Court Opinion

ID: 3034079
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:50:30.228173+00
Date Added: 2024-06-11T11:48:28.897382
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
________________

  No. 01-4008
________________

Infinity Products, Inc.,             *
                                     *
             Appellant,              *
                                     *
      v.                             *
                                     *
Premier Plastics, LLC; Prodesign,    *
Inc.,                                *
                                     *
             Appellees.              *

________________
                                           Appeals from the United States
Nos. 02-1136 & 02-2971                     District Court for the
________________                           District of Minnesota.

Infinity Products, Inc.,             *              [UNPUBLISHED]
                                     *
             Appellee,               *
                                     *
      v.                             *
                                     *
Premier Plastics, LLC,               *
                                     *
             Defendant,              *
                                     *
Prodesign, Inc.,                     *
                                     *
             Appellant.              *
                                ________________

                                Submitted: May 16, 2003
                                    Filed: March 15, 2004
                                ________________

Before SMITH and HANSEN, Circuit Judges, and READE, District Judge1.
                         ________________

HANSEN, Circuit Judge.

       This appeal involves a contract dispute arising out of the Joint Sales Agreement
(JSA) between Appellant Infinity Products, Inc. (Infinity) and Appellee Premier
Plastics, LLC (Premier). After Appellee Prodesign, Inc. (Prodesign) acquired
Premier, Infinity filed a breach of contract action against both Premier and Prodesign
based upon alleged oral modifications to the JSA. Following a jury verdict in favor
of Infinity, the district court granted Premier and Prodesign's motion for judgment as
a matter of law, concluding that the statute of frauds barred enforcement of the
alleged oral modifications. We affirm in part and reverse in part.

I. BACKGROUND

       Infinity assembles and markets molded plastic parts for use in automobile
interiors. Premier and Prodesign manufacture these parts. In November 1998,
Infinity and Premier entered into the JSA which created a three-year joint venture
whereby Premier agreed to manufacture parts solely for Infinity, with only three
agreed upon exceptions, and Infinity agreed to market only Premier's parts.

      1
       The Honorable Linda R. Reade, United States District Judge for the Northern
District of Iowa, sitting by designation.
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       The JSA provided a pricing formula under which Infinity could purchase the
plastic parts for approximately twenty-five percent over Premier's cost of production.
The JSA also provided that the agreement would terminate upon a bill of sale or
breach of the agreement by either party. Because production of the plastic parts
required specialized tools, or molds, the JSA provided that any jointly-owned tools
could not be transferred without the consent of both parties and were to be maintained
by Premier.

        It is undisputed that after signing the JSA, Infinity purchased parts from other
suppliers. Infinity argues that it was forced to make these purchases because Premier
initially was incapable of manufacturing the quantity and quality of parts that
Infinity's customers required. Infinity alleges that Premier was not only aware of
these purchases, but agreed to them. In order to assist Premier in updating its tools
to make parts suitable for Infinity's needs, Infinity sent one of its own engineers to
Premier's plant to re-engineer the tools.

       In January 1999, Coachmen Industries, Inc., the parent company of Appellee
Prodesign, purchased the assets of Premier via a bill of sale. From that point on, the
names of Premier and Prodesign were used interchangeably, but Premier was
effectively merged into Prodesign.2 The former president of Premier, Richard Grise,
became the vice president of the Prodesign division of Coachmen and continued to
serve as Infinity's contact person at Prodesign. Over the next eleven months,
Prodesign continued to sell parts to Infinity under the pricing terms of the JSA.

      In February 1999, Infinity learned that Prodesign was using the tools that had
been updated by its engineer to manufacture parts for Prodesign's other customers.

       2
        Although Infinity alleges that Prodesign continued to use the Premier name
after the bill of sale, the remainder of this opinion will refer to Premier for all pre-bill
of sale conduct and to Prodesign for all post-bill of sale conduct.
                                             3
Infinity objected to Prodesign's use of the tools, asserting that the terms of the JSA
and the labor expended by its engineer gave Infinity an ownership interest in the
tools. When approached by Infinity, Prodesign responded by mailing an invoice for
the cost of the tools. Infinity paid the invoice ($30,775) and notified Prodesign that
it was not to use the tools to manufacture parts for other customers. Prodesign
responded with a letter assuring Infinity that Prodesign had not and would not use
Infinity's tools to make products for other customers. Despite this assurance and
ongoing complaints from Infinity, Prodesign continued to sell parts to other
customers, some allegedly manufactured with Infinity's tools. In August 1999,
Prodesign did send Infinity an invoice credit of $5,237.50 as a royalty for parts made
from Infinity's tools. Nevertheless, the business relationship continued to deteriorate,
and in November 1999, Infinity retrieved the tools from Prodesign's plant and began
manufacturing its own plastic parts.

