Opinion ID: 551885
Heading Depth: 4
Heading Rank: 4

Heading: Term and Termination.

Text: 82 4.1 The period of joint cooperation hereunder shall be one (1) year from the date of execution of this agreement unless sooner terminated by either party by giving thirty (30) days' written notice to the other party. Termination of the period of joint cooperation shall not relieve the parties of their obligations under Sections 1, 2 and 3 hereof. 83 4.2 The period of joint cooperation hereunder may be extended by mutual agreement of both parties for such period or periods as the parties desire. 84 5. Assignment. This agreement shall be binding upon and inure to the benefit of the parties hereto and the respective successors and assigns of the entire business relating to the subject matter hereof but shall not otherwise be assigned by either party without the written consent of the other, and except as so provided, any purported assignment shall be void. 85 6. Law Governing. This agreement shall be governed by and construed in accordance with the internal laws of the State of New York without regard to conflict of laws. 86 Plaintiff's Ex. 420 (First Addendum to Appellant's Br., Doc. 8). General Poly maintains that the above written agreement served to memorialize certain aspects of the January 10, 1979 meeting in which Allied assumed fiduciary obligations. 87 3. The Basis of the District Court's Denial of Allied's 88 Motion For Judgment Notwithstanding the Verdict 89 The district court denied Allied's motion for judgment notwithstanding the verdict, holding that [t]he evidence presented at trial clearly supports the jury's verdict that a fiduciary relationship existed between the parties and that the fiduciary duties were breached by Allied. R. Vol. 2, Doc. 729 (Dist. Ct. Memorandum and Order, February 26, 1988, at 22). The court explained that the evidence clearly shows, and the jury found, that a fiduciary relationship existed between these two parties from the beginning of their negotiations. Id. Although the district court concluded that the relationship was not a joint venture, the court nonetheless relied on joint venture principles for its conclusion. The district court explained its reliance upon joint venture principles as follows: 90 Although I concluded at [the] summary judgment stage that a technical joint venture did not exist between these parties because they did not share profits, they did have a joint cooperation agreement very similar to a joint venture agreement. Thus, the type of fiduciary duties existing between these parties may be best understood by recognizing its analogy to a joint venture relationship.... In a joint venture situation, the fiduciary relationship arises when the parties begin their negotiations. In 46 Am.Jur.2d on Joint Ventures, the following general statement is made as to when the fiduciary relationship arises: 91 The fiduciary relationship upon which such obligations are consequent does not necessarily await the inception of the relationship as joint venturers. It may be predicated upon an arrangement to assume such a relationship. Thus, it is the plain and imperative duty of promoters of a syndicate, toward persons who are invited to cooperate in the enterprise, not only to abstain stating as a fact that which is not a fact, but not to omit to state any circumstances within their knowledge the existence of which might in any way affect the extent of quality of the advantages held out as inducements to the others. 92 46 Am.Jur.2d Joint Ventures Sec. 50 (1969). 93 By analogy, the fiduciary relationship began between General Poly and Allied at the January 10, 1979 meeting when the parties agreed to enter a joint cooperation agreement and when Allied made certain representations about the extent of its resin development. Thus, at the time of the Peru test, Allied had a fiduciary duty to reveal the true source of the resin tested. 94 .... 95 Contrary to Allied's arguments, the evidence clearly shows that the parties did not have an ordinary buyer/seller relationship. When the parties' relationship began, Allied did not have a product to sell which General Poly could buy. In January of 1979, Allied represented to General Poly that it had developed an experimental resin but it still needed work. Allied needed General Poly's special equipment and specially trained people to help in this development.... Of course, unbeknownst to General Poly, Allied had not in fact developed any type of resin at all. 96 Id. at 23-25 (emphasis in original). 