U.S. District Court for the Southern District of New York
Shantou Real Lingerie Manufacturing Co., Ltd. v. Native Group International, Ltd.





A U.S. buyer placed several orders with a Chinese seller for the purchase of lingerie products. Between October 2013 and February 2014, the seller delivered the goods to the buyer in five shipments. Each shipment included an invoice indicating the balance due as well as the price, quantity, and type of the products shipped. The buyer accepted each shipment but left part of the price unpaid. The seller then sued for breach of contract and moved for partial summary judgment.

As to the applicable law, the Court found that, although the seller had relied in its pleadings on domestic law (i.e., the Uniform Commercial Code), this could not amount to an implied exclusion of the Convention. It is an established principle in case law that if the parties wish to exercise their right to exclude the Convention, they must do so explicitly. Therefore, the Court ruled that the Convention applied to the case under its Art. 1(1)(a).

As to the merits, the Court first observed that, under CISG, a contract is concluded through offer and acceptance, yet the written form is not necessary (Art. 11 CISG). However, in the case at hand, the buyer’s purchase orders qualified as offers under Art.14 CISG, and the seller's issuance of sales confirmations indicating price, quantity, and type of goods ordered, or the seller's shipment of the goods, constituted acceptance under Art.18 CISG. The Court, therefore, concluded that a series of sales contracts had been validly formed between the parties.

Moreover, the Court dismissed the buyer's counterclaim that the delivery of the goods had been untimely, as it found that the buyer had not provided adequate proof thereof. In any case, the Court held that the buyer had lost its right to rely on the lack of conformity because of late delivery since it had not raised such a defense within a reasonable time under Art. 39(2) CISG:

Finally, the Court recognized that the seller was entitled to recover interest on the outstanding balance (Art.78 CISG). After recalling that Art.78 does not specify the rate of interest to be applied or how it should be determined, the Court maintained that the frequent reference in the Convention to a reasonableness standard could support its decision to solve - as already decided by other judges - such an issue based on its discretionary power. Thus, finding that the New York statutory interest rate applied by some courts was too high, while the interest rate on U.S. Treasury Bills used in other precedents was too low, the Court decided to resort to the statutory rate used in those situations where a taxpayer underpays his taxes (i.e., the sum of the Federal short-term rate, plus three percentage points).

Consequently, the Court granted the seller’s motion for partial summary judgment.


I. Introduction and Procedural History
In this action, plaintiff Shantou Real Lingerie Manufacturing Co., Ltd. («Shantou»), seeks to recover the balance outstanding following its shipments of garments to defendant Native Group International, Ltd., doing business as Native Intimates («Native»). (See ECF No. 1 («Compl.»)). Shantou also seeks to recover damages against Abe Nissim, an officer, director,
and shareholder of Native, on a veil piercing theory. (Id. ¶¶ 8, 39–47). In its answer, Native asserts a counterclaim that Shantou did not timely deliver the goods in question, causing Native to lose several contracts and incur damages. (ECF No. 13).
The parties have consented to my exercise of jurisdiction over this case for all purposes pursuant to 28 U.S.C. § 636(c). (See ECF No. 20). On July 8, 2016, Shantou moved for partial summary judgment against Native pursuant to Rule 56 of the Federal Rules of Civil Procedure.
(ECF No. 40). Native has not submitted any opposition papers. (ECF No. 45). For the reasons
set forth below, Shantou’s motion is granted, and Shantou is awarded judgment against Native in the amount of $272,040.40, plus prejudgment interest on that sum from January 1, 2014, through the date judgment is entered, at the rate set forth in 26 U.S.C. § 6621(a)(2).

II. Relevant Facts
The following facts are undisputed.1
1 In light of Native’s failure to respond to Shantou’s motion, it necessarily has admitted any factual assertions advanced by Shantou that are supported by admissible evidence. See Allen v. City of N.Y., 480 F. Supp. 2d 689, 703 (S.D.N.Y. 2007) (citing Giannullo v. City of N.Y., 322 F.3d 139, 140 (2d Cir. 2003)). Nevertheless, «[e]ven when a motion for summary judgment is unopposed, the district court is not relieved of its duty to decide whether the movant is entitled to judgment as a matter of law.» Vermont Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 242 (2d Cir. 2004).

