Larry Rasmusson, Appellant, vs. STEN Corporation and Aspen Surgical Products, Inc., Respondents.

Larry Rasmusson, Appellant, vs. STEN Corporation and Aspen Surgical Products, Inc., Respondents. A06-2058, Court of Appeals Unpublished Decision, December 18, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS
A06-2058
 
Larry Rasmusson,
Appellant,
 
vs.
 
STEN Corporation and Aspen Surgical Products, Inc.,
Respondents.

Filed December 18, 2007

Affirmed

Ross, Judge

 

Hennepin County District Court

File No.  27-CV-05-006649

 

Thomas P. Malone, Susan E. Sheely, Barna Guzy & Steffen, Ltd., 200 Coon Rapids Boulevard, 400 Northtown Financial Plaza, Minneapolis, MN 55433 (for appellant)

 

Randall J. Pattee, Christopher R. Smith, Lindquist & Vennum, P.L.L.P., 4200 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for respondents)

 

Considered and decided by Ross, Presiding Judge; Kalitowski, Judge; and Worke, Judge.

U N P U B L I S H E D   O P I N I O N

ROSS, Judge

Larry Rasmusson, former chief executive officer of STEN, Inc., appeals from summary judgment on his breach of contract and unjust enrichment claims brought against STEN and Aspen Surgical Products, Inc.  Rasmusson alleged that STEN and Aspen violated the license agreement between Rasmusson and STEN that entitled Rasmusson to royalties for STEN's sales of certain disposable medical products designed by Rasmusson and listed in the agreement.  STEN sold all product inventory to Aspen, paid Rasmusson royalties for those sales, and left the medical-products business altogether.  Aspen did not pay Rasmusson any royalties on its resale of those products or for its sale of identical products that Aspen later manufactured.  Because Rasmusson cannot establish on the undisputed evidence that STEN breached the license agreement or that Aspen assumed any royalty obligations, we affirm summary judgment.

FACTS

In 1990 Larry Rasmusson and the predecessor of STEN, Inc., entered into a license agreement, the construction and application of which are at the foundation of the present dispute.  Rasmusson first began working for STEN as a consultant.  In this role, he developed a line of disposable medical products designed to aid in surgery.  These are simple medical disposables, such as clamps, tapes, fabrics, and similar devices.  Rasmusson became STEN's president and chief executive officer in 1993, a position he left in 1998.

The STEN-Rasmusson license agreement granted STEN the exclusive license to use Rasmusson's "know-how," or expertise, to make, use, and sell the products.  In exchange for this know-how, STEN would pay Rasmusson up to 4% of the net sales price it charged for these products.  They amended the agreement in 1998 to grant STEN the option to cease paying royalties if it chose to transfer all product "rights" back to Rasmusson and to stop making and selling the products.  The agreement did not define what those "rights" were.

On November 8, 2004, STEN entered into an asset purchase agreement with Aspen Surgical Products, Inc.  Under that agreement, Aspen bought STEN's medical products line, including all inventory of the Rasmusson designed products.  In addition to the inventory, STEN sold specifications, customer lists, supplier lists, mailing lists, and associated goodwill to Aspen.  The asset purchase agreement specifically identified which of STEN's contracts Aspen was accepting from STEN; the purchase agreement expressly indicated that Aspen was not assuming the STEN-Rasmusson license agreement.

STEN therefore sold all the Rasmusson products from its inventory to Aspen, and it paid Rasmusson his final royalties for all products sold.  STEN entirely left the surgical-products business and made or sold no other products covered by the STEN-Rasmusson agreement.  But in a March 2005 letter, Rasmusson demanded that STEN and Aspen pay him royalties for the inventory resold by Aspen and for identical products manufactured and sold by Aspen.  Both companies refused.  Rasmusson unilaterally terminated the license agreement on April 7, 2005.

Rasmusson sued both STEN and Aspen for breach of contract and unjust enrichment.  The district court granted STEN's and Aspen's motions for summary judgment.  It held that STEN no longer had an obligation to pay royalties on the products because it no longer sold them.  The court also concluded that the asset purchase did not make Aspen liable for STEN's royalty obligations to Rasmusson.  Because STEN paid royalties to Rasmusson for the inventory sale to Aspen, the district court determined that the claims of unjust enrichment lacked factual support.  The court denied Rasmusson's motion to amend his complaint to add conversion claims, reasoning that Rasmusson had no rights under the license agreement except a right to royalties, for which he had already been paid.  This appeal follows.

