18-2459
Bank of America, N.A. v. New England Quality Service, Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
22nd day of November, two thousand nineteen.
Present: PIERRE N. LEVAL
DEBRA ANN LIVINGSTON,
JOSEPH F. BIANCO,
Circuit Judges.
_____________________________________
BANK OF AMERICA, N.A.,
Plaintiff-Counter-Defendant-Appellee,
v. 18-2459
NEW ENGLAND QUALITY SERVICE, INC., A VERMONT
CORPORATION, EARTH WASTE & METAL, INC., A
VERMONT CORPORATION, EWM REAL ESTATE INC.,
A VERMONT CORPORATION, EWM, INC., A VERMONT
CORPORATION, EWS OF NY, INC., A NEW YORK
CORPORATION, AMERICAN WASTE & METAL OF TN,
INC., A TENNESSEE CORPORATION, AMERICAN
WASTE & METAL, LLC, A VERMONT LIMITED
LIABILITY COMPANY, AMERICAN WASTE & METAL
COMPANY OF NEW YORK, LLC, A NEW YORK
LIMITED LIABILITY COMPANY, CASE STREET
HOLDINGS, LLC, A VERMONT LIMITED LIABILITY
COMPANY, AMERICAN IRON & METAL OF TN, INC., A
TENNESSEE CORPORATION, KEVIN C. ELNICKI, AN
INDIVIDUAL,
Defendants-Counter-Claimants-Appellants,
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WYRE WHEEL REAL ESTATE, INC., A VERMONT CORPORATION,
Defendant-Appellant
_____________________________________
For Defendants-Appellants: SHANNON A. BERTRAND (Heather Z. Cooper, on the
briefs), Facey Goss & McPhee, P.C., Rutland, VT
For Plaintiff-Appellee: DANIEL F. FLORES (Kara Thorvaldsen, on the briefs),
Wilson, Elser, Moskowitz, Edelman & Dicker, LLP,
New York, NY
Appeal from a judgment of the United States District Court for the District of Vermont
(Crawford, C.J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED.
Defendants-Appellants1 appeal from a grant of summary judgment in favor of plaintiff
Bank of America (“the Bank”). The Bank sued Appellants seeking to enforce and collect on
certain loans following Appellants’ default. Appellants asserted various counterclaims and
affirmative defenses. In a series of orders, the district court dismissed Appellants’
counterclaims, deemed their defenses unavailing, found in favor of the Bank, and awarded
attorneys’ fees to the Bank. We assume the parties’ familiarity with the underlying facts, the
procedural history of the case, and the issues on appeal.
* * *
1
“Appellants” refers to the following entities, collectively: New England Quality Service, Inc., Earth
Waste & Metal, Inc., EWM Real Estate, Inc., EWM, Inc., EWS of NY, Inc., American Waste & Metal of
TN, Inc., American Waste & Metal, LLC, American Waste & Metal Company of New York, LLC, Case
Street Holdings, LLC, American Iron & Metal of TN, Inc., Wyre Wheel Real Estate, and Kevin C.
Elnicki (“Elnicki”).
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“We review de novo the award of summary judgment, ‘construing the evidence in the
light most favorable to the nonmoving [parties]’ and ‘drawing all reasonable inferences and
resolving all ambiguities in [their] favor.’” Jaffer v. Hirji, 887 F.3d 111, 114 (2d Cir. 2018)
(quoting Darnell v. Pineiro, 849 F.3d 17, 22 (2d Cir. 2017)) (brackets in original omitted).
Summary judgment is appropriate only where “there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
I. Waiver/Estoppel
“There is no question that a party to a contract may lose the right to assert a term of the
contract, or to require performance of a part of the contract, by waiver or estoppel.” Greenmoss
Builders, Inc. v. King, 155 Vt. 1, 6 (1990). Waiver of a contract right is “the intentional
relinquishment or abandonment of a known right, and the act of waiver may be evidenced by
express words as well as by conduct. . . . [I]t involves the act or conduct of one party to the
contract only, and involves both knowledge and intent on the part of the waiving party.” Toys,
Inc. v. F.M. Burlington Co., 155 Vt. 44, 51 (1990) (quoting Lynda Lee Fashions, Inc. v. Sharp
Offset Printing, Inc., 134 Vt. 167, 170 (1976)). Where, as here, Appellants rely on a theory of
implied waiver, they “must show that [they] honestly and reasonably believed, based on the
[Bank’s] conduct, that the [Bank] would forego asserting some right to which it was otherwise
entitled, and that [Appellants] acted to [their] detriment in reliance on that belief.” Anderson v.
