March 19, 2001 In the Matter of a Mail Dispute Between JOHN MICHAELS INC. d/b/a KASADA and ACCESS CAPITAL, INC. P.S. Docket No. MD 00-489 APPEARANCE FOR DISPUTANT Karen Sadaka JOHN MICHAELS, INC.: 264 W. 40th Street 20th Floor New York, NY 10018-1512 APPEARANCE FOR DISPUTANT Vincent Grillo ACCESS CAPITAL, INC.: 405 Park Avenue New York, NY 10022-4405
INITIAL DECISION
This mail dispute has been docketed pursuant to Postal Operations Manual (POM 8, July 16, 1998 (with Revisions through November 30, 2000)) Section 616.21, which requires the Chief Field Counsel to forward certain unresolved mail disputes to the Judicial Officer for resolution. The mail in dispute is that addressed to John Michaels, Inc., d/b/a Kasada, at 264 West 40th Street, New York, NY 10018-1512. The New York City Postmaster is currently holding the mail.
Both parties filed sworn statements of corporate officers, as required by 39 C.F.R. §965.5, along with supporting documents, and both also filed replies, pursuant to 39 C.F.R. §965.6. Action on the case was suspended for approximately two months while the parties attempted to reach a settlement agreement on their underlying financial disputes and this mail dispute. As they have been unable to do so, the case is now ready for decision. The following findings of fact are based on all the material submitted by the parties, including the material forwarded by the United States Postal Service Law Department, New York Metro Office.
FINDINGS OF FACT
1. John Michaels, Inc. ("Michaels"), d/b/a Kasada, is a New York corporation engaged in the business of manufacturing clothing and selling it to retailers. Theodore Sadaka is president and Karen Sadaka is the chief operating officer. (Karen Sadaka affidavit)
2. Access Capital, Inc. ("Access"), is a New York corporation in the factoring business. A factor provides funding and accounts receivable management services to other businesses that sell to customers on credit terms. Miles Stuchin is president and Vincent Grillo is vice president. (Grillo affidavit)
3. On October 14, 1999, the two disputants entered into a Factoring Agreement ("Agreement"), signed by Theodore Sadaka, Karen Sadaka, and Vincent Grillo.1 The Agreement called for Michaels to tender all accounts receivable to Access, and for Access to determine which of those accounts it would purchase from Michaels (¶1). Access was to administer the collection of all accounts receivable and to remit payment, minus fees, to Michaels at weekly intervals (¶4). Michaels was to instruct its account debtors to mail or deliver payments on accounts receivable to Access, such instructions not to be rescinded or modified without written consent from Access (¶7). The Agreement listed certain actions by Michaels that could constitute default. Among these was an instruction by Michaels to any account debtor to remit payment to Michaels, or to any person other than Access (¶11(d)). If a default occurred, the Agreement gave Access irrevocable authority, as "attorney-in-fact" for Michaels, to notify postal authorities to change the address for delivery of Michaels' mail to an address designated by Access (¶12(g)(v)).
4. The term of the Agreement was for two years, with automatic renewal for successive two-year terms unless Michaels delivered "written notice of cancellation to Access Capital not earlier than 90 days and not later than 60 days prior to the expiration date of the Initial Term or any succeeding renewal term" (¶9).
5. On September 15, 2000, Michaels' attorney wrote to Mr. Stuchin, raising some issues about Access' failure to remit money to Michaels as required by the Agreement (attachment to Law Department submission). Mr. Stuchin replied by letter dated September 18, 2000, with a large volume of collection activity reports attached (attachment to Grillo submission, dated Jan. 9, 2000). On September 25, 2000, Michaels' attorney wrote to Mr. Stuchin, stating that his client considered the Agreement terminated as of September 22, 2000 (attachment to Sadaka affidavit).
6. In late September 2000, Michaels (Kasada) began to ask its customers to remit payments directly to Kasada, not to Access (Grillo affidavit, Ex. 3).
7. On October 27, 2000, Mr. Grillo wrote to Ms. Sadaka, giving notice that Access considered Michaels to be in default under the terms of the Agreement (Grillo affidavit, Ex. 4). On October 31, 2000, Mr. Grillo submitted a PS Form 3575 to the post office, directing that mail addressed to John Michaels/Kasada at 264 West 40th Street be forwarded to 405 Park Avenue, New York, NY 10022-4405, in care of Access Capital, Inc. (Grillo affidavit, Ex. 5).
8. On November 10, 2000, Karen Sadaka wrote to the post office, opposing the mail forwarding order, and this mail dispute arose (attachment to Law Department submission).
DECISION
The determinative issue is whether Michaels effectively terminated the Agreement in September 2000. If it did not, Michaels was in default under the provision of ¶11d by instructing its debtors to no longer remit payments to Access, and Access acted within its authority under the Agreement to change the mailing address. I find in favor of Access.
Although the Agreement contains no language as to what might constitute a default by Access, or what remedies Michaels might have in such a case, it is presumed that a material breach by either party would give the other party a right to cancel the Agreement. The evidence submitted by Michaels, however, is not sufficient to show that Access breached the Agreement. Michaels contends that Access has improperly withheld more money from Michaels than Access is entitled to under the Agreement, but has submitted no supporting evidence on which such a finding could be made.
As Michaels was not within the time window for exercising its option to terminate the Agreement (see Finding of Fact #4), Michaels remained bound by the Agreement and was in default when it directed customers to stop making payments to Access. Under ¶12(g)(v) of the Agreement, Access was then entitled to redirect delivery of the mail.
This decision deals only with delivery of the mail. It does not attempt to decide any other dispute between the parties. If Access receives mail that it has no claim to under the Agreement, it is the responsibility of Access to forward that mail to Michaels. If either party obtains a court order directing delivery of the mail, postal regulations provide that the mail will be delivered according to such an order. POM §616.3.
The Judicial Officer should issue an Order to the New York City Postmaster to deliver the mail as directed by Access Capital, Inc.
Bruce R. Houston Chief Administrative Law Judge