Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-15-01420/USCOURTS-ca8-15-01420-0/pdf.json

Parties Involved:
Steven Hood
Appellant
Loftness Specialized Farm Equipment, Inc.
Appellee
Terry Twiestmeyer
Appellant
Twiestmeyer & Associates, Inc.
Appellant

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 15-1420

___________________________

Loftness Specialized Farm Equipment, Inc.

lllllllllllllllllllll Plaintiff - Appellee

v.

Terry Twiestmeyer; Steven Hood; Twiestmeyer & Associates, Inc.

lllllllllllllllllllll Defendants - Appellants

____________

Appeal from United States District Court 

for the District of Minnesota - Minneapolis

____________

 Submitted: October 19, 2015

 Filed: March 15, 2016

____________

Before WOLLMAN, BEAM, and GRUENDER, Circuit Judges.

____________

GRUENDER, Circuit Judge.

Loftness Specialized FarmEquipment, Inc. (“Loftness”) brought a declaratory

judgment action against Terry Twiestmeyer, Steven Hood, and Twiestmeyer &

Associates, Inc. (“TAI”) involving contracts associated with the development,

manufacture, and sale of grain-bagging equipment. Twiestmeyer, Hood, and TAI

then asserted counterclaims against Loftness for, among other things, breach of two

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contracts: an agreement providing for two-percent override payments (“Override

Agreement”) on grain-bagging-equipment sales and a non-disclosure agreement

(“NDA”). The district court granted Loftness’s motion for summary judgment on the

breach-of-contract counterclaims and entered judgment for Loftness on its claim for

declaratory judgment. Twiestmeyer, Hood, and TAI appealed. This court affirmed

the district court’s grant of summary judgment to Loftness on the counterclaim for

breach ofthe Override Agreement and affirmed the dismissal ofthe unjust enrichment

counterclaim, but we vacated and remanded the grant of summary judgment on the

counterclaim for breach of the NDA. Loftness Specialized Farm Equipment, Inc. v.

Twiestmeyer, 742 F.3d 845, 851 (8th Cir. 2015) (“Loftness I”). On remand, the

district court again granted Loftness’s motion for summary judgment on the claimfor

breach of the NDA. Twiestmeyer, Hood, and TAI again appeal. We vacate the grant

of summary judgment and remand for further proceedings.

 

I.

Loftness is a corporation that manufactures and sells farm-machine

attachments. Terry Twiestmeyer owned TAI, an independent sales representative that

sold farming equipment on behalf of Loftness and other manufacturers. Hood’s

company, Hood & Company, Inc., also served as a sales representative for Loftness. 

Twiestmeyer and Hood sold grain-bagging equipment manufactured in

Argentina. This experience provided them with knowledge about the market for

grain-bagging equipment and insight into possible improvementsto the Argentinianmade equipment. In 2007, Twiestmeyer and Hood approached Loftness with an idea

for a new line of grain-bag loaders and unloaders for Loftness to manufacture and

sell. Loftness did not manufacture grain-bagging equipment prior to this time.

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At the May 2007 initial meeting to discuss the potential new product line,

Loftness and TAI executed the NDA. The NDA’s “Protection of Confidential

Information” provision states:

[Loftness] acknowledges that [TAI] claims its Confidential Information

as a valuable and unique asset . . . [Loftness] agrees that it will keep in

confidence all Confidential Information, and that it will not directly or

indirectly disclose to any third party or use for its own benefit, or use for

any purpose other than the Project, any Confidential Information it

receives from [TAI]. [Loftness] agrees to protect the Confidential

Information, and agrees that in no event will it use less than the same

degree of care to protect the Confidential Information as it would

employ with respect to its own information of like importance that it

does not desire to have published or disseminated.

The NDA defines “Confidential Information” as “[s]uch information that [TAI]

considers to be proprietary and/or confidential.” The “Competitive Business”

provision establishes that “[Loftness] agrees not to use [TAI]’s confidential

information in any way that could be construed as being competitive of [TAI]’s

business for a period of twenty (20) years after the effective date of this Agreement.” 

