In re: K&bfood Services v. County of Mercer on Appeal From the United States District Court for the District…

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 01-1243
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IN RE: K&B FOOD SERVICES,
Debtor
K&B FOOD SERVICES, INC.,
Appellant
v.
COUNTY OF MERCER
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ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
D.C. Civil No. 98-cv-04282
District Judge: The Honorable Anne E. Thompson
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Argued June 6, 2002
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Before: SLOVITER, NYGAARD, and BARRY, Circuit Judges
(Opinion Filed: December 12, 2002)
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Jeremy Galton, Esq. (Argued)
23 Bradford Lane
Plainsboro, NJ 08536
-AND-
Arthur C. Linderman, Esq.
20 South Van Burnt Street

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Englewood, NJ 07631
Attorneys for Appellant
Ashley Bostic-Hutchinson, Esq. (Argued)
Office of County Counsel
Count of Mercer
640 South Broad Street
McDade Administration Building
Trenton, NJ 08650
Attorney for Appellee
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OPINION
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BARRY, Circuit Judge
The long and torturous history of this case need not be recounted in much detail
given that we write for the parties only, who are intimately familiar with what has gone
before. Suffice it to say that extensive proceedings have taken place in the Bankruptcy
Court, the District Court, and this Court over a period of many years. Those proceedings
will now come to an end. In sum, we will vacate the order of the District Court insofar as
that order found the contract at issue unenforceable and set aside the damage award ordered
by the Bankruptcy Court and we will remand for entry of judgment in favor of appellant
K&B Food Services, Inc. (“K&B”) in the amount of $597, 849.00. The District Court had
jurisdiction under 28 U.S.C. §§ 158(a) and 1334. We have jurisdiction pursuant to 28
U.S.C. §§ 158(d) and 1291.

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I. BACKGROUND
K & B was in the food preparation and catering business. In June 1991, it purchased
and began operating Adelphia Restaurant, a pizzeria in Fairless Hills, Pennsylvania. This
operation soon expanded to include catering to area businesses and to corporate air traffic
at the Mercer County Airport in Ewing, New Jersey. As its catering business continued to
grow, K & B began to search for a production facility. Given that the majority of its clients
operated out of the Mercer County Airport, K & B approached appellee Mercer County
about leasing space at the airport.
On September 24, 1992, K & B executed a written agreement with Mercer County
to lease Building 31 at the Mercer County Airport for the purpose of establishing a flight
kitchen and warehouse. The term of the lease was five years, beginning October 1, 1992
and ending September 30, 1997. In consideration, K & B agreed to pay Mercer County a
six percent commission on all airport sales and a monthly rent of $844.96 during the first
year with the amount increasing each year thereafter. In the event K & B defaulted on its
obligations, Mercer County could cancel the lease provided it notified K & B in writing
ninety days beforehand.
Almost immediately after the parties executed the lease, K & B fell behind in its
monthly commission and rent payments. In early to mid-1994, several of K & B’s checks
were returned due to insufficient funds. Consequently, Mercer County initiated a landlord-

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1The record is far from clear but it appears that the County voluntarily dismissed the
action after receiving full satisfaction from K & B in May or June 1994.
2Although the contract states that its execution date is June 29, 1994, Howard S. Danzig,
Local R.R.’s Chairman, and Assad Khoury, K & B’s President, did not sign the contract
until July 14, 1994 and July 18, 1994, respectively.
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tenant action in the spring of 1994, seeking payment of the overdue rent and commissions.1
As of August 29, 1994, however, K & B had not paid the rent for July and August. As of
September 16, 1994, K & B had not paid its electric bill in over sixty days, and the
electricity was shut off.
In the spring and early summer of 1994, K & B began negotiating a contract with
Local Railroad Company, Inc. (“Local R.R.”) for the production and packaging of mini-
hamburgers for sale in Local R.R.’s vending machines. On June 27, 1994, Local R.R.’s
president, Gustav Homner, inspected K & B’s facilities at Building 31 and viewed test runs
of the burger production. Two days later, K & B and Local R.R. executed a written
contract.2 The contract provided that K & B was to produce Local R.R.’s line of Boxcar
Burgers at the price of $0.696 per three-pack of burgers. Of that price, $0.185 constituted
K & B’s profit, overhead, and labor costs. Local R.R. was responsible for shipping costs.
It was also required to place purchase orders at least biweekly for a reasonable amount of
burgers. The contract’s term was two years and, according to the parties, production was
scheduled to begin on October 1, 1994.
During conversations between Assad Khoury, K & B’s president, and Mr. Homner
before Mr. Homner’s visit on June 27, 1994, the parties agreed that Local R.R.’s weekly