97 In reaching its conclusion, the district court emphasized that Allied sought to benefit through its cooperation with General Poly by developing an HMW resin which it did not have at the time a fiduciary relationship was allegedly formed. See id. at 25. The district court was persuaded that the written agreement is highly unusual and not that of a typical buyer/seller. Id. The court also felt that evidence showing General Poly agreed to buy offgrade resin in part to assist Allied was indicative of a fiduciary relationship. Id. Finally, the district court pointed to the testimony by Allied's Jecha and Snell that the General Poly arrangement was a unique one as evidence that a fiduciary relationship was formed. Id. at 26. 3 98 The district court concluded its analysis of Allied's motion for judgment notwithstanding the verdict by reiterating the following statement made earlier in rejecting Allied's motion for directed verdict on General Poly's fiduciary duty claim: 99 Mr. Traver's testimony just cries out as regards the parties' mutual trust and their mutual risk in finally reaching a commercial high molecular weight resin. I believe that his letter of July 8, 1981, says it all in [stating that such a relationship existed] between a party (sic). In my view, and given definition of a fiduciary, circumstances here are such that the jury may well find these parties were indeed fiduciaries.... R. Vol. 41 at 4592. 4 4. Review of the District Court's Decision 100 After carefully reviewing the evidence presented at trial, and viewing that evidence most favorably to General Poly (with all inferences drawn in its favor), we are unable to affirm the district court's ruling denying Allied's motion for judgment notwithstanding the verdict. Our review of the record does not disclose any sufficient evidence upon which a reasonable jury could properly conclude that General Poly had established the existence of a fiduciary relationship with Allied. Although we would reach this conclusion even if General Poly was required only to show the relationship by a simple preponderance of the evidence under Kansas law, our holding is compelled all the more strongly because under Kansas law General Poly was obligated to prove the fiduciary relationship by clear and convincing evidence. 101 None of the evidence reviewed above indicates that Allied ever consciously assumed fiduciary duties as to General Poly. As discussed in section one, a showing that Allied consciously accepted fiduciary duties is the sine qua non of General Poly's claim. The duties of a fiduciary are serious and many, and an agreement to assume such duties will not be presumed. See Denison State Bank v. Madeira, 230 Kan. 684, 695-96, 640 P.2d 1235, 1243-44 (1982). 102 Relying on cases such as Paul v. North, 191 Kan. 163, 380 P.2d 421 (1963), and Wolf v. Brungardt, 215 Kan. 272, 284-85, 524 P.2d 726, 736 (1974), General Poly argues that the evidence at trial demonstrated that Allied and General Poly willingly and knowingly acted for one another's benefit in a manner to impose mutual trust and confidence. Wolf, 215 Kan. at 284, 524 P.2d at 736. However, that argument ignores the central importance of the holding in Denison. Merely acting for one another's benefit will not give rise to fiduciary duties under Kansas law unless it is shown that the alleged fiduciary consciously assumed fiduciary responsibilities. Although the evidence at trial showed that Allied intended to act in a manner which would have consequential benefits for General Poly, nothing in the record suggests that any authorized representative of Allied ever intended to assume fiduciary duties on behalf of General Poly. 103 Neither the testimony of the Allied and General Poly representatives, their written correspondence and internal memoranda, nor the written agreement itself support General Poly's assertion that a fiduciary relationship existed. Reviewing the evidence in a manner most favorable to General Poly, all that was shown was an arm's length commercial relationship. The General Poly representatives told Allied of their plans to enter the film market using HMW HDPE resin. The Allied representatives told the General Poly representatives of Allied's plans to develop and perfect such a resin. General Poly agreed to make available its extrusion equipment for Allied to test its product. In exchange, Allied agreed to sell its HMW resin, once developed, to General Poly on favorable credit terms with a first right to purchase a specified quantity. The two corporations agreed that all disclosures between themselves made during this one year period of joint cooperation would be protected by a secrecy agreement binding for five years. Nothing in that course of conduct suggests that Allied ever intended to take on the many responsibilities of a fiduciary in its dealings with General Poly. 104 Allied was