Lamoureux v. MPSC, Inc.

• Decision Date: 27 February 2017
• Docket Number: No. 16-1402,16-1402
• Citation: 849 F.3d 737
• Parties: Rita LAMOUREUX, as trustee of the Rita Lamoureux Trust, Plaintiff–Appellee v. MPSC, INC., also known as Meat Processing Service Corporation, Inc., Defendant Third Party Plaintiff–Appellant v. Rita Lamoureux, individually, Third Party Defendant–Appellee
• Court: U.S. Court of Appeals — Eighth Circuit

849 F.3d 737

Rita LAMOUREUX, as trustee of the Rita Lamoureux Trust, Plaintiff–Appellee

v.MPSC, INC., also known as Meat Processing Service Corporation, Inc., Defendant Third Party Plaintiff–Appellant

v.Rita Lamoureux, individually, Third Party Defendant–Appellee

No. 16-1402

United States Court of Appeals, Eighth Circuit.

Submitted: November 17, 2016

Filed: February 27, 2017

Counsel who presented argument on behalf of the appellant was Eric John Magnuson, of Minneapolis, MN. The following attorney(s) appeared on the appellant brief Patrick J. Rooney, of Eden Prairie, MN.

Counsel who presented argument on behalf of the appellee was Rolf Edward Gilbertson, of Minneapolis, MN. The following attorney(s) appeared on the appellee brief; Rolf Edward Gilbertson, of Minneapolis, MN., Eric E. Caugh, of Minneapolis, MN.

Before BENTON and SHEPHERD, Circuit Judges, and EBINGER,¹ District Judge.

SHEPHERD, Circuit Judge.

MPSC, Inc. was a start-up company with an innovative idea—the patented "Rinse & Chill service"—but no capital. An angel investor, John Lamoureux, provided the necessary capital in exchange for a royalty fee every time the company used its patented service. The contract specified three events that would terminate the agreement but did not specify a termination date. MPSC now asks the courts to supply an at-will termination term. The district court² declined to do so. We affirm.

I. Background

MPSC is a Minnesota corporation in the meat-processing business with its principal place of business in Wisconsin. In the 1980's, MPSC developed a new meat-processing technique called Rinse & Chill. The technique improved the amount and quality of the meat removed from the animal. But the company had a problem familiar to many start-ups: lack of capital to fund their innovation. So MPSC solicited investors to provide the needed capital. John Lamoureux, a resident of Florida, responded.

The two parties entered into an Investment Agreement in 1987. The agreement called for Lamoureux to pay MPSC the amount of $150,000. In return, he received the "rights to $1.50 per animal processed by MPSC, up to a maximum of the first five hundred (500) animals per day, for 260 days per year, as long as this agreement remains in effect." Paragraph five of the agreement discusses termination events :

5. This agreement shall terminate upon the happening of any of the following events:

(a) The dissolution, bankruptcy, insolvency or receivership of MPSC;

(b) The demise of the legal holder(s) of this agreement under such circumstances that no survivor or survivors of the holder(s) can be located;

(c) Written agreement of MPSC and the legal holder(s) of this agreement.

The agreement makes no mention of a termination date . It also states that "MPSC agrees there shall be no restriction to the transfer of rights granted by this agreement."

Some 25 years later, MPSC determined that because the agreement did not contain a precise termination date, MPSC had the right to terminate the agreement at will after providing reasonable notice. By this time, John Lamoureux had passed away, survived by his wife, Rita. In the spring of 2013, MPSC's president met with Rita and notified her of MPSC's determination. MPSC ceased making payments shortly thereafter.

Rita subsequently filed a lawsuit alleging breach of contract in the United States District Court for the District of Minnesota. The district court had diversity jurisdiction under 28 U.S.C. § 1332. MPSC counterclaimed,³ and then each party moved for summary judgment. The district court granted summary judgment to Rita and against MPSC. The court first looked at the agreement's text, which expressed no termination date or time period for the payments to continue. Rather, the district court noted, the agreement spells out three types of events, any of which would terminate the agreement. The court noted also that the agreement calls for payments to continue "as long as this agreement remains in effect." Together the termination events and the "as long as" language created a clear duty for MPSC to continue payments until the occurrence of any termination event, according to the district court. The court then considered Minnesota law and found that no specified termination date is required when the obligor's performance is conditioned on conduct within the obligor's control. And since MPSC has total control over whether it processes meat, the district court held the agreement valid as written; MPSC could not terminate the investment agreement at will. MPSC now appeals.