        Infinity sued Premier and Prodesign, alleging breach of contract and other
causes of action not relevant to this appeal. Specifically, Infinity claimed that
Premier and Prodesign breached the JSA by (1) selling parts to customers other than
Infinity; (2) charging Infinity more for the parts than the JSA specified; (3)
overcharging Infinity for the price of the jointly-owned tools; (4) using the jointly-
owned tools to manufacture parts for other customers; and (5) selling the jointly-
owned tools in the asset sale without Infinity's permission. Premier and Prodesign
filed a motion for summary judgment, arguing that Infinity breached the contract first
by purchasing parts from other manufacturers, thus resulting in an automatic
termination of the JSA, or alternatively that the JSA automatically terminated upon
Premier's sale to Coachmen and any implied modifications were unenforceable under
the statute of frauds. The district court denied the motion and allowed the parties to
proceed to trial. At the close of evidence, Premier and Prodesign filed a motion for
judgment as a matter of law (JAML). The district court did not rule on this motion
until after receiving the jury's verdict.

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       The jury returned a verdict finding that a contract existed between Infinity and
Prodesign, that Prodesign breached that contract, and that Prodesign was liable for
damages arising from Infinity's lost profits ($134,000), Prodesign's sales to other
customers ($80,566), Infinity's overpayment for the tools ($15,337), and Prodesign's
sale of parts made from the tools ($36,313). The jury also found that Premier did not
breach the JSA and was not liable to Infinity for any damages. Prodesign renewed
its earlier motion for JAML and, in the alternative, moved for a new trial.

       The district court granted the motion for JAML, concluding that the statute of
frauds barred enforcement of any agreement between Infinity and Prodesign or any
oral modifications to the JSA. Infinity appeals, arguing that Premier and Prodesign
waived the automatic termination provision, that the writings in evidence satisfy the
statute of frauds, or alternatively, that the evidence supports an exception to the
statute of frauds. Infinity also argues that the district court erred in allowing
Prodesign to amend its answer to include a statute of frauds affirmative defense.
Prodesign cross-appeals from the district court's denial of its conditional motion for
a new trial.

II. DISCUSSION

       We review de novo the district court's grant of JAML. Mouser v. Caterpillar,
Inc., 336 F.3d 656, 662 (8th Cir. 2003). In reviewing a grant of JAML after a jury
verdict, we must construe the facts in the light most favorable to the verdict. See
Ollie v. Titan Tire Corp., 336 F.3d 680, 685 (8th Cir. 2003). JAML is proper only if
the evidence is legally insufficient to support the verdict. See Fed. R. Civ. P. 50(a);
Belk v. City of Eldon, 228 F.3d 872, 878 (8th Cir. 2000), cert. denied, 532 U.S. 1008
(2001).

      The JSA provides, and the parties agree, that Indiana law applies to this case.
Indiana has adopted much of the Uniform Commercial Code ("U.C.C.") relating to

                                          5
the sale of goods, including the provision that "[t]he requirements of the statute of
frauds . . . must be satisfied if the contract as modified is within its provisions." Ind.
Code § 26-1-2-209(3). The statute of frauds provides that "a contract for the sale of
goods for the price of five hundred dollars ($500) or more is not enforceable . . .
unless there is some writing sufficient to indicate that a contract for sale has been
made between the parties and signed by the party against whom enforcement is
sought . . . ." Ind. Code § 26-1-2-201(1).

      A. Premier

      The district court determined that Infinity's initial breach of the exclusivity
provision resulted in an automatic termination of the JSA pursuant to the specific
terms of that agreement. Infinity argued that Premier and Infinity had agreed to an
oral modification of the JSA prior to Infinity's breach, and, alternatively, that
Premier's subsequent conduct constituted a waiver of the automatic termination
provision. The district court concluded that any prior oral modification of the JSA
regarding Infinity's ability to purchase parts from other suppliers was unenforceable
because it did not satisfy the statute of frauds. Alternatively, the district court
concluded that Premier did not have the intent or ability to waive the automatic
termination provision.

