Title: Agway, Inc. v. Gray

State: vermont

Issuer: Vermont Supreme Court

Document:

Agway, Inc. v. Gray  (95-651); 167 Vt. 313; 706 A.2d 440

[Opinion Filed 21-Nov-1997]

[Motion for Reargument Denied 19-Dec-1997]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.

                            No. 95-651

Agway, Inc.                                  Supreme Court

                                             On Appeal from
    v.                                       Orleans Superior Court

Keith Gray                                   September Term, 1996

Brian L. Burgess, J.

Susan J. Steckel, Montpelier, for plaintiff-appellee

Robert R. Bent of Zuccaro, Willis & Bent, P.C., St. Johnsbury, for 
  defendant-appellant

PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.

       MORSE, J.   Defendant Keith Gray appeals from a summary judgment of
  the Orleans Superior Court enforcing a New York judgment in favor of
  plaintiff Agway, Inc.  Gray contends the court erred in ruling that his
  counterclaims for consequential damages were barred by the New York
  judgment entered on an arbitration award.  We affirm.

       Agway, whose principal place of business is in Syracuse, New York,
  sold to Gray and installed at his farm in Holland, Vermont an automated
  milking parlor.  The two contracts of sale contained identical arbitration
  clauses providing that:

     [a]ny controversy or claim relating to this agreement shall be
     settled by arbitration in Syracuse, New York, in accordance with
     the rules of the American Arbitration Association, and any
     judgment upon any award rendered by the arbitrators may be
     entered in any court having jurisdiction thereof.  The determination
     of the arbitrators shall be final and binding upon both parties.

  The contracts also contained a waiver of any claim against Agway for
  incidental or consequential damages of any nature.

       Installation and modification of the equipment was completed early in
  1992.  Alleging that Gray had paid no part of the bill, Agway demanded
  payment in October 1992, and

 

  thereafter filed a demand for arbitration under the contracts.

       Gray was represented by counsel in the arbitration proceeding and
  actively contested Agway's claim.  He contended that the milking equipment
  was defective, that he had lost income from decreased milk production, and
  that he had incurred expenses to replace cows allegedly injured by the
  milking parlor.  Gray sought an offset against the sale price for the
  reduced value of the defective milking equipment (his lost benefit of the
  bargain) of approximately $18,000, as well as an offset for his
  consequential damages, which allegedly exceeded $125,000.

       In connection with his claim for consequential damages, Gray asserted
  that the contract clause excluding such damages was unenforceable for two
  reasons.  First, he argued that the exclusion had "fail[ed] of its
  essential purpose."  N.Y. U.C.C. § 2-719(2) (McKinney 1993). Second, he
  asserted that the exclusion was "unconscionable" under N.Y. U.C.C. §
  2-719(3), which provides: "Consequential damages may be limited or excluded
  unless the limitation or exclusion is unconscionable."  Gray argued in this
  regard that the parties enjoyed vastly unequal bargaining power ("Gray was
  an individual dairy farmer dealing with a large commercial operation") and
  that the agreement was a classic contract of adhesion; it had been
  presented on a preprinted form prepared by Agway, and its effect was never
  explained.  Gray cited a number of legal authorities in support of his
  claim, including Cayuga Harvester, Inc. v. Allis-Chalmers Corp., 465 N.Y.S.2d 606 (N.Y. App. Div. 1983), and Clark v. International Harvester
  Co., 581 P.2d 784 (Idaho 1978).

       Following the hearing, the arbitrator reduced Agway's claims by
  $15,950 attributable to defective materials in the milking parlor, but
  found no merit to Gray's claim for consequential damages, and accordingly
  entered an award of $57,945 in Agway's favor.  In response to Gray's motion
  for modification, the arbitrator reduced the award to $56,945.  The New
  York Supreme Court for Onondaga County subsequently granted Agway's motion
  to confirm the award and entered judgment in favor of Agway in the amount
  of $58,048.18 (the award plus interest). Gray neither appealed nor
  otherwise sought to modify the award in New York.

       Agway thereafter brought this action in the Orleans Superior Court to
  enforce the New

 

  York judgment.  Gray moved to stay enforcement of the judgment, arguing
  that the arbitrator had lacked jurisdiction to hear any counterclaim or
  defense relating to the unconscionability of the consequential-damages
  exclusion.  He also asserted counterclaims for breach of warranty and
  negligence, seeking consequential damages of $300,000.  Following a
  hearing, the trial court granted Agway's motion to dismiss the
  counterclaims and entered summary judgment in favor of Agway, ruling that
  Gray's counterclaims were barred under principles of res judicata. This
  appeal followed.

       The principle of res judicata, or claim preclusion, "`bars litigation
  of claims or causes of action which were or might properly have been
  litigated in a previous action.'"  State v. Dann, 8 Vt. L.W. 209, 210
  (1997) (quoting Cold Springs Farm Dev., Inc. v. Ball, 163 Vt. 466, 472,