2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 5-11-2009 

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. F leet B ank P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 07-3411

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Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

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w . vi ll anova . e du . Re c omme nde d C it at ion " F ar ash & Ro b b in s Inc v

. Fle e t B ank " (2009). 2009 D e cisio n s . P ape r 1386. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2009/1386NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

_____________ N o. 07- 3411

_____________ F ARASH & ROBBI NS, I NC.

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February6, 2009 B e f o re : M c K E E , J O R D A N , a n d L O U R IE * , C i rcui tJud ges. ( Fi l ed: M ay11, 2009)

_______________ * H o n o ra b le A lan D . L o u rie , C irc u it Ju d g e o f th e U n ited S tate s C o u rt o f A p p e a ls fort he Feder al C i r cui t , s i tt i ng bydes i gnat i on.F& R ’ s ear l i ercompl ai nt s ar e notr el evantt o t hi s appea l . Fors i m pl i ci t y , w e w i l l r efe r 1 t o F& R ’ s Second A m ended Com pl ai ntas i t s “C om pl ai nt . ” T he ident i t yof the corr ectdefe nd ant i n thi s case w as a con t est ed is sue, i n p artbecau se 2 Sum m i tand Fl eetent i t i es m er ged abouta y earaft erthe part i es her e fi nal i zed the Loan A g re e m e n t. T h e D istric t C o u rt d e ter m in e d th a t th e m e rg e r m a d e F lee t su c c e ss o r in i nt er es tt o t he Loan A gr eementand the pr operdefe ndanti n t he ca s e, a hol di ng thatthe p a rt ie s d o n o t d is p u te o n a p p e a l. 2 _______________ OPI NI ON O F THE COURT

_______________ J O R D A N , C i r cui tJudge . Far as h & R obbi ns , I nc. ( “F& R ”) and I s i dorFar as h appea l t he j udgm entof the U ni t ed St at es D i s t r i ctC our tfort he D i s t r i ctof N ew J er s eyagai ns tthem and i n favorof Fl eetC api t al C orp. ( “Fl eet ”) i n t he amountof $4, 498, 051. 40 and $350, 000. 00, re s p e c tiv e ly. F& R ’ s Second A m ended Com pl ai ntal l eged f i ve count s agai ns tFl eet : br eac h of c o n tra c t, ne g lig e n t m isre p re se n tatio n , b re a c h o f th e c o v e n a n t o f

g o o d f a ith a n d f

a ir d e a lin g , co n su m e r f

ra u d in v io latio n o f

th e N e w Je rse yC o n su m e r F ra u d A c t, N .J. S tat. A nn. § 56: 8- 2 ( “C FA ”) , and comm on l aw fr aud. T hos e cl ai m s al l ar os e outof a l oan 1 ag ree m en t ( the “ L o an A g ree m en t”) be tw ee n F & R an d S u m m itB an k (“S u m m it ”), Flee t’ s pr edec es s ori n i nt er es t . Fl eetfi l ed count er cl ai m s forbr eac h of contr act , conver s i on, and 2 fr aud, al ong w i t h a thi r d- par t ycompl ai ntagai ns tFar as h, the ow nerof F& R , forbr eac h of co n tr ac t ( as g u ara n tor t o the L o an A g ree m en t) , co n v ersion , an d fra u d . T h e D istri ct C o u rtT he D i s t r i ctC our t ’ s j udgm ents t at es thati tw as “di s m i s s i ng w i t h pr ej udi ce a l l of 3 F& R ’ s cl ai m s agai ns t[Fl eet ] . ” The C our t ’ s opi ni on m akes cl ear , how ever , thati tdeci ded F &R’ s b r e a c h o f

c o n t r a c ta n d b r e a c h o f

th e c o v e n a n to f

g o o d f a i t h a n d f

a i rd e a l i n g c l a i ms on t he m eri t s. T h e c o u rt a ls o h e ld th a t F le e t’ s c o n v e rs io n a n d f ra u d c la im s la c k e d m e ri t. Id . a t * 6 -8 . 4 F le e t d id n o t a p p e a l th a t d e te rm in a tio n . T h e L o a n A g re e m e n t w a s a m e n d e d tw ice . O n lyth e f in a l v e rsio n is re lev a n t to th is 5 a p p e a l. 3 d ism issed F & R ’s ne g li g en t m isr ep rese n tat ion , C F A , an d co m m o n law fra u d claim s b ef o re t r i al . Fol l ow i ng a benc h t r i al , t he D i s t r i ctC our trul ed aga i ns tF& R on i t s cl ai m s for br eac h of contr actand br eac h of the cove nantof good fa i t h and fa i rdeal i ng, hol di ng t hat Fl eethad notbr eac hed the Loan A gr eementand had a ct ed i n good fai t h i n i t s deal i ngs w i t h F & R ; t he C ou rtal so rul ed in favo r of Fleeton i t s breach of c on t ractcl ai m s. See 3 Far as h & Robbi ns , I

