Unibest International LLC v. Winfield Solutions LLC, No. 4:2016cv05031 - Document 60 (E.D. Wash. 2017)
Court Description: ORDER GRANTING 25 IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT. Signed by Senior Judge Edward F. Shea. (AY, Case Administrator)
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Unibest International LLC v. Winfield Solutions LLC Doc. 60 FI LED I N THE U.S. DI STRI CT COURT EASTERN DI STRI CT OF WASHI NGTON 1 Dec 18, 2017 2 SEAN F. MCAVOY, CLERK 3 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 4 5 No. UNIBEST INTERNATIONAL LLC, 4:16-CV-5031-EFS 6 Plaintiff, 7 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT v. 8 WINFIELD SOLUTIONS LLC, 9 Defendant. 10 11 Before the Court is Defendant Winfield Solutions’ Motion for 12 Summary Judgment, ECF No. 25. A hearing was held on this matter on 13 October 25, 2017. See ECF No. 56. This Order memorializes and further 14 develops the Court’s oral rulings made at the hearing. After reviewing 15 the record, relevant authority, and arguments from counsel for both 16 parties, the Court is fully informed. For the reasons set forth below, 17 the Court grants Winfield’s motion in part and denies it in part. 18 I. 19 Plaintiff Unibest FACTUAL HISTORY1 International LLC (“Unibest”) is a small 20 agricultural products company based out of Walla Walla, Washington. 21 See 22 products designed to “improve crop yields, enhance sustainability, 23 optimize 24 impact.” ECF No. 39 at 2. Among other things, Unibest manufactures ECF No. 41 at nutrient 2. Unibest application develops timing, soil and and crop minimize monitoring environmental 25 1 26 The facts are only briefly summarized. Detailed facts are contained in the parties’ briefing, statements of undisputed material facts, and responses to both. See, e.g., ECF Nos. 26 & 41. ORDER - 1 Dockets.Justia.com 1 resin capsules under the trade name “Ag Manager,” which “act[] like a 2 synthetic 3 amount and type of nutrients a plant is absorbing from the soil.” Id. 4 Defendant Winfield Solutions, LLC (“Winfield”) is a Delaware limited 5 liability company that is owned in part by Land O’Lakes, Inc., a large 6 Minnesota corporation. See ECF No. 26 at 1. Winfield is “in the 7 business of manufacturing and distributing soil-monitoring products.” 8 See ECF No. 28 at 2. This 9 plant root” dispute and allow arises from crop a producers to “Manufacturer “determine and the Distributor 10 Agreement” between Unibest and Winfield, which they entered into on 11 February 12 Agreement provides that Winfield would have the exclusive rights to 13 market and distribute Unibest’s resin capsule products. See Agreement 14 at 1. In return, Winfield agreed to purchase more than a certain 15 annually-increasing number of the resin capsules – the “Minimum Annual 16 Purchase Quantity” (“MAPQ”). In practice, this obligated Winfield to 17 purchase at least 60,000 capsules in 2013, at least 80,000 in 2014, 18 and increasing quantities in the following years. See Agreement at 3. 18, 2013. See ECF No. 28, Exhibit A (“Agreement”). The The Agreement also obligated Winfield to “work with [Unibest] to 19 20 develop a 21 “commercially 22 products. Agreement at 1–2. To that end, Winfield was to “develop 23 marketing materials and product packaging” for the resin capsules. 24 Agreement at 2. All marketing materials were to be approved by Unibest 25 before going to the market. See Agreement at 2. 26 / ORDER - 2 marketing strategy” reasonable for efforts the to resin sell capsules and and promote” to use Unibest’s 1 On June 30, 2014, the parties executed an amendment to the 2 Agreement. See ECF No. 28, Exhibit C (“Amendment”). The Amendment made 3 two primary changes to the Agreement: (1) it significantly reduced 4 Winfield’s 5 Winfield 6 capsules; 7 agreement to allow Unibest to sell the products directly to customers. 8 See Amendment at 1, 3; ECF No. 26 at 10; ECF No. 50, Exhibit E. It 9 also established a MAPQ payment schedule under which Winfield would 10 pay 50 percent of the MAPQ by February 15 of each year (the “First 11 Product Payment”) and the remaining balance of the MAPQ by October 1 12 of each year (the “Second Product Payment”). See Amendment at 2. 13 MAPQ was obligations struggling and (2) it to from 2014 sell permitted onward, the the purportedly requisite parties to amount make a because of resin subsequent To help develop supporting data for the resin capsules, Winfield 14 decided to use 15 demonstrations 16 country. See ECF No. 41 at 17. In spite of these efforts, Winfield 17 faced significant difficulty in selling Unibest products. 