Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-16-01402/USCOURTS-ca8-16-01402-0/pdf.json

Parties Involved:
Rita Lamoureux
Appellee
MPSC, Inc.
Appellant

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 16-1402

___________________________

Rita Lamoureux, as trustee of the Rita Lamoureux Trust

lllllllllllllllllllll Plaintiff - Appellee

v.

MPSC, Inc., also known as Meat Processing Service Corporation, Inc.

lllllllllllllllllllll Defendant Third Party Plaintiff - Appellant

v.

Rita Lamoureux, individually

lllllllllllllllllllllThird Party Defendant - Appellee

____________

Appeal from United States District Court 

for the District of Minnesota - Minneapolis

____________

 Submitted: November 17, 2016

 Filed: February 27, 2017

____________

Before BENTON and SHEPHERD, Circuit Judges, and EBINGER, District Judge. 1

____________

The Honorable Rebecca Goodgame Ebinger, United States District Judge for

1

the Southern District of Iowa, sitting by designation.

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SHEPHERD, Circuit Judge.

MPSC, Inc. was a start-up company with an innovative idea—the patented

“Rinse & Chill service”—but no capital. An angel investor, John Lamoureux,

provided the necessary capital in exchange for a royalty fee every time the company

used its patented service. The contract specified three events that would terminate

the agreement but did not specify a termination date. MPSC now asks the courts to

supply an at-will termination term. The district court declined to do so. We affirm.

2

I. Background

MPSC is a Minnesota corporation in the meat-processing business with its

principal place of business in Wisconsin. In the 1980’s, MPSC developed a new

meat-processing technique called Rinse & Chill. The technique improved the amount

and quality of the meat removed from the animal. But the company had a problem

familiar to many start-ups: lack of capital to fund their innovation. So MPSC

solicited investors to provide the needed capital. John Lamoureux, a resident of

Florida, responded.

The two parties entered into an Investment Agreement in 1987. The agreement

called for Lamoureux to pay MPSC the amount of $150,000. In return, he received

the “rights to $1.50 per animal processed by MPSC, up to a maximum of the first five

hundred (500) animals per day, for 260 days per year, as long as this agreement

remains in effect.” Paragraph five of the agreement discusses termination events:

5. This agreement shall terminate upon the happening of any of the

following events:

The Honorable JohnR. Tunheim, Chief Judge,United States DistrictCourt for

2

the District of Minnesota.

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(a) The dissolution, bankruptcy, insolvency or receivership of

MPSC;

(b) The demise of the legal holder(s) of this agreement under such

circumstances that no survivor or survivors of the holder(s) can be

located;

(c) Written agreement of MPSC and the legal holder(s) of this

agreement.

The agreement makes no mention of a termination date. It also states that “MPSC

agreesthere shall be no restriction to the transfer of rights granted by this agreement.”

Some 25 years later, MPSC determined that because the agreement did not

contain a precise termination date, MPSC had the right to terminate the agreement at

will after providing reasonable notice. By this time, John Lamoureux had passed

away, survived by his wife, Rita. In the spring of 2013, MPSC’s president met with

Rita and notified her of MPSC’s determination. MPSC ceased making payments

shortly thereafter. 

Rita subsequently filed a lawsuit alleging breach of contract in the United

States District Court for the District of Minnesota. The district court had diversity

jurisdiction under 28 U.S.C. § 1332. MPSC counterclaimed, and then each party 3

moved for summary judgment. The district court granted summary judgment to Rita

and against MPSC. The court first looked at the agreement’s text, which expressed

no termination date or time period for the payments to continue. Rather, the district

court noted, the agreement spells out three types of events, any of which would

terminate the agreement. The court noted also that the agreement calls for payments

to continue “as long as this agreement remains in effect.” Together the termination

events and the “as long as” language created a clear duty for MPSC to continue

This counterclaim involved an indemnity agreement between MPSC and Rita 3

Lamoureux. The district court held against MPSC on this claim, and MPSC did not

appeal. So we do not discuss the indemnity agreement or any facts related to it.

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payments until the occurrence of any termination event, according to the district

court. The court then considered Minnesota law and found that no specified

termination date is required when the obligor’s performance is conditioned on

conduct within the obligor’s control. And since MPSC has total control over whether

it processes meat, the district court held the agreement valid as written; MPSC could

not terminate the investment agreement at will. MPSC now appeals.

II. Discussion

“Minnesota law governs this diversity action.” Friedberg v. Chubb & Son,

Inc., 691 F.3d 948, 951 (8th Cir. 2012). We review a district court’s grant of

summary judgment de novo. Kobus v. Coll. of St. Scholastica, Inc., 608 F.3d 1034,

1035 (8th Cir. 2010). Summary judgment is appropriate when there are no genuine

issues of material fact and the moving party can demonstrate that it is entitled to

judgment as a matter of law. Fed. R. Civ. P. 56(a). Both parties agree there are no

genuine issues of material fact in this case. Only questions of law—Minnesota

contract law—are disputed.