        We need not address the waiver or statute of frauds issues as they relate to
Premier. Both the jury and the district court have concluded that Premier is not liable
for any breach of the JSA. Therefore, the only relevant inquiry for this court is
whether the JSA remained in effect after the bill of sale to bind Prodesign. Because
we conclude that it did not, we need not resolve whether the JSA survived Infinity's
initial breach.

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      B. Prodesign

       The jury found that a contract existed between Infinity and Prodesign and that
Prodesign breached that contract by making sales outside the JSA. Nevertheless, the
district court concluded that any agreement between Infinity and Prodesign was
unenforceable because there was no evidence satisfying the statute of frauds that
Prodesign agreed to substitute itself for Premier under the JSA. We agree with the
district court.

       The JSA specifically provided for automatic termination of the agreement upon
a bill of sale. Thus, by its express terms, the JSA terminated on January 5, 1999,
when Premier executed a bill of sale transferring all of its assets to Coachmen. Even
assuming, as we must in deference to the jury's findings, that Prodesign intended to
assume the JSA or otherwise to be bound by its specific terms, that agreement
between Infinity and Prodesign is not enforceable because it does not satisfy the
statute of frauds.

        First, Infinity relies upon a series of memos, invoices, and checks pertaining
to the sale and use of tools to prove that Prodesign assumed the JSA. While these
writings may be relevant to prove a separate agreement as to the tools, discussed
infra, they in no way prove that Prodesign entered into an exclusivity agreement with
Infinity to supply parts at a specific discounted price. Second, Infinity presents
documents to show that there was ongoing confusion as to the identity of Premier and
Prodesign after the bill of sale, but Infinity fails to demonstrate how this confusion
otherwise satisfies the requirement that Prodesign's agreement with Infinity be
reduced to a signed writing. Finally, Infinity argues that the price calculations used
by Prodesign after the bill of sale were identical to those contained in the JSA, and
therefore serve as evidence that Prodesign intended to continue operating under the
terms of the JSA. As the district court noted, these purchase orders prove nothing
more than the price of individual sales transactions. They contain nothing to

                                          7
document Prodesign's alleged promise to offer this pricing for all future transactions
or to refrain from selling parts to other customers.

       Although a writing need not contain every term of the contract to satisfy the
statute of frauds, the writing must "afford a basis for believing that the offered oral
evidence rests on a real transaction." U.C.C. § 2-201 Comment. Merely proving that
Infinity and Prodesign engaged in individual sales transactions after the bill of sale
does not afford a basis for believing that Prodesign promised to substitute itself for
Premier and to be bound by the terms of the JSA. To allow Infinity to use this type
of parol evidence for the purpose of establishing material elements of the alleged
contract presents the exact danger the statute of frauds was designed to prevent.
Furthermore, we agree with the district court that the exceptions to the statute of
frauds argued for by Infinity – waiver by attempted modification, payment made and
accepted, and judicial admissions – simply do not apply to the facts of this case.

      C. Tools

       The district court concluded that the memos, invoices, and checks related to the
tools did not prove the existence of an exclusivity contract between Infinity and
Prodesign sufficient to satisfy the statute of frauds. Furthermore, it would be futile
to rely on this evidence to prove an oral modification of a contract that we have
deemed unenforceable. Nevertheless, by awarding Infinity damages for Prodesign's
sale of parts manufactured with Infinity's tools, the jury clearly found that Infinity and
Prodesign came to an agreement on this subject. Because we find that the writings
presented by Infinity would satisfy the statute of frauds as to this separate agreement,
we reverse the district court's judgment and reinstate the jury award as to this item of
damages.

     The jury's award for parts sold off Infinity's tools was based on Prodesign's
promise not to use tools owned by Infinity to produce parts for Prodesign's other

                                            8
customers. In response to Infinity's assertion that it owned certain tools possessed by
Prodesign and Infinity's demands that Prodesign discontinue its use of those tools for
the benefit of other customers, Prodesign sent Infinity an invoice for the price of the
tools. (Appellant's App. at 171-72.) Infinity paid the invoice by writing a check to
Premier, which check was cashed by Prodesign. (Id. at 227.) Prodesign later sent a
signed memo to Infinity stating that "we have not used your tools and will not use
them to make products for other customers." (Id. at 221.) Apparently Prodesign did
not abide by this promise because three months later Infinity received an invoice
credit for "Royalty – Parts Made Their Tool." (Id. at 70.) Taken together, these
documents establish that the agreement found by the jury is enforceable against
Prodesign, not as a modification of the JSA, but as a separate, binding contract.

