Winthrop Resources v. Eaton Hydraulics

Decision Date11 March 2004
Docket NumberNo. 03-1790.,03-1790.
PartiesWINTHROP RESOURCES CORPORATION, a Minnesota corporation, Appellee, v. EATON HYDRAULICS, INC., formerly known as Vickers, Inc., a Delaware corporation, Appellant.
CourtU.S. Court of Appeals — Eighth Circuit

Counsel who presented argument on behalf of the appellee was Thomas H. Boyd, St. Paul, MN. Additional attorney appearing on the brief was Jeffrey R. Ansel, Matthew R. McBride and Justice E. Lindell.

Before RILEY, HEANEY, and SMITH, Circuit Judges.

SMITH, Circuit Judge.

Eaton Hydraulics, Inc. ("Eaton"),1 appeals the district court's2 summary judgment issued in favor of Winthrop Resources Corporation ("Winthrop") in Winthrop's breach-of-contract claim. The district court determined that Eaton breached the contract and owes $4,365,437.64 in damages, costs, disbursements, and attorney's fees. We affirm.

I. Background

Winthrop leases computer systems and other technology equipment to corporate customers. After Winthrop's customers select their equipment, Winthrop then purchases and leases the equipment to the customers. In June 1997, Eaton and Winthrop entered into a master lease agreement.3 The agreement provided that Winthrop would purchase almost $9 million of computer equipment that Eaton selected. The parties also signed nine lease schedules (001R, 002R, A01, A02, A03, B01, B02, C01 and C02) issued pursuant to the master lease agreement.4 Each lease schedule identified particular pieces of equipment leased by Eaton, and each incorporated the terms of the master lease by reference. Each lease schedule listed the monthly amount Eaton agreed to pay for the use of Winthrop's equipment. By executing the Lease, both Winthrop and Eaton expressly agreed that each provision was binding and enforceable.5

Winthrop sued Eaton on April 13, 2001, alleging that Eaton breached the Lease. Specifically, Winthrop claimed that Eaton failed to meet numerous payment obligations, failed to properly maintain the equipment during possession, failed to properly package the equipment upon return, and impermissibly sold pieces of equipment in violation of the Lease terms. Eaton counterclaimed that Winthrop breached the implied covenant of good faith and fair dealing, committed fraud, breached the contract, and violated various provisions of Minnesota law.

Winthrop moved for summary judgment on its claims and moved to dismiss Eaton's counterclaims. In its motion, Winthrop requested damages in the amount of $4,222,024.67, plus costs, disbursements, and attorney's fees. Winthrop provided affidavits and supporting documents detailing Eaton's various Lease breaches. Winthrop submitted its damage calculation pursuant to section 18 of the Lease setting forth past-due Lease charges, past-due taxes and late fees, and the greater of: (i) the accelerated rent remaining due, or (ii) the Casualty Loss Value ("CLV") for each lease schedule.6

In its counterclaim, Eaton asserted that: (i) Winthrop failed to give notice and opportunity to cure the payment defaults; (ii) it had procured Manufacturer's Maintenance Agreements ("MSMAs") on the equipment and that Winthrop purchased the MSMAs; (iii) Winthrop breached first; (iv) the CLV was an unenforceable penalty; (v) the CLV did not apply to equipment on "terminated" lease schedules. Applying Minnesota law, the district court rejected Eaton's arguments as insufficient to avoid liability and damages under the plain terms of the Lease.

On April 23, 2002, the district court granted Winthrop's motion for summary judgment. The district court found that Eaton breached the Lease and that the CLV damages provision was enforceable. The district court noted that Eaton did not dispute that it had breached the Lease. The court also noted that Eaton did not dispute Winthrop's damages calculation.

Winthrop subsequently filed a motion pursuant to Federal Rules of Civil Procedure 58 and 59(e) requesting clarification of the damages award in the summary judgment and dismissal order. The district court awarded judgment on April 23, 2002, in the amount of $4,365,437.64, which included Winthrop's costs and attorney's fees, less mitigation, because Eaton failed to challenge Winthrop's calculation of damages.

On May 8, 2002, Eaton moved pursuant to Federal Rule of Civil Procedure 59(e) to alter or amend the judgment. Eaton argued that the expert reports it submitted after the summary-judgment hearing demonstrated the unreasonableness of the CLV provision. Eaton also argued-for the first time-that: (i) Winthrop failed to prove that its claimed damages were reasonable; (ii) it could not maintain MSMAs on the equipment because MSMAs did not exist for this equipment; (iii) Eaton properly terminated lease schedules A02 and C01.