nc. v. F l eet

N at ’ lB ank ex r el . Sum m i tB ank , N o . 0 3 c v 3 6 1 , 2 0 0 7 WL 1686702 ( D . N . J . J une 11, 2007) . Forthe fol l ow i ng r eas ons , w e w i l l aff i r m the D i s t r i ct 4 C o u rt’s ju d g m e n t. I . Backg r ound A . T h e P a rtie s’ R e la tio n sh ip B ec au se w e w ri te prim aril yfo r th e p arti es, w e o n lyd esc ri b e tho se f ac ts th at are nece s s aryt o ourdeci s i on. Pur s uantt o t he Loan A gr eement , Sum m i tagr eed t o pr ovi de F & R a r e v o l v i n g l i n e o f c r e d i tw i t h a m a x i m u m p r i n c i p a l a m o u n to f , u l t i m a t e l y, $1, 500, 000 forw or ki ng capi t al . I n addi t i on t o t he $1. 5 m i l l i on cap, the r evol vi ng l i ne of 5 cre d itw as li m it ed to F & R ’s “B o rrow ing B ase . ” T h e L o an A g ree m en t def ined F & R ’sF o r si m p li city , w e w il l r ef er to the m ax im u m av ail ab le cred itw ith resp ec t t o F & R ’s 6 E lig ib le In v e n to ry a s th e “ In v e n to ry S u b lim it” o r s im p ly th e “ S u b lim it.” 4 B or r ow i ng B as e as “( a) 80% of [F& R ’ s ] E l i gi bl e A ccount s R ece i vabl e . . . pl us up t o ( b) 50% of the val ue of [ F& R ’ s ] E l i gi bl e I nvent ory. . . up t o a maxi m um of $1, 250, 000. 00 w ith resp ec t t o E li g ible Inv en tory . ” (A p p . at 75 9 . ) F ara sh p erso n all yg u ara n teed F & R ’s 6 o b lig a tio n s u n d e r t h e L o a n A g re e m e n t u p to $ 3 5 0 ,0 0 0 (t h e “ L im ite d G u a ra n te e ” ). T h e L o a n A g re e m e n t re q u ire d F & R to su b m it t o S u m m it (an d late r to F lee t) m ont hl yB or r ow i ng B as e C er t i fi cat es ( “B B C s ”) , w hi ch w er e t o i ncl ude i nform at i on re latin g to F & R ’s lin e o f c re d it, su c h a s its B o rro w in g B a se . S u m m it, a n d late r F lee t, p r o v i d e d b l a n k BBC f

o r ms f o rF &R t o c o mp l e t e , c e r t i f y , a n d s u b mi t . Th e s e f

o r ms re q u ir e d F & R to n o te its n e g o tia te d B o rr o w in g B a s e f o rm u la o n d e s ig n a te d lin e s . If F& R w ere t o d efau l ton t he L oan A greem ent, F l eetw as aut ho ri zed to i ncrease t he i nt er es tr at e on F& R ’ s l oans by5% . T he Loan A gr eemental s o r equi r ed F& R and F a r a s h t o p a yF l e e t ’ s a t t o r n e y s ’ f e e s a n d c o s t s f

o l l o wi n g a n F &R d e f

a u l t . An F &R d e f a u lt w a s d e f

in e d to in c lu d e th e n o n p a ym e n t o f a n yp a ym e n t d u e . L eadi ng up t o t he mer gerbetw een Fl eetand Sum m i t , R ober tW ai nw r i ght , a l oan o ff icer fro m F leet, assu red F ara sh that the L o an A g ree m en t w o u ld rem ain u n ch an g ed . In J une of 2001, how ever , w hi l e r evi ew i ng F& R ’ s fi nanci al document s i n connec t i on w i th a lice n sin g o p p o rtu n ity , F a ra sh a lleg e d lyd isc o v e re d th a t th e B B C s c o n tain e d a m ista k e in t he I nvent or ySubl i m i tof the B or r ow i ng B as e, l i s t i ng i tas $625, 000 r atherthan the $ 1 ,2 5 0 ,0 0 0 a llo w e d b yth e L o a n A g re e m e n t.5

