Court Opinion

ID: 3024412
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:31:17.891885+00
Date Added: 2024-06-11T11:47:41.174704
License: Public Domain

United States Court of Appeals
                             FOR THE EIGHTH CIRCUIT
                                     ___________

                                     No. 99-2398
                                     ___________

Herb Lindsey; Rita Lindsey,               *
                                          *
                   Appellants,            *
                                          * Appeal from the United States
      v.                                  * District Court for the
                                          * Western District of Missouri.
Jewels by Park Lane, Inc.,                *
                                          *
                   Appellee.              *
                                     ___________

                               Submitted: December 16, 1999

                                    Filed: March 8, 2000
                                     ___________

Before BEAM, HEANEY, HANSEN, Circuit Judges.
                          ___________

HEANEY, Circuit Judge.

       Herb and Rita Lindsey (the Lindseys) brought suit against Jewels by Park Lane,
Inc. (Park Lane) in the district court, claiming that Park Lane breached its oral contract
to indemnify them against liability and pay their attorneys fees in an unrelated suit. In
the alternative, the Lindseys claimed Park Lane fraudulently misrepresented that it
would indemnify them and pay their attorney's fees. The district court, on Park Lane's
motion, granted summary judgment with respect to the contract claim. On its own
motion, the district court granted summary judgment on the fraudulent
misrepresentation claim. The Lindseys appeal both rulings. We reverse the district
court and remand for proceedings consistent with this opinion.

                                          I.

       We recite the facts in the light most favorable to the Lindseys. Defendant Park
Lane sells jewelry through independent contractors who host sale parties offering Park
Lane's wares. Under Park Lane's compensation scheme, these independent contractors
receive a commission on sales of Park Lane products. Additionally, an independent
contractor could recruit others to become part of their sales team, and would receive
a cut of their team members' commissions.

      The Lindseys were involved in a similar program with Park Lane's primary
competitor, Princess House, Inc. (Princess House). Princess House and Park Lane had
previously entered into a consent decree regulating Park Lane's method of recruiting
independent contractors. After over fifteen years of service for Princess House, the
Lindseys decided to affiliate with Park Lane in 1990, bringing members of their sales
team with them. Princess House subsequently brought suit against Park Lane and the
Lindseys, alleging violations of the consent decree.

       After receiving word of the lawsuit, the Lindseys contacted Park Lane by
telephone. Along with the Lindseys, the following individuals were present on the line:
Arthur Levin, president of Park Lane; Shirley and Scott Levin, both officers of Park
Lane; and Jon Leader and Ed Woods, attorneys with Browne & Woods, the law firm
representing Park Lane. The Lindseys expressed their concern about the lawsuit,
particularly about paying for the suit. Herb Lindsey spoke with Scott Levin, who told
him not worry about the lawsuit. According to Herb Lindsey, when pressed further,
Levin stated:

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            Well, you don't have to worry about anything. You're a member of
      the Park Lane family.

      ...

            We're going to defend you, whether it costs $7,000 or a million and
      seven thousand dollars. It's just a harassment suit.

      ...

             We'll indemnify you; we even might file a counterclaim for you.

(Herb Lindsey Dep. of June 1, 1998, Vol. I at 118 (internal quotations omitted).)

      Herb Lindsey further testified that Scott Levin told him that the Lindseys “would
need to help prove that he did nothing wrong and so we were going to have to help
each other in the times to come and they were going to pay our expenses.” (Id. at 121.)

       At some point during this telephone meeting, Herb Lindsey handed the telephone
to Rita Lindsey. Shirley Levin assured her that the Lindseys were a part of the Park
Lane family, and that their expenses would be paid for by Park Lane. Shirley Levin
also echoed Scott Levin's sentiments about possibly filing a counterclaim on behalf of
the Lindseys. Further, according to Rita Lindsey, Shirley Levin “indicated to me on
early calls that she needed my help in regard to their lawsuit. That was the agreement,
that I would help her out and she would help me out.” (Rita Lindsey Dep. of Aug. 4,
1998, at 162.)