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consumption under the contract would be 75,000 units. This figure was based on Local
R.R.’s previous sales, which totaled about 300,000 in the six months before the contract’s
execution. Mr. Khoury confirmed the 75,000 figure and K & B’s ability to produce that
figure in a letter to Howard S. Danzig, Local R.R.’s chairman, sent the day after Mr.
Homner’s visit. After the contract was executed, Kalli Bliziotis, K & B’s bookkeeper,
telephoned Local R.R. to verify that 75,000 remained the correct production figure.
During their conversations, Mr. Khoury and Mr. Homner also discussed financiers
and suppliers. Local R.R. agreed to supply K & B with its credit lines to purchase raw
materials, such as meat, onions, and buns, if needed. Additionally, K & B had its own
sources of credit. Ms. Bliziotis’s father had lent K & B $20,000 in the past and agreed to
lend $20,000 again for the Local R.R. contract. Similarly, friends of Mr. Khoury had lent
K & B money in the past and made an oral commitment to provide approximately $15,000
for the Local R.R. contract. Mellon Bank, which lent K & B $250,000 for Building 31's
renovation and for equipment, indicated a continued willingness to work with K & B. Both
Mr. Khoury and Bill Bliziotis, K & B’s vice president, were prepared to lend K & B money
in the form of shareholder loans. Finally, K & B had a continuing source of income from
its Adelphia Restaurant.
As for suppliers, K & B solicited bids from several companies to provide cardboard
and packaging for the burgers. Negotiations with these companies occurred simultaneously
with the negotiations between K & B and Local R.R. K & B and Local R.R. selected the
James River Corporation to supply the packaging for the Boxcar Burgers on a purchase

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order basis. Other companies, such as Acme Paper & Supply Co., would supply additional
paper products and corrugated cardboard.
In the months between the execution of the Local R.R. contract and the October 1st
date on which production was scheduled to begin, K & B explored additional business
opportunities. One such opportunity was a joint venture with Global Fare, Ltd. (“Global”),
located in Flemington, New Jersey. As part of a trial period, K & B moved some of its
equipment, including a pizza oven, stainless steel production table, and assembly belt, to
Global’s facilities the first week of August 1994. Meanwhile, K & B temporarily
downsized its operations in Building 31 to reduce costs. Besides Mr. Khoury and Mr.
Bliziotis, there was only one employee and the U.S.D.A. inspector at building 31
throughout the summer. By the end of August 1994, K & B abandoned the joint venture
because Global’s business style conflicted with K & B’s.
K & B, however, left its pizza oven at Global so that it could be recalibrated to cook
burgers for the Local R.R. contract, and intended to return the oven to Building 31 at the
end of September before the contract performance was to start. Although K & B
approached a company in Flemington to perform the recalibration, it did not execute a
formal contract with that company. In the event that K & B needed machines to produce the
burgers, Local R.R. was willing to provide its machines.
On September 16, 1994, K & B intended to begin preparing Building 31 for the
Local R.R. contract. These preparations included realigning production tables and
conveyor belts, changing the compressors’ calibration, and stocking the facility with

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3The resident U.S.D.A. inspector confirmed that the premises were clean and orderly
through September 15, 1994. The inspector examined the facilities twice daily.
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packaging and food supplies. Before K & B could make these preparations and before
Local R.R. could place any orders, Mercer County dispossessed K & B from Building 31.
Specifically, on September 16, 1994, airport security, County officials, and Ewing
Township police prevented K & B employees, including Mr. Khoury, from entering and
using the premises. When Mr. Khoury was finally permitted to conduct a quick, escorted
walk-through of Building 31 later that evening, he observed that equipment and furniture
had been disturbed and were no longer in their original places. Prior to that time, K & B
had maintained the premises in an orderly and clean condition.3 In the days following the
lockout, K & B made several requests to County officials to enter the building but was
consistently denied access. K & B never received written notice from Mercer County
informing it of the lease’s cancellation before the above actions were taken.
Without the use of Building 31, K & B’s production was severely limited. K & B
searched for other U.S.D.A. approved facilities in which to conduct its business but to no
avail. On September 19, 1994, K & B filed a voluntary Chapter 11 bankruptcy petition in
the U.S. District Court and, by reference, the U.S. Bankruptcy Court for the District of New
Jersey. Six months later, it commenced an adversary proceeding against Mercer County
for, inter alia, wrongful termination of the parties’ lease and violation of the automatic stay
provision in 11 U.S.C. § 362. After a protracted trial, the Bankruptcy Court held that
Mercer County improperly terminated the lease and violated the automatic stay provision.