18 No. 50 at 21. to them at potential “Answer Plots” customers — — small located fields for throughout the See ECF 19 By September of 2015, the relationship between the parties had 20 begun to break down. On September 29, 2015, Unibest delivered to 21 Winfield 22 Payment; and 2702, for the “2015 Analysis Reconciliation Payment,” 23 another of Winfield’s obligations under the Agreement. See ECF No. 26 24 at 12. Winfield paid Invoice 2666, but did not pay Invoice 2702. See 25 ECF No. 26 at 13. On January 7, 2016, Unibest CEO Mark Riess sent 26 Winfield Marketing Director Tyler Grenzow a letter requesting payment ORDER - 3 two invoices: Invoice 2666, for the 2015 Second Product 1 of Invoice 2702 plus $13,035.45 of late “service charges” as provided 2 by the Agreement; this letter also included Invoice 2727, for the 2016 3 First 4 Invoice 2702 plus the requested service charges on January 27, 2016 — 5 118 days late. See ECF No. 28, Exhibit G. Product Following 6 Payment. Mr. See Riess’ ECF No. January 28, 7, Exhibit 2016 E. Winfield letter, Mr. paid Grenzow 7 allegedly contacted him to discuss modifying the Agreement to remove 8 Winfield’s annual purchase obligations and to transition the Agreement 9 into a research and development partnership. See ECF No. 26 at 14. On 10 February 12, 2016, Mr. Riess emailed Mr. Grenzow, “checking to see if 11 [he] 12 replied: “Yes, let’s plan on talking early next week. Also, per our 13 last 14 physical product under the contract. We have excess inventory that we 15 will be utilizing for research purposes in 2016 season.” ECF No. 28, 16 Exhibit J. had time to catch conversation[,] up.” Winfield ECF No. will 28, not Exhibit be taking J. Mr. anymore Grenzow [sic] 17 In response to Mr. Grenzow’s email, Unibest retained counsel and 18 sent him a letter on February 23, 2016. See ECF No. 28, Exhibit K. The 19 letter argued Mr. Grenzow’s February 12, 2016 email and Winfield’s 20 subsequent 21 Payment — by February 15, 2016, triggered the Agreement’s liquidated 22 damages 23 damages. failure clause in to its pay Invoice entirety, 2727 — entitling the 2016 Unibest First to Product $927,500 in 24 The parties dispute the exact amount of the payment and the 25 exact date, but they agree that Winfield eventually made the First 26 Product Payment plus late fees per the Agreement on April 1, 2016. See ORDER - 4 1 ECF No. 41 at 39; ECF No. 51 at 10; see also ECF No. 28, Exhibit Q. On 2 the 3 Agreement, effective sixty (60) days herefrom, pursuant to Section 4 4(a) of the Agreement.” ECF No. 28, Exhibit P. same day, Winfield II. 5 sent a notice “hereby terminating the PROCEDURAL HISTORY 6 On March 23, 2016, Unibest filed suit in the Eastern District of 7 Washington, alleging Winfield “breached the Agreement by failing to 8 pay invoice 2727 for the First Product Payment by February 15, 2016,” 9 and, in doing so, caused damages of $927,500 plus costs and attorney’s 10 fees. ECF No. 1 at 5–6. On July 15, 2016, Unibest filed an Amended 11 Complaint, alleging Winfield “breached the Agreement by: (1) failing 12 to pay the full amount owed under the Liquidated Damages Clause; (2) 13 failing to develop a marketing strategy for sales of the Products to 14 the Market; and (3) failing to use commercially reasonable efforts to 15 sell and promote the Products to the Market.” ECF No. 3 at 5–6. Its 16 alleged damages remained the same. See ECF No. 3 at 6. Winfield filed 17 an answer and demand for jury trial on August 9, 2016. See ECF No. 5. 18 Winfield filed the present Motion for Summary Judgment on September 5, 19 2017. See ECF No. 25. III. STANDARD OF REVIEW 20 21 Summary judgment is appropriate when, viewing the evidence in 22 the light most favorable to the nonmoving party, there is no genuine 23 dispute as to any material fact. United States v. JP Morgan Chase Bank 24 Account 25 $446,377.36, 835 F.3d 1159, 1162 (9th Cir. 2016). The district court’s 26 function at summary judgment is “not to weigh evidence and determine ORDER - 5 No. Ending 8215 in Name of Ladislao V. Samiengo, VL: 1 the truth of the matter but to determine whether there is a genuine 2 issue for trial.” Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986). 3 A court shall grant summary judgment if the movant shows that there is 4 no genuine dispute as to any material fact and the movant is entitled 5 to judgment as a matter of law. Fed. R. Civ. P. 56(a). IV. 6 ANALYSIS 7 Winfield asks the Court to grant summary judgment in its favor. 8 It relies on two primary arguments: (1) that Unibest’s claim for 9 liquidated damages fails as a matter of law; and (2) that Unibest’s 10 other damages are barred by Minnesota law and the plain language of 11 the Agreement. See ECF No. 25 at 3, 12, 16. The Court will address 12 each argument in turn. 13 A. Liquidated damages 14 Pursuant to Section 27 of the Agreement and Section 5 of the 15 Agreemnt, this dispute is governed by Minnesota law. See Agreement at 16 12; Amendment at 4; see also ECF No. 25 at 5; ECF No. 38 at 8. Under 17 Minnesota 18 presents a question of law. Brookfield Trade Ctr., Inc. v. Cty. of 19 Ramsey, 584 N.W.2d 390, 394 (Minn. 1998). The primary goal of contract 20 interpretation is to determine and enforce the intent of the parties. 21 Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979). 22 “If a contract is unambiguous, then the language must be given its 23 plain and ordinary meaning and will be enforced by the courts even if 24 the 25 Lipetzky, law, results 26 ORDER - 6 the are 674 construction harsh.” N.W.2d Bank 176, 179 and effect Midwest, (Minn. of a Minnesota, 2004) contract’s Iowa, (internal terms N.A. v. quotations 1 omitted); but see Brookfield, 584 N.W.2d at 394 (courts “will not 2 construe the terms so as to lead to a harsh and absurd result”). 