Nelson Design Group, L.L.C., Appellant, vs. Scoville Press, Inc., Respondent, American Spirit Graphics Corporation, Defendant and counterclaim plaintiff, and American Spirit Graphics Corporation, Defendant and counterclaim plaintiff, vs. Nelson Design Group, et al., counterclaim defendants, Appellants.

Nelson Design Group, L.L.C., Appellant, vs. Scoville Press, Inc., Respondent, American Spirit Graphics Corporation, Defendant and counterclaim plaintiff, and American Spirit Graphics Corporation, Defendant and counterclaim plaintiff, vs. Nelson Design Group, et al., counterclaim defendants, Appellants. A04-1603, Court of Appeals Unpublished, June 21, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-1603

 

Nelson Design Group, L.L.C.,

Appellant,

 

vs.

 

Scoville Press, Inc.,

Respondent,

American Spirit Graphics Corporation,

Defendant and counterclaim plaintiff,

and

American Spirit Graphics Corporation,

Defendant and counterclaim plaintiff,

 

vs.

 

Nelson Design Group, et al.,

counterclaim defendants,

Appellants.

 

Filed June 21, 2005

Reversed and remanded

Stoneburner, Judge

 

Hennepin County District Court

File No. 0312977

 

Nancy E. Brasel, William J. Otteson, Greene Espel, P.L.L.P., Suite 1200, 200 South Sixth Street, Minneapolis, MN 55402 (for appellant)

 

Patrick J. Rooney, Peter Gray, Rider Bennett, L.L.P., Suite 4900, 33 South Sixth Street, Minneapolis, MN 55402 (for respondent Scoville Press)

 

            Considered and decided by Stoneburner, Presiding Judge, Hudson, Judge, and Dietzen, Judge.

U N P U B L I S H E D  O P I N I O N

 

STONEBURNER, Judge

 

            Appellant Nelson Design Group, LLC (NDG) challenges summary judgment granted to respondent Scoville Press, Inc., arguing that the district court improperly weighed evidence, found facts, discredited witnesses, and applied the wrong legal standard in determining respondent's summary judgment motion.  NDG also asserts that the district court erred by excluding evidence of spoliation.  Because the district court improperly weighed evidence, engaged in inappropriate fact-finding, and failed to view the evidence in the light most favorable to NDG regarding the issue of a failed mailing and its cause, we reverse summary judgment granted to Scoville and remand.

FACTS

 

Appellant NDG is an Arkansas limited-liability company that prepares and sells residential and commercial building design plans.  Respondent Scoville is a printing/direct mail packaging and shipping business located in Hennepin County. 

            NDG entered into a purchase agreement with Scoville to package and mail a packet of materials designed to solicit business from potential customers consisting of a book of architectural drawings ("Builders Special Edition II"), a compact disc containing design plans, and a cover letter (collectively, BSE II).  Scoville's packaging and mailing of BSE II to approximately 50,000 potential NDG customers is the subject of this lawsuit.

            Scoville packaged BSE II in a polypropylene product it calls "UltraClear" that is approved by the United States Postal Service (USPS) for "any weight up to 16 ounces." The BSE II packages each weighed over 26 ounces.  USPS inspected sample packages provided by Scoville and approved them for mailing, but there is no evidence that the USPS inspection involved a determination that "UltraClear" was sufficiently strong for the weight of the package.

            Mailing began on February 24, 2003, and was completed on March 4, 2003.  The first 15,000 packages mailed were mislabeled by Scoville such that the notation "address service requested" did not appear on those packages.  Failure to label a package "address service requested" results in USPS destroying, rather than returning, any failed mailings.

            At some point in the mailing process, 20 to 50 packages were returned to NDG and according to NDG's publishing director, Vince Brown, all of these packages were open and the packaging was "in tatters."  NDG principal Mike Nelson testified that during the mailing process, NDG received telephone calls from customers complaining that books had arrived with the bags open, and in some cases the CDs were broken.

            Due to concerns about the mailing, Nelson instructed members of his sales staff to randomly call individuals from the BSE II mailing lists to ask if they received the mailing and if so, what condition it was in.  Nelson testified that "[t]here was no methodology" behind the sampling method and that none of the staff were trained in survey methodology.  The results of the calls were recorded in NDG's data base.  NDG staff contacted approximately 2,000 of the 50,000 addressees.  Eighty-nine percent of those called stated they had not received the mailing.