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4In holding that Mercer County properly terminated the lease, the District Court relied
on “newly discovered evidence,” specifically a letter by Sydney S. Souter, Esq., a County
attorney, to K & B. We determined that the District Court did not have jurisdiction to do
so and instructed the Court on remand not to consider the letter.
5Mercer County filed a cross-appeal, which raised four issues: (1) did the District Court
err in affirming the Bankruptcy Court’s finding that the County improperly terminated its
lease with K & B; (2) did the Bankruptcy Court abuse its discretion in refusing to consider
the County’s expert testimony; (3) did the Bankruptcy Court abuse its discretion in refusing
to adjourn the trial to allow the County to depose Local R.R.’s chairman; and (4) did the
Bankruptcy Court err in concluding that the County failed to prove that K & B could have
mitigated its damages? The County’s cross-appeal was untimely, and we dismissed that
appeal by order dated May 16, 2002.
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The Court awarded K & B $597,849.00 in damages for the former and $4,664.80 in
attorneys’ fees for the latter. Mercer County appealed to the District Court which vacated
the $597,849.00 award after concluding that Mercer County properly terminated the lease.
On K & B’s appeal to this Court, the District Court’s order was vacated and the matter was
remanded.4 On remand, the District Court determined that Mercer County wrongfully
terminated the lease but that K & B suffered no damages. K & B has again appealed to this
Court.5 As we noted above, we will reverse.
II. DISCUSSION
K & B argues that the District Court erred when it reversed the Bankruptcy Court
which had concluded that K & B and Local R.R. executed a requirements contract for the
weekly production of 75,000 three-packs of Boxcar Burgers beginning October 1, 1994. In
reviewing the Bankruptcy Court’s determinations, we apply the same standards as the

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District Court; that is, legal conclusions are reviewed de novo, factual findings are reviewed
for clear error, and exercises of discretion are reviewed for abuse. In re Professional Ins.
Mgmt., 285 F.3d 268, 282-83 (3d Cir. 2002). The Bankruptcy Court’s interpretation of the
Local R.R. contract is a question of fact subject to clear error review. See In re Cendant
Corp. Prides Litig., 233 F.3d 188, 193 (3d Cir. 2000)(citations omitted). A factual finding
is clearly erroneous if, “after reviewing the evidence, the court of appeals is left with a
definite and firm conviction that a mistake has been committed.” Id. (quoting United States
v. Various Articles of Merchandise, 230 F.3d 649, 655 (3d Cir. 2000)). The Bankruptcy
Court committed no such error here.
The Bankruptcy Court’s finding that K & B and Local R.R. entered into an agreement
for the weekly production of 75,000 Boxcar Burgers is reasonably supported by the record
evidence. At trial, K & B produced the written sales contract dated June 29, 1994 and
signed by Mr. Khoury, K & B’s president, and Mr. Danzig, Local R.R.’s chairman. That
written contract provided that, for a term of two years, K & B was to produce and package
Boxcar Burgers for Local R.R. The burger specifications were attached to the contract and
made a part thereof. In return, Local R.R. was required to pay K & B $0.696 per three-pack
of burgers. Local R.R. was also obligated to place orders for a reasonable amount of
burgers at least biweekly. The contract’s language is sufficiently specific to indicate a
mutual agreement to be bound, and the parties to that contract have throughout these
proceedings considered themselves bound.
Mercer County – a non-party – argues, however, that the contract is illusory because