Twiestmeyer and Hood shared confidential information with Loftness at this

May 2007 meeting. Specifically, Twiestmeyer and Hood informedLoftness about the

market for grain-bagging equipment, the need for such equipment in the United

States, their suggested design improvementsto the Argentinian-made equipment, and

the timing for bringing such a product line to the market. After the meeting, Loftness

representatives traveled to Arkansas and Nebraska to examine the Argentinian-made

equipment, then reverse-engineered a prototype of a grain-bag unloader, which,

according to Twiestmeyer and Hood, incorporated several of their ideas, including

the addition of two clutches. Loftness also developed a grain-bag loader. Loftness

began manufacturing and selling this equipment in 2008.

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In May 2008, the parties entered the Override Agreement to establish

Twiestmeyer and Hood’s compensation for their role in developing the new product

line. In this agreement, Loftness agreed to payTwiestmeyer and Hood “a two percent

(2%) override of the dealer net price on all grain bagging equipment and related

products, except grain bags, sold by LOFTNESS during the term of the Agreement.”1

The Override Agreement specified a duration of two years.

In May 2010—just before the Override Agreement wasset to expire—Loftness

informed all of its independent sales representatives, including Twiestmeyer and

Hood, that Loftness had reached a deal with Brandt Industries. Under this new

agreement, Brandt Industries would sell Loftness-manufactured grain-bagging

equipment, which allegedly incorporated TAI’s design improvements and other

confidential information.

Loftness continued paying the two-percent override to Twiestmeyer and Hood

through the end of 2010, even though the Override Agreement had expired. In

January 2011, Twiestmeyer and Hood approached Loftness with a new two-percent

agreement. This proposed agreement included Grain Bag Storage Systems,

Twiestmeyer and Hood’s new business entity, as an additional party and provided for

a ten-year term. Loftness declined, advising Twiestmeyer and Hood that it would

stop using TAI’s trademark and cease making the two-percent override payments

after February 2011.

Loftness brought suit, seeking a declaratory judgment that it had no duty to pay

Twiestmeyer, Hood, or TAI under any existing contract. Twiestmeyer, Hood, and

TAI filed an answer and asserted five counterclaims: (1) breach of the Override

Agreement, (2) breach of the NDA, (3) violation of the Uniform Trade Secrets Act,

TAI is not a party to the Override Agreement. 1

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(4) violation of the Uniform Deceptive Trade Practices Act, and (5) unjust

enrichment. The district court granted Loftness’s motion to dismiss with respect to

counts three, four, and five. The parties then completed discovery, and Loftness

moved for summary judgment on the two remaining breach-of-contract claims. The

district court granted Loftness’s motion for summary judgment on both claims. 

Twiestmeyer, Hood, and TAI appealed. On appeal, we affirmed the district court on

the counterclaims for breach of the Override Agreement and unjust enrichment, but

we vacated and remanded the grant of summary judgment on the counterclaim for

breach of the NDA. LoftnessI, 742 F.3d at 845, 851. The district court again granted

Loftness’s motion for summary judgment as to breach of the NDA. Twiestmeyer,

Hood, and TAI again appeal.

II.

We review a district court’s grant of summary judgment de novo, viewing the

record in the light most favorable to the non-moving party. Montin v. Johnson, 636

F.3d 409, 412 (8th Cir. 2011). Summary judgment is appropriate if there is no

genuine issue of material fact, and the moving party is entitled to judgment as a

matter of law. Specht v. City of Sioux Falls, 639 F.3d 813, 819 (8th Cir. 2011). Our

subject matter jurisdiction in this case is based upon diversity of citizenship, and the

parties agree that Minnesota law applies. See S. Wine & Spirits of Nev. v. Mountain

Valley Spring Co., LLC, 646 F.3d 526, 531 (8th Cir. 2011).

The sole issue before the district court in considering Loftness’s motion for

summary judgment on remand was whether there was any issue of material fact

regarding TAI’s claim that Loftness had breached the NDA by disclosing and using

confidential information when it agreed to have Brandt Industries sell Loftnessmanufactured grain-bagging equipment.