            Nelson testified that, based on experience with prior mailings, NDG expected return of between 2,000 and 4,000 of the BSE II mailing due to addressees having moved or having the wrong addresses on their list.[1]  But only 20 to 50 packages were returned to NDG.  The condition of those packages, telephone calls from addressees about damaged packages, results of calls to customers, and the failure to receive more than 50 returned packages, led NDG to conclude that 40,000 (90%) of the mailings failed to reach their destination.  NDG further concluded that faulty packaging was the cause of the failure.  NDG refused to pay the amount due on the Scoville invoice and sued Scoville alleging negligence, breach of contract, negligent misrepresentation, breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, estoppel, and unjust enrichment.[2]  Scoville counterclaimed for the amounts due under the purchase agreement and, after discovery, moved for summary judgment.

            After a hearing, the district court, ruling from the bench, denied NDG's motion for further discovery and granted summary judgment to Scoville, dismissing all claims against it and awarding the amount due under the purchase order.  The district court later signed a written order, and judgment was entered.  This appeal followed.

D E C I S I O N

 

Standard of review

Summary judgment motions are granted when the pleadings, depositions, answers to interrogatories, and admissions, together with any affidavits, show that there is no genuine issue of material fact and a party is entitled to judgment as a matter of law.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).  Genuine issues of material fact must be shown by substantial evidence.  Brookfield Trade Ctr., Inc. v. Ramsey County, 609 N.W.2d 868, 874 (Minn. 2000).  "[O]n a summary judgment motion a court may not weigh the evidence or make factual determinations."  State ex rel. Hatch v. Allina Health Sys., 679 N.W.2d 400, 406 (Minn. App. 2004) (quoting Fairview Hosp. & Health Care Servs. v. St. Paul Fire & Marine Ins. Co., 535 N.W.2d 337, 341 (Minn. 1995)) (quotation marks omitted).  "[T]he reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted."  Fabio, 504 N.W.2d at 761.  "[T]here is no genuine issue of material fact for trial when the nonmoving party presents evidence which merely creates a metaphysical doubt as to a factual issue and which is not sufficiently probative with respect to an essential element of the nonmoving party's case to permit reasonable persons to draw different conclusions."  DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997).

I.          Summary judgment

Appellant argues that the district court's statements at the hearing, coupled with its written findings of fact and conclusions of law, demonstrate that the district court made findings of fact, applied the standard for resolving factual issues, and generally treated the hearing as a bench trial rather than a hearing on a motion for summary judgment. 

The mere fact that part of the court's order is labeled "Findings of Fact" does not indicate that the district court engaged in inappropriate fact finding in the context of summary judgment.  Under Minn. R. Civ. P. 56, a district court may make findings of fact "if it wishes to do so, and [although] such findings may well be helpful in making clear the basis of the trial court's decision, they are not entitled to the respect which an appellate court is required to give findings made pursuant to Rule 52.01."  Whisler v. Findeisen, 280 Minn. 454, 455 n. 1, 160 N.W.2d 153, 154 n. 1 (1968).  See also Gresser v. Hotzler, 604 N.W.2d 379, 383 (Minn. App. 2000) (same).  As further discussed below, however, it appears that the district court in this case improperly weighed evidence and improperly engaged in fact finding on material issues.

Appellant also argues that the district court's reference to "preponderance of evidence" and statement that "the record, as a whole leads a reasonable trier to the conclusion that it's likelier than not. . . " further demonstrates that the district court treated the hearing as a bench trial, and applied the wrong standard for summary judgment.

In a summary judgment proceeding, the moving party has the burden of proof and the evidence is viewed in the light most favorable to the non-moving party.  Sauter v. Sauter,244 Minn. 482, 484-85, 70 N.W.2d 351, 353 (1955).  Summary judgment is not intended to be used as a substitute for a court trial.  Id.  And "[i]t is not intended to provide relief in cases where the evidence is so one-sided that the same evidence at trial might warrant a directed verdict."  2 David F. Herr & Roger S. Haydock, Minnesota Practice § 56.4 (2004) (citation omitted). 

