Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-05-03434/USCOURTS-ca8-05-03434-0/pdf.json

Parties Involved:
Millennium Inorganic Chemicals
Appellee
Slidell
Appellant

Document Text:

1

The Honorable John R. Tunheim, United States District Judge for the District

of Minnesota.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 05-3434

___________

Slidell, Inc., *

*

Appellant, *

* Appeal from the United States

v. * District Court for the

* District of Minnesota.

Millennium Inorganic Chemicals, Inc., *

*

Appellee. *

___________

Submitted: April 19, 2006

Filed: August 23, 2006 

___________

Before WOLLMAN, HANSEN, and BENTON, Circuit Judges.

___________

WOLLMAN, Circuit Judge.

Slidell, Inc. (Slidell) appeals from the judgment entered by the district court1

on the jury verdict in its breach of contract claim against Millennium Inorganic

Chemicals, Inc. (Millennium). Additionally, Slidell appeals from the district court’s

denial of its motion for judgment as a matter of law and for new trial and for an order

to determine liability for wrongful injunction. We affirm.

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Including the price for change orders that are not in dispute, the total contract

price for all seven machines and some additional equipment was about $11.2 million.

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I.

Slidell manufactures automated packaging equipment used in the titanium

dioxide industry. Millennium, which produces titanium dioxide, decided to purchase

from Slidell seven fully automated packaging machines to be installed in its facilities

in Ohio, England, and France. After months of negotiation, Slidell and Millennium

entered into a contract providing that Slidell would manufacture the seven machines

for a total contract price of $10,350,465,2

 which included up to a twelve percent

discount that Millennium would receive only if the fundamental aspects of all seven

machines were identical. The contract further provided that: 

Waivers shall not be binding unless set forth in writing and signed by the

party allowing the waiver. No waiver of a breach of any provision of

this Contract shall constitute a waiver of any other breach of the

provision or any breach of any other provisions of this Contract.

Appellant’s App. at 371. Additionally, the contract provided that any changes to the

final scope of the project were to be made in accordance with a written order to Slidell

and agreed to by the parties. The contract did not set a delivery date for the equipment

but instead required Millennium to make milestone progress payments to Slidell

throughout the course of performance. Testimony at trial indicated that the parties

understood that the seven machines would be completed within approximately sixteen

months. Additionally, the contract required that Slidell submit biweekly status reports

and updated Gantt schedules to Millennium. The contract specified that the agreement

should be interpreted in accordance with Minnesota law.

In October 2000, friction developed between Slidell and Millennium over the

equipment’s computerized supervisory system. Millennium decided to upgrade the

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supervisory system specified in the contract and executed two change order

development requests that authorized Slidell to start designing the system. In March

2001, Slidell informed Millennium that completing the supervisory system to

Millennium’s new specifications would add another $1.6 million to the contract price.

Millennium was dissatisfied with this price and requested that Slidell remove the

supervisory system from the scope of its work.

In May 2001, Millennium confirmed that it was removing the supervisory

system from the scope of the contract with Slidell. There is evidence that around May

11, sensitive information regarding Slidell’s design of the machines was provided to

the RoviSys Company (RoviSys) without Slidell’s consent. Throughout the rest of

May, Millennium had meetings with RoviSys regarding its manufacture of the new

supervisory system. Testimony at trial indicated that Slidell was never informed of

these meetings. Around this same period of time, Slidell met with Millennium to

discuss the removal of the supervisory system from their contract.

On June 21, 2001, Millennium asked Slidell for permission to share Slidell’s

technical information with RoviSys for the purpose of providing RoviSys with

background information on the packaging machines so that it could design the new

supervisory system. Slidell replied that this would require a separate nondisclosure

agreement with RoviSys. Slidell prepared the agreement, RoviSys signed it, and

Millennium sent it to Slidell for its signature. Without so informing Millennium,

Slidell did not sign the agreement. Millennium then shared Slidell’s design

documents with RoviSys.

