Court Opinion

ID: 3027432
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:38:14.707971+00
Date Added: 2024-06-11T12:26:44.734410
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 01-1090
                                   ___________

R&B Appliance Parts, Inc.,              *
doing business as                       *
Adasen Distributing,                    *
                                        *
             Appellee,                  *
                                        *
      v.                                * Appeal from the United States
                                        * District Court for the Northern
Amana Company, L.P.,                    * District of Iowa.
doing business as                       *
Amana Appliances,                       *
                                        *
             Appellant.                 *
                                   ___________

                             Submitted: June 13, 2001

                                  Filed: August 3, 2001
                                   ___________

Before LOKEN, HALL,1 and MORRIS SHEPPARD ARNOLD, Circuit Judges.
                            ___________

MORRIS SHEPPARD ARNOLD, Circuit Judge.

       Amana Company, L.P., sued R&B Appliance Parts, Inc., for the price of items
sold to R&B pursuant to a contract for microwave parts ("Microwave Agreement").

      1
        The Honorable Cynthia Holcomb Hall, United States Circuit Judge for the Ninth
Circuit, sitting by designation.
R&B counterclaimed, contending that Amana had breached an earlier contract (the
"Distribution Agreement") by failing to repurchase portions of R&B's inventory. The
district court granted Amana summary judgment on its claim, while a jury found for
R&B on its counterclaim.

        Amana filed post-verdict motions seeking judgment as a matter of law on the
counterclaim and prejudgment interest at a rate of 18% on the judgment rendered for
it on its claim. The district court denied the motion for judgment as a matter of law and
granted prejudgment interest at a lower rate than Amana had requested. Amana
appeals both decisions and we reverse both.

                                            I.
        In 1983, R&B and the Caloric Corporation signed the Distribution Agreement,
which entitled R&B to distribute replacement parts for Caloric appliances. The
Distribution Agreement provided that it would renew itself on a yearly basis "subject
to the right of either [Caloric or R&B] to terminate [the] Agreement ... upon sixty (60)
days prior written notice, from the party electing to terminate," sent to the other party
via certified mail. In the event that the agreement was terminated, Caloric obligated
itself, "upon written request of [R&B] received by Caloric within thirty (30) days after
the effective date of termination, [to] repurchase all of [R&B's] new functional
replacement parts provided they [were] listed in Caloric's most recent replacement parts
price list."

       At the time that the Distribution Contract was signed, Caloric and Amana were
separately-operated subsidiaries of Raytheon Appliances, Inc. The parties agree that
the relationship went smoothly until 1992, when Raytheon consolidated its appliance
subsidiaries into a single operation and Amana employees became responsible for the
sale of Caloric parts. Amana and Caloric were fully merged under the Amana label in
1994.

                                          -2-
       Until 1992, R&B appears to have been unchallenged in the southwestern United
States market for the distribution of Caloric parts. Once Amana became responsible
for Caloric parts sales, however, it installed competing distributors in R&B's market.
The resulting competition adversely affected R&B's sales, leaving it with a large
unwanted inventory. In May 1992, R&B's president, Bob Burggraf, sent a letter to
Amana suggesting that it "adjust[]" R&B's inventory by repurchasing half of that
portion of the inventory comprised of Amana, Caloric, and other brand-name parts.
Amana did not repurchase any inventory, and R&B continued to purchase Caloric parts
from Amana for several more years.

                                           II.
      Amana maintains that it is entitled to judgment as a matter of law on R&B's
claim that Mr. Burggraf's letter triggered the repurchase option in the Distribution
Agreement. We review the district court's denial of judgment as a matter of law de
novo, keeping in mind that "[p]ost-verdict judgment as a matter of law is appropriate
only where the evidence is entirely insufficient to support the verdict." Belk v. City of
Eldon, 228 F.3d 872, 877-78 (8th Cir. 2000), cert. denied, 121 S. Ct. 1734 (2001). As
a federal court sitting in diversity, we apply Iowa law, the law of the forum, to this
case.

        For R&B to succeed on its breach of contract claim, it must show, in part, that
all of the conditions precedent to Amana's repurchase obligation have occurred. See
Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998).
Before Amana can be obligated to repurchase R&B's inventory, R&B must have
terminated the Distribution Agreement and must have exercised the option. Amana
vigorously disputes that either of these conditions occurred. We need not determine
whether the option was exercised, however, because we hold that as a matter of law
the Distribution Agreement was never terminated.

                                          -3-
       In order to terminate the agreement, R&B had to follow the provisions of the
agreement relevant to termination, as "[t]he rule is quite universal that such cancellation
at the will or demand of one of the parties without the consent of the other can be
effected only by strict compliance with such terms and conditions" as are contained
within the agreement. Artificial Ice Co. v. Reciprocal Exchange, 184 N.W. 756, 759
(Iowa 1921). The Distribution Agreement provides that it could be terminated by
means of a written notice sent by certified mail, and the parties agree that such notice
was never sent. Under these circumstances, it is plain as a matter of law that the
agreement was not terminated.

