty
The case presents the following situation: defendants, an Arizona corporation, doing business in New York, and its managing member, an Arizona domiciliary, compensate plaintiff, a California corporation, doing business in Colorado, for its affiliate's shipment of durable medical goods and equipment to New York. Clearly the parties' business and geographic nexus is New York where performance has occurred and where the tangible goods lie. On the balance, the above grouping of contracts approach reveals that the court must apply New York law.
V. Defendants' Liability Under the Account Agreement, Continuing Guarantee, Guaranty, Note, and Security Agreement
A. Account Agreement, Continuing Guarantee, and Guaranty
Defendants have failed to present a genuine issue of material fact as to the substance or enforceability of either the Account Agreement, Continuing Guarantee or Guaranty. In New York, an enforceable negotiable instrument must: (1) be signed by the maker or drawer; (2) contain an unconditional promise or order to pay a sum certain in money and no promise, order, obligation or power given by the maker or drawer; (3) be payable on demand or at a definite time; and (4) be payable to order or to bearer. N.Y.U.C.C. § 3-104. Moreover, the parole evidence rule bars the introduction or consideration of extrinsic evidence of the meaning of a complete written agreement, if the terms of the agreement are clear and unambiguous. Municipal Capital Appreciation Partners, I, L.P. v. Page, 181 F.Supp.2d 379, 391 (S.D.N.Y. 2002) (citing W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 162-63, 566 N.E.2d 639, 643, 565 N.Y.S.2d 440, 443 (1990)). In order to apply the parole evidence rule, the court must: "(1) determine whether the written contract is an integrated agreement; if it is, (2) determine whether the language of the written contract is clear or is ambiguous; and, (3) if the language is clear, apply that clear language." Id. at 392 (citingWayland Inv. Fund, LLC v. Millenium Seacarriers, Inc., 111 F.Supp.2d 450, 454 (S.D.N.Y. 2000)). An integrated contract is one which "represents the entire understanding of the parties to the transaction." Investors Ins. Co. v. Dorinco Reinsurance, Co., 917 F.2d 100, 104 (2d Cir. 1990). "[U]nder New York law, a contract which appears complete on its face is an integrated agreement as a matter of law." Battery Steamship Corp. v. Refineria Panama, S.A., 513 F.2d 735, 738 n. 3 (2d Cir. 1975). Whether the language of a written contract is ambiguous is a question of law to be resolved by the courts. W.W.W. Assocs., 77 N.Y.2d at 162, 566 N.E.2d at 642, 565 N.Y.S.2d at 443. An ambiguity arises if "the terms of a contract could suggest more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business."
The Account Agreement, Continuing Guarantee and Guaranty satisfy the requirements of N.Y.U.C.C. § 3-104. Furthermore, the court finds that the Account Agreement is an integrated agreement, and that its language is clear and unambiguous. Defendants are liable to Sunrise for the amount due under the Account Agreement.
B. The Note and Security Agreement
1. The Note
In Colorado, a negotiable instrument
means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order if it: (1) [i]s payable to bearer or to order at the time it is issued or first comes into possession of a holder; (2) [i]s payable on demand or at a definite time; and (3) [d]oes not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) waiver of the benefit of any law intended for the advantage or protection of an obligor.
C.R.S.A. § 4-3-104(a)(1)-(3). Moreover, an instrument "is a 'note' if it is a promise. . . ." Id. § 4-3-104(e). Again, the parole evidence rule excludes extrinsic evidence to "contradict the terms of a binding integrated agreement or to add to the terms of a binding and completely integrated agreement." United States v. Rockwell Intern. Corp., 124 F.3d 1194, 1199 (10th Cir. 1997). The court finds that the Note meets the requirements of a negotiable agreement under Colorado law and finds no reason to apply the parole evidence rule. The terms of the Note are fully enforceable in Sunrise's favor.
2. The Security Agreement
In California, a negotiable instrument is
an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it is all of the following: (1) [i]s payable to bearer or to order at the time it is issued or first comes into possession of a holder; (2) [i]s payable on demand or at a definite time; (3) [d]oes not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.
Cal.Com. Code § 3104. The court finds that the Security Agreement meets the requirements of a negotiable instrument under the California Commercial Code and similarly finds no reason to consider any parole evidence. The terms of the Security Agreement are fully enforceable in Sunrise's favor.
The plain and unambiguous language of the Account Agreement, the Continuing Guarantee and the Guaranty provide, respectively, (1) that Sunrise Medical Inc., and/or any of its subsidiaries or affiliate now owned or hereafter acquired and (2) that Sunrise Medical Inc., and its current and future subsidiaries and affiliates may enforce and collect upon those agreements. Defendants are liable to Sunrise under those agreements. The plain and unambiguous language of the Note requires defendants to pay
the principal sum of $156,255.31 with interest on the principal balance from time to time remaining unpaid from the date hereof until paid, at the rate of 19.00% per annum, payable in 24 payments in the amount of $7,875.27 each, plus accrued interest thereon, payable on the 15th day of each calendar month commencing 7/15/00, through 6/15/02 at which time the entire principal amount and all accrued interst [sic] thereon shall become due and payable in full.
Dkt. No. 15, Ex. 1.C. The Note provides that its holder "shall have the right to sell, assign or otherwise transfer, either in part or in its entirety, this Note and any instrument or agreement securing this Note, to one or more persons without the undersigned's [defendants'] consent." Id. SunMed Finance, Inc., subsequently assigned the Note to Sunrise. See Dkt. No. 19, Ex. A. Hopp. Aff. at ¶ 3. Defendants are liable to Sunrise under the Note. The Security Agreement provides Sunrise Medical, Inc., and its current and future subsidiaries and affiliates with a security interest in the personal property therein described. The plain and unambiguous language of the Security Agreement secures payment and performance of all indebtedness, obligations and liabilities of defendants to Sunrise. See Dkt. No. 15, at Ex. 1.D. Defendants are liable to Sunrise under the Security Agreement.
VI. Amount Owed
Plaintiff notes that the amount owed by defendants under the Account Agreement, Continuing Guarantee, Guaranty, Note, and Security Agreement is not fixed because it includes not only a base amount, but also interest, which has continued to accrue. As to the base amount, Sunrise agreed to stipulate to judgment in the amount of $255,767.25 plus interest as the amount owed by defendants and waive its entitlement to the disputed difference. Dkt. No. 19, Pl.'s Reply Mem. at 5; Dkt. No. 16, Defs.' Statement of Material Facts in Opp'n at ¶ 9. Defendants claim a right of offset of at least $107,554.40, the amount Health Focus wrote off as invoices to Medicare. Dkt. No. 18, Defs.'s Mem. of Law at 9. Apparently Medicare declined to pay defendants' write off, and defendants' accounts receivable lender, Frostline Corporation, of Idaho Falls, Idaho, required defendants to "buy back" the receivables. Id. at 10. Frostline, of course, is not a party to this action and the court again will not consider any parole evidence as against the agreements here at issue. The court recognizes no offset and finds that defendants owe Sunrise $255,767.25 plus interest. The parties are to confer to determine the amount of interest due and owing and notify the court of such whereupon the court will enter judgement.
Defendants submit $255,767.25 as the balance due and owing. Sunrise initially sought $261,079.04.
CONCLUSION
WHEREFORE, after careful consideration of the file in this matter including the parties' submissions and oral argument, and the applicable law, the court hereby
GRANTS plaintiff's motion for summary judgment in all respects.
IT IS SO ORDERED.