Coop. Ins. Cos., 179 Vt. 288, 291 (2006).
Appellants assert that the Bank’s consistent waiver of covenant defaults prior to August
25, 2015, coupled with the Bank’s extension of the maturity dates on certain loans effectively
waived its rights to enforce in the event of future defaults. We disagree. Whenever the Bank
waived a covenant default, it did so solely as to the specific loan and the particular covenant
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breached. Indeed, the first time the Bank waived default, it explained to Elnicki “the
importance of meeting the requirement in the future.” A. 123.2 Similarly, each written notice
extending a maturity date stated that the Bank was not committing “to extend the Credit beyond
the date specified.” E.g., S.A. 60, 62, 64, 66, 68, 70, 74, 76, 78. And the loan agreements
themselves provided that, “[i]f the Bank waives a default, it may enforce a later default.” E.g.,
S.A. 148, 316, 349, 381, 577. In other words, the Bank’s conduct does not suggest that it
intended to waive future defaults generally, or the Basic Fixed Charge Coverage Ratio covenant
specifically. Cf. Anderson, 179 Vt. at 292 (notice allowing plaintiff to reinstate lapsed
insurance “did not reflect any intention to reverse” prior decision to deny coverage for accident
that occurred during lapse).
Nor does Appellants’ conduct indicate that they relied on these prior waivers and
extensions. They submitted quarterly compliance certificates from March 2013 through June
2015, indicating that they did not rely on the waivers but rather sought to comply with loan terms
even after the initial waivers. Likewise, when they did fail to comply, they promptly cured
those failures. Such a course of conduct by Appellants demonstrates that they strived to remain
in compliance with the terms of their loans, which is inconsistent with their theory that they
“honestly and reasonably believed . . . that the [Bank] would forego asserting” its rights under
the loan agreements. Anderson, 179 Vt. at 291. The only reasonable inference that may be
drawn from the foregoing is that the Bank did not waive its right to enforce covenant defaults.
Appellants’ alternative estoppel defense fails for largely the same reasons. “An estoppel
may be effectively asserted only if the plaintiff can demonstrate that he suffered a deleterious
change in position in reliance on misleading representations or conduct of the party sought to be
2
“A.” refers to Appellants’ Appendix. “S.A” refers to the Bank’s Supplemental Appendix.
4
estopped.” Hebert v. Jarvis & Rice & White Ins., Inc., 134 Vt. 472, 477 (1976). “[E]quitable
estoppel has four elements . . . : (1) the party to be estopped must know the facts; (2) the party
being estopped must intend that its conduct be relied upon or the party asserting estoppel has a
right to believe that the conduct is so intended; (3) the party asserting estoppel must be ignorant
of the true facts; and (4) the party asserting estoppel must rely on the conduct of the party to be
estopped to its own detriment.” Reed v. Zurn, 187 Vt. 613, 619–20 (2010). Here, the Bank
consistently informed Appellants that they had violated certain covenants and specifically
waived its rights as to the covenant violated. In other words, the Bank regularly took steps to
determine the extent of its rights and pursue a proper course of action. See Hebert, 134 Vt. at
477. Accordingly, the Bank did not “intend that its conduct be relied upon” as a broad decision
to not enforce its rights nor did Appellants have “a right to believe that the conduct [was] so
intended.” Reed, 187 Vt. at 619–20.
II. Duress
Appellants next argue that Scott Card (“Card”), a Bank employee, threatened, berated,
and browbeat Elnicki into signing certain loan documents. This behavior, they assert, renders
the February 2015 loan agreement invalid due to duress. “Generally speaking, improper
pressure during the bargaining process, i.e., duress, operates to undermine a party’s
manifestation of assent and thus undermines one of the foundational cores of any agreement.”
