Lanier Worldwide, Inc., Appellant, vs. TOPAC Acquisition Corporation, Respondent.

Lanier Worldwide, Inc., Appellant, vs. TOPAC Acquisition Corporation, Respondent. A05-1088, Court of Appeals Unpublished, April 4, 2006.

This opinion will be unpublished and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

A05-1088

 

Lanier Worldwide, Inc.,
Appellant,
 
vs.
 
TOPAC Acquisition Corporation,
Respondent.

 

Filed April 4, 2006

Reversed and remanded

Peterson, Judge

 

Dakota County District Court

File No. C1-04-6654

 

Wallace G. Hilke, Reuben Mjaanes, Lindquist & Vennum, P.L.L.P., 4200 IDS Center, 80 South Eighth Street, Minneapolis, MN  55402 (for appellant)

 

Margaret K. Savage, Jeffrey J. Keyes, Briggs and Morgan, P.A., 2200 IDS Center, 80 South Eighth Street, Minneapolis, MN  55402 (for respondent)

 

Glenn D. Dassoff, Paul, Hastings, Janofsky & Walker, L.L.P., 695 Town Center Drive, 17th Floor, Costa Mesa, CA  92626-1924 (pro hac vice)

 

            Considered and decided by Klaphake, Presiding Judge; Peterson, Judge; and Hudson, Judge.

U N P U B L I S H E D   O P I N I O N

PETERSON, Judge

Appellant Lanier Worldwide, Inc. challenges the district court's grant of partial summary judgment dismissing its claim for tortious interference with contract, arguing that the district court erred in determining that Lanier's dealer agreement with Stringer Business Systems, Inc. lacks mutuality and, therefore, is unenforceable.  We reverse and remand.

FACTS

            Pursuant to a series of written agreements, appellant Lanier Worldwide, Inc. and Stringer Business Systems, Inc. maintained a business relationship for 20 years.  In June 2002, Lanier and Stringer entered into a four-year agreement.  A document titled "Dealer Agreement," with attached schedules, and a document titled "Standard Dealer Terms and Conditions" constitute the June 2002 written agreement (collectively referred to as dealer agreement).  Under the dealer agreement, Stringer was an authorized Lanier dealer for a specified geographic area and was responsible for promoting, selling, and servicing Lanier copier, facsimile, and printer products and related software, parts, supplies, and accessories. 

            In February 2004, respondent TOPAC Acquisition Corporation entered into an asset-purchase agreement with Stringer.  Both Lanier and TOPAC sell copying, facsimile, and printing equipment.  After the acquisition, Lanier set up a direct office in Stringer's territory to fulfill Lanier's contractual obligations to provide support and service to its major and national accounts.  Lanier instructed Stringer to cease serving as a Lanier dealer by March 15, 2004, and Stringer complied. 

            TOPAC filed a complaint alleging six causes of action against Lanier and sought a temporary restraining order to prevent Lanier from hiring Stringer employees to staff Lanier's direct office.  Lanier successfully opposed TOPAC's request for a restraining order and asserted counterclaims against TOPAC that included a claim for tortious interference with Lanier's dealer agreement with Stringer.  TOPAC voluntarily dismissed all of its claims with prejudice and moved for partial summary judgment dismissing Lanier's tortious-interference claim, arguing that the dealer agreement is an unenforceable contract, and, therefore, it cannot support a tortious-interference claim.  The district court granted TOPAC's motion for partial summary judgment and dismissed Lanier's tortious-interference-with-contract claim.  Judgment was entered pursuant to Minn. R. Civ. P. 54.02, and this appeal followed.

D E C I S I O N

On an appeal from summary judgment, this court asks two questions:  (1) whether there are any genuine issues of material fact and (2) whether the district court erred in its application of the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  The reviewing court must view the evidence in the light most favorable to the nonmoving party.  Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 345 (Minn. 2003). 