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it fails to include, among other things, a quantity term and a start date for performance. The
Local R.R. contract does not have a choice of law clause, but it was to be performed in New
Jersey. Consequently, New Jersey law is applied in interpreting the contract. See Valdesa
Compania Naviera, S.A. v. Frota Nacional de Petroleiros, 348 F.2d 33, 38 (3d Cir. 1965);
see also RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188 (1971)(absent a
choice of law clause in a contract, the governing law generally is the law of the forum
where the contract is executed and performed.) In New Jersey, a contract for the sale of
goods is enforceable despite missing terms if the parties intended to make a contract and
“there is a reasonably certain basis for giving an appropriate remedy.” N.J. STAT. ANN. §
12A:2-204(3); see Truex v. Ocean Dodge, Inc., 529 A.2d 1017, 1021 (N.J. Super. Ct. App.
Div. 1987). As the statutory comments explain, this test is not one of certainty, and a court
is not required to deduce the exact amount of damages. N.J. STAT. ANN. § 12A:2-204(3),
U.C.C. cmt. Open terms may be implied from commercial standards. Id.; see, e.g., N.J.
STAT. ANN. §§ 12A:2-305 (price), 12A:2-306 (quantity), 12A:2-307 (place of delivery),
12A:2-309 (time).
A requirements contract is a specific example of an enforceable contract with an
open quantity term. N.J. STAT. ANN. § 12A:2-306; G. Loewus & Co. v. Vischia, 65 A.2d
604, 606 (N.J. 1949).
With regard to “requirement” contracts providing for the furnishing of such
material as one may need or require, they are, by the weight of authority, held
mutual and binding on the parties where, from the nature of the purchaser’s
business the quantity of the goods needed is subject to a reasonably accurate
estimate.

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6The District Court found the Local R.R. contract unenforceable by invoking the
requirement of N.J. STAT. ANN. § 12A:2-204(3) that there be “a reasonably certain basis
for giving an appropriate remedy” and concluding that “what performance [K & B] would
have fulfilled on the contract is purely speculative.” A84. We disagree and conclude, as
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G. Loewus & Co., 65 A.2d at 606. The quantity is that amount of product which the buyer
in good faith requires. N.J. STAT. ANN. § 12A:2-306(1) & U.C.C. cmt. 2.
The Bankruptcy Court correctly classified the Local R.R. contract as a requirements
contract and implied missing terms based on the testimony of Local R.R.’s and K & B’s
representatives. Mr. Khoury, K & B’s president, testified that he understood the contract
requirement to be 75,000 three-packs a week. Similarly, Mr. Homner, Local R.R.’s
president, affirmed that 75,000 was the contractual amount and that Local R.R. had sold
300,000 units a week during the six months prior to the contract’s execution. Mr. Khoury
and Mr. Homner, as well as Mr. Bliziotis, K & B’s vice president, also testified that
production was set to begin October 1, 1994. Finally, K & B’s bookkeeper, Ms. Bliziotis,
testified that 75,000 was the correct figure, as confirmed by Local R.R. All of this
testimony reasonably supports the Bankruptcy Court’s finding that K & B was required to
produce and Local R.R. was required to order at least 75,000 units of Boxcar Burgers a
week beginning October 1, 1994. As such, the Bankruptcy Court reasonably found the
Local R.R. contract enforceable.
Mercer County further attempts to attack this conclusion by asserting, an assertion
the District Court found compelling, that K & B was unable to perform under the Local
R.R. contract in the fall of 1994.6 Specifically, the County alleges that K & B had no

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did the Bankruptcy Court, that the “reasonably certain basis” for the remedy here was the
lost profits on 75,000 units per week over the two year contract period. We note in this
record that the County presented utterly no evidence to rebut K & B’s evidence of lost
profits.
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utilities, employees, equipment, supplies, or financing with which to produce the Boxcar
Burgers. As a factual matter, however, there is sufficient record evidence to support a
finding that K & B was able to perform under the contract. K & B had contacted several
individuals to provide financing, the James River Corporation to supply packaging, and a
company in Flemington to recalibrate the pizza oven. Furthermore, Local R.R. had offered
to supply its credit lines to K & B to purchase meat, onions, and buns and to provide
equipment, if necessary. Before the contract was even executed, Mr. Homner had
inspected K & B facilities to confirm whether K & B could actually produce the burgers.
More importantly, as a legal matter, K & B’s ability or inability to perform under the Local
R R. contract in and around the fall of 1994 is irrelevant to the question of whether the
parties executed a valid contract several months earlier. Mercer County’s argument fails.
III. CONCLUSION
In sum, the Bankruptcy Court reasonably concluded that the Local R.R. contract was
enforceable. Accordingly, that part of the District Court’s order of January 5, 2001
holding to the contrary will be vacated and this matter will be remanded to the District
Court to reinstate the award to K & B in the amount of $597,849.00.

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TO THE CLERK OF THE COURT:
Kindly file the foregoing Opinion.
/s/ Maryanne Trump Barry
Circuit Judge

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