EverBank v. Marini, 200 Vt. 490, 500 (2015). Vermont recognizes two types of duress: “duress
by physical compulsion, which renders an agreement void, and duress by improper threat, which
results in an agreement that is voidable by the victim.” Id. at 502 (citing Restatement (Second)
of Contracts §§ 174–76 (1981) (“Restatement”)). Appellants solely claim duress by improper
threat.
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Assuming, arguendo, that Card’s conduct amounted to an improper threat, that only
rendered the loans voidable by Appellants. But Appellants took no action to disavow the loans.
They never filed a complaint with the Bank, refused to comply with the loans’ terms, or
otherwise took action indicative of an intent to void, and they accepted the benefits of the
refinancing by making payments under the new terms. Thus, even if the loans extended in
February 2015 were voidable, Appellants ratified them. Appellants offer no argument to the
contrary and no reasonable jury could conclude otherwise.
III. Preliminary Agreement
Appellants further contend that a binding preliminary agreement existed, requiring the
Bank to continue to negotiate and, ultimately, to extend additional loans and restructure
Appellants’ pre-existing debts. The existence of “an enforceable contract to negotiate the
remaining terms in good faith” is reviewed de novo because the existence of “an enforceable
contract [is] a matter of law.” Miller v. Flegenheimer, 203 Vt. 620, 625 (2016). Under
Vermont law, two factors determine whether the parties have an enforceable contract or merely
an unenforceable preliminary agreement: “the parties’ intent to be bound and the definiteness of
terms in the communications between the parties.” Id.
There is “a ‘strong presumption’ against finding a binding obligation” in incomplete
preliminary agreements that include significant unsettled terms. Id. at 626 (quoting Arcadian
Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 73 (2d Cir. 1989)). Accordingly, “intent to be
bound” is evaluated “using an objective test,” that considers whether “unequivocal” words or
acts manifest such an intent. Id. A four-factor test guides this analysis: “‘(1) whether there
has been an express reservation of the right not to be bound in the absence of a writing; (2)
whether there has been partial performance of the contract; (3) whether all of the terms of the
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alleged contract have been agreed upon; and (4) whether the agreement at issue is the type of
contract that is usually committed to writing.’” Id. at 627 (quoting Catamount Slate Prods.,
Inc. v. Sheldon, 176 Vt. 158, 164 (2003)). None of these factors weigh in Appellants’ favor.
First, Appellants offer no evidence that the Bank expressed an intent to be bound.
Appellants rely solely on internal documents produced by the Bank to assess the viability of
discrete transactions. To the extent those internal memoranda and reports refer to an
interconnected set of lending arrangements, they solely identify them as proposed credit
facilities, not final agreements. Such language indicates a reservation of the right not to be
bound. See Catamount, 176 Vt. at 164; see also Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc.,
145 F.3d 543, 549–50 (2d Cir. 1998) (document titled “proposal” which states that it is
contingent “upon the execution of a sales agreement contract” expresses intent not to be bound);
Winston v. Mediafare Entm’t Corp., 777 F.2d 78, 81 (2d Cir. 1985) (phrases such as “proposed
agreement” and “subject to consummation of the proposed settlement” indicative of reservation).
Second, Appellants contend that the extension of a $4.5 million loan for the purchase of a
shredder amounts to partial performance. Not so. While that loan was discussed alongside
other proposed elements of the alleged preliminary agreement, the record indicates that the Bank
never viewed the $4.5 million loan as an inextricable part of any agreement. Rather, the Bank
was merely assessing the full landscape of its relationship with Appellants prior to extending a
substantial loan. The Bank’s ongoing relationship with Appellants and prior extension of credit
to them does not evince a comprehensive agreement such that extension of one loan constituted
partial performance.