O n e m igh t exp ec t th at F ara sh w o u ld h av e b rou g h t th e e rron eo u s Inv en tory Subl i m i tt o t he bank’ s at t ent i on, butappar ent l yhe di d not . T o t he contr ary , he i ncl uded a lette r w ith th e S e p tem b e r 2 0 0 1 B B C sta tin g th a t F & R w a s o v e ra d v a n c e d o n its c re d it fac i l i t y , t hough r eadyand abl e t o payi tdow n. T he onl yr eas on forthe over advanc e, how ever , w as t hatt he I nvent or ySubl i m i tw as i ncorr ect l yl i s t ed as $625, 000. H ad the I nvent or ySubl i m i tbeen l i s t ed corr ect l y , the B B C w oul d have i ndi cat ed thatF& R had o v e r $ 4 0 0 ,0 0 0 o f

c re d it s till a v a ila b le . I n O ct ober2001, Far as h m etw i t h W ai nw r i ghtand W ai nw r i ght ’ s s upervi s or , J eff D vor i n. A tt he meet i ng, Far as h gave W ai nw r i ghta che ck for$100, 000. W ai nw r i ght r ecor ded thatt he che ck w as a “pa y dow n t o m ai nt ai n form ul a. ” H e ac cept ed the che ck e v e n th o u g h th e b a n k ’s in ter n a l re p o rt in d ica ted th a t F & R h a d $ 4 1 9 ,9 0 9 a v a ilab le o n its lin e o f c re d it. A t th e sa m e m e e tin g , W a in w rig h t an d D v o rin to ld F a ra sh th a t F & R n e e d e d to b e g i n s u b mi t t i n g we e k l y , r a t h e rt h a n mo n t h l y , BBCs . F &R a l l e g e d th a tth e we e k l yBBC r equi r ementr educe d i t s cas h avai l abi l i t y , cr eat ed an i ncr eas ed w or kl oad forF& R , and m ad e itd ifficu ltfo r F & R to f o rec ast i ts cash req u ir em en ts. A d d ing to the co m p an y ’s di ffi cul t i es , F& R al l eged thatFl eetw as unw i l l i ng t o change the I nvent orySubl i m i ton t he B B C s unt i l M ayof 2002. B yt hatt i m e, how ever , F& R ’ s out s t andi ng l oan bal ance had near l yr eac hed the abs ol ut e l i m i tof $1. 5 m i l l i on.B yu sin g “ ro ll fo rw a rd ” re p o rtin g , F & R w o u ld u se its h isto ric g ro ss p ro f it m a rg in to 7 e stim a te th e v a lu e o f

its in v e n to ry . In o th e r w o rd s, f o r its E lig ib le I n v e n to ry , F & R w o u ld r e p o r tt o t h e b a n k t h e a n t i c i p a t e d v a l u e o f th e i n v e n t o r y , a s m e a s u r e d b ywh a tF &R char ges fori t s pr oduct s , aft erdeduct i ng i t s ant i ci pat ed gr os s pr ofi tm ar gi n. T hus , any uncert ai nt yi n t he var i abl es , i ncl udi ng the ant i ci pat ed gr os s pr ofi tm ar gi n, w oul d l i m i tt he a c c u ra c yo f

F & R ’s in v e n to ry c a lc u la tio n . 6 Att h e s a me t i me , t h e r e l a t i o n s h i p b e t we e n W a i n wr i g h ta n d F a r a s h h a d b e c o me s t r ai ned. I n A ugus t , D vor i n as s i gned G eor ge B ey j oun t o t he F& R acc ount , t o r epl ace W ai nw r i ght . A ft eran i ni t i al r evi ew , B ey j oun concl uded thatF& R ’ s i nvent oryr epor t i ng w a s “ w e a k ” b e c a u se F & R “ h a [ d ] n o p e rp e tu a l in v e n to rya n d u se [ d ] th e [ g ro ss p ro f it] m a rg in to ro ll fo rw a rd .” (A p p . at 1 6 0 7 ¶ 1 1 2 .) B e y jo u n a d d iti o n a llyn o ted th a t th e “ ro ll 7 forw ard cal culat i on [w as] no tbeing sub m i t t ed” an d thatthe “inven t orym akeu p [w as] w eak due t o l ar ge r etur ns and w at ches t o be r efurbi s hed. ” (Id . ) Subse quent corr es pondence fr om Fl eett o F& R i ndi cat ed thatF& R r efus ed t o al l ow Fl eett o conduct a n “ e x a m in a tio n o f