In August 2001, Slidell prepared Change Order No. 5, which, in accordance

with Millennium’s request, removed the supervisory system from the scope of

Slidell’s work without any change in the contract price. Slidell sent the change order

to Millennium for its signature, representing to Millennium that it would sign Change

Order No. 5 once Millennium signed it. Notwithstanding this representation, Slidell

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never signed the order, nor did it inform Millennium that it had not done so. There

is evidence that in August and September of 2001, Slidell threatened to sue

Millennium if it failed to perform on the contract or failed to accept a change order to

remove the 12 percent discount. 

On January 17, 2002, Slidell sued Millennium for breach of contract,

promissory estoppel, quantum meruit, equitable estoppel, and violations of the

Minnesota Uniform Trade Secrets Act, M.S.A. §§ 325C.01-.08. Millennium

counterclaimed for breach of contract, specific performance, replevin, unjust

enrichment, an equitable lien, and a constructive trust. At the time Slidell commenced

this action, Millennium had paid Slidell $8.82 million in progress payments under the

contract. This was $500,000 more than the amount to which Slidell was entitled under

the milestone progress payment schedule set forth in the contract. Slidell’s damages

expert testified that at the time Slidell stopped work on the machines, Slidell had

realized a net profit on the job of nearly $1.5 million. Millennium’s damages expert

determined this net profit to be about $4.6 million. 

In February 2002, Slidell informed Millennium that it intended to disassemble

the partially completed machines and sell and return the parts and components for

value. On March 7, 2002, Millennium moved for a preliminary injunction prohibiting

Slidell from selling, returning, or transferring any of the equipment or components to

third persons for value pending the outcome of the trial on the merits. The district

court granted the motion, entered the injunction, and required Millennium to post a

$2 million injunction bond to pay any costs or damages incurred by Slidell in the

event that it was found that Slidell had been wrongfully enjoined.

In October and November of 2003, Slidell and Millennium filed cross-motions

for summary judgment. On June 28, 2004, the district court granted Slidell’s motion

to dismiss Millennium’s equitable claims for a constructive trust, an equitable lien,

and unjust enrichment. The district court also granted Millennium’s motion to dismiss

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Slidell’s claim for equitable estoppel but denied summary judgment as to all

remaining claims. 

On October 4, 2004, both parties filed their own statements of the case.

Millennium’s statement related that Slidell’s work under the contract proceeded

slowly and that there were disputes about wire colors for the machines. Among other

things, Millennium also asserted that Slidell was deficient in providing the appropriate

level of management for the project. Slidell’s statement focused on Millennium’s

alleged misappropriation of trade secrets, breach of contract, quantum meruit, and

promissory estoppel regarding long-term European field support.

Prior to trial, both parties submitted proposed jury instructions. Slidell’s

proposed instruction on waiver stated that to establish waiver, “Millennium must

prove the heightened standard that (a) Slidell’s actions were so clear and unequivocal

that no other reasonable explanation of the conduct is possible, and (b) Millennium

must relied [sic] upon the conduct to its detriment.” Appellant’s App. at 287. It also

required the jury to find that Slidell intentionally relinquished the contract provision

providing that all waivers be in writing before it could find waiver. Finally, the

proposed instruction stated that if Slidell had clearly communicated to Millennium

that it reserved its rights under the contract, it did not waive these rights. Slidell’s

proposed instruction on equitable estoppel provided that the jury must find that

Slidell’s representations must be enforced to avoid injustice before it could find

equitable estoppel and that the jury could not find equitable estoppel if Millennium

had engaged “in any misleading tactics, concealments, misrepresentations and/or

defaults that exacerbated the situation.” Appellant’s App. at 288. Slidell’s proposed

instruction on prior breach provided that if the jury found “that Slidell’s decision to

stop performance of the contract and initiate this lawsuit occurred before

Millennium’s breach, then Millennium’s breach is excused.” Appellant’s App. at 287.

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The trial occupied some twenty-three days during January and February 2005.

Both Millennium and Slidell offered testimony relating the events that had occurred

between the parties and testimony that the project had been delayed for numerous

reasons. Millennium also offered testimony that Slidell’s initial project manager

lacked experience and that she had failed to provide the biweekly status reports and

updated Gantt schedules to Millennium as required by the contract. At the close of

the evidence, Slidell moved for judgment as a matter of law on Millennium’s

remaining equitable claims for specific performance and replevin, as well as its

affirmative defense of equitable estoppel. Millennium responded by voluntarily

dismissing its specific performance and replevin claims. The district court denied

Slidell’s motion to dismiss Millennium’s equitable estoppel defense and submitted the

remaining claims to the jury.