      Both of the attorneys present at the initial telephone conference provided
deposition testimony. Ed Woods, a partner with the firm Browne & Woods, was
involved in representing both the Lindseys and Park Lane in their suits with Princess
House. According to Woods' recollection, Arthur Levin had on several occasions told
the Lindseys that their litigation expenses would be paid for by Park Lane. In his past

                                          -3-
experience with Park Lane, this would include attorneys fees and any judgment entered
against the Lindseys. Woods further testified:

              Well, I do recall language in which Don and Art [Levin] said – but
      primarily Art said, “We'll take care of everything. Don't worry about it.
      We'll take care of everything. Your job is to cooperate with the
      attorneys,” meaning, at that point, give information to Jon [Leader] and
      I, that we need it in order to defend the lawsuit, being the Princess House
      Park Lane suit, and “get your group together so that they can generate the
      sales that justify us paying you the money that we're agreeing to pay you.”

(Ed Woods Dep. of Apr. 14, 1999, at 18-19.)

      In response to further questioning about what type of assistance Park Lane
expected of the Lindseys, Woods testified that

      Art [Levin] and Scott [Levin] -- Shirley [Levin] to some extent -- but Art
      and Scott expressed to the Lindseys their desire that the Lindseys
      assemble information relating to all the people in their group that had
      come over to Park Lane that they either preinterview witnesses or make
      it possible for us to interview witnesses, that they continue to hold their
      party plan meetings and continue to generate sales, that they provide us
      with sign-up lists.

            Everything we conceivably needed really rested with the Lindseys
      because we were talking that the lawsuit involved a contention of Park
      Lane had recruited the Lindseys and the Lindseys' group in a manner that
      was allegedly violative of the consent decree.

      ...

             And Park Lane made it clear that they expected the Lindseys to do
      that. Park Lane didn't have the relationship with the Lindseys' people that

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       would have permitted Park Lane to do it; so they had to rely on the
       Lindseys to assist us in preparing the defense.

(Id. at 27-28.)

       Jon Leader, an attorney in Woods' firm, testified that at the initial meeting
regarding the Princess House litigation it was agreed that “Park Lane would pay the
Lindseys' litigation expenses, fees and costs, and also a judgment that was entered, and
also provide assistance for the Lindseys and a Cross-Complaint, if they were going to
file one against Princess House.” (Jon Leader Dep. of Apr. 13, 1999, at 29.)
Subsequent to this meeting, the issue of attorney's fees and indemnity was often
discussed, and Park Lane representatives assured that Park Lane would pay the
Lindseys' expenses. Leader recalled one such conversation as follows:

       [I]t was will – "We will" – I don't know that the word "indemnify" was
       used; although it may have been. But, "We will pay your legal
       expenses." "You," meaning Park Lane, "will pay the Lindseys' legal
       expenses. Park Lane will take care of you. We'll pay a judgment if one
       is rendered against you.”

(Id. at 37.)

       Leader testified in his deposition that he couldn't remember the precise words
Park Lane used to assure the Lindseys that Park Lane would pay for the lawsuit, but
that phrases used by Park Lane included “We'll pay the judgment;” “If Princess House
wins, we'll take care of you;” and “You don't have to worry about it. No money will
ever come out of your pocket.” (Id. at 239.) He was certain that the agreement was
one in which Park Lane would pay all expenses including the judgment as they became

                                          -5-
due, rather than one in which the Lindseys would have to pay the expenses themselves
and be reimbursed by Park Lane.

       There is evidence in the record that the Lindseys followed through on their
obligation to assist in Park Lane's defense. Over an eight month period, the Lindseys
collected over one hundred affidavits on behalf of Park Lane. The Lindseys also
persuaded six or seven of Rita Lindsey's associates to testify on Park Lane's behalf in
a Boston trial. According to Rita Lindsey, “it became, 'Go out and gather witnesses for
our case; we need your help in that. Remember, we're paying for your defense.'” (Rita
Lindsey Dep. of Aug. 4, 1998, at 184.)

      Initially, Park Lane paid the Lindseys' attorney's fees as it had promised. In the
Princess House litigation, Park Lane was found to have violated the consent decree.
They subsequently stopped paying the Lindseys' litigation costs. Judgment was later
entered against the Lindseys, and Park Lane refused to pay the judgment.

