Paul Kaiser, d/b/a Kaiser Marketing Group, Appellant, vs. Direct Focus, Inc., Respondent.

 

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A04-130

 

Paul Kaiser, d/b/a Kaiser Marketing Group,
Appellant,
 
vs.
 
Direct Focus, Inc.,
Respondent.

 

Filed September 14, 2004

Affirmed

Stoneburner, Judge

 

Washington County District Court

File No. C3023401

 

Deno W. Berndt, Hellmuth & Johnson, P.L.L.C., Suite 500, 10400 Viking Drive, Eden Prairie, MN 55344 (for appellant)

 

Dean C. Eyler, Kelly W. Hoversten, Gray, Plant, Mooty, Mooty & Bennett, P.A., 500 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402; and

 

Kenneth L. Schubert, III, Garvey, Schubert, Barer, 1191 Second Avenue, 18th Floor, Seattle, WA 98101-2939 (for respondent)

 

            Considered and decided by Stoneburner, Presiding Judge; Schumacher, Judge; and Parker, Judge.*

 

U N P U B L I S H E D  O P I N I O N

 

STONEBURNER, Judge

 

            Paul Kaiser appeals from summary judgment granted to respondent Direct Focus, Inc., dismissing his claims of breach of an alleged dealership agreement.  Because there are no genuine issues of material fact, we affirm.

FACTS

 

Appellant Paul Kaiser began conducting business as Kaiser Marketing Group in 1997.  In the fall of 1998, he contacted Nautilus International (Nautilus) about the possibility of becoming a dealer of Nautilus fitness equipment.  In a September 15, 1998, letter to Karen Underwood, a Nautilus employee, Kaiser requested that Nautilus consider entering into a written agreement authorizing him to become a Nautilus dealer, to use the Nautilus trademark in exchange for marketing exclusively Nautilus products, and to use the domain name "nautilusonline.com" to advertise and sell the products.  In response to his letter, Underwood sent Kaiser a form letter inviting him to complete a dealer application. 

Kaiser never completed the application, but after several conversations with Underwood, Kaiser received oral authorization to become a Nautilus dealer for a period of indefinte duration.  Under the oral agreement, Nautilus agreed to sell its equipment to Kaiser for a "dealer" or wholesale price, and he could sell the products to consumers at a higher retail price and retain the difference.  Kaiser also established the website "nautilusonline.com" in the late summer or fall of 1998, to use for marketing Nautilus products.

Respondent Direct Focus Inc.'s personnel began running Nautilus in early December 1998 and officially took over ownership of Nautilus in early January 1999.  On December 15, 1998, Kaiser wrote to Underwood requesting that the parties enter into a formal written agreement permitting Kaiser to do business through his website, nautilusonline.com.  Kaiser's letter was referred to Reed Brown, general counsel for Direct Focus.  Brown responded to Kaiser by letter dated December 18, 1998, stating that Kaiser was not authorized to use the domain name nautilusonline.com and though he was authorized to sell Nautilus products, use of that domain name for his website infringed on Direct Focus's trademarks and "must be discontinued immediately."

            Kaiser responded to Brown's letter, again requesting that Direct Focus allow him to continue to do business using that domain name and asserting that three months after its creation, "nautilusonline.com" had a value of $20,000, that Kaiser had already spent "thousands of dollars" on website advertising to begin on January 15, 1999, and that his consultants predicted these advertisements would result in $200,000 to $250,000 in sales by March 15, 1999.  But Kaiser conceded that if Direct Focus "still demands that KMG discontinue the use of the ‘Nautilus Online' name and shell logo, then we will do so immediately at your instruction.  Furthermore, we will continue to market Nautilus products under a different name."

            Brown responded by letter dated December 29, 1998, demanding that Kaiser stop using nautilusonline.com, explaining that although Nautilus International had allowed certain third parties to use its trademark pursuant to a "strict written contract," Kaiser had no such contract.

            In January 1999, Direct Focus informed Kaiser that he was not permitted to sell Nautilus's commercial products.  At that time, Kaiser had not yet made any sales of any Nautilus products.  Kaiser did not immediately stop using the website, and Brown sent another letter dated March 17, 1999, demanding that Kaiser discontinue use of that website domain name.  Brown reiterated that Kaiser could continue to advertise and sell Nautilus's consumer products, but that he could not use the Nautilus trademark in the name of his website.  Brown informed Kaiser that if he did not discontinue the use of the "nautilusonline.com" domain name, Direct Focus would no longer permit Kaiser to sell any Nautilus products and that it would take legal action against Kaiser. 

            After receiving Brown's March 17, 1999, letter, Kaiser deactivated the "nautilusonline.com" domain name and paid $35 to register the domain name "fitnessbrokers.com" for one year.  He used the same graphics and information on "fitnessbrokers.com" that he had used on "nautilusonline.com."

            In a May 4, 1999, letter to Kaiser from Brian Cook, CEO of Direct Focus, Cook advised Kaiser that Direct Focus was concerned that Kaiser's website might confuse the public into believing that there was a connection between Kaiser and Direct Focus.  Cook warned Kaiser not to represent himself as "Nautilus," but merely as an independent dealer of Nautilus products and cautioned Kaiser against doing "any investment spending with regard to the Nautilus name" because the company was not positive that it would continue its Nautilus dealer program.