3 The meaning of a term is to be determined within the context of 4 the document as a whole and not in isolation. Republic Nat’l Life Ins. 5 Co. 6 Accordingly, courts are required to harmonize all provisions of a 7 contract and to avoid a construction that would render one or more 8 provisions meaningless. Current Tech. Concepts, Inc. v. Irie Enters., 9 Inc., 530 N.W.2d 539, 543 (Minn. 1995). v. Lorraine Realty Corp., 279 N.W.2d 349, 354 (Minn. 1979). The liquidated damages clause is contained in Section 2(c) of 10 11 the 12 triggered 13 applicable Minimum Annual Purchase Quantity in accordance with Section 14 2(b)(ii).” If the liquidated damages clause was triggered, Unibest had 15 two 16 exclusive 17 liquidated damages, calculated in the following manner: 18 Agreement. “in remedies. (i) 19 20 21 22 23 The the Agreement event First, distribution that Unibest rights. provides that [Winfield] had the Second, the fails clause to would purchase right to revoke it could be be the Winfield’s entitled to Distributor shall promptly pay Manufacturer, as liquidated damages and not as penalty, an amount equal to the product of (x) the sum of (A) the applicable Minimum Annual Purchase Quantity for such calendar year, minus (B) the number of Product units actually purchased by Manufacturer in such calendar year. . . multiplied by (y) the unit price of the lowest priced Product offered to Distributor for such calendar year, minus (z) the amount, if any, already prepaid for the Products by Distributor in such a calendar year pursuant to Section 2(b). 24 Agreement at 4. 25 Unibest initially contended that Winfield’s failure to timely 26 pay the First Product Payment, due February 15, 2016, triggered the ORDER - 7 1 liquidated damages clause. See ECF No. 1 at 5. However, Unibest now 2 focuses its liquidated damages claim on the contention that Winfield’s 3 failure 4 constituted a failure to purchase the MAPQ “in accordance with Section 5 2(b)(ii),” thus triggering the clause. ECF No. 38 at 3, 6. Unibest 6 argues it is entitled to recover $683,750 in liquidated damages as a 7 result of both alleged breaches of the Agreement. ECF No. 38 at 9. 8 1. 9 to As make the Second Product Payment on October 1, 2016, 2016 First Product Payment stated above, Unibest originally contended that it was 10 Winfield’s late payment of the First Product Payment – due on February 11 15, 2016, but not paid until April 1 – that entitled it to liquidated 12 damages. See ECF No. 1 at 5. Winfield responds that the Agreement 13 provides 14 accordingly, the liquidated damages clause is not controlling. a different, express penalty for late payments, and 15 Section 7 of the Agreement, in fact, does provide a remedy for 16 late payments: “[a]ny invoiced amount not paid when due shall be 17 subject to a service charge equal to the lesser of one percent (1%) 18 per month or the maximum rate permitted by law from the due date until 19 paid.” The parties’ conduct illustrates the operation of this clause. 20 After Winfield failed to pay an invoice due on September 29, 2015, 21 Unibest 22 calculated from the invoice due date through January 27, 2016, the 23 time 24 compliance 25 clarity of the clause’s language. charged the 26 ORDER - 8 Winfield invoice with was Section $13,035.45 actually 7 of of paid. the monthly This Agreement “service conduct and is charges,” fully demonstrates in the Moreover, 1 the Court is to harmonize all provisions of the 2 Agreement and avoid a construction that would render one or more 3 provisions meaningless. See Current Tech., 530 N.W.2d at 543. Holding 4 that 5 liquidated damages clause would render Section 7 of the Agreement 6 meaningless. Accordingly, viewing both the liquidated damages and late 7 payment clauses of the Agreement in harmony, Winfield’s late payment 8 of the First Product Payment did not trigger the liquidated damages 9 clause. 10 2. 11 Unibest’s a late payment of the First Product Payment triggered the 2016 Second Product Payment argument regarding the 2016 Second Product Payment 12 rests on two premises: (1) that Winfield’s purchase obligation accrued 13 in its 14 survived 15 Agreement contradicts both premises. entirety on January 1, the a. 16 Agreement’s 2016; termination. and (2) The that the obligation plain language of the Plain language 17 Unibest admits that “the Agreement does not explicitly state 18 when during the course of 2016 this obligation arose . . . .” ECF 19 No. 38 at 4. Nevertheless, it argues that a number of the Agreement’s 20 provisions suggest Winfield’s purchase obligation vested in full on 21 January 1 of each calendar year. Id. After a thorough review of the 22 Agreement and Amendment, the Court can find no language supporting 23 this interpretative theory; there is only language contradicting it. 24 25 26 For example, Unibest points to Section (2)(b)(ii) of the Agreement, which required Winfield to “purchase a number of Product ORDER - 9 1 units not less than the [MAPQ]” for “each calendar year.” Unibest 2 contends 3 Winfield’s MAPQ vested on January 1 of each year. It is undeniably 4 true that a calendar year begins on January 1. However, the context of 5 Section (2)(b)(ii) indicates that the term simply defines the period 6 in which Winfield was obligated to make the MAPQ – not that the MAPQ 7 vested in its entirety on January 1 of each year. 8 9 As this reference another to example, each Unibest “calendar points year” to indicates Section 1(c) of that the Amendment, which requires Winfield to “pay [Unibest] the First Product 10 Payment 11 [Winfield] 12 Amendment at 2. Unibest argues that this language “shows that the 13 purchase quantity requirement vested automatically at the commencement 14 of the year.” ECF No. 38 at 5. However, Unibest’s argument distorts 15 the language of the Agreement outside of its plain meaning. This 16 portion of the Amendment stands for nothing more than what it says: 17 that Winfield was obligated to make product payments on the schedule 18 outlined in the Agreement, whether or not it submitted a purchase 19 order. 