                                          II.

      With respect to the contract claim, the district court concluded that there was no
contract created by the course of dealings between the Lindseys and Park Lane. It
based its decision on two grounds: (1) that there was no mutual agreement on the
contract's essential terms; and (2) even if there was an agreement the Lindseys had
provided no consideration. The district court based its finding of no mutual agreement
on what it considered a lack of detail in the discussions between Park Lane and the
Lindseys.

       In concluding that the Lindseys provided no consideration to Park Lane in
exchange for Park Lane's promise to pay the judgment and attorneys fees, the district
court focused on the timing of the Lindseys' promise to assist Park Lane in its suit.
Upon reviewing the evidence, the court stated that “[t]here is absolutely no testimony

                                          -6-
that [Park Lane] initially told [the Lindseys] it would pay for [the Lindseys'] defense
and indemnify them only if [the Lindseys] promised to do something in exchange.”
Lindsey v. Jewels by Park Lane, Inc., No. 97-1501-CV-W-2, at 20 (W.D. Mo. May 10,
1999) (Order Granting Summ. J.).

       The court went on to hold that even if there was a binding contract as to the
judgment, it was one for indemnity against loss rather than indemnity against liability.
We cannot agree that summary judgment in favor of Park Lane was appropriate on any
of these grounds.

      Summary judgment is appropriate only where there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law. See
Union Nat'l Bank v. Federal Nat'l Mortg. Ass'n, 860 F.2d 847, 854 (8th Cir. 1988);
accord Tinucci v. R.V. Evans Co., 989 S.W.2d 181, 184 (Mo. Ct. App. 1998) (“Where
the evidence regarding a contract is conflicting or is capable of more than one
inference, the question raised is one of fact for the trier of fact to determine.”). When
reviewing a motion for summary judgment, we view the evidence in the light most
favorable to the nonmoving party, and accord the nonmoving party all reasonable
inferences to be drawn from that evidence. See Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1996).

                                            A.

       In Missouri, in order for a contract to be binding upon the parties, the agreement
must be definite enough to allow a court to give it exact meaning, using ordinary canons
of construction or by reference to other certainties. See Branson Land Co. v.
Guilliams, 926 S.W.2d 524, 526 (Mo. Ct. App. 1996). Still, “[e]ven if a contract is
ambiguous, it should not be held void for uncertainty if there is a possibility of giving
meaning to the agreement.” Id. Moreover, “[d]etermination that an agreement is
sufficiently definite is favored in the courts, so as to carry out the reasonable intention

                                           -7-
of the parties if it can be ascertained.” Maupin v. Hallmark Cards, Inc., 894 S.W.2d
688, 695 (Mo. Ct. App. 1995) (quoting Busching v. Griffin, 542 So. 2d 860, 863 (Miss.
1989)).

       In Carvitto v. Ryle, a subcontractor, concerned that he would not be paid by the
contractor, stopped working on the defendant's home. 495 S.W.2d 109, 111 (Mo. Ct.
App. 1973). The defendant, upon seeing this, told the subcontractor, “You boys don't
do that. I'll see that you get your money.” Id. (internal quotations omitted). Despite
the fact that the exchange included no agreed-upon price, payment terms, or completion
date, the court held this exchange created an enforceable contract that “the plaintiffs
were to finish the job and defendant would see that they got their money. In reviewing
this area, we must take language as it is and people as they are.” Id. at 113 (internal
quotations and citations omitted) (emphasis added); see also Woods v. Hobson, 980
S.W.2d 614 (Mo. Ct. App. 1998) (holding enforceable contract existed for repayment
of loan despite no discussion of time or term of repayment); Nooney Krombach Co.
v. Blue Cross and Blue Shield, 929 S.W.2d 888, 896 (Mo. Ct. App. 1996) (“There is
ample support in the case law to show that words such as 'I'll take care of it,' in
response to a definite inquiry, can sufficiently demonstrate an oral contract.”); Liberty
Hills Dev., Inc. v. Stocksdale, 742 S.W.2d 209 (Mo. Ct. App. 1987) (holding that
mutual agreement existed when one party, in response to an inquiry about payment,
stated “Don't worry, we'll take care of it,” despite fact agreement was concededly
vague).