At the charge conference, Slidell reiterated its view that to find a waiver of a

specific contract provision, a jury must first find a separate waiver of the provision

that requires all waivers to be in writing. It also argued that an implied waiver

requires a heightened standard of proof. Further, Slidell contended that if Millennium

breached, Slidell had the right to proceed in a commercially reasonable manner and

that if it continued performing under a reservation of rights, its performance could not

have constituted a waiver. Finally, Slidell argued that if an equitable estoppel

instruction were given to the jury, the court should include an instruction on the

unclean hands doctrine as a defense to equitable estoppel.

In its Instruction 13, the district court instructed the jury that:

First, Millennium alleges that Slidell waived Millennium’s breach. In

order for Slidell to have waived Millennium’s breach, you must find that

Slidell knew of its legal rights, intended to relinquish its rights, and

unequivocally did so. If you find that Millennium breached particular

provisions of the contract, in some way, but that Slidell knew of

Millennium’s breach and continued to exercise its rights under the

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contract and continued to demand performance after Millennium’s

breach, then Millennium’s breach may be excused. Any waiver by

Slidell is limited to the specific breach that was waived.

Second, Millennium argues that Slidell committed a material

breach of the contract prior to Millennium’s material breach. If you find

that Slidell materially breached the cont[r]act before Millennium

materially breached the contract, then Millennium’s breach is excused.

A breach is material if it defeats one of the primary purposes of the

contract.

Third, Millennium alleges the defense of “equitable estoppel.” To

establish equitable estoppel, Millennium must show that:

1) Slidell misrepresented a material fact or was silent when

it had a duty to speak;

2) Slidell knew or should have known the representation

was false;

3) Slidell intended Millennium to act on the representation;

4) Millennium lacked knowledge of the true facts; and

5) Millennium reasonably relied upon the misrepresentation

to breach the cont[r]act. 

Appellant’s App. at 308-09.

The jury returned a verdict on February 24, 2005, finding that Millennium had

breached the contract; that Millennium’s breach was legally justified; that Slidell had

breached the contract; that Slidell’s breach was not legally justified; that Slidell was

liable to Millennium for damages of $4,822,850.64; that Slidell’s confidential

information was not a trade secret; that Slidell proved each element of promissory

estoppel regarding European field support services; and that Millennium was liable

to Slidell for damages of $650,000.

On March 14, 2005, the district court dissolved the preliminary injunction

against Slidell. On April 14, 2005, Slidell moved to determine Millennium’s liability

for the wrongful issuance of the injunction. The district court denied the motion and

dismissed Millennium’s injunction bond. 

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II.

We generally review for abuse of discretion the district court’s jury instructions.

Eden Elec., Ltd. v. Amana Co., 370 F.3d 824, 827 (8th Cir. 2004). We afford the

district court broad discretion in choosing the form and language of the instructions,

and our review is limited to a determination of whether the instructions, taken as a

whole and viewed in the light of the evidence and applicable law, fairly and accurately

submitted the issues to the jury. Id.; United Fire & Cas. Co. v. Historic Pres. Trust,

265 F.3d 722, 727 (8th Cir. 2001); Wheeling Pittsburgh Steel Corp. v. Beelman River

Terminals, Inc., 254 F.3d 706, 711 (8th Cir. 2001). We will reverse a jury verdict

only if the erroneous instruction affected a party’s substantial rights, and thus a new

trial is necessary only when the errors misled the jury or had a probable effect on the

jury’s verdict. Goss Int’l Corp. v. Man Roland Druckmaschinen Aktiengesellschaft,

434 F.3d 1081, 1093 (8th Cir. 2006). 

We review the jury instructions for plain error, however, if the party

challenging them has failed to preserve the issue for review by failing to state

distinctly the matter objected to and the grounds for the objection on the record. See

Fed. R. Civ. P. 51; Dupre v. Fru-Con Eng’g Inc., 112 F.3d 329, 333 (8th Cir. 1997).