20 and the Second submitted Further, Product purchase Winfield Payment orders(s) correctly points regardless for out such that of whether Product units.” under Unibest’s 21 interpretation of the Agreement, Winfield could have sent notice of 22 termination as late as November 1, 2016, and still be obligated to 23 purchase the entire MAPQ for 2016. The absurdity of that scenario 24 illustrates that the parties could not have intended the MAPQ – in its 25 entirety – vest on January 1 of each year. See Lakeland Tool & Eng’g, 26 ORDER - 10 1 Inc. v. Thermo-Serv., 2 (“Contracts are to be construed as to avoid absurdity.”). Rather 3 than January 1 of (8th each Cir. 1990) the plain year, 6 each year, each year’s MAPQ obligation vested in two installments: 7 Winfield was to purchase at least 50% of the MAPQ on February 15 of 8 each year and the remainder of the MAPQ on October 1 of each year.2 9 Until those dates came, Winfield had no obligation to purchase any 10 products from Unibest. Of course Winfield had the option to purchase 11 the entire MAPQ on January 1, 2016, but it was not obligated to do so. reference this, both Winfield’s Amendment 481 interpretation. Although Winfield was obligated to purchase the MAPQ of and 476, 5 evidence Agreement on F.2d language As the vesting 916 4 12 of Inc., the supports Agreement ability to and “pre-pay” the the for following Amendment 13 repeatedly Products 14 subject to the MAPQ.3 If Winfield was obligated on January 1, 2016, to 15 2 See Amendment at 2. 16 (A) no later than February 15th of each calendar year during the Term, Distributor shall pay Manufacturer an amount equal to the sum of (i) 50% of the product of (x) the applicable [MAPQ] multiplied by (y) the unit price of the lowest priced Product offered to Distributor for such year. . ., minus (ii) the amount already paid to Manufacturer by Distributor for Product units purchased during such calendar year (the “First Product Payment”); and (B) no later than October 1st of each calendar year during the Term, Distributor shall pay Manufacturer an amount equal to the sum of (i) 50% of the product of (x) the applicable [MAPQ] multiplied by (y) the Lowest Product Price, minus (ii) the amount, if any, already paid to Manufacturer by Distributor for Product units purchased during such calendar year other than the Frist Product Payment (the “Second Product Payment”). 17 18 19 20 21 22 23 3 24 25 26 See Agreement at 3, 4, 6 (“Each invoice will specify the amount that Distributor has prepaid for the Product units. . . .”) (“Distributor may use “pre-purchased Capsules and Cylinders. . . ”, (Distributor shall pay liquidated damages, calculated in part by amount “already prepaid for the Products by Distributor in [a] calendar year”), (in event of termination, Manufacturer must refund “any and all pre-paid amounts”) (emphasis added); see also Amendment at 2 (Manufacturer will provide invoices specifying the ORDER - 11 1 purchase the entire MAPQ, as Unibest suggests, the “pre-payments” 2 referenced 3 “payments” for an existing obligation. Instead, the language of the 4 Agreement and Amendment reference “pre-payments” because the payments 5 did not become due until the enumerated dates of the First and Second 6 Product Payments (February 15 and October 1 of each calendar year). b. 7 not be “pre-” anything — they would simply be Termination clause Even if the MAPQ did vest in its entirety on January 1, 2016, 8 9 would the Agreement’s termination clause bars Unibest from recovering 10 liquidated damages for Winfield’s failure to make the Second Product 11 Payment. The clause reads: c. 12 13 14 15 16 17 Either party may terminate this Agreement at any time for any reason upon sixty (60) days prior written notice to the other party. In the event [Unibest] terminates this Agreement in accordance with this Section 4(a), [Unibest] shall refund to [Winfield] any and all pre-paid amounts attributable to Product not yet received by Distributor. In the event [Winfield] terminates this Agreement in accordance with this Section 4(a), [Unibest] shall have no obligation to refund [Winfield] any amounts prepaid by Distributor. 18 19 Agreement at 6. 20 The plain language of the above clause unambiguously empowers 21 either party to terminate the Agreement at will at any time.4 Further, 22 it 23 parties at the time of termination: if Unibest terminated, it was to directs the disposal of any pending transactions between the 24 25 26 amount that Distributor has “prepaid for the Product units covered by such invoice”). 