All West Pet Supply v. Hill's Pet Products

• Decision Date: 21 December 1993
• Docket Number: Civ. A. No. 92-1174-DES.
• Citation: 840 F. Supp. 1426
• Parties: ALL WEST PET SUPPLY COMPANY, a/k/a West Denver Feed Company, Plaintiff, v. HILL'S PET PRODUCTS DIVISION, COLGATE-PALMOLIVE COMPANY, and Veterinary Companies of America, Inc., Defendants. HILL'S PET PRODUCTS DIVISION, COLGATE-PALMOLIVE COMPANY, Counterclaim Plaintiff, v. ALL WEST PET SUPPLY COMPANY and Michael I. Bernstone, Counterclaim Defendants.
• Court: U.S. District Court — District of Kansas

840 F. Supp. 1426

ALL WEST PET SUPPLY COMPANY, a/k/a West Denver Feed Company, Plaintiff, v. HILL'S PET PRODUCTS DIVISION, COLGATE-PALMOLIVE COMPANY, and Veterinary Companies of America, Inc., Defendants.

HILL'S PET PRODUCTS DIVISION, COLGATE-PALMOLIVE COMPANY, Counterclaim Plaintiff, v. ALL WEST PET SUPPLY COMPANY and Michael I. Bernstone, Counterclaim Defendants.

Civ. A. No. 92-1174-DES.

United States District Court, D. Kansas.

December 21, 1993.

Ronald D. Heck, Heck & Sheppeard, P.A., Topeka, KS, Paul J. Hanley, Phyllis M. Ain, Durham & Baron, P.C., Denver, CO, for plaintiff.

Steven K. Morse, Hill's Pet Nutrition, Inc., Topeka, KS, Jeffrey F. Reiman, Reiman & Associates, P.C., Denver, CO, for defendants.

MEMORANDUM AND ORDER

SAFFELS, District Judge.

This matter is before the court on the motion of the plaintiff and counterclaim defendant All West Pet Supply Company ("All West") and counterclaim defendant Michael Bernstone ("Bernstone") for partial summary judgment on the counterclaim alleging fraud (Doc. 83).

Nature of the Claim

All West Pet Supply Company ("All West") brought this diversity suit against Hill's Pet Products Division, Colgate-Palmolive Company ("Hill's") and against Veterinary Companies of America, Inc. ("VCA"), also a division of Colgate-Palmolive Company. All West, a former Hill's distributor, alleges that Hill's breached the distributorship agreement by failing to maintain the confidentiality of certain customer and sales information provided by All West to Hill's on a periodic basis pursuant to the agreement. All West also alleges that the defendants' use of the information amounts to a violation of the Kansas Trade Secrets Act.

Hill's filed a counterclaim against All West for the amount due Hill's for pet food products sold and delivered to All West. All West has stipulated in the pretrial order that it failed to pay Hill's for these products. Hill's also filed a counterclaim for fraud against All West and Michael J. Bernstone ("Bernstone"), president of All West and the sole owner of its parent corporation, alleging that Bernstone intentionally ordered pet food products without intending to pay for them in the event that Hill's decided not to renew the distributorship agreement beyond March 1992.

All West and Bernstone (hereinafter "counterclaim defendants") contend they are entitled to summary judgment on the counterclaim for fraud. They argue that Hill's has not come forward with sufficient evidence of Bernstone's fraudulent intent to withstand summary judgment on the counterclaim. In objecting to the motion for summary judgment, Hill's argues that under Kansas law it is unnecessary to present clear and convincing evidence of Bernstone's fraudulent intent in order to avoid summary judgment in favor of the counterclaim defendants on the fraud counterclaim.

Jurisdiction and Venue

The court has diversity jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a)(1), (c)(1). Venue is proper in this district under 28 U.S.C. § 1391(a)(1)-(3), (c). There are no disputes between the parties as to either jurisdiction or venue.

Summary Judgment Standards

Under Fed.R.Civ.P. 56, the court is compelled to render summary judgment on behalf of a moving party if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Essentially, the inquiry as to whether an issue is genuine is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). An issue of fact is genuine if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party. Id. at 248, 106 S.Ct. at 2510. This inquiry necessarily implicates the substantive evidentiary standard of proof that would apply at trial. Id. at 252, 106 S.Ct. at 2512.

