Rindlisbacher v. Steinway & Sons Inc.

Decision Date30 October 2020
Docket NumberNo. CV-18-01131-PHX-MTL,CV-18-01131-PHX-MTL
Citation497 F.Supp.3d 479
Parties Kevin H RINDLISBACHER, et al., Plaintiffs, v. STEINWAY & SONS INCORPORATED, et al., Defendants.
CourtU.S. District Court — District of Arizona

Kenneth Layne Morrill, Morrill Law PLC, Paradise Valley, AZ, for Plaintiffs.

Bruce Edward Samuels, Heather Lee Stanton, Lewis Roca Rothgerber Christie LLP - Phoenix Office, Phoenix, AZ, for Defendants.

ORDER

Michael T. Liburdi, United States District Judge

The Court now addresses the partiescross-motions for summary judgment (Docs. 192, 199, 205, 207) and Defendant's Motion for Sanctions (Doc. 202). The Court rules as follows.

I. BACKGROUND

Defendant Steinway, Inc. ("Steinway") is a manufacturer of high-end acoustic pianos. (Doc. 163 ("FAC") ¶¶ 19, 26.) For decades, Steinway has contracted with independent dealers in various markets to sell new Steinway pianos to retail customers. (Doc. 205 at 2.) Through its dealer agreements, dealers can purchase new pianos from Steinway at wholesale prices and sell those pianos to retail customers. (Doc. 206, Ex. 6 ¶ 6.) Steinway also has company-owned stores where it sells pianos directly to retail customers. (Doc. 206 ¶ 5.)

Plaintiffs Kevin and Jami Rindlisbacher (the "Rindlisbachers") have been in the retail piano business for 37 years. (FAC ¶ 32.) In 1991, Mr. Rindlisbacher took control of his father's music business in Salt Lake City, Utah. (Id. ) The Rindlisbachers now own three music stores in the Salt Lake City area. (Id. ) In 2006, the Rindlisbachers expanded their business and entered into a dealer agreement with Steinway (the "Spokane Agreement"), which authorized them to sell Steinway pianos in Spokane, Washington. (Id. ¶¶ 37, 40–44.) The Rindlisbachers experienced great success in Washington and received Steinway's Partners in Performance Award for "best sales performance of a small market" in 2010. (Id. ¶¶ 46, 49–50.)

In September 2010, Mr. Rindlisbacher inquired whether Steinway would consider appointing him as the dealer for the Phoenix, Arizona market. (Id. ¶ 52.) Steinway had intended to convert a then-existing, unrelated dealership, Steinway of Phoenix, into a company-owned store. (Id. ¶ 52.) Instead, based on Mr. Rindlisbacher's stated interest, Steinway changed its plans and signed a dealer agreement (the "Phoenix Agreement") with the Rindlisbachers and their company, Piano Showroom of Arizona, Inc., later that year. (Id. ¶ 71.) The Phoenix Agreement allowed the Rindlisbachers to sell Steinway pianos in the Phoenix market.1 (Doc. 206, Ex. 35 at 1, 7.) Between Mr. Rindlisbacher's initial inquiry and the execution of the Phoenix Agreement, the parties had multiple conversations about the Phoenix market, and the Rindlisbachers and Steinway's Western District Sales Manager, Robert Snyder, had visited the prior dealer's store in Scottsdale, Arizona and Steinway's company-owned Hollywood, California store. (FAC ¶¶ 58–62.) Mr. Rindlisbacher also spoke with Mr. Snyder and the Hollywood store's manager by phone after the Hollywood visit. (Id. ¶ 63.)

The Rindlisbachers’ sales in the Phoenix market consistently fell far below the annual sales performance goals set forth in the Phoenix Agreement. (Id. ¶¶ 83–85.) Steinway terminated the Phoenix Agreement in July 2017. (Id. ¶ 94.)

This dispute arises from what the Rindlisbachers allege to be factual omissions by Steinway's representatives prior to the parties executing the Phoenix Agreement. Mr. Snyder allegedly told Mr. Rindlisbacher that "the Phoenix market is capable of selling 70 Steinway Grands per year" but "in the [2010] economic environment [he] should reasonably expect to sell 45 Steinway Grands per year." (Doc. 217 at 2; FAC ¶ 58.) When entering the Phoenix Agreement, the parties agreed to the reasonableness of the annual sales goals established therein. (FAC ¶ 72.) The Phoenix Agreement provides that the annual sales performance goal reasonable for the Phoenix market is 45 Steinway grand piano sales. (Id. ¶ 68.) The Rindlisbachers now argue that Steinway's failure to disclose the historical sales of Steinway grand pianos in the Phoenix market and at its Hollywood store rendered Mr. Snyder's statements and the sales goals misleading. (FAC ¶¶ 97–98.) Mr. Rindlisbacher, a sophisticated and experienced businessman, who conducted some amount of due diligence before entering into the Phoenix Agreement—and who had the ability to do more—did not ask Steinway's representatives or Eric Schwartz, the owner of the previous Phoenix-market Steinway dealer, about historical sales in the Phoenix market or at Steinway's Hollywood store. (Id. at ¶¶ 58, 62–63; Doc. 206, Ex. 33 at 27–28.)

