Foxco Industries, Ltd. v. Fabric World, Inc.

595 F.2d 976 (5th Cir. 1979)

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Nature of the Case

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Facts

P is in the business of manufacturing knitted fabrics for sale to retail fabric stores and the garment industry. P's principal place of business is in New York City. D is engaged in the retail fabric business and operates a chain of stores in a number of states; its headquarters is in Huntsville, Alabama. P has never maintained an office in Alabama. P's manufacturers' representative in Alabama was a resident of the state. P's sales manager, Feller, made periodic trips to Alabama to meet with this representative and to obtain orders from D and Kennemer Company, another large fabric retailer. P's gross sales approximated $14,000,000; Alabama accounted for in excess of $100,000 of that amount. A substantial portion of the Alabama business was with D. D gave P's sales manager an order for “first quality” goods. A dispute subsequently arose regarding the quality of the goods sent to fill the order, and D refused to pay for the portion of the goods it considered defective. P's sales manager returned to Huntsville to show D the line for the following spring season. D voiced no complaint about the quality of the goods received pursuant to the previous order. D gave P a new order, in writing, for 12,000 yards of first quality fabric, at a price of $36,705, to be delivered by January 15, 1975. A few weeks after the October 21 order was placed, the textile industry began to experience a precipitous decline in the price of yarn. D wrote P on November 15, 1974, and canceled its October 21 order. P immediately replied, stating that the manufacture of the order was substantially completed and that it could not accept the cancellation. P's attorney wrote D that if the goods were not accepted they would be finished and sold and D sued for the difference between the contract price and the sales price received by P. D agreed to accept the order, but threatened to return the entire shipment if it contained one flaw. P, believing that it was impossible to produce an order of this magnitude without a single flaw, decided it would not ship the order (which was completed a short time later). The fair market value of the October order was approximately 20% Less than the contract price. P make no attempt to sell the goods from the time D canceled the order until September 1975, when the goods had dropped 50% In value. P sold at a private sale without notice to D approximately 7,000 yards from the order for an average price of between $1.50 and $1.75 per yard, a total consideration of $10,119.50. By the time of trial in April 1976, P had on hand about 5,000 yards of the order worth between $1.25 and $1 per yard, or about $6,250. At trial, there was testimony regarding the meaning of the term first quality goods. D claimed that it meant fabric containing no flaws. P introduced evidence from of an exhibit containing standards for finished knitted goods promulgated by the Knitted Textile Association, a large textile industry group to which P belongs. These standards indicated that certain types and amounts of flaws were permissible in first quality fabric. D is not a member of that association and claimed it had no knowledge of the standards adopted by the association's members. P got the judgment for $26,000, and D appealed on numerous grounds. D claimed that the standards of a trade association of which it had no knowledge are not admissible to show the meaning of the undefined and disputed contract term “first quality” goods.