Shantou is incorporated and has its principal place of business in China. (ECF No. 43-1 («Pl.’s 3 56.1 Stmt.») ¶¶ 1–2). Shantou manufactures and exports garments to the United States. (Id.). Native is a corporation organized under the laws of New York «engaged in the business of selling intimate wear to the wholesale and retail market.» (Id. ¶¶ 3–4).
Between May and November 2013, Native placed dozens of orders with Shantou for lingerie. (ECF No. 42 (Decl. of Crity Lin, dated July 6, 2016 («Lin Decl.»)), ¶¶ 4–6; see also Ex. A).2 Following each order, Shantou issued a sales confirmation to Native, which referenced the cost, quantity, and type of goods ordered («Sales Confirmations»). (Id.). These Sales Confirmations each were signed by a representative of Native. (Id.). Thereafter, Shantou manufactured the goods in accordance with the requested specifications. (Lin Decl. ¶ 7).
Between October 2013 and February 2014, Shantou delivered the goods specified in the Sales 5 Confirmations to Native through five separate shipments. (See id. ¶¶ 8–10; see also Ex. B). Shantou also included in each of the five shipments an invoice, indicating the total balance
due, as well as the price, quantity, and type of products shipped. (Id.). Native accepted each shipment, retained the goods delivered, and never claimed a set-off or credit prior to the filing
of its answer. (Lin Decl. ¶ 11).
The total amount invoiced for the five shipments was $437,562.20. (Id. ¶¶ 13–14; see also Ex. 6 D). Between November 22, 2013, and July 16, 2014, Native made payments totaling $165,522.80, leaving an unpaid balance of $272,040.40. (Id.).

III. Standard of Review
Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment is appropriate only when «the movant shows that there is no genuine dispute as to any material fact» based on supporting materials in the record. Fed. R. Civ. P. 56. «An issue of fact is genuine if ‘the evidence is such that a reasonable jury could return a verdict for the nonmoving party.’ A fact is material if it ‘might affect the outcome of the suit under the governing law.’» Roe v. City of Waterbury, 542 F.3d 31, 35 (2d Cir. 2008) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
In deciding a motion for summary judgment, the Court must «view the evidence in the light most favorable to the party opposing summary judgment and must draw all permissible inferences» in favor of that party. Harris v. Provident Life & Accident Ins. Co., 310 F.3d 73, 78 (2d Cir. 2002). To defeat a motion for summary judgment, the nonmoving party cannot simply rely
upon allegations contained in the pleadings that raise no more than «some metaphysical doubt as to the material facts.» Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, the nonmoving party must offer «concrete evidence from which a reasonable juror could return a verdict in his favor.» Anderson, 477 U.S. at 256.
2 «Ex.» refers to the exhibits annexed to the Lin Declaration.

Assessments of credibility, choosing between conflicting versions of the events, and the weighing of evidence are matters for the jury, not for the Court. Fischl v. Armitage, 128 F.3d
50, 55 (2d Cir. 1997); see also Fed. R. Civ. P. 56(e) advisory committee’s note to 1963 amendment («Where an issue as to a material fact cannot be resolved without observation of the demeanor of witnesses ... summary judgment is not appropriate.»). Thus, «[t]he court’s function is not to resolve disputed issues of fact but only to determine whether there is a genuine issue of material fact to be tried.» Fischl, 128 F.3d at 55.

IV. Discussion
A. Breach of Contract
The communications between Shantou and Native are silent with respect to the governing law. Therefore, despite Shantou’s references to the Uniform Commercial Code («UCC») in its motion papers, Shantou’s breach of contract claims are governed by the United Nations Convention on Contracts for the International Sale of Goods, S. Treaty Doc. No. 98-9 (1983), reprinted in 15 U.S.C.A. App. («CISG»).3 See Cedar Petrochemicals, Inc. v. Dongbu Hannong Chem. Co., No. 06 Civ. 3972 (LTS) (JCF), 2011 WL 4494602, at *3 (S.D.N.Y. Sept. 28, 2011) («[The CISG] automatically applies to international sales contracts between parties from different contracting states[.] ... Where parties wish to exercise their right to derogate from the CISG, they must do so explicitly.») (internal quotation marks omitted) (quoting Zhejiang Shaoxing Yongli Printing & Dyeing Co. v. Microflock Textile Grp., No. 06 Civ. 22608 (JJO), 2008 WL 2098062, at *1 (S.D. Fla. May 19, 2008)); (see also Compl. ¶ 3 («This controversy is subject to [the CISG].»)).