            Kaiser sold some Nautilus consumer products between March 1999 and April 2002.  In a telephone conversation, Cook ordered Kaiser to stop selling Nautilus products at below Direct Focus's suggested retail prices.  Sometime in the spring of 2001, Direct Focus told Kaiser that Direct Focus was assembling a new dealer program, that he would not be included in that program, and that he would not be permitted to sell the new products included in the program.

            Kaiser sued Direct Focus, alleging that Direct Focus had violated the Minnesota Franchise Act, breached a dealership agreement, and set improper pricing restrictions.  Kaiser also sought a declaratory judgment that he is the owner of the domain name "nautilusonline.com."  Direct Focus moved for summary judgment.  The district court granted the motion for summary judgment on all but Kaiser's breach-of-contract claim.  Direct Focus requested that the court reconsider its denial of summary judgment on the breach-of-contract claim.  The court granted the request and, after a hearing, granted Direct Focus's motion to dismiss the breach-of-contract claim, concluding that the record was devoid of any facts that would support a conclusion that Direct Focus had failed to provide Kaiser with reasonable notice of its "intent to terminate and/or modify the contract entered into by the parties."  In this appeal, Kaiser challenges only the grant of summary judgment on his breach-of-contract claim, arguing that genuine issues of material fact exist, precluding summary judgment.

D E C I S I O N

 

"On an appeal from summary judgment we ask 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). 

A motion for summary judgment shall be granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law.  On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted.

 

Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted). 

            Summary judgment should not be granted if reasonable minds could draw different conclusions from the evidence.  DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997).  The burden falls on the nonmoving party to present evidence sufficiently probative to an essential element of the claim to allow reasonable minds to reach different conclusions.  Id. at 71. 

            The parties agree that the oral contract between them had no duration term and therefore was terminable at will, provided that the terminating party gave reasonable notice.  See Hayes v. Northwood Panelboard Co., 415 N.W.2d 687, 691 (Minn. App. 1987) (stating that a contract with no definite duration term, expressed or implied, is terminable at will by either party on reasonable notice), review denied (Minn. Jan. 28, 1998).  The district court concluded, as a matter of law, that Kaiser had reasonable notice.  Kaiser asserts that whether he had reasonable notice of respondent's intent to terminate the contract between the parties is an issue of material fact, precluding summary judgment. 

            Kaiser relies on Frerichs Constr. Co. v. Minnesota Counties Ins. Trust, for the proposition that reasonableness is a question of fact.  666 N.W.2d 398, 402 (Minn. App. 2003), review dismissed (Minn. Oct. 2, 2003).  But in Frerichs, this court affirmed the district court's grant of summary judgment in a case involving whether one party reasonably believed asbestos was present at a work site, noting that reasonableness becomes an issue of law when there is no evidence that supports a contrary conclusion.  Id. 

The district court, not Kaiser, first raised the issue of reasonable notice, when it originally denied Direct Focus's motion for summary judgment on the breach-of-contract claim.  Kaiser had not asserted in his complaint or in response to Direct Focus's summary-judgment motion that he had not received reasonable notice of the termination.  On reconsideration, the district court determined that the facts in the record conclusively established that Kaiser received reasonable notice that his dealership relationship with Nautilus would be terminated. 

The record demonstrates that Kaiser received reasonable notice that he would not be permitted to use the nautilusonline.com domain; that he would not be permitted to market the new Nautilus products; and that Direct Focus would not allow him to sell products for below suggested retail prices or outside the United States.  The communications over the domain name, in which Direct Focus clearly told Kaiser that he was not permitted to maintain the nautilusonline.com website, began in December 1998.  Correspondence from Direct Focus to Kaiser informed him that no contractual relationship existed between them on December 29, 1998, and Direct Focus discouraged Kaiser from doing any investment spending with regard to the Nautilus name on May 4, 1999.

The eighth circuit has held that reasonable notice is that period of time necessary to close out accounts and minimize losses.  Viking Supply v. Nat'l Cart Co., 310 F.3rd1092, 1098 (8th Cir. 2002) (applying Minnesota law).  In Viking Supply, the court determined that a notice of termination of a distributorship agreement provided by a manufacturer of shopping-cart corrals to a distributor of those corrals was reasonable as a matter of law, when the manufacturer agreed to honor the distributor's existing orders and to take additional orders after giving notice of termination, and in fact honored such orders for an extended period.  Id.  In the case before us, Kaiser does not assert that he did not have enough time to close out accounts and minimize losses.  Direct Focus continued to honor orders from Kaiser as late as the spring of 2002, more than three years after Brown's first letter to Kaiser and approximately three years after Cook's letter cautioning Kaiser against doing any investment spending with regard to the Nautilus name. 

Based on the record, the district court did not err in determining that the notice of termination/modification provided to Kaiser was reasonable as a matter of law.  Summary judgment was appropriate.

Affirmed.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.