Boland Inc v. Rolf C. Hagen (usa) Corp.

Citation685 F.Supp.2d 1094
Decision Date04 February 2010
Docket NumberNo. CIV. S-08-2201 LKK/JFM.,CIV. S-08-2201 LKK/JFM.
CourtU.S. District Court — Eastern District of California
PartiesBOLAND, INC., a California corporation dba S & S Suplies, Plaintiff, v. ROLF C. HAGEN (USA) CORP., and Does 1 through 50, inclusive, Defendants.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Christopher W. Sweeney, Law Office of Christopher W. Sweeney, Fairfield, CA for Plaintiff.

Lawrence E. Butler, Seyfarth Shaw LLP, San Francisco, CA, for Defendants.

ORDER

LAWRENCE K. KARLTON, Senior

District Judge.

Defendant "Rolf C. Hagen (USA) Corp." manufactures pet supply products. Plaintiff Boland Inc., d/b/a S & S Supplies distributes products from defendant and other manufacturers to individual retailers. In 2007, Hagen effectively eliminated the middleman by offering to sell directly to retailers on the same terms offered to distributors. Plaintiff filed suit, bringing contract, trade secret, and other state law claims. Pending before the court is defendant's motion for summary judgment on all claims. The court resolves this motion on the papers and after oral argument. For the reasons stated below, the motion is granted in part and denied in part.1

I. BACKGROUND2

The following discussion of the facts is meant to provide context for the present dispute. The facts are discussed in greater detail in the court's analysis.

A. The Parties' Initial Relationship

Plaintiff Boland is a family corporation. Its president is Sam Sarkissian. Many, if not all, of its directors and managers are members of the Sarkissian family. Sometime around 1993, plaintiff began purchasing pet products from defendant and distributing these products to individual retailers. Plaintiff contends that at that time, the parties entered an oral contract regarding distribution of defendant's products. While defendant disputes whether a contract was entered or is en- forceable, for purposes of this motion defendant does not deny the existence of an enforceable contract. This agreement was never reduced to writing.

The distribution arrangement was nonexclusive. Plaintiff distributed defendant's products as well as competing manufacturers', defendant sold its products to plaintiff as well as to other distributors, and individual retailers purchased defendant's products from plaintiff and from other distributors. Defendant's Undisputed Facts ("Def.'s UF") 1-3, 33. Plaintiff contends that the contract contained terms regarding (1) pricing, (2) defendant's ability to sell directly to dealers, (3) plaintiff's obligation to use best efforts to promote Hagen products, and (4) termination of the agreement. The court summarizes parties' positions here, postponing discussion of the evidence offered in support of their contentions.

Defendant sold its products to plaintiff and other distributors at prices set by defendant unilaterally, and plaintiff had no right to negotiate these prices. Def.'s UF 5-6. Prior to 2007, these prices were typically one third of the suggested retail price. Deposition of Dieter Hagen, 31.

Plaintiff argues that another term of this agreement was that defendant would not sell directly to retailers. Defendant argues that plaintiff is barred from making this argument, and that there is insufficient evidence of such a term.

Plaintiff apparently contends that the contract required plaintiff to use best efforts to promote defendant's products.3

Plaintiff argues that defendant could only terminate the contract if plaintiff failed to use best efforts, while defendant argues that the contract was terminable at will.

B. Defendant's Gold Dealer Program

Plaintiff's trade secrets claims arise out defendant's "Gold Dealer" program. The program rewarded retailers for buying defendant's products. Deposition of Trevor Hagen, 31. Defendant identified and solicited the participating retailers using defendant's own information. Def.'s UF 24, 25. Plaintiff, along with other distributors provided defendant with information regarding participating retailers' purchases. In reporting this information, plaintiff submitted to defendant lists of retailers who purchased defendant's products from plaintiff, with the name, telephone number and net value of purchases for each retailer. Def.'s UF 26. Of this information only the amount of sales was unknown to defendant, and the remaining information was included for identification. Def.'s UF 28.

C. HagenDirect Program

In February of 2007, defendant sent a letter to plaintiff and other parties announcing defendant's intention to sell its products directly to retailers. Compl. Ex. A; see also Declaration of Andrea K. Anapolsky Ex. D.4 Defendant had not previ- ously sold directly to retailers in the United States. Plaintiffs Additional Fact ("PL's AF") 26.

In the letter, defendant explained that retailers would be able to purchase defendant's products at the prices previously offered to distributors. Def.'s UF 17; Deposition of Sam Sarkissian ("Sam Depo.") 107, 108. This letter offered to accept returns of products purchased in the previous ninety days, subject to a 10 percent restocking fee and the purchaser's payment of shipping costs. Anapolsky Decl. Ex. D.

"Immediately prior" to this announcement, "plaintiff had purchased in excess of $200,000 of products," which defendant had already shipped. Declaration of Sam Sarkissian ("Sam Deck") ¶ 5. Plaintiff contends that it "requested that [defendant] accept the return of [this] [disputed [inventory and refund the price paid by plaintiff for the products," but that defendant has refused to do so. Sam Decl. ¶ 6. The parties have not further explained this dispute. That is, the parties have not explained whether defendant refused to accept the inventory on the terms offered in the HagenDirect announcement, or whether plaintiff instead demanded that defendant accept different terms.5

Plaintiff contends that in implementing the HagenDirect program, defendant used proprietary information plaintiff had provided to defendant for a limited purpose, to wit, the information regarding the volume of products purchased by each retailer. Sam Dec. ¶ 12. Defendant contends that no evidence indicates that defendant so used this information, or that any such use would be impermissible.

II. STANDARD FOR A FED. R. CIV.

P. 56 MOTION FOR SUMMARY JUDGMENT

Summary judgment is appropriate when it is demonstrated that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P 56(c); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Poller v. Columbia Broadcasting System, 368 U.S. 464, 467, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Jung v. FMC Corp., 755 F.2d 708, 710 (9th Cir.1985); Loehr v. Ventura County Community College Dist, 743 F.2d 1310, 1313 (9th Cir. 1984).

Under summary judgment practice, the moving party

[A]lways bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact

.

Celotex Corp. v. Catrett, 411 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "[W]here the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the 'pleadings, depositions, answers to interrogatories, and admissions on file.'" Id. Indeed, summary judgment should be entered, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id. at 322, 106 S.Ct. 2548. "[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. In such a circumstance, summary judgment should be granted, "so long as whatever is before the district court demonstrates that the standard for entry of summary judgment, as set forth in Rule 56(c), is satisfied." Id. at 323, 106 S.Ct. 2548.

If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Ruffin v. County of Los Angeles, 607 F.2d 1276, 1280 (9th Cir. 1979), cert, denied, 445 U.S. 951, 100 S.Ct. 1600, 63 L.Ed.2d 786 (1980).

In attempting to establish the existence of this factual dispute, the opposing party may not rely upon the denials of its pleadings, but is required to tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Rule 56(e); Matsushita, 475 U.S. at 586 n. 11, 106 S.Ct. 1348; First Nat'l Bank, 391 U.S. at 289, 88 S.Ct. 1575; Strong v. France, 474 F.2d 747, 749 (9th Cir.1973). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, Anderson v. Liberty Lobby, Inc., All U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987), and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party, Anderson, 477 U.S. at 248-49, 106 S.Ct. 2505; Wool v. TandemComputers, Inc., 818 F.2d 1433, 1436 (9th Cir.1987).

In the endeavor to establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its...

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