4 In cases involving similar contract language, Minnesota courts have come to the same conclusion. See, e.g., Banbury v. Omnitrition Intern., Inc., 533 N.W.2d 876, 880 (Minn. Ct. App. 1995). ORDER - 12 1 refund any pre-paid amounts for product not yet received by Winfield; 2 and if Winfield terminated, it agreed to forfeit any amounts it had 3 pre-paid to Unibest. This express settlement of pending transactions 4 indicates the parties’ intent that all obligations — aside from those 5 expressly included in the survival clause — would cease upon the 6 Agreement’s effective termination. 7 Further, the Agreement’s survival clause indicates the parties 8 did not intend for any purchase obligations to survive termination. 9 The survival clause contains a list of contract provisions that the 10 parties expressly agreed would survive termination.5 Absent from the 11 list is Section 2 of the Agreement — the original clause obligating 12 Winfield to purchase the annual MAPQ. The parties also negotiated and 13 executed an Amendment to the Agreement. See generally Amendment. The 14 Amendment does not amend the survival clause to include Section 1(c) 15 of the Amendment — the section replacing Section 2 of the Agreement. 16 These absences are telling. If the parties intended Winfield’s MAPQ 17 obligations to survive termination of the contract, they would have 18 included the payment provision in the survival clause. 19 Winfield sent notice of termination on April 1, 2016. See ECF 20 No. 28, Exhibit P. Unibest has not disputed the notice’s validity, and 21 the Court can find no facial errors that would render the notice 22 ineffective. Section 19 of the Agreement provides that all notices are 23 5 24 25 The survival clause is contained in Section 21 of the Agreement: Survival. Sections 7 through 11, 15, 17, through 28, and any other provision which by its sense and context is appropriate, shall survive the termination of this Agreement by either party for any reason. 26 Agreement at 12. ORDER - 13 1 deemed to be effective three days after mailing. See Agreement at 11. 2 Thus, the Agreement was effectively terminated 63 days later, on June 3 3, 4 obligations ended on June 3, 2016. 2016. So, Unibest 5 regardless argues that of when Winfield they vested, remained Winfield’s obligated to MAPQ purchase 6 products from Unibest on October 1, 2016 — 6 months from its notice of 7 termination. Not only 8 language the termination 9 inequitable to Winfield. of d. 10 is this result and contradicted survival clauses, by the it plain would be Minnesota law 11 In addition, Unibest’s claim for liquidated damages is barred by 12 Minnesota law. Generally, Minnesota law provides that where a contract 13 is terminable at will, termination bars recovery for damages incurred 14 after the date of termination. In Ag-Chem Equipment Co., Inc. v. Hahn, 15 Inc., 480 F.2d 482, 492 (8th Cir. 1973), the Court of Appeals for the 16 Eighth 17 distributor could not recover from a manufacturer damages that were 18 incurred post-termination. Even though the manufacturer had breached 19 the contract, the distribution contract in question was terminable at 20 will by either party. The court noted that “Minnesota law does not 21 prohibit termination by one who has already breached the contract. As 22 a consequence, damages incurred after termination . . . were not 23 recoverable. . . .” Id. (citing Western Oil & Fuel Co. v. Kemp, 245 24 F.2d 633 (8th Cir. 1957)). 25 // 26 / Circuit ORDER - 14 affirmed the district court’s holding that a 1 In a similar case, the Minnesota Supreme Court explained the 2 crux of the issue was whether the agreement in question was terminable 3 at will. In Benson Coop. Creamery Ass’n v. First District Ass’n, 151 4 N.W.2d 422 (Minn. 1967), a dairy cooperative made an oral contract to 5 process milk and deliver the resultant products — butter, skim milk, 6 and dried milk — to Land O’Lakes and a subsidiary cooperative. After 7 approximately 8 subsidiary informed the dairy cooperative that it was terminating the 9 contract. nine Id. at years of 424–25. deliveries, The dairy on March cooperative 7, 1963, sued, the seeking 10 injunctive relief and damages for milk deliveries from March 27, 1963, 11 to June 14, 1963. 12 The trial court granted the subsidiary’s motion for summary 13 judgment on damages and held that because contracts in Minnesota are 14 presumptively terminable at will, the dairy cooperative could not 15 recover for deliveries that were to be made post-termination. Id. at 16 425. On appeal, the Minnesota Supreme Court Court reversed the trial 17 court’s 18 contract was terminable was a “crucial issue of fact that must be 19 determined by trial.” Id. at 427. The Court explained, entry of summary judgment on damages because whether the [i]f the evidence as finally adduced leads to a sustainable determination that this contract was terminable at the will of the Association upon reasonable notice without cause, there would be no cause of action for damages, at least not for failure to pick up Benson's milk after March 27, 1963. 