The moving party has the burden of showing the absence of a genuine issue of material fact. This burden "may be discharged by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). In opposing a properly supported motion for summary judgment, a party "may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256, 106 S.Ct. at 2514. The nonmoving party must go beyond the pleadings and designate specific facts, by affidavits, depositions, answers to interrogatories, and admissions on file, showing that there is a genuine issue for trial. Celotex Corp., 477 U.S. at 323, 106 S.Ct. at 2553. The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. Anderson, 477 U.S. at 256, 106 S.Ct. at 2514.

The court must consider factual inferences tending to show triable issues in the light most favorable to the existence of those issues. United States v. O'Block, 788 F.2d 1433, 1435 (10th Cir.1986). The court must also consider the record in the light most favorable to the party opposing the motion. Bee v. Greaves, 744 F.2d 1387, 1396 (10th Cir.1984), cert. denied, 469 U.S. 1214, 105 S.Ct. 1187, 84 L.Ed.2d 334 (1985). However, a mere scintilla of evidence in favor of the nonmoving party is insufficient to create a genuine issue of material fact. Anderson, 477 U.S. at 252, 106 S.Ct. at 2512.

In this case, as required by D.Kan.Rule 206(c), counterclaim defendants as the moving parties have set forth a concise statement of material facts as to which they contend no genuine issue of fact exists, properly supported by the affidavit of Bernstone and copies of relevant extracts of depositions and answers to interrogatories. They contend there is no evidence to establish Bernstone's alleged fraudulent intent when he ordered the products in question. The court finds that the moving parties have met their initial burden under Celotex in support of their motion for summary judgment.

Hill's has filed a memorandum in opposition, generally challenging counterclaim defendants' assertions of undisputed facts as merely "statements of belief or intent." Under D.Kan.Rule 206(c), "all material facts set forth in the statement of the movant shall be deemed admitted for the purpose of summary judgment unless specifically controverted by the statement of the opposing party." Hill's has not "specifically controverted" counterclaim defendants' statement of undisputed facts, with the possible exception of their assertion that the decision not to pay Hill's the balance due for the products was made as a business decision following receipt of the notice of nonrenewal.¹ Therefore, the uncontroverted facts as set forth by the counterclaim defendants are otherwise deemed admitted for purposes of resolving the motion presently before the court.

Facts

Hill's is a manufacturer of specialty pet foods. All West previously served as a regional distributor of Hill's pet food products pursuant to a series of distributorship agreements between All West and Hill's. The most recent distributorship agreement provided for a one-year term ending March 31, automatically renewable from year to year except upon either party's giving notice to the other of its intent not to renew at least 30 days prior to the expiration date.

Beginning in February, 1991, All West began to question whether Hill's would renew its distributorship agreement. Shortly thereafter, All West was notified that the agreement would be renewed for the year ending March 31, 1992. In the fall of 1991, Bernstone spoke with a representative of Hill's, Dana Morgan, concerning All West's interest in distributing another line of pet foods. According to Bernstone, upon discussing his concerns with Morgan regarding rumors that Hill's might not renew the All West distributorship, Morgan assured Bernstone that although he could not guarantee the agreement would be renewed forever, it was certainly good for 1992.² Bernstone interpreted this statement to mean that the distributorship agreement would remain in effect throughout calendar year 1992.

On February 27, 1992, Hill's notified All West that the distributorship agreement would not be renewed after March 31, 1992. Thereafter, All West ordered no additional pet food products from Hill's. On or about that date, after it received notice of the nonrenewal, All West made a business decision to hold all payments owed to Hill's in abeyance until it analyzed its options with regard to Hill's decision to terminate its relationship with All West.³ Sometime after that date, as required by the terms of the agreement, All West returned approximately $45,000 worth of Hill's products that had not been sold.⁴

In opposition to counterclaim defendants' argument that there is no evidence in the record to support the requisite element of fraudulent intent,⁵ Hill's contends only that the issue cannot be determined on summary judgment because the issue of what Bernstone "believed" is a question of fact. Hill's argues that even if it offered no evidence to refute Bernstone's testimony regarding his state of mind at the relevant time, a genuine issue of material fact would still exist as to his credibility. Relying on cases decided by the Kansas courts, Hill's argues that a court should be cautious in granting a motion for summary judgment when the resolution of the dispositive issue requires a determination of the state of mind of one or both of the parties.⁶ Hill's also argues that fraud may be inferred from circumstantial evidence.

Hill's complains that...