       R&B contends that, although the contractual prerequisites for termination of the
Distribution Agreement did not occur, the jury could nevertheless find that the
Distribution Agreement terminated. Mr. Burggraf testified at trial that he believed that
the Distribution Agreement terminated when Amana took over the sale of Caloric parts.
This takeover, however, resulted from Caloric's delegation to Amana of its duty under
the Distribution Agreement to provide Caloric parts to R&B. A party to a contract is
permitted to delegate its duty of performance to a third party unless the contract
specifically provides otherwise, or unless "the other party has a substantial interest in
having the original promisor perform or control the acts required by the contract." Iowa
Code Ann. § 554.2210.1; see also Restatement (Second) of Contracts § 318 cmt. a.
Nothing in the Distribution Agreement prevented Caloric from delegating its duties
under the agreement to Amana, and R&B had no substantial interest in having Caloric,
rather than Amana, perform the contract. R&B therefore cannot cite this delegation as
evidence that the agreement had terminated.

       R&B also relies on the testimony of Ronald Schnack to support its contention
that the Distribution Agreement terminated. Mr. Schnack testified in his deposition,
given as the corporate representative of Amana under Fed. R. Civ. P. 30(b)(6), that the
Distribution Agreement terminated ipso facto when Amana took over sales
responsibility from Caloric. At trial, however, Mr. Schnack testified that his deposition

                                           -4-
testimony had been in error. R&B contends that Amana is bound by Mr. Schnack's
deposition testimony or, in the alternative, that the jury was entitled to believe the
deposition testimony and thus find that the Distribution Agreement had terminated.
Neither of these contentions is persuasive.

        Although Amana is certainly bound by Mr. Schnack's testimony, it is no more
bound than any witness is by his or her prior deposition testimony. A witness is free
to testify differently from the way he or she testified in a deposition, albeit at the risk
of having his or her credibility impeached by introduction of the deposition. R&B
seems to think that Amana is estopped from denying the truth of Mr. Schnack's
deposition testimony. Even though we have not defined with precision when a party
is estopped by a prior assertion advanced in litigation, we recognize that the purpose
of such an estoppel is to protect " 'the integrity of the judicial process,' " Hossaini v.
Western Missouri Med. Ctr., 140 F.3d 1140, 1143 (8th Cir. 1998), quoting Total
Petroleum, Inc. v. Davis, 822 F.2d 734, 737 n.6 (8th Cir. 1987). No threat to the
integrity of the judicial process has been posed in this case, and Amana was thus free
to assert at trial that the Distribution Agreement had not been terminated.

       We also observe that what Mr. Schnack was really testifying to here was not a
matter of fact at all. It was a legal conclusion that the agreement had been terminated,
which, as we have already said, is incorrect. The jury therefore had nothing before it
from which it could conclude that the agreement was terminated. Because the
Distribution Agreement was not terminated, Amana was not obligated under the
agreement to repurchase parts from R&B. Amana was therefore entitled to judgment
as a matter of law on R&B's counterclaim.

                                      III.
     In 1997, R&B and Amana executed the Microwave Agreement, authorizing
R&B to purchase various microwave products and parts from Amana for resale. R&B

                                           -5-
does not dispute that it owes Amana $225,000 for parts purchased pursuant to the
Microwave Agreement.

       Following the district court's entry of summary judgment for Amana on this
claim, Amana requested prejudgment interest on the award. The Microwave
Agreement provided that the terms of sale would be provided by Amana from time to
time. Beginning in 1997, the terms of sale provided by Amana included a service
charge on past due amounts at an interest rate of 18%. Although Amana requested
interest at the 18% rate specified in the terms of sale, the district court awarded interest
at the Iowa statutory rate of 8.241% instead. We review the district court's ruling on
prejudgment interest for an abuse of discretion, see Frazier v. Iowa Beef Processors,
Inc., 200 F.3d 1190, 1194 (8th Cir. 2000), and apply Iowa law to the award of
prejudgment interest in this diversity case, see Berglund v. State Farm Mut. Auto. Ins.
Co., 121 F.3d 1225, 1230 (8th Cir. 1997).

       Iowa Code Ann. § 668.13.2 provides that "[i]f the interest rate is fixed by a
contract on which the judgment or decree is rendered, the interest allowed shall be at
the rate expressed in the contract" (emphasis added). The statutory rate employed by
the district court, see Iowa Code Ann. § 668.13.3, applies only if no such rate is fixed.
The facts in the instant case are virtually identical to Carson Grain & Implement, Inc.
v. Dirks, 460 N.W.2d 483, 485 (Iowa Ct. App. 1990), where no interest rate was
specifically mentioned in the oral contract at issue, but bills sent pursuant to the
contract included a finance charge of 18% on late accounts. In that case, the court
awarded prejudgment interest at the rate of 18%. See id.

       It follows that here the district court committed an error of law by awarding a
lower interest rate than that provided by the terms of sale and thus abused its discretion.
See Computrol, Inc. v. Newtrend, L.P., 203 F.3d 1064, 1070 (8th Cir. 2000). We
therefore remand the award of prejudgment interest to the district court for calculation
at the proper rate.

                                            -6-
                                         IV.
     For the foregoing reasons, the judgment of the district court is reversed and
remanded for further proceedings not inconsistent with this opinion.

      A true copy.

            Attest:

               CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                       -7-