Lanier seeks reversal of the district court's partial summary judgment, arguing that the district court erred in determining that because the dealer agreement "imposes no obligation upon either party," the agreement lacks mutuality and is, therefore, unenforceable.  When there is no dispute over relevant facts, the existence of a contract is solely a question of law to be determined by the court.  Murray v. MINNCOR, 596 N.W.2d 702, 704 (Minn. App. 1999), review denied (Minn. Sept. 28, 1999).  An appellate court reviews a district court's resolution of legal issues de novo.  Frost-Benco Elec. Ass'n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984)

The dealer agreement provides that it "shall be governed by and be construed and interpreted in accordance with the laws of the State of Georgia applicable to agreements made and to be performed wholly within the State of Georgia."  "[P]arties may agree that the law of another state shall govern their agreement and [Minnesota courts] will interpret and apply the law of another state where such agreement is made."  Milliken & Co. v. Eagle Packaging Co., 295 N.W.2d 377, 380 n.1 (Minn. 1980).  But "matters of procedures and remedies [are] governed by the law of the forum state."  Davis v. Furlong, 328 N.W.2d 150, 153 (Minn. 1983).  Therefore, "general choice of law provisions, as expressed in contracts, incorporate only substantive law, and do not displace the procedural law of the forum state."  Fredin v. Sharp, 176 F.R.D. 304, 308 (D. Minn. 1997). 

1.         Mutuality

The district court cited Pabian Outdoor-Aiken, Inc. v. Dockery, 560 S.E.2d 280, 282 (Ga. Ct. App. 2002), for the principle that a contract lacks mutuality when its terms provide for unilateral termination at the will of a party, and Halley v. Harden Oil Co., 357 S.E.2d 138, 139 (Ga. Ct. App. 1987), for the principle that a contract lacks mutuality when no obligation whatsoever is imposed on a party.  The district court then concluded that the dealer agreement "allows either party to refuse to contract with the other for the sale of Lanier products" and that because the dealer agreement "imposes no obligation upon either party, the contract lacks mutuality and is therefore, unenforceable."

We agree that the opinions that the district court cited stand for the principle that there is no mutuality and, therefore, no contract when a party may unilaterally terminate an agreement or when an agreement imposes no obligation on a party.  It has long been the law in Georgia that "[u]nless there are mutual promises in the contract which will bind both parties, it may be conceded that the mere promise of one of the parties to do or not to do a particular thing, without binding both, would make the contract unilateral and unenforceable."  Palmer Brick Co. v. Woodward, 75 S.E. 480, 482 (Ga. 1912).

But the Supreme Court of Georgia has also explained:

"While the doctrine of mutuality of obligation may have a core of validity it has clearly been over-generalized and used as a mistaken premise for decisions defeating justified expectations.  It has been subjected to so many so-called exceptions and judicial circumventions that it has been suggested that the term ‘mutuality of obligation' should be abandoned.  More importantly, the misleading notion that both parties must be ‘bound' must be dispensed with. . . . [T]he supposed requirement of mutuality of obligation is merely one of mutuality of consideration: Each contracting party must supply consideration to the other."

 

Jackson Elec. Membership Corp. v. Ga. Power Co., 364 S.E.2d 556, 558 n.2 (Ga. 1988) (alteration and emphasis in original) (quoting John D. Calamari & Joseph M. Perillo, Contracts § 67, at 131 (1970)).  And in Pabian Outdoor-Aiken, the Georgia Court of Appeals explained:

It is axiomatic in the law of contracts that there must be a consideration moving the parties thereto. . . . Among the considerations recognized by law as sufficient to support a contract is that of mutual promises, or, as it is sometimes termed, a promise for a promise. . . . A promise, however, is not a good consideration for a promise unless there is an absolute mutuality of engagement, so that each party has the right at once to hold the other to a positive agreement.  And in case[s] of mutual promises, where the promise of one party is relied on as a consideration for the other, the promises must be concurrent and obligatory upon each at the same time, in order to render either binding.

 

560 S.E.2d at 281 (alteration in original) (quoting Morrow v. S. Express Co., 28 S.E. 998, 998-99 (1897)).

            The district court did not identify the provision in the dealer agreement that supports the court's conclusion that the agreement allows either party to refuse to contract with the other for the sale of Lanier products.  This conclusion is contradicted by paragraph 1.1 of the document titled "Dealer Agreement," which states, "Subject to the terms and conditions of this Agreement, Lanier shall sell Products to [Stringer], and [Stringer] shall purchase Products from Lanier."  Paragraph 1.2 of the Dealer Agreement gives Lanier "the right . . . to discontinue the distribution or sale of any Product upon thirty (30) days' notice to [Stringer]," which means that Lanier could eliminate its obligation to sell products to Stringer by discontinuing the distribution or sale of all products.[1]  But Lanier could only do so upon 30 days' notice, which means that, during those 30 days, the agreement does not allow either party to refuse to contract with the other for the sale of Lanier products.

