Scotts Co. v. Central Garden & Pet Co.

Decision Date12 April 2005
Docket NumberNo. 03-4386.,No. 03-4452.,03-4386.,03-4452.
Citation403 F.3d 781
PartiesSCOTTS COMPANY, Plaintiff-Appellee/Cross-Appellant, v. CENTRAL GARDEN & PET COMPANY, Defendant-Appellant/Cross-Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED: John P. Gilligan, Schottenstein, Zox & Dunn, Columbus, Ohio, for Appellant. David S. Cupps, Vorys, Sater, Seymour & Pease, Columbus, Ohio, for Appellee. ON BRIEF: John P. Gilligan, Daniel M. Anderson, Schottenstein, Zox & Dunn, Columbus, Ohio, George A. Yuhas, Orrick, Herrington & Sutcliffe, San Francisco, California, for Appellant. David S. Cupps, William J. Pohlman, Vorys, Sater, Seymour & Pease, Columbus, Ohio, for Appellee.

Before: MARTIN and GILMAN, Circuit Judges; COHN, District Judge.*

OPINION

GILMAN, Circuit Judge.

This complex commercial case presents a Gordian knot of issues arising from multiple, interrelated contract disputes between the Scotts Company, a manufacturer of lawn and garden products, and Central Garden & Pet Company, a distributor of lawn and garden products. In June of 2000, Scotts brought suit against Central, alleging that Central owed Scotts $23.8 million on accounts arising from multiple transactions in which Central distributed lawn and garden-care products for Scotts. Central responded with a counterclaim that alleged 11 separate causes of action relating to these transactions, and sought $976 million in damages. The majority of the issues to be resolved on appeal pertain to Central's counterclaims.

In a series of partial judgments, including the dismissal of Central's contract and promissory-estoppel claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the granting of summary judgment against Central on its fraud claim, and the dismissal during trial of Central's inventory-return claim, the district court limited or dismissed the majority of Central's claims before they reached the jury. The jury rendered verdicts of $22.5 million in favor of Scotts and $12.075 million in favor of Central. A portion of the jury's verdict relating to incentive compensation was later stricken by the district court pursuant to Rule 59(e) of the Federal Rules of Civil Procedure, reducing Central's award by $750,000. In a further string of rulings, the district court set the rates of prejudgment and postjudgment interest, and determined that the transition from the former to the latter occurred when the jury's verdict was entered by the court as a judgment on May 16, 2002.

Central appeals the entire series of judgments against it, ranging from the Rule 12(b)(6) determinations to the award of prejudgment interest to Scotts. Scotts's cross-appeal raises several issues involving the court's calculation of prejudgment and postjudgment interest, and contests the court's denial of attorney fees. For the reasons set forth below, we AFFIRM in part and REVERSE in part the final judgment of the district court, and REMAND for further proceedings consistent with this opinion.

I. BACKGROUND
A. Factual background

1. Central's breach-of-contract, promissory-estoppel, and fraudulent-misrepresentation claims

From July of 1995 until October of 1999, Central was party to an Exclusive Agency and Distributor Agreement (referred to by the parties as the Alliance Agreement) with a division of the Monsanto Company called the Solaris Group. The Alliance Agreement allowed Central to act as the exclusive distributor of the Solaris Group's Ortho and RoundUp garden products. In its counterclaim to Scotts's lawsuit, Central alleged that Monsanto began exploring the sale of the Solaris Group in 1998, and that both Scotts and Central began independently negotiating for the purchase.

Central claimed that William Brown, its Chairman and CEO, and Glenn Novotny, its President, traveled to Scotts's corporate headquarters in Marysville, Ohio in April of 1998 to negotiate the purchase of the Solaris-owned brands. According to Central, "the parties reached a meeting of the minds and formed an agreement relating to the Solaris Group's sale of its Ortho and RoundUp product lines." This so-called "Acquisition Sharing Agreement" allegedly provided that, if either Scotts or Central was successful in purchasing the Solaris Group, the benefits and liabilities of the new entity would be split between them. The specific percentages that each company would have of each brand would depend on which company succeeded in purchasing the Solaris Group.

