599 F.3d 856 (8th Cir. 2010), 09-1725, Cole v. Homier Distributing Co., Inc.

Docket Nº:09-1725.
Citation:599 F.3d 856
Opinion Judge:MELLOY, Circuit Judge.
Party Name:Gregory M. COLE; Cole's Tractor & Equipment, Inc., Appellants, v. HOMIER DISTRIBUTING COMPANY, INC., Appellee.
Attorney:David M. Duree, argued, O'Fallon, IL, for appellant. Peter C. Woods, argued, St. Louis, MO, for appellee.
Judge Panel:Before WOLLMAN, RILEY, and MELLOY, Circuit Judges.
Case Date:March 29, 2010
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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599 F.3d 856 (8th Cir. 2010)

Gregory M. COLE; Cole's Tractor & Equipment, Inc., Appellants,

v.

HOMIER DISTRIBUTING COMPANY, INC., Appellee.

No. 09-1725.

United States Court of Appeals, Eighth Circuit.

March 29, 2010

Submitted: Dec. 16, 2009.

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David M. Duree, argued, O'Fallon, IL, for appellant.

Peter C. Woods, argued, St. Louis, MO, for appellee.

Before WOLLMAN, RILEY, and MELLOY, Circuit Judges.

MELLOY, Circuit Judge.

This appeal involves claims arising out of the dissolution of agreements between Appellants and Appellee. At the district court, Appellants asserted two breach-of-contract claims, as well as claims for violation of the Missouri Franchise Act, Mo.Rev.Stat. § 407.405, tortious interference with contracts and business expectancies, and fraud. The district court granted Appellee's motion to dismiss the latter two counts for failure to state a claim. After discovery, the district court granted Appellee's motion for summary judgment on the remaining counts because Appellants were unable to prove damages. For the following reasons, we affirm in part and reverse in part.

I. Background

Gregory Cole is the sole owner of Cole's Tractor & Equipment, Inc., a closely held Missouri corporation dealing in the sale, distribution, and repair of tractors and other equipment.1 Homier Distributing Company, Inc. is an Indiana corporation that, among other things, sells and distributes Farm Pro tractors and other equipment. In December 2002, Cole entered into an oral agreement with Homier under which Cole became a distributor and dealer of the Farm Pro tractor line. According to the complaint, Cole " agreed to establish dealerships throughout Missouri for the resale of [Farm Pro] tractors and related products, and to also resell [Farm Pro] tractors and related products to retail customers." The agreement permitted Cole to establish dealerships in other states, so long as Homier approved them. In return, Homier agreed that Cole would be the exclusive Missouri distributor of Farm Pro tractors.

As a result of the oral agreement, Cole established more than thirty dealerships in Missouri between December 2002 and September 2004. During this time, a number of Cole's Missouri dealerships resold Farm Pro tractors and related equipment on the

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internet through electronic auction websites. In July 2004, however, Homier sent out a memorandum announcing a new policy forbidding dealers from selling Farm Pro products on electronic auction websites. The policy did not explicitly prohibit such sales by Homier itself. Cole alleges, however, that subsequent written agreements, as discussed below, prohibited Homier from making direct-to-public internet-auction sales and that Homier breached these agreements.

On September 20, 2004, the parties memorialized their oral agreement in two written documents: the Distributorship Agreement and the Distributor Caged Tractor 2 Purchase Agreement (the " Purchase Agreement" ). Under the terms of the Distributorship Agreement, Homier agreed not to " supply or distribute any whole goods to the dealers of Cole's Tractor & Equipments, Inc." The Distributorship Agreement also maintained Cole's right as the exclusive distributor of " whole goods" in Missouri. The Distributorship Agreement defined " whole goods" as " tractors, recreational vehicles, and larger motor driven shop related equipment." It also provided that either party could terminate the agreement, for cause, so long as that party gave ninety days' notice. The Purchase Agreement allowed Cole to purchase, assemble, and sell caged tractors. It also required Cole to " keep a readily available shelf stock of parts," and if parts were not available from Homier, to get permission from Homier before purchasing parts elsewhere.

By June 2007, Cole's and Homier's sales had declined rapidly. Cole had originally established thirty-eight Farm Pro Dealerships, but only twenty-four of those dealerships remained in operation as of June 2007. Cole alleges that this decline was due to Homier's failure to provide tractors (both assembled and unassembled), implements, repair parts, and other equipment. Cole also attributes the decline to Homier's price increase on Farm Pro tractors and equipment. On June 15, 2007, Homier sent Cole a letter giving notice of its intent to terminate the Distributorship Agreement within ninety days. The letter cited as the reason for termination Cole's declining sales performance and failure to develop its territory for Farm Pro tractors. The letter noted, however, that the termination did not affect Cole's ability to act as a Farm Pro dealer. Cole alleges that before and during the ninety-day notice period, Homier contacted Cole's dealerships for marketing purposes and made sales of parts, products, implements, and tractors directly to those dealerships.

