Badger Pharmacal, Inc. v. Colgate-Palmolive Co.
| Citation | 1 F.3d 621 |
| Decision Date | 06 August 1993 |
| Docket Number | COLGATE-PALMOLIVE,No. 92-2810,92-2810 |
| Parties | BADGER PHARMACAL, INC., d/b/a Wisconsin Pharmacal Company, Inc., Plaintiff-Appellant, v.COMPANY and SoftSoap Enterprises, Inc., Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
John R. Stoffer, Stephen T. Jacobs (argued), David J. Sisson, Reinhart, Boerner, Vandeuren, Norris & Rieselbach, Milwaukee, WI, for plaintiff-appellant.
Reuben W. Peterson, Jr., James M. Fredericks, Borgelt, Powell, Peterson & Frauen, Milwaukee, WI, Charles A. Gilman (argued), Laura Mezey, Cahill, Gordon & Reindel, New York City, for defendants-appellees.
Before COFFEY and KANNE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.
Wisconsin Pharmacal Company (WPC) sued Colgate-Palmolive Company (Colgate) and its wholly owned subsidiary, SoftSoap Enterprises (SoftSoap), for breach of contract, claiming the defendants had failed to use their best efforts under an exclusive marketing agreement between the parties. Two other claims solely against Colgate alleged negligent and strict responsibility misrepresentation, 1 also involving the marketing agreement.
After the district court dismissed the misrepresentation counts against Colgate, WPC filed an amended complaint adding a second breach of contract claim, this one charging that both defendants had improperly terminated the agreement. Colgate and SoftSoap moved for summary judgment on both counts; WPC moved for summary judgment on the termination issue. The district court granted the defendants' motion. On consideration of the merits, we agree that the plaintiff has failed to state viable claims for negligent and strict responsibility misrepresentation against Colgate, but find that Colgate and SoftSoap did not fulfill their obligations to WPC when they defaulted in their performance of the agreement.
WPC, a Wisconsin corporation, is the inventor of "Disposer Care," a cleaning powder for kitchen sink garbage disposers. In 1986, WPC entered into an exclusive marketing agreement with SGM Group, Inc. (SGM), under which SGM would market and sell Disposer Care. According to the agreement drafted by WPC, SGM agreed to purchase all of its requirements of Disposer Care from WPC, and to "utilize its very best efforts to advertise and promote" the product. WPC earned money under the agreement both from sales to SGM and from patent royalties. Royalties were based on net sales and paid to WPC annually. The payments were to continue until SGM had paid "an aggregate of $5 million," after which SGM's obligation to pay royalties, but not its obligation to continue marketing and distributing WPC's product, would end (unless SGM opted to purchase all right, title, and interest in Disposer Care under a purchase option provision in the marketing agreement).
One provision of the agreement guaranteed payment of minimum royalties to WPC. Section 2(b)(ii) provides, in relevant part:
SGM shall pay to WPC, and Twin Oak Products, Inc. guarantees such payment, of $1.5 million in royalties regardless of whether it continues to sell Product or utilize the Trademark unless SGM is prohibited from selling the Product. The unpaid portion of such guaranteed minimum royalties shall become immediately due and payable in the event of a default by SGM hereunder or termination of this Agreement. 2
By its terms, the marketing agreement would end upon the earlier of: (1) the patent's expiration, (2) consummation of the aforementioned purchase option, whereby SGM would purchase Disposer Care from WPC for $5 million, less the amount of royalties previously paid, or (3) termination of the agreement under Sec. 7. Section 7(a)(i) and (ii) provides that, in the event of a material breach or default in the performance of the agreement by either WPC or SGM, the non-breaching party "may terminate" the agreement upon notice to the breaching party, subject to that party's right to remedy the breach or default within sixty days.
In December 1987, with WPC's consent, SGM assigned its rights and obligations under the marketing agreement to Colgate, a Delaware corporation. Pursuant to the assignment, WPC, Colgate, and SGM signed a consent agreement, titled "WPC Consent to Assignment," which contains a provision modifying the term of the marketing agreement by adding another termination event. According to Sec. 4(c) of the consent to assignment, the term of the marketing agreement would "expire upon payment to WPC by [SGM] and [Colgate] of aggregate royalties payable under the Agreement in addition to the other circumstances referred to in the definition of the 'Term' in Sec. 2(b)(iv) of the Agreement." Section 2(b)(iv) is the option purchase provision, and the parties agree that "aggregate royalties" are $5 million. On January 18, 1988, Colgate entered into a distributorship agreement with its wholly owned subsidiary, SoftSoap Enterprises, a Minnesota Corporation, whereby SoftSoap assumed Colgate's obligations under the marketing agreement.