th e c o lla te ra l.” (A p p . a t 1 6 0 8 ¶ 1 1 3 .) O n O ct ober21, 2002, Fl eetdemanded paym ent“i n ful l of al l obl i gat i ons due and ow i ng undert he Loan A gr eement ” w i t hi n s i xtyday s . ( A pp. at1608 ¶ 115. ) F& R fi l ed th is la w s u it s h o rt ly b e f

o re th e s ix ty d a y s e x p ir e d . B . P r ocedur alB ackgr ound Fol l ow i ng i t s pr etr i al di s m i s s al of F& R ’ s negl i gentm i s r epr es ent at i on, C FA , and co m m o n law fra u d claim s, the D istri ct C o u rtco n d u cted a 1 0 -da yb en ch tr ial o n F & R ’s br eac h of contr actcl ai m s and Fl eet ’ s count er cl ai m s and thi r d- par t ycl ai m s . A tthe c o n c l u s i o n o f

t r i a l , t h e Di s t r i c tCo u r ti s s u e d i t s f i n d i n g s o f

f a c ta n d c o n c l u s i o n s o f

l a w.7

T h e C o u rtp ref

ac ed it s o p inion b yn o ti n g that itfo u n d F leet’s w itn esse s m o re cr edi bl e than Far as h. 2007 W L 1686702, at*1. T he C our tthen found that“the B ank l oaned Pl ai nt i ff 100% of thatw hi ch i tagr eed t o l oan, $1. 5 m i l l i on, and anypr obl ems that ar os e w i t h t he form ul a forl endi ng ar os e as a r es ul tof Pl ai nt i ff’ s ow n s l oppybookkeepi ng a n d its e rro rs in su b m itt in g .. . B o rro w in g B a se C e rtific a tes .. . w h ich w e re n e c e ss a ryto s ecur e moni es undert he l oan agr eement . ” I d. at*2. Speci fi cal l y , the C our tfound that

“ o n th e B B C s s u b m itt e d b yP lain tiff to th e B a n k , P lain tiff ’s b o o k k e e p e r e n ter e d o n e -h a lf [of the I nvent or ySubl i m i t , ] t her ebytheor et i cal l yr educi ng the amountof the pot ent i al l oan fr om $1. 25 m i l l i on t o $625, 000. 00. ” I d. Fur t herm or e, “Far as h hi m s el f s i gned off on t he B B C s on a r egul arbas i s gi vi ng hi m the oppor tuni t yt o corr ectthe mi s t ake. ” I d. T h e C o u rt a lso f

o u n d th a t F lee t “r o u tin e lyso u g h t w e e k lya n d so m e tim e s d a ily re p o rt in g f

ro m its b o rr o w e rs ,” i d. at*3, that the “ B B C s su b m itted b yP lai n ti ff w ere i nacc ur at e due t o among ot hert hi ngs the type of i nvent oryanal y s i s thatPl ai nt i ff c o n d u c te d ,” id . at*5, a n d t h a tW a i n wr i g h t“ b e l i e v e d th e s u b mi s s i o n s o f we e k l yBBCs w o u ld a c tu a llya ss ist F & R b yim p ro v in g c a sh f lo w a n d re d u c in g b o rro w in g c o sts w ith acc um ul at ed i nt er es t . ” I d. B as ed on thos e fi ndi ngs , t he D i s t r i ctC our thel d t hatFl eetdi d notbr eac h t he Loan A g re e m e n t. Id . a t * 5 . A cc o rdin g to the C o u rt , F leet w as n o t ob li g ated to co rrect F & R ’s m i s t ake w i t h r es pectt o t he I nvent orySubl i m i t . T he C our tal s o hel d t hatthe Loan A gr eementexpr es s l yauthor i zed Fl eet , ati t s di s cr et i on, t o r eques taddi t i onal fi nanci alT he D i s t r i ctC our thad di ver s i t yj ur i s di ct i on pur s uantt o 28 U . S. C . § 1332. W e have 8 j ur i s di ct i on pur s uantt o 28 U . S. C . § 1291. W e r evi ew a di s t r i ctcour t ’ s fac tual fi ndi ngs forcl earerr or , w hi ch exi s t s w hen, gi vi ng 9 a ll d u e d e f

