Grace Label, Inc. v. Kliff

• Citation: 355 F.Supp.2d 965
• Decision Date: 25 January 2005
• Docket Number: No. 4:02-CV-30538-RAW.,4:02-CV-30538-RAW.
• Parties: GRACE LABEL, INC., Plaintiff, v. Steve KLIFF, individually and d/b/a Steve Kliff & Associates, Defendant. Steve Kliff, individually and d/b/a Steve Kliff & Associates, Counterclaim Plaintiff, v. Grace Label, Inc., Counterclaim Defendant.
• Court: United States District Courts. 8th Circuit. United States State District Court of Southern District of Iowa

355 F.Supp.2d 965

GRACE LABEL, INC., Plaintiff, v. Steve KLIFF, individually and d/b/a Steve Kliff & Associates, Defendant.

Steve Kliff, individually and d/b/a Steve Kliff & Associates, Counterclaim Plaintiff, v. Grace Label, Inc., Counterclaim Defendant.

No. 4:02-CV-30538-RAW.

United States District Court, S.D. Iowa, Central Division.

January 25, 2005.

Sean P. Moore, Brown Winick Graves Gross Baskerville & Schoenebaum PLC, Retchen Witte Kraemer (Null) Kevin M. Reynolds, Robert L. Fanter, Whitfield & Eddy PLC, Des Moines, IA, for Plaintiff.

Kevin M. Reynolds, Robert L. Fanter, Gretchen Witte Kraemer, Whitfield & Eddy PLC, Richard J. Sapp, Nyemaster Goode Voights West Hansell & O'Brien PC, Des Moines, IA, for Defendant.

RULING ON MOTION FOR SUMMARY JUDGMENT OF DEFENDANT/COUNTERCLAIM PLAINTIFF STEVE KLIFF

WALTERS, Chief United States Magistrate Judge.

The claims in this case are based on a contract for the purchase of at least 47,250,000 foil trading cards bearing the likeness of pop music star Britney Spears. The Court has diversity jurisdiction. 28 U.S.C. § 1332(a)(1). Plaintiff Grace Label, Inc. (Grace Label) sues for money due. Defendant Steve Kliff (Kliff) maintains the cards were rightfully rejected as malodorous and otherwise not conforming to the contract requirement that they be "direct food contact compatible." He has counterclaimed for breach of contract. Kliff has moved for summary judgment on both the Complaint and his counterclaim (# 45). The matter has been referred to the undersigned pursuant to 28 U.S.C. § 636(c)(1). The motion for summary judgment is fully submitted following hearing. The Court appreciates the careful attention both sides have paid to the requirements of LR 56.1 in preparing their summary judgment papers.

I. SUMMARY JUDGMENT

Kliff is entitled to summary judgment if the affidavits, pleadings, and discovery materials "show that there is no genuine issue as to any material fact and that [Kliff is] entitled to judgment as a matter of law." Erenberg v. Methodist Hospital, 357 F.3d 787, 791 (8th Cir.2004) (citing Fed.R.Civ.P. 56(c)); see LeGrand v. Area Resources for Community and Human Services, 394 F.3d 1098, 1100-01 (8th Cir.2005). The Court must view the facts in the light most favorable to Grace Label, and give it the benefit of all reasonable inferences which can be drawn from them, "that is, those inferences which may be drawn without resorting to speculation." Mathes v. Furniture Brands Int'l, Inc., 266 F.3d 884, 885-86 (8th Cir.2001) (citing Sprenger v. Federal Home Loan Bank of Des Moines, 253 F.3d 1106, 1110 (8th Cir.2001)); see Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); John Q. Hammons Hotels, Inc. v. Acorn Window Systems, Inc., 394 F.3d 607, 609-10 (8th Cir.2005); Erenberg, 357 F.3d at 791; Tademe v. St. Cloud State University, 328 F.3d 982, 987 (8th Cir.2003). An issue of material fact is genuine if it has a real basis in the record. Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir.1992) (citing Matsushita, 475 U.S. at 586-87, 106 S.Ct. 1348 (1986)). A genuine issue of fact is material if it "might affect the outcome of the suit under governing law." Hartnagel, 953 F.2d at 395 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)); see Hitt v. Harsco Corp., 356 F.3d 920, 923 (8th Cir.2004).

In resisting summary judgment Grace Label must "go beyond the pleadings and by affidavits, depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue of material fact." Rouse v. Benson, 193 F.3d 936, 939 (8th Cir.1999); see Hesse v. Avis Rent A Car System, Inc., 394 F.3d 624, ___, 2005 WL 36451, *3 (8th Cir.2005); Hitt, 356 F.3d at 923. In assessing the motion for summary judgment the Court must determine whether a fair-minded trier of fact could reasonably find for Grace Label based on the evidence presented. Anderson, 477 U.S. at 248, 106 S.Ct. 2505; Herring v. Canada Life Assurance Co., 207 F.3d 1026, 1030 (8th Cir.2000).

II. FACTUAL BACKGROUND

Except as noted, the following facts are either undisputed or are presented in the light most favorable to Grace Label.