Under the CISG, like New York law, a contract is formed through offer and acceptance, evidencing an agreement to which both parties are bound. CISG arts. 14, 18. Unlike New York
law, however, «the CISG has no statute of frauds, and does not require contracts for [the sale
of goods] to be concluded in writing.» Weihai, 2014 WL 1494327, at *6 (quoting Miami Valley
Paper, LLC v. Lebbing Eng’g & Consulting Gmbh, No. 05 Civ. 702, 2009 WL 818618, at *5 (S.D. Ohio Mar. 26, 2009)); see also CISG art. 11.4
As previously noted, Native sent dozens of purchase orders to Shantou for garments. These 12 purchase orders were acknowledged by Shantou through the Sales Confirmations, signed by Native, that detailed the price, quantity, and type of goods ordered. The issuance of these
Sales Confirmations and their signature by a representative of Native thus constitutes both an
offer and acceptance. See CISG arts. 14(1) («A proposal for concluding a contract ... constitutes an offer if it ... indicates the intention of the offeror to be bound in case of acceptance ... [and] indicates the goods[,] ... the quantity and the price.»), 18(1) («[C]onduct of the offeree indicating assent to an offer is an acceptance.»). Moreover, even if the Sales Confirmations could be viewed as merely an acknowledgment of Native’s offer, Shantou’s subsequent shipment of the goods pursuant to the Sales Confirmations clearly constituted an acceptance. Id. art. 18(3) («[I]f, by virtue of the offer ..., the offeree may indicate assent by ... dispatch[ing] ... the goods[,] ... the acceptance is effective at the moment the act is performed.»). It therefore is evident that Shantou and Native entered into a series of contracts regarding the sale of garments, and that Shantou performed its obligations under those contracts by making five shipments of goods conforming to the items identified in the Sales Confirmations. (Lin. Decl. ¶¶ 7– 9). Rather than complying with their obligations under those contracts, however, Native made only partial payment. Shantou is thus entitled to recover the unpaid balance of $272,040.40.

B. Counterclaim
In its answer, Native asserted a counterclaim that Shantou «did not timely ship and deliver the specified goods,» causing Native to lose several contracts and incur damages exceeding
the unpaid balance of $272,040.40. (ECF No. 13 at 5–6). The only evidence supporting Native’s counterclaim consists of discrepancies between the delivery dates indicated in the Sales Confirmations and the actual date the shipments were received. (See Exs. A, B). There are, however, multiple revised versions of each Sales Confirmation, many of which have conflicting delivery dates or dates which are crossed-out and replaced with «TBA,» presumably meaning that the delivery date was «T[o] B[e] A [nnounced].» See J.M.P.H. Wetherell v. Sentry Reinsurance, Inc., 743 F. Supp. 1157, 1161 (E.D. Pa. 1990) («[T]he policy period would be ‘Date T.B.A. [to be announced].’»). It therefore is impossible to conclude on the basis of the information before the Court that any of the shipments were, in fact, late.

In any event, Native failed to raise these issues in the more than one year that elapsed from their receipt of the last delivery to the filing of their answer. (See Lin Decl. ¶ 11 («At no time
did [Native] reject the goods it received ... [or] claim[ ] a set-off or credit on its payments.»);
Ex. B; ECF No. 13). Under Article 39 of the CISG, «the buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the
lack of conformity within a reasonable time after he has discovered it or ought to have discovered it.» See CISG art. 39(1). Here, because the alleged breach (late delivery) would have been apparent on the date of Native’s receipt of the goods, if not earlier, the one year delay plainly was unreasonable. See, e.g., Sara Corp, 2008 WL 2944862, at *8 (buyer waived claim the late delivery of goods pursuant section 2-607 of the UCC by first raising claim several months after delivery in response to seller’s suit seeking payment); Mount Vernon Mills, Inc. v. Murphy Textile Mills, 539 N.Y.S.2d 334, 335 (1st Dep’t 1989) (same). Thus, Native has waived its right to avoid payment of the sums owed to Native based upon alleged late deliveries.

Although the text of Article 39 refers only to a «lack of conformity of the goods,» see CISG art. 39(1) (emphasis added), at least one court has extended Article 39 to other breaches of contract, such as late deliveries, see Sky Cast, Inc. v. Glob. Direct Distribution, LLC, No. 07 Civ. 161 (JBT), 2008 WL 754734 (E.D. Ky. Mar. 18, 2008); see also Clayton P. Gillette & Steven D. Walt, The UN Convention for the International Sale of Goods: Theory and Practice 210 n.164 (2016) (assuming, for the sake of argument, «that Article 39(1)’s reference to ‘lack of conformity in the goods’ applies to all breaches of the seller’s contractual obligations, not just to its obligations with respect to the goods»). The analogous provision of the UCC, section 2-607, also has been interpreted as extending to late deliveries. See Sara Corp. v. Sainty Int’l Am., Inc., No. 05 Civ. 2944 (JCF), 2008 WL 2944862, at *8 (S.D.N.Y. Aug. 1, 2008); see also Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024, 1028 (2d Cir. 1995) («Caselaw interpreting analogous provisions of Article 2 of the [UCC], may also inform a court where the language of the relevant CISG provisions tracks that of the UCC.»). To be sure, section 2-607, which requires buyers to inform sellers of «any breach» of contract, is more susceptible to this interpretation. See UCC § 2-607 (emphasis added). Nevertheless, this reading is a logical extension of Article 39, requiring minimal effort from buyers, while providing the seller both the opportunity to remedy an alleged defect promptly and some finality for transactions in which the goods are accepted.