e re n c e to th e o p p o rtu n ityo f th e ju d g e in a b e n c h trial to e v a lu a te th e c re d ib ili ty of w i t nes s es and t o w ei gh t he evi dence , w e ar e l eftw i t h a def i ni t e and f

i r m convi ct i on 8 i nform at i on fr om F& R , i ncl udi ng B B C s . Si m i l ar l y , the C our thel d t hatFl eetdi d not b re a c h th e c o v e n a n t o f

g o o d f a ith a n d f

a ir d e a lin g b e c a u se it h a d a c o n tra c tu a l rig h t to r equi r e addi t i onal fi nanci al r epor t i ng, and F& R adduce d no evi dence thatFl eethad a ba d m ot i ve ori nt ent i on w hen i texer ci s ed thatr i ght . T he C our tal s o concl uded that , even ha d F& R been a bl e t o s ubs t ant i at e i t s cl ai m s forbr eac h of contr act , F& R ’ s cl ai m ed i nj ur i es w e re to o s p e c u la tiv e to w a rr a n t r e c o v e ry. A s t o Fl eet ’ s br eac h of contr actcl ai m s , the C our ts ai d i tw as undi s put ed thatFl eet l oaned F& R $1. 5 m i l l i on, t hatF& R had fa i l ed t o r epayanyof the out s t andi ng bal ance sin c e re q u e ste d b yF lee t in O c to b e r o f 2 0 0 2 , an d th a t F a ra sh g u a ra n tee d th e lo a n u p to $ 3 5 0 ,0 0 0 . I

d. a t * 6 . B e c a u se F lee t ac ted re a so n a b lya n d in g o o d f a ith in e x e rc isin g its contr actual r i ght s , t he C our tconcl uded thatF& R br eac hed the Loan A gr eementand F a ra s h b re a c h e d th e L im ite d G u a ra n te e . B o th F & R a n d F a ra s h tim e ly ap p e a le d . I I . D i s cus s i on 8 A . Li abi l i t

y f orB r each of

C ontr act A ppel l ant s cont end thatt he D i s t r i ctC our t ’ s fac tual fi ndi ngs w er e contr aryt o t he evi dence . W e di s agr ee. T he evi dence cl ear l yr evea l s thatanyl i m i ton F& R ’ s l i ne of 9th a t a m is ta k e h a s b e e n c o m m itte d . C om m erce N at’ lIns. Servs. , Inc. v. C om m erce I ns. A gency, I