Steve Kliff, a citizen of California, does business as Steve Kliff & Associates, a sole proprietorship he formed in 2002. He is in the business of brokering printing projects. On May 24, 2002, Barcel, S.A. de C.V. (Barcel), a Mexican company, by purchase order contracted with Kliff for at least 47,250,000 foil trading cards bearing the likeness of Britney Spears. Barcel is a large, multinational corporation which sells a variety of food products. It indicated the cards would be placed in snack food packaging and would come in direct contact with the food contents.

On May 30, 2002, Kliff by purchase order contracted with Grace Label to produce the Spears cards. Grace Label is an Iowa corporation located in Des Moines engaged in the business of manufacturing pressure-sensitive labels and flexible packaging. The purchase order described the product as a "Foil Trading Card (Direct Food Contact Compatible)." (Def.App. at 5). It also specified the printing process was to use "FDA Varnish." (Id.). In his affidavit Grace Label's president, Steve Grace, has said he understood Grace Label was to use FDA varnish to accomplish the direct food contact compatibility requirement. (Pltf.App. at 3). Grace Label did not have any direct communications with Barcel concerning the Spears cards. Kliff did not want Grace Label to be in contact with his customer.¹ (Id. at 18).

The Spears job was the third (or fourth) Barcel job Grace Label had worked on in association with Mr. Kliff in about a year's time. Grace Label relies heavily on the prior course of dealing between the parties for its contention that the Spears cards conformed to the contract specifications. Kliff disputes the admissibility of this evidence.

Before setting up his own company, Mr. Kliff was president of Chromium Graphics. The first Barcel job Grace Label worked on was in the summer and fall of 2001 when Kliff was still employed by Chromium Graphics, the "66 million job." (Pltf.App. at 22). According to Kliff the 66 million job involved two print orders of the same project which he refers to separately as the "Cupon Portatil job" and "Cupon Prendete job." (Def. Reply Stat. of Add. Facts ¶ 2). The Cupon Portatil job was placed with Grace Label by Kliff while employed at Chromium Graphics. (Def. Supp.App. at 134). The second part of the 66 million job, the Cupon Prendete job, essentially a re-order, came about in October-December 2001. Chromium Graphics had been sold and Kliff suggested Barcel work directly with Grace Label while he provided coordinating services. Ultimately he agreed to act as Grace Label's agent in dealing with Barcel. (Id. at 136).

The next job, just before the Spears job, was the "Ponte Sobre Ruedas job" in February 2002. Mr. Kliff had started his new company by then and contracted with Grace Label to produce the cards. (Def. Supp. at App. 136-37).

Despite its name, the 66 million job apparently involved in total about 58,000,000 "scratch off" game piece cards. Consumers scratched or rubbed off a coating to see if they had won a prize. (Def. Supp.App. at 49). The Ponte Sobre Ruedas job involved about 42,000,000 "peel apart" game piece cards. Consumers peeled off a top layer of the card to see if they had won a prize. The Spears card was simply a trading card with no "scratch off" or "peel apart" feature. The purchase order to Grace Label for the Ponte Sobre Ruedas job, like the Spears job, specified the use of "FDA Varnish." The Spears card was varnished on both sides, the others on one side. The "direct food contact compatible" description appeared only in the Spears card purchase order. All of the cards manufactured by Grace Label for the various Barcel projects were inserted in packages of Barcel's snack food products. (Id.).

Mr. Grace has testified all of the printing jobs were based on material specifications originally given by Chromium Graphics to Grace Label for the 66 million job through its employee Barry McKillip² (Pltf.App. at 3, 7-8), and in fact Chromium Graphics supplied the material for that job. (Id. at 22). Mr. Grace further testified that over the course of several phone calls setting up the Spears job Mr. Kliff "described the application and he said, `Let's do it similar to the last job that we printed for them.' I said, `That's good. We'll use the same materials. That's great.' `I'd like a prototype — or, I'd like a sample' ... I think we had discussions saying, `We'll run it like we did the other jobs.'" (Id. at 13). Later in Mr. Grace's deposition the questioning returned to the subject: "[Kliff] said, `I want a card just like we did.' I took that and said, `Let's use the same material.' I didn't need to re-invent the wheel." (Id. at 20).

Beyond vendor invoices, Grace Label did not keep records of the materials used to produce the Spears cards, but Mr. Grace has testified the adhesive was "Rad-Cure 12PSFLV." (Id. at 9). Chromium Graphics, by Mr. McKillip, told Grace Labels to use the adhesive on the 66 million job. (Id. at 39). Rad-Cure 12PSFLV is not listed on the Rad-Cure website as being among Rad-Cure's FDA food grade adhesives. Grace Label was unaware whether or not this was the case. Other than ordering the FDA varnish, Grace Label did nothing to determine if the materials used to produce the Spears cards were compatible for direct contact with food items. (Def. Stat. of Facts ¶ 13; Pltf. Response ¶ 13). Before its work for Barcel, Grace Label had not produced a product intended to be in direct contact with food. (Pltf.App. at 7). Mr. Grace testified Grace Label assumed the materials Grace Label was told to use had been approved by Chromium Graphics or Barcel. (Id. at 89).

Grace Label prepared prototype cards which were...