Grandoe Corp. v. Gander Mountain Co.
| Decision Date | 03 July 2013 |
| Docket Number | Case No. 11-CV-0947 (PJS/FLN) |
| Parties | THE GRANDOE CORPORATION, Plaintiff, v. GANDER MOUNTAIN COMPANY, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Lisa Lamm Bachman and Peter A. T. Carlson, FAFINSKI MARK & JOHNSON, P.A., for plaintiff.
Dudley W. Von Holt and Paul M. Brown, THOMPSON COBURN LLP; John Edward Connelly, FAEGRE BAKER DANIELS LLP, for defendant.
This lawsuit arises out of a broken promise. Gander Mountain Company ("Gander Mountain"), a retailer of outdoor sporting goods, promised to buy approximately $3.05 million worth of gloves from the Grandoe Corporation ("Grandoe"), a manufacturer of gloves and other apparel. In reliance on this promise, Grandoe purchased the necessary raw materials and manufactured the gloves. After ordering and paying for approximately $950,000 worth of the gloves, however, Gander Mountain refused to issue any further purchase orders, denied that it had any legal obligation to pay for the rest of the gloves, and left Grandoe with a warehouse full of gloves that Grandoe cannot sell because they bear Gander Mountain's trademarks.
After unsuccessfully attempting to persuade Gander Mountain to honor its promise, Grandoe filed this lawsuit. The Court granted in part and denied in part Gander Mountain's motion for summary judgment. ECF No. 40. Grandoe's claims for breach of contract and promissory estoppel were tried to a jury. The Court asked the jury to make findings on both claims but explained that, in the event that the jury awarded Grandoe damages on both claims,Grandoe would not receive a double recovery, but would instead recover only on the contract claim.
The jury found in Grandoe's favor on both claims. It awarded the identical amount — $1,557,284.40 — on each claim, and the Court entered judgment on Grandoe's behalf in the amount of $1,557,284.40. ECF Nos. 81, 83. This figure represents the contract price for Grandoe's remaining inventory of Gander Mountain-branded gloves.1 See Minn. Stat. § 336.2-709(1)(b) (). Grandoe should also have recovered incidental damages, see Minn. Stat. § 336.2-710, but the Court precluded Grandoe from introducing evidence of such damages at trial, because Grandoe's attorneys had inexplicably failed to disclose that evidence during discovery. This mistake appears to have cost Grandoe over $600,000.
This matter is now before the Court on the parties' post-trial motions. Gander Mountain moves for judgment as a matter of law on Grandoe's breach-of-contract and promissory-estoppel claims, and alternatively moves for a new trial. Grandoe moves to alter or amend the judgment to include pre- and post-judgment interest, and also asks the Court to order Gander Mountain to increase its letter of credit in Grandoe's favor for the purpose of staying execution of the judgment.
For the reasons stated below, the Court denies Gander Mountain's motion and grants Grandoe's motion in part. The Court awards Grandoe prejudgment interest in the amount of $572,389.20, for a total judgment of $2,129,673.60. Grandoe is also entitled to recover post-judgment interest at an annual compound rate of .15 percent. Finally, the Court orders Gander Mountain to increase its letter of credit to $2.15 million.
Viewing the evidence in the light most favorable to Grandoe and drawing all reasonable inferences in Grandoe's favor, a jury could find the following facts:
A. Grandoe and Glove Manufacturing
Grandoe is a small, family-run glove manufacturer that has been in business for over 100 years. Grandoe manufactures gloves under its own brand and under private-label programs for major retailers such as Dillard's, L.L.Bean, Nordstrom, REI, and Eddie Bauer. Grandoe had sold Grandoe-branded gloves to Gander Mountain before the events that gave rise to this lawsuit.
The manufacture of gloves is a surprisingly complex process. A high-performance glove consists of multiple components, including an outer shell, inner layers of insulation and padding, waterproof inserts, a palm grip, straps, clips, buckles, tags, logos, and wristlets. These components are made from an array of raw materials, some of which must be processed and manufactured into component parts by subcontractors before being shipped to the Grandoe factory.