The Rindlisbachers claim they first discovered the alleged factual omissions on May 27, 2015, during a Steinway-dealer meeting in Florida. (FAC ¶ 109.) On that day, the Rindlisbachers had lunch with Mr. Schwartz. (Id. ) During their conversation, Mr. Schwartz said, "Let me guess: Steinway told you 25 Steinway & Sons grand pianos per year was reasonable; and you sell about 10 or 12." (Id. ¶ 111.) Mr. Schwartz also told the Rindlisbachers that his business sold only 10 to 15 Steinway grand pianos each year between 2005 and 2010. (Id. ¶ 112.)

The Rindlisbachers initiated this action on April 12, 2018. (Doc. 1.) The Court has already dismissed some of the Rindlisbachers’ claims. The claims that remain are labelled in their Fourth Amended Complaint ("FAC") as (1) Nondisclosure/Constructive Fraud, and (2) Fraudulent Representations and Omissions.2 The parties now move for summary judgment on several different theories. (See Docs. 192, 199, 205, 207.)

II. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party," and material facts are those "that might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). At the summary judgment stage, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255, 106 S.Ct. 2505 (internal citations omitted); see also Jesinger v. Nev. Fed. Credit Union , 24 F.3d 1127, 1131 (9th Cir. 1994) (court determines whether there is a genuine issue for trial but does not weigh the evidence or determine the truth of matters asserted). That said, "[w]hen opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment." Scott v. Harris , 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007).

III. DISCUSSION

Steinway argues the Rindlisbachers’ remaining claims are barred by the statute of limitations. (Doc. 205 at 1.) Steinway contends that the Rindlisbachers "had actual knowledge of the sales history of the prior Steinway dealer" and were aware of "the decline in sales in the Phoenix market" in 2011 but failed to initiate this lawsuit until April 2018.3 (Id. at 7.) The Rindlisbachers allege that their fraud claims, arising from the historical sales in the Phoenix market, did not accrue until their May 27, 2015 conversation with Mr. Schwartz. (Doc. 217 at 12). Additionally, the Rindlisbachers contend that Steinway is not entitled to summary judgment as to their claims premised on eight other factual predicates that accrued within the relevant limitations period. (Id. at 2–4, 10.)

In reply, Steinway argues the Rindlisbachers have improperly raised "entirely new allegations about alleged omissions that were not raised in their Fourth Amended Complaint." (Doc. 227 at 1.) The Court ordered the parties to each file a supplemental brief to more fully develop arguments related to this issue. (Doc. 246.) Steinway concedes that the Rindlisbachers properly pleaded two factual bases for their fraud claims: (1) the historical sales of Steinway grand pianos in the Phoenix market, and (2) the sales of Steinway grand pianos at Steinway's Hollywood store during 2009 and 2010. (Doc. 248 at 3.)

But Steinway argues that the Court should not consider the factual allegations that the Rindlisbachers have purportedly raised for the first time in opposition to Steinway's motion for summary judgment.4 (Doc. 248 at 5–6.) As a threshold matter, the Court must determine whether to consider the facts at issue.

A. New Factual Allegations

Rule 8(a) of the Federal Rules of Civil Procedure requires that a civil complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The United States Supreme Court has interpreted the "short and plain statement" requirement to mean that the complaint must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 545, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotations and alternations omitted). The Rindlisbachers contend "it would be unjust" to exclude the facts at issue because they "are consistent with the pleadings and do not introduce any new issue." (Doc. 249 at 7.) Steinway argues that the Rindlisbachers assert new omissions "to try to salvage their time-barred claims," and because Steinway did not receive notice of those allegations, Steinway says, "they should not be considered at summary judgment." (Doc. 248 at 7.) In support of its argument, Steinway relies on two Ninth Circuit cases, Coleman v. Quaker Oats Co. , 232 F.3d 1271 (9th Cir. 2000), and Pickern v. Pier 1 Imports (U.S.), Inc. , 457 F.3d 963 (9th Cir. 2006).

In Coleman , the Ninth Circuit prohibited the plaintiffs from proceeding with...

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