      Although the terms of this contract are not provided as clearly as the district
court may have desired due to the absence of a written agreement, a fact-finder could
reasonably conclude the Lindseys struck a bargain with Park Lane that they would help
Park Lane in its lawsuit and continue their affiliation with Park Lane in exchange for
Park Lane's financial assistance in the Lindseys' lawsuit. The Lindseys expressed their
concerns about how they would pay for the lawsuit; in response, Park Lane offered to
pay their litigation expenses, including the judgment, provided the Lindseys helped

                                          -8-
Park Lane through litigation preparation and continuing to sell its products. Thus, the
district court erred in holding the agreement too vague to a be valid contract.

                                          B.

      A trier of fact could further determine that the Lindseys provided sufficient
consideration to support the agreement. Consideration is an essential element of a
contract. See Earl v. St. Louis University, 875 S.W.2d 234, 236 (Mo. Ct. App. 1994).

       Consideration sufficient to support a contract may be either a detriment
       to the promisee or a benefit to the promisor. The detriment to the
       promisee may consist of doing anything which he is not legally bound to
       do or refraining from doing anything which he has the legal right to do.

Id. (citation omitted).

        The only evidence in the record as to any pre-existing obligation the Lindseys
owed to Park Lane is their respective sales contracts, which list both Herb and Rita
Lindsey as independent contractors. Rita Lindsey's contract lists her mission as
“solicit[ing] bona fide orders,” (Joint App. at 64); Herb Lindsey's contract contains no
such requirement. Neither contract details any obligation to continue working with
Park Lane for a specified period, nor do they recite any duty to assist Park Lane in
litigation.

       Both Herb and Rita Lindsey testified that Park Lane made clear that it would pay
the Lindseys' litigation expenses, but that in exchange the Lindseys would be required
to provide assistance to Park Lane. This sentiment was echoed by both Ed Woods and
Jon Leader, attorneys involved in the suit and present during the initial meetings with
the Lindseys. The Lindseys did assist Park Lane, and provided valuable resources for
Park Lane's defense.

                                          -9-
        There is further evidence that Park Lane wanted to be sure that the Lindseys'
continued their affiliation with Park Lane. Missouri courts have considered this issue
in the past. In Earl, the defendant signed a severance agreement with the plaintiff, Earl,
in which Earl was to continue working through a specified date. Later, the defendant
claimed no contract was formed because Earl had not provided sufficient consideration.
In holding that the severance agreement was a legally enforceable contract, the court
reiterated that “[a] promise to continue working by an employee who is under no
obligation to remain supplies adequate consideration for a contract with the employer.”
Earl, 875 S.W.2d at 237; see also Nooney, 929 S.W.2d at 897 (holding “ample
consideration” existed to support contract modification where plaintiff continued
performing services for defendant without exploring alternatives).

                                            C.

        The district court further held that even if an enforceable contract existed, it was
one for indemnity against loss rather than indemnity against liability. The primary
difference between these two types of indemnity agreements is that in the former
(indemnity against loss) the indemnitor only commits to reimburse the indemnitee after
the indemnitee pays the amount due, while in the latter (indemnity against liability) the
indemnitor is immediately liable for the amounts due, releasing the indemnitee from
liability. See Ruysser v. Smith, 293 S.W.2d 930, 933-34 (Mo. 1956). The district
court held that because the Lindseys were indemnified against loss only and had not
paid any of the outstanding litigation expenses or the judgment against them, they
suffered no damages and no action had accrued.

       In deciding whether a contract provides for indemnity against loss or indemnity
against liability, Missouri requires the contract in question to be read as a whole, and
for the arbiter to give consideration “not only to the language of the contract but also
to the situation of the parties and the circumstances surrounding them at the time the
contract was made.” Id. at 934 (internal quotations omitted). A party's use of certain

                                           -10-
terms can aid the determination of what type of indemnity was considered by the
parties. See Burns & McDonnell Eng'g Co. v. Torson Constr. Co., 834 S.W.2d 755,
758 (Mo. Ct. App. 1992) (holding contract created indemnity against liability when
party agreed to indemnify against “claims,” but also created indemnity against loss
where when party agreed to indemnify against “losses.”)