In this case, the district court noted a problem of proof in NDG's asserting lost profits from the allegedly failed mailing of BSE II based on profits NDG experienced from prior distributions of advertising materials.  The district court stated that NDG only has proof of 50 returned packages from the BSE II mailing, and noted the differences in time, materials, addressees, and geographic areas involved in the distributions.  The district court stated: "And there are all those variables which make it impossible to come to any conclusion, by a preponderance of the evidence, that the mailing was not as good as the previous mailings because the packaging failed. . . . You can't get from A to Z that way."  The district court's reference to a "conclusion by a preponderance of the evidence" is troubling in the context of summary judgment and indicates that the district court was improperly weighing the evidence.

The district court also stated: "I think that the record, as a whole, leads a reasonable trier to the conclusion that it's likelier than not that Scoville's work, per the contract, was what [NDG] agreed to pay for.  And that [NDG] therefore, needs to pay Scoville a couple thousand dollars it still owes at this point."  Again, the district court appears to be weighing evidence as a fact finder rather than determining whether there are genuine issues of material fact.

II.        Evidentiary rulings           

            a.         Exclusion of staff calls to customers

            NDG argues that the district court completely disregarded its evidence about the staff calls to entities on the BSE II mailing lists and improperly concluded that the evidence that 89% of customers called did not receive the mailing was inadmissible.  Scoville noted in its brief to the district court that although NDG called the evidence a "survey," "it actually consisted of notes from follow-up telemarketing phone calls made by NDG's telemarketing staff."  Scoville nonetheless argued to the district court, based on non-jurisdictional case-law, that to be admissible, survey results have to be the product of sound methodology and if the methodology is not sound, the survey evidence is not admissible.  See e.g., Pittsburgh Press Club v. United States, 579 F.2d 751, 758 (3d Cir. 1978) (finding surveys and polls trustworthy if conducted under generally accepted survey principles and with results being used in a statistically correct way, and without such safeguards, district court should give little weight to survey).  And, "[e]vidence offered to support or defeat a motion for summary judgment must be such evidence as would be admissible at trial."  Hopkins by LaFontaine v. Empire Fire and Marine Ins. Co., 474 N.W.2d 209, 212 (Minn. App. 1991) (citing Murphy v. Country House, Inc., 307 Minn. 344, 349, 240 N.W.2d 507, 511 (1976)).  Scoville also argued that the evidence offered is "simply a compilation of hearsay" and that the evidence does not fit the only potentially applicable exception, the "catch-all" exception found at Minn. R. Evid. 804(b)(5). 

            In its brief to the district court, NDG did not address Scoville's argument that the evidence was inadmissible as a survey, but asserted that it "routinely makes follow-up calls to the mailings it does."  The record reflects that counsel for NDG attempted to orally argue the admissibility of this evidence to the district court, but the district court cut off these argument with the statement that the "survey" was "total junk."  The district court stated that it relied on Nelson's statement that there was "no methodology" concerning how this information was obtained to exclude all evidence related to the calls to the BSE II mailing list addressees.

            On appeal, NDG argues that the results of the random calls to customers qualify as business records and that the method of gathering the information goes more to the weight than the admissibility of the evidence.  Generally, a failure to raise an argument in the district court results in the issue not being addressed on appeal, but the general rule presupposes an opportunity to raise an argument in the district court.  See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that this court will generally not consider matters not argued and considered in the district court).  And, though "[s]peculation, general assertions, and promises to produce evidence at trial are not sufficient to create a genuine issue of material fact for trial," Nicollet Restoration, Inc. v. City of St. Paul, 533 N.W.2d 845, 848 (Minn. 1995), credibility cannot be assessed or determined by summary judgment.  See Smith v. Woodwind Homes, Inc., 605 N.W.2d 418, 423 (Minn. App. 2000). 

            A district court's evidentiary rulings are reviewed under an abuse-of-discretion standard,[3] but, because the district court failed to provide any analysis of the reason for exclusion of this evidence, we are unable to adequately determine on review whether the exclusion was in fact an evidentiary ruling or the result of weighing the evidence.  See Fairview Hospital & Health Care Servs., 535 N.W.2d at 341 (noting that it is axiomatic that a court may not weigh evidence on summary judgment but must take the evidence in a light most favorable to the nonmoving party and concluding that a district court's rejection of evidence as "speculative" without reference to an evidentiary rule, constituted improper weighing of evidence).  Because we are remanding this matter on the issue of spoliation, we also remand for analysis of evidentiary reasons for which the information contained in NDG's telephone logs is inadmissible.

            b.         Evidence of condition of packaging on packages returned to NDG

            NDG argues that the district court also improperly disregarded testimony about the condition of the packaging on the 50 packages returned to NDG.  Although the district court appears to have accepted the testimony that 50 packages were returned to NDG, the district court excluded testimony about the condition of the packages because only one of the purported 50 packages still exists.  Discussing the testimony of the condition of the remaining packages, the district court said: "[I]t's certainly not sufficient evidence . . . no evidence is what it is.  If you don't have it you don't have it."  The district court appears to have excluded the evidence as a sanction for spoliation,[4] but there is no analysis in the record of spoliation or any other legal basis for excluding the eyewitness testimony about the condition of the returned packages. 