In July 2007, Cole filed an action against Homier in Missouri state court, alleging breach of contract (Counts I and II), tortious interference with contracts and business expectancies (Count III), fraud (Count IV), and constructive termination of the Distributorship Agreement without ninety days notice, in violation of Mo.Rev.Stat. § 407.405 (Count V). Homier removed the case to federal court based on diversity of citizenship. See 28 U.S.C. § 1332. The district court then granted Homier's motion to dismiss Counts III and IV for failure to state a claim upon which relief could be granted.

Discovery closed December 31, 2008, and on January 20, 2009, Homier filed a Daubert 3 motion to exclude the expert report of Dr. Bart Basi, Cole's damages expert. Homier also moved for summary judgment based, in part, on Cole's inability

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to prove damages. The district court granted Homier's Daubert motion, and upon determining that Cole could not otherwise prove damages, granted Homier's motion for summary judgment on Counts I and II. It also dismissed Count V, finding that there was no proof of sales made during the relevant time period. Finally, the district court denied Cole's motion to strike exhibits attached to Homier's reply memoranda and alternative motion for leave to respond to those exhibits. The district court found that the motions were either moot as a result of its decision or otherwise ill-founded. Cole appeals each of these rulings.

II. Motion to Dismiss

We begin by addressing Cole's argument that the district court erred in dismissing its claims for tortious interference and fraud. " We review the district court's grant of a motion to dismiss de novo. " Anderson-Tully Co. v. McDaniel, 571 F.3d 760, 762 (8th Cir.2009). Because this is a diversity case, we apply federal procedural rules and Missouri substantive law. Ashley County, Ark. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir.2009). To survive a motion to dismiss, a claim must be facially plausible, meaning that the " factual content ... allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, __ U.S. __, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). When determining whether a claim is facially plausible, we " accept the allegations contained in the complaint as true and draw all reasonable inferences in favor of the nonmoving party." Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir.2005). Where we can infer from those factual allegations no more than a " mere possibility of misconduct," the complaint must be dismissed. Iqbal, 129 S.Ct. at 1950.

A. Tortious Interference (Count III)

Count III of Cole's complaint alleges a claim for tortious interference with contracts and business expectancies. Under Missouri law, a tortious interference claim requires that a plaintiff prove: " ‘ (1) a contract or a valid business expectancy; (2) defendant's knowledge of the contract or relationship; (3) intentional interference by the defendant inducing or causing a breach of contract or relationship; (4) absence of justification; and (5) damages resulting from defendant's conduct.’ " Horizon Mem'l Group, LLC v. Bailey, 280 S.W.3d 657, 662 (Mo.Ct.App.2009) (citation omitted). Cole claims that Homier tortiously interfered with Cole's dealer relationships by selling directly to Cole's dealers in violation of the Distributor Agreement. The district court dismissed this claim, finding that because the dealership agreements were not preexisting, but arose out of the agreements with Homier, Cole could not state a claim for tortious interference. We agree.

Under Missouri law, a plaintiff need not have an existing contract with a third party to maintain a claim for tortious interference. Stehno v. Sprint Spectrum, L.P., 186 S.W.3d 247, 251 (Mo.2006). It is sufficient that a plaintiff have " a probable future business relationship that gives rise to a reasonable expectancy of financial benefit." Id. However, " when a contract alone creates a business expectancy, [a] plaintiff cannot bring a claim for interference with a business expectancy against a party to that contract." BMK Corp. v. Clayton Corp., 226 S.W.3d 179, 191 (Mo.Ct.App.2007); see also Kelly v. State Farm Mut. Auto. Ins. Co., 218 S.W.3d 517, 525 (Mo.Ct.App.2007); Jurisprudence Wireless Commc'ns, Inc. v. CyberTel Corp., 26 S.W.3d 300, 302 (Mo.Ct.App.2000). This rule does not mean that " a party may not have a valid business expectancy in a

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preexisting and independent business relationship just because the preexisting relationship relies upon a third-party supply contract to furnish the subject of their agreement." BMK, 226 S.W.3d at 191. The critical issue in this case, then, is whether Cole had independent business relationships with its dealers predating its agreement with Homier. The complaint demonstrates that Cole had no such relationships.

There are two relevant sets of agreements: the Cole-Homier Distributorship...

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