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Critically, the district court determined that TAI’s argument that Loftness

breached the NDA by using TAI’s confidential information for Loftness’s own

benefit was not properly before the court because that argument was not asserted in

TAI’s counterclaims. We disagree. Those counterclaims posited three theories of

breach, namely, that Loftness breached the NDA by (1) “disclosing Confidential

Information to Brandt for purposes other than the Grain Bag Storage System

developed by Loftness and [TAI],” (2) “[u]sing Confidential Information in

competition [with] the business developed as part of the Project,” and (3) [f]ailing to

protect the Confidential information from being published or disclosed as to third

parties.” The second theory of breach raised in the counterclaims appears fairly to

encompass TAI’s use-for-its-own-benefit argument.

Having disposed of the argument based on Loftness’s use of confidential

information for Loftness’s own benefit, the district court instead focused on whether

Loftness had disclosed TAI’s confidential information in violation of the NDA. The

language of the NDA, the district court found, protected the use or disclosure of

“Confidential Information” related to the “Project,” but the NDA did not prohibit the

use or disclosure of project-related information that was no longer confidential. The

district court then determined that the “Project” covered by the NDA was the

development and marketing of the new grain-bagging product line with the intention

ofselling that product to the public, a definition supplied by TAI during the litigation

and reinforced by testimony from both parties. According to the district court, this

evidence conclusively showed that the parties intended the NDA to protect the

confidential information pertaining to the project in the event Loftness decided not

to develop, manufacture, and sell the new equipment; the parties did not intend to

provide twenty-year protection for information that was confidential at the time the

NDA was executed but later became publicly available when the grain-bagging

equipment openly was sold to the public. Additionally, the court found that the

information had, in fact, ceased to be confidential when the Loftness-built grainbagging equipment was sold to the public, as the equipment came with an owner’s

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manual sufficiently detailed to enable any other manufacturer to replicate the

equipment. The court reasoned that, because the confidential information initially

protected by the NDA was no longer confidential, that information was no longer

protected by the NDA when Loftness began its relationship with Brandt Industries. 

Therefore, the district court concluded, there was no genuine issue of material fact

remaining as to Loftness’s alleged breach of the NDA, rendering summary judgment

for Loftness appropriate.

On appeal, TAI argues that the NDA protected the information TAI disclosed

to Loftness for twenty years, regardless of whether the information subsequently

became publicly available. Resolution of this argument turns on interpretation of the

NDA. Under Minnesota law, “the primary goal of contract interpretation is to

determine and enforce the intent of the parties.” Motorsports Racing Plus, Inc. v.

Arctic Cat Sales, Inc., 666 N.W.2d 320, 323 (Minn. 2003). “Where the parties

express their intent in unambiguous words, those words are to be given their plain and

ordinary meaning.” Id. “The general rule is that where the intention of the parties

may be gained wholly fromthe writing, construction of a contract is a question of law

for the court. However, where the terms are not clear and unambiguous, construction

becomes a question of fact unless extrinsic evidence is conclusive.” Martens v.

Minnesota Min. & Mfg. Co., 616 N.W.2d 732, 751 (Minn. 2000). “Whether the terms

of a contract are ambiguous is a question of law to be determined by the court.” 

Blackburn, Nickels & Smith, Inc. v. Erickson, 366 N.W.2d 640, 643 (Minn. Ct. App.

1985) (citing Noreen v. Park Constr. Co., 96 N.W.2d 33, 36 (Minn. 1959)). “A

contract is ambiguous if it is reasonably susceptible to more than one construction.”

City of Virginia v. Northland Office Props. Ltd. P’ship, 465 N.W.2d 424, 427 (Minn.

Ct. App. 1991) (emphasis in original). 