Third, Appellants do not dispute that many terms of the alleged preliminary agreement
had not been fixed. “While it is true that ‘not all terms of a contract need to be fixed with
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absolute certainty,’ it is also true that an agreement ‘in which a material term is left for future
negotiations[] is unenforceable.’” Miller, 203 Vt. at 628–29 (quoting Tractebel Energy Mktg.,
Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 95 (2d Cir. 2007)). “Therefore, terms left open for
negotiation must be minor terms,” id. at 629, or the contract must define “a practicable, objective
method of determining the [omitted] essential terms,” Toys, 155 Vt. at 49. Assuming,
arguendo, that the Bank’s internal documents served as a draft preliminary agreement, material
terms remained open, including interest rates and repayment schedules for the future or
restructured loans. Moreover, to the extent the agreement involved a mortgage on certain
transfer stations, the terms of purchase of the transfer stations were never agreed upon or
incorporated into any proposed financing. The failure to fix such terms or provide a method for
determining them weighs against a finding of an enforceable contract. See, e.g., Miller, 203 Vt.
at 628–29; Catamount, 176 Vt. at 165–66.
Fourth, Appellants do not dispute that the preliminary agreement was never reduced to
writing nor that such a complex financing arrangement usually would be. See Willey v. Willey,
180 Vt. 421, 428 (2006).
Finally, the communications between the parties did not express the terms of this
proposed agreement with a sufficient degree of definiteness. Miller, 203 Vt. at 625. Indeed,
the most concrete expression of this alleged preliminary agreement consists solely of internal,
preliminary documents prepared by the Bank and not shared with Appellants until discovery, and
Appellants point to no communications between the parties that contain more definite terms.
Instead, they rely on vague communications regarding future loans and possible restructurings.
Such generalized discussions are insufficient to support a finding that a binding preliminary
agreement existed. See id. at 630–31.
8
In sum, Appellants have failed to establish a binding preliminary agreement and the
district court properly dismissed this counterclaim.
IV. Waiver of Right to Jury Trial
Because we affirm the district court’s grant of summary judgment, there will not be a trial
in this case. Thus, Appellants’ arguments related to the jury trial waiver are moot, and we do
not address them. See B & L Sales Assocs. v. H. Daroff & Sons, Inc., 421 F.2d 352, 354 (2d
Cir. 1970); Century Pac., Inc. v. Hilton Hotels Corp., 354 F. App’x 496, 497 n.1 (2d Cir. 2009).
V. Attorneys’ Fees
Finally, Appellants object to the district court’s decision to award attorneys’ fees without
hearing expert testimony as to the reasonableness of the fees sought. “We review a district
court’s award of attorneys’ fees for abuse of discretion.” Barbour v. City of White Plains, 700
F.3d 631, 634 (2d Cir. 2012).
Appellants assert that Vermont law requires a court to receive expert or independent
testimony when awarding fees. Neither case relied on by Appellants mandates such a practice.
Parker, Lamb & Ankuda, P.C. v. Krupinsky recognized that, “[i]f an attorney's fees are in
dispute, the record is often best served on the issue of reasonableness by the receipt of expert
testimony from independent counsel.” 146 Vt. 304, 309 (1985) (emphasis added). But Parker
also acknowledges that where the trial court “fix[es] the reasonable value of legal services”—as
occurred here—“the fee allowed by a trial court will ordinarily not be disturbed unless there is
strong evidence of excessiveness or inadequacy . . . .” Id. at 307 (quotation marks and citation
omitted). Appellants offer no evidence of excessiveness. Indeed, the district court awarded
only the portion of the fee request that was unchallenged by Appellants.
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Nor does Bruntaeger v. Zellar, 147 Vt. 247 (1986), stand for the broad proposition that
expert testimony is required when awarding fees. While the court there recognized that such
testimony is useful where the only evidence submitted was counsel’s bill, id. at 254–55, courts
have repeatedly upheld awards even absent expert testimony. See, e.g., Ring v. Carriage House
Condo. Owners’ Ass’n, 198 Vt. 109, 121–23 (2014); Huard v. Henry, 188 Vt. 540, 544–45
(2010); Gokey v. Bessette, 154 Vt. 560, 567 (1990); see also CARCO Grp., Inc. v. Maconachy,
718 F.3d 72, 85 (2d Cir. 2013). The district court here considered not only the bills submitted,
but two attorney affidavits, publicly available information regarding counsels’ backgrounds and
prior fee awards, and other cases discussing prevailing rates in Vermont. On such a record, we
cannot conclude that the court abused its discretion.
* * *
We have considered Appellants’ remaining arguments and find them to be without merit.
Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
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Bank of America, N.A. v. New England Quality Service, Inc.
Combined Opinion