Our review under this standard is narrow and is confined to the exceptional case in

which error has “seriously affected the fairness, integrity, or public reputation of the

judicial proceedings.” Genthe v. Lincoln, 383 F.3d 713, 718 (8th Cir. 2004) (citations

omitted); see also Niemiec v. Union Pac. R.R. Co., 449 F.3d 854, 858 (8th Cir. 2006)

(stating that plain error review is stringently limited, especially in the civil context).

We will reverse “only if the error prejudices the substantial rights of a party and

would result in a miscarriage of justice if left uncorrected.” Genthe, 383 F.3d at 718

(citations omitted).

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A.

Slidell first argues that the district court’s jury instruction on waiver was

deficient in numerous respects and that we should thus grant it a new trial. We

disagree.

1. 

Slidell argues that the district court erred in failing to instruct the jury that the

contract’s written waiver requirement must have been waived before the jury could

find that Slidell waived any specific contract provision by any means other than in

writing. Minnesota courts have held that despite a contract’s requirement that a

waiver be in writing, certain provisions of the contract may be waived even if they are

not in writing. See Pollard v. Southdale Gardens of Edina Condo. Ass’n, Inc., 698

N.W.2d 449, 453 (Minn. Ct. App. 2005); Larson v. Hill’s Heating & Refrigeration of

Bemidji, Inc., 400 N.W.2d 777, 781 (Minn. Ct. App. 1987). Further, Minnesota

courts have never stated that the requirement of a written waiver requires a waiver

separate from any waiver of the specific contract provision. Indeed, they have

indicated that the waiver of the requirement that a waiver be in writing may result in

an effective waiver of the specific contract provision and vice versa. See Citizens

Nat’l Bank of Madelia v. Mankato Implement, Inc., 441 N.W.2d 483, 483-87 (Minn.

1989); Albany Roller Mills, Inc. v. N. United Feeds & Seeds, Inc., 397 N.W.2d 430,

432-33 (Minn. Ct. App. 1986) (stating that “the requirement of a writing may be

waived and result in an effective oral modification”). An example of this can be seen

in Citizens National Bank of Madelia v. Mankato Implement, Inc. See 441 N.W.2d

at 483-87. There, a debtor granted a bank a security interest in his farm equipment

under an agreement that provided that the debtor would not sell or otherwise dispose

of this collateral without prior written consent of the bank. Id. at 484. Thereafter, the

debtor traded some of his old farm equipment for newer farm equipment. Id.

Although the bank did not give the debtor written consent to trade the equipment, the

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debtor discussed each trade-in with the bank’s president before it was made and the

bank president orally approved and encouraged the trades. Id. The Minnesota

Supreme Court held that the facts that proved that the bank gave consent to the

transactions also proved that the bank waived its right to require written approval of

the transactions. Id. at 487. Slidell has cited no persuasive Minnesota law to the

contrary, and thus it has failed to demonstrate that the district court abused its

discretion in failing to instruct the jury that two separate waivers were required to find

a waiver of Millennium’s alleged breach.

2.

Slidell also argues that the jury instruction erroneously indicated that the jury

could find a waiver by Slidell based solely on Slidell’s continued performance under

the contract. We disagree.

Under this argument, Slidell first contends that the district court should have

included language that an implied waiver is a narrow defense requiring that “[t]he

conduct must be so consistent with and indicative of an intention to relinquish the

particular right and so clear and unequivocal that no other reasonable explanation of

the conduct is possible.” Appellant’s Br. at 36 (quoting Medicare Glaser Corp. v.

Guardian Photo, Inc., 936 F.2d 1016, 1021 (8th Cir. 1991) (applying Missouri law))

(alterations and internal quotations omitted). Under Minnesota law, a waiver is “an

intentional relinquishment of a known right, and it must clearly be made to appear

from the facts disclosed.” Citizens Nat’l Bank of Madelia, 441 N.W.2d at 487

(internal quotations omitted); see also Niazi v. St. Paul Mercury Ins. Co., 121 N.W.2d

349, 354 n.5 (Minn. 1963) (“Waiver is the voluntary relinquishment of a known

right.”). Slidell fails to cite any Minnesota law supporting the heightened standard for

waiver that it suggests. The instruction clearly required the jury to find an

unequivocal relinquishment of Slidell’s known rights to find waiver. The balance of

the instruction does not vitiate this requirement because the instruction, taken as a

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whole, fairly and adequately submitted the issue to the jury. Given the district court’s

broad discretion in choosing the language of the instructions, we conclude that the

district court did not abuse that discretion in failing to instruct the jury on the

heightened standard requested by Slidell. 