Manufacturing a private-label glove — that is, a glove sold under the retailer's brand rather than the manufacturer's brand — is an even more complex process. The manufacturer and retailer must work closely together to determine how the retailer's logo will appear on both theproduct and the packaging. There may be branding on multiple components, including tags, clips, and straps, as well as on the main body of the glove. The retailer may also want a custom-designed product so that its private-label products are clearly distinguishable from the manufacturer's own branded merchandise. Significantly for purposes of this case, the branding of the retailer's logos on a glove occurs fairly early in the manufacturing process, after the material is cut but before the glove is fully assembled.
It is the custom and practice of the apparel-manufacturing industry for a manufacturer to begin production after getting a verbal commitment from a buyer. Both the buyer and the seller treat these verbal commitments as binding. Some weeks or months after making the verbal commitment, the buyer will issue purchase orders to provide final shipping and payment details. Grandoe's previous transactions with Gander Mountain followed the industry practice: Gander Mountain made a verbal commitment, Grandoe manufactured the products based on the verbal commitment, and Gander Mountain followed up with purchase orders that were consistent with the verbal commitment. Gander Mountain did not issue the purchase orders until shortly before the shipping dates. Given the length of time normally necessary to manufacture gloves, Gander Mountain must have known, at the time it issued the purchase orders, that the gloves that it was ordering had already been manufactured in reliance on Gander Mountain's verbal commitments.
B. The Glove Contract
In the fall of 2008, Grandoe and Gander Mountain discussed a possible purchase of Grandoe-branded gloves for the fall 2009 season. Jeff Lee, who was Grandoe's vice president of sales, met with Jeanne Hall, who was Gander Mountain's product manager for its accessories department (which included cold-weather accessories such as gloves).
Sometime in late September or early October 2008, Lee and Hall met and discussed what the parties call an "early-season production program" of Grandoe-branded gloves. "Early-season production" (or "early production") means that Grandoe would manufacture the gloves during its slow season, which is normally between October and March. Because the program would make use of Grandoe's excess manufacturing capacity, Grandoe would offer a substantial discount on the wholesale price. To take advantage of this program, however, Gander Mountain had to commit in time for Grandoe to start production during its slow season.
At their meeting, Lee and Hall discussed quantities, styles, and other details. On October 28, Lee sent Hall an email with an attached spreadsheet itemizing the gloves to be manufactured. Pl.'s Ex. 1 at GC00004. At that point, Lee believed that he had a commitment from Gander Mountain to buy Grandoe-branded gloves, and Lee was seeking to nail down the details. Lee's email emphasized that "[t]iming is critical" because the early-production season was imminent. Pl.'s Ex. 1 at GC00004.
Hall emailed Lee in response, telling him that Gander Mountain had decided that all of its cold-weather accessories for the fall 2009 season would be marketed under Gander Mountain's own brand. Pl.'s Ex. 1 at GC00003. As Lee described it, this would mean that the product, packaging, header cards, and hang tags would all be branded with Gander Mountain logos. Lee told Hall that Grandoe could make the change — and, in fact, Grandoe had a great deal of expertise in producing private-label goods. Pl.'s Ex. 1 at GC00002. But, Lee told Hall, in order to take on the additional difficulties inherent in a private-label program, Grandoe would want Gander Mountain to commit to an in-line production program — that is, a manufacturing run atregular prices during Grandoe's peak April through October season — in addition to the discounted, early-production program.
Because this was such a significant opportunity for Grandoe, both Lee and Eric Friedman, Grandoe's president and CEO, flew to Minnesota to meet with Hall on November 13. Also at that meeting was Bruce Marsh, an independent sales representative who was helping Grandoe negotiate with Gander Mountain. Marsh was an experienced sales representative who had worked with Grandoe for a number of years in transactions with other retailers. Marsh had also represented other manufacturers in their dealings with Gander Mountain, and thus Hall was quite familiar with him.
At the November 13 meeting, Lee and Friedman talked up Grandoe's private-label expertise and showed Hall samples of gloves, fabric swatches, and colors. The parties then engaged in detailed discussions about different styles, materials, and customization options. The parties agree that the meeting was productive and that Hall was quite enthusiastic about what she saw. Hall was also very attracted to the idea of the early-production program and the discount that Gander Mountain would enjoy. Lee and Friedman made it clear, however, that Grandoe's ability to offer a discount in connection with the early-production program was contingent on Gander Mountain also agreeing to purchase gloves at regular prices through the in-line program.
As noted, Hall was familiar with Marsh, who had worked with Gander Mountain before. Hall consulted Marsh about the quantity of each style of gloves that he...
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