On December 10, 2002, the district court denied Eaton's Rule 59(e) motion. The district court determined that Eaton failed to submit any newly-discovered evidence, failed to show reversible error, and failed to present any facts or law overlooked by the court. Following this decision, Winthrop moved for entry of judgment on damages, and on February 21, 2003, the district court entered an amended judgment including damages in the amount of $4,365,437.64.

Eaton timely filed a notice of appeal from all of the district court's orders. However, in this appeal, Eaton challenges only the grant of summary judgment and the order clarifying the damages award.

II. Standard of Review

Rule 56(c) provides that a motion for summary judgment shall be granted only if "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). We review de novo a grant of summary judgment, applying the same standard as the district court. Evergreen Inv., LLC v. FCL Graphics, Inc., 334 F.3d 750, 753 (8th Cir.2003). When considering a motion for summary judgment, we must view the evidence and the inferences that may be reasonably drawn from the evidence in the light most favorable to the non-moving party. Enter. Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir.1996). The burden of demonstrating that there are no genuine issues of material fact rests on the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Medtronic, Inc. v. U.S. Xpress, Inc., 341 F.3d 798, 800 (8th Cir.2003). If the moving party has carried its burden, the non-moving party must demonstrate the existence of specific facts in the record that create a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Krenik v. County of LeSueur, 47 F.3d 953, 957 (8th Cir.1995). In addition, where the district court's decision involved determinations of state law, we review those determinations de novo. Salve Regina Coll. v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991).

III. Analysis

Eaton challenged only the summary-judgment and damages orders.7 Despite the parties' extensive arguments in the briefs-including arguments raised in and in defense of Eaton's Rule 59(e) motion-we review de novo only the evidence and arguments that were before the district court when it made its determination in the orders challenged on appeal. See Hagerman v. Yukon Energy Corp., 839 F.2d 407, 413 (8th Cir.1988) (failure to raise an argument when contesting motion for summary judgment, and raising it only in a post-judgment Rule 59(e) motion does not preserve issue for de novo review on appeal). As such, this appeal turns on two core issues-(1) whether Eaton defaulted under the contract, and (2) whether the damages award was proper.

A. Default Under the Lease

The district court determined that Eaton defaulted under section 17(a) of the Lease by failing to make required Lease, late-charge, and property-tax payments for the equipment in 2001, failing to properly pack, ship, and return all of the equipment as required in section 7, and failing to properly maintain the equipment under the MSMAs required in section 8.8

Eaton argues that it did not default under section 17(a) of the Lease because, although it now concedes that it made late payments of "Lease Charges,"9,10 it argues for the first time here that section 17(a) required Winthrop to give Eaton notice and twenty days to cure any potential default. Section 17(a) of the Lease provides in pertinent part:

The occurrence of any of the following events shall constitute an event of default under this Lease Agreement or any Lease Schedule:

(a) The nonpayment by Lessee of any Lease Charges when due, or the nonpayment by Lessee of any other sum required hereunder to be paid by Lessee which nonpayment continues for a period of twenty (20) days after written notice thereof from Lessor.

The district court determined that this section unambiguously provides that default occurs if Eaton failed to pay Lease charges when due. Eaton argues that the district court incorrectly interpreted the plain, unambiguous language of section 17(a).

To interpret the terms of a contract under Minnesota law, we must initially determine whether a contract term is ambiguous. Porous Media Corp. v. Midland Brake, Inc., 220 F.3d 954, 959-960 (8th Cir.2000) (citing Green Tree Acceptance, Inc., v. Wheeler, 832 F.2d 116, 117 (8th Cir.1987) (applying Minnesota law)). The determination that a contract is or is not ambiguous is a legal determination, and no deference is paid to the trial court's decision on this issue. Maurice Sunderland Architecture, Inc. v. Simon, 5 F.3d 334, 337 (8th Cir.1993); Blattner v. Forster, 322 N.W.2d 319, 321 (Minn.1982). If the contract is unambiguous, the interpretation is a question of law and is reviewed de novo. Lakeland Tool & Eng'g, Inc. v. Thermo-Serv, Inc., 916 F.2d 476, 481 (8th Cir.1990...

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