not shown to be acting primarily for the benefit of General Poly. To the contrary, it was openly and unabashedly developing its own capacity to produce HMW resin. Denison, 230 Kan. at 691-92, 640 P.2d 1241. Allied was not given and did not assume, any influence over General Poly other than the normal commercial arms length influence that suppliers and customers have over each other in the marketplace. Id. Allied did have superior knowledge of its own product and production capabilities, but that will be true of every supplier or potential supplier, and that is not sufficient to give rise to a fiduciary obligation. Ritchie Enterprises v. Honeywell Bull, Inc., 730 F.Supp. 1041, 1054 (D.Kan.1990). None of General Poly's property, interest or authority was placed in charge of Allied. Denison, 230 Kan. at 691-92, 640 P.2d at 1241. The parties did place confidence in each other, but once again, that was a confidence based on commercial self-interest in which both parties had the power contractually to protect their own interests however they chose. Here, General Poly did not choose to obtain the contractual guarantees and rights that it now wishes it had. But, it can not imply fiduciary duties that were not clearly and convincingly assumed by Allied in order to cure its contractual deficiencies. Wedman v. Home National Bank of Arkansas City, No. 88-1439-K (D.Kan. Jan. 25, 1990) (WESTLAW, 1990 WL 7501) (J. Kelly) (citing Denison for the proposition that when a person is competent and able to protect his own interests, he may not abandon all caution and responsibility for his own protection and unilaterally impose a fiduciary relationship on another without a conscious assumption of such duties by the other party.); Pizza Management, Inc. v. Pizza Hut, Inc., 737 F.Supp. 1154, 1184 (D.Kan.1990) (J. Crow) (refusing to impose fiduciary duties on a franchisor under Kansas law: In the setting of a commercial contract between two equally sophisticated business entities, this court is not prepared to impose heightened legal duties on one of the parties simply because that party may have more powers and discretion under the express terms of the agreement. Defendants are entitled to summary judgment on plaintiff's breach of fiduciary duty claims.); Ritchie Enterprises v. Honeywell Bull, Inc., 730 F.Supp. 1041, 1053-54 (D.Kan.1990) (J. Crow) (refusing, under Kansas law, to find a fiduciary duty on behalf of a supplier of a computer system, even though the supplier has superior knowledge of his systems. This court is unwilling to radically alter the given scheme of commercial dealings by the possible imposition of a fiduciary relationship upon a seller under these circumstances.); LNS Investment Company, Inc. v. Phillips 66 Company, No. 87-2215-0 (D.Kan. Aug. 29, 1989) (WESTLAW, 1989 WL 103637) (C.J. O'Connor) (refusing, under Kansas law, to imply a fiduciary relationship on a major purchaser of bottled motor oil who terminated a relationship with its supplier because of supplier's inability to provide the needed quantities of product.); Adams Parker Furniture, Inc. v. Ethan Allen, Inc., No. 86-2113-5 (D.Kan. Oct. 13, 1987) (WESTLAW, 1987 WL 56676) (J. Saffels) (refusing, under Kansas law, to imply a fiduciary duty on a furniture manufacturer who terminated a distributorship even though the manufacturer had superior knowledge and power. While [the manufacturer] certainly had a duty to meet any contractual obligations it owed to plaintiff, including a duty not to mislead plaintiff so it would detrimentally rely ... it did not owe a duty to put [plaintiff's] interests before its own. It was not plaintiff's fiduciary, and therefore summary judgment ... will be granted.). See also Gillespie v. Seymour, 14 Kan.App.2d 563, 796 P.2d 1060 (1990). 105 The evidence upon which the district court relied in denying Allied's motion for judgment notwithstanding the verdict is similarly inadequate. There was testimony by Allied representatives that the relationship with General Poly was unique. However, that characterization falls far short of demonstrating that Allied intended to increase its duties from those inherent in a commercial transaction to the level of those which are imposed in a fiduciary relationship. Likewise, the letter by Mr. Traver which the district court pointed to as evidence of the fiduciary relationship does no more than summarize the interactions of the two corporations, interactions which we find inadequate to show Allied consciously accepted fiduciary duties. Therefore, we reverse the district court's order denying Allied's motion for judgment notwithstanding the verdict and order that judgment be entered in favor of Allied on this claim. 5 106