Baer Gallery, Inc. v. Citizen's Scholarship

• Decision Date: 16 June 2006
• Docket Number: No. 05-2620.,05-2620.
• Citation: 450 F.3d 816
• Parties: THE BAER GALLERY, INC., Appellant, v. CITIZEN'S SCHOLARSHIP FOUNDATION OF AMERICA, INC., now known as Scholarship America, Inc., Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

450 F.3d 816

THE BAER GALLERY, INC., Appellant, v. CITIZEN'S SCHOLARSHIP FOUNDATION OF AMERICA, INC., now known as Scholarship America, Inc., Appellee.

No. 05-2620.

United States Court of Appeals, Eighth Circuit.

Submitted: February 17, 2006.

Filed: June 16, 2006.

COPYRIGHT MATERIAL OMITTED

Joseph S. Jaworski, argued, Glaveston, TX (Paul A. Sortland of Minneapolis, MN, on the brief), for appellant.

Eleasalo V. Ale, argued, Minneapolis, MN (Martin S. Chester, on the brief), for appellee.

Before WOLLMAN, ARNOLD, and GRUENDER, Circuit Judges.

WOLLMAN, Circuit Judge.

The Baer Gallery, Inc. (Baer Gallery) sued Citizens' Scholarship Foundation, Inc., now known as Scholarship America, Inc. (Scholarship America) for fraud and breach of contract. The district court¹ granted summary judgment in favor of Scholarship America, and Baer Gallery appeals. We affirm.

I.

Baer Gallery is owned by artist Dean Baer and exists to promote his artwork. Following the September 11, 2001, terrorist attacks against the United States, Baer was inspired to paint a rendering of the U.S. flag (the Image). To ensure that the Image was used for a good cause, Baer and Baer Gallery entered into a contract with Scholarship America (the Agreement) on May 21, 2002. Scholarship America managed the Families of Freedom Scholarship Fund (the Fund), an educational scholarship program benefitting dependents of the terrorist attack victims.

The Agreement provided that Baer Gallery "will guarantee a sponsorship donation to [Scholarship America] and [the Fund] of 100% of the designated funds ... generated through the sale of [the Image]. This contribution will be designated as a [Scholarship America] Sponsorship and all proceeds will be unrestricted." App. at 459. The Agreement allowed Baer Gallery to use certain trademarks owned by Scholarship America in connection with the Image, but indicated that Baer Gallery "must obtain prior written approval of all materials displaying our trademarks before the materials are shown to the public. [Scholarship America] requires, at a minimum, 72 hours (excluding weekends and holidays) to review and approve the materials." Id. (emphasis in original).

After entering into this contract, Baer Gallery began to make plans to promote the sale of prints of the Image on the first anniversary of the terrorist attacks. On August 18, 2002, Baer Gallery sent a draft press release to Scholarship America for approval. Scholarship America, fearful that Baer Gallery's publicity campaign would conflict with its own public relations goals, did not approve the press release prior to September 11, 2002. As a result, Baer Gallery was unable to promote the Image on the first anniversary of the terrorist attacks as it had hoped.

In September 2002, Scholarship America informed Baer Gallery via email that it had "a corporation interested in using the print." As a result, Scholarship America requested that the parties append an addendum (the Addendum) to the original contract that would assign Baer Gallery's copyright of the Image to Scholarship America. After months of negotiation, the parties agreed to the Addendum in December 2002. The Addendum provided that Scholarship America would receive exclusive rights to the Image in exchange for sponsorship benefits. Scholarship America, in turn, agreed that "where the Image is being used on or in connection with a product or products, it will include in some way, shape, or form information on how to purchase the print." Id. at 73.

At the time the Addendum was finalized, Baer Gallery was unaware of Scholarship America's specific plans for the Image. Unbeknownst to Baer Gallery, Scholarship America had been negotiating with Easy Spirit to use the Image on a hang-tag attached to a promotional Freedom Shoe. The hang-tag referred purchasers to Scholarship America's website "for more information on how you can help and how you can purchase a print of this Image." The funds raised as a result of this promotion with Easy Spirit were used to fund Dollars for Scholars, a different program managed by Scholarship America.

On June 12, 2003, Baer Gallery terminated its relationship with Scholarship America. Baer Gallery then filed this action against Scholarship America in the district court, alleging fraud, breach of contract, unjust enrichment, promissory estoppel, and a breach of the duty of good faith and fair dealing. The district court granted Scholarship America's motion for summary judgment on all claims. On appeal, Baer Gallery argues that genuine questions of material fact exist regarding the fraud and breach of contract allegations.

II.

We review de novo a district court's grant of summary judgment. Drake ex rel Cotton v. Koss, 445 F.3d 1038, 1042 (8th Cir.2006). Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c); Drake, 445 F.3d at 1042. We view the evidence and the inferences that may reasonably be drawn from the evidence in the light most favorable to the nonmoving party. Id. We review de novo the district court's interpretation of Minnesota law. Id.

A.

Baer Gallery alleges that Scholarship America made three fraudulent representations or omissions: (1) by claiming in an email that there was "a corporation interested in using the print," (2) by failing to disclose the true nature of Easy Spirit's planned use of the Image, and (3) by failing to disclose that all proceeds from the agreement with Easy Spirit would benefit Dollars for Scholars.

To prevail on a claim of fraud by misrepresentation under Minnesota law, Baer Gallery must show: (1) a false representation of a material fact, (2) made with knowledge of the falsity or made without knowing whether the statement was true or false, (3) made with the intention to induce appellants to act in reliance on the statement, (4) that the representation caused Baer Gallery to act in reliance, and (5) pecuniary damage. Am. Computer Trust Leasing v. Boerboom Int'l, Inc., 967 F.2d 1208, 1212 (8th Cir.1992). Baer Gallery's reliance on the representation must be reasonable, and reliance on an implied misrepresentation is unreasonable if a written contract provision explicitly states a fact completely contradictory to the claimed misrepresentation. Houlihan v. Offerman & Co., 31 F.3d 692, 695-96 (8th Cir.1994).

Baer Gallery claims that the email stating that there was "a corporation interested in using the print" implied that the unnamed corporation would use full-size prints of the Image. Baer Gallery thus argues that the email-specifically, the mention of "the print"-was a false representation that induced Baer Gallery to agree to the Addendum. Even assuming that the email implied that the interested corporation would use full-size prints of the Image, we conclude that the express language of the Addendum precludes Baer Gallery from reasonably relying on such an implication. Under the specific provisions of the Addendum, Scholarship America could modify, adapt, and use the Image in connection with other products, but was not free to sell the Image by itself. For example, paragraph 3 provides that Scholarship America "may, without limitation, reproduce, distribute, publish, display, modify, adapt, create derivative works (works consisting of editorial revisions, elaboration, or other modifications of the Image), or otherwise use or exploit all or part of the Image." App. at 71. In paragraph 16, Baer Gallery agreed "to work with [Scholarship America] on a new print layout, if necessary, to include a corporate sponsor who wishes to use the Image on or in connection with its product." Id. at 72. Finally, paragraph 19 provides that "This Agreement covers use of the Image to promote a product or products, but does not include selling the Image itself. For example, the Image may be used on an enclosure or collateral item distributed with (but not sold separately from) a corporate sponsor's product.... Use of the Image for any other purpose other than stated is prohibited under the Agreement." Id. at 73.

In light of this contractual language, we conclude that Baer Gallery could not have reasonably believed that Scholarship America agreed only to sell full-size, high-quality prints. Indeed, paragraph 19 prohibited Scholarship America from selling copies of the Image unless the...