Slidell next contends that a course-of-conduct waiver requires detrimental

reliance, which the instruction failed to reflect. In support of its argument, Slidell

cites Hedged Investment Partners, L.P. v. Norwest Bank Minnesota, N.A., in which

the Minnesota Court of Appeals stated that a “course-of-conduct waiver is based on

the theory of estoppel and requires detrimental reliance.” 578 N.W.2d 765, 771-72

(Minn. Ct. App. 1998). We must be careful not confuse waiver and estoppel,

however, because they are entirely different. Clark v. Dye, 197 N.W. 209, 212 (Minn.

1924). The Minnesota Supreme Court has repeatedly stated that the definition of

waiver is the intentional relinquishment of a known right, and it has made no mention

of any element of detrimental reliance. See, e.g., Illinois Farmers Ins. Co. v. Glass

Serv. Co., 683 N.W.2d 792, 798 (Minn. 2004); Seavey v. Erickson, 69 N.W.2d 889,

895 (Minn. 1955). In Clark v. Dye, the Minnesota Supreme Court indicated that there

are two types of waivers—one resulting from the intentional relinquishment of a

known right and the other resulting from an estoppel enforcing that right. See 197

N.W. at 212. Indeed, post-Hedged Investment Partners cases have not required a

finding of detrimental reliance for waivers. See, e.g., Pollard, 698 N.W.2d at 453-54.

Thus, while a waiver based on estoppel may require detrimental reliance, not every

form of implied waiver requires such reliance. Accordingly, the jury instructions were

not erroneous in this respect.

Slidell also contends that the jury should have been instructed that Slidell did

not waive its claim for breach of contract if it continued performance on the contract

but proceeded in a commercially reasonable manner in accordance with Minnesota

Statute Annotated §§ 336.2-703 and 704 or reserved its right to sue. Minnesota

Statute Annotated § 336.1-308 provides that a party can reserve its rights under a

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contract if it does so explicitly. Because we agree with the district court that “there

is insufficient evidence to support a finding that Slidell ‘explicitly’ reserved its rights

despite continuing to perform under the contract,” D. Ct. Memorandum Opinion and

Order of July 26, 2005, at 11, we conclude that the district court did not abuse its

discretion in failing to include within the instruction Slidell’s suggested language on

reservation of rights. 

Additionally, Slidell failed to provide a proposed instruction on the issue of

proceeding in a commercially reasonable manner after a breach. Accordingly, we

review for plain error. See Melford Olsen Honey, Inc. v. Adee, 452 F.3d 956, 966

(8th Cir. 2006) (holding that claimed error in district court’s decision to not include

an instruction on anticipatory repudiation was waived because appellant failed to

request a jury instruction on the issue). We conclude that even if the district court

erred in omitting such an instruction, no miscarriage of justice resulted. 

3.

Next, Slidell argues that the district court erred in failing to instruct the jury that

Slidell’s claim for a breach of the implied covenant of good faith and fair dealing and

its claim that Millennium anticipatorily repudiated the contract could not be waived.

Because Slidell failed to propose a jury instruction to this effect, we review for plain

error. 

Slidell has failed to cite any Minnesota law that supports its argument that a

party cannot waive a breach of good faith and fair dealing. The law that it does cite

instead stands for the proposition that a party that acts in bad faith cannot raise

equitable remedies. It does not, however, support Slidell's argument that a party

cannot waive a breach of good faith and fair dealing. Without deciding whether a

party can waive the implied covenant of good faith and fair dealing, we conclude that

the district court did not plainly err in failing to include any such instruction.