TAI contends that Loftness breached the NDA by using confidential

information for Loftness’s own benefit in its relationship with BrandtIndustries while

the twenty-year term of the NDA was still in effect, even though TAI admitted that

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it no longer considered that information confidential at the time of Loftness’s alleged

breach. TAI argues that, at the time it entered the NDA and provided confidential

information to Loftness, TAI considered the information to be confidential and,

therefore, protected from future use or disclosure by Loftness for any purpose other

than the TAI-Loftness grain-bagging project, including any competitive use, such as

Loftness’s subsequent relationship with Brandt Industries. Loftness, in turn, argues

that it did not breach the NDA because it provides protection only for information

that remained confidential at the time of the alleged breach. According to Loftness,

the parties intended the NDA to protect TAI’s confidential information until the

successful manufacture and sale of the grain-bagging equipment rendered that

information no longer confidential or for twenty years if the grain-bagging project

never came to fruition. Under that interpretation, Loftness contends that it could not

have breached the NDA because TAI no longer considered the information at issue

confidential at the time of Loftness’s alleged breach. Despite these competing

interpretations ofthe meaning and implications of “confidential information,” neither

party argued before the district court that the NDA was ambiguous, and the district

court premised its reasoning on this seeming point of agreement, finding in favor of

Loftness’s interpretation. On appeal, however, “a reviewing court may make a

determination of whether a contract is ambiguous without deference to the trial

court’s determination.” Blackburn, 366 N.W.2d at 643.

The NDA’s “Protection ofConfidentialInformation” provision bound Loftness

to “not directly or indirectly disclose to any third party or use for its own benefit, or

use for any purpose other than the Project, any Confidential Information it receives

from [TAI].” Likewise, the competitive-business provision indicated that Loftness

agreed not to use any “confidential information in any way that could be construed

as being competitive of [TAI’s] business for a period of twenty (20) years after the

effective date of this agreement.” Thus, in order to violate either the protection or the

non-compete provisions, Loftness must have disclosed or used confidential

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information. In relevant part, the NDA defines “Confidential Information” to mean

“[s]uch information that [TAI] considers to be proprietary and/or confidential.”

However, the terms of the contract do not specify a temporal vantage point

from which to make our confidentiality inquiry. We therefore find that the NDA is

ambiguous as to whether “considers to be confidential” means that TAI had to

consider the information to be confidential at the time the parties entered the NDA

or whether TAI wasrequired to consider the information to be confidential at the time

of an alleged future breach. Although the district court rightly observesthat the NDA

does not specify that it protects information TAI considers confidential at the time of

execution of the NDA, the NDA likewise does not specify that its protections cease

once the information becomes public. We consider it reasonable that TAI would seek

to prevent Loftness from using the confidential information it provided at the outset

from any competitive use for twenty years, even if the parties completed the project

of manufacturing and selling grain-bagging equipment to the public. Likewise, it

seems reasonable that the parties may have intended to protect TAI’s confidential

information only so long asit remained confidential. We note that the NDA does not

refer to termination at all, except by indicating that the agreement “shall remain

binding for twenty (20) years,” unless terminated “in writing signed by both parties.”

Confronted with this apparent ambiguity, we turn elsewhere in the contract to

determine whether the ambiguity can be resolved. Boe v. Christlieb, 399 N.W.2d

131, 133 (Minn. Ct. App. 1987) (“Contracts must be construed as a whole, with the

parties’ intentions gathered from the entire instrument, not from isolated clauses.”). 

Paragraph 2 of the NDA explicitly restricts use of confidential information “for any

purpose other than the Project”; however, the NDA’s definition of project provides

no further guidance in delineating the project’s contours. Faced with two reasonable

interpretations and unable to glean the parties’ intent “wholly from the writing,”

Martens, 616 N.W.2d at 751, we consider the NDA to be ambiguous as to the scope

of the parties’ intended protection of confidential information. See Boe, 399 N.W.2d

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at 133. Accordingly, “construction then becomes a question offactfor the jury unless

[extrinsic] evidence is conclusive.” Blackburn, 366 N.W.2d at 643.

“To determine intent of the parties, the court looks at surrounding

circumstances and the parties’ own subsequent conduct.” Fredrich v. Indep. Sch.