C. Prejudgment Interest
Shantou also seeks to recover prejudgment interest on the unpaid balance. Article 78 of the CISG provides that, «[i]f a party fails to pay the price or any other sum that is in arrears, the
other party is entitled to interest on it.» CISG art. 78. Article 78, however, «does not specify
the rate of interest to be applied or how the rate should be determined.» Profi-Parkiet Sp. Zoo
v. Seneca Hardwoods LLC, No. 13 Civ. 4358 (PKC) (LB), 2014 WL 2169769, at *9 (E.D.N.Y. May 23, 2014) (quoting Chicago Prime Packers, Inc. v. Northam Food Trading Co., 320 F. Supp. 2d 702, 715 (N.D. Ill. 2004), aff’d, 408 F.3d 894 (7th Cir. 2005)).
Courts have varied considerably in their approach to determining the appropriate rate of interest under the CISG. See Chicago Prime Packers, 320 F. Supp. 2d at 715 (describing different approaches). In the Second Circuit, judges generally have used their discretion to arrive at a reasonable rate, as is commonly done in cases arising under federal question jurisdiction where the relevant statute is silent with respect to prejudgment interest. See Delchi Carrier, SpA v. Rotorex Corp., No. 88 Civ. 1078, 1994 WL 495787, at *7 (N.D.N.Y. Sept. 9, 1994), rev’d in part on other grounds, 71 F.3d 1024 (2d Cir. 1995) («Because [CISG] Article 78 does not specify the rate of interest to be applied, the court in its discretion awards Delchi prejudgment interest at the United States Treasury Bill rate.»); see also S.E.C. v. First Jersey Sec., Inc., 101 F.3d 1450, 1476 (2d Cir. 1996) (choosing the appropriate interest rates is a matter «confided to the district court’s broad discretion») (quoting Endico Potatoes, Inc. v. CIT Grp./Factoring, Inc., 67 F.3d 1063, 1071 (2d Cir. 1995)).
This approach is consistent with the CISG, many provisions of which use «reasonable[ness]» as a guidepost. See, e.g., CISG art. 39; see also CISG art. 7(2) («Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based.»).
In choosing a reasonable prejudgment interest rate in this case, the Court is mindful of two extremes. On the one hand, New York law provides for a prejudgment interest rate of nine percent per annum. See N.Y. C.P.L.R. § 5004. On the other hand, at least two judges in this District have used the United States Treasury Bill rate to calculate prejudgment interest under the CISG. See Delchi Carrier, 1994 WL 495787, at *7; Profi-Parkiet, 2014 WL 2169769, at *10. Neither rate is wholly satisfactory here. For example, there does not appear to be any federal statute providing prejudgment interest at a rate anywhere near nine percent per annum. Conversely, although the 52-week Treasury Bill rate has the benefit of fluctuating with the market, it is currently about one-half of one percent, which would hardly compensate Shantou for the significant delay in payment. See ter/interest-rates/Pages/TextView.aspx?data=billrates (last visited Aug. 23, 2016). The appropriate rate thus should lie somewhere between these two poles.

In trademark cases, when prejudgment interest is awarded under 15 U.S.C. § 1117(b), prevailing plaintiffs are entitled to recover interest at the rate established under 26 U.S.C. § 6621(a).
See 15 U.S.C. § 1117(b). That rate is the one used when a tax payer underpays his taxes. See
26 U.S.C. § 6621(a)(2). The rate is calculated based upon «the sum of – (A) the Federal short-
term rate ... [for the first month in each calendar quarter], plus (B) [three] percentage points.» Id. That rate strikes me as reasonable. Accordingly, Shantou will be awarded prejudgment interest at the rate set forth in 26 U.S.C. § 6621(a)(2) from January 1, 2014 (the approximate midpoint of the arrival of the five shipments), through the date judgment is entered. See, e.g., Manzo v. Sovereign Motor Cars, Ltd., No. 08 Civ. 1229 (JG) (SMG), 2010 WL 1930237, at *12 n. 21 (E.D.N.Y. May 11, 2010) («Utilizing the midpoint date is a practical method of accounting for the fact that [the plaintiff’s] damages accrued over a period of time.»)

V. Conclusion
For the foregoing reasons, Shantou’ motion for partial summary judgment, (ECF No. 40), is 20 granted. Since there is not just reason for delay, see Fed. R. Civ. P. 54(b), the Clerk of Court
shall enter judgment against Native only in the amount of $272,040.40, plus prejudgment interest on that sum from January 1, 2014, through the date judgment is entered, at the rate
set forth in 26 U.S.C. § 6621(a)(2). Finally, the Court will hold a telephone conference on August 31, 2016, at 4 p.m., to discuss next steps in this case with respect to Mr. Nissim. Shantou’s counsel shall initiate the call.

So ordered.}}