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In support of its argument that a party cannot waive its claim for anticipatory

repudiation, Slidell cites Minnesota Statute Annotated § 336.2-610 and National

Liberty Corp. v. Wal-Mart Stores, Inc., 120 F.3d 913, 916 (8th Cir. 1997) (applying

Missouri law). These authorities do not support Slidell’s argument, and we have

found no Minnesota authority that does support it. See Space Ctr., Inc. v. 451 Corp.,

298 N.W.2d 443, 451 (Minn. 1980) (noting that a party may have waived its claim for

anticipatory breach). Accordingly, we conclude that the district court did not plainly

err in failing to include Slidell’s now-contended for instruction.

4.

Finally, Slidell argues that no evidence supports the jury’s finding that Slidell

waived Millennium’s breach. We construe this argument as one based on Federal

Rule of Civil Procedure 59. Under this rule, the district court’s denial of a new trial

is virtually unassailable, and we will reverse only when there is an absolute absence

of evidence to support the jury’s verdict. Pulla v. Amoco Oil Co., 72 F.3d 648, 656-

57 (8th Cir. 1995). Our review of the record satisfies us that there was sufficient

evidence that Slidell knew of its rights and voluntarily relinquished them. There was

testimony indicating that Slidell was aware of Millenium’s actions that allegedly

constituted a breach, that Slidell continued to manufacture the equipment, and that

Millennium continued to make milestone progress payment, which Slidell continued

to accept. Accordingly, Slidell’s argument fails.

B.

Next, Slidell argues that Millennium’s equitable estoppel defense should not

have been submitted to the jury because it constitutes a question of law, that the

instruction misstated the law, and that no evidence supported a finding of estoppel.

We disagree. First, equitable estoppel depends on the facts of a case and is ordinarily

a fact question for the jury to decide. N. Petrochemical Co. v. United States Fire Ins.

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Co., 277 N.W.2d 408, 410 (Minn. 1979). Second, Slidell failed to preserve for review

its arguments that the court’s instruction misstated the law. Slidell did not propose an

instruction stating that Millennium’s equitable estoppel offense was limited to the

specific breach to which Slidell’s misrepresentations or omissions related, nor did it

raise the objection that the instruction lacked the element of unconscionability.

Accordingly, we review for plain error, and we conclude that neither of these

omissions would result in a miscarriage of justice if left uncorrected. Finally, we

conclude that Slidell’s argument that there was no evidence to support a finding of

estoppel is without merit. The record contains evidence that Slidell represented to

Millennium that it had signed Change Order No. 5, that Slidell intentionally failed to

sign the order, that Slidell failed to inform Millennium that it had not signed the order,

that Slidell intended Millennium to act on the misrepresentation or omission, that

Millennium was unaware that Slidell had not signed the order, and that Millennium

relied to its detriment on Slidell’s misrepresentation or omission when it assigned the

manufacture of the supervisory system to RoviSys.

C.

Slidell next argues that the district court’s instruction that either party’s breach

of contract could be excused by the other party’s prior breach improperly permitted

Millennium to assert a new prior breach theory during its closing argument. Because

Slidell failed to object to the instruction, we again review for plain error. The district

court’s instruction, viewed in the light of the evidence and applicable law, fairly and

accurately submitted the issue to the jury. Further, although it is true that surprise

resulting from a major variance in the theory of a defense may be a ground for

granting a new trial, see Sanford v. Crittenden Mem’l Hosp., 141 F.3d 882, 886 (8th

Cir. 1998), no such surprise occurred here. Millennium placed Slidell on notice that

it would assert a prior breach defense when it referred to Slidell’s poor management

of the contract in its statement of the case and when it deposed and examined

witnesses on the issues of Slidell’s failures in updating schedules and making regular

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reports to Millennium as the contract required. In any event, any error that may have

occurred did not amount to a substantial prejudice to Slidell’s rights and will not

amount to a miscarriage of justice if left uncorrected. 

D.

Slidell also argues that the district court erred in failing to instruct the jury that

if it found that Millennium had acted inequitably, Millennium would be barred from

relying on its equitable defenses of waiver, estoppel, and prior breach. While it is true

that the unclean hands doctrine bars a party that acted inequitably from obtaining

equitable relief, Heidbreder v. Carton, 645 N.W.2d 355, 371 (Minn. 2002), such

inequitable conduct must bear some relation to the merits of the case. Prow v.