nc. , 2 1 4 F .3 d 4 3 2 , 4 3 5 n .1 (3 d C ir . 2 0 0 0 ). 9 cr edi tbey ond t hatw hi ch w as pr ovi ded i n t he Loan A gr eementw as pl ace d t her e thr ough A ppel l ant s ’ ow n doi ng. A tt r i al , Far as h admi t t ed thati tw as F& R ’ s bookkeepe r s , not F l e e t , t h a ti n c l u d e d t h e e r r o n e o u s I n v e n t o r yS u b l i mi to f $ 6 2 5 , 0 0 0 , a n d th a tth e s a me Subl i m i tcont i nued t o appea reven a ft erFar as h di s cover ed the mi s t ake. H e al s o admi t t ed t hatF& R neverr ece i ved anyor al orw r i t t en not i ce f r om Fl eet( orSum m i t ) thatthe In v e n to ryS u b lim it w a s b e in g re d u c e d a n d a d m itt e d th a t h is e a rlier sw o rn sta tem e n ts to t he contr aryw er e fa l s e. M or eover , the t es t i m onyof Fl eet ’ s w i t nes s es and Fl eet ’ s i nt ernal document s r evea l t hatFl eetm ai nt ai ned the I nvent orySubl i m i tat$1, 250, 000, not w i t hs t andi ng t he err oneous B B C s , and Fl eetneverdeni ed a l oan r eques tbas ed on the Subl i m i terr or . A ppel l ant s admi tt hatFl eet ’ s as s ert i on thatthe I nvent orySubl i m i thad neverbeen r educe d byFl eeti s “t echni cal l yacc ur at e. ” (R e p ly B r. a t 8 .) F& R t r i es t o pai ntFar as h’ s O ct ober2001 m eet i ng w i t h W ai nw r i ghtand D vor i n as a n o v e rb e a r i n g e n c o u n t e r , s t a t i n g t h a tth e l o a n o f f i c e r s “ d e ma n d e d th a tF &R g i v e th e m a chec k t o covert he over advanc e” a nd i ndi cat ed thatFl eethad i m pos ed a r educe d In v e n to ry S u b lim it o n F & R . (A p p e lla n ts O p e n in g B r. a t 1 4 .) T he record reveal s a d if f e re n t p ictu re . F a ra sh b ro u g h t th e su p p o se d o v e ra d v a n c e to F lee t’s a tten tio n in h is O ct ober11 l et t erand vol unt eer ed a pa ym ent . W ai nw r i ght ’ s t es t i m onyattr i al i m pl i ed that F& R ’ s paym ent , m ade a ta meet i ng thatFar as h hi m s el f des cr i bed as “cor di al , ” ( A pp. atW e revi ew a dis t ri ctcou rt ’s con struct i on of co ntr actt erm s de novo . Me d tr o n i c AVE, 10 I nc. v. A dvance d C ar di ovas cularSys . , I nc. , 2 4 7 F .3 d 4 4 , 5 3 n .2 (3 d C ir . 2 0 0 1 ). 10 2479- 80) , w as notoutof the or di naryand w oul d be no r eas on t o t r i ggeran i nt ernal in v e stig a tio n in to w h e th e r F & R w a s a c tu a llyo v e ra d v a n c e d . A lth o u g h F a ra sh a n d D v o rin di d di s cus s t he I nvent or ySubl i m i tar ound t he t i m e of thatm eet i ng, the r ecor d j us tas c lea rlysu p p o rts a c o n c lu sio n th a t th e d isc u ss io n c e n ter e d a ro u n d w h e th e r th e S u b lim it w as t o be cons t r ai ned byt he i nvent or yval ue, r atherthan w hetherthe Subl i m i thad bee n im p rop erlyred u ce d to $ 6 2 5 , 0 0 0 . T h u s, the e v iden ce su p p o rt s the D istri ct C o u rt ’s co n clus ion that the re d u ce d Inv en toryS u b li m itw as d u e to F & R ’s m ist ak es, no t Flee t’ s act i on s. A ppel l ant s al s o m ake tw o l egal ar gum ent s as t o t he D i s t r i ctC our t ’ s i nt erpr et at i on o f th e L o a n A g re e m e n t. A p p e llan ts f irst a rg u e th a t itw a s F lee t’s re sp o n sib ili tyto 10 c o rre c t er ro rs in th e B B C s. T h a t ar g u m e n t d o e s n o t w ith sta n d sc ru tin y . N o p ro v isio n in t h e Lo a n Ag r e e me n tp l a c e s s u c h a n o b l i g a t i o n o n F l e e t . To th e c o n t r a r y , th e BBCs th e m se lv e s re q u ire d F & R to c e rtify th a t th e in f o rm a tio n p ro v id e d w a s c o rre c t. A p p e llan ts ar gue thatFl eetw as obl i gat ed t o i nform F& R of anyerr or s i n t he B B C beca us e Fl eet g e n e ra llyre v iew e d B B C s to e n su re th a t th e yw e re p re p a re d c o rre c tly . A p p e llan ts f a il, how ever , t o pr ovi de us w i t h anybas i s fori m pos i ng a l egal obl i gat i on on Fl eett o conduct t h o s e e v a l u a t i o n s o rt o r e v e a l t h e i rr e s u l t s t o F &R. Second, A ppel l ant s ar gue thatFl eetdi d nothave the author i t yt o r equi r e w eekl y , as oppos ed t o m ont hl y , B B C s fr om F& R . T hatar gum enti s bel i ed bythe pl ai n l anguage ofT here i s no sup po rtfor F& R ’s con t enti on that the ad dit i on al i nfo rm at i on cl ause 11 s houl d be i nt erpr et ed “a s appl y i ng t o fi nanci al i nform at i on of [s i c] borr ow er , exce ptfor B B C s .” (A p p e lla n ts O p e n in g B r. a t 3 1 .) C ontr aryt o A ppel l ant s ’ as s ert i on, the doctr i ne of e ju sd e m g e n e ris does notas s i s tt hem. I n fac t , as Fl eetnot es , appl y i ng i ther e maybe vi ew ed as havi ng t he oppos i t e ef fec t : the t erm “addi t i onal fi nanci al i nform at i on, dat a, and document s ” s houl d i ncl ude B B C s beca us e theyar e s peci fi cal l yl i s t ed ea r l i er . ( A ns w er i ng B r . at37. ) T he cl earl anguage of thatcl aus e al s o for ecl os es A ppel l ant s ’ ar gum entthat F le e t w a s n o t a u th o ri z e d to d e m a n d a c tu a l in v e n to ry c o u n ts . 11 t he Loan A gr eement , w hi ch author i zes Fl eett o r equi r e “s uch addi t i onal fi nanci al i nform at i on, dat a, and document s , i n form r eas onabl ys at i s fac t oryt o t he B ank, as m aybe req u ested fro m ti m e to tim e b ythe B an k in it s so le discre ti o n . ” (A p p . at 71 2 § 6 . 1 6 . ) 11 E ven i f, as A ppel l ant s cont end, F& R vi gor ous l ynegot i at ed form ont hl yr epor t i ng r equi r ement s att he out s et , i tcannotavoi d t he unambi guous l anguage of the Loan A g ree m en t al low ing F leet t o alt er tho se re q u ir em en ts l ater. B . Li abi l i t