Dist. No. 720, 465 N.W.2d 692, 695 (Minn. Ct. App. 1991). “The most probative

evidence is the actions of the parties afterwards.” Id. We first note that TAI has

defined “Project” throughout this litigation as comprising the development of the

sales of grain-bagging equipment. In relation to that purpose, TAI admits in its brief,

“If the Project was successfully completed, [TAI] and Loftness fully intended for

[TAI]’s grain-bagging concept to be manufactured and sold to the general public.” 

The project thus culminated in the public availability of the Loftness-built grainbagging equipment. This equipment, in turn, came with a a detailed owner’s manual.

Twiestmeyer acknowledged that this owner’s manual would enable any other

manufacturer, including Brandt Industries, to replicate the Loftness-built grainbagging system—that is, the project, if successful, necessarily divulged TAI’s

confidential information. Once made public in this manner, TAI concedesin its brief

“that the information conveyed would no longer be ‘confidential’ in the traditional

sense of the word.”

The fact that the parties made no effort to keep TAI’s confidential information

confidential, however, does not convince us that the parties intended for the NDA’s

protectionsto end. Even though the non-disclosure provision might no longer apply,

the non-use provision still might have prevented Loftnessfromusing thisinformation

for twenty years “in a[] way that could be construed as being competitive of [TAI’s]

business”—if the NDA is interpreted to protect information TAI considered to be

confidential at the time it disclosed the information to Loftness. 

Loftness offers that TAI failed to object to the disclosure or use of its

confidential information between the date when Loftness disclosed the Brandt

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Industries relationship and the date Loftness ceased making payments to TAI under

the Override Agreement and that this delay reflects a “course of performance

accepted or acquiesced in without objection” that is “relevant to determine the

meaning of the agreement.” See Oskey Gasoline & Oil Co., Inc. v. OKC Refining,

Inc., 364 F. Supp. 1137, 1143 (D. Minn. 1973) (quoting Minn. Stat. Ann. § 336.2-208

(1966)). This failure to object, Loftness continues, shows that the parties intended

the NDA to protect TAI’s confidential information for the twenty-year duration ofthe

agreement or until accomplishment of the manufacture and sale of the grain-bagging

equipment—whichever happened first. This evidence, however, does not

conclusively refute TAI’s argument that the NDA protected TAI’s confidential

information fromLoftness’s use “for its own benefit,” “for any purpose other than the

Project”—that is, for a use that benefitted Loftness without also benefitting TAI. 

Indeed, until Loftness stopped paying TAI, any use of TAI’s once-confidential

information for Loftness’s benefit through the Brandt Industries relationship also

benefitted TAI via the override payments. TAI thus reasonably might not have

“construed as being competitive of [TAI]’s business” Loftness’s use of TAI’s

confidential information while Loftness continued to make the override payments. 

The district court found dispositive the NDA’s lack of any provision relating

to payment, observing that the parties instead chose to address TAI’s compensation

through the Override Agreement, an agreement we already held Loftness had not

breached. Loftness I, 742 F.3d at 853. We disagree. The NDA bans Loftness’s use

2

of TAI’s confidential information “for [Loftness’s] own benefit” or in a way that

“could be construed as being competitive of [TAI]’s business.” As mentioned above,

however, so long as Loftness continued to pay TAI, TAI reasonably may have

considered Loftness’s use of TAI’s confidential information as part of the Brandt

Industries relationship to be a non-competitive use. Under this view, had Loftness

The district court addressed this argument in the alternative, having found

2

TAI’s use-for-its-own-benefit argument not before it, as noted above.

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wished to continue to use TAI’s confidential information in a potentially competitive

manner, Loftness could have continued to enter into ancillary payment agreements

with TAI. Because the extrinsic evidence is not conclusive, the fact question of the

parties’ intent should have gone to a jury, and summary judgment wasinappropriate. 

See Blackburn, 366 N.W.2d at 643.

III.

For the reasons set forth above, we vacate the district court’s grant ofsummary

judgment for Loftness on TAI’s claim for breach of the NDA and remand for further

proceedings. ______________________________

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