To properly interpret a written contract, we first examine the text of the

contract to identify the parties’ intent. Dykes v. Sukup Mfg. Co., 781 N.W.2d 578,

582 (Minn. 2010). “Intent is ascertained, not by a process of dissection in which

words or phrases are isolated from their context, but rather from a process of

synthesis in which the words and phrases are given a meaning in accordance with the

obvious purpose of the contract . . . as a whole.” Motorsports Racing Plus, Inc. v.

Arctic Cat Sales, Inc., 666 N.W.2d 320, 324 (Minn. 2003) (citation omitted). 

Unambiguous contract language will be given its plain meaning. Savela v. City of

Duluth, 806 N.W.2d 793, 796-97 (Minn. 2011). 

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In this case, the Investment Agreement unambiguously calls for MPSC’s

continued performance for as long as it processes meat, unless one of the termination

events occurs. This is true for three key reasons.

First, the termination clause offers no specific end date or duration for MPSC’s

contractual obligations. Rather, it lists three termination events. This suggests the

partiesintended for the express termination events to serve asthe exclusive means of

contract termination. See Weber v. Sentry Ins., 442 N.W.2d 164, 167 (Minn. Ct.

App. 1989) (“The well-recognized rule of ‘expressio unius est exclusio alterius’

provides that the expression of specific things in a contract implies the exclusion of

all not expressed.”). The types of events chosen to terminate the contract bolsters our

conclusion. The first termination event was a very real possibility at the time the

parties entered into the Investment Agreement. Many start-up companies fail

financially before they have a chance to provide any kind of return to investors. The

second termination event calls for the contract to end when no survivor(s) of the

agreement’s legal holder can be found. This event appears to contemplate the

benefits of the royalty payments passing from one generation to the next. The third

termination event resembles a residual, catchall method of terminating the contract

by written agreement between the parties. On the surface, this clause seems

meaningless; any contract can be terminated by later written agreement. But if the

parties intended for this list of events to serve as the exclusive means of contract

termination, then the inclusion of a residual clause makes perfect sense.

Second, the contract as a whole evinces an intent for continued performance. 

The contract specifically states that MPSC’s obligations continue “as long as this

agreement remains in effect.” At first glance, this phrase looks to be pure tautology. 

But, when read together with the three termination events, it takes on real meaning. 

MPSC owes the rights holder “as long as” one of the three termination events has not

occurred and MPSC still processes meat. A separate clause in the agreement

disallowing any restriction on transfer offers further evidence of intent for continued

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performance. The underlying premise of that clause is the same as that of the second

termination event—an intent for the rights to the royalty payments to pass to the

successors of the rights holder.

Third, continued performance fits with the purpose of the contract as a whole. 

See Motorsports Racing, 666 N.W.2d at 324. This is an investment agreement. The

purpose of this kind of contract is clear: an offer of cash from an angel investor to get

a start-up off the ground in exchange for a slice of the rewards should the start-up

succeed. See Holdahl v. Bioergonomics, Inc., No. A12-1495, 2013 WL 401885, at

*1 n.1 (Minn. Ct. App. Feb. 4, 2013) (discussing angel investors). A variety of

financial arrangements can fulfill this purpose. A common form of investment

agreement consists of the start-up granting the angel investor an equity stake in the

company. See Darian M. Ibrahim, The (Not So) Puzzling Behavior of Angel

Investors, 61 Vand. L. Rev. 1405, 1422 (2008). Here, we see an alternative

investment agreement where the start-up retains all of its equity but instead offers a

stream of royalty payments based on the product’s use. If John Lamoureux had taken

an equity stake in the company, MPSC surely could not come back some 25 years

later, after it had achieved great success, and erase Lamoureux’s equity stake. 

Likewise, we see no reason to presume that a stream of royalty payments, paid out as

part of an investment agreement, can be terminated except under the terms of that

agreement.

For these reasons, we conclude that the express terms of the Investment

Agreement compel MPSC’s continued performance. MPSC can relieve itself of

continued performance only if some principle of Minnesota contract law overrides

the express terms of the contract.

MPSC argues that Minnesota contract law requires us to supply an at-will

termination provision to the Investment Agreement because the agreement has no

definite duration. See Minn. Deli Provisions, Inc. v. Boar’s Head Provisions Co., 606

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F.3d 544, 549 (8th Cir. 2010). MPSC relies primarily on two Minnesota state cases

to support its argument. In Hayes v. Northwood Panelboard Co., a letter sent by a

plywood manufacturer to a logging company stated that the manufacturer would

purchase wood “annually” from the logging company. 415 N.W.2d 687, 689 (Minn.