Medtronic, Inc., 770 F.2d 117, 121-22 (8th Cir. 1985) (applying Minnesota law).

Slidell points out that the jury found that Millennium acted unconscionably

when it concluded that Slidell had proved each element of promissory estoppel

regarding European field support services. This finding of unconscionability,

however, was unrelated to Millennium's assertion of equitable estoppel, which was

directed at Slidell's claim that Millennium had breached the contract by deleting the

supervisory system from the scope of Slidell's work and by transferring Slidell's

technical drawings and data to RoviSys without Slidell's consent. That the court's

instruction on estoppel was not so limited did not constitute an abuse of discretion

because, taken as a whole, the estoppel instruction fairly and accurately submitted the

issue to the jury.

Slidell also argues that Millennium was guilty of unclean hands for numerous

other reasons. We conclude, however, that the district court did not abuse its

discretion in determining that there was not “such strong evidence of oppressive or

deceptive conduct here that it’s required that this be pointed out.” Tr. at 3987.

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Slidell failed to preserve for review its argument that an instruction regarding

Millennium's unclean hands should have been included with respect to Millennium's

defenses of waiver and prior breach. We conclude that the district court's refusal to

include the instruction would not amount to a miscarriage of justice if left uncorrected.

III.

Finally, Slidell argues that the district court wrongfully enjoined it from selling

and returning the parts and components of the partially completed machines for value

because each of Millennium’s equitable claims was dismissed. Because this is a

question of law, we review de novo whether Slidell was wrongfully enjoined. See

Nintendo of Am., Inc. v. Lewis Galoob Toys, Inc., 16 F.3d 1032, 1036 (9th Cir. 1994)

(“We review de novo a district court’s decision to execute [an injunction] bond.”); cf.

Bowman v. White, 444 F.3d 967, 974 (8th Cir. 2006) (“We review de novo the district

court’s conclusions of law.”).

Federal Rule of Civil Procedure 65(c) provides that a party that has incurred or

suffered costs and damages because it was wrongfully enjoined may recover on an

injunction bond. We have not previously had the opportunity to define the term

“wrongfully enjoined,” but both the Second and Ninth Circuits have determined that

a party has been wrongfully enjoined if it is ultimately found that the enjoined party

had at all times the right to do what it was enjoined from doing. Nintendo of Am.,

Inc., 16 F.3d at 1036 (wrongfully enjoined if the party “had the right all along to do

what it was enjoined from doing”); see also Blumenthal v. Merrill Lynch, Pierce,

Fenner & Smith, Inc., 910 F.2d 1049, 1054 (2d Cir. 1990) (wrongfully enjoined “if

it is ultimately found that the enjoined party had at all times the right to do the

enjoined act”).

Slidell contends that because Millennium’s claims for equitable relief were

dismissed before the case was submitted to the jury, Millennium failed to establish

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that it was entitled to equitable relief, and thus Slidell was wrongfully enjoined.

While the failure to carry the burden of proof on a permanent injunction may show

that a preliminary injunction should not have been issued, this failure is only

conclusive if there is an absence of a decision on the merits of the case. See

Middlewest Motor Freight Bureau v. United States, 433 F.2d 212, 243 (8th Cir. 1970).

If a party prevails on the merits of the case, a preliminary injunction issued on its

behalf could not have been wrongful unless the basis for arguing that the preliminary

injunction was wrongfully issued is independent of the claim on the merits. See

Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 313-

18 (1999). This is not one of those rare cases, because Slidell’s basis for arguing that

the preliminary injunction was wrongfully issued is the claim that it retained the right

to sell and return the parts and components for value, a right that was dependent on

the merits of the case. Millennium argued that if Slidell did not have the legal right

to stop work on the machines, it did not have the legal right to dismantle the machines

and sell and return the parts and components for value. This wrongful conduct on

Slidell’s part is the only reason that Slidell, absent the preliminary injunction, would

have had the opportunity to sell and return the parts and components of the unfinished

machines. The district court did not err in granting the preliminary injunction to

prevent Slidell from doing this.

Conclusion

The judgment is affirmed.

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