D E C I S I O N

Rasmusson disputes the district court's summary judgment decision.  This court will reverse summary judgment only if there are disputed issues of material fact or the district court misapplied the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  Here, there are no material facts in dispute.  Rasmusson contends that the district court misconstrued the royalty obligations under the license agreement and made other errors of law in awarding summary judgment for his breach-of-contract and unjust enrichment claims.  He also maintains that the district court abused its discretion by not allowing Rasmusson to add conversion claims.  We first address the breach-of-contract claims.

I

Rasmusson begins his breach-of-contract argument by challenging the district court's interpretation of the license agreement.  He argues that material portions of the license agreement are ambiguous and that summary judgment is therefore inappropriate.  Rasmusson is correct that the interpretation of an ambiguous contract is a fact issue.  City of Virginia v. Northland Office Props. Ltd.,465 N.W.2d 424, 427 (Minn. App. 1991), review denied (Minn. Apr. 18, 1991).  But whether a contract is ambiguous is a question of law, which we review de novo.  Id.  We therefore first decide whether the license agreement is ambiguous.

Rasmusson contends that the language of three paragraphs of the license agreement (paragraphs 4.1, 7.3, and 7.8), when taken together, creates an ambiguity that prevents summary judgment.  The paragraphs state:

4.1       LICENSEE [STEN] shall pay [Rasmusson] royalties in the amount of Four Percent (4%) of the net sales price of all products sold by [STEN].  Royalties shall continue for the life of the products.

 

7.3       This Agreement (but not the Contract for Services) may be assigned by either party and shall enure to the benefit of the parties, their successors and assigns, including the resultant of any merger, consolidation, or reorganization.

 

7.8       . . . [STEN] will have the option at any time to cease paying Royalties to Rasmusson with respect to any individual item included in the products or the Additional Products by transferring all rights to such item back to Rasmusson and cease to manufacture, market and sell such products or Additional Products.  [STEN] will also have the right to maintain its exclusive license to an individual item included in the products or the Additional Products, even if such item is defined as no longer sold by the Company . . .

 

Rasmusson would have us conclude that by virtue of STEN's right of assignment in paragraph 7.3 and the right to cease manufacturing in paragraph 7.8, the phrase "life of the products" in paragraph 4.1 is ambiguous and may mean the period of time for as long as these product designs are being manufactured and sold by any seller.  A contract is ambiguous if it is reasonably susceptible to multiple meanings.  Landwehr v. Landwehr, 380 N.W.2d 136, 138 (Minn. App. 1985).  We agree with the district court that, considered as a whole, the agreement unambiguously defines "life of the products."

We note that Rasmusson's focus on the phrase "life of the products" appears to be an unnecessary detour because it overlooks the material restriction imposed by the preceding sentence: STEN shall pay royalties for "all products sold by [STEN]."  (Emphasis added.)  So regardless of how we construe "life of the products," Rasmusson generally is entitled to royalties for products sold only by STEN, and he does not dispute STEN's contention that STEN paid him all royalties for all of these products, including the final inventory sold to Aspen.  But turning to the issues as presented, we agree with the district court that "life of the products," when read in context with this limitation, is also unambiguous.

A contract is unambiguous when it has only one reasonable meaning.  Id.  We construe a contract to give meaning to all of its terms.  Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 394 (Minn. 1998).  The other provisions of the agreement identified by Rasmusson do not render the phrase "life of the products" unclear.  Paragraph 7.3 allows the license agreement to be assigned to another entity through STEN's merger, consolidation, or reorganization.  Even if evidence had been presented to establish that Aspen resulted from STEN's merger, consolidation, or reorganization, the phrase "life of the products" would still apply unambiguously because Aspen would simply step into STEN's shoes as the obligated "licensee" referred to in paragraph 4.1.  That royalty payments might continue to be made to Rasmusson's heirs or that there are specific procedures to terminate the royalty obligations, as contemplated by paragraph 7.8, does nothing to disturb the unambiguous nature of "life of the products" as that phrase is used in paragraph 4.1.  We hold that the phrase "life of the products" in the license agreement is unambiguous.  We now construe the agreement and decide whether the evidence allows a determination that STEN or Aspen breached it.