            "Spoliation is the destruction of evidence."  Wajda v. Kingsbury, 652 N.W.2d 856, 860 (Minn. App. 2002), review denied (Minn. Nov. 19, 2002).  A decision by a district court to impose sanctions on a party for spoliation "focuses on prejudice to the opposing party. . . ."  Himes v. Woodings-Verona Tool Works, Inc., 565 N.W.2d 469, 471 (Minn. App. 1997), review denied (Minn. Aug. 26, 1997).  The district court has broad authority in determining what, if any, sanction is to be imposed for spoliation.  Patton v. Newmar Corp., 538 N.W.2d 116, 118-19 (Minn. 1995).  This court will reverse a district court's decision on spoliation sanctions "only when it is clear that no reasonable person would agree [with] the trial court's assessment of what sanctions are appropriate."  Himes, 565 N.W.2d at 471 (quotation omitted).

            There is no evidence of prejudice to Scoville as a result of not having all of the returned packages.  It is undisputed that Scoville has tested identical packages, and the district court clearly weighed evidence that Scoville successfully mailed an identical package to itself, Scoville's employees repeatedly threw an identical package against a hard surface with no damage to the packaging, USPS inspected and accepted the packages for mailing, and USPS did not notify NDG of any significant failure of this mailing.  Because there is no evidence in the record that Scoville was prejudiced by NDG's failure to preserve all but one of the returned packages, we conclude that exclusion of the eyewitness testimony regarding the condition of returned packages was an inappropriate sanction.  We reverse the sanction of exclusion of this evidence and conclude that evidence regarding the condition of the packages, viewed in a light most favorable to NDG, together with other evidence in the record, raises, however minimally, a fact issue concerning the suitability of the packaging for this mailing, making summary judgment for Scoville inappropriate.

V.        Failure to address unsuitability of wrapping material

            Because the district court concluded that NDG failed to produce sufficient evidence to raise a material fact that the mailing failed, the district court declined to address NDG's evidence that the mailing failed due to inadequacy of the wrapping material.  The district court credited USPS's acceptance of the packages for mailing, lack of evidence that USPS had notified NDG of any problems with the mailing, and Scoville's argument that it had successfully used this wrapping in the past.  But the district court ignored NDG's argument that USPS's normal practices would not have resulted in notification to NDG if the packages arrived in postal stations damaged beyond remedy or repair, and ignored Brown's testimony that Scoville's mailing department supervisor admitted that BSE II was much heavier than anything Scoville normally worked with.  And NDG argues that the district court misunderstood the significance of post-hearing evidence submitted by NDG and considered by the district court.  That evidence consisted of an affidavit from a postal service worker stating that the 140-gauge "UltraClear" wrap used by Scoville was of insufficient thickness for the packages under USPS regulations.  In finding, as the district court did, that "[t]here is no persuasive evidence that Scoville used an unsuitable wrapping or in any other way mishandled the NDG mailings," the district court improperly weighed the evidence.

            Reversed and remanded.

[1] Nelson explained that for this mailing NDG did not run the addresses through the "national change of address" program which would have updated addresses for any intended recipients who had updated their addresses.  Nelson testified that returned packages would have demonstrated that the packages were successfully delivered to the address on the label, and he considered the lack of returns an indication that the packages were not delivered to the original addressees.

[2] NDG also sued American Spirit Graphics, Corp., which printed the book and recommended Scoville for packaging and mailing.  NDG has settled all claims against ASGC.

[3] See McKay's Family Dodge v. Hardrives, Inc., 480 N.W.2d 141, 147 (Minn. App. 1992) (stating a decision on the sufficiency of the foundation for evidence is within the discretion of the trial court), review denied (Minn. Mar. 26, 1992).

[4] The record uses the term "exfoliation" but it is clear that "spoliation" is the topic being discussed.