y f orB r each of

C ovenant

of G ood Fai th and Fai rD eal i ng U nd er N ew Jer seyl aw , F & R i s r equ i red t o sho w “bad m oti ve o r i ntent i on ” as a p a rt o f its c la im f

o r b re a c h o f

th e c o v e n a n t o f

g o o d f a ith a n d f

a ird e a lin g . Ilia d is v . W a lMar tSt or es , I

nc. , 922 A . 2d 710, 722 ( N . J . 2007) . A ppel l ant s ar gue thatther e i s s uffi ci ent evi dence t o s uppor ta conc l us i on t hatFl eetact ed i n bad fa i t h beca us e “i tcr eat ed a re a so n a b le b e lief

o n th e p a rt o f

F & R th a t it s lo a n a v a ilab ili tyh a d b e e n re d u c e d .” (R e p ly B r. a t 1 0 .) B utt he D i s t r i ctC our tfound thati tw as F& R ’ s ow n err or s thatcr eat ed that r eas onabl e bel i ef, notanyr epr es ent at i on m ade byFl eet . A s di s cus s ed above , thatfi ndi ng i s s uppor t ed byt he r ecor d.12

A ppel l ant s ar gue thatFl eet ’ s s i l ence as t o t he ac tual I nvent orySubl i m i tw as i n bad f a ith . See B runsw i ck Hi l l s R acq uet C l ub , Inc. v. R ou t e 18 Sh op ping C tr. A ssocs. , 864 A . 2d 387, 397 ( N . J . 2005) ( hol di ng thata comm er ci al ent i t ym aycl ai m a br eac h of the d u t yo f g o o d f a i t h a n d f

a i rd e a l i n g wh e r e a n o t h e rr e ma i n s s i l e n ti n th e f a c e o f a k n o wn m i s t ake “ w i t h t he purpos e of e xpl oi t i ng the t erm s of the contr actw i t houtr egar d t o t he harm caus ed t o pl ai nt i ff. ”) . T hatar gum entfai l s . E ven i f w e as s um e thatFl eet ’ s l oan offi cer s r eal i zed thatt he B B C s err oneous l ys t at ed the I nvent orySubl i m i t , ther e i s no e v i d e n c e t h a tF l e e twa s e x p l o i t i n g t h e t e r m s o f th e c o n t r a c t . T o th e c o n t r a r y , F &R rec eive d v irtuallyall the m o n eythat itw as a ll o w ed u n d er the L o an A g ree m en t, an d there i s no evi dence t hatFl eeteverdeni ed F& R ’ s r eques tforfunds bas ed on the err oneous B B C s . A l t hough F& R ’ s i nt er es tr at e ul t i m at el yi ncr eas ed, thatw as a di r ectr es ul tof F& R ’ s s ubs equentdefa ul tfornonpaym ent , notFl eet ’ s s i l ence . A ppel l ant s al s o ar gue thatt he D i s t r i ctC our ts houl d have i nferr ed a ba d m ot i ve b a s e d o n th e “ c o m p le te a b s e n c e o f ra tio n a le f