20 21 22 23 24 Id. Here, as discussed above, the termination clause plainly 25 entitled either party to terminate the Agreement at any time and for 26 any reason. In other words, it was terminable “at will.” Accordingly, ORDER - 15 1 Minnesota law arguably bars recovery 2 Unibest after the Agreement was terminated. See Ag-Chem, 480 F.2d at 3 492; see 4 Minnesota law bars Unibest’s claim for liquidated damages. Whether 5 Winfield had breached the Agreement at the time of termination is 6 inapposite because Minnesota law does not prohibit a breaching party 7 from terminating a contract. See Ag-Chem, 480 F.2d at 492. also Benson, N.W.2d at of all damages 427 (Minn. 1967). In incurred by any event, 8 For the reasons outlined above, neither the plain language of 9 the Agreement nor Minnesota law as applied to the facts before the 10 Court permit Unibest to recover liquidated damages against Winfield. 11 Accordingly, Winfield’s motion for summary judgment is granted insofar 12 as it relates to Unibest’s claim for liquidated damages. 13 3. Anticipatory repudiation 14 Unibest also argues that Winfield’s termination of the Agreement April 1, on 16 constituted 17 entitled Unibest to “either elect to sue immediately or wait until the 18 time when performance is due.”7 ECF No. 38 at 10 (quoting Space Ctr., 19 Inc. v. 451 Corp., 290 N.W.2d 443, 451 (Minn. 1980). Unibest explains an 2016, and Mr. anticipatory Grenzow’s repudiation February of the 12, 2016 email6 15 Agreement, which 20 6 The relevant portion of the email reads: 21 22 23 24 25 26 Also, per our last conversation[,] WinField will not be taking anymore [sic] physical product under the contract. We have excess inventory that we will be utilizing for research purposes in 2016 season. Look forward to catching up, Tyler Grenzow Marketing Manager, WinField 7 Notably, this argument supports the Court’s conclusion that Winfield’s obligation to make the Second Product Payment did vest not until October 1, 2016. ORDER - 16 1 that it “elected to sue immediately rather than wait on Winfield’s 2 failure to pay the Second Invoice . . . .” Id. In 3 Minnesota, an anticipatory refusal, not of that character, will not obviate the necessity of a 6 tender.” Space Ctr., 298 N.W.2d at 450. Mr. Grenzow’s email does not 7 meet this threshold requirement. The preface “[a]lso, per our last 8 conversation,” indicates Mr. Grenzow qualified Winfield’s intent to 9 withdraw Agreement on the of premise the contract. that Unibest A “an 5 the repudiation requires unqualified from or first 4 10 renunciation repudiation did mere not disagree. 11 In a sense, Winfield’s April 1, 2016 notice of termination was 12 an anticipatory repudiation, in that it stated Winfield’s intent to no 13 longer perform its contractual obligations. See ECF No. 28, Exhibit P. 14 However, as discussed above, Winfield’s termination – effective June 15 3, 2016, relieved it of all its contractual obligations. Moreover, 16 Minnesota law still bars Unibest’s claim for liquidated damages for 17 Winfield’s failure to make the Second Product Payment. 18 4. Enforceability of liquidated damages 19 Because the Court has granted Winfield’s motion for summary 20 judgment as to Unibest’s liquidated damages claim, it need not address 21 whether the damages would be enforceable under Minnesota law. 22 B. Other damages Unibest also alleges non-liquidated damages under a variety of 23 24 legal theories, which the Court will address in turn. 25 // 26 / ORDER - 17 1 1. 2 Unibest’s expert report, ECF No. 27, Exhibit C, asserts that 3 Unibest also suffered “lost profits” of up to $2,841,300. ECF No. 2, 4 Exhibit C at 12. These damages appear to consist of the 2016 Second 5 Product Payment and the entirety of Winfield’s MAPQ obligations for 6 2017 and 2018. See id. at 13, 15. Above, the Court held that the plain 7 language of the Agreement and Minnesota law bar Unibest’s claim for 8 liquidated damages related to the 2016 Second Product Payment. For the 9 same reasons, the Court grants Defendant’s motion as to Unibest’s 2017 10 Lost profits and 2018 “lost profits.” 11 As is common in contract cases, the parties dispute the nature 12 of these damages. As noted above, Unibest’s expert referred to the 13 damages as “lost profits.” Id. In its response, Unibest appeared to 14 back away from this characterization.8 Winfield, on the other hand, 15 embraces 16 constitutes consequential damages, which are barred by the Agreement’s 17 broad limitation of liability clause.9 See ECF No. 25 at 12–13. the term “lost profits” and contends that this claim 18 It is certainly true that Unibest suffered a significant loss 19 when Winfield terminated the Agreement; it would no longer receive the 20 8 21 22 23 24 25 26 Unibest contends that Winfield’s arguments regarding lost profits “are misplaced because (other than the liquidated damages discussed above), Unibest is only seeking direct damages incurred prior to termination.” See ECF No. 38 at 13. 