WPC filed suit against Colgate and SoftSoap on January 24, 1991, alleging that both defendants had breached the marketing agreement by failing to use their best efforts to market and distribute Disposer Care (count I), and that Colgate had misrepresented its marketing plan to WPC and was liable under either a negligence (count II) or strict responsibility theory (count III). Colgate and SoftSoap answered the complaint, and Colgate moved to dismiss the misrepresentation counts for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). By order dated August 12, 1991, the district court granted the motion. SoftSoap continued to market and distribute Disposer Care for the remainder of 1991. On December 11, when WPC had received just over $1.5 million in royalty payments under the agreement, SoftSoap gave WPC written notice of its intention to stop marketing Disposer Care as of December 31. On that date, SoftSoap ceased performance under the agreement and returned the product to WPC.
Based on SoftSoap's actions, WPC sought and was granted leave to file an amended complaint. WPC deleted the misrepresentation counts and replaced them with a second breach of contract claim. This new count II alleged that Colgate and SoftSoap had terminated the marketing agreement by refusing to market and distribute Disposer Care before WPC had received $5 million in royalties. The defendants answered the amended complaint and moved for summary judgment on both the breach of contract/best efforts and breach of contract/termination counts, arguing that they had fulfilled their obligations to WPC under the agreement by insuring that WPC had been paid $1.5 million in royalties. In March 1992, WPC filed a cross-motion for summary judgment on the breach of contract/termination claim. On July 27, the district granted the defendants' motion; 3 final judgment dismissing WPC's complaint was entered the same day.
We turn first to our jurisdiction. Federal Rule of Appellate Procedure 3(c) provides:
The notice of appeal shall specify the party or parties taking the appeal; shall designate the judgment, order or part thereof appealed from; and shall name the court to which the appeal is taken.... An appeal shall not be dismissed for informality of form or title of the notice of appeal.
Colgate and SoftSoap point out that WPC's notice of appeal mentions only the district court's order dated July 27, 1992, without mentioning the August 12, 1991 order that dismissed WPC's misrepresentation claims. 4 The defendants argue that WPC's notice of appeal is defective and, as a result, this court lacks subject matter jurisdiction to review the August 12 order. They rely on Torres v. Oakland Scavenger Co., 487 U.S. 312, 108 S.Ct. 2405, 101 L.Ed.2d 285 (1988), and certain of our decisions that have followed Torres. See Leahy v. Board of Trustees of Community College, 912 F.2d 917 (7th Cir.1990); Brandt v. Schal Associates, Inc., 854 F.2d 948 (7th Cir.1988).
We adhere to the general principle that the rules of procedure, including Federal Rule of Appellate Procedure 3, will be liberally construed. Smith v. Barry, --- U.S. ----, ----, 112 S.Ct. 678, 681, 116 L.Ed.2d 678 (1992); Torres, 487 U.S. at 317, 108 S.Ct. at 2409; Leahy, 912 F.2d at 923. "Thus, if a litigant files papers in a fashion that is technically at variance with the letter of a procedural rule, a court may nonetheless find that the litigant has complied with the rule if the litigant's action is the functional equivalent of what the rule requires." Torres, 487 U.S. at 316-17, 108 S.Ct. at 2408-09. We bear in mind, however, that "Rule 3's dictates are jurisdictional in nature, and their satisfaction is a prerequisite to appellate review"; thus noncompliance with the rule is fatal to an appeal. Smith, --- U.S. at ----, 112 S.Ct. at 682.
Torres held that, under Rule 3's provisions, an appellant's inadvertent failure to include his own name on a notice of appeal deprives the court of jurisdiction over the appeal. 487 U.S. at 317, 108 S.Ct. at 2409. That case bears some resemblance to the case at hand, but we find that Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962), is a better match. In Foman, the appellant failed to specify the precise judgment of the district court being appealed, designating in his notice of appeal an order denying the motion to amend the judgment rather than the judgment itself. The Court found that the defect could be overlooked so long as the faulty notice "did not mislead or prejudice" the appellee. Id. at 181, 83 S.Ct. at 229. Because the appellant's "intention to seek review of [the final judgment] ... was manifest," the Court concluded that the technicality could be disregarded. Id.
As we have previously recognized, Foman is still good law after Torres:
Although [Torres] construed Foman as finding that the particular notice of appeal...
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