Although the benefits and liabilities created by this purported agreement potentially involved millions of dollars, it was never reduced to writing. Instead, it was allegedly an oral agreement, with the particulars "memorialized by the parties on a series of enlarged pages which were part of an easel display." Central claimed that it had requested copies of these pages during discovery, but that they were never produced.

In August of 1998, Scotts reached a tentative agreement with Monsanto to integrate its business with the Solaris Group's product line. Specifically, Scotts would acquire the Ortho line and would be Monsanto's partner in the sales and marketing of RoundUp. Central claims that, when it reminded Scotts of the purported Acquisition Sharing Agreement, Scotts refused to comply on the ground that the deal Scotts had reached with Monsanto was different from the one contemplated by the parties during their prior discussions.

As part of Scotts's deal with Monsanto, Scotts acquired all of the rights that Monsanto had under the Alliance Agreement with Central. The Alliance Agreement came to an end in September of 1999. Central's counterclaim alleged that the failure of Scotts to comply with the Acquisition Sharing Agreement constituted a breach of the oral contract, that Scotts's statements at the April 1998 meeting were fraudulent misrepresentations, and that the doctrine of promissory estoppel required Scotts to comply with the Acquisition Sharing Agreement.

2. Central's inventory-return claims

Although the Alliance Agreement terminated at the end of September of 1999, Central continued to distribute Scotts's products in the period between October 1, 1999 and September 30, 2000 ("Program Year 2000"). According to Central, the distribution was allegedly regulated by an "Oral Agency Agreement," under which

the parties agreed that Central would serve as Scotts'[s] distribution agent for certain customers and certain products during the 2000 Program Year.... Scotts agreed to pay Central agency compensation in exchange for Central's distribution and delivery of Scotts'[s] products to customers during the 2000 Program Year.

Central claimed that, during Program Year 2000, it had accumulated an excess inventory of Scotts's lawn, garden, and horticulture products, as well as Ortho and RoundUp products. According to Central, the Oral Agency Agreement gave it two options with regard to the excess inventory: (1) Central could return the inventory to Scotts and get a refund, or (2) it could keep the inventory for distribution the following year. The district court correctly found that the second option "was not feasible since Scotts had notified Central that it would not enter into any future distribution agreement at the end of Program Year 2000." Central claims that it attempted to return the inventory, but that Scotts refused.

In its counterclaim, Central contended that Scotts had breached the Oral Agency Agreement by refusing to take back the Scotts, Ortho, and RoundUp inventory. But Central did not formally tender this excess inventory back to Scotts until the filing of its counterclaim.

Central also contends that it had attempted to return certain Miracle Gro products to Scotts during Program Year 1999. This claim was treated separately from the Program Year 2000 claims.

3. The incentive-compensation award

The jury's verdict included an award of $750,000 to Central for Scotts's purported breach of contract with regard to an incentive program. This claim derived from an incentive program for sales of Ortho and RoundUp products to distributors such as Central titled "2000 Distributor Buy/Sell Trade Program." The program, which applied to sales made in Program Year 2000, set out three separate incentives for sales made by distributors in that time frame. Although it contained a caveat that the incentive program "should not be interpreted as an across-the-board price reduction," the effect of the incentive program was to reduce the price that distributors paid for Ortho and RoundUp products that they timely sold. The amount of an award for Scotts's violation of this agreement would therefore depend on the amount of Central's sales of Ortho and RoundUp products during Program Year 2000.

One of Scotts's witnesses testified that Central had not given Scotts any sales information for Program Year 2000. According to the district court, "the only evidence pertaining to Central's buy/sell sales for PY 2000 was a conclusory statement by Mr. Brown that he believed Central's sales were `about $15 million.' "

B. Procedural background (including prejudgment and postjudgment interest issues)
1. Central's breach-of-contract, promissory-estoppel, and fraudulent-misrepresentation claims

Through a series of partial judgments, the district court addressed the claims discussed above, as well as the subsequent disputes over prejudgment interest, postjudgment interest, and attorney fees. In January of 2002, the court ruled on a motion by Scotts to dismiss the breach-of-contract, promissory-estoppel, and fraudulent-misrepresentation claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. It held that, "even assuming as true the terms of the `Acquisition Sharing Agreement' as pled by Defendant Central Garden, no enforceable obligation resulted." For that reason, it dismissed the breach-of-contract claim and the promissory-estoppel claim. Because Central pled its...

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