9 The limitation of liability clause is contained in Section 10 of the Agreement and reads: In no event shall either party be liable to the other for costs of procurement of substitute goods or any indirect, incidental, punitive, or consequential damages (including but not limited to loss of revenue or profits) arising from or caused, directly or indirectly by such party’s failure to perform under this agreement, even if advised or aware of the possibility of such damages. ORDER - 18 1 six-figure Second Product Payment in 2016, and it would not receive 2 any payments at all from Winfield in 2017 and 2018. So although these 3 damages do not constitute “lost profits” as they are often thought of 4 — as resulting from business with third parties — to a certain extent, 5 they are Unibest’s lost profits as a result of Winfield’s alleged 6 breach and subsequent termination of the Agreement.10 7 That said, the alleged damages are clearly direct. These Product 8 Payments are expressly mentioned in the Agreement and Amendment and 9 arise directly from them. See Agreement at 3; Amendment at 2. For this 10 reason, Unibest’s claim for lost profits is for direct, rather than 11 consequential, damages.11 And because the alleged damages are direct, 12 the limitation of liability clause, which expressly bars “indirect, 13 incidental, 14 Unibest’s claim. punitive, or consequential damages,” does not bar 15 Nonetheless, the damages are barred by the plain language of the 16 Agreement and Minnesota law. Just as with the Second Product Payment, 17 Winfield was not obligated to meet the 2017 and 2018 MAPQs until the 18 product payment dates enumerated in the Amendment. See Amendment at 2. 19 Winfield’s termination of the Agreement, effective June 3, 2016, freed 20 it from all of its obligations under the Agreement, including those in 21 2017 and 2018. Unibest incurred or will incur all of its alleged 22 10 23 24 25 26 Black’s Law Dictionary and the Uniform Commercial Code define “lost profits” broadly: “[a] measure of damages that allows a seller to collect the profits that would have been made on the sale if the buyer had not breached. U.C.C. § 2-708(2).” Notably, the definition does not limit a plaintiff to claiming only lost profits from a third party. 11 See Kleven v. Geigy Agric. Chemicals, 303 Minn. 320, 324, 227 N.W.2d 566, 569 (Minn. 1975) (direct damages “arise out of the breach itself,” while consequential damages “do not arise directly . . . from the breach of the contract itself, but are those which are the consequences of special circumstances known to . . . the parties when the contract was made”). ORDER - 19 1 damages for lost profits after Winfield terminated the Agreement. 2 Therefore, Unibest’s claim for lost profits is barred by the law of 3 Minnesota; and as to the lost profits, Winfield’s motion is granted. 4 See Ag-Chem, 480 F.2d at 492 (“As a consequence, damages incurred 5 after termination, including lost profits, were not recoverable.”). 6 2. “Go-to-market strategy” 7 Unibest also alleges it suffered damages caused by Winfield’s 8 failure to “develop a marketing strategy for sales of the Products to 9 the Market” and failure to “use commercially reasonable efforts to 10 sell and promote the Products to the Market.” See ECF No. 3 at 6, 9– 11 10; ECF No. 38 at 15. Unibest claims “the estimated cost of obtaining 12 replacement 13 $975,000 . . . .” ECF No. 41 at 41. Broken out, this amount consists 14 of “$401,080 to attend trade shows to market the Products,” “$25,100 15 to 16 partnerships,” and “$300,000 to replace data and perform new research 17 that should have been done under the Agreement.” ECF No. 41 at 41–42. 18 Unibest also claims an additional $800,208 that Unibest has “already 19 incurred . . . to develop the Soil Analytics Database that Winfield 20 should have developed under the Agreement.” ECF No. 41 at 42. services create 21 a. 22 Unibest for marketing the ones materials,” Winfield failed “$250,200 to to provide develop is new Research and development asserts that Section (2)(a) of the Agreement, which 23 obligated Winfield to “develop a marketing strategy for sales of the 24 Products 25 research and development on product performance and to develop a “Soil 26 Analytics Database,” which would purportedly be “used for marketing.” to ORDER - 20 the Market,” impliedly obligated Winfield to conduct 1 See ECF No. 38 at 14–15; ECF No. 41 at 16, 41–42. After all, Unibest 2 argues, “[a] contract to build a house does not have to describe every 3 single nail to be hammered.” ECF No. 38 at 15. However, 4 Unibest’s interpretation of the terms “marketing 5 strategy” and “go-to-market strategy” stretches the Agreement’s plain 6 language beyond its breaking point. A contract to build a house need 7 not describe every nail, but it must at least mention the house. In 8 the same way, a contract establishing an affirmative duty to conduct 9 more than a million dollars of research and database development must least mention the research and the database.12 The Court 10 at 11 acknowledges that a marketing strategy can take a variety of forms, 12 but the language of the Agreement simply does not support Unibest’s 13 claim. 14 Curiously, an example of the requisite language to establish 15 such a duty is present in a contract that Unibest signed with Midwest 16 Soil Management in 2010, well before the Agreement with Winfield was 17 executed. See ECF No. 50, Exhibit B, C; see also Agreement at 1. In 18 that contract, the parties agreed to following: Midwest Soil is committed to funding and performing a study that involves the use of UNIBEST resin technology. The study shall be performed over a maximum of a 5 year period spanning 2010 through 2014 and shall encompass an area of at least 10,000 acres with standard sampling frequency. Midwest Soil shall reimburse UNIBEST its cost for the resin product and laboratory analysis as supplied for the study at 19 20 21 22 23 24 25 26 12 The terms “research” and “database” each appear only once in the Agreement. “Research” is mentioned in the context of describing the Market in which the products were to be sold. See Agreement at 1. “Database” appears only in reference to services that Unibest was obligated to perform in return for Winfield’s payment of a $60,000 Manufacturer Services Fee. See Agreement at 5. ORDER - 21 the rate of $15.00 per sample during years. After year 3, the parties thorough business review and access to determine if the remaining 2 years is necessary for project success. 