        Here, the language used by the parties and the parties' circumstances could
reasonably lead a factfinder to conclude that the contract was for indemnity against
liability. The Lindseys contacted Park Lane in response to being served with a lawsuit,
and, according to Herb Lindsey, stated to Scott Levin, “My God, we can't afford to
defend against a lawsuit.” (Herb Lindsey Dep. of June 1, 1998, Vol. I at 118.) In
response, Scott Levin, as well as other Park Lane representatives, assured the Lindseys
that they would be taken care of and that Park Lane would pay their litigation expenses.

       Given the evidence presented by the Lindseys, a trier of fact may well find it
improbable that Park Lane was simply assuring the Lindseys that it would pay the
Lindseys back if a judgment was entered against them. The Lindseys contacted Park
Lane because they did not have the financial resources to defend the suit; they did not
state that they had the resources but wanted to be reimbursed. In response, Park Lane
assured the Lindseys that they would be taken care of. Park Lane did in fact pay a
substantial portion of the Lindseys' attorneys fees early in the lawsuit. Thus, a
factfinder could conclude that Park Lane indemnified the Lindseys against liability with
regard to their litigation expenses.

       The same can be said for the judgment. There is evidence that Park Lane had
agreed to pay a judgment in the Lindseys' case, if one should be entered against them.
If the Lindseys did not have enough money to defend themselves, it would clearly
follow that they could not afford a judgment. This conclusion is buttressed by the
testimony of Jon Leader, who stated that Park Lane assured the Lindseys that Park

                                         -11-
Lane would pay a judgment if one was entered against the Lindseys.1 Ed Woods
testified that Park Lane had assured the Lindseys that Park Lane would take care of
everything, and that in his experience with Park Lane, this included any judgment
rendered. Thus, the district court erred in holding that as a matter of law the agreement
was to indemnify the Lindseys against loss only.

                                          III.

      The Lindseys claimed that if no enforceable contract existed, Park Lane had
fraudulently misrepresented to them that it would pay for the Lindseys' litigation
expenses and any judgment rendered against the Lindseys. After granting summary
judgment in favor of Park Lane on the contract claim, the court, on its own motion and
without notice to the parties, granted summary judgment to Park Lane on the fraudulent
misrepresentation claim. We need not belabor this point, as a sua sponte grant of
summary judgment is appropriate only when the party against whom judgment will be
entered is given sufficient advance notice and an adequate opportunity to respond, see
Hobbs v. Lockhart, 46 F.3d 864, 868 (8th Cir. 1995), unless the losing party has failed
to state a claim, see Enowmbitang v. Seagate Tech., Inc., 148 F.3d 970, 973 (8th Cir.
1998).

       Here, the district court held that its finding that the Lindseys had suffered no
damage because their indemnity was against loss would be dispositive of the Lindseys'
fraud claims. Because we have reversed the district court with respect its indemnity

      1
         The district court appeared concerned with minor inconsistencies in Leader's
deposition testimony. Upon review of the record, paying particular attention to the
context of these inconsistencies, we do not believe that they rise to the level of
contradictory statements. Leader was giving a deposition in 1999 about events that
occurred in 1990. Thus in considering the inconsistencies in Leader's testimony, the
district court should have credited Leader's own statement that “it's hard to remember
the details of something that happened in 1990 . . . .” (Leader Dep. at 22.)

                                          -12-
finding, the fraud claims should not be dismissed on this ground. We further hold that
the Lindseys were not provided adequate notice or an opportunity to respond to the
district court's summary judgment motion, and that, after a careful review of their
allegations, the Lindseys' fraud claim states a claim upon which relief could be granted.
Accordingly, we reverse the district court's sua sponte grant of summary judgment on
the Lindseys' fraud claim.

                                          IV.

     For the reasons stated above, we reverse the district court's grant of summary
judgment on the Lindseys' contract and fraudulent misrepresentation claims, and
remand for proceedings consistent with this opinion.

      A true copy.

             Attest:

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

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