       The jury also awarded an amount for overpayment for tools. This amount was
based on the theory that Infinity had an ownership interest in the tools prior to paying
the full amount of the invoice. Infinity argues that Prodesign orally agreed to put
Infinity's name on the tools after Infinity's engineer spent time fixing the tools.
Although the jury's award suggests that such an agreement took place, we agree with
the district court that the agreement is unenforceable because an oral promise does
not satisfy the statute of frauds and nothing in the JSA gave Infinity an ownership
interest in the tools before the bill of sale. Accordingly, we affirm the district court's
judgment on this item of damages.

      D. Statute of Frauds Amendment to Prodesign's Answer

       Infinity also argues that the district court abused its discretion by allowing
Prodesign to amend its answer to include a statute of frauds defense after discovery
had ended and simultaneously with Prodesign's motion for summary judgment. We
review the district court's decision to allow a party to amend its answer for an abuse
of discretion. Hammer v. City of Osage Beach, MO, 318 F.3d 832, 844 (8th Cir.
2003). Infinity alleges that it was prejudiced by its inability to conduct further

                                            9
discovery after such a defense was raised. However, the evidence that Infinity states
it would have discovered relates only to the issues of whether Infinity and Prodesign
engaged in over 140 sales transactions and whether Infinity paid for all of the goods
in those transactions. We have already determined that facts involving individual
sales transactions are irrelevant to establishing whether Prodesign assumed the JSA
and agreed to all of the terms therein. Infinity was not unduly prejudiced by the
amendment. See id. (listing the justifications for denying a motion to amend
pleadings). Therefore, we find no abuse of discretion by the district court in allowing
Prodesign to amend its answer.

      E. Cross-Appeal

       The district court denied Prodesign's conditional motion for a new trial.
Prodesign appeals this decision, arguing that the testimony of Infinity's expert witness
on damages should have been excluded and that the jury's verdict as to start-up costs
and lost profits is internally inconsistent. Although Prodesign argues that Kenneth
Ritterspach was not qualified as an expert and that his damage calculations were
flawed, nothing in Prodesign's brief challenges Ritterspach's calculations related to
the amount of damages for parts made from Infinity's tools. Because this is the only
surviving portion of damages, we do not address Ritterspach's testimony as to the
other measures of damages. Similarly, because we affirm the district court's judgment
vacating the jury's award for lost profits, we will not address Prodesign's separate
challenge to the jury's calculation of that award.

III. CONCLUSION

       The jury award included damages for lost profits, parts sold off Infinity's tools,
overpayment for tools, and sales outside the JSA. The damages for lost profits and
for sales outside the JSA were both based on the theory that an exclusivity agreement
existed between Infinity and Prodesign and that Prodesign breached that agreement.

                                           10
Because we agree with the district court that the statute of frauds prevents Infinity
from enforcing any agreement it claims it had with Prodesign as to price or
exclusivity, we hold that Infinity may not recover these damages, and we affirm the
district court's judgment as to those claims. Similarly, the damages for overpayment
for tools were based on the theory that Infinity had an ownership interest in the tools
prior to submitting its payment to Prodesign. Nothing in the terms of the JSA gives
Infinity this interest, and the termination of the JSA upon the bill of sale made it
impossible for Prodesign to agree to such a modification via an oral promise.
Therefore, we also affirm the district court's judgment as to the overpayment for tools.

       Finally, the jury awarded damages for parts sold off Infinity's tools. These
damages were based on a theory that Prodesign agreed to a modification of the JSA
whereby it would not use the tools purchased by Infinity to manufacture parts for
other customers. This theory necessarily fails because, as we have held, the JSA
terminated upon the bill of sale. Nevertheless, we believe that Infinity has presented
sufficient evidence, consistent with the jury's findings, to prove the existence of a
separate agreement by Prodesign not to use Infinity's tools for other customers. We
find that the documentation provided by Infinity would be sufficient to enforce that
agreement, and we reverse the district court's judgment on that item of damages and
reinstate the jury's award of $36,313.
                       ______________________________

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