The construction of an unambiguous contract is a question of law, which we review de novo.  Wolfson v. City of St. Paul, 535 N.W.2d 384, 386 (Minn. App. 1995), review denied (Minn. Sept. 28, 1995).  We interpret contract language according to its plain and ordinary meaning.  Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 34647 (Minn. 2003).  Based on the plain and ordinary meaning of "life of the products" read in context with the other provisions of the license agreement, we conclude that Rasmusson was entitled to receive royalty payments from STEN, or from STEN's "successors and assigns," for so long as Rasmusson's products continued to be possessed and sold by STEN or its successor or assignee.

Under this construction, it is clear as a matter of law that neither STEN nor Aspen is liable to Rasmusson for continued royalty payments.  STEN no longer sells Rasmusson's products, and it is undisputed that STEN paid Rasmusson royalties for all the covered products that STEN sold.  Aspen is not generally liable for royalty payments under the license agreement because Aspen did not result from a merger with, consolidation with, or reorganization of STEN.  And Aspen, having expressly rejected assumption of the STEN-Rasmusson license agreement within the STEN-Aspen asset purchase agreement, also cannot be found liable through assignment for royalties under the license agreement.

Rasmusson counters that although Aspen expressly rejected assignment, a fact dispute exists as to whether Aspen impliedly accepted an assignment.  He relies only on Borer v. Carlson, 450 N.W.2d 592, 594 (Minn. App. 1990), review denied (Minn. Mar. 8, 1990).  That reliance is misplaced.  In Borer, this court held that an assignee who impliedly assumes a contract's obligations is liable for those obligations.  Id.  The Borer analysis concerning an impliedly assumed duty depends on the existence of an actual assignment.  So before considering whether the acceptance of an assignment might imply the assumption of the duties attendant to the assignment, there must first be an assignment on which the implied assumption of duties might rest.  Rasmusson misreads Borer to stand for the proposition that an entity that is indirectly benefited by the existence of a contract impliedly assumes the contract's duties.  Borer's holding does not approach that proposition.  That Aspen expressly declined to accept assignment of the STEN-Rasmusson agreement renders Borer's analysis and holding inapplicable.

Rasmusson points us to the Supreme Court's decision in Aronson v. Quick Point Pencil Co.  440 U.S. 257, 26364, 99 S. Ct. 1096, 10991100 (1979), to contend that he district court erroneously concluded that, because Rasmusson's products were not patentable, Rasmusson had no rights to royalties for the covered products.  Rasmusson misunderstands the district court's reliance on Aronson.  The district court actually cited Aronson for the proposition that because Rasmusson has no patent, patent law cannot extend Rasmusson's product protection to require royalties beyond the protection afforded by the license agreement.  Rasmusson had urged the district court to determine that he alone "possesses the exclusive right to market, manufacture and sell [the covered] products."  The district court construed this contention effectively to be a request to honor Rasmusson's supposed patent rights, but none exists.  The district court's discussion of Aronson was legally correct and incidental to its ruling that the license agreement afforded Rasmusson no basis to continue to collect royalties from STEN.

Rasmusson also argues that STEN breached the STEN-Rasmusson license agreement by conveying the raw materials, product specifications, toolings, packaging equipment, marketing materials, and staff training necessary to allow Aspen to manufacture and sell products identical to those covered by the agreement.  He contends that this conveyance breached STEN's obligation under paragraph 7.8 of the agreement to return the rights to the covered products to Rasmusson.  We see no breach.

Under the license agreement, Rasmusson exchanged his knowledge, technical information, and methods of use concerning the covered products for royalties based on the sale of those products.  The agreement defines no other "rights" in the products, and Rasmusson has no independent claim to intellectual property in them.  We agree with Rasmusson that the license agreement would prohibit STEN from selling Rasmusson's know-how to a third party, leaving nothing to be transferred back to Rasmusson upon STEN's decision to cease manufacturing and selling the products as contemplated in paragraph 7.8.  But Rasmusson offers no record support for his contention that STEN conveyed Rasmusson's know-how to Aspen by selling the product specifications, equipment, and training related to manufacturing the covered products.  It is undisputed that the products, though originally creative in conception, are so simple by design that Aspen gained no particularized know-how through the challenged conveyance.  During oral argument, Rasmusson's counsel was unable to point to record evidence establishing any factual relationship between the know-how that Rasmusson provided to STEN and the product specifications and the other items that STEN conveyed to Aspen.  After STEN completed the asset sale to Aspen, it informed Rasmusson that all rights to the products under the license agreement returned to Rasmusson.  STEN therefore met its obligation under the license agreement to transfer all rights back to Rasmusson, and the district court accurately determined that Rasmusson failed to establish that STEN conveyed any rights to which Rasmusson was entitled.