Ct. App. 1987). When the manufacturer stopped purchasing wood, the logging

company filed suit but lost at trial. Id. On appeal, the court held, “Because [the]

letter is indefinite as to its durational terms, the trial court properly ruled that any

contract based on the letter was indefinite as a matter of law and could be terminated

at will.” Id. at 691. In Rosenberg v. Heritage Renovations, LLC, a real-estate broker

contracted with a developer to sellseveral hundred condominium units. 685 N.W.2d

320, 322 (Minn. 2004). The developer terminated the agreement before all units were

sold. Id. at 323. The broker sued, but the trial court held in favor of the developer. 

Id. at 323-24. On appeal, the Minnesota Supreme Court held, “Because there is no

definite date in the contract or even an event from which one could reasonably

determine a definite date, . . . the district court could properly conclude that the lack

of a specific termination date rendered the [contract] terminable at will.” Id. at 326. 

Here, the Investment Agreement is terminable at will, MPSC contends, because the

agreement is an indefinite contract—it lacks either an expressed or implied definite

duration.

But we disagree; Minnesota law makes clear that a contract is not indefinite

when a party’s performance is conditioned on conduct within that party’s control. 

See Minn. Deli, 606 F.3d at 549 (“Minnesota law does not, however, permit unilateral

termination at will in cases where the contract provides that it will continue ‘so long

as’ one party performs satisfactorily.”); Benson Co-op. Creamery Ass’n v. First Dist.

Ass’n, 151 N.W.2d 422, 427 (Minn. 1967) (holding that if the obligor’s performance

was conditioned on the obligee remaining in the obligor’s association, then the

obligor could not terminate the contract at will); Legred v. Smeal Pork Co., No. C9-

02-619, 2002 WL 31819222, at *2 (Minn. Ct. App. Dec. 17, 2002) (holding that a

contract between a pork company and its marketer was not of indefinite duration

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because performance was called for “as long as” the pork company kept a particular

breed of hog in its herd). Here, MPSC must pay royalty fees “as long as” it processes

meat (or until one of the termination events occurs). The choice to process meat,

which triggers the contractual obligation to pay, rests entirely at MPSC’s discretion. 

Thus, under Minnesota law, the Investment Agreement is not indefinite; no at-will

termination provision need be added by the courts.

Even the cases cited by MPSC fail to support its contention that this particular

agreement is terminable at will. The jury in Hayes determined that no contract

actually existed between the parties. 415 N.W.2d at 689. So no durational

term—definite or indefinite—actually existed in that case. Rosenberg, on the other

hand, involved an employment agreement. “Under Minnesota law, an employment

agreement with no definite expiration date is presumed to be at will.” Rosenberg, 685

N.W.2d at 326. Employment contracts implicate the law’s aversion to involuntary

servitude. See 25 Williston on Contracts § 67:102 (4th ed. 2002) (discussing the

judiciary’s “repugnance” to involuntary servitude in employment contracts). So it

makes sense for Minnesota courts to demand a definite expiration date in an

employment contract. Yet a concern for involuntary servitude is not present here. 

After all, this is an Investment Agreement, not an employment contract. 

MPSC’s last argument relies on a decision from the Fifth Circuit supplying an

at-will termination provision to a contract with specified termination events but no

termination date. In Trient Partners I Ltd. v. Blockbuster Entertainment Corp., a

limited partnership (Trient) entered into a licensing agreement with Blockbuster to

own and operate a number of Blockbuster stores in a given geographic area. 83 F.3d

704, 706 (5th Cir. 1996). The License Agreement stated that it would “continue

indefinitely . . . until terminated in accordance with the provisions hereof.” Id. at 709. 

The referenced provision contained four terminations events:

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(1) defaults by either party that are not or cannot be cured within a

specified number of days; (2) the death or incapacity of a natural person

who is one of Trient’s partners, if Blockbuster does not consent to the

transfer of the deceased partner’s interest; (3) the transfer or change of

control of Trient’s partnership withoutBlockbuster’s prior approval; and

(4) the insolvency of either party.

Id. Analyzing the agreement, the Fifth Circuit found that the termination events did

“not limit the duration of the License Agreement or make its duration determinable

in any real or concrete way.” Id. The agreement wastherefore terminable at will. Id.

Unfortunately for MPSC, the Fifth Circuit’s decision examines a factually

distinguishable contract with inapplicable legal analysis. The agreement in Trient

states that it will “continue indefinitely,” whereas the Investment Agreement here

makes no such statement. Turning to the legal analysis, the Trient court analyzed a

contract under Texas—not Minnesota—state law. Id. at 708. And precedent from

our own circuit stands opposed to Trient’s principal holding. In Southern Wine &

Spirits of Nevada v. Mountain Valley Spring Co., we held a contract had a definite

duration when the contract stated that it would terminate upon the occurrence of a

termination event, without any mention of a durational term. 646 F.3d 526, 532 (8th

Cir. 2011) (applying Nevada law).

III. Conclusion

The clear intent of the Investment Agreement is for MPSC’s continued

performance as long as it processes meat and none of the three termination events

occur. We see no principle of Minnesota state law or general contract law that

overrides the agreement’s intent. Thus we affirm the district court.

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