The district court's conclusion is also contradicted by its findings with respect to provisions in the document titled "Standard Dealer Terms and Conditions."  The district court found:

7.  Section 1.2 of the Dealer Agreement contains a "best efforts" clause that obligates Stringer to "vigorously and diligently promote the sale, rental and service of [Lanier] Products within [Stringer's territory] to the full potential of [Stringer]."

 

8.  In meeting its obligations under the Dealer Agreement, Stringer was required to (1) maintain an adequate stock of Lanier Products; (2) equip and maintain a showroom that prominently displayed Lanier Products; (3) maintain an adequate, well-trained and competently directed and managed sales force; (4) make use of sales assistance provided by Lanier; (5) follow up on customer and potential customer inquiries; (6) ensure the fair and equitable treatment of Lanier Products in its advertising, training and promotional activity; and (7) extend to customers warranties on Lanier Products that meet or exceed those warranties given to Stringer by Lanier.

 

9.  Lanier was to assist Stringer by making available promotional materials, technical information, and other selling aids.

 

The record supports these findings, and the findings indicate that Stringer and Lanier each promised to perform certain acts to promote the sale of Lanier products to Stringer's customers.  Under these concurrent promises, each party has the right to hold the other to a positive agreement; Lanier has the right to hold Stringer to its agreement to make certain specific efforts to sell Lanier products, and Stringer has the right to hold Lanier to its agreement to provide Lanier products and sales-support services to Stringer.  Therefore, we disagree with the district court's conclusion that the dealer agreement lacks mutuality. 

Citing schedule G, which is attached to the document titled "Dealer Agreement," TOPAC argues that the dealer agreement "is nothing more than an agreement to try to agree in the future, if the parties are then inclined to try to do so."  Schedule G addresses opportunities that Lanier could extend to Stringer to participate in providing services to Lanier's major accounts.  Schedule G explains the opportunities as follows:

Lanier maintains direct sales and service agreements ("Master Agreements") with many of its Major Accounts, as defined in the Dealer Agreement.  A Major Account may, from time to time, order equipment or services for a location within [Stringer's] Territory.  When this occurs, Lanier may, at its option and in its sole discretion, elect to offer [Stringer] an opportunity to participate in the fulfillment of the order.

 

Schedule G then describes an offer to participate as follows:

If Lanier does elect to offer [Stringer] a participation opportunity, that will be extended through certain written documentation prepared by Lanier, identifying the opportunity and the associated pricing.  [Stringer] may accept the opportunity by signing and returning the offer.  Any exceptions to the offer extended by Lanier must be specifically negotiated and agreed to in writing by Lanier.

 

            We agree that schedule G reflects an agreement to try to agree in the future with respect to opportunities to participate in the fulfillment of major account orders.  Lanier did not promise to offer Stringer opportunities to participate, and Stringer did not promise to participate in major account orders.  But this does not mean that the dealer agreement lacked mutuality because in Georgia,

a contract may be either entire or severable.  In the former the whole contract stands or falls together; in the latter, the failure of a distinct part does not void the remainder.  The character of the contract in such case is determined by the intention of the parties.  Numerous cases have stated that the criterion for determining whether the contract is entire or severable under this rule is to be found in the question of whether the whole quantity, service, or thing, all as a whole, is of the essence of the contract, and if it appear that the contract was to take the whole or none, then the contract would be entire, but, on the other hand, if the quantity, service, or thing is to be accepted by successive performances, then the contract may properly be held to be severable.

 

Piedmont Life Ins. Co. v. Bell, 119 S.E.2d 63, 72 (Ga. Ct. App. 1961).

            It is apparent that the opportunities to participate addressed in schedule G are not the essence of the dealer agreement.  Each opportunity to participate involves an order for equipment or services that occurs from time to time, and an individual order may result in an offer to participate without affecting any other order or any other obligations under the dealer agreement.  Because individual orders involve separate, successive performances, schedule G is severable from the rest of the dealer agreement, and the lack of mutuality in schedule G does not void the remainder of the dealer agreement.

2.         Quantity

The district court also determined that the dealer agreement "does not satisfy the quantity term necessary for an enforceable contract under the U.C.C., as applied by Georgia law."  Because we have determined that under general contract principles, the mutual promises in the dealer agreement provide sufficient consideration to make the agreement binding on both parties, it is not necessary for us to determine whether there is an enforceable contract under the U.C.C.

Reversed and remanded.

[1] There is no evidence that Lanier had discontinued the distribution or sale of products when TOPAC purchased Stringer's assets.