The district court properly dismissed Rasmusson's breach-of-contract claims at summary judgment.  We turn next to the dismissal of Rasmusson's claims of unjust enrichment.

II

Rasmusson asserts that the district court erred by granting summary judgment against him on his claims of unjust enrichment.  The claim of unjust enrichment arises from an equitable doctrine, and the district court has discretion to grant or deny equitable relief.  City of Cloquet v. Cloquet Sand & Gravel, Inc., 312 Minn. 277, 279, 251 N.W.2d 642, 644 (1977).  We will reverse a discretionary decision only where a district court's conclusion is clearly erroneous and "against logic and the facts on the record."  Putz v. Putz, 645 N.W.2d 343, 347 (Minn. 2002).  Unjust enrichment has three elements: (1) a party received something of value, (2) the party was not entitled to receive it, and (3) it would be unjust to allow the party to retain the benefit.  Acton Const.  Co.  v. State, 383 N.W.2d 416, 417 (Minn. App. 1986), review denied (Minn. May 22, 1986).

Rasmusson has not demonstrated that the district court acted in clear error outside of its discretion.  Rasmusson does not deny that he received all royalty payments due him for the products STEN sold to Aspen.  He maintains that the facts may establish that STEN received an unjust windfall by selling its customer base to Aspen because, according to Rasmusson, a portion of this base exists due to customer interest in the covered products as opposed to interest in noncovered products.

Rasmusson's contention that the district court improperly weighed facts at summary judgment concerning the basis for customer loyalty is not compelling.  It is axiomatic that "unjust enrichment claims do not lie simply because one party benefits from the efforts or obligations of others."  First Nat'l Bank of St. Paul v. Ramier, 311 N.W.2d 502, 504 (Minn. 1981).  It may be that by selling the covered products STEN benefited financially beyond any direct profit from the manufacture-and-sale process.  But Rasmusson does not make the case that STEN's enrichment is unjust.  He claims no legal right to the customer list.  STEN was free to use that list as a prospecting source to market its other products or, barring no legal restriction, simply to sell for profit, as it did.  Rasmusson's only alleged contribution to the development of the list was conveying to STEN the right to manufacture and sell the covered products, but he negotiated for and received all the consideration to which he was entitled in the nature of royalty payments.  We fail to see any injustice in STEN's sale of its customer list, even if some of the customers were on the list solely because they were enticed by the covered products.  Similarly, we see no basis to conclude that Aspen's purchase of the customer list makes Aspen liable to Rasmusson for unjust enrichment, and Rasmusson does not support his challenge to the district court's summary judgment decision as to Aspen with any developed argument.  Because Rasmusson fails to demonstrate an injustice to him by STEN's sale of its customer list to Aspen, the alleged factual dispute is immaterial.  The remaining issue concerns Rasmusson's effort to add conversion claims.

III

Rasmusson argues that the district court abused its discretion by denying his  motion to amend his complaint to add claims of conversion.  A district court has broad discretion to decide whether to grant leave to amend a complaint, and its ruling will not be reversed absent a clear abuse of discretion.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).  The district court may deny a motion to amend a complaint when no evidence supports the proposed amendment.  Eustis v. David Agency, Inc., 417 N.W.2d 295, 299 (Minn. App. 1987).

The evidence could not support Rasmusson's claims of conversion.  To prove conversion, a plaintiff must show that he possesses a property interest and that the defendant deprived him of that interest.  Olson v. Moorhead Country Club, 568 N.W.2d 871, 872 (Minn. App 1997), review denied (Minn. Oct. 31, 1997).  Rasmusson offers only the conclusory argument that the district court improperly denied his motion to amend "by misapplying applicable law, improperly weighing the credibility and probative value of evidence and testimony, and ignoring issues of material fact."  His opening brief does nothing to identify the supposed misapplied law, improperly weighed evidence, or material fact issues.  Rasmusson's only apparent property rights concerning the covered products manufactured and sold by STEN arise from the license agreement.  For reasons previously discussed, Rasmusson has not demonstrated any deprivation of those rights.  The district court accurately determined that the facts in the record could not support the proposed conversion claims, and it therefore did not abuse its discretion by denying Rasmusson's motion to amend.

Affirmed.