II. Discussion

"Minnesota law governs this diversity action." Friedberg v. Chubb & Son, Inc. , 691 F.3d 948, 951 (8th Cir. 2012). We review a district court's grant of summary judgment de novo. Kobus v. Coll. of St. Scholastica, Inc. , 608 F.3d 1034, 1035 (8th Cir. 2010). Summary judgment is appropriate when there are no genuine issues of material fact and the moving party can demonstrate that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Both parties agree there are no genuine issues of material fact in this case. Only questions of law—Minnesota contract law—are disputed.

To properly interpret a written contract, we first examine the text of the contract to identify the parties' intent. Dykes v. Sukup Mfg. Co. , 781 N.W.2d 578, 582 (Minn. 2010). "Intent is ascertained, not by a process of dissection in which words or phrases are isolated from their context, but rather from a process of synthesis in which the words and phrases are given a meaning in accordance with the obvious purpose of the contract ... as a whole." Motorsports Racing Plus, Inc. v. Arctic Cat Sales, Inc. , 666 N.W.2d 320, 324 (Minn. 2003) (citation omitted). Unambiguous contract language will be given its plain meaning. Savela v. City of Duluth , 806 N.W.2d 793, 796–97 (Minn. 2011).

In this case, the Investment Agreement unambiguously calls for MPSC's continued performance for as long as it processes meat, unless one of the termination events occurs. This is true for three key reasons.

First, the termination clause offers no specific end date or duration for MPSC's contractual obligations. Rather, it lists three termination events. This suggests the parties intended for the express termination events to serve as the exclusive means of contract termination. See Weber v. Sentry Ins. , 442 N.W.2d 164, 167 (Minn. Ct. App. 1989) ("The well-recognized rule of ‘expressio unius est exclusio alterius' provides that the expression of specific things in a contract implies the exclusion of all not expressed."). The types of events chosen to terminate the contract bolsters our conclusion. The first termination event was a very real possibility at the time the parties entered into the Investment Agreement. Many start-up companies fail financially before they have a chance to provide any kind of return to investors. The second termination event calls for the contract to end when no survivor(s) of the agreement's legal holder can be found. This event appears to contemplate the benefits of the royalty payments passing from one generation to the next. The third termination event resembles a residual, catchall method of terminating the contract by written agreement between the parties. On the surface, this clause seems meaningless; any contract can be terminated by later written agreement. But if the parties intended for this list of events to serve as the exclusive means of contract termination, then the inclusion of a residual clause makes perfect sense.

Second, the contract as a whole evinces an intent for continued performance. The contract specifically states that MPSC's obligations continue "as long as this agreement remains in effect." At first glance, this phrase looks to be pure tautology. But, when read together with the three termination events, it takes on real meaning. MPSC owes the rights holder "as long as" one of the three termination events has not occurred and MPSC still processes meat. A separate clause in the agreement disallowing any restriction on transfer offers further evidence of intent for continued performance. The underlying premise of that clause is the same as that of the second termination event—an intent for the rights to the royalty payments to pass to the successors of the rights holder.

Third, continued performance fits with the purpose of the contract as a whole. See Motorsports Racing , 666 N.W.2d at 324. This is an investment agreement. The purpose of this kind of contract is clear: an offer of cash from an angel investor to get a start-up off the ground in exchange for a slice of the rewards should the start-up succeed. See Holdahl v. Bioergonomics, Inc. , No. A12-1495, 2013 WL 401885, at *1 n.1 (Minn. Ct. App. Feb. 4, 2013) (discussing angel investors). A variety of financial arrangements can fulfill this purpose. A common form of investment agreement consists of the start-up granting the angel investor an equity stake in the company. See Darian M. Ibrahim, The (Not So) Puzzling Behavior of Angel Investors , 61 Vand. L. Rev. 1405, 1422 (2008). Here, we see an alternative investment agreement where the start-up retains all of its equity but instead offers a stream of royalty payments based on the product's use. If John Lamoureux had taken an equity stake in the company, MPSC surely could not come back some 25 years later, after it had achieved great success, and erase Lamoureux's equity stake. Likewise, we see no reason to presume that a stream of royalty payments, paid out as part of an investment agreement, can be terminated except under the terms of that agreement.

For these reasons, we conclude that the express terms of the Investment Agreement compel MPSC's continued performance. MPSC can relieve itself of continued performance only if some principle of Minnesota contract law overrides the express terms of the contract.

MPSC argues that Minnesota contract law requires us to supply an at-will termination provision to the Investment Agreement because...