1 2 3 the first 3 agree to a all aspects of sampling 4 ECF No. 50, Exhibit B at 2. Because there is no such language in its 5 Agreement with Winfield, Unibest’s claim that a “marketing strategy” 6 encompasses research and development is unpersuasive. 7 Unibest further supports its claim by arguing that the parties 8 entered into the Agreement with the understanding that Winfield would 9 conduct research and build the soil database, a claim Winfield 10 vehemently denies. See ECF No. 27 at 16–17. Where a contract term is 11 unambiguous, the Court may not consider extrinsic evidence of the 12 parties’ intent. See Brookfield Trade Ctr., 584 N.W.2d at 392 n. 1. As 13 discussed 14 strategy” simply do not encompass the research and development claimed 15 by Unibest. The terms, as a matter of law, are unambiguous in this 16 regard. Accordingly, the Court may not consider any evidence of the 17 parties’ intent and declines to address this argument.13 Winfield’s 18 motion for above, the summary terms judgment “marketing is granted strategy” insofar and as “go-to-market it relates to 19 20 13 21 22 23 24 25 26 Even if the terms were ambiguous, the record contains insufficient evidence to establish a genuine dispute of material fact as to whether the parties intended the terms to encompass research and development. In fact, the record indicates that they clearly did not; Unibest CEO Mark Riess admitted in a July 14, 2014 email to Midwest Soil Management that “Winfield has no involvement in the data side since the agreement only applies to hardware. We are free to seek partners on the data and modeling side as we see fit with no immediate impact to the agreement . . . .” ECF No. 50, Exhibit E (emphasis added). Other evidence in the record leads the Court to the same conclusion. See ECF No. 50, Exhibits C, D, F. To whatever degree Winfield conducted research and development of Unibest’s products (e.g. in answer plots) or attempt to create a product database, it did so out of a good faith desire to market Unibest products, not out of any obligation under the Agreement. ORDER - 22 1 Unibest’s claims of damages for research and development and the Soil 2 Analysis Database. b. 3 4 Failure to market Setting aside the $300,000 in alleged damages for additional 5 research and 6 Database, Unibest claims approximately $675,000 in alleged damages due 7 to Winfield’s failure to market the products. See ECF No. 41 at 41–42. 8 Viewing all facts in the light most favorable to Unibest, a 9 genuine dispute of material fact exists as to its damages arising 10 directly out of Winfield’s alleged breach of its contractual duty to 11 “work with Unibest to develop a marketing strategy for sales of the 12 Products to the Market.” See Agreement at 2. Accordingly, Winfield’s 13 motion 14 Unibest’s claim for damages – aside from research and development – it 15 suffered directly as a result of Winfield’s alleged failure to market 16 the products. See Fed. R. Civ. P. 56(a). for the $800,208 summary for judgment development is denied of the insofar as Soil it Analytics relates to 17 Accordingly, IT IS HEREBY ORDERED: 18 1. As set forth above, Defendant Winfield Solutions’ Motion for 19 Summary Judgment, ECF No. 25, is GRANTED IN PART AND DENIED IN 20 PART. 21 2. The parties are case directed schedule to MEET AND that will align CONFER with regarding one of a 22 proposed the 23 following trial dates: April 16, 2018; April 30, 2018; or June 24 25, 2018. 25 3. By no later than January 8, 2018, the parties shall jointly 26 FILE a notice that indicates their preferred trial date as ORDER - 23 1 well 2 following deadlines: 3 Witness and Exhibit lists: Lists filed and served: Objections filed and served: Deposition Designations: Designated Transcripts served: Cross-Designations served: Objections filed and served: All motions in limine filed Joint Proposed Pretrial Order filed and emailed to the Court Confer with Courtroom Deputy regarding JERS PRETRIAL CONFERENCE Mediation, if any, must be completed by Trial briefs, jury instructions, verdict forms, requested voir dire, and list of exhibits admitted without objection, filed and emailed to the Court FINAL PRETRIAL CONFERENCE 4 5 6 7 8 9 10 11 12 13 14 15 as a proposed JURY TRIAL amended case schedule, including the (At least 1 Week Before Pretrial Conference) Richland (At least 90 Days Before Trial) (9:00 a.m. First day of trial) April 16, 2018; April 30, 2018; or June 25, 2018 16 17 18 19 IT IS SO ORDERED. The Clerk’s Office is directed to enter this Order and provide copies to all counsel. DATED this 18th day of December 2017. 20 s/Edward F. Shea EDWARD F. SHEA Senior United States District Judge 21 22 23 24 25 26 Q:\EFS\Civil\2016\16-5031.Unibest.ord.grant.deny.mot.SJ.lc02.docx ORDER - 24
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