o r d e m a n d in g w e e k ly re p o rt s .” (R ep lyB r. a t 1 6 .) A gai n, how ever , t he D i s t r i ctC our tj us t i fi abl yfound thatFl eethad a r at i onal e, i ncl udi ng a bel i ef thatw eekl yB B C s w oul d as s i s tF& R byi m pr ovi ng i t s cas h fl ow and r educi ng bor r ow i ng cos t s w i t h acc um ul at ed i nt er es t . M or eover , Fl eetr out i nel yr eques t ed w eekl yB B C s fr om i t s ot hercus t om er s . T o t he ext entthatthes e fi ndi ngs w er e bas ed on cr edi bi l i t ydet erm i nat i ons , w e mustgi ve them defer ence . F u rth e r, th e re c o rd su p p o rts anothergood- fai t h r eas on forFl eet ’ s r eques t : F& R ’ s i nvent oryturnover , w hi ch r el i edA s W ai nw r i ghtand D vor i n bot h t es t i fi ed, Fl eetw as conce r ned thatabout80 per cent 12 o f F & R ’s b u s in e s s c a m e f ro m th e c ru is e s h ip in d u s tr y . B eca us e w e conc l ude thatF& R fai l ed t o pr ove thatFl eetbr eac hed the Loan 13 A greem ent, w e need no tadd res s A pp el l ants ’ ar gu m ents rel at i ng t o d am ages. 13 heavi l yon t he t our i s m i ndus t r y , w as adver s el yaff ect ed bythe eve nt s of Sept ember11, 2 0 0 1 . T h e D istric t C o u rt’s d e ter m in a tio n th a t F lee t ac ted in g o o d f a ith is a d e q u a tely 12 s uppor t ed byt he r ecor d. 13 C. F & R ’s T

o r tCla i ms W e mayaff

i r m t he D i s t r i ctC our t ’ s pr e- t r i al di s m i s s al of F& R ’ s t or tcl ai m s on d if f e re n t g ro u n d s th a n th o s e o n w h ic h th e D is tr ic t C o u rt re lie d . Se e D o n a h u e v . G a v in , 280 F. 3d 371, 372 n. 2 ( 3d C i r . 2002) ( “A n appel l at e courtm ayaff i r m a r es ul tr eac hed by th e D is tr ic t C o u rt o n d if f e re n t r e a s o n s ... a s lo n g a s th e re c o rd s u p p o rt s th e ju d g m e n t.” ( c i t a t i o n s o mi t t e d ) ) . Be c a u s e F &R f a i l e d t o e s t a b l i s h th a tF l e e ta c t e d o u t s i d e o f th e t e r ms of the L oan A greem ent, i ti s unab l e t o est abli sh, as the st at ed p rem i se for i t s t ortcl ai m s, t hat Fl eetfal sel yrepr esent ed thati tdid not i ntend t o ch ang e t he term s of t he p art i es’ agr eement . T hus , t he D i s t r i ctC our t ’ s di s m i s s al of F& R ’ s t or tcl ai m s w as appr opr i at e. D. F l e e t ’s B r e a c h o f Co n tr a c tCla i ms A ppel l ant s do notdi r ect l ycont es tthe D i s t r i ctC our t ’ s rul i ng on Fl eet ’ s br eac h of contr actcl ai m s i n favorof Fl eet . H ad F& R s ucce eded on e i t herof i t s br eac h of contr act c la im s , th a t m ig h t h a v e a f f e c te d F le e t’ s ri g h t to re c o v e r f o r b re a c h o f

c o n tr a c t. A ppel l ant s do nots t at e thei rt heoryas t o w hatthateff ectw oul d be, how ever , and,14

b e c a u se w e h a v e d e ter m in e d th a t th e D istric t C o u rt c o rre c tlyru led a g a in st F & R o n its br eac h of contr actcl ai m s , w e nee d notdw el l on i tanyfur t her . Suffi ce i tt o s aythat A p p e lla n ts d o n o t d is p u te th e D is tr ic t C o u rt ’s c o n c lu s io n s th a t F le e t lo a n e d F & R $ 1 .5 m i l l i o n , t h a tt h e L o a n Ag r e e m e n ts e t s th e d e f a u l ti n t e r e s tr a t e a n d a s s e s s e s F &R at t or ney s ’ fee s and cos t s , t hatFar as h i s a guar ant orof the l oan up t o $350, 000, and that F &R h a s f

a i l e d t o r e p a ya n yo f

t h e o u t s t a n d i n g b a l a n c e s i n c e Oc t o b e ro f 2 0 0 2 . T h u s , we w i l l aff i r m t he D i s t r i ctC our t ’ s j udgm enti n favorof Fl eetand aga i ns tF& R forbr eac h of t he Loan A gr eementi n t he amountof $4, 498, 051. 40 and aga i ns tFar as h forbr eac h of the L i m i t ed G uar ant ee i n t he amountof $350, 000. 00. I I I . C oncl usi on F o r th e f o re g o in g re a so n s, w e w ill a f f irm th e ju d g m e n t.